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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
or
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO ______________ TO ______________.
COMMISSION FILE NUMBER 000-22581
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STAR TELECOMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 77-0362681
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
223 EAST DE LA GUERRA 93101
SANTA BARBARA, CALIFORNIA (Zip Code)
(Address of Principal Executive Offices)
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(805) 899-1962
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Name of each exchange on which registered: THE NASDAQ NATIONAL MARKET
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K /X/
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on March 31, 2000, based on the average bid and
asked prices for the Common Stock as reported by Nasdaq was approximately
$127,968,042.
As of March 31, 2000, the number of shares of the Registrant's Common Stock
outstanding was 58,626,677 shares.
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PART I
This Annual Report on Form 10-K for the year ended December 31, 1999 (the
"Form 10-K") contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Forward-looking statements are statements other than historical
information or statements of current condition and relate to future events or
our future financial performance. Some forward-looking statements may be
identified by use of such terms as "expects," "anticipates," "intends,"
"estimates," "believes" and words of similar import. These forward-looking
statements relate to plans, objectives and expectations for future operations.
In light of the risks and uncertainties inherent in all such projected operation
matters, the inclusion of forward-looking statements in this Form 10-K should
not be regarded as a representation by us or any other person that our
objectives or plans will be achieved or that any of our operating expectations
will be realized. Revenues and results of operations are difficult to forecast
and could differ materially from those projected in the forward-looking
statements contained in this Form 10-K for the reasons detailed in the "Risk
Factors" section of this Form 10-K, beginning on page 21, or elsewhere in this
Form 10-K.
ITEM 1. BUSINESS.
OVERVIEW
We are a leading facilities-based international telecommunications company.
We provide high-quality, competitively priced, long distance telecommunication
services to consumer and commercial retail customers as well as to other
telecommunications carriers located within the U.S. and Europe. In Germany, we
offer Internet service providers ("ISPs") wholesale dial-up services along with
a range of support services including data center co-location and bandwidth
provisioning. We seek to capitalize on the increasing demand for high-quality
international communications services which is being driven by the globalization
of the world's economies, the worldwide trend toward telecommunications
deregulation, and the growth of voice, data and Internet traffic.
Historically, we have focused our operations on the wholesale international
long distance market. However, we have recently undertaken a number of strategic
measures in order to diversify our revenue base and improve operating margins.
In the first quarter of 1999, we closed two acquisitions in the U.S., providing
us with consumer and commercial retail long distance operations. With the
acquisition of PT-1 Communications, Inc. ("PT-1"), we acquired the leader in the
U.S. prepaid calling card market as well as a dial around business that
leverages the branding strength of the prepaid calling card business. The
acquisition of United Digital Network, Inc. ("UDN") (now a part of our ALLSTAR
Telecom division), provided us with a U.S. commercial retail services platform
enabling us to target higher margin business customers for our long distance
voice communication services.
Additionally, in the second quarter of 1998, we commenced operations in
Germany, the third largest telecommunications market in the world, to capitalize
on the opportunities presented by the deregulation of the European
telecommunications industry. We have established several key strategic alliances
that may provide us with direct broadband access to the end user in Germany. The
German operations act as our platform to expand into other European countries as
deregulation occurs.
We own and operate an extensive global communications network of
transoceanic cables, domestic and international fiber optic capacity and
switching facilities. We continue to expand our network through additional
investments in international fiber optic cable capacity. Our management believes
that ownership of our network is critical to providing high quality,
competitively priced telecommunications services for the following reasons:
- Transmission costs decline as we carry a larger percentage of our traffic
on-net on both domestic and international routes;
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- We have the ability to meet the needs of our customers, such as ISPs, who
consistently demand large amounts of transmission capacity as well as
those of smaller enterprises, which require less capacity or need it less
frequently;
- The network increases our flexibility in introducing new products and
services, such as adding value enhancing data and Internet services to
voice offerings, in order to provide our customers with a single source
for their international and domestic voice, data and Internet needs; and
- We have the ability to sell, lease or swap network segments, further
enhancing our ability to expand the reach of our network and/or reduce
transmission costs.
MERGER WITH WORLD ACCESS
During the first quarter of 1999, our Board of Directors (the "Board") and
members of our management began searching for additional capital at a time when
our core business margins were declining as a result of additional competition.
In addition, significant capital costs were being incurred in connection with
the expansion of our business into Germany and the development of our retail
long distance operations. During this period, Goldman Sachs Credit Partners, LP.
("Goldman Sachs") Kaufman Brothers, Lehman Brothers, Morgan Stanley Dean Witter
("Morgan Stanley") and Deutsche Bank Securities, Inc. ("Deutsche Bank") were
retained to pursue a possible high yield bond offering and to provide financial
advice on potential transactions with strategic merger partners. We ultimately
concluded that a high yield bond offering was not going to be an effective means
of raising necessary capital.
During this same period, we also consulted with each of Goldman Sachs,
Kaufman Brothers, Lehman Brothers, Morgan Stanley and Deutsche Bank about the
feasibility of spinning off our European operations, the possibility of the sale
of stock of one or more of our subsidiaries and raising senior subordinated
debt. Market conditions in the telecommunications business and our capital
position made such contemplated transactions infeasible.
We received several acquisition proposals in the last quarter of 1999, but
each proposal was limited to the acquisition of our German operations. These
proposals were not considered attractive by the Board as the sale of our German
operations would have provided additional cash but did not fit with our strategy
to diversify and improve our overall business mix.
In the late fall of 1999, we were approached by World Access, Inc. ("World
Access"), a leading provider of bundled voice, data and Internet services to key
regions of the world, who was aware of our search for a strategic transaction.
We were unable to discuss a transaction with World Access at that time as we
were subject to a prior exclusive negotiating agreement with Global Crossing,
Ltd. On December 20, 1999, after the exclusive negotiating agreement had expired
we announced the execution of a letter of intent whereby World Access proposed
to acquire all of our outstanding capital stock in exchange for shares of World
Access common stock ("World Access Common Stock"), and possibly cash, valued at
approximately $10.50 per share of our common stock. The letter also called for
World Access to infuse cash in the form of a bridge loan upon the signing of the
definitive agreement. During the due diligence period contemplated by the letter
of intent, the price was renegotiated and World Access indicated that we were
free to shop for better offers from other bidders.
On February 2, 2000, the parties announced that after World Access' due
diligence, World Access proposed a reduced price of between $7.50 and $8.00 per
share, and that World Access had agreed to provide us with significant interim
financing. During the period between December 20, 1999 and February 2, 2000, we
did not receive a superior proposal from another potential competing bidder.
Prior to signing a definitive agreement, the Board was free to and did seek
other proposals. The Board met on February 7, 2000 and considered the revised
proposal at length. Given our rising debt and cash shortage and the
unavailability of superior offers, management was instructed to continue
negotiations with World Access.
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On or about February 7, 2000 and February 11, 2000, the Board met to
consider World Access' renegotiated proposal. The Board received an opinion from
Deutsche Bank that the proposal was fair from a financial point of view to us
and our stockholders. The Board also received advice from Delaware legal counsel
on its obligations with respect to its duty of care and its duty to exercise
informed business judgment. At the meeting on February 11, 2000, the Board
considered our current financial condition, the decline in margins in our core
business due to increased competition and the significant capital required to
accomplish management's program of diversification. The Board also considered
the potential benefits of the merger, including relevant business, financial,
legal and market factors. After due deliberation, the Board concluded that the
proposed transaction was in our best interest and that of our stockholders for,
among other things, the following reasons:
- The combination would potentially solve our capital problems;
- The combined company would have an enhanced and more diversified
geographic and product market position;
- The combination would provide us with significant cost savings and
synergies;
- The combined management team would enhance our capabilities;
- We lacked alternative options for additional capital requirements;
- We did not receive a superior offer and management was concerned about our
capital position and ability to diversify in the face of declining margins
in our core business; and
- The contemplated transaction offered us the opportunity to receive interim
financing from World Access.
At the Board meeting held on February 11, 2000, the Board also voted to
approve the definitive Agreement and Plan of Merger ("Merger Agreement") between
us, World Access and STI Merger Co. ("Merger Sub") and the transactions
contemplated thereby and voted to recommend that our stockholders vote for the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby. Pursuant to the Merger Agreement we will be merged with and into Merger
Sub (the "Merger") and all outstanding shares of our common stock, other than
shares held by dissenting stockholders who perfect their statutory appraisal
rights under Delaware law, will be converted into the right to receive a number
of shares of World Access Common Stock equal to the Exchange Ratio (as defined
below) or, at the election of World Access, 60% of the Merger consideration
shall be paid in World Access Common Stock and 40% of the Merger consideration
shall be paid in cash. In no event will World Access pay cash for more than 45%
of the outstanding shares of our common stock, including cash paid for
fractional shares and cash paid to dissenting stockholders. The "Exchange Ratio"
will be .3905 plus a contingent feature based on the sale of certain of our
assets. The transaction is valued at approximately $500 million subject to,
among other things, certain regulatory approvals, the approval of our
stockholders and the stockholders of World Access, and the divestiture of our
dial around and prepaid calling card business segments for specified minimum net
cash proceeds.
Pursuant to the terms of the Merger Agreement, we are required to sell our
dial around and prepaid calling card operations for proceeds of $150 million or
more as a condition to the close of the Merger. On March 29, 2000, we entered
into a letter of intent ("Letter of Intent") with a communications subsidiary of
a publicly traded company ("PT-1 Acquiror") for the sale of all of the assets
relating to our dial around and prepaid calling card business operated by PT-1
("PT-1 Sale"). Pursuant to the terms of the Letter of Intent, PT-1 Acquiror will
pay $150 million in cash for the assets of PT-1, less certain liabilities and
subject to a purchase price adjustment based on an audit of PT-1 to be conducted
after the close of the PT-1 Sale. The completion of the PT-1 Sale is subject to,
among other things: (1) the completion of due diligence (which is currently in
process) by PT-1 Acquiror satisfactory to PT-1 Acquiror in its absolute
discretion, (2) the negotiation and execution of a definitive purchase agreement
between us and PT-1 Acquiror, and (3) a
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vote in favor of the transaction by a majority of our stockholders. Pursuant to
the terms of the Merger Agreement, if we fail to sell our dial around and
prepaid calling card business prior to the close of the Merger with World
Access, then World Access does not have to complete the Merger. In addition,
under the Merger Agreement, if we do not enter into a definitive agreement for
the PT-1 Sale prior to the close of the Merger or if we do not receive net cash
proceeds of at least $150 million from the sale of our dial around and prepaid
calling card business, then World Access (1) does not have to complete the
Merger, (2) may agree to amend the Merger Agreement or (3) may, in its sole
discretion, agree to waive this condition.
INDUSTRY BACKGROUND
INTERNATIONAL LONG DISTANCE
The international long distance telecommunications services industry, which
includes all transmissions of voice and data that originate in one country and
terminate in another, is undergoing a period of fundamental change. This change
has resulted, and is expected to continue to result, in significant growth in
the usage of international telecommunications services. According to
TeleGeography, a leading telecommunications industry source, the international
telecommunications long distance industry increased from approximately
$27.0 billion in revenues and 24 billion minutes of use in 1988 to
$66.0 billion in revenues and 82 billion minutes of use in 1997 representing a
compound annual growth rate of approximately 10% in revenues. Furthermore,
TeleGeography projects that the industry will reach approximately $80.0 billion
in revenues and 159 billion minutes of use by the year 2001.
We believe that a number of trends in the international telecommunications
market will continue to drive growth in international traffic, including:
- The globalization of the world's economies;
- The worldwide trend of continuing deregulation and privatization of
telecommunications markets driven by greater competition and resulting in
declining prices and a wider choice of products and services;
- The growth of data and Internet traffic worldwide; and
- Increased telephone accessibility resulting from technological advances
and greater investment in telecommunications infrastructure, including
deployment of wireless networks.
According to International Data Corporation ("IDC"), the European
international long distance market for voice services was the largest in the
world in 1998, with approximately 84 billion minutes. The market for total
domestic and international long distance in the European countries in which we
currently operate represented approximately $27.4 billion, with $18.1 billion
representing domestic long distance and approximately $9.3 billion representing
international long distance. In many European Union ("EU") member states, the
ability to provide telecommunications services was liberalized on January 1,
1998. We believe that regulatory liberalization in Europe and technological
advancements eventually will lead to market developments similar to those that
have occurred in the U.S. and United Kingdom following deregulation, including
an increase in both international and domestic traffic volume, reduced prices,
increased service offerings and the emergence of new entrants.
GERMAN TELECOMMUNICATIONS MARKET
The German telecommunications market is the world's third largest and is
estimated to be approximately $49 billion in 1999. This market has become one of
the most competitive in Europe since the regulatory liberalization program was
adopted in 1998. Germany represents an attractive market for telecommunications
for the following reasons:
- It is one of the world's largest economies with a gross domestic product
of $2.1 trillion in 1998;
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- Germany provides a liberalized telecommunications regulatory environment
that favors competition from new entrants and mandates interconnection
with the incumbent carrier on reasonable terms;
- There is a robust national infrastructure on which to build local
connections;
- Germany's population density is approximately 230 people per square
kilometer;
- Business Internet access revenues are expected to grow at an approximate
25% compound annual growth rate through 2003; and
- There are over seven million estimated Internet users.
INTERNET AND DATA SERVICES
Internet connectivity and enhanced Internet and data services represent two
of the fastest growing segments of the telecommunications services market. We
believe companies operating in these markets are particularly well positioned to
benefit from the rise of the Internet and the development of the e-commerce
industry, as they supply the critical tools and infrastructure that enable
companies to participate in the "global digital economy".
According to IDC, the number of Internet users worldwide reached
approximately 100 million in 1998 and is forecasted to grow to approximately 320
million by 2002, representing a compound annual growth rate of 34%. In the
United States and Europe, businesses increasingly use the Internet not only to
offer e-commerce to consumers and other businesses, but also for mission
critical applications such as sales, customer service and project coordination
worldwide. These enterprises require high quality, competitively priced, voice
and data services, in many cases internationally, with the flexibility to call
on capacity as needed. The popularity of the Internet with consumers has driven
the rapid proliferation of the Internet as a commercial medium. Businesses use
the Internet to establish Web sites and corporate Intranets and Extranets to
expand their customer reach and improve their communications efficiency.
Most of these businesses, and substantially all consumers in the U.S. and
Europe, obtain Internet connections from one of the large number of highly
competitive Internet service providers who are seeking to increase their share
of this market. Total ISP revenues for the United States are projected by IDC to
grow from $10.7 billion in 1998 to $37.4 billion in 2003 while total ISP
revenues for Western Europe are projected to grow from $4.3 billion in 1998 to
$17.7 billion in 2003. Furthermore, IDC estimates that corporate dedicated
access revenues in the U.S. will grow from $2.9 billion in 1998 to $12.0 billion
in 2003 and that Western European corporate dedicated access revenues will grow
from $2.2 billion to $7.7 billion over the same period. In addition to Internet
connectivity, business customers are increasingly seeking a variety of enhanced
products and applications to take full advantage of the Internet. For example, a
growing number of businesses are implementing secured virtual private networks
over the Internet as a more economical option than dedicated private networks.
IDC estimates that the ISP value-added services market in the U.S. will grow
from $3.0 billion in 1998 to over $12.9 billion in 2003 and the Western European
ISP value-added services market will grow from $528 million to $3.7 billion over
the same period.
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We believe there is substantial market opportunity to leverage our extensive
global network infrastructure by bundling Internet connectivity and enhanced
data products and services with traditional voice services as a way to satisfy
the needs of our existing customers and to attract additional customers as more
users and businesses access the Internet internationally and as individuals and
enterprises merge their voice and data traffic.
OUR APPROACH
NORTH AMERICA
We are a multinational telecommunications services company focused primarily
on the international long distance market. We offer highly reliable, low-cost
switched voice services on a wholesale basis, primarily to U.S.-based long
distance carriers. We provide international long distance service to
approximately 200 foreign countries through a flexible network comprised of
various foreign termination relationships, international gateway switches,
leased and owned transmission facilities and resale arrangements with long
distance providers. We have grown our revenues rapidly by capitalizing on the
deregulation of international telecommunications markets, combining
sophisticated information systems with flexible routing and leveraging
management's industry expertise.
We market our services to large global carriers seeking lower rates, as well
as to small and medium-sized long distance companies that do not have the
critical mass to invest in their own international transmission facilities or to
obtain volume discounts from the larger facilities-based carriers. During the
fourth quarter of 1999, we provided switched international long distance
services to 241 customers and 12 of the top forty global carriers.
In the first quarter of 1999, we acquired PT-1 and UDN. With these
acquisitions, we began providing international and domestic long distance
services to individual consumers and businesses. These commercial acquisitions
provided us with a higher margin customer base and complemented our wholesale
business by enabling us to maximize the use of available capacity on our
network.
EUROPE
We commenced our European operations in August 1997, after obtaining an
operating license and activating a London-based switch earlier that year. We
targeted North America and Europe for the immediate development of our network
due to the economic stability and the rapid pace of deregulation in those
regions as compared to other areas of the world. We expect to expand our network
into additional markets within our principal service regions. In addition, we
are using our German operations as a platform to enter other major markets in
Europe in conjunction with the deregulation of the telecommunications industry
in certain EU countries, which began in 1998. This expansion commenced with our
installation of international gateway switches in Vienna, Austria and Geneva,
Switzerland.
STRATEGY
Our objective is to enhance our position as a leading facilities-based
global telecommunications company by capitalizing on our extensive global
communications network and international long distance experience in order to
provide high quality, competitively priced international and domestic voice,
data and Internet services to our customers. The key elements of our strategy to
achieve this goal include the following:
EXPAND SCOPE AND CAPABILITY OF OUR GLOBAL NETWORK. We believe that
ownership of our network is critical to providing high quality, competitively
priced communications services by enabling us to lower our transmission costs
and better manage service offerings and transmission quality. To this end, we
are continuing to pursue a flexible approach to expanding and enhancing our
network facilities by investing in network, switching and transmission
facilities upon determination that such investments would enhance
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operating efficiency or reduce transmission costs. We have taken the following
steps to expand the scope and capability of our network:
- In September 1998, we entered into a 20-year agreement with Qwest
Communications International, Inc ("Qwest") to obtain dedicated capacity
over its nationwide U.S. network, which is still being implemented; and
- Since 1998, we have added 13 national and international gateway switching
facilities including Dallas and Miami, Dusseldorf, Frankfurt, Hamburg,
Berlin, Hannover, Nuremberg, Stuttgart and Munich, Germany, Geneva,
Switzerland, and Vienna, Austria.
OFFER A PORTFOLIO OF VOICE, DATA AND INTERNET SERVICES. Historically, we
have offered primarily wholesale and commercial long distance communication
services to our customers. We intend to expand the scope of our data and
Internet service offerings in order to provide a portfolio of communications
services to our customers in selected key markets. For example, in the United
States, we currently offer data center co-location and bandwidth partitioning to
ISPs. In Europe, beginning with Germany, we currently offer data and Internet
services to ISP customers and intend to offer these services to commercial and
consumer retail customers through our own branded full service ISP. By expanding
our data and Internet service offerings and bundling them with traditional long
distance communication services, we believe we will attract and retain a strong
base of commercial customers with higher operating margins than traditional long
distance communications services alone.
CAPITALIZE ON PROJECTED INTERNATIONAL LONG DISTANCE GROWTH. We believe that
the international long distance market continues to provide attractive
opportunities due to its high revenue, gross profit per minute and projected
growth rate. We will continue to target international markets with high volumes
of traffic, relatively high rates per minute and favorable prospects for
deregulation and privatization. On an opportunistic basis, we will also target
certain overseas markets for foreign origination of minutes, using traditional
channels in markets where we are able to obtain an operating license or voice
over IP in markets where regulatory barriers remain high. We believe foreign
origination will continue to offer higher priced and higher margin minutes than
U.S. originated routes.
EXPAND OUR COMMERCIAL BUSINESSES. We recognize that the provision of
telecommunications services to commercial customers is vital to the long term
development of our business providing valuable stability and higher gross
margins that cannot be sustained from wholesale services alone. As a result, we
are expanding our commercial businesses in the U.S. and Germany, the two largest
markets in which we operate. We are focused on building a commercial customer
base with significant demand for international and domestic voice, data and
Internet services on a stand-alone or bundled basis.
LEVERAGE ESTABLISHED EUROPEAN MARKET PRESENCE AND LOCAL DISTRIBUTION
NETWORK. We were one of the first telecommunications providers to establish a
presence in Germany to capitalize on the opportunities presented by the
deregulation of the European telecommunications industry. As a result, we have
gained substantial experience in the operational, technical, financial,
logistical and marketing issues involved in operating a network and selling our
services before most other service providers in Europe. To market our products
and services, we currently have 11 European sales offices, including London,
Frankfurt, Geneva, Vienna and Berlin. In addition, we are using our German
operations as a platform to expand into other European countries as evidenced by
our recent service launches in Austria and Switzerland.
IDENTIFY AND ENTER KEY MARKETS AHEAD OF FULL DEREGULATION. We believe there
is significant market opportunity in the form of substantial growth and profit
potential in providing competitively priced international telecommunications
services as an early entrant in deregulating markets where the incumbent Post,
Telegraph and Telephone operator ("PTT") is the sole telecommunications
provider. Competitive advantages arising from early entry include: developing
multiple sales and distribution channels and customer bases, achieving name
recognition prior to widespread competition and acquiring experienced local
telecommunications professionals. We believe that the ongoing trend toward
deregulation and privatization will continue to create new opportunities for us
to increase our revenues and profitability. In
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order to speed entry into a new market, we initially emphasize providing
wholesale or facilities-based services to our customers. As we establish
ourselves in a market, we expand into commercial telecommunications services by
investing in additional infrastructure, devoting employees to commercial sales
efforts and developing products and services tailored to the local commercial
market. We will continue to target international markets with high volumes of
traffic, relatively high rates per minute and favorable prospects for
deregulation and privatization.
NETWORK
We currently operate a state-of-the-art extensive global communications
network of transoceanic cables, domestic and international fiber optic capacity
and switching facilities. The network consists of:
- A global backbone network connecting intelligent gateway switches in our
principal service regions;
- A domestic and international long distance network presence within certain
countries in our principal service regions; and
- A combination of owned and leased transmission facilities, termination
arrangements and foreign carrier agreements.
We believe that ownership of our network is critical to becoming a high
quality, competitively priced provider of communications services by enabling us
to (1) meet the needs of our customers who demand large amounts of transmission
capacity, (2) increase our flexibility in introducing new products and services
and (3) sell, lease or swap network segments which expands the reach of our
network and reduces our transmission costs. We continue to pursue a flexible
approach to expanding and enhancing our network facilities by investing in
international fiber optic cable capacity, developing a pan-German fiber optic
network and adding switching facilities worldwide.
TRANSOCEANIC FIBER OPTIC CABLE SYSTEMS
Where our customer base has developed sufficient traffic, we have purchased
and leased transoceanic fiber optic cable transmission capacity to connect to
our various switches. We either purchase lines or lease lines on a monthly or
longer-term basis at a fixed cost and acquire economic interests in transmission
capacity through minimum assignable ownership units and Indefeasible Rights of
Use ("IRU") to international traffic destinations.
OWNERSHIP INTERESTS IN TRANSOCEANIC FIBER OPTIC CABLE SYSTEMS. The
following table sets forth a listing of the transoceanic fiber optic cable
systems in which we have capacity through either ownership or IRU's:
<TABLE>
<CAPTION>
CABLE SYSTEM COUNTRIES SERVED STATUS
- --------------------- ---------------- ------
<S> <C> <C> <C>
AC-1 United States--United Kingdom Existing
Americas II United States--Argentina Under Construction
APCN Japan--Indonesia Existing
CANUS United States--Canada Existing
CANTAT 3 United States--United Kingdom--
Denmark Existing
Columbus III United States--Spain Under Construction
Gemini United States--United Kingdom Existing
Maya-1 United States--Mexico--Honduras--
Cayman Islands--Panama--Costa
Rica--Columbia Under Construction
NPC United States--Japan Existing
ODIN Netherlands--Denmark Existing
Pan American U.S. Virgin Islands--Aruba--
Venezuela--Panama--Columbia--
Ecuador--Peru--Chile Under Construction
</TABLE>
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<TABLE>
<CAPTION>
CABLE SYSTEM COUNTRIES SERVED STATUS
- --------------------- ---------------- ------
<S> <C> <C> <C>
PTAT-1 United Kingdom--United States Existing
RIOJA Netherlands--Belgium Existing
TAT 12/13 United States--United Kingdom Existing
TAT 14 United States--United Kingdom Existing
TPC-5 United States--Japan Existing
UK-NL 14 United Kingdom--Netherlands Existing
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SWITCHES AND POINTS OF PRESENCE
We have made substantial investments in switching infrastructure in the past
three years. We believe that this investment in switches provides the network
with several important benefits. First, switches help to maintain a relatively
low network cost base by reducing the need for transmission capacity between
points on the network. Second, switches substantially enhance the security and
redundancy of the network. Our network consists of 22 high capacity,
carrier-grade Nortel and Siemens Stromberg switches, including 12 international
gateway switches and 10 domestic switches. We currently operate more than 150
points of presence within our principal service regions.
The following table contains information regarding the location and type of
our existing switches:
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LOCATION TYPE OF SWITCH USE STATUS
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New York City, NY DMS 300-250 International Gateway Existing
New York City, NY Siemens DCO(2) International Gateway Existing
Los Angeles, CA DMS 300-250 International Gateway Existing
Los Angeles, CA Siemens DCO International Gateway Existing
Dallas, TX DMS 250 Domestic Existing
Miami, FL DMS 300-250 International Gateway Existing
Miami, FL (PT-1) DMS 250 Domestic Existing
Flushing, NY (PT-1) DMS 250 Domestic Existing
Jersey City, NJ (PT-1) DMS 250 International Gateway Existing
London, U.K. DMS 100E International Gateway Existing
Hamburg, Germany DMS 100E Domestic Existing
Dusseldorf, Germany DMS 100E Domestic Existing
Munich, Germany DMS 100E Domestic Existing
Frankfurt, Germany DMS 100E(2) International Gateway Existing
Berlin, Germany DMS 100E Domestic Existing
Hanover, Germany DMS 100E Domestic Existing
Stuttgart, Germany DMS 100E Domestic Existing
Nuremberg, Germany DMS 100E Domestic Existing
Geneva, Switzerland DMS 100E International Gateway Existing
Vienna, Austria DMS 100E International Gateway Existing
</TABLE>
TERRESTRIAL FIBER OPTIC CABLE SYSTEMS
We have made investments in terrestrial fiber networks in the U.S. and
Europe. We intend to increase our investment in direct and IRU ownership of
terrestrial cable systems in markets where we enter into operating agreements
and in situations where we determine that such an investment would enhance
operating efficiency and/or reduce transmission costs.
UNITED STATES. We have made substantial investments in our terrestrial
fiber network in the U.S. In September 1998, we entered into a 20-year agreement
with Qwest to acquire OC-48, OC-12 and OC-3 transmission capacity on their U.S.
Macro Capacity (SM) Fiber Network which is expected to serve over 130 cities in
the U.S. This network, which is still being implemented, provides connections
among our U.S. gateway switches and existing and future points of presence. As
we replace existing leased lines in the U.S.
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with this owned high-speed capacity, we are reducing our operating cost
structure and providing improved service to customers on our high traffic
routes.
EUROPE. In 1998, we signed an agreement to lease domestic German capacity
from o.tel.o Communications under a three-year contract and have recently signed
an agreement with GTS Carrier Services (Ireland) Limited for additional capacity
to augment the network. We have an agreement with Worldport Communications, Inc.
providing us with an IRU for transmission capacity on their network from London
to Frankfurt. In addition, we have leased capacity from VIAG Interkom GmbH & Co.
on their networks from Stuttgart to Geneva and from Munich to Vienna.
TERMINATION ARRANGEMENTS
We offer international long distance telecommunications services to
approximately 200 countries around the world. We seek to retain flexibility and
maximize our termination opportunities by utilizing a continuously changing mix
of routing alternatives, including alternative termination agreements, operating
agreements and resale arrangements. Due to our diversified approach, we believe
we are well positioned to take advantage of the rapidly evolving international
telecommunications market to provide high-quality, competitively priced
international long distance service to our customers.
Our strategy is based on our ability to enter into and maintain: (1)
operating agreements with PTTs in countries that have yet to become liberalized
so that we would then be permitted to terminate traffic in, and receive return
traffic from, that country, (2) operating agreements with PTTs and emerging
carriers in foreign countries whose telecommunications markets have liberalized
so we can terminate traffic in such countries, (3) resale agreements and transit
and refile agreements to terminate our traffic in countries with which we do not
have operating agreements so as to provide us with multiple options for routing
traffic and (4) interconnection agreements with the PTT in each of the countries
where we plan to have operating facilities so that we can terminate traffic in
those countries.
SALES AND MARKETING
NORTH AMERICA
We market our services on a wholesale basis to other telecommunications
companies through our experienced direct sales force and marketing/account
management team who leverage the long-term industry relationships of our senior
management. We reach our customers primarily through domestic and international
trade shows and through relationships gained from years of experience in the
telecommunications industry. We had 71 direct sales and marketing employees as
of December 31, 1999.
In the wholesale market, our sales and marketing employees utilize the
extensive, customer specific usage reports and network utilization data
generated by our sophisticated information systems to effectively negotiate
agreements with customers and prospective customers and to rapidly respond to
changing market conditions. We believe that we have been able to compete more
effectively as a result of the personalized service and ongoing senior
management-level attention that is given to each customer.
In connection with our expansion into the North American commercial market,
we primarily market our domestic and international long distance services
directly to individual consumers through two distinct marketing channels:
prepaid calling cards and dial around services. We believe that prepaid calling
cards and dial around services provide consumers with convenient, attractively
priced alternatives to traditional presubscribed long distance services. The
prepaid calling card market in the U.S. is estimated to be $2.5 billion and has
exhibited considerable growth over the past several years, driven primarily by
the overall decline in long distance pricing and by the need for convenient
communication tools for an increasingly mobile population. PT-1 currently
markets 40 cards, primarily to markets with major immigrant and ethnic
populations, such as New York, Los Angeles, Washington DC and Miami, that have
substantial international long distance calling requirements.
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EUROPE
We have a European carrier sales team headquartered in Zurich, Switzerland.
This team is responsible for sales to wholesale customers throughout Europe. We
also have a reseller sales team with offices in Frankfurt, Germany, Vienna,
Austria, and Geneva, Switzerland that is responsible for sales to switch-based
and switchless resellers in their respective markets.
In connection with our expansion into the European commercial market, we
market our services to small- and medium-sized enterprises through a network of
independent sales agents and utilize a direct sales force of over 67
professionals to approach larger corporate accounts. We intend to provide our
commercial retail customers with a bundled product offering local, long
distance, data and Internet services which we believe provides us with a
competitive advantage over other telecommunications carriers who have limited
ability to offer a full suite of telecommunications services. As we expand our
service offerings into other deregulating markets such as Austria and
Switzerland, we expect to hire qualified, in-country managers to oversee our
sales efforts in each market in addition to utilizing independent sales agents.
CUSTOMER SERVICE
We strive to provide personalized customer service and believe that the
quality of our customer service is one of our competitive advantages. Our
business customers are covered actively by dedicated account and service
representatives who seek to identify, prevent and solve problems. We provide
toll-free, customer service in Europe 24-hours per day seven days a week.
Furthermore, advanced Network Management Systems ("NMS") have been implemented
in order to maximize the visibility of our global switched network. In both the
U.S. and Europe, our customer service and network management departments work
closely together in order to minimize trouble resolution response time and
maximize customer satisfaction.
We also have a team of customer service representatives to handle our
prepaid calling card and dial around businesses in the U.S. We believe that
effective and convenient multilingual customer service is essential to
attracting and retaining prepaid calling card customers. Our customer service
center handles an average of 8,000 to 10,000 customer inquiries per day,
including inquiries relating to prepaid calling card balances, prepaid calling
card availability, rates, international calling service, billing and becoming a
distributor.
MANAGEMENT INFORMATION AND BILLING SYSTEMS
Our operations use advanced information systems including call data
collection and call data storage linked to a proprietary reporting system. We
also maintain redundant billing systems for rapid and accurate customer billing.
Our switching facilities are linked to a proprietary reporting system, which we
believe provides us with a competitive advantage by permitting management on a
real-time basis to determine the most cost-effective termination alternatives,
monitor customer usage and manage gross margins by route. We are also able to
ensure accurate and timely billing and to reduce routing errors as a result of
our advanced information systems.
Our proprietary reporting software compiles call, price and cost data into a
variety of reports that we can use to re-program our routes on a real-time
basis. The reporting software can generate the following reports as needed:
- Customer usage, detailing usage by country and by time period within
country, in order to track sales and rapidly respond to any loss of
traffic from a particular customer;
- Country usage, subtotaled by vendor or customer, which assists us with
route and network planning;
- Vendor rates, through an audit report that allows management to determine
at a glance which vendors have the lowest rates for a particular country
in a particular time period;
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- Vendor usage by minute, enabling us to verify and audit vendor bills;
- Dollarized vendor usage to calculate the monetary value of minutes passed
to our vendors, which assists with calculating operating margin when used
in connection with the customer reports; and
- Loss reports used to rapidly highlight routing alternatives that are
operating at a loss as well as identifying routes experiencing substantial
overflow.
We have built multiple redundancies into our billing and call data
collections systems. Nine call collector computers receive call information in
real-time, immediately duplicating data, sending one copy to billing, while the
other copy is used internally for customer service and for traffic analysis. We
maintain two independent and redundant billing systems in order to verify
billing internally and to ensure that bills are sent out on a timely basis. We
continually back up all of the call data and resulting billing data on tape
drives and redundant storage devices, and regularly transport them to an
off-site safe location.
NETWORK OPERATIONS AND TECHNICAL SUPPORT
Our switching facilities are linked to a proprietary reporting system, which
we believe provides us with a competitive advantage by permitting management, on
a real-time basis, to determine the most cost-effective termination
alternatives, monitor customer usage and manage gross margins by route. We have
installed multiple redundancies into our switching facilities to decrease the
risk of a network failure. For example, we employ both battery and generator
power back-up and have installed hardware that automatically shifts the system
to auxiliary power during a power outage, rather than relying on manual
override. We have network control centers in Los Angeles which control our
switches and monitors our U.S. network, and Frankfurt which controls our
switches and monitors our European network. Our switching facilities are staffed
24-hours per day, seven days per week.
COMPETITION
The international telecommunications industry is intensely competitive and
subject to rapid change. Our competitors in the international wholesale switched
long distance market include large, facilities-based multinational corporations
and PTTs, smaller facilities-based providers in the U.S. and overseas that have
emerged as a result of telecommunications deregulation, switched-based resellers
of international long distance services and international joint ventures and
alliances among such companies. International wholesale-switched long distance
providers compete on the basis of price, customer service, transmission quality,
breadth of service offerings and value-added services. We also compete abroad
with a number of dominant telecommunications operators that previously held
various monopolies established by law over the telecommunications traffic in
their countries. Additionally, the telecommunications industry is in a period of
rapid technological evolution, marked by the introduction of competitive new
product and service offerings, such as the utilization of the Internet for
international voice and data communications. We are unable to predict which of
many possible future product and service offerings will be important to maintain
our competitive position or how much it will cost to develop and provide such
products and services. We believe we compete favorably on the basis of price,
transmission quality and customer service. The number of our competitors is
likely to increase as a result of the new competitive opportunities created by
the World Trade Organization Basic Telecommunications Agreement ("WTO
Agreement"). Further, under the terms of the WTO Agreement, the United States
and the other 68 countries participating in the WTO Agreement have committed to
open their telecommunications markets to competition, foreign ownership and
adopt measures to protect against anticompetitive behavior. As a result, we
believe that competition will continue to increase, placing downward pressure on
prices. This pressure could adversely affect our gross margins if we cannot
reduce our costs commensurate with these price reductions.
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COMPETITION FROM DOMESTIC AND INTERNATIONAL COMPANIES
AT&T, MCI WorldCom and Sprint currently generate a majority of the U.S.
based international telecommunications services revenue. We also compete with
other U.S. based and foreign long distance providers, including regional bell
operating companies, which presently have Federal Communications Commission
("FCC") authority to resell and terminate international telecommunication
services. Many of these companies have considerably greater financial and other
resources and more extensive domestic and international communications networks
than we do. Our business would be materially adversely affected to the extent
that a significant number of our customers limit or cease doing business with us
for competitive or other reasons. Consolidation in the telecommunications
industry will continue to create even larger competitors with greater financial
and other resources, and could adversely affect us by reducing the number of
potential customers for our services.
COMPETITION IN THE COMMERCIAL MARKET
In the prepaid calling card market, we compete with other providers of
prepaid calling cards and with providers of commercial telecommunications
services in general. Many of the largest telecommunications providers currently
offer prepaid calling cards, in addition to other telecommunications services.
We also compete with smaller, emerging carriers in the prepaid calling card
commercial market, including IDT Corporation, RSL Communications, SmarTalk
Teleservices, Inc., Pacific Gateway Exchange, Inc., World Access, Inc. and
Primus Telecommunications. To the extent we begin providing services to
customers outside the U.S. market, we may compete with other large
telecommunications companies such as British Telecommunications in the U.K. and
Deutsche Telekom in Germany. Our ability to compete effectively in the
telecommunications services industry will depend in part upon our ability to
develop products that appeal to increasingly specialized segments of the
telecommunications services market.
GOVERNMENT REGULATION
Our U.S. interstate and international telecommunications service offerings
generally are subject to the regulatory jurisdiction of the FCC. Certain
telecommunication services offered by us in the U.S. may also be subject to the
jurisdiction of state regulatory authorities, commonly known as public utility
commissions ("PUCs"). Our telecommunications service offerings outside the U.S.
are also generally subject to regulation by national regulatory authorities. In
addition, U.S. and foreign regulatory authorities may affect our international
service offerings as a result of the termination or transit arrangements
associated therewith. U.S. or foreign regulatory authorities may take actions or
adopt regulatory requirements which could adversely affect us. See "Risk
Factors" beginning on page 21.
U.S. REGULATION
Our business is subject to various U.S. and foreign laws, regulations,
agency actions and court decisions. Our U.S. international telecommunications
service offerings are subject to regulation by the FCC. The FCC requires
international carriers to obtain authorization under Section 214 of the
Communications Act of 1934, as amended (the "Communications Act"), prior to
acquiring international facilities by purchase or lease, or providing
international service to the public. Prior FCC approval is also required to
transfer control of a certificated carrier. We are also subject to FCC policies
and rules that regulate the manner in which international telecommunication
services may be provided, including, for instance, the circumstances under which
a carrier may provide international switched services using international
private line ("IPL") facilities and under which it may route traffic through
third countries to or from its final destination.
The Communications Act and the FCC's rules and policies also impose certain
other obligations on carriers providing international telecommunication
services. These include the obligation (1) to file at the FCC and to maintain
tariffs containing the rates, terms, and conditions applicable to their
services, (2) to
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file certain reports regarding international traffic and facilities, (3) to file
certain contracts with correspondent carriers, (4) to disclose affiliations with
foreign carriers and significant foreign ownership interests, and (5) to pay
certain regulatory fees based upon, among other things, the carrier's revenues
and ownership of international transmission capacity.
INTERNATIONAL SERVICES
FCC rules require us to obtain prior FCC authorization to acquire and
operate international communication circuits in satellites and undersea fiber
optic cables; similar FCC authority is required for us to resell such capacity.
We hold both facilities-based and resale international authorizations, including
a "global" authorization that provides broad authority to offer switched and
private line international services. We have filed tariffs for international
services with the FCC.
FCC INTERNATIONAL PRIVATE LINE RESALE POLICY
The FCC's IPL resale policy limits the conditions under which a carrier may
connect IPLs to the public switched telephone network ("PSTN") at one or both
ends to provide switched services, commonly known as international simple resale
("ISR"). A carrier generally may only offer ISR services to a foreign country if
the FCC has found (a) the country is a member of the World Trade Organization
("WTO") and at least 50% of the U.S. billed and settled traffic to that country
is settled at or below the benchmark settlement rate adopted by the FCC in IB
Docket No. 96-261, or (b) the country is not a WTO member, but it offers U.S.
carriers equivalent opportunities to engage in ISR and at least 50% of the U.S.
billed and settled traffic is settled at or below the applicable benchmark.
Settled traffic refers to traffic subject to an accounting rate agreement
between the U.S. and foreign carriers. An accounting rate is a per minute
wholesale charge negotiated by international carriers for terminating traffic in
either direction. Each carrier is paid a settlement rate for terminating traffic
on its own network which ordinarily is one-half of the accounting rate. Our FCC
authority currently permits us to provide ISR service to Canada, the U.K.,
Sweden, New Zealand, Australia, the Netherlands, Germany, France, Belgium,
Denmark, Norway, Austria, Switzerland, Luxembourg, Italy, Ireland, Hong Kong,
Japan, Singapore, Spain, Iceland, Poland, Israel and the Dutch Antilles. The FCC
is currently reviewing U.S. carrier applications to provide ISR to Finland and
Mexico among other routes, and upon the grant of any such ISR application to a
given country, the FCC's rules also would permit us to provide ISR service to
that country. If ISR is not permitted on a route, absent prior FCC consent, U.S.
facilities based international carriers must terminate switched telephone
traffic in accordance with the International Settlement Policies ("ISP") which
is primarily intended to deter foreign carriers with market power from
discriminating amongst competing U.S. carriers by, for example, favoring the
foreign carrier's U.S. affiliate. The ISP requires that all U.S. carriers
terminate traffic with a foreign carrier on the same terms (i.e., that
settlement rates be equivalent) and receive inbound traffic only in proportion
to the volume of U.S. outbound traffic which they generate.
On a few routes, we may use IPLs to terminate international switched
telephone services where ISR has not been authorized. In such routes, therefore,
our termination arrangements may not be consistent with the FCC's ISP. On any
such route, however, to our knowledge the foreign correspondent lacks market
power, no U.S. inbound traffic is involved, and the effective settlement rate is
lower than the prevailing rate. Thus, we believe our actions are not
inconsistent with the ISP's underlying purpose. If the FCC were to determine, by
its own actions or in response to the filing of a third party, that any of our
IPL arrangements violate its ISR policy or our ISR authorization, the FCC could
order us to terminate any non-conforming arrangements. In addition, we could be
subject to a monetary forfeiture and to other penalties, including the
revocation of our FCC authorizations to operate as an international carrier. Any
such FCC action could have a material adverse effect upon our business,
operating results and financial condition.
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FCC INTERNATIONAL SETTLEMENTS POLICY
The FCC's ISP places limits on the arrangements which U.S. international
carriers may enter into with dominant foreign carriers for exchanging public
switched telecommunications traffic, which the FCC terms International Message
Telephone Service ("IMTS"). The policy does not apply to ISR services and does
not apply to U.S. carrier agreements with non-dominant foreign carriers. The ISP
is primarily intended to deter dominant foreign carriers from discriminating
amongst competing U.S. carriers by, for example, favoring the foreign carrier's
U.S. affiliate. Absent FCC consent, the ISP requires that U.S. carriers receive
an equal share of the accounting rate (i.e., that settlement rates be
equivalent) and receive inbound traffic in proportion to the volume of U.S.
outbound traffic which they generate. The ISP does not apply to certain "low
cost" routes where 50% or more of the U.S. billed traffic is settled at rates
which are 25% or more below an FCC benchmark rate. FCC policies also prohibit a
U.S. carrier from offering or accepting a "special concession" from a foreign
carrier where the foreign carrier possesses sufficient market power on the
foreign end of the route to affect competition adversely in the U.S. market. A
"special concession" is defined by the FCC as an exclusive arrangement involving
services, facilities or functions on the foreign end of a U.S. international
route which are necessary for providing basic telecommunications, and which are
not offered to similarly situated U.S. carriers authorized to serve that route.
It is possible that the FCC could find that certain of our arrangements with
foreign operators were or are inconsistent with the ISP and that we have not
requested prior FCC authority therefor. If the FCC were to determine by its own
actions or in response to the filing of a third party that we have violated the
ISP, the FCC could order us to terminate any non-conforming arrangement. In
addition, we could be subject to a monetary forfeiture and to other penalties,
including revocation of our FCC authorizations to operate as an international
carrier. Any such FCC action could have a material adverse effect upon our
business, operating results and financial condition.
The FCC's policies also require U.S. international carriers providing IMTS
to negotiate and adopt settlement rates with foreign correspondents for IMTS
which are at or below certain benchmark rates beginning January 1, 1999 for high
income countries.
We currently have IMTS operating agreements with certain foreign
correspondents which provide for settlement rates above the FCC's prescribed
benchmarks. We will negotiate in good faith to establish IMTS settlement rates
with our foreign correspondents which satisfy the FCC's benchmarks but there can
be no assurance that such negotiations will succeed. If we are unable to
negotiate benchmark settlement rates with certain foreign correspondents, the
FCC may intervene on its own action or in response to a filing by a third party.
We are unable to predict the form which such intervention may take but it could
disrupt our arrangement for transmitting traffic to certain countries or require
us to suspend direct service to certain countries or require us to make
alternative termination arrangements with certain countries, all of which could
have a material adverse effect on our business, operating results and financial
condition.
FCC POLICIES ON TRANSIT AND REFILE
International switched telecommunication traffic is frequently routed
indirectly via one or more third countries to its final destination. When such
arrangements are mutually agreed upon, they are commonly based on a transit
agreement under which settlement payments are made to all parties. In other
cases, traffic may be sent to a third country and then forwarded or refiled for
delivery to its final destination without the knowledge or consent of the
destination carrier. We use both transit and refile arrangements to terminate
our international traffic. The FCC routinely approves transit arrangements by
U.S. international carriers. The FCC's rules also permit carriers to use ISR
facilities in many cases to route traffic via a third country for refile through
the public switched network. However, the extent to which U.S. carriers may
enter into refile arrangements consistent with the ISP is currently under review
by the FCC. In 1997, the FCC stated that above-cost accounting rates had led an
increasing amount of international traffic to migrate to least cost routes
through the use of practices such as hubbing, refile and reorigination. The FCC
stated that such practices are an economically rational response to inflated
settlement rates. Notwithstanding the FCC's past rules, policies and statements
regarding the scope of permissible transit and refile arrangements, the FCC
could find by its own actions or in response to the filing of a third party,
that
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certain of our transit or refile arrangements violate the ISP or other FCC
policies. In that event, the FCC could order us to terminate any non-conforming
transit or refile arrangements. In addition, we could be subject to a monetary
forfeiture and to other penalties, including revocation of our FCC
authorizations to operate as an international carrier. Any such FCC action could
have a material adverse effect on our business, operating results and financial
condition.
REPORTING REQUIREMENTS
International telecommunication carriers also are required by the FCC's
rules to file timely certain reports regarding international traffic and
revenues, the ownership and use of international facilities, and their
affiliates with foreign carriers. The FCC considers a U.S. carrier to be a
foreign carrier if it has a 25% interest in the capital stock of the carrier, or
controls the foreign carrier or is under common ownership or control. The FCC
requires these reports so that, among other things, it may monitor the
development of industry competition and the potential for a dominant foreign
carrier to discriminate amongst U.S. carriers. We generally have filed said
traffic, facilities and foreign affiliation reports. The FCC's rules require
international telecommunication carriers to file at the FCC copies of their
contracts with other carriers, including operating agreements, within 30 days of
execution. The FCC by its own action or in response to the filing of a third
party could determine that we have failed to meet certain of the foregoing
filing and reporting requirements or that certain filings are deficient. In that
event, we could be directed to remedy any asserted non-compliance; we could also
be subject to a monetary forfeiture and to other penalties, and, although we
believe that it would be largely unprecedented in such circumstances, and hence
unlikely, the FCC could revoke our authorizations to operate as an international
carrier. Any such FCC action could have a material adverse effect on our
business, operating results and financial condition.
REGULATORY FEES
The Communications Act, and FCC rules and policies, impose certain fees upon
carriers providing interstate and international telecommunication services.
These fees are levied, among other things, to defray the FCC's operating
expenses, to underwrite universal telecommunication service (e.g., by
subsidizing certain services used by schools and libraries), such as Internet
access, and by other telecommunications users in areas of the U.S. where service
costs are significantly above average, to fund the Telecommunications Relay
Service ("TRS"), which provides special options for hearing-impaired users, and
to support the administration of telephone numbering plans.
Carriers that provide domestic interstate and international services must
pay an annual regulatory fee based on their interstate revenues; for the 1999
filing year, the fee was 0.12% of net revenue. International carriers that own
international transmission capacity must also pay a fee for each international
64 kilobit per second equivalent circuit they operate; for the 1999 filing year,
the fee was $7 per circuit. Carriers that provide, or that have an affiliate
which provides, domestic interstate services to end users must pay a universal
telecommunications service fee each month based upon the total estimated demand
for U.S. universal service funding. If applicable, each carrier's share is
approximately 5% of the carrier's annual end user revenues (including both
domestic and international end user revenue, unless only a small percentage of
the carrier's end-user revenues comes from domestic interstate services, in
which case only domestic revenues are counted). We generally offer our services
only to other carriers that in turn provide services to end-users. Such
carrier-to-carrier revenues are not subject to universal service fees, and thus
we generally are not liable to pay universal service fees. U.S. interstate and
international carriers must pay a percentage of their total revenue each year to
support the North American Numbering Plan Administrator. The contribution rate
is approximately 0.006% of net telecommunications revenue. U.S. carriers must
pay a certain percentage of their domestic interstate revenues to support the
Telecommunications Relay Services Fund. The contribution rate is approximately
0.04% of gross revenues. U.S. carriers must pay a percentage of their end-user
revenue to support local number portability ("LNP"); that rate varies depending
on the cost of the supported services and overall revenue for all carriers in
different regions of the United States. Our LNP payments would typically be
minimal because most of our revenue comes from other carriers rather than end
users. We have routinely paid the foregoing regulatory fees; however, we may owe
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approximately $150,000 in additional fees to satisfy our TRS and annual
regulatory fee obligations for the 1996 and 1997 filing years. The foregoing
regulatory fees typically change annually. We cannot predict the future
regulatory fees for which we may be liable. Said fees could rise significantly
for us and amount to 5% or more of our gross international and interstate
revenues if we are no longer exempt from paying universal service in the event
we provide service directly to end-users, or because amendments to the
Communications Act repeal the universal service fee exemption for revenues from
connecting carriers. Because the international telecommunication services
business is highly competitive, an increase in the regulatory fees that we must
pay could impair our market position and have a material adverse effect on our
business, operating results and financial condition.
RECENT AND POTENTIAL FCC ACTIONS
Recent FCC rulemaking orders and other actions have lowered the entry
barriers for new facilities-based and resale international carriers by
streamlining the processing of new applications and granting non-dominant
carriers greater flexibility in establishing non-standard settlement
arrangements with non-dominant foreign carriers, including the non-dominant U.S.
affiliates of such carriers. In addition, the FCC's rules implementing the WTO
Agreement presume that competition will be advanced by the U.S. entry of
facilities-based and resale carriers from WTO member countries, thus further
increasing the number of potential competitors in the U.S. market and the number
of carriers which may also offer end-to-end services. The FCC has recently
approved several industry mergers, including the Concert joint venture between
the AT&T and BritishTelecom international carrier businesses, the merger of
Global Crossing and Frontier and the merger of LCI International and Qwest.
There are also pending applications before the FCC for the merger of Sprint and
MCI WorldCom and GTE and Bell Atlantic, among others. In December 1999, the FCC
authorized Bell Atlantic to begin originating U.S. long distance service,
including international service, in New York State under Section 271 of the
Communications Act and other applications for "in region" service under Section
271 are expected to be filed and approved by the FCC in 2000. The 1996 amendment
to the Communications Act permits the FCC to forbear enforcement of the tariff
provisions in the Act, which apply to all interstate and international carriers,
and the U.S. Court of Appeals is currently reviewing an FCC order directing all
domestic interstate carriers to detariff their offerings. Subject to the Court's
decision, the FCC may forbear its current tariff rules for U.S. international
carriers, such as us, or order such carriers to detariff their services. In that
event, we would have greater flexibility in pricing our service offerings and to
compete, although any such FCC action likely would grant other non-dominant
international carriers equivalent freedom. The FCC routinely reviews the
contribution rate for various levels of regulatory fees, including the rate for
fees levied to support universal service, which fees may be increased in the
future for various reasons, including the need to support the universal service
programs mandated by the Communications Act, the total costs for which are still
under review by the FCC. The FCC also is reviewing the extent to which
international carriers may refile traffic using international private line
facilities or otherwise. Future FCC actions regarding refile could affect us by,
for example, requiring us to discontinue certain termination arrangements which
we now have or to implement alternative routing arrangements for certain
countries; on the other hand, the FCC may further liberalize its existing rules
and policies regarding refile, in which case we are likely to be well positioned
to expand certain refile operations even though new opportunities may become
available to our competitors. We cannot predict the net effect of these or other
possible future FCC actions on our business, operating results and financial
condition, although the net effect could be material.
STATE REGULATION
STATE
Our intrastate long distance telecommunications operations and those of our
subsidiaries are subject to various state laws and regulations, including prior
certification, notification, registration and/or tariff requirements. In certain
states, prior regulatory approval is required for changes in control of
telecommunications services. The vast majority of states require us and our
subsidiaries to apply for certification to provide intrastate telecommunications
services, or at a minimum to register or to be found to be exempt
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from regulation, prior to commencing sale of intrastate services. Additionally,
the vast majority of states require us or our subsidiaries to file and maintain
detailed tariffs setting forth rates charged by us to our end-users for
intrastate services. Many states also impose various reporting requirements
and/or require prior approval for transfers of control of certificated carriers
and assignments of carrier assets, including customer bases, carrier stock
offerings, and incurrence by carriers of significant debt. Certificates of
authority can generally be conditioned, modified, canceled, terminated or
revoked by state regulatory authorities for failure to comply with state laws
and/or rules, regulations and policies of the state regulatory authorities.
Fines and other penalties, including, for example, the return of all monies
received for intrastate traffic from residents of a state in which a violation
has occurred, may be imposed.
We, along with our regulated subsidiaries, believe we have made the filings
and taken the actions we believe are necessary to provide the intrastate
services we currently provide to end-users throughout the U.S. We and/or our
subsidiaries are qualified to do business as foreign corporations, and have
received certification to provide intrastate telecommunications services in all
states where certification is required, and have received approval for changes
of control where such approvals are necessary. We and our subsidiaries are
required to make periodic filings in order to maintain certificated status and
remain qualified as foreign corporations.
In early 1997, the FCC instituted significant changes to the current
incumbent local exchange carrier access charge structure. These changes were
meant, in part, to bring access charges closer to their actual costs. While
there has been a general trend towards access charge reductions, new primary
interexchange carrier charges ("PICCs") were authorized by the FCC to be imposed
on interexchange carriers serving presubscribed access charges closer to their
actual costs. PICCs are a flat-rated, per presubscribed line, per month access
charge imposed upon all facilities-based carriers (although they may be passed
through to resellers). Facilities-based carriers were assessed interstate PICCs
effective January 1, 1998. Intrastate PICCs have also been adopted in the
five-state Ameritech region (Michigan, Wisconsin, Illinois, Indiana, and Ohio),
and may be adopted elsewhere. At the same time, we may pursue underlying
carriers for pass throughs of any access charge reductions they may realize from
incumbent local exchange carriers.
ACTIONS AGAINST CEO
In 1997, prior to our acquisition of CEO Telecommunications, Inc. ("CEO"),
we settled disputes with the California PUC and with the District Attorney of
Monterey, California regarding CEO's alleged unauthorized switching of long
distance customers. As part of these settlements, CEO was subject to fines and
restrictions on its business operations in California. In addition, the FCC has
received numerous informal complaints against CEO regarding the alleged
unauthorized switching of long distance customers, which complaints currently
remain under review.
Following our acquisition of CEO, and in order to comply with the
settlements described above, we have imposed strict restrictions on certain
former CEO employees, restricting these employees with respect to California
intrastate telecommunications operations. Additionally, we have taken a number
of steps to reduce the risk of a repeat occurrence regarding the alleged
unauthorized switching of commercial customers in California.
FOREIGN REGULATION
UNITED KINGDOM
In the U.K., telecommunications services offered by us and through our
affiliate, STAR Europe Ltd. ("STAR Europe"), are subject to regulation by
various U.K. regulatory agencies. The U.K. generally permits competition in all
sectors of the telecommunications market, subject to licensing requirements and
license conditions. We have been granted a license to provide international
services on a resale basis and STAR Europe has been granted a license to provide
international services over its own facilities, which licenses are subject to a
number of restrictions. Implementation of these licenses have permitted us to
engage in cost-effective routing of traffic between the U.S. and the U.K. and
beyond.
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GERMANY
In Germany, telecommunications services offered by us through our affiliate,
STAR Telecommunications Deutschland GmbH ("STAR Germany"), are subject to
regulation by the Regulierungsbehorde fur Telekommunikation und Post (which is
under the jurisdiction of the Ministry of Economy). Germany permits the
competitive provision of international facilities-based and resale services.
STAR Germany was granted a license for the provision of voice telephony on the
basis of self-operated telecommunications networks in December 1997. Under this
license, STAR Germany has installed telecommunications switching facilities in
Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart, Berlin, Nuremberg and Hanover
and is leasing connection transmission facilities between these switches and
additional facilities. The network of STAR Germany will be used primarily for
routing international telecommunications traffic between the U.S., the U.K.,
Germany and beyond. There can be no assurance that future changes in regulation
of the services provided by STAR Germany will not have a material adverse effect
on our business, operating results and financial condition.
EMPLOYEES
As of March 1, 2000, we employed 855 full-time employees. We are not subject
to any collective bargaining agreements and we believe that our relationships
with our employees are good.
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RISK FACTORS
IN EVALUATING US, OUR BUSINESS, OPERATIONS AND FINANCIAL POSITION, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS FORM 10-K. THIS FORM 10-K CONTAINS, IN ADDITION TO
HISTORICAL INFORMATION, "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT THAT
INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH BELOW AND ELSEWHERE
IN THIS FORM 10-K.
THERE CAN BE NO ASSURANCE THAT WE WILL REALIZE THE ANTICIPATED BENEFITS FROM THE
MERGER WITH WORLD ACCESS.
We expect that our Merger with World Access will result in a combined
company that will be a leading provider of global telecommunications services,
increasing stockholder value through significant cost savings and synergies.
While the combination is expected to complement the geographic network coverage
of each company and enhance World Access' European operations through the
integration of our network assets and licenses in Germany, there can be no
assurance that our operations will be successfully integrated into World Access'
operations or that our stockholders will ultimately realize any of the
anticipated benefits of the Merger.
After due deliberation our Board concluded that the Merger was in our best
interest, and that of our stockholders for, among other things, the following
reasons:
- The combination would potentially solve our capital problems;
- The combined company would have an enhanced and more diversified
geographic and product market position;
- The combination would provide us with significant cost savings and
synergies;
- The combined management team would enhance our capabilities;
- We lacked alternative options for additional capital requirements;
- We did not receive a superior offer and management was concerned about our
capital position and ability to diversify in the face of declining margins
in our core business; and
- The contemplated transaction offered us the opportunity to receive interim
financing from World Access.
There can be no assurance that any of the expected results will be
accomplished as rapidly as currently expected or at all or that any savings or
synergies will not be offset by increases in other expenses or operating losses
incurred by World Access based on the occurrence of events or actions taken by
World Access that are out of our control.
In addition, the completion of the Merger is subject to, among other things,
certain regulatory approvals, the approval of our stockholders and the
stockholders of World Access, and the divestiture by us of certain business
segments for specified minimum net cash proceeds. Accordingly, there can be no
assurance that the Merger will be approved by our stockholders or the
stockholders of World Access, that we will obtain the necessary regulatory
approvals or that we will successfully complete the required sale of certain
assets. In the event that the Merger is not successfully completed, we may face
significant costs associated with the failed Merger, including a termination fee
of $14 million, and we may need to obtain additional capital. We are not certain
that we will be able to raise additional capital on favorable terms or at all.
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IF THE PT-1 ASSET SALE IS NOT COMPLETED PRIOR TO THE CLOSING OF THE MERGER WITH
WORLD ACCESS, OR IF WE DO NOT RECEIVE NET PROCEEDS OF AT LEAST $150 MILLION
FROM THE PT-1 ASSET SALE, THE MERGER WITH WORLD ACCESS MAY NOT CLOSE OR THE
CONSIDERATION TO BE RECEIVED BY OUR STOCKHOLDERS FROM THE MERGER MAY BE
REDUCED.
On March 29, 2000, we entered into a Letter of Intent with PT-1 Acquiror for
the sale of all of the assets of PT-1. Pursuant to the terms of the Letter of
Intent, PT-1 Acquiror will pay $150 million in cash for the assets of PT-1, less
certain liabilities and subject to a purchase price adjustment based on the
results of a final audit to be conducted after the close of the PT-1 Sale. While
we expect that we will successfully complete the PT-1 Sale, there can be no
assurance that we will complete the PT-1 Sale or that we will find another
purchaser for the assets of PT-1. Further, there can be no assurance that we
will complete the sale of the assets of PT-1 to PT-1 Acquiror, or to any other
purchaser, for net cash proceeds of at least $150 million, as required by the
Merger Agreement.
Pursuant to the terms of the Merger Agreement, if we fail to sell the assets
of PT-1 prior to the close of the Merger with World Access, then World Access
does not have to complete the Merger. In addition, under the Merger Agreement,
if we do not enter into a definitive agreement for the PT-1 Sale prior to the
close of the Merger or if we do not receive net cash proceeds of at least
$150 million from the sale of the assets of PT-1, then World Access (1) does not
have to complete the Merger, (2) may agree to amend the Merger Agreement or (3)
may, in its sole discretion, agree to waive this condition. In the event that
the Merger is not completed, we may face significant costs associated with the
failed Merger, including a termination fee of $14 million, and may need to
obtain additonal capital. We are not certain that we will be able to raise
additional capital on favorable terms or at all.
While we believe we will complete the PT-1 Sale, the completion of the PT-1
Sale to PT-1 Acquiror is subject to, among other things: (1) the completion of
due diligence by PT-1 Acquiror satisfactory to PT-1 Acquiror in its absolute
discretion, (2) the negotiation and execution of a definitive purchase agreement
between us and PT-1 Acquiror, (3) a vote in favor of the transaction by a
majority of our stockholders, and (4) certain regulatory approvals. Accordingly,
there can be no assurance that PT-1 Acquiror will be satisfied with the outcome
of its due diligence, that we will reach satisfactory agreement on a definitive
purchase agreement with PT-1 Acquiror, that our stockholders will approve the
PT-1 Sale, or that we will obtain the necessary regulatory approvals. In
addition, the completion of the PT-1 Sale for net cash proceeds of at least
$150 million is dependent, in part, on the results of a final audit to be
conducted after the close of the PT-1 Sale. There can be no assurance that the
net value of the assets of PT-1 will be greater than or equal to the value of
the assets as presented to PT-1 Acquiror in the Letter of Intent, which may
result in net cash proceeds of less than $150 million for the PT-1 Sale. If we
fail to complete the PT-1 Sale prior to the close of the Merger or to sell the
assets of PT-1 for net proceeds of less than $150 million, the Merger may not
close or the consideration to be received by our stockholders from the Merger
may be reduced.
IF OUR LENDERS ACCELERATE PAYMENT OF THE AMOUNTS WE OWE THEM, WE COULD BECOME
INSOLVENT OR BE FORCED TO FILE FOR BANKRUPTCY.
We are subject to certain restrictions under our financing arrangements,
including our financing arrangements with WorldCom and RFC Capital Corporation
("RFC") and our anticipated financing arrangements with World Access. If we
violate any restrictions under our financing arrangements, our lenders may
accelerate payment of the amounts we owe them. If they accelerate payment on any
of our debt, it could force us to file for bankruptcy or reorganize our
business. Under our financing arrangements with WorldCom and our anticipated
financing arrangements with World Access, if we commit a breach of the terms of
the Merger Agreement which results in World Access having the right to terminate
the Merger Agreement, World Access and WorldCom can accelerate payment of the
outstanding balance. Our anticipated financing arrangement with World Access
will provide for a predetermined initial advance with additional advances of up
to $35 million to be made solely in World Access' discretion. There can be no
assurance that we will not breach any restrictions under our financing
arrangements, that we will not breach the terms of the Merger Agreement or that
if we enter into a financing arrangement with World
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Access, World Access will agree to make additional advances to us. We cannot
predict what actions our lenders will take if we are out of compliance with any
restrictions under any of our financing arrangements or under the Merger
Agreement.
WE MAY NOT HAVE SUFFICIENT CASH FLOW FROM OUR BUSINESS TO PAY OUR DEBT.
The amount of our outstanding debt is large compared to our cash flow and
the net book value of our assets. We have substantial repayment obligations
under our outstanding debt. As of December 31, 1999 we had:
- Total consolidated debt of approximately $212.5 million, including
$99.5 million outstanding pursuant to our financing arrangements with RFC
and including our financing arrangement with WorldCom which was entered
into on April 12, 2000; and
- Stockholders' equity of approximately of $278.1 million.
The following chart shows our aggregate interest and principal payments due
on all of our currently outstanding debt for each of the next five fiscal years,
assuming our lenders do not accelerate payment of the amounts due under our
financing arrangements. Also, because the interest rates under some of our
financing arrangements. Also, because the interest rates under some of our
financing arrangements are based upon variable market rates, the amount of these
interest payments could fluctuate in the future.
<TABLE>
<CAPTION>
SCHEDULED PAYMENTS
--------------------
INTEREST PRINCIPAL
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
For the year ending December 31:
2000...................................................... $10,012 $ 75,690
2001...................................................... 6,487 107,637
2002...................................................... 1,679 20,675
2003...................................................... 1,428 8,446
2004...................................................... 0 0
</TABLE>
Due to the large amount of these principal and interest payments, we may not
generate enough cash from our operations to meet these obligations. We have
entered into a Letter of Intent with PT-1 Acquiror to sell the assets of PT-1,
less certain liabilities for cash proceeds of approximately $150 million subject
to a purchase price adjustment based on an audit of PT-1 to be conducted after
the close of the PT-1 Sale. We expect that the proceeds we receive from the sale
of PT-1 will provide us with sufficient capital to continue our operations and
service our debt. However, there can be no assurance that we will reach a
definitive agreement with PT-1 Acquiror regarding the sale of the assets of PT-1
or that the proceeds we receive from the sale will be sufficient.
WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL CAPITAL THAT WE NEED TO FINANCE OUR
ONGOING CAPITAL REQUIREMENTS AND OUR GROWTH.
We have considerable ongoing capital requirements related to our operations
and our existing debt. In addition, we will need to continue to expand our
network to maintain our competitive position and continue to meet the increasing
demands for service quality, capacity and competitive pricing. We will need to
raise additional capital from equity or debt sources if (1) our cash flow from
operations after the end of a period is insufficient to meet our working capital
and capital expenditure requirements, (2) our cash flow from operations after
the end of a period is insufficient to service our debt, or (3) our growth
exceeds current expectations. We are not certain that we will be able to raise
this capital on favorable terms or at all. If we are unable to obtain this
additional capital, we may be unable to continue our operations or service our
debt and we may be required to reduce the scope of our anticipated expansion.
Our ability to grow depends, in part, on our ability to expand our operations
through the ownership and leasing of network capacity, which requires
significant capital expenditures, that are often incurred prior to our receipt
of the related revenue. We have entered into a Letter of Intent with PT-1
Acquiror to sell the assets of PT-1, less certain liabilities for cash proceeds
of approximately $150 million subject to a purchase price
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adjustment based on an audit of PT-1 to be conducted after the close of the PT-1
Sale. We expect that the proceeds we receive from the sale of PT-1 will provide
us with sufficient capital to meet our working capital and capital expenditure
requirements, service our debt and expand our network. However, there can be no
assurance that we will reach a definitive agreement with PT-1 Acquiror regarding
the sale of the assets of PT-1 or that the proceeds we receive from the sale
will be sufficient.
WE MAY NOT BE ABLE TO PROVIDE DATA TRANSMISSION SERVICES EFFECTIVELY.
Our experience in providing data transmission services to date has been
limited and, consequently, we can provide no assurance that we will be
successful in the data transmission business. Our ability to successfully enter
the data transmission business will depend upon, among other things, our ability
to:
- Select new equipment and software and integrate these into our network;
- Hire and train qualified personnel; and
- Enhance our billing, back-office and information systems to accommodate
data transmission services.
If we are not successful, there may be a material adverse effect on our
business, financial condition and operations.
The data transmission business is also extremely competitive and prices have
declined substantially in recent years and are expected to continue to decline.
In providing these services, we will be dependent upon vendors for assistance in
the planning and development of our data product offerings, as well as ongoing
training and support. In Europe, there are a number of different protocols for
data transmission. Our network will need to be able to handle all of these
protocols, which will pose technical difficulties.
WE CANNOT ASSURE YOU THAT OUR PLANNED ENTRY INTO THE INTERNET AND DATA BUSINESS
IN EUROPE WILL BE SUCCESSFUL.
The market for Internet connectivity and related services is extremely
competitive. Our primary competitors include other ISPs that have a significant
national or international presence. Many of these carriers have substantially
greater resources, capital and operational experience than we do. We also expect
we will experience increased competition from traditional telecommunications
carriers that expand into the market for Internet services. In addition, we will
require substantial additional capital to make investments in our Internet
operations and we may not be able to obtain that capital on favorable terms or
at all.
Further, even if we are able to establish and expand our Internet business,
we will face numerous risks that may adversely affect the operations of our
Internet business. These risks include:
- Competition in the market for Internet services;
- Our limited operating history as an ISP;
- Our ability to adapt and react to rapid changes in technology related to
our Internet business;
- Uncertainty relating to the continuation of the adoption of the Internet
as a medium of commerce and communications;
- Vulnerability to unauthorized access, computer viruses and other
disruptive problems due to the accidental or intentional actions of
others;
- Adverse regulatory developments;
- The potential liability for information disseminated over our network; and
- Our need to manage the growth of our Internet business, including the need
to enter into agreements with other providers of infrastructure capacity
and equipment and to acquire other ISPs and Internet-related businesses on
acceptable terms.
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OUR QUARTERLY OPERATING RESULTS FLUCTUATE SIGNIFICANTLY DUE TO MANY FACTORS AND
ARE THEREFORE DIFFICULT TO FORECAST.
Our quarterly operating results fluctuate significantly due to a number of
factors, some of which are beyond our control, and are therefore difficult to
forecast with any degree of accuracy. Because operating results fluctuate
significantly, we believe that period-to-period comparisons of our operating
results are not necessarily meaningful and should not be relied upon as
indications of our future performance.
Our revenues, costs and expenses have fluctuated significantly in the past
and are likely to continue to fluctuate significantly in the future as a result
of numerous factors. Our revenues in any given period can vary due to factors
such as:
- Call volume fluctuations, particularly in regions with relatively high
per-minute rates;
- The addition or loss of major customers, whether through competition or
merger;
- The loss of economically beneficial routing options for the termination of
our traffic;
- Pricing pressure resulting from increased competition; and
- Technical difficulties with or failures of portions of our network that
impact our ability to provide service to or bill our customers.
Our cost of services and operating expenses in any given period can vary due to
factors such as:
- Fluctuations in rates charged by carriers to terminate our traffic;
- Increases in bad debt expense and reserves;
- The timing of capital expenditures, and other costs associated with
acquiring or obtaining other rights to switching and other transmission
facilities;
- Changes in our sales incentive plans; and
- Costs associated with changes in staffing levels of sales, marketing,
technical support and administrative personnel.
In addition, our operating results can vary due to factors such as:
- Changes in routing due to variations in the quality of vendor transmission
capability;
- Our loss of favorable routing options;
- The amount of, and the accounting policy for, return traffic under
operating agreements;
- Actions by domestic or foreign regulatory entities;
- The level, timing and pace of our expansion in international and
commercial markets; and
- General domestic and international economic and political conditions.
Further, we obtain a substantial portion of our transmission capacity on a
variable, per minute and short term basis; therefore, we may experience
unanticipated price increases and service cancellations. Since we do not
generally have long term arrangements for the purchase or resale of long
distance services, and since rates fluctuate significantly over short periods of
time, our gross margins may also fluctuate significantly over short periods of
time. Competitive pricing pressures may also negatively affect our gross
margins.
WE MAY NOT BE ABLE TO EFFECTIVELY CONTINUE OUR REVENUE GROWTH.
Our revenues have increased from $67.0 million in 1995 to $1,061.8 million
in 1999. You should not consider this growth indicative of our future revenue
growth or operating results. We cannot predict whether we will be able to
achieve or maintain profitability on a quarterly or annual basis in the future.
If our revenue levels fall below expectations, net loss is likely to increase
disproportionately because a proportionately smaller amount of our operating
expenses varies with our revenues. This effect will probably increase as a
greater percentage of our cost of services are associated with owned and leased
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facilities. In our first two quarters of 1999, our operating results were below
the expectations of public market analysts and investors. In future quarters we
could have similar disappointments. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
WE MAY NOT BE ABLE TO EFFECTIVELY CONTINUE TO MANAGE OUR REVENUE GROWTH.
We cannot be certain that our personnel, systems, procedures and controls
will be adequate to support our future operations. As part of our significant
revenue growth, we have expanded, and plan to continue to expand, the number of
our employees and the geographic scope of our operations. These factors create
increased responsibilities for our management personnel and place increased
demands upon our operating and financial systems, which may lead to
unanticipated costs and divert our management's attention from day-to-day
operations. We may also need to attract, train and retain additional highly
qualified management, technical, sales and marketing and customer support
personnel. The process of locating such personnel with the combination of skills
and attributes necessary to implement our strategy is often lengthy. We expect
that our expansion into foreign countries will lead to increased financial and
administrative demands, such as:
- Increased operational complexity associated with expanded network
facilities;
- Administrative burdens associated with managing an increasing number of
foreign subsidiaries and relationships with foreign partners; and
- Expanded treasury functions to manage foreign currency risks.
With the acquisitions of CEO, UDN, and PT-1, we began servicing commercial
markets, which are more labor intensive than the wholesale market, and as a
result have higher overhead costs. We also may need to update and improve our
billing systems and procedures and/or hire new management personnel to handle
the demands of the commercial markets. There is a risk that we will not be able
to effectively manage the costs of and risks associated with our expansion into
the commercial markets.
WE SELL A SIGNIFICANT PERCENTAGE OF OUR COMMERCIAL PRODUCTS ON CREDIT. IF WE
HAVE DIFFICULTY COLLECTING RISING ACCOUNTS RECEIVABLE OR WE FACE SIGNIFICANT
CREDIT LOSSES IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
We sell prepaid cards on terms ranging from cash on delivery to thirty days
credit. As accounts receivable balances grow and we extend credit to new
commercial customers, we may not be able to adequately monitor and evaluate our
accounts receivable and credit risks and we may not be able to collect all the
money we are owed. If we have difficulty collecting rising accounts receivable
or we face significant credit losses it could have a negative effect on our
business, financial condition and results of operations. We usually sell prepaid
cards that we ship with common carriers or that we sell over the counter in
smaller amounts for cash on delivery. We extend 7-to-30 day credit to
distributors who only market our prepaid cards and who introduce our products
into new markets and territories. We also sell prepaid cards wholesale to
carriers on credit, requiring them to pay us in 7-to-30 days. Customers are
billed after services are rendered for dial around and presubscribed long
distance services.
INCREASED COMPETITION IN THE PREPAID CARD BUSINESS MAY FORCE US TO LOWER OUR
PRICES AND IN TURN MAY NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
We cannot guarantee that we will be able to continue to provide
competitively priced prepaid cards to our distributors or that lower prices in
the prepaid card marketplace will not have a negative effect on the results of
our operations. The lack of customer loyalty to any particular prepaid card
company and the increased entry into the prepaid card market by various
competitors, including companies larger than us, could cause prices to drop
throughout the prepaid card industry. Because we depend on informal
relationships with independent distributors to market and sell our products,
increased competition and lower prices could force us to further lower our
prices to continue to sell prepaid cards to these distributors.
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Our operations and the prepaid card business that we operate through PT-1
face a number of risks with respect to competition, which can be summarized to
include the following:
- The increased entry into the market by prepaid card vendors, including
vendors that are larger than us;
- The low barriers to entry for new prepaid card operators;
- Our reliance on independent distributors to place prepaid cards in
commercial outlets;
- Our inability to create exclusive phone card distribution arrangements;
- Our inability to enter into written agreements with distributors and the
lack of written agreements among our distributors and any other party in
our prepaid card chain of supply;
- The price-sensitive, fickle nature of consumer demand; and
- The lack of customer loyalty to any particular prepaid card company.
THE GROWTH OF OUR TELECOMMUNICATIONS NETWORK WILL BE COSTLY, AND WE MAY NOT BE
ABLE TO INCREASE OUR NETWORK CAPACITY AT A RATE THAT IS COMMENSURATE WITH THE
DEMANDS OF OUR CUSTOMER BASE.
We are currently in the process of expanding our network and as we expand
our network and the volume of our network traffic, our cost of revenues will
increasingly consist of fixed costs arising from the ownership and maintenance
of switches and fiber optic cables. While we believe that in the long-term these
investments will reduce our cost of service and enhance our service offerings,
in the short-term, costs may increase and our operating margins may decrease. If
our traffic volume were to decrease, or fail to increase to the extent expected
or necessary to make efficient use of our network, our costs as a percentage of
revenues would increase significantly, which could have a material adverse
effect on our business, financial condition and results of operations.
Historically, we have relied primarily on leased transmission capacity for the
delivery of our telecommunications services. Our telecommunications expenses
have in the past primarily been variable, based upon minutes of use, consisting
largely of payments to other long distance carriers, customer/carrier
interconnect charges, leased fiber circuit charges and switch facility costs.
Recently, however, we have made considerable capital expenditures to expand our
network, and intend to continue to do so. See "Business--Network." Our strategy
is to establish significant traffic volumes prior to investing in fixed-cost
facilities. At the same time, the development of these facilities entails
significant costs and prior planning, which are based in part on our
expectations concerning future revenue growth and market developments.
In addition, our business depends in part on our ability to obtain
transmission facilities on a cost-effective basis. We may not be able to obtain
sufficient transmission facilities or access to undersea fiber optic cable on
economically viable terms. Our failure to obtain telecommunications facilities
that are sufficient to support our network traffic in a manner that ensures the
reliability and quality of our telecommunications services could have a material
adverse effect on our business, financial condition and results of operations.
Undersea fiber optic cables typically take several years to plan and construct,
carriers generally make investments well in advance, based on a forecast of
anticipated traffic. Therefore, our operations are subject to the risk that we
will not adequately anticipate the amount of traffic over our network, and may
not procure sufficient cable capacity or network equipment in order to ensure
the cost-effective transmission of customer traffic. Although we participate in
the planning of undersea fiber optic transmission facilities, we do not control
the construction of these facilities and must obtain access to these facilities
through partial ownership positions. If ownership positions are not available,
we must obtain access to these facilities through lease arrangements on
negotiated terms that may vary with industry and market conditions.
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THE INTERNATIONAL NATURE OF OUR OPERATIONS EXPOSES US TO REGULATORY, POLITICAL
AND ECONOMIC RISKS.
We have to date generated a substantial majority of our revenues by
providing international telecommunications services to our customers on a
wholesale basis. We send traffic to numerous countries throughout the world,
including India, Mexico and China. The international nature of our operations
involves certain risks, such as:
- Changes in U.S. and foreign government regulations and telecommunications
standards;
- Dependence on foreign partners, tariffs, taxes and other trade barriers;
- The potential for nationalization and economic downturns; and
- Political instability in foreign countries.
In addition, a reversal in the current trend toward deregulation of
telecommunications carriers could adversely affect our business. We will
continue to encounter these risks to the extent that we proceed with the planned
expansion of our international operations.
DEPENDENCE ON FOREIGN PARTNERS. We will increasingly rely on foreign
partners to (1) terminate our traffic in foreign countries and (2) assist in
installing transmission facilities and network switches, complying with local
regulations, obtaining required licenses and assisting with customer and vendor
relationships. We may have limited recourse if our foreign partners do not
perform under their contractual arrangements with us. As a result of our
arrangements with foreign partners, we may encounter significant legal,
regulatory or economic risks.
FOREIGN GOVERNMENT CONTROL AND HIGHLY REGULATED MARKETS. Foreign government
actions in the future could have a material adverse effect on our operations.
Governments of many countries exercise substantial influence over various
aspects of the telecommunications market. In some cases, the government owns or
controls companies that are or may become our competitors or companies, such as
national telephone companies, upon which we and our foreign partners may depend
for required interconnections to local telephone networks and other services. In
highly regulated countries in which we do not deal directly with the dominant
local exchange carrier, the dominant carrier may have the ability to terminate
service to us or to our foreign partner and, if this occurs, we may have limited
or no recourse. In some countries where competition is not yet fully
established, we transact business through an alternative operator. Foreign laws
in these countries may prohibit or impede new operators, like us, from offering
services.
FOREIGN CURRENCY FLUCTUATIONS. Our revenues and cost of long distance
services are sensitive to foreign currency fluctuations. We expect that an
increasing portion of our net revenue and expenses will be denominated in
currencies other than U.S. dollars, and changes in exchange rates may have a
significant effect on our results of operations. Although we utilize hedging
instruments to reduce the risk of foreign currency fluctuations, we will not be
fully protected from these risks and the instruments themselves involve a degree
of risk. See "Quantitative and Qualitative Disclosure About Market Risk."
FOREIGN CORRUPT PRACTICES ACT. The FCPA generally prohibits U.S. companies,
like us, and their intermediaries from bribing foreign officials for the purpose
of obtaining or keeping business. Past or future actions taken without our
knowledge by agents, strategic partners and other intermediaries could expose us
to liability under the FCPA. This liability could have a material adverse effect
on our business, operating results and financial condition.
OUR FAILURE TO MEET CURRENT OR FUTURE GOVERNMENT REGULATIONS COULD CAUSE US TO
INCUR PENALTIES. FUTURE GOVERNMENT REGULATIONS COULD ALSO INCREASE COMPETITION
OR IMPEDE THE EXPANSION OF OUR OPERATIONS.
Our business is subject to various U.S. and foreign laws, regulations,
agency actions and court decisions. The FCC regulates our U.S. international
telecommunications service offerings. The FCC could determine, by its own
actions or in response to a third party's filing, that some of our services,
termination
28
<PAGE>
arrangements, agreements with foreign carriers, transit or refile arrangements
or reports do not or did not comply with FCC policies and rules. As a result,
the FCC could order us to terminate noncompliant arrangements, fine us or revoke
our authorizations. Any of these actions could have a material adverse effect on
our business, operating results and financial condition. Generally, the FCC
requires international carriers to obtain authorizations under Section 214 of
the Communications Act, prior to acquiring international facilities by purchase
or lease, or providing international service to the public. Prior FCC approval
is also required to transfer control of a certificated carrier. We must file
reports and contracts with the FCC and pay regulatory fees, which are subject to
change. The FCC policies and rules discussed below also regulate our operations.
Future FCC action may also negatively affect our operations by:
- Intensifying the competition that we face;
- Increasing our operating costs;
- Disrupting our transmission arrangements; or
- Otherwise requiring us to modify our operations.
The FCC is encouraging new market entrants by implementing the WTO Agreement
and through other actions. The FCC may approve pending mergers which could
produce more effective competitors in our market. The FCC may increase
regulatory fees by eliminating the exemption for carrier revenues obtained from
other carriers for certain fees or through other actions, which could increase
our costs of service. See "Business--Government Regulation."
OUR PRACTICES MAY BE INCONSISTENT WITH THE FCC'S INTERNATIONAL SETTLEMENT
POLICY.
The FCC's international private line resale policy limits the conditions
under which a carrier may connect IPLs to the PSTN at one or both ends to
provide switched services, commonly known as ISR. We may use IPLs to terminate
international switched telephone services on a few routes where the FCC has not
yet authorized ISR. On these routes, therefore, our termination arrangements may
not be consistent with the FCC's ISP. On any of these routes, however, to our
knowledge the foreign correspondent lacks market power, no U.S. inbound traffic
is involved, and the effective settlement rate is lower than the prevailing
rate. Thus, we believe our actions are consistent with the ISP's underlying
purpose.
A carrier generally may only offer ISR services to a foreign country if the
FCC has found (1) the country is a member of the WTO, and at least 50% of the
U.S. billed and settled traffic to that country is settled at or below the FCC's
benchmark settlement rate or (2) the country is not a WTO member, but it offers
U.S. carriers equivalent opportunities to engage in ISR and at least 50% of the
U.S. billed and settled traffic is settled at or below the applicable benchmark.
If ISR is not permitted on a route, absent prior FCC consent, U.S. facilities
based international carriers must terminate switched telephone traffic in
accordance with the FCC's ISP. The ISP requires that all U.S. carriers terminate
traffic with a foreign carrier on the same terms and receive inbound traffic
only in proportion to the volume of U.S. outbound traffic which they generate.
The FCC could also find that some of our IMTS arrangements with foreign
operators are inconsistent with the ISP. The ISP limits the IMTS arrangements
between U.S. international carriers and dominant foreign carriers for exchanging
public switched telecommunications traffic. This policy does not apply to ISR
services and does not apply to U.S. carrier agreements with non-dominant foreign
carriers. The ISP requires that U.S. carriers receive an equal share of the
accounting rate and receive inbound traffic in proportion to the volume of U.S.
outbound traffic which they generate. The ISP and other FCC policies also
prohibit a U.S. carrier and some foreign carriers from entering into exclusive
arrangements involving services, facilities or functions on the foreign end of a
U.S. international route which are necessary for providing basic
telecommunications and which are not offered to similarly situated U.S.
carriers.
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<PAGE>
We use both transit and refile arrangements to terminate our international
traffic. Some of our transit or refile arrangements may violate the ISP or other
FCC policies. The FCC routinely approves transit arrangements by U.S.
international carriers. FCC rules also permit carriers in many cases to use ISR
facilities to route traffic via a third country for refile through the PSTN. The
extent to which U.S. carriers may enter into refile arrangements consistent with
the ISP is currently under review by the FCC.
OUR FAILURE TO COMPLY WITH STATE REGULATIONS COULD RESULT IN PENALTIES,
INCLUDING REVOCATION OF ONE OF OUR CERTIFICATES OF AUTHORITY.
Various state laws and regulations impose prior certification, notification,
registration, tariff and/or other requirements on our intrastate long distance
telecommunications operations and our subsidiaries. The vast majority of states
require that we and our subsidiaries apply for certification to provide
intrastate telecommunications services. In most jurisdictions, we also must file
and obtain prior regulatory approval of tariffs for intrastate services. State
regulatory authorities can generally condition, modify or revoke certificates of
authority or impose fines and other penalties for failure to comply with state
laws and regulations.
FOREIGN REGULATIONS MAY IMPEDE OUR EXPANSION INTO RECENTLY DEREGULATED
TELECOMMUNICATIONS MARKETS OUTSIDE OF THE U.S.
Foreign countries, either independently or jointly as members of the
International Telecommunications Union or other supra-national organizations,
may have adopted or may adopt laws or regulatory requirements regarding
telecommunications services that (1) would be difficult or expensive for us to
comply with, (2) could force us to choose less cost-effective routing
alternatives and (3) could adversely affect our business, operating results and
financial condition. We are subject to regulation in foreign countries, such as
the U.K. and Germany, in connection with some of our business activities. For
example, laws or regulations in either the transited or terminating foreign
jurisdiction may affect our use of transit, ISR or other routing arrangements.
If we seek to provide telecommunications services in other non-U.S. markets,
we will be subject to the developing laws and regulations governing the
competitive provision of telecommunications services in those markets. We cannot
be certain that the regulatory regime in any such countries will provide us with
practical opportunities to compete in the near future, or at all, or that we
will be able to take advantage of any such liberalization in a timely manner. We
currently plan to provide a limited range of services in Mexico and Belgium, as
permitted by regulatory conditions in those markets, and to expand our
operations as these markets implement scheduled liberalization to permit
competition in the full range of telecommunications services. The nature, extent
and timing of the opportunity for us to compete in these markets will be
determined, in part, by the actions taken by the governments in these countries
to implement competition and the response of incumbent carriers to these
efforts. See "Business--Government Regulation."
THE FCC REQUIRES US TO PAY FEES TO PAY PHONE OWNERS WHEN OUR CUSTOMERS USE
PAY PHONES TO ACCESS OUR SERVICES. WE MAY HAVE DIFFICULTY PASSING THESE
FEES ON TO OUR CUSTOMERS.
The Communications Act requires long distance carriers to compensate pay
phone owners when a pay phone is used to make a call through a toll-free number.
We cannot be certain that we will be able to continue to pass these costs on to
our prepaid card customers or that these charges will not have a negative effect
on our business, financial condition or results of operations. A small portion
of our prepaid card customers use pay phones to access our services through our
toll-free number. Recent regulations adopted under the Communications Act
require that we pay $0.24 per call, although the grounds for this fee are being
reconsidered by the FCC pursuant to a court order. In February 1998, PT-1 began
passing these costs on to prepaid card customers who use pay phones.
30
<PAGE>
OUR CUSTOMERS ARE SUBJECT TO GOVERNMENT REGULATIONS THAT MAY MATERIALLY
AFFECT THEIR ABILITY TO DO BUSINESS WITH US.
Our customers are also subject to actions taken by domestic or foreign
regulatory authorities that may affect their ability to deliver traffic to us.
Regulatory authorities have imposed sanctions on some of our customers in the
past. While these sanctions have not adversely impacted the volume of traffic
that we receive from these customers to date, future regulatory actions could
materially adversely affect the volume of traffic received from a major
customer, which could have a material adverse effect on our business, financial
condition and results of operations.
OUR BUSINESS IS DEPENDENT UPON THE INTEGRITY AND EXPANSION OF OUR NETWORK AND
TELECOMMUNICATIONS FACILITIES WHICH PUTS OUR OPERATIONS AT RISK TO OUTSIDE
FORCES BEYOND OUR CONTROL.
Any system or network failure that interrupts our operations could have a
material adverse effect on our business, financial condition or results of
operations. Our operations are dependent on our ability to successfully expand
our network and integrate new and emerging technologies and equipment into our
network, which are likely to increase the risk of system failure and to cause
strain upon the networks. Our operations also depend on our ability to protect
our hardware and other equipment from damage from natural disasters such as
fires, floods, hurricanes and earthquakes, other catastrophic events such as
civil unrest, terrorism and war and other sources of power loss and
telecommunications failures. Although we have taken a number of steps to prevent
our network from being affected by natural or man-made disasters, such as
building redundant systems for power supply to the switching equipment, we
cannot be certain that these prophylactic measures will prevent our switches
from becoming disabled in the event of an earthquake, power outage or otherwise.
If our network fails, or our telephone traffic decreases significantly as a
result of a natural or man-made disaster, this could have a material adverse
effect on our relationships with our customers and our business, operating
results and financial condition. See "Business--Network."
WE ARE DEPENDENT ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PERCENTAGE
OF OUR REVENUES. THE LOSS OF A SIGNIFICANT CUSTOMER COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.
The loss of a significant customer could have a material adverse effect on
our business. While our most significant customers vary from quarter to quarter,
our five largest customers accounted for approximately 17.4% of our revenues in
1999. We could lose a significant customer for many reasons, including:
- The entrance into the market of significant new competitors with lower
rates than us;
- Transmission quality problems;
- Changes in U.S. or foreign regulations; or
- Unexpected increases in our cost structure as a result of expenses related
to installing a global network or otherwise.
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<PAGE>
WE HAVE OBTAINED BRAND AWARENESS WITH THE USE OF THE PT-1 NAME AND OTHER NAMES
THAT WE USE TO MARKET OUR PREPAID CARDS, BUT OUR CONTINUED USE OF THOSE NAMES
MAY BE CHALLENGED IN THE FUTURE.
We believe that the prepaid card products that we market through PT-1 have
achieved significant brand awareness with distributors, commercial outlets,
ethnic communities and other consumer groups. In 1998, PT-1 changed its name
from Phonetime, Inc. and the name of one of its prepaid cards from The PTI Card
to The PT-1 Card in response to letters challenging PT-1's use of these names.
We cannot guarantee that our continued efforts to protect the proprietary rights
of our PT-1 operations will be successful or that other companies will not
challenge the PT-1 trademarks and service marks. We also intend to expand the
marketing of prepaid cards in foreign countries. This may result in the use of
PT-1 prepaid cards in countries where intellectual property protections are
limited. Our inability to protect our proprietary rights or continue to use such
marks in the U.S. and abroad could have a negative effect on our business,
financial condition and results of operations.
WE MAY NOT BE ABLE TO RETAIN KEY PERSONNEL.
Our success depends to a significant degree upon the efforts of senior
management personnel and a group of employees with longstanding industry
relationships and technical knowledge of our operations; in particular,
Christopher E. Edgecomb, our Chief Executive Officer. We maintain and are the
beneficiary under a key person life insurance policy in the amount of $10
million with respect to Mr. Edgecomb. We believe that our future success will
depend in large part upon our continuing ability to attract and retain highly
skilled personnel. Competition for qualified, high-level telecommunications
personnel is intense and there can be no assurance that we will be successful in
attracting and retaining such personnel. The loss of the services of one or more
of our key individuals, or the failure to attract and retain other key
personnel, could materially adversely affect our business, operating results and
financial condition. See "Management."
WE MAY FACE SIGNIFICANT COMPETITION FROM INTERNATIONAL AND DOMESTIC CARRIERS.
The international telecommunications industry is intensely competitive and
subject to rapid change. We believe that competition will continue to increase,
placing downward pressure on prices. Such pressure could adversely affect our
gross margins if we are not able to reduce our costs commensurate with such
price reductions. Our competitors in the international wholesale switched long
distance market include large, facilities-based multinational corporations and
smaller facilities-based providers in the U.S. and overseas that have emerged as
a result of deregulation, switch-based resellers of international long distance
services and international joint ventures and alliances among such companies. We
also compete abroad with a number of dominant telecommunications operators that
previously held various monopolies established by law over the
telecommunications traffic in their countries. International wholesale switched
service providers compete on the basis of price, customer service, transmission
quality, breadth of service offerings and value-added services. Additionally,
the telecommunications industry is in a period of rapid technological evolution,
marked by the introduction of competitive product and service offerings, such as
the utilization of the Internet for international voice and data communications.
We are unable to predict which technological development will challenge our
competitive position or the amount of expenditures that will be required to
respond to a rapidly changing technological environment. Further, the number of
competitors is likely to increase as a result of the competitive opportunities
created by members of the WTO in February 1997. Under the terms of the WTO
Agreement, starting February 5, 1998, the United States and over 68 countries
have committed to open their telecommunications markets to competition and
foreign ownership and to adopt measures to protect against anti-competitive
behavior.
COMPETITION FROM DOMESTIC AND INTERNATIONAL COMPANIES. A majority of the
U.S.-based international telecommunications services revenue is currently
generated by AT&T, MCI WorldCom and Sprint. We also compete with Pacific Gateway
Exchange, Inc., and other U.S.-based and foreign long distance providers,
including the Regional Bell Operating Companies, which presently have FCC
authority to resell and
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<PAGE>
terminate international telecommunication services. Many of these competitors
have considerably greater financial and other resources and more extensive
domestic and international communications networks than we do. Our business
would be materially adversely affected to the extent that a significant number
of such customers limit or cease doing business with us for competitive or other
reasons. Consolidation in the telecommunications industry could not only create
even larger competitors with greater financial and other resources, but could
also adversely affect us by reducing the number of potential customers for our
services.
EXPANSION INTO COMMERCIAL MARKET. With the acquisition of CEO, we began
providing long distance service to the commercial market, a market that is
subject to intense competition from a number of well capitalized companies. The
commercial market is also characterized by the lack of customer loyalty, with
commercial customers regularly changing service providers. There can be no
assurance that we will be able to compete successfully in the commercial market.
THE PRICE OF OUR STOCK IS SUBJECT TO FLUCTUATION BASED ON FACTORS BEYOND OUR
CONTROL.
The market price of the shares of our common stock has been highly volatile
since our initial public offering in June 1997 and may be significantly affected
by factors such as:
- Actual or anticipated fluctuations in our operating results;
- The announcement of potential acquisitions by us;
- Changes in federal and international regulations;
- Activities of the largest domestic providers;
- Industry consolidation and mergers;
- Conditions and trends in the international telecommunications market;
- Adoption of new accounting standards affecting the telecommunications
industry;
- Changes in recommendations and estimates by securities analysts; and
- General market conditions and other factors.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the shares of emerging growth companies like ours. These broad market
fluctuations may adversely affect the market price of our common stock.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K, including without
limitation, statements containing the words "believe," "anticipate," "intend,"
"expect" and words of similar import, constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: (1) general economic and business
conditions, both nationally and in the regions in which we operate,
(2) industry capacity, (3) existing government regulations and changes in, or
the failure to comply with, government regulations, (4) competition,
(5) changes in business strategy or development plans, (6) our ability to manage
growth, (7) the availability and terms of capital to fund the expansion of our
business, including the acquisition of additional businesses, and (8) other
factors referenced in this Form 10-K. GIVEN THESE UNCERTAINTIES, THE
STOCKHOLDERS OF THE COMPANY ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS.
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ITEM 2. PROPERTIES
Our principal offices are located in Santa Barbara, California in nine
facilities providing an aggregate of approximately 45,918 square feet of office
space expiring between June 2002 and February 2007. Additionally, we have office
and switching sites in the following locations (including the offices and switch
sites for PT-1 and our ALLSTAR Telecom division):
<TABLE>
<CAPTION>
APPROXIMATE
OFFICE SITES SQUARE FEET EXPIRATION DATE
- ------------ ----------- -------------------------------------
<S> <C> <C>
Vienna, Virginia............................... 3,909 May 2004
New York, New York (multiple leases)........... 4,625 December 2001--November 2008
Los Angeles, California (multiple leases)...... 24,898 June 2000--July 2005
Dallas, Texas.................................. 8,000 July 2000
Chelsea, Massachusetts......................... 2,000 July 2004
West New York, New Jersey...................... 2,000 June 2003
Rio Piedras, Puerto Rico....................... 1,200 July 2000
London, England................................ 5,414 December 2003
Jersey City, New Jersey........................ 5,565 January 2008
Los Angeles, California (multiple leases)...... 38,695 April 2001--September 2008
New York, New York (multiple leases)........... 62,491 March 2002--April 2008
Dallas, Texas.................................. 6,167 April 2007
Miami, Florida (multiple leases)............... 20,853 October 2007--March 2008
Atlanta, Georgia............................... 17,300 April 2008
Seattle, Washington............................ 7,020 June 2008
London, England................................ 5,600 July 2006
Hamburg, Germany............................... 9,981 January 2008--July 2009
Dusseldorf, Germany............................ 8,831 January 2008--July 2009
Frankfurt, Germany............................. 17,579 January 2008--August 2009
Munich, Germany................................ 7,473 February 2008--July 2009
Berlin, Germany................................ 6,719 April 2009
Hannover, Germany.............................. 5,857 March 2014
Nurnberg, Germany.............................. 5,454 June 2009
Stuttgart, Germany............................. 3,396 February 2009
Geneva, Switzerland............................ 5,578 May 2004
Vienna, Austria................................ 6,467 March 2000
Zurich, Switzerland............................ 663 May 2005
</TABLE>
A number of the above-listed leases grant us the right to extend the lease term
beyond the stated expiration date. The aggregate facility lease payments we made
in 1999 were approximately $9.9 million.
We believe that all other material terms of our leases are commercially
reasonable terms that are typically found in commercial leases in each of the
respective areas in which we lease space. We believe that our facilities are
adequate to support our current needs and that additional facilities will be
available at competitive rates as needed.
ITEM 3. LEGAL PROCEEDINGS
On February 14, 2000 and March 1, 2000 identical class action complaints
were filed against us and directors Christopher E. Edgecomb, Mary A. Casey, Mark
Gershien, Gordon Hutchins, Jr., John R. Snedegar, Arunas A. Chesonis, and Samer
Tawfik. The complaints allege causes of action for breach of fiduciary duty
arising from approval of the merger with World Access on the ground that the
consideration to be received is unfair, unconscionable and grossly inadequate.
The complaints seek both injunctive relief and damages, despite the fact that we
have not yet published the full terms of the proposed merger in our joint proxy
statement/prospectus. We believe that the complaints have no merit, and we are
prepared to defend such claims vigorously. A demurrer to the complaint was filed
on March 29, 2000 in the Santa Barbara Superior Court and is scheduled to be
heard on April 26, 2000.
On September 24, 1998, PT-1 was named in a cause of action filed in the
Supreme Court of the State of New York by certain former partners of Samer
Tawfik, one of our directors. The plaintiffs allege that
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<PAGE>
PT-1 is a successor corporation to a prior company owned by the plaintiffs and
Mr. Tawfik and that they are entitled to a substantial percentage of PT-1. The
cause of action seeks compensatory and punitive damages.
On March 11, 1999, a proceeding was commenced by PT-1 by notice of petition
following the election by a PT-1 shareholder to dissent from our proposed merger
with PT-1 and following a demand for payment of the fair value of the
approximately 2,731,330 shares of PT-1 held by such shareholder. The proceeding
was commenced in the Supreme Court of the State of New York. The PT-1
shareholder is seeking damages in accordance with his appraisal rights under New
York law.
On April 9, 1999, we were named, along with PT-1, as defendants in a cause
of action brought before the Superior Court of New Jersey, and thereafter
removed to the federal district court in New Jersey, by Godotsoft LLC, a
licensor of certain software code, documentation and related technology utilized
by PT-1 in on-line rating and billing and dial around services. The plaintiff is
suing for breach and anticipatory breach of the license agreement between
Godotsoft and PT-1 and for breach of the duty of good faith and fair dealing.
The plaintiff is seeking judgment against us for an unspecified amount of
damages and punitive damages and seeks preliminary and permanent injunctive
relief prohibiting us from any further use, exploitation or development of the
licensed software.
We believe that the legal proceedings listed above have no merit and we are
prepared to defend such claims vigorously. From time to time, we are party to
various legal proceedings, including billing disputes and collection matters,
and actions brought by certain terminated employees that arise in the ordinary
course of business. Although the amount of any liability that could arise with
respect to these actions cannot be accurately predicted, in our opinion, any
such liability will not have a material adverse effect on our operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock has been traded on the Nasdaq National Market under the
symbol "STRX" since June 12, 1997. The following table sets forth, for the
fiscal periods indicated, the quarterly high and low sales prices for our common
stock, as reported by Nasdaq and as adjusted to reflect the stock split that
occurred on March 31, 1998.
<TABLE>
<CAPTION>
HIGH LOW
------------ ------------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... 28 3/64 13 29/32
Second Quarter.............................................. 37 3/8 19 3/8
Third Quarter............................................... 23 9 11/16
Fourth Quarter.............................................. 18 7 1/8
FISCAL YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... 15 3/4 9 5/8
Second Quarter.............................................. 11 7/8 7 7/16
Third Quarter............................................... 8 7/16 5 1/4
Fourth Quarter.............................................. 8 51/64 4 11/16
</TABLE>
The last reported sale price of our common stock on the Nasdaq National
Market on March 31, 2000 was $6.00 per share. As of March 31, 2000, there were
approximately 269 holders of record of our common stock.
We have never paid cash dividends on our common stock and have no intention
of paying cash dividends in the foreseeable future. We anticipate that all
future earnings, if any, generated from operations will be retained by us to
develop and expand our business. Any future determination with respect to the
payment of dividends will be at the discretion of the Board and will depend
upon, among other things, our operating results, financial condition and capital
requirements, the terms of then-existing indebtedness, general business
conditions and such other factors as the Board deems relevant.
We issued and sold the following unregistered securities during 1999:
1. On February 4, 1999, we acquired PT-1, a provider of international
and domestic long-distance and local telecommunications services primarily
through the marketing of prepaid calling cards. We issued 15,050,000 shares
of common stock (valued at $153.6 million) and $19.5 million in cash or
short-term promissory notes, made a $2 million payment to a former PT-1
shareholder and incurred estimated merger costs of $10 million for all
outstanding shares of PT-1. In connection with the acquisition, we placed,
along with PT-1, 500,000 shares of our common stock in escrow for
distribution to certain PT-1 distributors for no consideration. We are
recognizing the related compensation expense of approximately $2.8 million
over a four year vesting period. As a result of subsequent negotiations, we
entered into a distribution agreement with NY Phone Card Distributors LLC
("Distribution Co."), a partnership of distributors, on March 1, 2000. The
agreement provides for a total of 400,000 shares of our common stock to be
issued to Distribution Co. under the following arrangements: (i) 228,750
shares at the date of execution, (ii) 31,250 shares at the end of May 2000,
provided that the agreement is still in effect, and (iii) 140,000 shares
contingently issuable based on certain minimum purchase requirements. We
also issued 179,973 options for outstanding PT-1 options at an exercise
price of $0.01 per share of which 50% vested on the date of the merger, and
the remaining 50% vested on October 15, 1999.
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<PAGE>
2. On March 24, 1999, we issued approximately 1,005,000 shares of our
common stock in exchange for all of the outstanding capital stock of UDN,
plus 36,142 stock options in exchange for UDN options in a transaction
valued at $9,924,000.
3. During the year ended December 31, 1999, we granted to employees and
directors options to purchase an aggregate of approximately 2,150,708 shares
of our common stock pursuant to stock option agreements and our stock option
plans.
The sales and issuances described above were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof, as
transactions by an issuer not involving any public offering, Regulation S of the
Securities Act, or in reliance upon the exemption from registration provided by
Rule 701 promulgated under the Securities Act. In addition, the recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with us, to information about us and our operations.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," each of which is included elsewhere in this Form 10-K. The
consolidated statements of operations data for the years ended December 31,
1997, 1998, and 1999 and the balance sheet data at December 31, 1998 and 1999
are derived from audited financial statements included elsewhere in this Form
10-K. The consolidated statement of operations data for the years ended December
31, 1995 and 1996 and the balance sheet data at December 31, 1995, 1996 and 1997
are derived from audited financial statements not included in this Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues...................................... $66,964 $283,450 $434,086 $619,220 $1,061,774
Operating expenses:
Cost of services............................ 50,300 244,153 374,504 523,621 925,206
Selling, general and administrative......... 13,356 41,804 48,906 66,140 160,067
Depreciation and amortization............... 952 2,343 5,650 15,054 44,236
Loss on impairment of goodwill.............. -- -- -- 2,604 --
Merger expense.............................. -- -- 286 1,026 1,878
------- -------- -------- -------- ----------
Total operating expenses.................... 64,608 288,300 429,346 608,445 1,131,387
------- -------- -------- -------- ----------
Income (loss) from operations............... 2,356 (4,850) 4,740 10,775 (69,613)
Other income (expenses):
Interest income............................. 65 138 464 4,469 2,192
Interest expense............................ (214) (1,270) (2,617) (3,386) (9,895)
Legal settlements and expenses.............. -- (100) (1,653) -- --
Other....................................... (97) 186 208 (304) 1,373
------- -------- -------- -------- ----------
Income (loss) before provision for income
taxes..................................... 2,110 (5,896) 1,142 11,554 (75,943)
Provision (benefit) for income taxes.......... 66 577 2,905 9,923 (12,096)
------- -------- -------- -------- ----------
Net income (loss)............................. $ 2,044 $ (6,473) $ (1,763) $ 1,631 $ (63,847)
======= ======== ======== ======== ==========
Pro forma net income (loss) (unaudited)(1).... $ 478 $ (7,416) $ (1,958)
======= ======== ========
Income (loss) per common share(2)
Basic and Diluted........................... $ 0.10 $ (0.27) $ (0.06) $ 0.04 $ (1.12)
======= ======== ======== ======== ==========
Pro forma income (loss) per common share
(unaudited)(2)
Basic and Diluted........................... $ 0.02 $ (0.31) $ (0.06)
======= ======== ========
Weighted average number of common shares
outstanding--basic(2)
Basic....................................... 19,916 24,076 31,101 40,833 57,036
Diluted..................................... 19,916 24,076 31,101 42,434 57,036
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit).................. $(1,065) $(10,913) $ 4,692 $ 46,698 $(197,921)
Total assets............................... 37,169 76,250 130,382 374,651 807,754
Total long-term liabilities, net of current
portion.................................. 2,980 8,834 14,800 33,048 96,693
Accumulated deficit........................ (6,294) (12,077) (13,737) (12,106) (75,953)
Stockholders' equity....................... 6,614 9,986 40,615 195,591 278,054
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATE PER MINUTE DATA)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED FINANCIAL AND
OPERATING DATA:
Capital expenditures(3)................ $ 2,922 $ 14,810 $ 26,584 $ 147,236 $ 150,588
North American wholesale billed minutes
of use(4)............................ 38,106 479,681 1,034,187 1,657,523 2,129,296
North American wholesale revenue per
billed minute of use(5).............. $0.4102 $ 0.4288 $ 0.3612 $ 0.3145 $ 0.2084
</TABLE>
- ------------------------
(1) The pro forma net income or loss per share assumes that we and CEO, which we
acquired in a pooling of interests transaction on November 30, 1997, were
C-corporations for all periods presented.
(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used in computing basic
and diluted income (loss) per common share and pro forma basic and diluted
income (loss) per common share.
(3) Includes assets financed with capital leases, notes and vendor financing
arrangements. See Note 2 of Notes to Consolidated Financial Statements.
(4) Does not include wholesale billed minutes of use from T-One prior to the
year ended December 31, 1997. Includes wholesale billed minutes of use to
UDN for all years presented.
(5) Represents wholesale gross call usage revenue per billed minute. Amounts
exclude other revenue related items such as finance charges. This data does
not include wholesale billed minutes of use from T-One prior to the year
ended December 31, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS.
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH "SELECTED CONSOLIDATED FINANCIAL
DATA" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO, EACH OF
WHICH IS INCLUDED ELSEWHERE IN THIS FORM 10-K. THIS DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS, AS DEFINED IN SECTION 27A OF THE SECURITIES ACT AND
SECTION 21E OF THE EXCHANGE ACT, THAT INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT
LIMITED TO THOSE DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS FORM 10-K.
OVERVIEW
We are a multinational telecommunications services company focused primarily
on the international long distance market. We offer highly reliable, low-cost
switched voice services on a wholesale basis, primarily to U.S.-based long
distance carriers. We provide international long distance service to
approximately 200 countries through our flexible network comprised of various
foreign termination relationships, international gateway switches, leased and
owned transmission facilities and resale arrangements with other long distance
providers.
39
<PAGE>
We installed our first international gateway switch in Los Angeles in June
1995 and initially recognized wholesale revenues through this switch in August
1995. A significant portion of our revenues in 1995 were generated by the
commercial operations of CEO and UDN.
REVENUES. Prior to 1999, the majority of our revenues were generated by the
sale of international long distance services on a wholesale basis to other
carriers, primarily domestic, long distance providers. Due to the acquisition of
PT-1 on February 4, 1999, our mix of wholesale and commercial traffic in 1999
reached approximately 50% wholesale and 50% commercial. We record revenues from
the sale of long distance services at the time of customer usage. Our agreements
with our wholesale customers are short-term in duration and the rates charged to
customers are subject to change from time to time, generally with five days
notice to the customer. Our commercial business segments are a mix of
traditional "picked" retail and commercial customers, accompanied by a
significant presence in the debit card and "dial around" business primarily as a
result of the PT-1 acquisition. Additionally, revenues in 1999 include broadband
sales.
Historically, we have increased total revenues from quarter to quarter,
often times by a significant percentage. Our total revenues increased 71.5% to
$1,061.8 million in 1999 over revenues of $619.2 million for 1998. Our North
American wholesale minutes of use have also greatly increased from quarter to
quarter, generally by amounts that exceed the relative increases in revenues. In
the year ended December 31, 1999, North American wholesale revenues decreased by
12.1% over revenues for 1998. Over the same period to period comparison, North
American minutes of wholesale use increased by 28.5%. The decline in North
American wholesale revenues was offset by an increase in commercial revenues
resulting from the acquisition of PT-1. There are a variety of reasons for the
growth in our call volume, including the growth of our North American customer
base, increased usage by existing North American customers, and increased
capacity over our telecommunications network, with the addition of a number of
switches and growth in available fiber optic lines.
The growth in North American wholesale minutes has been accompanied by a
corresponding decline in North American rates per minute. For example, for the
year ended December 31, 1999, such rates declined by 32.3% from North American
wholesale rates per minute in 1998. The decline in North American wholesale
rates can be attributed to a number of factors, including a changing country mix
that includes a growing number of minutes routed by us to lower rate per minute
countries such as Mexico, Germany and the United Kingdom and, as the wholesale
international long distance market continues to mature and evolve, a general
downward trend in rates on competitive routes. Our pricing for wholesale minutes
varies materially from customer to customer and is generally based on the time
of day, the day of the week and the destination of the call. While we continue
to route traffic to certain destinations at attractive rates, market conditions
have forced us to reduce our overall wholesale rate per minute.
Accordingly, we believe that the growth in our revenues has been fueled
almost entirely by our ability to diversify our business into the commercial
market. The general erosion in the rates per minute for North American wholesale
traffic has partially offset the contribution to the increase of revenues made
by such increased volume of North American commercial minutes. Through our
acquisition of PT-1, we continued a high level of revenue growth in 1999.
Although commercial rate per minute erosion is not as rapid as in the wholesale
marketplace, management recognizes that similar rate per minute erosion could
impact our ability to maintain our historic revenue growth rates. In addition,
on March 29, 2000 we entered into a Letter of Intent to sell all of the assets
of our prepaid calling card and dial around business operated by PT-1.
We completed our acquisition of T-One in March 1998. Revenues from T-One's
operations for the periods set forth below were not material to our overall
results of operations during such periods. We completed our acquisition of PT-1
on February 4, 1999. Revenues for PT-1 are not included for periods previous to
this date, as the acquisition was accounted for as a purchase.
COSTS OF SERVICES (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION). We have
pursued a strategy of attracting customers and building calling volume and
revenue by offering favorable rates compared to
40
<PAGE>
other long distance providers. We continue our plan to lower cost of services
(exclusive of depreciation and amortization) by (1) expanding our owned network
facilities, (2) continuing to utilize our sophisticated information systems to
route calls over the most cost-effective routes and (3) leveraging our traffic
volumes and information systems to negotiate lower variable usage-based costs
with domestic and foreign providers of transmission capacity.
Costs of services (exclusive of depreciation and amortization) include those
costs associated with the transmission and termination of domestic and
international long distance services, as well as costs relating to broadband
sales. Currently, a majority of the transmission capacity we use is obtained on
a variable, per minute basis. As a result, some of our current costs of services
(exclusive of depreciation and amortization) are variable. Our contracts with
our vendors provide that rates may fluctuate, with rate change notice periods
varying from five days to one year, with certain of our longer term arrangements
requiring us to meet minimum usage commitments in order to avoid penalties. Such
variability and the short-term nature of many of the contracts subject us to the
possibility of unanticipated cost increases and the loss of cost-effective
routing alternatives. Each quarter management reviews the network cost of
services accrual and adjusts the balance for resolved items. Costs of services
(exclusive of depreciation and amortization) also include fixed costs associated
with the leasing of network facilities.
We began providing international long distance services to commercial
customers in certain European countries, including Germany in 1998. We began
providing long distance service to commercial markets in the U.S. with the
acquisition of CEO in November 1997. We continued our commercial expansion
efforts through the acquisition of PT-1 in 1999. We believe that traffic from
commercial customers will be more profitable than wholesale traffic. We expect
that an expansion into this market will increase the risk of bad debt exposure
and lead to higher overhead costs.
Prices in the international long distance market have declined in recent
years and, as competition continues to increase, we believe that prices are
likely to continue to decline. Additionally, we believe that the increasing
trend of deregulation of international long distance telecommunications will
result in greater competition, which could adversely affect our revenue per
minute. We believe, however, that the effect of such decreases in prices will be
offset by increased calling volumes and decreased costs.
OTHER OPERATING EXPENSES. Selling, general and administrative expenses
consist primarily of personnel costs, advertising, tradeshow and travel
expenses, commissions and consulting fees, as well as bad debt expense. These
expenses have been increasing over the past year, which is consistent with our
recent growth, accelerated expansion into Europe and investment in systems and
facilities. We expect this trend to continue, and to include, among other
things, a significant increase in depreciation and amortization. Management
believes that additional selling, general and administrative expenses will be
necessary to support the expansion of our network facilities, our sales and
marketing efforts and our expansion into commercial markets.
FOREIGN EXCHANGE. Our revenues and cost of long distance services are
sensitive to foreign currency fluctuations. We expect that an increasing portion
of our revenues and expenses will be denominated in currencies other than U.S.
dollars, and changes in exchange rates may have a significant effect on our
results of operations. See "Quantitative and Qualitative Disclosures About
Market Risk."
FACTORS AFFECTING FUTURE OPERATING RESULTS. Our quarterly operating results
are difficult to forecast with any degree of accuracy because a number of
factors subject these results to significant fluctuations. As a result, we
believe that period-to-period comparisons of our operating results are not
necessarily meaningful and should not be relied upon as indications of future
performance.
Our revenues, costs and expenses have fluctuated significantly in the past
and are likely to continue to fluctuate significantly in the future as a result
of numerous factors. Our revenues in any given period can vary due to factors
such as (1) call volume fluctuations, particularly in regions with relatively
high per-minute rates, (2) the addition or loss of major customers, whether
through competition, merger, consolidation or otherwise, (3) the loss of
economically beneficial routing options for the termination of our traffic,
41
<PAGE>
(4) financial difficulties of major customers, (5) pricing pressure resulting
from increased competition, and (6) technical difficulties with or failures of
portions of our network that impact our ability to provide service to or bill
our customers. Our operating expenses in any given period can vary due to
factors such as (1) fluctuations in rates charged by carriers to terminate our
traffic, (2) increases in bad debt expense and reserves, (3) the timing of
capital expenditures, and other costs associated with acquiring or obtaining
other rights to switching and other transmission facilities, (4) changes in our
sales incentive plans, and (5) costs associated with changes in staffing levels
of sales, marketing, technical support and administrative personnel. In
addition, our operating results can vary due to factors such as (1) changes in
routing due to variations in the quality of vendor transmission capability, (2)
loss of favorable routing options, (3) the amount of, and the accounting policy
for, return traffic under operating agreements, (4) actions by domestic or
foreign regulatory entities, (5) the level, timing and pace of our expansion in
international and commercial markets, and (6) general domestic and international
economic and political conditions. Further, a substantial portion of
transmission capacity we use is obtained on a variable, per minute and
short-term basis, subjecting us to the possibility of unanticipated price
increases and service cancellations. Since we do not generally have long term
arrangements for the purchase or resale of long distance services, and since
rates fluctuate significantly over short periods of time, our operating results
are subject to significant fluctuations over short periods of time. Our
operating results also may be negatively impacted in the longer term by
competitive pricing pressures.
RECENT ACQUISITIONS AND DEVELOPMENTS
We have recently acquired the following companies and have taken the
following actions:
- PT-1 COMMUNICATIONS, INC. On February 4, 1999, we acquired PT-1, a
provider of international and domestic long-distance and local
telecommunications services primarily through the marketing of prepaid
calling cards. We issued 15,050,000 shares of common stock (valued at
$153.6 million) and $19.5 million in cash or short-term promissory notes,
made a $2 million payment to a former PT-1 shareholder and incurred
estimated merger costs of $10 million for all outstanding shares of PT-1.
In connection with the acquisition, we placed, along with PT-1,
500,000 shares of our common stock in escrow for distribution to certain
PT-1 distributors for no consideration. We are recognizing the related
compensation expense of approximately $2.8 million over a four year
vesting period. We also issued 179,973 options for outstanding PT-1
options at an exercise price of $0.01 per share, of which 50% vested on
the date of the merger, and the remaining 50% vested on October 15, 1999.
On March 29, 2000, we entered into a Letter of Intent with PT-1 Acquiror
for the sale of all of the assets of PT-1. Pursuant to the terms of the
Letter of Intent, PT-1 Acquiror will pay $150 million in cash for the
assets, less certain liabilities, and subject to adjustment based on the
results of a final audit to be conducted after the close of the PT-1 Sale.
We will record a loss on this transaction of approximately $100 million
upon closing which is expected to occur during the second quarter of
fiscal 2000.
- UNITED DIGITAL NETWORK, INC. On March 24, 1999, we completed the
acquisition of UDN for approximately 1,005,000 shares of our common stock
in a transaction accounted for as a pooling of interests. All financial
data presented has been restated to include the results of operations,
financial position and cash flows of UDN.
- MERGER WITH WORLD ACCESS, INC. On February 14, 2000, we entered into the
Merger Agreement with World Access pursuant to which all of our
outstanding capital stock will be exchanged for World Access Common Stock.
The expected Merger with World Access complements our existing wholesale
and commercial operations. The combined company is expected to increase
stockholder value through increased cost savings and synergies. However,
there can be no assurances that the Merger will be completed, or if the
Merger is completed, that additional cost savings and synergies will be
realized in 2000 and beyond. Pursuant to the terms of the Merger
Agreement, we are required to sell PT-1. On March 29, 2000, we entered
into a Letter of Intent with PT-1 Acquiror for the sale of all of the
assets of PT-1, less certain liabilities. While we believe the PT-1 Sale
and the World Access
42
<PAGE>
Merger will be completed, the failure to complete the PT-1 Sale or the
completion of the PT-1 Sale for less than $150 million may result in the
termination of the Merger Agreement and, consequently, prevent the Merger
with World Access.
- NOTE WITH WORLDCOM. On April 12, 2000 STAR entered into a note agreement
with WorldCom which provided for the conversion of $56.0 million of trade
payables into a note payable. The note is secured by our customer base,
bears interest at 16.0% per annum and is payable at the earlier of the
close of the World Access Merger or August 1, 2000.
43
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain selected items in our statements of
operations as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Operating expenses:
Cost of services.......................................... 86.3 84.6 87.1
Selling, general and administrative expenses.............. 11.3 10.7 15.1
Depreciation and amortization............................. 1.3 2.4 4.2
Loss on impairment of goodwill............................ -- 0.4 --
----- ----- -----
Total operating expenses................................ 98.9 98.3 106.6
Income (loss) from operations............................... 1.1 1.7 (6.6)
----- ----- -----
Income (loss) before provision for income taxes............. 0.3 1.9 (7.2)
Provision for income taxes.................................. 0.7 1.6 (1.1)
----- ----- -----
Net income (loss)........................................... (0.4)% 0.3% (6.0)%
===== ===== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUES: Total revenues increased 71.5% to $1,061.8 million in the twelve
months ended December 31, 1999 from $619.2 million in the twelve months ended
December 31, 1998. The increase is primarily a result of the continued growth in
the North American commercial operations due to the acquisition of PT-1, which
contributed revenues from prepaid calling card and dial around programs, and the
European operations.
Revenues from North American wholesale customers decreased 12.1% to $465.8
million in the twelve months ended December 31, 1999 from $529.8 million in the
twelve months ended December 31, 1998. North American wholesale revenues for the
twelve months ended December 31, 1999 include broadband sales activity. Minutes
of use generated by North American wholesale customers increased 28.5% to
2.1 billion minutes of use in the twelve months ended December 31, 1999, as
compared to 1.7 billion minutes of use in the comparable period of the year
prior. The increase in minutes of use reflects the continued growth in the
number of North American wholesale customers to 241 at December 31, 1999, up
from 151 customers at December 31, 1998, as well as an increase in usage by
existing customers. The decrease in revenue for the twelve months ended December
31, 1999 resulted from a significant decline in rates per minute, as the average
North American wholesale rate per minute of use declined approximately 32.3% to
$0.21 for the current twelve month period as compared to $0.31 for the twelve
month period ended December 31, 1998, reflecting continued lower prices on
competitive routes. This decline is also attributable to a change in country mix
that includes a larger proportion of lower rate per minute countries such as
Mexico, Germany, the United Kingdom, Canada and Japan. The period to period
decline in rate per minute was not a significant factor in the relative increase
in minutes of use.
North American commercial revenues increased over 680% to $471.5 million in
the twelve months ended December 31, 1999 from $60.2 million in the comparable
1998 period. The growth is due primarily to the consummation of the PT-1
acquisition in the first quarter of 1999 which diversified our revenue base with
both prepaid calling card and dial around programs. Minutes of use generated by
North American commercial customers increased over 780% to 3.0 billion minutes
in the twelve months ended December 31, 1999, as compared to 337.8 million
minutes of use in the comparable twelve month period of the prior year. The
average North American commercial rate per minute decreased approximately 11.1%
to $0.16 per minute in the twelve months ended December 31, 1999 from $0.18 per
minute in the twelve months ended December 31, 1998, primarily due to the
increase in commercial usage from the prepaid calling card and dial around
programs.
44
<PAGE>
The twelve months ended December 31, 1999 also includes revenues from the
European operations which increased over 320% to $124.4 million, as compared to
$29.2 million in the comparable twelve month period of 1998. We had twelve
switches throughout Europe at December 31, 1999, as compared to five switches at
December 31, 1998. Management believes that the prospects for growth in Europe
remain strong as STAR Telecommunications Deutschland GmbH is fully utilizing its
interconnect with Deutsche Telekom AG, as well as with other European PTTs. In
addition, management expects continued growth in European revenues as we further
expand into Austria and Switzerland.
COST OF SERVICES (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION): Total cost
of services (exclusive of depreciation and amortization) increased 76.7% to
$925.2 million in the twelve months ended December 31, 1999 from $523.6 million
in the twelve months ended December 31, 1998 and increased as a percentage of
revenues for the same periods to 87.1% from 84.6%.
Cost of services (exclusive of depreciation and amortization) from North
American vendors increased 66.5% to $817.0 million in the twelve months ended
December 31, 1999 from $490.7 million in the comparable 1998 period and
increased as a percentage of North American revenues to 87.2% from 83.2%,
respectively. Cost of services (exclusive of depreciation and amortization)
includes costs relating to broadband sales during the twelve months ended
December 31, 1999. The growth in cost of services (exclusive of depreciation and
amortization) reflects the increase in minutes of use from the commercial usage
generated from prepaid calling card and dial around programs offset by an
overall declining average cost per minute. The average cost per minute declined
as a result of competitive pricing pressures, a larger proportion of lower cost
per minute countries, as well as an increasing proportion of traffic routed over
our proprietary network. Management believes that the average cost per minute
will continue to decline as we expand our domestic and international network.
Cost of services (exclusive of depreciation and amortization) for the twelve
months ended December 31, 1999, were negatively impacted as a result of delays
in delivery for domestic network capacity which resulted in redundant leased
line costs. The majority of this capacity was delivered and accepted in the
fourth quarter of 1999.
The twelve months ended December 31, 1999 also includes cost of services
(exclusive of depreciation and amortization) of $108.2 million generated from
the European operations, as compared to $33.0 million in the comparable twelve
months ended December 31, 1998. The increase in cost of services (exclusive of
depreciation and amortization) from the European operations was attributable to
increased usage and increased private line costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: For the twelve months ended
December 31, 1999, total selling, general and administrative expenses, exclusive
of merger expenses of $1.9 million, increased over 142% to $160.1 million from
$66.1 million in the twelve months ended December 31, 1998 and increased as a
percentage of revenues to 15.1% from 10.7% over the comparable 1998 period. The
increase is primarily a result of continued growth in our North American
commercial and European operations.
North American selling, general and administrative expenses increased by
128% to $126.2 million in the twelve months ended December 31, 1999 from $55.0
million in the comparable 1998 period. North American selling, general and
administrative expenses increased as a percentage of North American revenues to
13.5% from 9.3%, respectively. The increase is primarily a result of PT-1
operating expenses subsequent to the acquisition, which include payroll,
advertising, bad debt and other related expenses in connection with the
expansion of the prepaid calling card and dial around programs. In addition, the
increase is attributable to the sales force expansion and additional back office
support personnel for ALLSTAR in the first and second quarters of 1999. The
provision for bad debt expense increased for the twelve month period ending
December 31, 1999 as compared to the twelve month period ending December 31,
1998 due, in part, to a reserve for a commercial customer of ALLSTAR in the
second quarter of 1999 as well as increased bad debt reserves related to the
North American wholesale and commercial segments.
Selling, general and administrative expenses related to our European
operations increased over 205% to $33.9 million in the twelve months ended
December 31, 1999, from approximately $11.1 million in the
45
<PAGE>
comparable 1998 period. The increase reflects our commitment to continue
expansion efforts in Europe by adding personnel to become a carrier in
additional European countries and to expand our commercial sales force and back
office support personnel in Germany.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
increased by 193.8% to $44.2 million for the twelve months ended December 31,
1999 from $15.1 million for the comparable 1998 period, and increased as a
percentage of revenues to 4.2% from 2.4% over the comparable period in the prior
year. The increase is primarily due to approximately $9.3 million of goodwill
amortization expense resulting from the PT-1 acquisition. In addition,
depreciation expense increased due to significant asset additions in Europe and
the inclusion of the depreciation expense for PT-1 assets. Depreciation expense
also increased as a result of our investment in domestic broadband capacity
during 1999. Depreciation and amortization attributable to North American assets
amounted to approximately $32.9 million. European operations realized total
depreciation and amortization of approximately $11.3 million. We expect
depreciation and amortization expense to continue to increase as a percentage of
revenues as we continue to expand our global telecommunications network.
INCOME (LOSS) FROM OPERATIONS: For the twelve months ended December 31,
1999, loss from operations was $69.6 million as compared to income from
operations of $10.8 million in the comparable 1998 period. Operating margin in
the twelve months ended December 31, 1999 was a negative 6.6% as compared to a
positive 1.7% in 1998. Operating margin decreased in the twelve months ended
December 31, 1999 due primarily to rate compression in the wholesale market,
goodwill amortization, an accrued rate dispute related to European operations in
the second quarter of 1999, and additional bad debt reserves in the second
quarter of 1999, as well as increased payroll, commission, and operating
expenses attributable to our expansion of our commercial programs. The decrease
in operating margin was partially offset by profit realization of $9.5 million
from broadband sales in the third and fourth quarters of 1999. In addition, our
completion of two significant acquisitions in 1999 and approximately $1.9
million in merger expense contributed to the decline in operating margin in the
twelve months ended December 31, 1999.
OTHER INCOME (EXPENSE): We reported other expense, net, of $6.3 million for
the twelve months ended December 31, 1999 as compared to other income, net, of
approximately $779,000 for the comparable 1998 period. This increase is
primarily due to an increase in interest expense to $9.9 million during the
twelve months of 1999 from $3.4 million in the comparable period in 1998 due to
interest incurred on borrowings from our line of credit and additional capital
lease obligations for switches.
During the twelve months ended December 31, 1998, we earned a substantial
amount of interest on the proceeds from our May 1998 secondary equity offering.
Therefore, interest income decreased to $2.2 million from $4.5 million for the
periods ended December 31, 1999 and 1998, respectively.
In addition, other income of $1.4 million reflects a $9.2 million gain from
the sale of investments during the twelve month period ended December 31, 1999,
which was partially offset by $7.8 million in other expense. Of the $7.8 million
in other expense, $3.5 million related to the recognition of foreign currency
translation losses and $2.9 million related to the amendment and termination of
our credit facility with Foothill Capital Corporation.
PROVISION (BENEFIT) FOR INCOME TAXES: We recorded a tax benefit of $12.0
million in the twelve months ended December 31, 1999 due to operating losses.
The provision for income taxes for the twelve months ended December 31, 1998 was
$9.9 million.
YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUES: Total revenues increased 42.6% to $619.2 million in 1998 from
$434.1 million in 1997 primarily as a result of the continued growth in North
American wholesale operations, as described below.
Revenues from North American wholesale customers increased 40.9% to $529.8
million in 1998 from $376.0 million in 1997. Minutes of use generated by North
American wholesale customers increased 60.3% to 1.7 billion minutes of use
(including wholesale billed minutes of use to UDN) in 1998, as compared to
46
<PAGE>
1 billion minutes of use (including wholesale billed minutes of use to UDN) in
1997. The increase in revenues and minutes of use reflects the growth in the
number of North American wholesale customers from 105 in 1997 to 151 at the end
of 1998, as well as an increase in usage by existing customers, primarily
resulting from our expanding transmission capacity. The increase in revenues was
partially offset by a decline in rates per minute, as the average North American
wholesale rate per minute of use declined from $0.36 per minute in 1997 to $0.31
per minute in 1998, reflecting continued lower prices on competitive routes. The
decline in rates per minute is also attributable to the change in country mix to
include a larger proportion of lower rate per minute countries such as Mexico,
Germany and the United Kingdom. The period to period decline in rates per minute
was not a significant factor in the relative increase in minutes of use.
North American commercial revenues increased 3.6% to $60.2 million in 1998
from $58.1 million in 1997 reflecting the continued success of new international
rate plans that target ethnic markets for Latin America and the Pacific Rim. The
average North American commercial rate per minute of use decreased from $0.26
per minute in 1997 to $0.18 per minute in 1998, reflecting the continued pricing
pressures in the international market. Commercial minutes and average rates per
minute do not include any revenue or minutes attributable to UDN, which amounts
were negligible in 1998 and 1997.
In 1998, revenues generated from European operations totaled $29.2 million.
Management believes that the prospects for growth in Germany remain strong as
Star Telecommunications Deutschland GmbH is fully utilizing its interconnect
with Deutsche Telekom, AG as well as other European PTTs, to lower our cost of
services and to grow our European commercial customer base.
COST OF SERVICES (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION): Total cost
of services (exclusive of depreciation and amortization) increased 39.8% to
$523.6 million in 1998 from $374.5 million in 1997 and decreased as a percentage
of total revenues for the same periods to 84.6% from 86.3%.
Cost of services (exclusive of depreciation and amortization) from North
American wholesale vendors increased 35.1% to $453.2 million in 1998 from $335.5
million in 1997 and decreased as a percentage of North American wholesale
revenues for the same periods to 85.5% from 89.2%. North American commercial
cost of services (exclusive of depreciation and amortization) decreased 4.1% to
$37.4 million in 1998 from $39.0 million in 1997 and decreased as a percentage
of North American commercial revenues for the same periods to 62.1% from 67.1%.
The year ended 1998 also includes cost of services (exclusive of depreciation
and amortization) of $33.0 million generated from our European operations. The
growth in cost of services (exclusive of depreciation and amortization) reflects
the increase in minutes of use as well as an increase in leased private line
cost offset by an overall declining average cost per minute. The average cost
per minute declined as a result of changes in country mix to include a larger
proportion of lower cost per minute countries, competitive pricing pressures as
well as an increasing proportion of traffic routed over our proprietary network.
We currently have routes to 51 countries on our global network, up from 24
countries in 1997. Management believes that countries will continue to be added
to our global network thereby contributing to an overall decline in cost per
minute.
SELLING, GENERAL AND ADMINISTRATIVE: In 1998, total selling, general and
administrative expenses, (exclusive of merger costs of $1.0 million), increased
35.2% to $66.1 million from $48.9 million in 1997 and decreased as a percentage
of revenues to 10.7% from 11.3% over the comparable periods, due primarily to an
increased sales force, as described below. North American wholesale selling,
general and administrative expenses increased 26.8% to $32.6 million in 1998
from $25.7 million in 1997 and decreased as a percentage of North American
wholesale revenue to 6.2% from 6.8%, respectively.
47
<PAGE>
North American commercial selling, general and administrative expense
increased 2.8% to $22.4 million in 1998 from $21.8 million in 1997 and remained
flat as a percentage of revenues between the two periods. We expect North
American commercial selling, general and administrative costs to increase as a
percentage of revenues as additions to the sales force are hired to expand our
North American commercial customer base.
Selling, general and administrative expenses related to the European
operations amounted to $11.1 million in 1998 and $1.4 million in 1997 reflecting
the start up of new business efforts in Europe. We expect overall selling,
general and administrative expenses to continue to grow as a percentage of
revenues as we add personnel to staff our German operations and to initiate
carrier operations in additional European countries.
DEPRECIATION AND AMORTIZATION: In 1998, depreciation expense attributable
to North American assets amounted to $11.1 million and European operations
realized total depreciation of $4.0 million. In 1998, total depreciation
increased as a percentage of revenues to 2.4% from 1.3% for 1997. Depreciation
expense increased as a result of our continuing expansion of our proprietary
international network, which includes purchases of switches, submarine cable and
leasehold improvements associated with switch sites. We expect depreciation
expense to continue to increase as a percentage of revenues as we continue to
expand our global telecommunications network. As of July 1, 1998, we revised the
remaining lives of certain operating equipment from five to ten years. This
charge reduced depreciation expenses and increased income before income taxes by
approximately $2.0 million.
INCOME FROM OPERATIONS: Income from operations increased 127.3% to $10.8
million during 1998 from $4.7 million in 1997. Operating margin increased to
1.7% from 1.1%, respectively. Operating margin is expected to expand as we
continue to diversify our revenue base and as traffic is migrated from leased
facilities onto our owned network. Offsetting the declining cost of services on
a per minute basis were the startup costs of launching operations in Europe and
the expansion of the North American based commercial operations.
OTHER INCOME (EXPENSE): Other income (expense), net, increased to
approximately $779,000 in 1998 from a net expense of $3.6 million in 1997.
Interest income grew to $4.5 million in 1998 from $464,000 in 1997 as a result
of interest earned on investing proceeds from our secondary equity offering in
May 1998. Interest expense increased to $3.4 million in 1998 from $2.6 million
in 1997 in response to the additional capital leases for the financing of new
switches.
PROVISION FOR INCOME TAXES:
The provision for income taxes increased to $9.9 million in 1998 from $2.9
million in 1997 primarily due to the increase in our profitability.
LIQUIDITY AND CAPITAL RESOURCES.
We have incurred significant operating and net losses over the past twelve
months. Several factors contributed to this situation. We experienced
significant pricing pressures in the wholesale market, with deteriorating
wholesale gross margins during the last twelve months. We continue to deploy new
international direct circuits in an effort to increase the number of on-net
countries which historically have provided higher wholesale margins. Wholesale
gross margins were further affected by delayed delivery of North American fiber
routes by one of our major vendors which significantly increased the cost of our
leased lines. Completion of our domestic broadband network is expected to
provide margin improvement in the first quarter of 2000, though there can be no
assurances in that regard.
As of December 31, 1999, we had cash and cash equivalents of approximately
$25.6 million, short-term investments of $1.5 million, and a working capital
deficit of $197.9 million.
48
<PAGE>
Net cash provided by operating activities was $40.1 million for the twelve
months ended December 31, 1999 as compared to net cash used of $12.4 million for
the comparable 1998 period. This increase is due primarily to increases in
accounts payable and accrued expenses offset by increases in accounts and notes
receivable. The increase in accounts and notes receivable was due to general
increases in volume and extended payment terms for certain customers.
Our investing activities used cash of $58.3 million during the twelve months
ended December 31, 1999 as compared to $101.0 million for the comparable 1998
period. This use of cash was the result of our continued investment in capital
expenditures. Capital expenditures for the twelve months ended December 31, 1999
related primarily to the continued development of our network which included
switch expansion, and the replacement of leased line facilities with IRU's and
ownership interests on both domestic and international cable systems. On
September 29, 1999, Star Telecommunications Deutschland GmbH entered into an
agreement with Deutsche Leasing AG to finance new and pre-existing equipment
through a capital lease-financing arrangement. Under the terms of the agreement,
they had the option to finance equipment up to 80DM million or roughly $45
million. Cash generated from this arrangement was used primarily to finance
pre-existing equipment resulting in a net decrease in capital expenditures as
presented in the Consolidated Statement of Cash Flows. This use of cash was
partially offset by the sale of substantially all of our investment in a
Competitive Local Exchange Carrier ("CLEC") in 1999.
Cash used by financing activities for the twelve months ended December 31,
1999, totaled $1.0 million as compared to cash provided by financing activities
of $158.5 million for the comparable 1998 period. This reflects additional
borrowings under our line of credit offset by repayments of the line of credit,
long-term debt and capital lease obligation payments. The variance from 1999 to
1998 relates primarily to our secondary offering which generated approximately
$144.7 million in cash for us in 1998. Our indebtedness at December 31, 1999 was
approximately $156.4 million, of which $112.9 million represented long-term debt
and $43.5 million represented short-term debt. Our debt is currently a
combination of capital lease obligations, vendor financing for operating
equipment and amounts due under our existing credit facility.
On June 9, 1999, we entered into a $100 million two-year credit facility
agreement with Foothill Capital Corporation ("Foothill"). We failed to meet the
EBITDA and tangible net worth covenants in accordance with the agreement for the
period ended June 30, 1999. On October 15, 1999, we received an amendment from
the lender group which included resetting the financial covenants in accordance
with our updated financial forecast. Interest rates were adjusted to 2.75% over
the prime rate of interest for the revolving line of credit and 8.0% over the
prime rate for the term note. The interest rate on the term note increased 1.0%
per month for the remainder of the term. We also agreed to the reduction of
eligible borrowings on the revolving portion of the line of credit to $30
million from $75 million as well as the payment of a supplemental agency fee of
$500,000. The expiration date of the $25 million term loan was also modified to
January 31, 2000
On November 30, 1999, we entered into a two year receivables financing
agreement with RFC Capital Corporation ("RFC"). This facility allows us to
borrow up to $75 million based upon our eligible accounts receivable, and
replaced our facility with Foothill. The facility bears interest at the rate of
prime plus 2.75% and expires on November 30, 2001. The facility was funded on
December 23, 1999, allowing us to avoid $1 million in supplemental term loan
fees from Foothill. Additionally, the RFC facility provides the flexibility to
borrow against foreign receivables which would allow us to significantly
increase our eligible receivables available for borrowings. As of December 31,
1999, we had $43.5 million outstanding and were in compliance with all
covenants.
On April 12, 2000, we signed a promissory note with WorldCom for
$56.0 million dollars. This balance represents the total amount due to WorldCom
for termination and leased line services provided to us through December 31,
1999. The note, secured by our customer base, bears interest at a rate of 16.0%
per annum and does not require that any payment be made by us until the earlier
of the close of World Access Merger or August 1, 2000.
49
<PAGE>
On February 11, 2000, we entered into the Merger Agreement with World
Access. The agreement calls for World Access to infuse cash in the form of
bridge loan of up to $35 million with $25 million to go to our U.S. operations
and $10 million to go to STAR Germany. Our anticipated financing arrangements
with World Access will provide for predetermined initial advances with
additional advances to be made solely in World Access' discretion.
We believe that the PT-1 Sale and the Merger with World Access will be
completed as scheduled and that the WorldCom note payable will be satisfied at
maturity. We believe that our operating cash flow, World Access line of credit
availability and the proceeds from the PT-1 Sale will be adequate to meet our
operating requirements for at least fiscal 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
FOREIGN CURRENCY RISK. As a global enterprise, we face exposure to adverse
movements in foreign currency exchange rates. Our foreign currency exposures may
change over time as the level of activity in foreign markets grows which could
have a material adverse impact upon our financial results.
Certain of our assets, including certain bank accounts and accounts
receivable, exist in non dollar-denominated currencies, which are sensitive to
foreign currency exchange rate fluctuations. The non dollar-denominated
currencies are principally Deutschmarks and British Pounds Sterling.
Additionally, certain of our current and long-term liabilities are denominated
principally in Deutschmarks and British Pounds Sterling, which are also
sensitive to foreign currency exchange rate fluctuations.
We employ hedges in order to mitigate foreign currency exposure and intend
to do so in the future, in appropriate circumstances. The success of this
activity depends upon the estimation of international cash flow and intercompany
balances denominated in various currencies, primarily the Deutschmark. To the
extent that these forecasts are over- or understated during periods of currency
volatility, we could experience unanticipated currency gains or losses. We had
no foreign currency contracts outstanding as of December 31, 1999.
INTEREST RATE RISK. As of December 31, 1999, we had borrowings under our
receivables financing agreement amounting to $43.5 million. The interest rate on
the receivables financing line is equal to prime plus 2.75%. At any time, a
sharp rise in interest rates could have a material adverse impact upon our cost
of working capital and interest expense. We do not currently hedge this interest
rate exposure.
In addition, we had borrowings under long-term debt for capital equipment
amounting to $486,000 at December 31, 1999. The interest rate on this long-term
debt from our two outstanding obligations is 8.0% and LIBOR plus 6.0%. At any
time, a sharp rise in interest rates could have a material adverse impact upon
our cost of working capital and interest expense. We do not currently hedge this
interest rate exposure.
The following table presents the hypothetical impact on our financial
results for changes in interest rates for the variable rate obligations we held
at December 31, 1999. The modeling technique used measures the change in our
results arising from selected potential changes in interest rates. Market rate
changes reflect immediate hypothetical parallel shifts in the yield curve of
plus or minus 50 basis points ("BPS"), 100 BPS, and 150 BPS over a twelve month
time horizon.
INTEREST RATE EXPOSURE ANALYSIS
INCREASE OR (DECREASE) IN ANNUAL INTEREST EXPENSE DUE TO CHANGES IN INTEREST
RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DESCRIPTION 50 BPS 100 BPS 150 BPS (50) BPS (100) BPS (150) BPS
- ----------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Line of Credit.......................... $218 $435 $653 $(218) $(435) $(653)
Long Term Debt.......................... $ 2 $ 5 $ 7 $ (2) $ (5) $ (7)
</TABLE>
50
<PAGE>
ITEM 8. FINANCIAL STATEMENTS.
See the Index included at "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 10-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
51
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Our officers and directors who served as officers and directors in 1999 and
their ages as of March 6, 2000 are set forth in the table below. Mark Gershein
and Arunas A. Chesonis have since resigned from their positions as directors and
their seats on the Board are currently vacant. James E. Kolsrud has since
resigned from his position as Executive Vice President--Operations and
Engineering and his position is currently vacant.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Christopher E. Edgecomb(1)................ 41 Chief Executive Officer, Chairman of the
Board and Director
Mary A. Casey(1)(2)....................... 37 President, Secretary and Director
David Vaun Crumly......................... 36 Executive Vice President--Sales and
Marketing
James E. Kolsrud.......................... 55 Executive Vice President--Operations and
Engineering
Kelly D. Enos............................. 41 Chief Financial Officer, Treasurer and
Assistant Secretary
Mark Gershien............................. 48 Director
Gordon Hutchins, Jr.(3)................... 50 Director
John R. Snedegar(2)(3).................... 50 Director
Arunas A. Chesonis........................ 37 Director
Samer Tawfik.............................. 34 Director
</TABLE>
- ------------------------
(1) Member of Non-Executive Stock Option Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
CHRISTOPHER E. EDGECOMB co-founded us in September 1993. He served as our
President until January 1996 and has served as our Chief Executive Officer and
Chairman of the Board since January 1996. Mr. Edgecomb has been one of our
directors since our inception. Prior to that time, Mr. Edgecomb was a founder
and the Executive Vice President of West Coast Telecommunications ("WCT"), a
nation-wide long distance carrier, from August 1989 to December 1994. Prior to
founding WCT, Mr. Edgecomb was President of Telco Planning, a telecommunications
consulting firm, from January 1986 to July 1989. Prior to that time,
Mr. Edgecomb held senior level sales and marketing positions with TMC
Communications, American Network and Bay Area Teleport.
MARY A. CASEY has been a director and our Secretary since co-founding us in
September 1993, and has served as our President since January 1996. Prior to
that time, Ms. Casey was Director of Customer Service at WCT from December 1991
to June 1993, and served as Director of Operator Services at Call America, a
long distance telecommunications company, from May 1988 to December 1991.
DAVID VAUN CRUMLY has served as our Executive Vice President--Sales and
Marketing since January 1996. Prior to that time, Mr. Crumly served as a
consultant to the Company from November 1995 to January 1996, was Vice President
of Carrier Sales of Digital Network, Inc. from June 1995 to November 1995 and
was Director of Carrier Sales of WCT from June 1992 to June 1995. Prior to
joining WCT, Mr. Crumly served in various sales and marketing capacities with
Metromedia, a long-distance company, from September 1990 to June 1992 and with
Claydesta, a long-distance company, from May 1987 to September 1989.
JAMES E. KOLSRUD has served as our Executive Vice President--Operations and
Engineering since September 1996 and resigned from such position effective
February 15, 2000. Prior to joining us, Mr. Kolsrud was an international
telecommunications consultant from March 1995 to September 1996.
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<PAGE>
Prior to that time, he was a Vice President, Corporate Engineering and
Administration of IDB Communications Group, Inc. ("IDB"), an international
communications company, from October 1989 to March 1995, and prior to that time,
he was President of the International Division of IDB.
KELLY D. ENOS has served as our Chief Financial Officer since December 1996
and as Treasurer and Assistant Secretary since April 1997. Prior to that time,
Ms. Enos was an independent consultant in the merchant banking field from
February 1996 to November 1996 and a Vice President of Fortune Financial, a
merchant banking firm, from April 1995 to January 1996. Ms. Enos served as a
Vice President of Oppenheimer & Co., Inc., an investment bank, from July 1994 to
March 1995 and a Vice President of Sutro & Co., an investment bank, from January
1991 to June 1994.
MARK GERSHIEN has served as one of our directors since March 1998, and
resigned as a director effective October 20, 1999. Mr. Gershien has been the
Senior Vice President of Sales and Marketing for Level 3 Communications, a
telecommunications and information services company, since January 1998. Prior
to that time, Mr. Gershien was the Senior Vice President of National Accounts
for WorldCom, Inc., an international telecommunications company, and President
and Chief Executive Officer of MFS Telecom, a division of MFS Communications,
Inc. prior to its merger with WorldCom, Inc.
GORDON HUTCHINS, JR. has served as one of our directors since January 1996.
Mr. Hutchins has been President of GH Associates, a telecommunications
consulting firm, since July 1989. Prior to founding GH Associates, Mr. Hutchins
served as President and Chief Executive Officer of ICC Telecommunications, a
competitive access provider, and held senior management positions with several
other companies in the telecommunications industry.
JOHN R. SNEDEGAR has served as one of our directors since January 1996. Mr.
Snedegar has been the Chief Executive Officer of Micro General Corp. since April
1999. He served as Chief Executive Officer of UDN from June 1990 to April 1999.
From June 1980 to February 1992, Mr. Snedegar was the President and Chief
Executive Officer of AmeriTel Management, Inc., a provider of long distance
telecommunications and management services. Mr. Snedegar is also a director for
StarBase Corporation, a software development company, Micro General Corporation,
a full service communications service provider, and Shopnow.com, an electronic
commerce software company. Mr. Snedegar also serves as President of Kendall
Venture Funding, Ltd., a reporting company in Alberta, Canada.
ARUNAS A. CHESONIS has served as one of our directors since May 1998, and
resigned as a director effective February 22, 2000. Mr. Chesonis is presently
the Chairman and Chief Executive Officer of PaeTec Communications, Inc., a local
exchange carrier located in Fairfield, New York. From May 1987 to April 1998,
Mr. Chesonis served in various executive positions with ACC Corp. and its
subsidiaries, including most recently President of ACC Corp. and President and
Chief Operating Officer of ACC Global Corp.
SAMER TAWFIK has served as one of our directors since February 1999. Mr.
Tawfik founded PT-1 in April 1995 and served as Chief Executive Officer of PT-1
until February 3, 1999, at which time Mr. Tawfik assumed the title of President
of PT-1 Communications. Mr. Tawfik resigned his position on December 31, 1999.
From 1984 to 1994, Mr. Tawfik was principal owner and manager of three amusement
companies.
BOARD COMPOSITION
In accordance with the terms of our Certificate of Incorporation, the terms
of office of the Board are divided into three classes: Class I, whose term will
expire at the annual meeting of stockholders to be held in 2001; Class II, whose
term will expire at the annual meeting of stockholders to be held in 2002; and
Class III, whose term will expire at the annual meeting of stockholders to be
held in 2000. The Class I directors are Gordon Hutchins, Jr. and John R.
Snedegar, the Class II directors are Mary A. Casey and Samer Tawfik, and the
Class III director is Christopher E. Edgecomb. At each annual meeting of
stockholders after the initial classification, the successors to directors whose
term will then expire will be elected to serve from the time of election and
qualification until the third annual meeting following election. This
classification of the Board may have the effect of delaying or preventing
changes in control or changes in our management.
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<PAGE>
Each officer is elected by and serves at the discretion of our Board. Each
of our officers and directors, other than nonemployee directors, devotes
substantially full time to our affairs. Our nonemployee directors devote such
time to our affairs as is necessary to discharge their duties. There are no
family relationships among any of our directors and officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16") requires our executive
officers, directors and beneficial owners of more than 10% of our common stock
(collectively, "Insiders") to file reports of ownership and changes in ownership
of our common stock with the Securities and Exchange Commission and to furnish
us with copies of all Section 16 forms they file. We became subject to Section
16 in conjunction with the registration of our common stock under the Exchange
Act effective June 12, 1997. Based solely on our review of the copies of such
forms we received, or written representations from certain reporting persons
that no reports on Form 5 were required for those persons, we believe that our
Insiders complied with all applicable Section 16 filing requirements during
1999.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned
by our Chief Executive Officer and four other executive officers who earned (or
would have earned) salary and bonus in excess of $100,000 for services rendered
in all capacities to us and our subsidiaries (the "STAR Named Officers") for
each of the fiscal years in the three-year period ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- -------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Christopher E. Edgecomb ................ 1999 305,000 95,000 -- --
Chief Executive Officer and Chairman 1998 360,000 -- -- --
of the Board 1997 360,000 -- -- 3,202(1)
1999 292,000 95,000 -- 10,413(2)
Mary A. Casey .......................... 1998 240,000 -- -- 10,413(2)
President and Secretary 1997 217,500 -- -- 13,615(2)
David Vaun Crumly ...................... 1999 338,901(4) 20,000 137,746 9,000(2)
Executive Vice President-Sales and 1998 351,005 -- 4,200 7,000(2)
Marketing 1997 380,779 253 -- 6,202(3)
James E. Kolsrud ....................... 1999 237,500 20,000 39,500 9,600(2)
Executive Vice President-Operations 1998 200,833 354 4,200 9,600(2)
and Engineering 1997 177,083 1,014 -- 5,528(6)
1999 180,000 20,000 10,000 --
Kelly D. Enos .......................... 1998 160,833 259 4,200 --
Chief Financial Officer 1997 150,000 1,014 20,500 25,924(5)
</TABLE>
- ------------------------
(1) Consists of life and health insurance premiums paid by us.
(2) Consists of a car allowance paid by us.
54
<PAGE>
(3) Consists of life and health insurance premiums and a car allowance paid by
us.
(4) Includes $218,901 of sales commissions.
(5) Consists of a moving allowance of $22,721 and life and health insurance
premiums paid by us.
(6) Consists of health insurance premiums paid by us.
The following table contains information concerning the stock option grants
made to each of the STAR Named Officers named below during the year ended
December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(1)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR PER SHARE($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------------- --------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
10,000(2) 0.5% $13.00 2/8/09 81,756 207,187
2,746(3) 0.1% $16.39 3/24/09 28,305 71,729
David Vaun Crumly ...... 125,000(4) 5.8% $ 8.88 5/28/09 698,073 1,769,054
10,000(5) 0.5% $13.00 1/31/01 81,756 207,187
James E. Kolsrud ....... 29,500(5) 1.4% $ 4.91 1/31/01 91,092 230,846
Kelly D. Enos........... 10,000(2) 0.5% $13.00 2/08/09 81,756 207,187
</TABLE>
- ------------------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of our
securities that the actual stock price appreciation over the 10-year option
term will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of our common stock appreciates over the option
term, no value will be realized from the option grants made to the executive
officer.
(2) The option becomes exercisable in four equal annual installments on
February 8, 2000, 2001, 2002 and 2003.
(3) The option becomes exercisable in four equal annual installments on
March 24, 2000, 2001, 2002 and 2003.
(4) The option becomes exercisable in four equal annual installments on May 28,
2000, 2001, 2002 and 2003.
(5) The option is fully vested as of February 11, 2000.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON (#)VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
NAME EXERCISE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------- ---------------------------------
<S> <C> <C> <C> <C>
David Vaun Crumly..... -- -- 65,904/103,376 $168,514/$0
James E. Kolsrud...... -- -- 0/197,450 $0/$1,028,070
Kelly D. Enos......... -- -- 130,139/58,311 $426,158/$147,479
</TABLE>
No stock appreciation rights were exercised during 1999 nor were any outstanding
at the end of that year.
55
<PAGE>
DIRECTOR COMPENSATION
Our non-employee directors receive $2,000 for each Board meeting attended
and $1,000 for each telephonic Board meeting. In addition, each non-employee
director is reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board and its committees. In 1999, Messrs.
Hutchins, Chesonis and Gershien were each granted stock options to purchase
10,000 shares of our common stock. See "Certain Relationships and Related
Transactions--Transactions with Outside Directors."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board (the "Compensation Committee") was
formed in May 1996, and, in 1999, the members of the Compensation Committee were
Gordon Hutchins, Jr. and John R. Snedegar. Neither of these individuals was at
any time during the year ended December 31, 1999, or at any other time, our
officer or employee. The Non-Executive Compensation Committee of the Board (the
"Non-Executive Compensation Committee") was formed in 1997, and the members are
Christopher E. Edgecomb and Mary A. Casey. No member of the Compensation
Committee or the Non-Executive Compensation Committee served at any time during
the year ended December 31, 1999 as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our Board, Compensation Committee or Non-Executive
Compensation Committee. The Compensation Committee and the Non-Executive
Compensation Committee shall collectively be referred to hereafter as the
"Compensation Committees." See "Certain Relationships and Related
Transactions--Transactions with Outside Directors" for information regarding the
interests of Messrs. Snedegar and Hutchins in certain transactions and
arrangements involving us.
1997 OMNIBUS STOCK INCENTIVE PLAN
Our 1997 Omnibus Stock Incentive Plan (as amended, the "Omnibus Plan") was
adopted by the Board on January 30, 1997 as the successor to our 1996
Supplemental Option Plan (the "Supplemental Plan"). We have issued and reserved
for issuance an aggregate of 4,075,000 shares under the Omnibus Plan, comprised
of (i) the 2,050,000 shares that were available for issuance under the
Supplemental Plan, plus (ii) an increase of 2,025,000 shares. As of December 31,
1999, 371,074 shares had been issued under the Supplemental and Omnibus Plans,
options for approximately 3,648,833 shares were outstanding (594,446 of which
were granted under the Supplemental Plan) and options for approximately 55,093
shares remained available for future grant. Outstanding options, including
options granted under the Supplemental Plan, which expire or terminate prior to
exercise, will be available for future issuance under the Omnibus Plan. In
addition, if stock appreciation rights ("SARs") and stock units are settled
under the Omnibus Plan, then only the number of shares actually issued in
settlement will reduce the number of shares available for future issuance under
this plan.
Under the Omnibus Plan, employees, outside directors and consultants may be
awarded options to purchase shares of our common stock, SARs, restricted shares
and stock units. Options may be incentive stock options designed to satisfy
Section 422 of the Internal Revenue Code or nonstatutory stock options not
designed to meet such requirements. SARs may be awarded in combination with
options, restricted shares or stock units, and such an award may provide that
the SARs will not be exercisable unless the related options, restricted shares
or stock units are forfeited.
The Omnibus Plan is administered by the Board or the Compensation Committees
(the "Administrator"). The Administrator has the complete discretion to
determine which eligible individuals are to receive awards; determine the award
type, number of shares subject to an award, vesting requirements and other
features and conditions of such awards; interpret the Omnibus Plan; and make all
other decisions relating to the operation of the Omnibus Plan.
56
<PAGE>
The exercise price for options granted under the Omnibus Plan may be paid in
cash or in outstanding shares of our common stock. Options may also be exercised
on a cashless basis, by a pledge of shares to a broker or by promissory note.
The payment for the award of newly issued restricted shares will be made in
cash. If an award of SARs, stock units or restricted shares from our treasury is
granted, no cash consideration is required.
The Administrator has the authority to modify, extend or assume outstanding
options and SARs or may accept the cancellation of outstanding options and SARs
in return for the grant of new options or SARs for the same or a different
number of shares and at the same or a different exercise price.
The Board may determine that an outside director may elect to receive his or
her annual retainer payments and meeting fees from us in the form of cash,
options, restricted shares, stock units or a combination thereof. The Board will
decide how to determine the number and terms of the options, restricted shares
or stock units to be granted to outside directors in lieu of annual retainers
and meeting fees.
Upon a change in control, the Administrator may determine that an option or
SAR will become fully exercisable as to all shares subject to such option or
SAR. A change in control includes a merger or consolidation, certain changes in
the composition of the Board and an acquisition of 50% or more of the combined
voting power of our outstanding stock. In the event of a merger or other
reorganization, outstanding options, SARs, restricted shares and stock units
will be subject to the agreement of merger or reorganization, which may provide
for the assumption of outstanding awards by the surviving corporation or its
parent, their continuation by us (if we are the surviving corporation),
accelerated vesting and accelerated expiration, or settlement in cash.
The Board may amend or terminate the Omnibus Plan at any time. Amendments
may be subject to stockholder approval to the extent required by applicable
laws. In any event, the Omnibus Plan will terminate on January 22, 2007, unless
sooner terminated by the Board.
1996 STOCK INCENTIVE PLAN
Our 1996 Stock Incentive Plan ("the Plan") was adopted by the Board on
January 22, 1996, and amended on March 31, 1996. We have issued and reserved for
issuance an aggregate of 1,476,000 shares under the Plan. As of December 31,
1999, 1,165,572 shares had been issued under the Plan, options for 177,790
shares were outstanding and options for 132,638 shares remained available for
future grant. Outstanding options which expire or terminate prior to exercise
will be available for future issuance under the Plan.
Under the Plan, employees, outside directors and consultants may be awarded
options to purchase shares of our common stock. These options may be incentive
stock options designed to satisfy Section 422 of the Internal Revenue Code or
nonstatutory stock options not designed to meet such requirements.
The Plan is administered by the Board or the Compensation Committees (the
"Administrator"). The Administrator has the complete discretion to determine
which eligible individuals are to receive awards; determine the award type,
number of shares subject to an award, vesting requirements and other features
and conditions of such awards; interpret the Plan; and make all other decisions
relating to the operation of the Plan.
The exercise price for options granted under the Plan may be paid in cash
or, at the discretion of the Administrator, in outstanding shares of our common
stock. Options may also be exercised by delivery of an irrevocable direction to
a broker to sell shares and deliver all or part of the sales proceeds in payment
of the exercise price to us, by the proceeds of a loan secured by the shares or,
at the discretion of the Administrator, by full recourse promissory note.
57
<PAGE>
Upon a change in control, the Board may determine that an option shall
become fully exercisable as to all shares subject to such option. A change in
control includes an acquisition of more than 50% of our stock outstanding
immediately prior to such acquisition, a merger whereby our stockholders,
immediately after consummation of such transaction, own equity securities
possessing less than 50% of the voting power of the surviving or acquiring
corporation and the sale or other disposition of all or substantially all of our
assets. In the event that we merge with or into another entity in which our
stockholders receive cash in exchange for their shares, the Board may provide
that, upon consummation of such merger, all then outstanding options shall
automatically be converted into the right to receive cash in an amount equal to
the difference, if any, between the price to be received by holders of our
common stock for their shares and the respective exercise prices of the
outstanding options. If a change in control occurs and the Board does not
determine that an option shall become fully exercisable, the exercisability of
an option granted under the Plan shall not be affected, except that any options
held by an optionee whose employment with us is terminated other than for cause
within one year of such change of control shall be deemed fully exercisable as
of the date of such termination of employment.
The Board may amend or terminate the Plan at any time. Any amendment which
increases the number of shares which may be issued under the Plan, materially
increases the benefits accruing to persons eligible to purchase shares under the
Plan or materially modifies the requirements for eligibility under the Plan
shall not become effective unless and until approved by our stockholders. The
Plan shall expire on January 22, 2006, unless sooner terminated by the Board.
1996 OUTSIDE DIRECTOR NONSTATUTORY STOCK OPTION PLAN
Our 1996 Outside Director Nonstatutory Stock Option Plan (the "Director
Plan") was ratified and approved by the Board as of May 14, 1996. We have issued
and reserved for issuance an aggregate of 410,000 shares of our common stock
under the Director Plan. As of December 31, 1999, 82,000 shares had been issued
under the Director Plan, options for 71,500 shares were outstanding and options
for 256,500 shares remained available for future grant. If an outstanding option
expires or terminates unexercised, then the shares subject to such option will
again be available for issuance under the Director Plan.
Under the Director Plan, our outside directors may receive nonstatutory
options to purchase shares of our common stock. The Director Plan is
administered by the Board or the Compensation Committee (the "Administrator").
The Administrator has the discretion to determine which eligible individuals
will receive options, the number of shares subject to each option, vesting
requirements and any other terms and conditions of such options.
The exercise price for options granted under the Director Plan will be at
least 85% of the fair market value of our common stock on the option grant date,
shall be 110% of the fair market value of our common stock on the option grant
date if the option is granted to a holder of more than 10% of our common stock
outstanding and may be paid in cash, check or shares of our common stock. The
exercise price may also be paid by cashless exercise or pledge of shares to a
broker.
The Administrator may modify, extend or renew outstanding options or accept
the surrender of such options in exchange for the grant of new options, subject
to the consent of the affected optionee.
Upon a change in control, the Board may accelerate the exercisability of
outstanding options and provide an exercise period during which such accelerated
options may be exercised. The Board also has the discretion to terminate any
outstanding options that had been accelerated and had not been exercised during
such exercise period. In the event that we merge into another corporation in
which holders of our common stock receive cash for their shares, the Board may
settle the option with a cash payment equal to the difference between the
exercise price and the amount paid to holders of our common stock pursuant to
the merger.
58
<PAGE>
The Board may amend or terminate the Director Plan at any time. In any
event, the Director Plan will terminate on May 14, 2006, unless sooner
terminated by the Board.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
We have an employment agreement with Mary A. Casey, pursuant to which Ms.
Casey holds the position of President, is paid an annual salary of $20,000 per
month, subject to adjustment to reflect increases in the Consumer Price Index,
was entitled to purchase 1,677,273 shares of our common stock, and is eligible
to receive a bonus, as determined by the Chief Executive Officer and the Board.
The agreement provides that if Ms. Casey's employment is terminated without
cause, she will continue to receive the compensation provided in the agreement
until its expiration on December 31, 2000, less any amounts she earns from other
employment. Under the agreement and the other employment agreements discussed
below, cause is defined as a material act of dishonesty, fraud or
misrepresentation or any act of moral turpitude, the default in the performance
of the person's duties or if the person fails to execute the specific
instructions of the Board or management and does not correct the failure after
receiving notice from us.
In January 1996, we entered into an employment agreement with David Vaun
Crumly pursuant to which Mr. Crumly became Executive Vice President--Sales and
Marketing. The agreement provides for an annual salary of $10,000 per month with
an annual increase, plus incentive bonuses tied to our gross revenues. The
agreement also provides for a commission on certain of our accounts and an
option to purchase 369,000 shares of our common stock at an exercise price of
$0.73 per share. In addition, in the event of a Sale Transaction, Mr. Crumly
will receive a bonus payment equal to the lesser of $1,500,000 or a percentage
of the monthly gross sales of accounts relating to customers introduced to us by
Mr. Crumly. If his employment is terminated in certain circumstances, without
cause, within four months after a Sale Transaction (as defined below), Mr.
Crumly is entitled to receive the compensation provided in this agreement, minus
any compensation earned by other employment, until the expiration of the
agreement on December 31, 2000. A Sale Transaction is an acquisition of more
than 75% of our voting securities, pursuant to a tender offer or exchange offer
approved in advance by the Board.
In December 1996, we entered into an employment agreement with Kelly D.
Enos, pursuant to which Ms. Enos became Chief Financial Officer. The agreement
provides for an annual salary of $150,000 (which has been increased to $180,000)
and an option to purchase 153,750 shares of our common stock at an exercise
price of $4.00 per share. The agreement also provides that Ms. Enos will receive
a severance payment equal to the compensation which she would have received
under the remaining term of the agreement, or December 31, 2000, if terminated
without cause. The amounts Ms. Enos earns by virtue of other employment will
reduce the amounts she receives under the agreement prior to the expiration of
the term.
In September 1996, we entered into an employment agreement with James
Kolsrud, pursuant to which Mr. Kolsrud became Executive Vice
President--Operations and Engineering. The agreement provides for a monthly
salary of $20,000. The agreement also provides for Mr. Kolsrud to receive a
severance payment equal to the compensation which he would have received under
the remaining term of the agreement, or December 31, 2000, if terminated without
cause. The amounts Mr. Kolsrud earns by virtue of other employment will reduce
the amounts he receives under the agreement prior to the expiration of the term.
We accepted Mr. Kolsrud's resignation from his position as Executive Vice
President--Operations and Engineering effective February 25, 2000. We
accelerated the vesting of Mr. Kolsrud's options effective upon his resignation
and extended the period during which he may exercise such options to
January 31, 2001.
59
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us regarding
beneficial ownership of our common stock as of March 31, 2000 by (i) each person
who is known by us to own beneficially more than five percent of our common
stock, (ii) each of our directors, (iii) each of the STAR Named Officers, and
(iv) all current officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT(2)
- ------------------------------------ ---------- ----------
<S> <C> <C>
West Highland Capital(3).................................... 7,737,660 13.2%
Gotel Investments Ltd.(4)................................... 4,192,296 7.1%
Gordon Hutchins(5).......................................... 202,260 *
John R. Snedegar(6)......................................... 20,250 *
Mark Gershien(6)............................................ 20,250 *
Arunas A. Chesonis(6)....................................... 20,000 *
Christopher E. Edgecomb(7).................................. 13,166,265 22.4%
Mary A. Casey............................................... 1,596,613 2.7%
David Vaun Crumly(8)........................................ 803,936 1.4%
James E, Kolsrud(9)......................................... 319,197 *
Kelly D. Enos(10)........................................... 151,859 *
Samer Tawfik................................................ 9,138,717 15.6%
All directors and executive officers as a group (10
persons)(11).............................................. 25,439,347 42.9%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
our common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to securities. The address for each listed director and officer
is c/o STAR Telecommunications, Inc., 223 East De La Guerra Street, Santa
Barbara, California 93101. To our knowledge, except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of our common stock.
(2) Percentage of beneficial ownership is based on 58,693,650 shares of our
common stock outstanding as of March 31, 2000. The number of shares of our
common stock beneficially owned includes the shares issuable pursuant to
stock options and warrants that are exercisable within sixty days of
March 31, 2000.
(3) Represents 2,079,500 shares of our common stock held by West Highland
Capital, Inc., 1,789,330 shares of our common stock held by Estero Partners,
LLC, 2,079,500 shares of our common stock held by Lang H. Gerhard, 1,539,790
shares of our common stock held by West Highland Partners, L.P., and 249,540
shares of our common stock held by Buttonwood Partners, L.P., as reported by
West Highland Capital, Inc. in its Schedule 13G filed with the Securities
and Exchange Commission on February 11, 1999.
(4) Represents 1,397,432 shares of our common stock held by Gotel Investments
Ltd., 1,397,432 shares of our common stock held by Global Investments Trust,
and 1,397,432 shares of our common stock held by Intertrust (Guernsey)
Limited, as reported by Gotel Investments Ltd. in its Schedule 13G filed
with the Securities and Exchange Commission on February 9, 1999.
(5) Consists of 3,660 shares of our common stock and 198,600 shares of our
common stock issuable upon the exercise of stock options exercisable within
sixty days of March 31, 2000.
60
<PAGE>
(6) Consists entirely of shares of our common stock issuable upon the exercise
of stock options exercisable within sixty days of March 31, 2000.
(7) Mr. Edgecomb disclaims beneficial ownership with respect to 4,100 shares of
our common stock.
(8) Consists of 738,032 shares of our common stock, and 65,904 shares of our
common stock issuable upon the exercise of stock options exercisable within
sixty days of March 31, 2000.
(9) Consists of 121,747 shares of our common stock held in joint tenancy and
197,450 shares of our common stock issuable upon the exercise of stock
options exercisable within sixty days of March 31, 2000.
(10) Consists of 21,720 shares of our common stock and 130,139 shares of our
common stock issuable upon the exercise of stock options exercisable within
sixty days of March 31, 2000.
(11) Consists of 652,593 shares of our common stock issuable upon the exercise
of stock options exercisable within sixty days of March 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
TRANSACTIONS WITH OUTSIDE DIRECTORS
During 1998, we invested $5.1 million in the common stock of PaeTec
Communications, Inc. ("PaeTec"), a competitive local exchange carrier. Our
investment represented approximately 19% of PaeTec's equity outstanding at
December 31, 1998. Arunas Chesonis, a former director, is a majority shareholder
and the Chief Executive Officer of PaeTec. During the third and fourth quarters
of 1999, we sold substantially all of our interest for $14.3 million dollars. On
February 22, 2000, Arunas Chesonis resigned from our Board.
At December 31, 1998 and 1999, we had an obligation to John Snedegar, a
director, in the amount of $1 million with interest at 10%.
GH Associates, an affiliate of Gordon Hutchins, Jr., a director, provides
consulting services to us. For the year ended December 31, 1999, we paid
approximately $33,612 to GH Associates for general business consulting services
relating to the telecommunications industry and for the performance of other
tasks requested by our Chief Executive Officer, President and Board.
During 1999, our non-employee directors were granted nonstatutory stock
options under the Director Plan. See "Management--Director Compensation."
TRANSACTIONS WITH EXECUTIVE OFFICERS
For the year ended December 31, 1999, we provided $2.1 million in long
distance services to Pae Tec. Pae Tec is a company in which Mr. Edgecomb is a
member of the board of directors and approximately a 10% shareholder. During
1999, we purchased $43,000 in services from Pae Tec.
On April 12, 1999, we provided Kelly Enos, our Chief Financial Officer, with
a revolving line of credit in the aggregate amount of approximately $111,000 at
an annual interest rate of 8%. Approximately $120,000 of this debt was
outstanding at March 31, 2000.
On April 12, 1999, we provided James Kolsrud, our Executive Vice
President--Operations and Engineering, with a revolving line of credit in the
aggregate amount of approximately $100,000 at an annual interest rate of 8%.
Approximately $107,000 of this debt was outstanding at March 31, 2000.
Ms. Enos received incentive stock options to purchase 10,000 shares of our
common stock at an exercise price of $13.00 in February 1999.
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<PAGE>
Mr. Crumly received incentive stock options to purchase 125,000 shares of
our common stock at an exercise price of $8.88 in May 1999, incentive stock
options to purchase 2,746 shares of our common stock at an exercise price of
$16.39 in March 1999 and incentive stock options to purchase 10,000 shares of
our common stock at an exercise price of $13.00 in January 1999.
Mr. Kolsrud received incentive stock options to purchase 29,500 shares of
our common stock at an exercise price of $4.91 in October 1999 and incentive
stock options to purchase 10,000 shares of our common stock at an exercise price
of $13.00 in February 1999.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Amended and Restated Certificate of Incorporation limits the liability
of our directors for monetary damages arising from a breach of their fiduciary
duty as directors, except to the extent otherwise required by the Delaware
General Corporation Law. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
Our Bylaws provide that we shall indemnify our directors and officers to the
fullest extent permitted by Delaware law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. We have also
entered into or will enter into indemnification agreements with our officers and
directors containing provisions that may require us, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the Board, including a majority of the independent and disinterested
outside directors on the Board, and will continue to be on terms no less
favorable to us than could be obtained from unaffiliated third parties.
62
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 15(d) of the Securities Act of 1934,
the registrant has duly caused this Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, in Santa Barbara,
California on April 14, 2000.
<TABLE>
<S> <C> <C>
STAR TELECOMMUNICATIONS, INC.
By: /s/ CHRISTOPHER E. EDGECOMB
-----------------------------------------
Christopher E. Edgecomb
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Christopher E. Edgecomb, Mary A. Casey and Kelly
D. Enos, and each of them, his true and lawful attorney-in-fact with full power
of substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments to this
Report on Form 10-K and to file same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHRISTOPHER E. EDGECOMB Chief Executive Officer and
------------------------------------------- Director (Principal and April 14, 2000
Christopher E. Edgecomb Executive Officer)
/s/ MARY A. CASEY
------------------------------------------- President and Director April 14, 2000
Mary A. Casey
/s/ KELLY D. ENOS Chief Financial Officer
------------------------------------------- (Principal Financial April 14, 2000
Kelly D. Enos Officer)
/s/ JOHN J. PASINI Vice President of Finance
------------------------------------------- (Principal Accounting April 14, 2000
John J. Pasini Officer)
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GORDON HUTCHINS, JR.
------------------------------------------- Director April 14, 2000
Gordon Hutchins, Jr.
/s/ JOHN R. SNEDEGAR
------------------------------------------- Director April 14, 2000
John R. Snedegar
/s/ SAMER TAWFIK
------------------------------------------- Director April 14, 2000
Samer Tawfik
</TABLE>
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C> <C> <C>
(a) Documents filed as part of this Report:
(1) Index to Financial Statements:
Report of Independent Public Accountants.................... F-1
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-2
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-3
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1998 and 1999.............. F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-5
Notes to Consolidated Financial Statements.................. F-6
(2) Index to Financial Statement Schedules:
Report of Independent Public Accountants on Supplemental
Schedules................................................. S-1
Schedule II--Valuation and Qualifying Accounts.............. S-2
(3) Exhibits:
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------- ------------------------------------------------------------
<C> <S>
2.1* Amended and Restated Stock Acquisition Agreement and Plan of
Merger dated as of November 30, 1997 by and among the
Registrant, Big Dave's Acquisition Corp., LCCR, Inc., and
the shareholders listed on the signature page thereto.
2.2++ Agreement and Plan of Merger dated as of November 19, 1997
by and among the Registrant, IIWII Corp. and United
Digital Network, Inc.
2.3** Stock Purchase Agreement dated as of January 26, 1998 by and
among the Registrant, T-One Corp. and Taha Mikati, as
amended.
2.4- Amended and Restated Agreement and Plan of Merger dated as
of August 20, 1998 by and among the Registrant, Sierra
Acquisition Co., Inc., PT-1 Communications, Inc. ("PT-1")
and the Stockholders listed on the signature page thereto,
(the PT-1 Merger Agreement).
2.5++ First Amendment to the PT-1 Merger Agreement dated
September 1, 1998.
2.6++ Second Amendment to the PT-1 Merger Agreement dated December
29, 1998.
2.7 Agreement and Plan of Merger dated February 11, 2000, by and
among the Registrant and World Access, Inc.
3.1** Amended and Restated Certificate of Incorporation of the
Registrant.
3.2** Bylaws of the Registrant.
4.1+ Specimen Common Stock certificate.
4.2+ Registration Rights Agreement, dated September 24, 1996,
between the Registrant and the investors named therein.
4.3+ Registration Rights Agreement, dated July 12, 1996, between
the Registrant and the investor named therein.
4.4+ Investor Rights Agreement dated July 25, 1996, between the
Registrant and the investors named therein.
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------- ------------------------------------------------------------
<C> <S>
4.5* Registration Rights Agreement dated as of November 30, 1997
by and among the Registrant and the shareholders listed on
the signature page thereto.
4.6** Registration Rights Agreement dated as of March 10, 1998
between the Registrant and Taha Mikati.
4.7-- Registration Rights and Restricted Share Agreement dated as
of February 3, 1999 between the Registrant and the
shareholders named therein.
10.l+ Form of Indemnification Agreement.
10.2+ 1996 Amended and Restated Stock Incentive Plan.
10.3+ 1996 Outside Director Nonstatutory Stock Option Plan.
10.4+ 1997 Omnibus Stock Incentive Plan.
10.5+ Employment Agreement between the Registrant and Mary Casey
dated July 14, 1995, as amended.
10.6+ Employment Agreement between the Registrant and Kelly Enos
dated December 2, 1996.
10.7+ Employment Agreement between the Registrant and David Vaun
Crumly dated January 1, 1996.
10.8+ Intentionally omitted.
10.9+ Consulting Agreement between the Registrant and Gordon
Hutchins, Jr. dated May 1, 1996.
10.10+ Nonstatutory Stock Option Agreement between the Registrant
and Gordon Hutchins, Jr. dated May 15, 1996.
10.11+ Free Standing Commercial Building Lease between the
Registrant and Thomas M. Spear, as receiver for De La
Guerra Court Investments, dated for reference purposes as
of March 1, 1996.
10.12+ Standard Office Lease Gross between the Registrant and De La
Guerra Partners, L.P. dated for reference purposes as of
July 9, 1996.
10.13+ Office Lease between the Registrant and WHUB Real Estate
Limited Partnership dated June 28, 1996, as amended.
10.14+ Standard Form of Office Lease between the Registrant and
Hudson Telegraph Associates dated February 28, 1996.
10.15+ Agreement for Lease between the Registrant and Telehouse
International Corporation of Europe Limited dated
July 16, 1996.
10.16+ Sublease between the Registrant and Borton, Petrini & Conron
dated March 20, 1994, as amended.
10.17+ Office Lease between the Registrant and One Wilshire Arcade
Imperial, Ltd. dated June 28, 1996.
10.18+ Lease Agreement between the Registrant and
Telecommunications Finance Group dated April 6, 1995.
10.19+ Lease Agreement between the Registrant and
Telecommunications Finance Group dated January 3, 1996, as
amended.
10.20+ Master Lease Agreement between the Registrant and NTFC
Capital Corporation dated December 20, 1996.
10.21+ Variable Rate Installment Note between the Registrant and
Metrobank dated October 4, 1996.
10.22+ Assignment of Purchase Order and Security Interest between
the Registrant and DSC Finance Corporation dated
January 1, 1996.
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------- ------------------------------------------------------------
<C> <S>
10.23+ Line of Credit Promissory Note between the Registrant and
Christopher E. Edgecomb dated November 7, 1996, as
amended.
10.24+ Office Lease Agreement between the Registrant and Beverly
Hills Center LLC effective as of April 1, 1997.
10.25** Credit Agreement dated as of September 30, 1997 among the
Registrant, the financial institutions party thereto and
Sanwa Bank California, as amended.
10.26** Office Lease between the Registrant, Hudson Telegraph
Associates and American Communications Corp., as amended.
10.27** Amendment Number Three to Employment Agreement between the
Registrant and Mary A. Casey dated as of July 1, 1997.
10.28** Amendment Number One to Employment Agreement between the
Registrant and Kelly D. Enos dated as of November 12,
1997.
10.29** Amendment Number One to First Restatement of Employment
Agreement between the Registrant and James Kolsrud dated
as of June 16, 1997.
10.30** Amendment Number One to Employment Agreement between the
Registrant and David Vaun Crumly dated as of November 11,
1997.
10.31** First Amendment to Amended and Restated 1996 Stock Incentive
Plan.
10.32*** Agreement dated as of December 1, 1997 between the
Registrant and Nortel Dasa Network Systems GmbH & Co. KG.
10.33** Leasing Agreement between the Registrant and Nortel Dasa
Network Systems GmbH & Co. KG.
10.34** Guarantee Agreement between the Registrant and Nortel Dasa
Network Systems GmbH & Co. KG.
10.35** Note and Security Agreement dated as of December 18, 1997
between the Registrant and NationsBanc Leasing
Corporation.
10.36** Amendment of Lease dated as of September 30, 1997 between
the Registrant and Hudson Telegraph (reference is hereby
made to Exhibit 10.14).
10.37 Intentionally omitted.
10.38** Lease Agreement dated July 29, 1996 between the Registrant
and Telecommunications Finance Group.
10.39** Promissory Note issued by Christopher E. Edgecomb in favor
of the Registrant dated November 26, 1997.
10.40** Stock Pledge Agreement dated November 26, 1997 between the
Registrant and Christopher E. Edgecomb.
10.41** Commercial Lease dated October 31, 1997 between the
Registrant and Prinzenpark GbR.
10.42** Commercial Lease dated October 9, 1997 between the
Registrant and WSL Weststadt Liegenschafts GmbH.
10.43** Office Lease between the Registrant and Airport-Center KGHP
Gewerbeban GmbH & Cie.
10.44** Lease dated November 19, 1997 between the Registrant and
DIFA Deutsche Immobilien Fonds Aktiengesellschaft.
10.45- Second Restatement of Employment Agreement between the
Registrant and James Kolsrud dated as of July 9, 1998.
10.46- First Amendment to 1997 Omnibus Stock Incentive Plan.
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------- ------------------------------------------------------------
<C> <S>
10.47--- Loan and Security Agreement dated as of June 9, 1999 by and
among the Registrant and certain of its subsidiaries as
the Obligors, and the financial institutions that are
identified therein as the Lenders, and Foothill Capital
Corporation ("Foothill") as Agent.
10.48--- Pledge Agreement dated as of June 9, 1999 by and among the
Registrant certain of its subsidiaries and Foothill, as
Agent.
10.49--- General Continuing Guaranty dated as of June 9, 1999
delivered by certain subsidiaries of the Registrant to
Foothill, as Agent.
10.50--- Suretyship Agreement dated as of June 9, 1999 among
Foothill, as Agent, the Registrant and certain of its
subsidiaries.
10.51--- Intercompany Subordination Agreement dated as of June 9,
1999 among the Registrant, certain of its subsidiaries and
Foothill, as Agent.
10.52--- Trademark Security Agreement dated as of June 9, 1999 by the
Registrant certain of its subsidiaries and Foothill, as
Agent.
10.53--- Copyright Security Agreement dated as of June 9, 1999 by the
Registrant certain of its subsidiaries and Foothill, as
Agent.
10.54 Receivables Sale Agreement dated as of November 30, 1999, by
and between the Registrant, the entities listed on the
signature pages thereto, and RFC Capital Corporation as
Purchaser.
10.55 Amendment Number Four to Employment Agreement between the
Registrant and Mary A. Casey dated as of April 21, 1999.
10.56 Amendment Number Two to Employment Agreement between the
Registrant and Kelly D. Enos dated as of April 21, 1999.
10.57 Amendment Number One to Second Restatement of Employment
Agreement between the Registrant and James Kolsrud dated
as of May 5, 1999.
10.58 Amendment Number Two to Employment Agreement between the
Registrant and David Vaun Crumly dated as of April 21,
1999.
10.59 Amendment Number Three to Employment Agreement between the
Registrant and David Vaun Crumly dated as of November 11,
1999.
10.60 Revolving Line of Credit Promissory Note dated April 12,
1999 between the Registrant and Kelly Enos.
10.61 Revolving Line of Credit Promissory Note dated April 12,
1999 between the Registrant and James Kolsrud.
10.62 Master Lease Purchase Agreement dated February 20, 1998, as
amended, by and among the Registrant, PT-1 and Chase
Equipment Leasing.
10.63 Office and Switch Lease dated April 8, 1997 between PT-1 and
Golden Union, LLC, C/O Alma Realty Co., 28-18 31st Street,
Astoria, NY 11102.
10.64 Office and Switch Lease dated October, 1997 between PT-1 and
Evergreen America Corporation.
10.65 Office and Switch Lease dated July, 1997 between the
Registrant and NWT Partners, Ltd.
10.66 Office Switch Lease between STAR Telecommunications
Deutschland GmbH ("STAR GmbH") and Prinzzenpark GbR
Kanzlerstr, 4.
10.67 Office and Switch Lease dated April 1, 1999 between STAR
GmbH and Rentax Gesellschaft Fur Grundbesitzan-Lagen GmbH.
(English language summary of the original German language
lease is attached thereto.)
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------- ------------------------------------------------------------
<C> <S>
10.68 Office and Switch Lease dated March 1, 1999 between STAR
GmbH and Gewerbehof Athen. (English language summary of
the original German language lease is attached thereto.)
10.69 Office and Switch Lease dated June 1, 1999 between STAR GmbH
and Hamm & Co. (English language summary of the original
German language lease is attached thereto.)
10.70 Office and Switch Lease dated February 1, 1999 between STAR
GmbH and Rudolf Geray. (English language summary of the
original German language lease is attached thereto.)
10.71 Office and Switch Lease dated August 1, 1999 between STAR
GmbH and Erbengemeinschaft Fiszman. (English language
summary of the original German language lease is attached
thereto.)
10.72 Office and Switch Lease dated February 1, 1999 between STAR
GmbH and Kallco Projekt Projekges GmbH. (English language
summary of the original German language lease is attached
thereto.)
10.73 Office and Switch Lease dated June 1, 1999 between STAR GmbH
and Comptoir Genvois Immobilier. (English language summary
of the original German language lease is attached
thereto.)
10.74 Office and Switch Lease between PT-1 and NWT Partners, Ltd.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
24.1 Power of Attorney (included on page 63).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+ Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(Registration No. 333-21325) on February 7, 1997 and incorporated by
reference herein.
++ Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-53335) and incorporated by reference herein.
* Filed on December 15, 1997 as an exhibit to the Registrant's Current Report
on Form 8-K (File No. 000-22581) and incorporated by reference herein.
** Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(Registration No. 333-48559) on March 24, 1998 and incorporated by reference
herein.
*** Filed as an exhibit to the Registrant's Annual Report on Form 10-K (File
No. 000-22581) on March 31, 1998 and incorporated by reference herein.
- Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q (File
No. 000-22581) on November 11, 1998 and incorporated by reference herein.
-- Filed as an exhibit to the Registrant's Current Report on Form 8-K (File No.
000-22581) on February 19, 1999 and incorporated by reference herein.
- --- Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q (File
No. 000-22851) on August 16, 1999 incorporated by reference herein.
<TABLE>
<S> <C> <C> <C>
(4) Reports on Form 8-K.
(a) None.
</TABLE>
69
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
STAR Telecommunications, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of STAR
TELECOMMUNICATIONS, INC. (a Delaware corporation) and Subsidiaries as of
December 31, 1998 and 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These 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 auditing standards generally accepted
in the United States. 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.
STAR Telecommunications, Inc. has entered into a merger agreement under which it
is required to sell certain operations prior to consummation of the merger. To
meet this requirement, STAR Telecommunications, Inc. has entered into a letter
of intent to sell certain net assets of its prepaid calling card and dial around
operations for an amount that is significantly less than the net carrying value
of the operations. See Notes 1 and 13 to the accompanying consolidated financial
statements for a description of this proposed transaction and related matters.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of STAR Telecommunications, Inc.
and Subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 14, 2000
F-1
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 47,297 $ 25,561
Short-term investments.................................... 835 1,482
Accounts and notes receivable, net of allowance of $12,561
and $46,707 at December 31, 1998 and 1999,
respectively............................................ 100,235 167,403
Receivables from related parties.......................... 762 1,390
Inventory................................................. -- 1,088
Other receivables......................................... 23,017 2,478
Prepaid expenses and other................................ 14,295 9,838
Deferred income taxes..................................... 6,269 25,846
-------- --------
Total current assets.................................. 192,710 235,086
-------- --------
PROPERTY AND EQUIPMENT:
Operating equipment....................................... 158,811 351,605
Leasehold improvements.................................... 14,853 24,744
Furniture, fixtures and equipment......................... 19,106 38,399
-------- --------
192,770 414,748
Less--Accumulated depreciation and amortization........... (21,818) (51,659)
-------- --------
170,952 363,089
-------- --------
OTHER ASSETS:
Intangible assets, net.................................... 2,497 200,582
Other..................................................... 8,492 8,997
-------- --------
10,989 209,579
-------- --------
Total assets.......................................... $374,651 $807,754
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit.................................. $ 19,330 $ 43,540
Current portion of long-term debt......................... 2,085 486
Current portion of capital lease obligations.............. 8,567 18,042
Accounts payable.......................................... 43,989 159,920
Taxes payable............................................. 1,640 3,361
Related party payable..................................... 2,267 1,133
Accrued network costs..................................... 51,262 147,672
Other accrued expenses.................................... 15,772 22,479
Deferred revenue.......................................... 1,100 36,374
-------- --------
Total current liabilities............................. 146,012 433,007
-------- --------
LONG-TERM LIABILITIES:
Capital lease obligations, net of current portion......... 29,407 49,324
Deferred income taxes..................................... 2,991 --
Other long-term liabilities............................... 650 47,369
-------- --------
Total long-term liabilities........................... 33,048 96,693
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A preferred stock, $.001 par value,
authorized--5,000 shares; issued and
outstanding--none....................................... -- --
Common stock, $.001 par value, authorized--100,000 shares;
issued and outstanding--43,245 and 58,574 at
December 31, 1998 and 1999, respectively................ 43 58
Additional paid-in capital................................ 207,466 365,845
Deferred compensation..................................... -- (2,160)
Note receivable from stockholder.......................... -- (3,714)
Accumulated other comprehensive income (loss)............. 188 (6,022)
Accumulated deficit....................................... (12,106) (75,953)
-------- --------
Total stockholders' equity.............................. 195,591 278,054
-------- --------
Total liabilities and stockholders' equity............ $374,651 $807,754
======== ========
</TABLE>
See accompanying notes to these consolidated balance sheets.
F-2
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
REVENUES.................................................... $434,086 $619,220 $1,061,774
OPERATING EXPENSES:
Cost of services.......................................... 374,504 523,621 925,206
Selling, general and administrative expenses.............. 48,906 66,140 160,067
Depreciation and amortization............................. 5,650 15,054 44,236
Loss on impairment of goodwill............................ -- 2,604 --
Merger expense............................................ 286 1,026 1,878
-------- -------- ----------
429,346 608,445 1,131,387
-------- -------- ----------
Income (loss) from operations........................... 4,740 10,775 (69,613)
-------- -------- ----------
OTHER INCOME (EXPENSES):
Interest income........................................... 464 4,469 2,192
Interest expense.......................................... (2,617) (3,386) (9,895)
Legal settlements and expenses............................ (1,653) -- --
Other income (expense).................................... 208 (304) 1,373
-------- -------- ----------
(3,598) 779 (6,330)
-------- -------- ----------
Income (loss) before provision (benefit) for income
taxes................................................. 1,142 11,554 (75,943)
PROVISION (BENEFIT) FOR INCOME TAXES........................ 2,905 9,923 (12,096)
-------- -------- ----------
NET INCOME (LOSS)........................................... $ (1,763) $ 1,631 $ (63,847)
======== ======== ==========
Basic and diluted income (loss) per share................... $ (0.06) $ 0.04 $ (1.12)
======== ======== ==========
</TABLE>
See accompanying notes to these consolidated statements.
F-3
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
------------------- ------------------- PAID-IN DEFERRED FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION SHAREHOLDER
-------- -------- -------- -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996......... 2,802 $ 3 25,511 $26 $ 22,152 $ (118) $ --
Net loss....................... -- -- -- -- -- -- --
Effect of CEO
Telecommunications, Inc.
terminating the
S-corporation election....... -- -- -- -- (61) -- --
Effect of UDN's change in
fiscal year end.............. -- -- (37) (1,916) -- --
Conversion of redeemable
preferred stock to common
stock........................ (2,802) (3) 1,868 2 1 -- --
Initial public offering of
common stock................. -- -- 8,097 8 30,936 -- --
Private placement.............. -- -- 49 -- 1,740 -- --
Exercise of stock options...... -- -- 493 -- 496 -- --
Exercise of warrants........... -- -- 10 -- 384 -- --
Converion of debenture......... -- -- 37 -- 500 -- --
Compensation expense relating
to stock options............. -- -- -- -- -- 88 --
Tax benefit from non-qualified
stock options................ -- -- -- -- 114 -- --
Cash distributions to
stockholders................. -- -- -- -- -- -- --
------ ---- ------ --- -------- ------- -------
Balance, December 31, 1997......... -- -- 36,028 36 54,346 (30) --
Comprehensive income:
Net income................... -- -- -- -- -- -- --
Foreign currency translation
adjustment................. -- -- -- -- -- -- --
Comprehensive income........... -- -- -- -- -- -- --
Secondary public offering of
common stock................. -- -- 5,685 6 144,705 -- --
Exercise of stock options...... -- -- 1,533 1 2,506 -- --
Exercise of warrants........... -- -- 25 -- 274 -- --
Cancellation of escrow
shares....................... -- -- (26) -- -- -- --
Compensation expense relating
to stock options............. -- -- -- -- -- 30 --
Tax benefit from non-qualified
stock options................ -- -- -- -- 5,635 -- --
------ ---- ------ --- -------- ------- -------
Balance, December 31, 1998 -- -- 43,245 43 207,466 -- --
Comprehensive income:
Net loss..................... -- -- -- -- -- -- --
Foreign currency translation
adjustment................. -- -- -- -- -- -- --
Comprehensive loss............. -- -- -- -- -- -- --
PT-1 acquisition............... -- -- 15,050 15 153,563 -- (3,559)
Shares reserved for PT-1
distributors................. -- -- -- -- 2,803 (2,803) --
Exercise of stock options...... -- -- 279 -- 716 -- --
Compensation expense relating
to distributor shares........ -- -- -- -- -- 643 --
Interest on note receivable
from stockholder............. -- -- -- -- -- -- (155)
Tax benefit from non-qualified
stock options................ -- -- -- -- 1,297 -- --
------ ---- ------ --- -------- ------- -------
Balance, December 31, 1999......... -- $ -- 58,574 $58 $365,845 $(2,160) $(3,714)
====== ==== ====== === ======== ======= =======
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED
INCOME DEFICIT TOTAL
------------- ----------- --------
<S> <C> <C> <C>
Balance, December 31, 1996......... -- $(12,077) $ 9,986
Net loss....................... -- (1,763) (1,763)
Effect of CEO
Telecommunications, Inc.
terminating the
S-corporation election....... -- 61 --
Effect of UDN's change in
fiscal year end.............. -- 1,100 (816)
Conversion of redeemable
preferred stock to common
stock........................ -- -- --
Initial public offering of
common stock................. -- -- 30,944
Private placement.............. -- -- 1,740
Exercise of stock options...... -- -- 496
Exercise of warrants........... -- -- 384
Converion of debenture......... -- -- 500
Compensation expense relating
to stock options............. -- -- 88
Tax benefit from non-qualified
stock options................ -- -- 114
Cash distributions to
stockholders................. -- (1,058) (1,058)
------- -------- --------
Balance, December 31, 1997......... -- (13,737) 40,615
Comprehensive income:
Net income................... -- 1,631 1,631
Foreign currency translation
adjustment................. 188 -- 188
Comprehensive income........... 188 1,631 1,819
Secondary public offering of
common stock................. -- -- 144,711
Exercise of stock options...... -- -- 2,507
Exercise of warrants........... -- -- 274
Cancellation of escrow
shares....................... -- -- --
Compensation expense relating
to stock options............. -- -- 30
Tax benefit from non-qualified
stock options................ -- -- 5,635
------- -------- --------
Balance, December 31, 1998 188 (12,106) 195,591
Comprehensive income:
Net loss..................... -- (63,847) (63,847)
Foreign currency translation
adjustment................. (6,210) -- (6,210)
Comprehensive loss............. (6,210) (63,847) (70,057)
PT-1 acquisition............... -- -- 150,019
Shares reserved for PT-1
distributors................. -- -- --
Exercise of stock options...... -- -- 716
Compensation expense relating
to distributor shares........ -- -- 643
Interest on note receivable
from stockholder............. -- -- (155)
Tax benefit from non-qualified
stock options................ -- -- 1,297
------- -------- --------
Balance, December 31, 1999......... $(6,022) $(75,953) $278,054
======= ======== ========
</TABLE>
See accompanying notes to these consolidated statements.
F-4
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(1,763) $ 1,631 $(63,847)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 5,650 15,054 44,236
Loss on impairment of goodwill............................ -- 2,604 --
Gain on investments....................................... -- -- (9,953)
Compensation expense relating to stock options............ 88 30 643
Provision for doubtful accounts........................... 13,770 7,477 25,003
Deferred income taxes..................................... (3,699) 421 (2,014)
Proceeds from factoring of trade receivables, net......... 2,092 -- --
Other..................................................... 79 107 --
Decrease (increase) in assets, net of acquisitions:
Accounts and notes receivable............................. (24,320) (61,510) (105,573)
Related party receivable.................................. 99 (721) (79)
Other receivables......................................... (1,914) (20,428) 10,184
Prepaid expenses and other assets......................... (1,853) (8,757) 286
Deposits.................................................. (425) (558) 1,254
Increase (decrease) in liabilities, net of acquisitions:
Accounts payable.......................................... (593) 23,913 59,304
Taxes payable............................................. 2,270 5,119 (7,618)
Related party payable..................................... (269) 2,267 (2,301)
Accrued network costs..................................... 19,747 11,697 86,232
Other accrued expenses.................................... 2,353 8,440 3,574
Deferred revenue.......................................... -- 1,100 (3,120)
Other liabilities......................................... 164 (265) 3,927
------- -------- --------
Net cash provided by (used in) operating activities..... 11,476 (12,379) 40,138
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (14,674) (113,020) (60,317)
Investments............................................... 126 (5,083) (2,829)
Short-term investments.................................... (16,975) 17,796 477
Sale of investments....................................... -- -- 14,350
Purchase of PT-1, net of cash acquired.................... -- -- (4,435)
Purchase of CTN, net of cash acquired..................... (350) -- --
Other..................................................... 716 (679) (5,543)
------- -------- --------
Net cash used in investing activities................... (31,157) (100,986) (58,297)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholders' distributions............................... (1,058) -- --
Borrowings under lines of credit.......................... 34,211 19,330 460,820
Repayments under lines of credit.......................... (42,025) -- (441,610)
Borrowings under lines of credit with stockholder......... 583 -- 2,500
Repayments under lines of credit with stockholder......... (471) (138) (2,500)
Borrowings under long-term debt........................... 193 -- --
Payments under long-term debt............................. (3,587) (1,798) (8,122)
Payments under capital lease obligations.................. (2,236) (6,360) (12,801)
Issuance of common stock.................................. 32,684 144,711 --
Stock options exercised................................... 496 2,507 716
Warrants exercised........................................ 384 274 --
Other financing activities................................ -- -- 6
------- -------- --------
Net cash provided by (used in) financing activities..... 19,174 158,526 (991)
------- -------- --------
EFFECTS OF CHANGE IN UDN'S FISCAL YEAR END.................. 54 -- --
EFFECTS OF FOREIGN CURRENCY TRANSLATION..................... -- 188 (2,586)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (453) 45,349 (21,736)
CASH AND CASH EQUIVALENTS:
Beginning of year......................................... 2,401 1,948 47,297
------- -------- --------
End of year............................................... $ 1,948 $ 47,297 $ 25,561
======= ======== ========
</TABLE>
See accompanying notes to these consolidated statements.
F-5
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. NATURE OF BUSINESS AND PROPOSED MERGER
STAR Telecommunications, Inc., a Delaware Corporation, and Subsidiaries (the
"Company" or "STAR"), is a multinational telecommunications services company
focused primarily on the international long distance market. STAR offers
low-cost switched voice services on a wholesale basis primarily to U.S. based
long distance carriers. STAR provides international long distance services
through a flexible network comprised of foreign termination relationships,
international gateway switches, leased and owned transmission facilities and
resale arrangements with other long distance providers.
During 1997, 1998 and 1999, the Company established several wholly-owned
foreign subsidiaries to further expand its international network. The Company
made substantial investments to install switch facilities in four of these
subsidiaries, Star Europe Limited ("SEL") which is located in London, England,
Star Telecommunications Deutschland ("GmbH") which is located in Frankfurt,
Germany, Star Telecommunications Switzerland which is located in Geneva,
Switzerland, and Star Telecommunications Austria GmbH which is located in
Vienna, Austria. The Company uses these switching facilities to decrease
international traffic termination costs and to initiate outbound calls from
these local markets.
In November 1997, the Company entered into the domestic commercial
long-distance market through the acquisition of L.D. Services Inc., now known as
CEO Telecommunications, Inc. ("CEO"). CEO is a commercial long-distance service
provider throughout the United States. In March 1998, the Company consummated a
merger with T-One Corp. ("T-One"), an international wholesale long-distance
telecommunications provider. In March 1999, the Company expanded its commercial
operations through the acquisition of United Digital Network, Inc. and its
affiliated companies ("UDN" now known as "ALLSTAR Telecom"). The mergers
constituted tax-free reorganizations and have been accounted for as poolings of
interests. Accordingly, all prior period consolidated financial data has been
restated to include the results of operations, financial position and cash flows
of CEO, T-One and UDN.
In February 1999, the Company completed its acquisition of PT-1
Communications ("PT-1"). PT-1 is a provider of international and domestic long
distance and local telecommunications services primarily through the marketing
of prepaid calling cards and dial around service. The transaction constituted a
tax free reorganization and has been accounted for as a purchase under
Accounting Principles Board Opinion No. 16. Accordingly, the consolidated
financial statements presented include the results of operations, financial
position and cash flows of PT-1 subsequent to the date of acquisition.
On February 11, 2000, STAR and World Access, Inc. ("World Access") entered
into a merger agreement (the "Merger Agreement") pursuant to which World Access
will acquire all of the outstanding common stock of STAR in exchange for World
Access common stock or, at the election of World Access, a combination of cash
and common stock. Based upon the market price of World Access common stock at
the date of the Merger Agreement, the purchase price exceeds STAR's net book
value. The Merger Agreement requires that STAR sell PT-1 for minimum net cash
proceeds of $150 million.
On March 29, 2000, STAR entered into a letter of intent to sell the assets
of PT-1 to a communications subsidiary of a publicly traded company ("PT-1
Acquiror") for cash proceeds of $150 million, less certain liabilities, and
subject to a purchase price adjustment based on an audit of PT-1 to be conducted
after the close of the sale of PT-1. Due diligence is currently in process by
PT-1 Acquiror and the definitive acquisition agreement is expected to be
completed by April 21, 2000. STAR will record a loss on this transaction of
approximately $100 million at closing which is expected to occur during the
second quarter of fiscal 2000. See Note 13 for further details of this
transaction and related matters.
F-6
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. NATURE OF BUSINESS AND PROPOSED MERGER (CONTINUED)
The Company is subject to various risks in connection with the operation of
its business. These risks include, but are not limited to, regulations (both
domestic and foreign), dependence on transmission facilities-based carriers and
suppliers, price competition and competition from larger industry participants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
STAR. and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated.
REVENUE RECOGNITION AND DEFERRED REVENUE
The Company records revenues for telecommunications sales, direct dial,
prepaid calling card, and travel card long distance services at the time of
customer usage.
Sales of prepaid calling cards are made to distributors with no contractual
right of return. At the time of sale, the Company becomes legally obligated to
provide such service. Such sales are initially recorded as deferred revenue upon
shipment and revenue is recognized in accordance with the terms of the card as
the ultimate card users utilize calling time and service fees for all prepaid
cards. The terms of the card refer to the rates, fees and expiration dates of
the card as well as any other provisions which govern their use. The Company
assesses a monthly service fee per card, commencing 30 days after the date a
prepaid calling card is first used to make a telephone call by reducing the
unused card balance available for calls. All prepaid calling cards sold by PT-1
expire upon the earlier to occur of (i) an expiration date printed on the
prepaid calling card or (ii) six months after the prepaid calling card is first
used. Upon expiration and cancellation of the prepaid calling card, the Company
recognizes the related deferred revenue as revenue.
In 1999, the Company began selling excess broadband fiber optic capacity
that they obtained under 20 year Indefeasable Rights of Use ("IRU") agreements.
Revenues from broadband sales are recorded upon customer acceptance and the
fulfillment of all the Company's obligations under the original lease agreement
and all of the Company's obligations under the sales contract are complete. The
accounting for sale of broadband is evolving and may require the Company to
account for future broadband sales as operating leases over the lives of the
agreements, generally 20 years. During 1999, the Company realized a profit of
$9.5 million from its broadband sales.
COST OF SERVICES
Cost of services for wholesale long distance services represents direct
charges from vendors that the Company incurs to deliver service to its
customers. These include leasing costs for the dedicated phone lines and
rate-per-minute charges from other carriers that terminate traffic on behalf of
the Company. In addition, commercial long distance service costs include billing
and collection service fees, call rating services, and per minute charges from
other carriers that terminate traffic on behalf of the Company.
The primary costs associated with the provision of telecommunications
services to holders of prepaid calling cards and travel cards are carrier costs
for transport of traffic and switch administration fees.
Cost of services for broadband sales represents the cost capitalized under
the original IRU agreement less any accumulated depreciation applicable to the
IRU.
F-7
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUES FROM FOREIGN CUSTOMERS
The Company has carrier service agreements with telecommunications carriers
in foreign countries under which international long distance traffic is both
originated and terminated on the Company's network. The Company records revenues
and related costs as the traffic is recorded in its switches. Revenues from
foreign customers amounted to $6,577,000, $83,998,000 and $183,768,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of demand deposits and money market funds,
which are highly liquid short-term instruments with original maturities of three
months or less. Cash and cash equivalents are stated at cost, which approximates
market. The Company has restricted cash of $1 million as of December 31, 1999.
FINANCIAL INSTRUMENTS
The carrying amounts of lines of credit, long-term debt and capital lease
obligations approximate their fair value as interest rates approximate market
rates for similar instruments.
Off balance sheet derivative financial instruments at December 31, 1998
consisted of foreign currency exchange agreements. There were no off balance
sheet derivatives at December 31, 1999. During 1997, 1998 and 1999, the Company
entered into currency exchange contracts in the normal course of business to
manage its exposure against foreign currency fluctuations on payable positions
resulting from fixed asset purchases and other contractual expenditures
denominated in foreign currencies. The principle objective of such contracts was
to minimize the risks and costs associated with financial and global operating
activities. The Company does not utilize financial instruments for trading or
other speculative purposes.
The fair value of foreign currency contracts is estimated by obtaining
quotes from brokers. At December 31, 1998, the Company had foreign currency
contracts outstanding with a notional and fair value of $35,000,000.
Accordingly, no gain or loss was recognized in operations. The Company had
contracts in German Marks at December 31, 1998, but none at December 31, 1999.
For the years ended December 31, 1997, 1998 and 1999, gains and losses on
foreign exchange contracts were not material to the consolidated financial
statements.
SHORT-TERM INVESTMENTS
Short-term investments consist of interest bearing securities with original
maturities in excess of three months. At December 31, 1998 and 1999, the fair
market value of temporary investments, classified as "available for sale
securities," approximated cost, thus no unrealized holding gains or losses were
reported in the accompanying balance sheets. During 1997, the Company realized
gains from the sale of securities of approximately $48,000. The Company did not
realize any gains or losses from sale of securities during 1998 or 1999.
INVENTORY
Inventory consists of costs of production and packaging of unsold prepaid
calling cards, is valued using the average cost method, and is charged to cost
of services when the card is sold.
F-8
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation and amortization of
property and equipment are computed using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Operating equipment......................................... 2-25 years
Leasehold improvements...................................... Life of lease
Furniture, fixtures and equipment........................... 3-7 years
</TABLE>
Operating equipment includes assets financed under capital lease obligations
of $51,738,000 and $92,405,000 at December 31, 1998 and 1999, respectively.
Accumulated amortization related to assets financed under capital leases was
$7,908,000 and $15,763,000 at December 31, 1998 and 1999, respectively.
In addition, operating equipment includes twelve and fourteen IRUs in
international cable systems amounting to $29,943,000 and $41,254,000 and eight
and ten ownership interests in international cables amounting to $3,101,000 and
$51,540,000 at December 31, 1998 and 1999, respectively. Included in ownership
interests at December 31, 1998 and 1999, is $1,508,000 and $48,684,000,
respectively, for the China-US Undersea Cable System. This capacity was not in
use as of December 31, 1999, and was reclaimed during the first quarter of
fiscal 2000. During 1999, the Company acquired two additional domestic IRUs with
major points of presence in Los Angeles, New York, Dallas and Miami, amounting
to $71,755,000 at December 31, 1999. These assets are amortized over the life of
the agreements of 5 to 20 years.
As of July 1, 1998, the Company prospectively revised the remaining useful
lives of certain operating equipment from five to ten years. The increase in the
estimated life of these assets was based on the knowledge gained by the Company
in making the transition from a reseller of telephone services to a facility
based provider, as well as to the fact that the Company is purchasing more
sophisticated telephone switches and has transitioned from smaller Stromberg
switches to larger capacity, more feature-rich Nortel switches. This change
reduced depreciation expense and increased income before provision for income
taxes for the year ended December 31, 1998 by approximately $2 million. The
difference between depreciating all switch equipment over a 5-year life versus a
10-year life since acquisition would represent approximately $2.9 million for
the year ended December 31, 1998, or 4 cents per diluted share for the year then
ended.
Replacements and betterments, renewals and extraordinary repairs that extend
the life of the asset are capitalized; other repairs and maintenance are
expensed. The cost and accumulated depreciation applicable to assets sold or
retired are removed from the accounts and the gain or loss on disposition is
recognized in operations.
INTANGIBLE ASSETS
Intangible assets consist of the cost to purchase customer lists, a
non-compete agreement and goodwill associated with the purchase of PT-1 and
other acquisitions. These intangibles are amortized using the straight-line
method over their estimated useful lives. The realizability of goodwill and
customer lists is evaluated periodically as events or circumstances indicate a
possible inability to recover their carrying amount. Such evaluation is based on
various analyses, including cash flow and profitability projections that
incorporate, as applicable, the impact on existing company businesses. These
analyses involve significant
F-9
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
management judgment to evaluate the capacity of an acquired business to perform
within projections. During the year ended December 31, 1998, the Company
recorded a loss on impairment of goodwill of approximately $2.6 million.
Intangible assets consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- ---------
<S> <C> <C>
Goodwill.................................................... $5,065 $ 215,382
Customer lists and non-compete agreement.................... 1,579 3,742
------ ---------
6,644 219,124
Accumulated amortization.................................... (1,543) (15,938)
Accumulated loss on impairment.............................. (2,604) (2,604)
------ ---------
$2,497 $ 200,582
====== =========
</TABLE>
The Company amortizes goodwill over 20 years, customer lists over 4 to 7
years and the non-compete agreement over 3 years.
OTHER ASSETS
At December 31, 1998 and 1999, other assets consist primarily of investments
and deposits.
During 1998, the Company made a $5.1 million investment in a competitive
local exchange carrier ("CLEC") for 2.9 million common shares, representing
18.97 percent of the CLEC's common shares outstanding at December 31, 1998. A
stockholder of the Company is also an investor and board member of this company.
The Company accounted for this investment under the cost method. Substantially
all of this investment was sold in 1999 for approximately $14.3 million.
The Company had investments in one and three telecommunications companies
totaling $5.1 million and $2.8 million at December 31, 1998 and 1999,
respectively. At December 31, 1998, the investment was carried at cost. At
December 31, 1999, three new investments totaling $2.0 million were accounted
for under the equity method. During 1999, STAR's share of earnings or losses
from these investments was not material.
Included in other assets are deposits of approximately $2.2 million at
December 31, 1998 and 1999, which represent payments made to long distance
providers to secure lower rates. These deposits are refunded or applied against
future services.
ACCRUED NETWORK COSTS
Accrued network costs represent accruals for services to transmit and
terminate long distance telephone traffic, which has been provided to the
Company but not yet billed. It also includes differences between billings
received by the Company and the liability computed by the Company's own systems
which are being resolved by the Company and its vendors.
F-10
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
During the years ended December 31, 1997, 1998, and 1999, cash paid for
interest was $2,357,000, $4,396,000 and $8,719,000, respectively. For the same
periods, cash paid for income taxes amounted to $3,761,000, $4,146,000 and
$1,832,000, respectively.
Non-cash investing and financing activities, which are excluded from the
consolidated statements of cash flows, are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Equipment purchased through capital leases..... $10,020 $34,216 $ 27,605
Deposit applied against capital leases......... -- 4,405 --
Notes issued for asset purchases............... 1,890 -- --
Assets acquired through a vendor financing
arrangement.................................. -- -- 62,666
Operating agreement acquired through issuance
of note...................................... 350 -- --
Conversion of debenture........................ 500 -- --
Tax benefits related to stock options.......... 114 5,635 1,297
Issuance of convertible debenture and note
payable for acquisition of CTN capital
stock........................................ 1,050 -- --
Detail of PT-1 acquisition:
Fair value of assets acquired................ -- -- 299,960
Liabilities assumed.......................... -- -- (140,780)
Common stock issued.......................... -- -- (153,578)
Notes payable issued......................... -- -- (1,167)
</TABLE>
NET INCOME (LOSS) PER COMMON SHARE
The following schedule summarizes the information used to compute basic and
diluted net income or loss per common share for the years ended December 31,
1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Weighted average number of common shares used to
compute basic net income (loss) per common
share............................................. 31,101 40,833 57,036
Weighted average common share equivalents........... -- 1,601 --
------ ------ ------
Weighted average number of common shares and common
share equivalents used to compute diluted net
income (loss) per common share.................... 31,101 42,434 57,036
====== ====== ======
</TABLE>
F-11
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Options to purchase 4,045,723 shares of common stock at prices ranging from
$0.01 to $34.38 were outstanding at December 31, 1999, but were not included in
the computation of diluted earnings per share, as the effect would be
antidilutive due to the net loss.
CONCENTRATIONS OF RISK
At December 31, 1998 and 1999, no individual customer had an accounts
receivable balance greater than 10% of gross accounts receivable other than
PT-1, which was acquired on February 4, 1999.
The two largest customers represented approximately 15%, 11% and 11% of
revenues during the years ended December 31, 1997, 1998 and 1999, respectively.
During 1997 and 1999, no customer exceeded 10% of revenues. During 1998, no
customer, other than PT-1, exceeded 10% of revenues.
The Company performs ongoing credit evaluations of its customers. The
Company analyzes daily traffic patterns and concludes whether or not the
customer's credit status justifies the traffic volume. If the customer is deemed
to carry too large a volume in relation to its credit history, the traffic
received by the Company's facilities is reduced to prevent further build up of
the receivable from this customer. The Company's allowance for doubtful accounts
is based on current market conditions.
Purchases from the four largest vendors for the years ended December 31,
1997, 1998 and 1999 amounted to 32%, 29%, and 38% of total purchases,
respectively.
Included in the Company's balance sheets at December 31, 1998 and 1999 is
approximately $85,207,000 and $121,518,000, respectively, of equipment which is
located in foreign countries.
USE OF ESTIMATES
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998 and June 1999, the AICPA issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. The Company will adopt the standard in
January 2001 and is currently analyzing the statement to determine the impact,
if any, on the Company's financial position or results of operations.
TRANSLATION OF FOREIGN CURRENCY
Management determined that the functional currency of its foreign
subsidiaries, excluding its German subsidiary, is the U.S. dollar. Thus, all
foreign translation gains or losses, which were immaterial for the years ended
December 31, 1997 and 1998, and amounted to a loss of $3,470,000 in 1999, are
reflected in the results of operations as a component of other income (expense).
On July 1, 1998, due to the fact that GmbH became self sufficient as an
operating entity, the Company changed the functional currency from
F-12
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the U.S. dollar to the German mark. As a result, translation effects of this
subsidiary after July 1, 1998 are reflected as other comprehensive income in the
consolidated statements of stockholders' equity.
The foreign subsidiaries' balance sheets, excluding the German subsidiary,
are translated into U.S. dollars using the year-end exchange rates except for
prepayments, property, other long-term assets, and stockholders' equity
accounts, which are translated at rates in effect when these balances were
originally recorded. Revenues and expenses are translated at average rates
during the year except for depreciation and amortization, which are translated
at historical rates. The German subsidiary's balance sheet at December 31, 1999
is translated into U.S. dollars using the year-end exchange rate except for
stockholders' equity accounts, which are translated at rates in effect when
these balances were originally recorded. Revenues and expenses are translated at
average rates during the year. Effective April 1, 1999, management
recharacterized the balance of the intercompany loan from STAR to GmbH from a
note payable to equity. As a result, the translation effect on the note balance
after April 1, 1999 is reflected as other comprehensive loss in the accompanying
financial statements.
TAXES ON PREPAID CALLING CARDS
Various jurisdictions levy taxes on telecommunications services whether
provided through prepaid cards or some other means utilizing different methods
and rates. The Company accrues for excise, sales and other usage based taxes on
telecommunication services based on the enacted method and rate for each
jurisdiction in the period usage occurs and revenue is recognized. The taxation
of prepaid calling cards is evolving and is not specifically addressed by many
of the states in which the Company does business. While the Company believes it
has adequately provided for any such taxes it may ultimately be required to pay,
certain states that enact legislation which specifically provides for taxation
of such cards or may interpret current laws in a manner resulting in additional
tax liabilities.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising costs for the years
ended December 31, 1997 and 1998 were not material to the consolidated financial
statements. For the year ended December 31, 1999, they amounted to
$16.8 million.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform to the current
year presentation.
3. LINES OF CREDIT
REVOLVING LINES OF CREDIT.
Effective September 30, 1997, the Company executed an agreement with Sanwa
Bank, California for a $25 million line of credit, which expired on July 1,
1999. This facility was paid in full and replaced with the Foothill facility on
June 9, 1999.
F-13
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
3. LINES OF CREDIT (CONTINUED)
On June 9, 1999, the Company entered into a two year credit facility
agreement with Foothill. The Company failed to meet the EBITDA and tangible net
worth covenants in accordance with the agreement for the period ended June 30,
1999. On October 15, 1999, the Company received an amendment from the lender
group which included resetting the financial covenants in accordance with the
Company's updated financial forecast. In exchange for the amendment, the Company
agreed to pay Foothill a supplemental agency fee of $500,000, and a term loan
supplemental fee of $2 million due January 31, 2000. Interest rates were
adjusted to 2.75 percent over the prime rate of interest for the revolving line
of credit. For the term note, interest rates were adjusted to 8.0 percent over
the prime rate through the end of September and increased by 1.0 percent over
the prime rate during each month thereafter. The Company also agreed to the
reduction of eligible borrowings on the revolving portion of the line of credit
to $30 million from $75 million. The expiration date of the $25 million term
loan was also modified to January 31, 2000. The agreement with Foothill was
terminated on December 23, 1999, when a new agreement was executed with RFC
Capital Corporation ("RFC"). As such, the $2 million term loan supplemental fee
was reduced to $1 million.
On November 30, 1999, the Company entered into a two year purchase of
receivables financing agreement with RFC. This facility allows the Company to
borrow up to $75 million based upon the eligible accounts receivable of the
Company. The Company was in compliance with all covenants under this facility as
of December 31, 1999. At December 31, 1999 approximately $43.5 million was
outstanding under this facility.
The weighted average interest rate on short-term debt during the years ended
December 31, 1997, 1998 and 1999, was 9.12%, 7.75% and 13.16%, respectively.
REVOLVING LINES OF CREDIT WITH STOCKHOLDER
The Company had revolving lines of credit with its founder and chief
executive officer. The debt matured on March 30, 1998 with interest payable at a
rate of 9%. The Company recognized interest expense related to this debt of
$9,000, $4,000, and $0 for the years ended December 31, 1997, 1998 and 1999,
respectively.
F-14
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
The Company finances some of its telecommunications equipment under capital
lease arrangements or through notes payable as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Convertible debenture with interest of 7 percent due
January 1999.......................................... $ 500 $ --
Notes payable in monthly installments of principal plus
interest of 8 percent through February 2000........... -- 147
Notes payable for Indefeasible Rights of Use, payable in
quarterly installments of principal plus interest at
LIBOR plus 6 percent (11.1 percent at December 31,
1998) through various dates in 2000................... 471 339
Notes payable in monthly installments of principal plus
interest at 7 percent to 9.5 percent through January
1999.................................................. 1,114 --
Obligations under capital leases........................ 37,974 67,366
-------- --------
40,059 67,852
Less current portion.................................. (10,652) (18,528)
-------- --------
$ 29,407 $ 49,324
======== ========
</TABLE>
Minimum future payments under capital lease obligations at December 31, 1999
are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL
YEAR ENDING DECEMBER 31, LEASES
- ------------------------ --------
<S> <C>
2000.................................................... $22,143
2001.................................................... 21,392
2002.................................................... 22,354
2003.................................................... 9,874
-------
75,763
Less amount representing interest........................... (8,397)
-------
$67,366
=======
</TABLE>
On September 29, 1999, Star Telecommunications Deutschland GmbH entered into
an agreement with Deutsche Leasing AG to finance new and pre-existing equipment
through a capital lease financing arrangement. Under the terms of the agreement
the Company has the option to finance equipment up to 80DM million or roughly
$45 million. The contract includes provisions to increase that amount as GmbH's
equipment needs expand. The financing terms of the agreement are a minimum lease
commitment of four years with an interest rate of approximately 6%. Cash
generated from this arrangement is used to help fund the growth and operations
of the German business. At December 31, 1999, approximately $8.0 million is
available for additional borrowing under this agreement.
F-15
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
OTHER LONG-TERM LIABILITIES
On September 15, 1998, STAR entered into a commitment to purchase an
$85 million IRU on the Qwest Communications US Domestic Fiber Optic Cable
System. On March 24, 1999, the agreement was amended to include the following
terms: Qwest Communications International, Inc. ("Qwest") agreed to allow the
conversion of a substantial portion of STAR's outstanding liability to a vendor
financing arrangement. The terms of this arrangement allow STAR to provide long
distance services to Qwest with the balance being offset against STAR's
liability to Qwest on a monthly basis. Additionally, STAR was given the option
to meet its obligation through the purchase of a combination of IRU's switched
services and dedicated private line services. Any remaining balance outstanding
to Qwest as of April 30, 2001 must be paid in full. The remaining balance due
under this arrangement as of December 31, 1999 was approximately $45 million.
During the year STAR sold certain portions of this capacity to other third
parties. STAR has paid these portions in full and has no further obligations to
Qwest under this agreement.
5. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space, dedicated private telephone lines,
equipment and other items under various agreements expiring through 2014. At
December 31, 1999, the minimum aggregate payments under non-cancelable operating
leases are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FACILITIES AND DEDICATED
YEAR ENDING DECEMBER 31, EQUIPMENT PRIVATE LINES TOTAL
- ------------------------ -------------- ------------- --------
<S> <C> <C> <C>
2000................................. $10,457 $24,569 $ 35,026
2001................................. 10,023 7,984 18,007
2002................................. 9,130 1,154 10,284
2003................................. 8,102 65 8,167
2004................................. 8,631 65 8,696
Thereafter........................... 24,990 368 25,358
------- ------- --------
$71,333 $34,205 $105,538
======= ======= ========
</TABLE>
Office facility and equipment rent expense for the years ended December 31,
1997, 1998 and 1999 was approximately $3,669,000, $5,704,000, and $12,542,000
respectively. Dedicated private line expense was approximately $9,414,000,
$24,306,000 and $67,090,000, respectively, for those same periods and is
included in cost of services in the accompanying consolidated statements of
operations.
EMPLOYMENT AGREEMENTS
The Company has employment agreements through December 31, 2000 with several
employees and executives. Some of these agreements provide for a continuation of
salaries in the event of a termination, with or without cause, following a
change in control of the Company. One agreement provides for a payment of up to
$1,500,000 in the event of a change in control of the Company.
F-16
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company expensed $64,000, $52,000, and $0 of deferred compensation
relating to these agreements for the years ended December 31, 1997, 1998 and
1999, respectively.
PURCHASE COMMITMENTS
The Company is obligated under various service agreements with long distance
carriers to pay minimum usage charges. The Company anticipates exceeding the
minimum usage volume with these vendors. The Company has minimum future usage
charges at December 31, 1999 of $6,747,000 payable through December 31, 2000.
The Company signed an $85 million agreement with Qwest to purchase the long-term
rights to use capacity, switched services, and dedicated private line services
over Qwest's domestic network over a twenty-year period. In addition, in
November 1998, the Company signed an IRU agreement with IXC Communication, Inc.
("IXC") and has a commitment to purchase $10 million of capacity on IXC's U.S.
based digital fiber network. As of December 31, 1999, STAR had completed its
financial commitment to both IXC and Qwest. These commitments are not included
in the above table.
LEGAL MATTERS
The Company is subject to litigation from time to time in the normal course
of business. Although it is not possible to predict the outcome of such
litigation, based on the facts known to the Company and after consultation with
counsel, management believes that such litigation will not have a material
adverse effect on its financial position or results of operations.
On September 4, 1997, prior to the merger between CEO and the Company, CEO
entered into a settlement agreement with the Consumer Services Division of the
California Public Utilities Commission ("PUC"). The agreement settled the
alleged unauthorized switching of long-distance customers to CEO between the
years 1995 and 1996. It included payment of $760,000 to the PUC for restitution
to affected customers as defined in the agreement. Additionally, CEO agreed to a
voluntary revocation of its operating authority in the State of California.
Under the agreement, service to all California customers had to be terminated
within 120 days after approval of the agreement by the PUC. On November 19,
1997, the PUC approved the agreement along with a transfer of control to STAR.
On November 15, 1997, CEO settled a civil suit with the District Attorney of
Monterey, California for a monetary payment of $700,000 and various non-monetary
concessions as defined in the agreement. This suit was of the same nature as the
above action of the PUC and covers complaints from the years 1994 through 1997.
During the third quarter of 1999, GmbH recorded a cost of services accrual
of approximately $6.7 million for a retroactive rate increase imposed by a
European telecom carrier that is currently being disputed. The outcome of this
dispute in not determinable as of December 31, 1999.
LETTERS OF CREDIT
At December 31, 1999, the Company had 17 stand by letters of credit
outstanding, which expire beginning April 28, 2000. These letters of credit,
which are secured by deposits held at the issuing financial institutions,
totaled approximately $1.9 million.
F-17
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. RELATED PARTY TRANSACTIONS
During 1997, the Company provided a short-term loan to the chief executive
officer for $8,000,000. The loan carried interest of 7 percent per annum, was
secured by $30,000,000 of the stockholder's stock in the Company, and was repaid
in seven days. During 1999, the chief executive officer provided a short-term
loan to the Company for $2,500,000, which was repaid in 70 days. The Company was
not charged any interest on this borrowing. During 1998 and 1999, the Company
paid for certain expenses for this individual, which are to be reimbursed to the
Company, resulting in a receivable due to the Company of $164,000 and $65,000 at
December 31, 1998 and 1999, respectively.
During 1997, 1998 and 1999, the Company provided services to a company
related to an employee of STAR in the amounts of $926,000, $289,000, and $20,000
respectively. As of December 31, 1998 and 1999, the account receivable from this
related party amounted to $11,000 and $0, respectively.
During 1997, 1998 and 1999, the Company purchased consulting services from a
company owned by a board member in the amount of $72,000, $71,000 and $27,000,
respectively. The Company has a payable to this company of $6,000 and $0 at
December 31, 1998 and 1999, respectively.
The Company purchased equipment and services from a company owned in part by
an employee of STAR in the amount of $1,114,000, $10,013,000 and $3,967,000 in
1997, 1998 and 1999, respectively. At December 31, 1998 and 1999, the Company
has a payable due to this related party of $1,261,000 and $35,000, respectively.
Additionally, the Company provided services to this company in the amount of
$543,000 and $1,351,000 in 1998 and 1999, respectively.
During 1999, the Company provided long-distance telephone service to a
company in which the founder and chief executive officer of STAR, other STAR
employees and board members are investors. Services provided were $2,139,000
during 1999. Additionally, STAR purchased services from this company in the
amount of $43,000 during 1999.
At December 31, 1998 and 1999, the Company had an obligation to a board
member in the amount of $1,000,000 with interest at a rate of 10 percent.
During 1999, the Company advanced $500,000 to a company, which is 50 percent
owned by STAR. At December 31, 1999, this advance was still outstanding.
The Company has various receivables due from other related parties,
primarily employee receivables, in the amount of $46,000 and $434,000 at
December 31, 1998 and 1999, respectively. The Company also has payables due to
other related parties in the amount of $98,000 at December 31, 1999.
STAR believes that all of the transactions set forth above were made on
terms no less favorable to STAR than could have been obtained from unaffiliated
third parties.
7. BUSINESS COMBINATIONS
POOLING OF INTEREST TRANSACTIONS
In November 1997, the Company acquired CEO, a domestic commercial long
distance telecommunications provider, in a transaction that was accounted for as
a pooling of interests. The Company issued 849,298 shares of its common stock to
CEO shareholders in exchange for all outstanding CEO shares plus shares of
certain non-operating entities owned by CEO shareholders and majority ownership
in an affiliated telephone retailer controlled by CEO.
F-18
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. BUSINESS COMBINATIONS (CONTINUED)
On March 10, 1998, the Company acquired T-One, an international wholesale
long distance telecommunications provider, in a transaction accounted for as a
pooling of interests. The Company issued 1,353,000 shares of its common stock to
the T-One shareholder in exchange for all outstanding T-One shares.
On March 24, 1999, the Company acquired UDN, a telephone service provider
focused on switched and dedicated local and long distance, toll free and calling
card services to multinational corporations, in a transaction that was accounted
for as a pooling of interests. The Company issued approximately
1,005,000 shares of common stock in exchange for all outstanding shares of UDN,
plus 36,142 stock options in exchange for UDN options based on the exchange
ratio of 1 to 0.1464. Upon completion of the merger, the Company changed the
name UDN to ALLSTAR Telecom.
The accompanying consolidated financial statements have been restated to
include the financial position and results of operations of CEO, T-One and UDN
for all periods presented.
Revenues and historical net income (loss) of STAR, CEO, T-One and UDN
through the dates of acquisitions are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
Revenues:
STAR.............................................. $348,738 $584,170 $1,056,839
CEO............................................... 27,460 -- --
T-ONE............................................. 30,438 11,788 --
UDN............................................... 30,622 29,166 7,478
Eliminations...................................... (3,172) (5,904) (2,543)
-------- -------- ----------
Total........................................... $434,086 $619,220 $1,061,774
======== ======== ==========
Net income (loss):
STAR.............................................. $ 4,464 $ 8,061 $ (60,381)
CEO............................................... (37) -- --
T-ONE............................................. 201 (88) --
UDN............................................... (6,391) (6,342) (3,466)
-------- -------- ----------
Total........................................... $ (1,763) $ 1,631 $ (63,847)
======== ======== ==========
</TABLE>
Revenues and net income (loss) subsequent to the dates of acquisitions are
included in the STAR balances above.
PURCHASE TRANSACTIONS
On February 4, 1999, the Company acquired PT-1, a provider of international
and domestic long-distance and local telecommunications services primarily
through the marketing of prepaid phone cards. The Company issued 15,050,000
shares of common stock (valued at $153.6 million) and $19.5 million in cash or
short-term promissory notes, made a $2 million payment to a former PT-1
shareholder and incurred estimated merger costs of $10 million for all
outstanding shares of PT-1. In connection with the
F-19
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. BUSINESS COMBINATIONS (CONTINUED)
acquisition, the Company and PT-1 placed 500,000 shares of STAR common stock in
escrow for distribution to certain PT-1 distributors for no consideration. The
Company is recognizing the related compensation expense of approximately $2.8
million over a four year vesting period. The Company also issued 179,973 options
for outstanding PT-1 options at an exercise price of $0.01 per share, of which
50 percent vested on the date of the merger, and the remaining 50 percent vested
on October 15, 1999.
The acquisition has been accounted for by the purchase method and,
accordingly, the results of operations of PT-1 have been included with those of
the Company since the date of acquisition. The purchase price has been allocated
to assets and liabilities based on preliminary estimates of fair value as of the
date of acquisition. The final allocation of the purchase price will be
determined when appraisals and other studies are completed. Based on the
preliminary allocation of the purchase price over the net assets acquired,
goodwill of approximately $204 million was recorded. Such goodwill is being
amortized on a straight-line basis over 20 years.
The following summary, prepared on a pro forma basis, combines the results
of operations as if PT-1 had been acquired as of the beginning of the periods
presented. The summary includes the impact of certain adjustments such as
goodwill amortization and estimated changes in interest income because of cash
outlays associated with the transaction and the related income tax effects (in
thousands, except per-share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1998 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Pro forma sales............................................. $1,023,847 $1,082,623
Pro forma net loss.......................................... (26,299) (75,356)
Pro forma basic and diluted net loss per common share....... $ (0.47) $ (1.29)
</TABLE>
8. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No.109,
"Accounting for Income Taxes," under which deferred assets and liabilities are
provided on differences between financial reporting and taxable income using
enacted tax rates. Deferred income tax expenses or credits are based on the
changes in deferred income tax assets or liabilities from period to period.
Under SFAS No. 109, deferred tax assets may be recognized for temporary
differences that will result in deductible amounts in future periods. A
valuation allowance is recognized if, on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax asset will not
be realized.
F-20
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
8. INCOME TAXES (CONTINUED)
The Company has recorded a net deferred tax asset of $25,846,000 at December
31, 1999. Realization is dependent on generating sufficient taxable income in
the future. Although realization is not assured, management believes it is
likely that the net deferred tax asset will be realized.
The components of the net deferred tax asset at December 31, 1998 and 1999
are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Deferred taxes short-term:
Reserve for accounts and notes receivable................. $ 4,564 $ 17,512
Accrued network costs..................................... 1,707 1,886
Other accrued liabilities................................. 360 6,911
State income taxes........................................ 270 7
Change in tax method...................................... 41 (226)
Merger costs.............................................. (163) --
------- --------
6,779 26,090
Valuation reserve......................................... (510) (510)
------- --------
$ 6,269 $ 25,580
======= ========
Deferred taxes long-term:
Net operating loss........................................ $ 9,255 $ 34,827
Deferred rent............................................. 313 --
Depreciation and amortization............................. (3,304) (7,900)
Basis difference arising from purchase accounting......... (296) (317)
------- --------
5,968 26,610
Valuation reserve......................................... (8,959) (26,344)
------- --------
$(2,991) $ 266
======= ========
</TABLE>
In prior years, T-One generated net operating losses ("NOL's") for financial
statement and income tax purposes, which may be available for carryforwards
against future income. As of December 31, 1999, T-One has deductions available
for carryforward in the amount of approximately $500,000. These NOL's will
expire through 2010. ALLSTAR has net operating loss carryforwards of
approximately $17.7 million, which expire through 2018. Utilization of the net
operating loss carryforwards may be limited by the separate return loss year
rules and by ownership changes, which have occurred or could occur in the
future. The Company also has foreign NOL's of approximately $44.7 million.
F-21
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
8. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes for the years ended December 31,
1997, 1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current taxes:
Federal................................................ $ 4,900 $7,146 $(10,726)
State.................................................. 1,147 1,909 20
Foreign................................................ -- 447 626
------- ------ --------
6,047 9,502 (10,080)
------- ------ --------
Deferred taxes:
Federal................................................ (2,273) 278 (1,714)
State.................................................. (869) 143 (302)
------- ------ --------
(3,142) 421 (2,016)
Provision (benefit) for income taxes..................... $ 2,905 $9,923 $(12,096)
======= ====== ========
</TABLE>
Differences between the provision (benefit) for income taxes and income
taxes at the statutory federal income tax rate for the years ended December 31,
1997, 1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income taxes at the statutory federal rate................ $ 400 $4,044 $(26,580)
State income taxes, net of federal income tax effect...... 66 663 (4,557)
Foreign taxes at rates different than U.S. taxes.......... 187 (359) (1,372)
Changes in valuation reserve.............................. 862 3,455 17,385
Permanent differences..................................... 119 319 4,958
Other..................................................... 1,271 1,801 (1,930)
------ ------ --------
$2,905 $9,923 $(12,096)
====== ====== ========
</TABLE>
9. STOCK OPTIONS
On January 22, 1996, the Company adopted the 1996 Stock Incentive Plan (the
"Plan"). The Plan, which was amended on March 31, 1996, provides for the
granting of stock options to purchase up to 1,476,000 shares of common stock and
terminates January 22, 2006. Options granted become exercisable at a rate of not
less than 20 percent per year for five years.
During 1996, the Company entered into three separate stock option agreements
outside the Plan to issue 1,025,000 option shares at fair market value. At
December 31, 1999, options of 147,600 issued under these agreements were
outstanding.
On September 23, 1996, the Company adopted the 1996 Supplemental Stock
Option Plan. This plan, which expires on August 31, 2006, has essentially the
same features as the Plan. The Company can issue options or other rights to
purchase up to 2,050,000 shares of stock which expire up to 10 years after the
date of grant, except for incentive options issued to a holder of more than 10
percent of the common stock outstanding, which expire five years after the date
of grant.
F-22
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. STOCK OPTIONS (CONTINUED)
In December 1996, the Company issued 174,000 options at $4.00 per share. The
Board of Directors determined the market value of the December options to be
$4.68 per share. The Company is recognizing the difference between the market
value at the date of grant and the exercise price as compensation expense over
the vesting period.
At December 31, 1999, options of 772,236 were outstanding under the
aggregate of the 1996 Stock Incentive Plan and the Supplemental Stock Option
Plan.
On May 14, 1996, the Company adopted the 1996 Outside Director Nonstatutory
Stock Option Plan (the "Director Plan"). The number of shares which may be
issued under this plan upon exercise of options may not exceed 410,000 shares.
The exercise price of an option is determined by the Board of Directors and may
not be less than 85 percent of the fair market value of the common stock at the
time of grant and has to be 110 percent of the fair market value of the common
stock at the time of grant if the option is granted to a holder of more than 10
percent of the common stock outstanding. At the discretion of the administrator,
the options vest at a rate of not less than 20 percent per year, which may
accelerate upon a change in control, as defined. The plan expires on May 14,
2006. At December 31, 1999, options of 71,500 were outstanding under the
Director Plan.
On January 30, 1997, the Board of Directors approved the 1997 Omnibus Stock
Option Incentive Plan (the "Omnibus Plan") to replace the existing 1996
Supplemental Stock Option Plan upon the effective date of the initial public
offering. The plan provides for awards to employees, outside directors and
consultants in the form of restricted shares, stock units, stock options and
stock appreciation rights and terminates on January 22, 2007. The maximum number
of shares available for issuance under this plan may not exceed 4,075,000
shares, comprised of the 2,050,000 shares that were available for issuance under
the Supplemental Stock Option Plan, plus an increase of 2,025,000 shares. Under
this Plan, options granted to any one optionee may not exceed more than
1,025,000 common shares per year subject to certain adjustments. Incentive stock
options may not have a term of more than 10 years from the date of grant. At
December 31, 1999, options of 3,054,387 were outstanding under the Omnibus Plan.
F-23
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. STOCK OPTIONS (CONTINUED)
Information regarding the Company's stock option plans and nonqualified
stock options as of December 31, 1997, 1998 and 1999, and changes during the
years ended on those dates is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
December 31, 1996......................................... 3,464,500 $ 1.89
---------- ------
Granted................................................. 914,296 7.91
Exercised............................................... (488,925) 0.89
Forfeited............................................... (392,774) 2.40
---------- ------
December 31, 1997......................................... 3,497,097 3.54
---------- ------
Granted................................................. 1,026,925 15.37
Exercised............................................... (1,522,649) 1.57
Forfeited............................................... (104,987) 10.79
---------- ------
December 31, 1998......................................... 2,896,386 8.62
---------- ------
Granted................................................. 2,157,458 7.32
Exercised............................................... (279,472) 2.56
Forfeited............................................... (728,649) 12.14
---------- ------
December 31, 1999......................................... 4,045,723 $ 7.63
========== ======
</TABLE>
At December 31, 1997, 1998 and 1999, 1,275,645, 765,317 and 1,286,322
options were exercisable at weighted average exercise prices of $1.51, $4.28 and
$5.49 per share, respectively. The options outstanding at December 31, 1999
expire in various years through 2009.
Information about stock options outstanding at December 31, 1999 is
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------------ ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.01 to $1.46 474,194 7.11 $ 1.07 387,722 $ 0.98
$4.00 to $6.83 1,659,213 8.51 $ 4.82 510,860 $ 4.44
$8.11 to $12.19 1,421,687 8.65 $10.03 277,250 $ 9.18
$12.81 to $20.94 456,829 8.41 $15.67 102,040 $15.95
$27.00 to $34.38 33,800 8.32 $27.87 8,450 $27.87
--------- ---- ------ --------- ------
4,045,723 8.38 $ 7.67 1,286,322 $ 5.49
========= ==== ====== ========= ======
</TABLE>
F-24
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. STOCK OPTIONS (CONTINUED)
The fair value of each STAR option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions for
the grants:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Expected life (years)....................................... 6 6 6
Interest rate............................................... 6.2% 5.2% 5.8%
Volatility.................................................. 31.05% 75.49% 79.73%
Dividend yield.............................................. -- -- --
</TABLE>
The Company has elected to adopt FASB No. 123 for disclosure purposes only
and applies APB Opinion No. 25 and related interpretations in accounting for its
employee stock options. Approximately $88,000, $30,000, and $0 in compensation
cost was recognized relating to consultant options for the years ended December
31, 1997, 1998 and 1999, respectively. Had compensation cost for stock options
awarded under these plans been determined based on the fair value at the dates
of grant consistent with the methodology of FASB No. 123, the Company's net
income or loss and basic and diluted income or loss per share for the years
ended December 31, 1997, 1998 and 1999 would have reflected the following pro
forma amounts:
<TABLE>
<CAPTION>
1997 1998 1999
----------- -------- ------------
<S> <C> <C> <C>
Pro forma net income (loss)...................... $(2,575,000) $65,000 $(69,311,000)
Pro forma basic and diluted net income (loss) per
common share................................... $ (0.08) $ 0.00 $ (1.20)
</TABLE>
Because the Company did not have a stock option program prior to 1996, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.
10. CAPITAL STOCK
In June 1997, the Company completed its Initial Public Offering ("IPO") of
9,430,000 shares of common stock of which 8,097,500 shares were sold by the
Company and 1,332,500 shares were sold by certain selling stockholders. The net
proceeds to the Company (after deducting underwriting discounts and offering
expenses of approximately $4.6 million) from the sale of shares was
approximately $30.9 million.
On November 30, 1997, the Company completed the acquisition of CEO pursuant
to the terms of the agreement and 849,298 shares were issued for all of the
outstanding shares of CEO.
On March 10, 1998, the Company completed the acquisition of T-One, and
1,353,000 shares were issued for all of the outstanding shares of T-One.
On March 31, 1998, the Company effected a 2.05 for 1 stock split in the
nature of a stock dividend. The stock split has been reflected in the
consolidated financial statements for all periods presented.
On May 4, 1998, the Company completed a secondary public offering of
6,000,000 shares of common stock of which 5,685,000 were sold by the Company and
315,000 shares were sold by a selling stockholder. On June 4, 1998, an
additional 30,900 shares of common stock were sold by a selling stockholder of
STAR. The net proceeds to the Company (after deducting underwriting discounts
and offering expenses) from the sale of such shares of common stock were
approximately $145 million.
F-25
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
10. CAPITAL STOCK (CONTINUED)
On February 4, 1999, in connection with the PT-1 merger, the Company issued
approximately 15,050,000 shares of common stock, and together with PT-1, placed
500,000 shares of STAR common stock in escrow for distribution to certain PT-1
distributors for no consideration. In connection with the acquisition, the
Company acquired a stockholder note receivable issued in connection with the
exercise of stock options. The note was originally in the amount of $3.57
million, and increased to $3.71 million at December 31, 1999 due to interest
which is earned at 8%. The note is due on February 4, 2001.
On March 24, 1999, in connection with the UDN merger, the Company issued
approximately 1,005,000 shares of common stock in exchange for all outstanding
shares of UDN.
11. BUSINESS SEGMENTS
At December 31, 1999, STAR has three separately managed business segments,
North American Wholesale, North American Commercial and European long distance
telecommunications.
The accounting policies of the segments are the same as those described in
the significant accounting policies; however, the Company evaluates performance
based on profit or loss from operations before income taxes and non-recurring
gains or losses.
For the year ended December 31, 1998, STAR evaluated performance based on
profit or loss from North American and European operations, however, with the
acquisition of PT-1, senior management began analyzing operations by its North
American Wholesale, North American Commercial and European segments.
Reportable segment information for the years ended December 31, 1997, 1998
and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
NORTH NORTH
AMERICAN AMERICAN
WHOLESALE COMMERCIAL EUROPEAN TOTAL
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1997
Revenues from external customers................ $376,004 $ 58,082 $ -- $ 434,086
Revenue between segments........................ 1,141 -- 321 1,462
Interest income................................. 464 -- -- 464
Interest expense................................ 1,482 906 229 2,617
Depreciation and amortization................... 4,152 1,069 429 5,650
Segment net income (loss) before provision for
income taxes.................................... 10,632 (7,569) (1,921) 1,142
Other significant non-cash items:
Capital lease additions....................... 6,755 -- 3,265 10,020
Property financed by notes payable............ 1,890 -- -- 1,890
Operating agreement acquired through issuance
of a note..................................... 350 -- -- 350
Issuance of convertible debenture and note
payable for CTN capital stock................. 1,050 -- -- 1,050
Segment assets.................................. 99,077 19,373 11,932 130,382
Expenditures for segment assets................. 10,944 931 2,799 14,674
1998
Revenues from external customers................ $529,807 $ 60,242 $ 29,171 $ 619,220
Revenue between segments........................ 21,547 -- 34,018 55,565
</TABLE>
F-26
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
11. BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
NORTH NORTH
AMERICAN AMERICAN
WHOLESALE COMMERCIAL EUROPEAN TOTAL
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Interest income................................. 4,387 39 43 4,469
Interest expense................................ 1,518 565 1,303 3,386
Depreciation and amortization................... 8,951 2,066 4,037 15,054
Segment net income (loss) before provision for
income taxes.................................... 26,207 (12,863) (1,790) 11,554
Other significant non-cash items:
Capital lease additions....................... 11,080 -- 23,136 34,216
Deposit applied against capital leases........ -- -- 4,405 4,405
Tax benefit related to stock options.......... 5,635 -- -- 5,635
Segment assets.................................. 208,125 16,615 149,911 374,651
Expenditures for segment assets................. 59,288 837 52,895 113,020
1999
Revenues from external customers................ $465,831 $471,504 $124,439 $1,061,774
Revenue between segments........................ 214,742 15,683 33,874 264,299
Interest income................................. 1,812 261 119 2,192
Interest expense................................ (2,241) (4,783) (2,871) (9,895)
Depreciation and amortization................... 16,797 16,071 11,368 44,236
Segment net income (loss) before provision for
income taxes.................................... (13,018) (25,860) (37,065) (75,943)
Other significant non-cash items:
Capital lease additions....................... -- -- 27,605 27,605
Vendor financing arrangements................. 62,666 -- -- 62,666
Segment assets................................ 290,364 343,888 173,502 807,754
Expenditures for segment assets................. 54,797 1,481 4,039 60,317
</TABLE>
Segment information for North America represents primarily activity in the
United States. In 1999, approximately 98.1 percent of European revenue from
external customers was generated in Germany.
12. QUARTERLY CONSOLIDATED INFORMATION (UNAUDITED)
The following table presents unaudited quarterly operating results,
including the results of CEO, T-One and UDN for each of the Company's eight
quarters in the two-year period ended December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
--------- -------- --------- --------
<S> <C> <C> <C> <C>
1998
Net sales......................................... $136,571 $138,911 $169,686 $174,052
Operating income (loss)........................... 3,622 4,337 4,204 (1,388)
Net income (loss)................................. 1,343 2,365 2,356 (4,433)
1999
Net sales......................................... $228,209 $272,269 $279,216 $282,080
Operating loss.................................... (6,342) (33,248) (8,559) (21,464)
Net loss.......................................... (7,552) (27,932) (8,763) (19,600)
</TABLE>
F-27
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
13. SUBSEQUENT EVENTS
On January 18, 2000 STAR was notified that its capacity on the China-US
Undersea Cable System would be reclaimed, unless a payment of approximately
$47.0 million was made by February 1, 2000. The $47.0 million represents the
total amount of liabilities due to the China-US Undersea Cable System as of
December 31, 1999. STAR elected to allow reclamation of the capacity to take
place. As a result, STAR will remove the capitalized cost of $48.7 million,
which is included in operating equipment at December 31, 1999, and the related
accounts payable balance in the first quarter of 2000.
On February 11, 2000, World Access and STAR entered into a definitive
agreement to merge STAR with and into World Access. Under the terms of the
agreement, each share of STAR common stock will be converted into 0.3905 shares
of World Access common stock. World Access may, at its election, pay up to 40%
of the merger consideration in cash.
The merger is subject to, among other things, certain regulatory approvals,
the approval of the shareholders of World Access and STAR, and the divestiture
by STAR of its prepaid card and dial around businesses for minimum net cash
proceeds of $150 million. Any net proceeds in excess of the specified minimum
proceeds would be added to the merger consideration. The merger will be
accounted for as a purchase transaction. The transaction is expected to close by
the end of the second quarter of 2000.
In connection with the acquisition of PT-1 on February 4, 1999, the Company
and PT-1 placed 500,000 shares of STAR common stock into escrow for issuance to
certain PT-1 distributors for no consideration. As a result of subsequent
negotiations, the Company entered into a distribution agreement with NY Phone
Card Distributors LLC ("Distribution Co."), a partnership of distributors, on
March 1, 2000. The agreement provides for a total of 400,000 shares of STAR
common stock to be issued to Distribution Co. under the following arrangements:
(i) 228,750 shares at the date of execution, (ii) 31,250 shares at the end of
May 2000, provided that the agreement is still in effect, and (iii) 140,000
shares contingently issuable based on certain minimum purchase requirements.
Under the agreement, the accounts receivable balances totaling $1.2 million
as of March 1, 2000 were converted into interest free notes receivable due in
monthly installments through January 2001.
The agreement requires Distribution Co. to purchase a minimum of
approximately $121 million of prepaid calling cards from PT-1 during the period
from March 2000 through May 2001, with additional quarterly increases of three
percent from June 2001 through May 2002.
On March 29, 2000, STAR entered into a Letter of Intent to sell the assets
of PT-1 to PT-1 Acquiror for cash proceeds of $150 million less certain
liabilities, and subject to a purchase price adjustment based on an audit of
PT-1 to be conducted after the close of the sale of PT-1. Due diligence is
currently in process by PT-1 Acquiror and a definitive acquisition agreement is
expected to be completed by April 21, 2000. This transaction is subject to
shareholder approval. STAR expects to close this transaction during the second
quarter of fiscal 2000 and to record a loss of approximately $100 million on
this sale at closing.
On April 12, 2000, STAR entered into a note agreement with WorldCom which
provides for the conversion of $56.0 million of trade payables into a note
payable. The note is secured by the customer base of the Company, bears interest
at 16.0% per annum and is payable at the earlier of the close of the World
Access, Inc. merger or August 1, 2000. Management believes that the PT-1 asset
sale and the World Access merger will close as planned and the WorldCom note
will be satisfied at maturity.
F-28
<PAGE>
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
13. SUBSEQUENT EVENTS (CONTINUED)
On February 14, 2000 an individual shareholder of STAR Telecommunications,
Inc., filed a lawsuit in Santa Barbara Superior Court seeking to block STAR's
pending merger with World Access. The suit alleges that STAR and its Board of
Directors failed to take actions necessary to attain a higher valuation for the
company than provided for in the World Access merger, and seeks to block the
pending merger. STAR believes the lawsuit is without merit and will defend
itself vigorously against the class action shareholder lawsuit. STAR has filed
demurrers on the grounds that the complaints are legally deficient.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of STAR Telecommunications, Inc. and Subsidiaries
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of STAR Telecommunications, Inc. and
Subsidiaries, included in this Form 10-K, and have issued our report thereon
dated April 14, 2000. Our audits were made for the purpose of forming an opinion
on the basic consolidated financial statements taken as a whole. The schedule of
valuation and qualifying accounts is the responsibility of the Company's
management and is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 14, 2000
S-1
<PAGE>
SCHEDULE II
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF END OF
PERIOD ACQUISITION PROVISION WRITE-OFF PERIOD
------------ ----------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended December 31, 1997............ $ 6,521 $ -- $13,770 $ (7,229) $13,062
Year ended December 31, 1998............ $13,062 $ -- $ 7,477 $ (7,978) $12,561
Year ended December 31, 1999............ $12,561 $37,925 $25,003 $(28,782) $46,707
Deferred tax valuation allowance
Year ended December 31, 1997............ $ 5,152 $ -- $ 862 $ -- $ 6,014
Year ended December 31, 1998............ $ 6,014 $ -- $ 3,455 $ -- $ 9,469
Year ended December 31, 1999............ $ 9,469 $ -- $17,385 $ -- $26,854
</TABLE>
S-2
<PAGE>
Exhibit 2.7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 11, 2000 (this
"AGREEMENT"), is made and entered into among WORLD ACCESS, INC., a Delaware
corporation ("WAXS"), STI Merger Co., a Delaware corporation and wholly-owned
subsidiary of WAXS ("MERGER SUB"), and STAR TELECOMMUNICATIONS, INC., a Delaware
corporation ("STAR").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of STAR and WAXS deem it advisable and
in the best interests of each corporation and its respective stockholders that
STAR and WAXS engage in a business combination in order to advance the long-term
strategic business interests of STAR and WAXS;
WHEREAS, the combination of STAR and WAXS shall be effected by the
terms of this Agreement through a merger as outlined below (the "MERGER");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
STAR, Merger Sub and WAXS have approved the Merger, upon the terms and subject
to the conditions set forth in this Agreement, pursuant to which each share of
common stock, par value $0.001 per share, of STAR ("STAR COMMON STOCK") issued
and outstanding immediately prior to the Effective Time (as defined in Section
1.3) will be converted into the right to receive the consideration set forth in
Section 1.6;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations
promulgated thereunder; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, WAXS and Christopher E. Edgecomb and Samer Tawfik (the "PRINCIPAL
STOCKHOLDERS") are entering into an agreement (the "VOTING AND STOCK TRANSFER
RESTRICTION AGREEMENT") pursuant to which each Principal Stockholder will agree
to, among other things, vote in favor of the Merger and certain restrictions on
the transfer of the consideration received in the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
<PAGE>
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), STAR shall be merged with and into Merger Sub at
the Effective Time (as defined below). Following the Merger, the separate
corporate existence of STAR shall cease and Merger Sub shall continue as the
surviving corporation (the "SURVIVING CORPORATION").
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth in Article VI, the closing of the Merger and the transactions
contemplated by this Agreement (the "CLOSING") will take place on the second
business day following the satisfaction or waiver of such conditions, unless
another time or date is agreed to in writing by the parties hereto (the date of
the Closing being referred to herein as the "CLOSING DATE"). The Closing shall
be held at the offices of Long Aldridge & Norman LLP, 303 Peachtree Street,
Suite 5300, Atlanta, Georgia 30303, unless another place is agreed to by the
parties hereto.
1.3 EFFECTIVE TIME. On the Closing Date the parties shall (i) file a
certificate of merger (the "CERTIFICATE OF MERGER") in such form as is required
by, and executed in accordance with, the relevant provisions of the DGCL and
(ii) make all other filings or recordings required under the DGCL in connection
with the Merger. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State or at
such subsequent time as WAXS and STAR shall agree and as shall be specified in
the Certificate of Merger (the date and time the Merger becomes effective being
the "EFFECTIVE TIME").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers, licenses, authorizations and franchises of Merger
Sub and STAR shall be vested in the Surviving Corporation, and all debts,
liabilities and duties of Merger Sub and STAR shall become the debts,
liabilities and duties of the Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION/BYLAWS. The certificate of
incorporation and bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation and bylaws of the
Surviving Corporation, until thereafter changed or amended as provided therein
or by applicable law.
1.6 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of WAXS, Merger Sub, STAR or the
holders of any of the following securities:
(a) [INTENTIONALLY OMITTED.]
2
<PAGE>
(b) Each share of STAR Common Stock issued and outstanding and
directly or indirectly owned or held by STAR or a Subsidiary thereof at the
Effective Time shall, by virtue of the Merger, cease to be outstanding and shall
be canceled and retired and no capital stock of WAXS or other consideration
shall be delivered in exchange therefor.
(c) Subject to Section 2.4, each share of STAR Common Stock
issued and outstanding immediately prior to the Effective Time (other than the
Dissenter's Shares (as defined in Section 8.12)) shall be converted into the
right to receive, at the election of WAXS by written notice to STAR prior to the
Closing, (i) the number of shares of WAXS Common Stock obtained by solving for
"X" in the following formula (the "Exchange Ratio"):
X = 7.81 + Z
--------
20
or (ii) such number of shares of WAXS Common Stock as shall equal sixty percent
(60%) of the Exchange Ratio and an amount in cash equal to forty percent (40%)
of the sum of $7.81 plus "Z" (as defined below); provided, however, that WAXS
and STAR expressly agree that, notwithstanding anything in this Agreement to the
contrary, in order to ensure that the Merger satisfies the continuity of
interest requirement under Treasury Regulation Section 1.368-1(e), that in no
event shall WAXS issue cash for more than forty-five percent (45%) of the
outstanding shares of STAR Common Stock, including for purposes of this
calculation cash paid for fractional shares pursuant to Section 2.4 and cash
paid for Dissenters' Shares.
For purposes of this Section 1.6, "Z" shall equal the PT-1 Excess Proceeds (as
defined in Section 8.12) DIVIDED BY 62,856,702. All shares of STAR Common Stock,
at the Effective Time, shall no longer be outstanding and shall automatically be
canceled and retired and each holder of a certificate representing any such
shares (a "CERTIFICATE") shall cease to have any rights with respect thereto,
except as set forth in this Section 1.6(c), Section 2.4 or at law. The shares of
WAXS Common Stock issued pursuant to this Section 1.6(c) together with any cash
in lieu of fractional shares paid pursuant to Section 2.4 shall be referred to
herein as the "MERGER CONSIDERATION."
1.7 STAR STOCK OPTIONS.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of STAR, WAXS, Merger Sub or the holder of any
outstanding option, warrant or other right to acquire STAR capital stock (a
"STAR STOCK OPTION"), each STAR Stock Option will be automatically converted
into a WAXS Stock Option (as defined in Section 3.1(b)) to purchase shares of
WAXS Common Stock in an amount equal to the number of shares of STAR Common
Stock covered under such STAR Stock Option multiplied by the Exchange Ratio
(rounded to the nearest whole number of shares of WAXS Common Stock) at a
price per share of WAXS Common Stock
3
<PAGE>
equal to the per share option exercise price specified in the STAR Stock
Option divided by the Exchange Ratio (rounded to the nearest whole cent).
Each such WAXS Stock Option shall contain terms and provisions which are
substantially similar to those terms, conditions and provisions governing the
original STAR Stock Option, except that references to STAR in such STAR Stock
Option will be deemed to refer to WAXS and the date of grant of the STAR
Stock Option shall be deemed to be the date of grant of such WAXS Stock
Option. At the Effective Time, for purposes of interpretation of such new
WAXS Stock Option, (i) all references in any stock option plan of STAR shall
be deemed to refer to WAXS; (ii) any stock option plan of STAR which governs
the STAR Stock Option shall continue to govern the WAXS Stock Option
substituted therefor; and (iii) WAXS shall, as soon as practicable after the
Effective Time, issue to each holder of an outstanding STAR Stock Option a
document evidencing the foregoing issued and substituted WAXS Stock Option by
WAXS. It is the intention of the parties: (1) that, subject to applicable
law, STAR Stock Options assumed by WAXS qualify, following the Effective
Time, as incentive stock options, as defined in Section 422 of the Code, to
the extent that STAR Stock Options qualified as incentive stock options prior
to the Effective Time, (2) that each holder of a STAR Stock Option shall
receive a new WAXS Stock Option which preserves (but does not increase) the
excess of the fair market value of the shares subject to such STAR Stock
Option immediately before the Effective Time over the aggregate option price
of such shares immediately before the Effective Time, if any such excess then
exists, (3) that the terms, conditions, restrictions and provisions of the
WAXS Stock Option be substantially similar to the terms, conditions,
restrictions and provisions of the STAR Stock Option, and (4) any terms
conditions, restrictions or provisions of a STAR Stock Option applicable to a
number of shares rather than a percentage or fraction of shares should be
appropriately adjusted based upon the Exchange Ratio. Without the prior
written consent of WAXS (which may be withheld in its discretion), no new
options shall be issued by STAR on or after the date hereof, including,
without limitation, under any stock option plan currently maintained by STAR.
(b) With respect to each STAR Stock Option converted into a WAXS
Stock Option pursuant to Section 1.7(a), and with respect to the shares of
WAXS Common Stock underlying such option, WAXS shall file and keep current all
requisite registration statements, on Form S-8 or other appropriate form, for as
long as such options remain outstanding, which registration statement shall
include a prospectus meeting the requirements of General Instruction C to Form
S-8 with respect to affiliates of STAR, subject at all times to compliance with
all applicable federal and state securities laws.
(c) After the date of this Agreement, STAR agrees that it will
not grant any restricted stock, stock appreciation rights or limited stock
appreciation rights and also agrees that it will not permit cash payments to
holders of STAR Stock Options in lieu of the substitution therefor of WAXS Stock
Options, as described in this Section 1.7.
1.8 CERTAIN ADJUSTMENTS. If between the date hereof and the Effective
Time, the outstanding WAXS Common Stock or STAR Common Stock shall have been
changed into a different number of shares or different class by reason of any
reclassification, recapitalization, stock split, split-up, combination, exchange
of shares or similar capital stock event or a stock dividend or
4
<PAGE>
dividend payable in any other securities shall be declared with a record date
within such period, or any similar event shall have occurred, the Exchange
Ratio shall be appropriately adjusted to provide to the holders of STAR
Common Stock and the holders of STAR Stock Options the same economic effect
as contemplated by this Agreement prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 EXCHANGE FUND. At least five (5) days prior to the mailing of the
Joint Proxy Statement/Prospectus (as defined in Section 5.1), WAXS shall appoint
a commercial bank or trust company reasonably acceptable to STAR to act as
exchange agent hereunder (the "EXCHANGE AGENT") for the purpose of exchanging
Certificates for the Merger Consideration. Immediately prior to the Effective
Time, WAXS shall deposit with the Exchange Agent, in trust for the benefit of
holders of shares of STAR Common Stock, cash payable and certificates
representing the WAXS Common Stock issuable pursuant to Section 1.6 in exchange
for outstanding shares of STAR Common Stock. WAXS agrees to deposit with the
Exchange Agent from time to time as needed, cash sufficient to pay cash in lieu
of fractional shares pursuant to Section 2.4 and any dividends and other
distributions pursuant to Section 2.3. Any cash and certificates of WAXS Common
Stock deposited with the Exchange Agent shall hereinafter be referred to as the
"EXCHANGE FUND".
2.2 EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, WAXS shall cause the Exchange Agent to mail to each holder of a
Certificate (other than to holders of Dissenter's Shares) (i) a letter of
transmittal which shall advise such holder of the effectiveness of the Merger
and specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, and which letter shall be in customary form and have such other
provisions as WAXS may reasonably specify and (ii) instructions for effecting
the surrender of such Certificates in exchange for the applicable Merger
Consideration. Upon surrender of a Certificate to the Exchange Agent together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor promptly (A) one or more shares of WAXS Common
Stock (which shall be in uncertificated book entry form unless a physical
certificate is requested) representing, in the aggregate, the whole number of
shares that such holder has the right to receive pursuant to Section 1.6 (after
taking into account all shares of STAR Common Stock then held by such holder),
and (B) a check in the amount equal to the cash that such holder has the right
to receive pursuant to the provisions of Section 1.6(c), if any, and this
Article II, including cash in lieu of any additional shares of WAXS Common Stock
pursuant to Section 2.4 and dividends and other distributions pursuant to
Section 2.3. No interest will be paid or will accrue on any cash payable
pursuant to 1.6(c), Section 2.3 or Section 2.4. In the event of transfer of
ownership of STAR Common Stock which is not registered in the transfer records
of STAR, one or more shares of WAXS Common Stock evidencing, in the aggregate,
the proper number of shares of WAXS Common Stock, a check in the proper amount
of cash in lieu of any additional shares of WAXS
5
<PAGE>
Common Stock pursuant to Section 2.4, a check in the proper amount of cash
pursuant to Section 1.6(c) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.3, may be issued with respect
to such STAR Common Stock to such a transferee if the Certificate
representing such shares of STAR Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
2.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED CERTIFICATES. No
dividends or other distributions declared or made with respect to shares of WAXS
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unexchanged Certificate with respect to the shares of WAXS Common
Stock that such holder would be entitled to receive upon surrender of such
Certificate and no cash payment in lieu of fractional shares of WAXS Common
Stock shall be paid to any such holder pursuant to Section 2.4 until such holder
shall surrender such Certificate in accordance with Section 2.2. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to such holder of shares of WAXS Common Stock issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of WAXS Common Stock to
which such holder is entitled pursuant to Section 2.4 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of WAXS Common Stock, and (b)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such shares of
WAXS Common Stock.
2.4 NO FRACTIONAL SHARES OF WAXS COMMON STOCK.
(a) No certificates or scrip or shares of WAXS Common Stock
representing fractional shares of WAXS Common Stock or book-entry credit of the
same shall be issued upon the surrender for exchange of Certificates and such
fractional share interests will not entitle the owner thereof to vote or to have
any rights of a stockholder of or a holder of shares of WAXS Common Stock.
(b) Notwithstanding any other provision of this Agreement, each
holder of shares of STAR Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of WAXS
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of WAXS Common Stock
multiplied by (ii) the average of the daily closing price for a share of WAXS
Common Stock on the Nasdaq for the ten (10) consecutive trading days in which
such shares are traded on the Nasdaq, ending at the close of trading on the date
of the Effective Time or, if such date is not a business day, the business day
immediately preceding the date on which the Effective Time occurs. As promptly
as practicable after the determination of the amount of cash, if any, to be paid
to holders of fractional interests, the Exchange Agent shall so notify WAXS, and
WAXS shall promptly deposit such amount with the Exchange Agent and shall cause
the Exchange Agent to promptly forward payments to such holders of fractional
interests subject to and in accordance with the terms hereof.
6
<PAGE>
2.5 NO FURTHER OWNERSHIP RIGHTS IN STAR COMMON STOCK. As applicable,
all shares of WAXS Common Stock issued and cash paid upon conversion of shares
of STAR Common Stock in accordance with the terms of Article I and this Article
II (including any cash paid pursuant to Section 2.4) shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to the shares
of STAR Common Stock.
2.6 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six (6) months
after the Effective Time shall be delivered to the Surviving Corporation or
otherwise on the instruction of the Surviving Corporation, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation and WAXS for the Merger
Consideration with respect to the shares of STAR Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.6
and Section 2.2, any cash in lieu of fractional shares of WAXS Common Stock to
which such holders are entitled pursuant to Section 2.4 and any dividends or
distributions with respect to shares of WAXS Common Stock to which such holders
are entitled pursuant to Section 2.3. Any such portion of the Exchange Fund
remaining unclaimed by holders of shares of STAR Common Stock five (5) years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Entity (as defined in Section 3.1(c)(3)) shall, to the extent permitted by law,
become the property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled thereto.
2.7 NO LIABILITY. None of WAXS, Merger Sub, STAR, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.8 INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by the Surviving Corporation
on a daily basis. Any interest and other income resulting from such investments
shall promptly be paid to the Surviving Corporation.
2.9 LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
STAR Common Stock formerly represented thereby, any cash in lieu of fractional
shares of WAXS Common Stock, and unpaid dividends and distributions on shares of
WAXS Common Stock deliverable in respect thereof, pursuant to this Agreement.
7
<PAGE>
2.10 WITHHOLDING RIGHTS. Each of the Surviving Corporation and WAXS
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of STAR Common Stock
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or WAXS, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of STAR Common Stock
in respect of which such deduction and withholding was made by the Surviving
Corporation or WAXS, as the case may be.
2.11 STOCK TRANSFER BOOKS. The stock transfer books of STAR shall be
closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of STAR Common Stock thereafter on the
records of STAR. On or after the Effective Time, any Certificates presented to
the Exchange Agent or WAXS for any reason shall be converted as provided in
Articles I and II hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF WAXS AND MERGER SUB. Except as
set forth in the WAXS SEC Reports (as defined below) filed and publicly
available prior to the date hereof or the WAXS Disclosure Schedule delivered by
WAXS to STAR prior to the execution of this Agreement (the "WAXS DISCLOSURE
SCHEDULE") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein), WAXS
and Merger Sub represent and warrant to STAR as follows:
(a) ORGANIZATION; STANDING AND POWER; SUBSIDIARIES.
(1) Each of WAXS, its Subsidiaries (as defined in Section
8.12) and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the requisite power and authority
to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and
authority would not have a Material Adverse Effect on WAXS, and is
duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure to so qualify or to be
in good standing would not have a Material Adverse Effect on WAXS.
The copies of the certificate of incorporation and bylaws of WAXS
and Merger Sub which were previously furnished or made available to
STAR are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
8
<PAGE>
(2) Exhibit 21.1 to WAXS's Annual Report on Form 10-K for
the year ended December 31, 1998 includes all the Subsidiaries of
WAXS which as of the date of this Agreement are Significant
Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC).
All the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary have been validly
issued and are fully paid and nonassessable and are owned directly
or indirectly by WAXS, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature
whatsoever (collectively "LIENS") and free of any other restriction
(including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). Neither
WAXS nor any of its Subsidiaries directly or indirectly owns any
equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in,
any corporation, partnership, joint venture or other business
association or entity (other than the Subsidiaries of WAXS) that is
or would reasonably be expected to be material to WAXS and its
Subsidiaries taken as a whole.
(b) CAPITAL STRUCTURE. As of February 7, 2000:
(1) The authorized capital stock of WAXS consists of (A)
150,000,000 shares of WAXS Common Stock, of which 53,787,805 shares
are outstanding and no shares are held in the treasury of WAXS and
(B) 10,000,000 shares of Preferred Stock, par value $.01 per share,
of which 50,000 shares designated as 4.25% Cumulative Senior
Perpetual Convertible Preferred Stock, Series A, par value $.01 per
share (the "SERIES A PREFERRED STOCK"), and 350,259.875 shares
designated as Convertible Preferred Stock, Series C (the "SERIES C
PREFERRED STOCK"), are outstanding. WAXS has reserved or has
available 4,347,827 shares of WAXS Common Stock for issuance upon
conversion of the Series A Preferred Stock and 18,027,478 shares of
WAXS Common Stock for issuance upon conversion of the Series C
Preferred Stock. All issued and outstanding shares of the capital
stock of WAXS are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock is entitled to
preemptive rights. In addition to the rights described in Section
3.1(b) of the WAXS Disclosure Schedule, there are outstanding
options, warrants or other rights (a "WAXS STOCK OPTION") to acquire
13,133,837 shares of capital stock from WAXS.
(2) No bonds, debentures, notes or other indebtedness of
WAXS having the right to vote on any matters on which holders of
capital stock of WAXS may vote ("WAXS VOTING DEBT") are issued or
outstanding.
(3) Except as otherwise set forth in this Section 3.1(b)
and as contemplated by Section 1.5 and Section 1.6, there are no
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which WAXS
or any of its Subsidiaries is a party or by which any of them is
bound obligating WAXS or any of its Subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares
of capital stock or other voting securities of WAXS or any of its
Subsidiaries or obligating WAXS or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call
right, commitment, agreement, arrangement or
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undertaking. There are no outstanding obligations of WAXS or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of WAXS or any of its Subsidiaries.
(c) AUTHORITY; NO CONFLICTS.
(1) WAXS and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the
Merger and the other transactions contemplated hereby, subject, in
the case of WAXS, to the approval by the stockholders of WAXS by the
Required WAXS Vote (as defined in Section 3.1(g)) of this Agreement,
the Merger and the other transactions contemplated hereby and, in
the case of Merger Sub, the affirmative vote of WAXS, as sole
stockholder thereof, of this Agreement, the Merger and the other
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the Merger and the other
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of WAXS and Merger Sub,
subject, in the case of WAXS, to the approval by the stockholders of
WAXS of this Agreement, the Merger and the transactions contemplated
hereby by the Required WAXS Vote and subject, in the case of Merger
Sub, to the affirmative vote of WAXS, as sole stockholder thereof,
of this Agreement, the Merger and the other transactions
contemplated hereby. This Agreement has been duly executed and
delivered by WAXS and Merger Sub and constitutes a valid and binding
agreement of each of WAXS and Merger Sub, enforceable against it in
accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(2) Subject, in the case of WAXS, to the approval by the
stockholders of WAXS of this Agreement, the Merger and the
transactions contemplated hereby by the Required WAXS Vote and, in
the case of Merger Sub, the affirmative vote of WAXS, as sole
stockholder thereof, of this Agreement, the Merger and the other
transactions contemplated hereby, the execution and delivery of this
Agreement by WAXS and Merger Sub does not, and the consummation by
WAXS and Merger Sub of the Merger and the other actions contemplated
hereby will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a Lien on any assets (any
such conflict, violation, default, right of termination, amendment,
cancellation or acceleration, loss or creation, a "VIOLATION") of:
(A) any provision of the certificate of incorporation or bylaws of
WAXS, any Subsidiary of WAXS or Merger Sub, or (B) except as would
not have a Material Adverse Effect on WAXS and subject to obtaining
or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (3)
below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree,
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statute, law, ordinance, rule or regulation applicable to WAXS, any
Subsidiary of WAXS or their respective properties or assets.
(3) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational,
national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or
commission or other authority thereof, or any quasi-governmental or
private body exercising any supranational, national, state,
municipal, local or foreign regulatory, taxing, importing or other
governmental or quasi-governmental authority (a "GOVERNMENTAL
ENTITY"), is required by or with respect to WAXS, any Subsidiary of
WAXS or Merger Sub in connection with the execution and delivery of
this Agreement by WAXS or Merger Sub or the consummation of the
Merger and the other transactions contemplated hereby, except for
those required under or in relation to (A) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (B)
state securities or "blue sky" laws (the "BLUE SKY LAWS"), (C) the
Communications Act of 1996, as amended (the "COMMUNICATIONS ACT"),
and all applicable state public utilities laws, (D) the Securities
Act, (E) the Exchange Act, (F) the DGCL with respect to the filing
of the Certificate of Merger, (G) rules and regulations of Nasdaq,
(H) antitrust or other competition laws of other jurisdictions, (I)
such consents, approvals, orders, authorizations, registrations,
declarations and filings as are required by applicable laws,
regulations and rules governing the telecommunications business
including, without limitation, those of the United States Federal
Communication Commission (the "FCC"), (J) any filings and approvals
expressly contemplated by this Agreement, and (K) such consents,
approvals, orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain would not have a
Material Adverse Effect on WAXS. Consents, approvals, orders,
authorizations, registrations, declarations and filings required
under or in relation to any of the foregoing clauses (A) through (K)
are hereinafter referred to as "NECESSARY CONSENTS".
(d) REPORTS AND FINANCIAL STATEMENTS.
(1) WAXS has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it under the federal securities
laws with the SEC since January 1, 1998 (collectively, including all
exhibits thereto, the "WAXS SEC REPORTS"). No Subsidiary of WAXS,
including, without limitation Merger Sub, is required to file any
form, report, registration statement, prospectus or other document
with the SEC not otherwise filed with a WAXS SEC Report. As of the
respective times such documents were filed or, as applicable, became
effective, or as subsequently amended, the WAXS SEC Reports complied
as to form and content, in all material respects, with the
requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations promulgated thereunder and,
taken as a whole, the WAXS SEC Reports do not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements (including the
related notes) included in the WAXS SEC Reports (or,
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if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) presents fairly, in all
material respects, the consolidated financial position and
consolidated results of operations and cash flows of WAXS and its
Subsidiaries as of the respective dates or for the respective
periods set forth therein all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments that have
not been and are not expected to be material in amount. All of such
WAXS SEC Reports, as of their respective dates (or as of the date of
any amendment to the respective WAXS SEC Report filed prior to the
date of this Agreement), complied or will comply as to form in all
material respects with the applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations promulgated
thereunder.
(2) Since December 31, 1998, WAXS and its Subsidiaries
have not incurred any liabilities that are of a nature that would be
required to be disclosed on a balance sheet of WAXS and its
Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course of
business or (B) liabilities that would not have a Material Adverse
Effect on WAXS.
(e) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by WAXS for inclusion or incorporation by reference in the
Joint Proxy Statement/Prospectus (as defined herein) will, on the date it is
first mailed to WAXS's and STAR's stockholders, as applicable, or at the time
of the WAXS Stockholders Meeting or the STAR Stockholders Meeting, as
applicable, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Joint Proxy Statement/Prospectus will, on the date
it is first mailed to WAXS's and STAR's stockholders and at the time of the
WAXS Stockholders Meeting and the STAR Stockholders Meeting, comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
(f) WAXS BOARD APPROVAL. The Board of Directors of WAXS, by
resolutions duly adopted by unanimous vote at a meeting duly called and held
and not subsequently rescinded or modified in any way (the "WAXS BOARD
APPROVAL"), has duly (i) determined that this Agreement, the Merger and the
other transactions contemplated hereby are fair to and in the best interests
of WAXS and its stockholders, (ii) approved this Agreement, the Merger and
the other transactions contemplated hereby and (iii) declared the
advisability of this Agreement, the Merger and the other transactions
contemplated hereby, and, further, (iv) recommended that the stockholders of
WAXS approve and adopt this Agreement, the Merger and the other transactions
contemplated hereby and directed that this Agreement and the transactions
contemplated hereby be submitted for consideration by WAXS's stockholders at
the WAXS Stockholders Meeting.
(g) REQUIRED WAXS STOCKHOLDER VOTE. The affirmative vote of
holders of shares of WAXS Common Stock, Series A Preferred Stock and Series C
Preferred Stock, voting together as a single class, representing a majority
of the outstanding shares of WAXS Common Stock, Series A Preferred Stock and
Series C Preferred Stock (the "REQUIRED WAXS VOTE"), is the only vote of
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the holders of any class or series of WAXS capital stock necessary to adopt
this Agreement and approve the Merger and the other transactions contemplated
hereby.
(h) REQUIRED MERGER SUB BOARD APPROVAL. The Board of Directors
of Merger Sub, by resolutions duly adopted by a unanimous written consent and
not subsequently rescinded or modified in any way, has duly (i) determined
that this Agreement, the Merger and the other transactions contemplated
hereby are fair to and in the best interests of Merger Sub and its sole
stockholder, WAXS, (ii) approved this Agreement, the Merger and the other
transactions contemplated hereby and (iii) declared the advisability of this
Agreement, the Merger and the other transactions contemplated hereby, and,
further, (iv) recommended that WAXS adopt this Agreement and approve the
Merger and the other transactions contemplated hereby and directed that this
Agreement and the transactions contemplated hereby be submitted for
consideration by WAXS at a meeting duly called.
(i) REQUIRED MERGER SUB STOCKHOLDER VOTE. The affirmative vote
of WAXS, as sole stockholder of Merger Sub, is the only vote of the holders
of any class or series of Merger Sub capital stock necessary to adopt this
Agreement and approve the Merger and the other transactions contemplated
hereby.
(j) LITIGATION: COMPLIANCE WITH LAWS.
(1) There is no suit, investigation, action or proceeding
pending or, to the Knowledge of WAXS, threatened, against or
affecting WAXS or any Subsidiary of WAXS having, or which would have
a Material Adverse Effect on WAXS, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against WAXS or any Subsidiary of WAXS
having, or which would have a Material Adverse Effect on WAXS.
(2) Except as would not have a Material Adverse Effect on
WAXS, WAXS and its Subsidiaries hold all permits, licenses,
variances, authorizations, exemptions, orders and approvals of all
Governmental Entities including, without limitation, the FCC and
state public utilities commissions, which are necessary for the
operation of the businesses of WAXS and its Subsidiaries (the "WAXS
PERMITS"). Such WAXS permits are valid and in full force and effect
and WAXS and its Subsidiaries are in compliance with the terms of
the WAXS Permits, except where the failure to be valid and in full
force and effect or to so comply would not have a Material Adverse
Effect on WAXS. The businesses of WAXS and its Subsidiaries are not
being conducted in violation of, and WAXS has not received any
notices of violations with respect to, any law, ordinance or
regulation of any Governmental Entity, except for possible
violations which would not have a Material Adverse Effect on WAXS.
WAXS is not aware of any threatened suspension, cancellation or
invalidation of any such WAXS Permit. Except as set forth in the
WAXS SEC Reports or except as would not have a Material Adverse
Effect on WAXS, neither WAXS nor any of its Subsidiaries has
received notice from either the FCC or any state public utilities
commissions of any
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complaint filed therewith concerning WAXS or any of its
Subsidiaries, operations or services.
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, and except as permitted by Section 4.1, since December
31, 1998 through and including the date hereof, (i) WAXS and its Subsidiaries
have conducted, in all material respects, their business only in the ordinary
course and (ii) there has not been any change, circumstance or event which
has had, or would reasonably be expected to have, a Material Adverse Effect
on WAXS, other than any change, circumstance or effect relating (A) to the
economy or financial markets in general, or (B) in general to the industries
in which WAXS and its Subsidiaries operate and not specifically relating to
WAXS and its Subsidiaries.
(l) INTELLECTUAL PROPERTY. Except as would not have a Material
Adverse Effect on WAXS: (i) WAXS and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens, or claim of
rights therein by any third party) all Intellectual Property (as defined
below) used in or necessary for the conduct of its business as currently
conducted, (ii) the use of any Intellectual Property by WAXS and its
Subsidiaries does not infringe on or otherwise violate the rights of any
Person and is in accordance with any applicable license pursuant to which
WAXS or any Subsidiary acquired the right to use any Intellectual Property;
(iii) to the Knowledge of WAXS, no Person is challenging, infringing on or
otherwise violating any right of WAXS or any of its Subsidiaries with respect
to any Intellectual Property owned by and/or licensed to WAXS or its
Subsidiaries; and (iv) neither WAXS nor any of its Subsidiaries has received
any written notice of any pending claim with respect to any Intellectual
Property used by WAXS and its Subsidiaries and to WAXS's Knowledge no
Intellectual Property owned and/or licensed by WAXS or its Subsidiaries is
being used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes
of this Agreement, "INTELLECTUAL PROPERTY" shall mean trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in
part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; non-public information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works, whether
copyrightable or not, in any jurisdiction; registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; any similar intellectual property or proprietary rights;
and any claims or causes of action arising out of or relating to any
infringement or misappropriation of any of the foregoing.
(m) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of WAXS, except Donaldson, Lufkin &
Jenrette Securities
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Corporation (the "WAXS FINANCIAL ADVISOR"), whose fees and expenses will be
paid by WAXS in accordance with WAXS's agreement with such firm, a copy of
which has been, or will be promptly when available, provided to STAR.
(n) OPINION OF WAXS FINANCIAL ADVISOR. WAXS has received the
opinion of the WAXS Financial Advisor, dated the date of this Agreement, to
the effect that as of such date, the Merger Consideration is fair, from a
financial point of view, to WAXS and its stockholders, a copy of which has
been provided to STAR.
(o) TAXES.
(1) (i) All material Tax Returns of WAXS and each of its
Subsidiaries have been filed, or requests for extensions have been
timely filed and have not expired; (ii) all Tax Returns filed by
WAXS and its Subsidiaries are complete and accurate in all material
respects; (iii) all Taxes shown to be due on such Tax Returns or on
subsequent assessments with respect thereto have been paid or
adequate reserves have been established for the payment of such
Taxes, and no other material Taxes are payable by WAXS or any of its
Subsidiaries with respect to items or periods covered by such Tax
Returns (whether or not shown on or reportable on such Tax Returns)
or with respect to any period prior to the date of this Agreement;
(iv) there are no material liens on any of the assets of WAXS or any
of its Subsidiaries with respect to Taxes, other than liens for
Taxes not yet due and payable or for Taxes that WAXS and its
Subsidiaries is contesting in good faith through appropriate
proceedings and for which appropriate reserves have been
established; and (v) there is no audit, examination, deficiency or
refund litigation or matter in controversy with respect to any Taxes
of WAXS and its Subsidiaries that might reasonably be expected to
result in a Tax determination which would have a Material Adverse
Effect on WAXS.
(2) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this
Agreement, covering any employee or former employee of WAXS or any
of its Subsidiaries that, individually or collectively, could give
rise to the payment of any amount (or portion thereof) that would
not be deductible pursuant to Sections 280G, 404, or 162 of the Code.
(3) Neither WAXS nor any of its Subsidiaries is a party to a
Tax Sharing Agreement.
(p) CERTAIN CONTRACTS. Neither WAXS nor any of its Subsidiaries
is a party to or bound by (i) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) any
noncompetition agreement or any other agreement or arrangement that limits or
otherwise restricts WAXS or any of its Subsidiaries or any successor thereto,
from engaging or competing in any line of business or in any geographic area,
which agreement or arrangement would have a Material Adverse Effect on WAXS
or the Surviving Corporation after giving effect to the Merger, or (iii) any
agreement or arrangement between WAXS or any of its Subsidiaries, on the one
hand, and any affiliates, directors or officers of WAXS or its Subsidiaries,
on the other hand, that
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is not on arm's-length terms. All contracts filed with the WAXS SEC Reports
and the contracts listed on Section 3.1(p) of the WAXS Disclosure Schedule
are valid, binding and are in full force and effect and enforceable in
accordance with their respective terms, except to the extent that such
enforceability may be subject to applicable bankruptcy, insolvency,
moratorium, reorganization, or other laws affecting the enforcement or
creditors' rights generally or by general equitable principles, and other
than such contracts which by their terms are no longer in force or effect.
Neither WAXS nor its Subsidiaries are in violation or breach of or default
under any such contract, nor to WAXS's and its Subsidiaries' Knowledge, is
any other party to any such contract in violation or breach or other default
under any such contract, except for any such violation, breach or default
which would not have a Material Adverse Effect on WAXS.
3.2 REPRESENTATIONS AND WARRANTIES OF STAR. Except as set forth in the
STAR SEC Reports (as defined below) filed and publicly available prior to the
date hereof or the STAR Disclosure Schedule delivered by STAR to WAXS prior to
the execution of this Agreement (the "STAR DISCLOSURE SCHEDULE") (each section
of which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), STAR represents and warrants to WAXS
as follows:
(a) ORGANIZATION; STANDING AND POWER; SUBSIDIARIES.
(1) Each of STAR and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization, has the requisite
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have
such power and authority would not have a Material Adverse Effect on
STAR, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure to so
qualify or to be in good standing would not have a Material Adverse
Effect on STAR. The copies of the certificate of incorporation and
bylaws of STAR which were previously furnished or made available to
WAXS are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(2) Exhibit 21.1 to STAR's Annual Report on Form 10-K for
the year ended December 31, 1998 includes all the Subsidiaries of
STAR which as of the date of this Agreement are Significant
Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC).
All the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary have been validly
issued and are fully paid and nonassessable and are owned directly
or indirectly by STAR, free and clear of all Liens and free of any
other restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other ownership
interests). Neither STAR nor any of its Subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or
other business association or entity (other than the Subsidiaries of
STAR),
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that is or would reasonably be expected to be material to STAR and
its Subsidiaries taken as a whole.
(b) CAPITAL STRUCTURE.
(1) The authorized capital stock of STAR consists of (A)
50,000,000 shares of STAR Common Stock, of which 58,683,131 shares
are outstanding and no shares are held in the treasury of STAR and
(B) 5,000,000 shares of preferred stock, par value $0.001 per share,
of which no shares are outstanding. All issued and outstanding
shares of the capital stock of STAR are duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock
is entitled to preemptive rights. There are outstanding options,
warrants or other rights to acquire 4,173,571 shares of capital
stock from STAR. Section 3.2(b) of the STAR Disclosure Schedule
lists the exercise price and vesting schedule for each STAR Stock
Option.
(2) No bonds, debentures, notes or other indebtedness of
STAR having the right to vote on any matters on which holders of
capital stock of STAR may vote ("STAR VOTING DEBT") are issued or
outstanding.
(3) Except as otherwise set forth in this Section 3.2(b),
there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to
which STAR or any of its Subsidiaries is a party or by which any of
them is bound obligating STAR or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of
STAR or any of its Subsidiaries or obligating STAR or any of its
Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. There are no outstanding obligations of
STAR or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of STAR or any of its
Subsidiaries.
(c) AUTHORITY; NO CONFLICTS.
(1) STAR has all requisite corporate power and authority to
enter into this Agreement and to consummate the Merger and the other
transactions contemplated hereby, subject to the approval by the
stockholders of STAR by the Required STAR Vote (as defined in
Section 3.2(g)) of this Agreement, the Merger and the other
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the Merger and the other
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of STAR, subject to the
approval by the stockholders of STAR of this Agreement and the
Merger and the other transactions contemplated hereby by the
Required STAR Vote. This Agreement has been duly executed and
delivered by STAR and constitutes a valid and binding agreement of
STAR, enforceable against it in accordance with its terms, except to
the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors'
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rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
(2) Subject to the approval by the stockholders of STAR of
this Agreement, the Merger and the other transactions contemplated
hereby by the Required STAR Vote, the execution and delivery of this
Agreement by STAR does not, and the consummation by STAR of the
Merger and the other actions contemplated hereby will not, conflict
with, or result in a Violation of: (A) any provision of the
certificate of incorporation or bylaws of STAR or a Shareholder or
any Subsidiary of STAR or (B) except as would not have a Material
Adverse Effect on STAR, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (3) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to STAR, any Subsidiary of STAR or their
respective properties or assets.
(3) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to STAR or any Subsidiary of STAR in
connection with the execution and delivery of this Agreement by
STAR, or the consummation of the Merger and the other transactions
contemplated hereby, except the Necessary Consents and such
consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain
would not have a Material Adverse Effect on STAR.
(d) REPORTS AND FINANCIAL STATEMENTS.
(1) STAR has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it under the federal securities
laws with the SEC since January 1, 1998 (collectively, including all
exhibits thereto, the "STAR SEC REPORTS"). No Subsidiary of STAR is
required to file any form, report, registration statement or
prospectus or other document with the SEC not otherwise filed with
an STAR SEC Report. As of the respective times such documents were
filed or, as applicable, became effective, or as subsequently
amended, the STAR SEC Reports complied as to form and content, in
all material respects, with the requirements of the Securities Act
and the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and, taken as a whole, the STAR
SEC Reports do not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the STAR SEC Reports (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing)
presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash
flows of STAR and its Subsidiaries as of the respective dates or for
the respective periods set forth therein, all in conformity with
GAAP consistently applied during the periods
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involved except as otherwise noted therein, and subject, in the case
of the unaudited interim financial statements, to normal and
recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such STAR SEC Reports, as
of their respective dates (or as of the date of any amendment to the
respective STAR SEC Report filed prior to the date of this
Agreement), complied or will comply as to form in all material
respects with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated
thereunder.
(2) Since December 31, 1998, STAR and its Subsidiaries have
not incurred any liabilities that are of a nature that would be
required to be disclosed on a balance sheet of STAR and its
Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course of
business or (B) liabilities that would not have a Material Adverse
Effect on STAR.
(e) INFORMATION SUPPLIED. None of the information supplied or to
be supplied by STAR for inclusion or incorporation by reference in the Joint
Proxy Statement/Prospectus will, on the date it is first mailed to WAXS's or
STAR's stockholders, as applicable, or at the time of the WAXS Stockholders
Meeting (as defined in Section 5.1) or the STAR Stockholders Meeting, as
applicable, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(f) BOARD APPROVAL. The Board of Directors of STAR, by
resolutions duly adopted by unanimous vote at a meeting duly called and held
and not subsequently rescinded or modified in any way (the "STAR BOARD
APPROVAL"), has duly (i) determined that this Agreement, the Merger and the
other transactions contemplated hereby are fair to and in the best interests
of STAR and its stockholders, (ii) approved this Agreement, the Merger and
the other transactions contemplated hereby and (iii) declared the
advisability of this Agreement, the Merger and the other transactions
contemplated hereby, and, further, (iv) recommended that the stockholders of
STAR approve and adopt this Agreement, the Merger and the other transactions
contemplated hereby and directed that this Agreement and the transactions
contemplated hereby be submitted for consideration by STAR's stockholders.
(g) REQUIRED STOCKHOLDER VOTE. The affirmative vote of the
holders of a majority of the outstanding shares of STAR Common Stock (the
"REQUIRED STAR VOTE") is the only vote of the holders of any class or series of
STAR capital stock necessary to adopt this Agreement and approve the Merger and
the other transactions contemplated hereby.
(h) LITIGATION: COMPLIANCE WITH LAWS.
(1) There is no suit, investigation, action or proceeding
pending or, to the Knowledge of STAR, threatened, against or
affecting STAR or any Subsidiary of STAR having, or which would have
a Material Adverse Effect on STAR, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against
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STAR or any Subsidiary of STAR having, or which would have a
Material Adverse Effect on STAR.
(2) Except as would not have a Material Adverse Effect on
STAR, STAR and its Subsidiaries hold all permits, licenses,
variances, authorizations, exemptions, orders and approvals of all
Governmental Entities including, without limitation, the FCC and
state public utilities commissions, necessary for the operation of
the businesses of STAR and its Subsidiaries (the "STAR PERMITS").
Such STAR permits are valid and in full force and effect and STAR
and its Subsidiaries are in compliance with the terms of the STAR
Permits, except where the failure to be valid and in full force and
effect or to so comply would not have a Material Adverse Effect on
STAR. The businesses of STAR and its Subsidiaries are not being
conducted in violation of, and STAR has not received any notices of
violations with respect to, any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not
have a Material Adverse Effect on STAR. STAR is not aware of any
threatened suspension, cancellation or invalidation of any STAR
Permit. Except as set forth in the STAR SEC Reports or except as
would not have a Material Adverse Effect on STAR, STAR has not
received notice from either the FCC or any state public utilities
commissions of any complaint filed therewith concerning STAR or any
of its Subsidiaries, operations or services.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, except as disclosed in the STAR SEC Reports filed prior to the date
of this Agreement, and except as permitted by Section 4.2, since December 31,
1998 through and including the date hereof, (i) STAR and its Subsidiaries
have conducted, in all material respects, their business only in the ordinary
course and (ii) there has not been any change, circumstance or event which
has had, or would reasonably be expected to have, a Material Adverse Effect
on STAR, other than any change, circumstance or effect relating (A) to the
economy or financial markets in general, or (B) in general to the industries
in which STAR and its Subsidiaries operate and not specifically relating to
STAR and its Subsidiaries.
(j) EMPLOYEE BENEFITS MATTERS.
(1) Section 3.2(j)(l) of the STAR Disclosure Schedule sets
forth a list of all material agreements, arrangements, commitments,
and policies (i) which relate to employee benefits; (ii) which
pertain to present or former employees, retirees, directors or
independent contractors (or their beneficiaries, dependents or
spouses) of STAR; and (iii) which are currently or expected to be
adopted, maintained by, sponsored by, or contributed to by STAR or
any other employer (a "STAR AFFILIATE") which, under Section 414 of
the Code, would constitute a single employer with STAR (collectively
referred to as "STAR EMPLOYEE BENEFIT PLANS"), including, but not
limited to, all: (A) employee benefit plans as defined in Section
3(3) of ERISA; and (B) all other deferred compensation, incentive,
profit-sharing, thrift, stock ownership, stock appreciation rights,
bonus, stock option, stock purchase, vacation, or other benefit
plans or arrangements.
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(2) STAR and all STAR Affiliates have complied with their
respective substantive obligations with respect to all STAR Employee
Benefit Plans (including, but not limited to, (i) filing or
distributing all reports or notices required by ERISA or the Code
and (ii) complying with all requirements of Part 6 of Title I of
ERISA and Code Section 4980B) and have maintained the STAR Employee
Benefit Plans in compliance with all applicable laws and regulations
(including, but not limited to, ERISA and the Code), except where
the failure to comply with such obligations would not result in a
Material Adverse Effect on STAR. Each STAR Employee Benefit Plan
that is intended to qualify under Code Section 401(a) has received a
favorable determination letter (or other ruling indicating its
tax-qualified status) from the IRS, and the IRS has not threatened
or taken any action to revoke any favorable determination letter
issued with respect to any such STAR Employee Benefit Plan. No
statement, either oral or written, has been made by STAR or any STAR
Affiliate (or any agent of either) to any Person regarding any STAR
Employee Benefit Plans that is not in accordance with the terms of
that plan that would have a Material Adverse Effect on STAR.
(3) STAR has made available to WAXS true, correct and
complete copies of all of the current documents relating to the STAR
Employee Benefit Plans, including, but not limited to: (i) all plan
texts (including any subsequent amendments), trust instruments and
other funding arrangements adopted or entered into in connection
with each of the STAR Employee Benefit Plans; (ii) the notices and
election forms used to notify employees and their dependents of
their continuation coverage rights under group health plans (under
Code Section 4980B(f) and ERISA Section 606), if applicable; and
(iii) the most recent Form 5500 annual reports (including all
schedules thereto), summary plan descriptions and favorable
determination letters, if applicable, for Employee Benefit Plans.
Since the date such documents were supplied to WAXS, no plan
amendments have been adopted and no such amendments or changes shall
be adopted or made prior to the Closing Date without WAXS's
approval, except as required by applicable law after the date hereof.
(4) Neither STAR nor any STAR Affiliate has any agreement,
arrangement, commitment or understanding to create any additional
STAR Employee Benefit Plans or to continue, modify, change or
terminate any existing STAR Employee Benefit Plans that could have a
Material Adverse Effect on STAR.
(5) None of the STAR Employee Benefit Plans (i) is
currently under investigation, audit or review by the U.S.
Department of Labor, the IRS, the Pension Benefit Guaranty
Corporation or any other federal or state agency or (ii) is liable
for any federal, state, local or foreign taxes that would have a
Material Adverse Effect on STAR. Except for such liabilities that
would not have a Material Adverse Effect on STAR, there is no
transaction in connection with which STAR or any STAR Affiliate
could be subject to either a civil penalty assessed pursuant to
ERISA Section 502, a tax imposed by Code Section 4975 or liability
for a breach of fiduciary responsibility under ERISA.
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(6) Other than routine claims for benefits payable to
participants or beneficiaries in accordance with the terms of the STAR
Employee Benefit Plans, or relating to qualified domestic relations
orders (as defined in Section 414(p) of the Code), there are no claims,
pending or threatened, by any participant or beneficiary against any of
the STAR Employee Benefit Plans or any fiduciary of any of the STAR
Employee Benefit Plans that could have a Material Adverse Effect on
STAR.
(7) Neither STAR nor any STAR Affiliate has at any time
maintained, sponsored or contributed to any "pension plan" as
defined in ERISA Section 3(2) which is subject to Title IV of ERISA
or contributed to any pension plan which is a "multiemployer plan"
as defined in ERISA Section 3(37)(A).
(8) Section 3.2(j)(8) of the STAR Disclosure Schedule sets
forth a list of all agreements, arrangements, commitments and STAR
Employee Benefit Plans, under which (i) any benefits will be
increased, (ii) the vesting or exercisability of benefits will be
accelerated, (iii) amounts will become immediately payable, and/or
(iv) the immediate funding for any benefits is required, upon the
occurrence of the transaction contemplated by this Agreement.
Section 3.2(j)(8) of the STAR Disclosure Schedule sets forth an
estimate of the total value and/or cost of any such change in
control benefits and/or funding and the time periods in which such
payments must be made and/or funding obligations must be met,
including but not limited to the value and/or costs of any gross up
payments for tax purposes.
(9) To the Knowledge of STAR, no key employee, or group of
employees of STAR has any plans to terminate employment with STAR
other than employees with plans to retire. STAR has complied in all
material respects with all laws relating to the employment of labor,
including provisions thereof relating to wages, hours and equal
opportunity, and it does not have any material labor relations
problems (including threatened or actual strikes or work stoppages
or material grievances).
(10) Neither STAR nor any of its Subsidiaries is a party to
any collective bargaining agreement.
(k) INTELLECTUAL PROPERTY. Except as would not have a Material
Adverse Effect on STAR: (i) STAR and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens, or claims of
rights therein by any third party), all Intellectual Property used in or
necessary for the conduct of its business as currently conducted, (ii) the
use of any Intellectual Property by STAR and its Subsidiaries does not
infringe on or otherwise violate the rights of any Person and is in
accordance with any applicable license pursuant to which STAR or any
Subsidiary acquired the right to use any Intellectual Property; (iii) to the
Knowledge of STAR, no Person is challenging, infringing on or otherwise
violating any right of STAR or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to STAR or its Subsidiaries;
and (iv) neither STAR nor any of its Subsidiaries has received any written
notice of any pending claim with respect to any Intellectual Property used by
STAR and its Subsidiaries and to STAR's Knowledge, no Intellectual Property
owned and/or licensed by STAR or its Subsidiaries is being used or enforced
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in a manner that would result in the abandonment, cancellation or
unenforceability of such Intellectual Property.
(l) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement, based upon
arrangements made by or on behalf of STAR except Deutsche Bank Alex Brown
(the "STAR FINANCIAL ADVISOR"), whose fees and expenses will be paid by STAR
in accordance with STAR's agreement with such firm, a copy of which has been,
or will be promptly when available, provided to WAXS.
(m) OPINION OF STAR FINANCIAL ADVISOR. STAR has received the
opinion of the STAR Financial Advisor, dated the date of this Agreement, to
the effect that as of such date, the Merger Consolidation is fair, from a
financial point of view, to STAR and its stockholders, a copy of which has
been provided to WAXS.
(n) TAXES.
(1) (i) All material Tax Returns of STAR and each of its
Subsidiaries have been filed, or requests for extensions have been
timely filed and have not expired; (ii) all Tax Returns filed by
STAR and its Subsidiaries are complete and accurate in all material
respects; (iii) all Taxes shown to be due on such Tax Returns or on
subsequent assessments with respect thereto have been paid or the
STAR SEC Reports reflect that adequate reserves have been
established for the payment of such Taxes, and no other material
Taxes are payable by STAR and its Subsidiaries with respect to items
or periods covered by such Tax Returns (whether or not shown on or
reportable on such Tax Returns) or with respect to any period prior
to the date of this Agreement; (iv) STAR and each of its
Subsidiaries have disclosed on its federal income Tax Return all
positions taken therein that could give rise to a substantial
understatement of income Tax within the meaning of Section 6662 of
the Code; (v) there are no material liens on any of the assets of
STAR or any of its Subsidiaries with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that STAR or
any of its Subsidiaries is contesting in good faith through
appropriate proceedings and for which the STAR SEC Reports reflect
that appropriate reserves have been established; (vi) no power of
attorney to deal with Tax matters or waiver or extension of any
statute of limitations with respect to Taxes has been granted by
STAR or any of its Subsidiaries; and (vii) there is no (X) audit,
examination, deficiency or refund litigation or matter in
controversy with respect to any Taxes of STAR and its Subsidiaries
nor (Y) has the IRS nor any other Tax authority asserted any claim
for Taxes in writing, or to the knowledge of STAR, is threatening to
assert any claim for Taxes, that might reasonably be expected to
result in a Tax determination which would have a Material Adverse
Effect on STAR.
(2) [INTENTIONALLY OMITTED.]
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(3) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this
Agreement, covering any employee or former employee of STAR or any
of its Subsidiaries that, individually or collectively, could give
rise to the payment of any amount (or portion thereof) that would
not be deductible pursuant to Sections 280G, 404, or 162 of the Code.
(4) Neither STAR nor any of its Subsidiaries is a party to
(A) a Tax Sharing Agreement, (B) transactions which have produced
deferred intercompany gains, losses or other intercompany items or
excess loss accounts (within the meaning of Treas. Reg. Section
1.1502-13 or 1.1502-19, respectively, or any predecessor regulations
or any comparable items for state, local or non-United States Tax
purposes), or (C) any joint venture, partnership, limited liability
company or other arrangement or contract that should be treated as a
partnership for federal income Tax purposes or as to which, an
election has been made under Treas. Reg. Section 301.7701-3 to have
the entity disregarded for federal income Tax purposes as an entity
separate from its owner.
(5) None of STAR and its Subsidiaries (A) has or has had
operations or assets outside the United States taxable as a "branch"
by the United States or as a "permanent establishment" by any
foreign country, (B) has received written notice of any claim made
by a Tax authority in a jurisdiction where STAR or any of its
Subsidiaries does not file Tax Returns that it is or may be subject
to Taxes in such jurisdiction, (C) does business in or derives
income from any state, local territorial or non-United States taxing
jurisdiction other than those for which Tax Returns have been filed
and made available to WAXS pursuant to Section 3.2 (n)(6) hereof,
(D) is a "passive foreign investment company" within the meaning of
the Code, (E) has participated in or cooperated with an
international boycott or has been requested to do so in connection
with any prior transaction or the transactions contemplated by this
Agreement, and (F) has availed itself of any Tax amnesty, Tax
holiday or similar relief in any jurisdiction.
(6) STAR has made available to WAXS true copies of (A) all
material Tax Returns that STAR or its Subsidiaries have filed since
January 1, 1994 and (B) all material correspondence, including
without limitation, closing agreements, private letter rulings,
advance pricing agreements and gain recognition agreements and other
written submissions to or communications with any Tax authorities.
(o) CERTAIN CONTRACTS. Neither STAR nor any of its Subsidiaries
is a party to or bound by (i) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) any
noncompetition agreement or any other agreement or arrangement that limits or
otherwise restricts STAR or any of its Subsidiaries or any successor thereto
or that would, after the Effective Time, limit or restrict WAXS or the
Surviving Corporation or any of its affiliates or any successor thereto, from
engaging or competing in any line of business or in any geographic area,
which agreement or arrangement would have a Material Adverse Effect on WAXS
or the Surviving Corporation, (iii) any agreement or arrangement between STAR
or any of its Subsidiaries, on the one hand, and any affiliates, directors or
officers of STAR or its Subsidiaries, on the other hand, that is
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not on arm's-length terms or (iv) any agreement or arrangement that may
require the payment of money or provision of services in excess of $500,000
annually or $1,000,000 over the term of such agreement or arrangement. All
contracts filed with the STAR SEC Reports and the contracts listed on Section
3.2(o) of the STAR Disclosure Schedule are valid binding and are in full
force and effect and enforceable in accordance with their respective terms,
except to the extent that such enforceability may be subject to applicable
bankruptcy, insolvency, moratorium, reorganization, or other laws affecting
the enforcement of creditors' rights generally or by general equitable
principles, and other than such contracts which by their terms are no longer
in force or effect. Neither STAR nor its Subsidiaries are in violation or
breach of or default under any such contract, nor to STAR's Knowledge, is any
other party to any such contract in violation or breach or other default
under any such contract, except for any such violation, breach or default
which would not have a Material Adverse Effect on STAR.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF STAR. During the period from the date of this
Agreement and continuing until the Effective Time, STAR agrees as to itself
and its Subsidiaries that (except as expressly required, contemplated or
permitted by this Agreement or the STAR Disclosure Schedule or as required by
a Governmental Entity of competent jurisdiction or any law or regulation or
to the extent that WAXS shall otherwise consent in writing, which consent
shall not be unreasonably withheld, delayed or conditioned):
(a) ORDINARY COURSE. STAR and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore conducted,
and shall use all reasonable efforts to preserve intact their present lines
of business, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having significant
business dealings with them.
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. STAR shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any
of its capital stock, except for dividends by wholly owned Subsidiaries of
STAR, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock, except for any
such action by a wholly owned Subsidiary of STAR which remains a wholly owned
Subsidiary after consummation of such transaction, or (iii) repurchase,
redeem or otherwise acquire any shares of capital stock of STAR or any of its
Subsidiaries or any securities convertible into or exercisable for any shares
of such capital stock except for the purchase from time to time by STAR of
STAR Common Stock in the ordinary course of business consistent with past
practice in connection with the STAR Employee Benefit Plans.
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(c) ISSUANCE OF SECURITIES. STAR shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any STAR Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such shares
or STAR Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of STAR Common Stock upon the exercise of
STAR Stock Options or in connection with other stock-based Benefits Plans
outstanding on the date hereof, in each case in accordance with their present
terms, or (ii) issuances by a wholly-owned Subsidiary of STAR of capital stock
to such Subsidiary's parent or another wholly-owned subsidiary of STAR.
(d) GOVERNING DOCUMENTS. Except to the extent required by the
rules and regulations of the Nasdaq, neither STAR nor any of its Subsidiaries
shall amend or propose to amend their respective certificates of
incorporation, by-laws or other governing documents.
(e) ACQUISITIONS. STAR shall not, and shall not permit any of
its Subsidiaries to acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other
than the acquisition of assets used in the operations of the business of STAR
and its Subsidiaries in the ordinary course).
(f) SALES. Except as set forth in Section 4.1(f) of the STAR
Disclosure Schedule, STAR shall not, and shall not permit any of its
Subsidiaries to, sell or agree to sell by merging or consolidating with, or
by selling or substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise sell or agree to sell any assets (other than the sale of assets
used in the operations of the business of STAR and its Subsidiaries in the
ordinary course; provided, however, STAR may enter into a definitive
agreement for (and consummate) the PT-1 Sale on terms and conditions which
would satisfy the condition set forth in Section 6.2(h) hereof).
(g) INVESTMENTS; INDEBTEDNESS. STAR shall not, and shall not
permit any of its Subsidiaries to, (i) make any loans, advances or capital
commitments to, or investments in, any other Person, other than (x) by STAR
or a Subsidiary of STAR to or in STAR or in any Subsidiary of STAR or (y)
pursuant to any contract or other legal obligation of STAR or any of its
Subsidiaries existing at the date hereof or (ii) create, incur, assume or
suffer to exist any indebtedness, issuances of debt or securities,
guarantees, loans or advances not in existence as of the date hereof except
pursuant to credit facilities, indentures and other arrangements in existence
on the date hereof or in the ordinary course of business consistent with past
practice, in each case as such credit facilities, indentures and other
arrangements may be amended, extended, modified, refunded, renewed or
refinanced after the date hereof.
(h) COMPENSATION. Other than as contemplated by Section 4.1(h)
of the STAR Disclosure Schedule, STAR shall not increase the amount of
compensation of any director or
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executive officer except in the ordinary course of business consistent with
past practice or as required by an existing agreement, make any increase in
or commitment to increase any employee benefits, issue any additional STAR
Stock Options, adopt or make any commitment to adopt any additional employee
benefit plan or make any contribution, other than regularly scheduled
contributions, to any Employee Benefit Plan.
(i) ACCOUNTING METHODS; INCOME TAX MATTERS. STAR shall not
change its methods of accounting in effect on December 31, 1998, except as
required by changes in GAAP as concurred in by STAR's independent auditors.
STAR shall not (i) change its fiscal year, (ii) make any material tax
election, (iii) adopt or change any Tax accounting method, (iv) enter into
any closing agreement, (v) settle or compromise a Tax liability with a Tax
authority, (vi) surrender any right to claim a refund of Taxes, or (vii) take
(or permit any Subsidiary of STAR to take) any other action which would have
the effect of materially increasing the Tax liability or materially
decreasing any Tax Asset of STAR or any of its Subsidiaries, other than in
the ordinary course of business consistent with past practice.
(j) CERTAIN AGREEMENTS. STAR shall not, and shall not permit
any of its Subsidiaries to, enter into any agreement or arrangement that
limits or otherwise restricts STAR or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that could, after the
Effective Time, limit or restrict WAXS or the Surviving Corporation or any of
their respective affiliates or any successor thereto, from engaging or
competing in any line of business or, in any geographic area which agreement
or arrangement would reasonably be expected to have a Material Adverse Effect
on WAXS or the Surviving Corporation.
(k) OTHER ACTIONS. Notwithstanding the fact that STAR may take
certain actions as permitted under Article IV hereof, STAR agrees not to take
any action which could reasonably be expected to cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code.
(l) LITIGATION. STAR shall not and shall not permit any of
its Subsidiaries to settle or, compromise any litigation, except where the
amount paid or payable, in each case, does not exceed $200,000.
4.2 CONTROL OF STAR'S BUSINESS. Except as provided in Section 5.9,
nothing contained in this Agreement shall give WAXS, directly or indirectly, the
right to control or direct STAR's operations prior to the Effective Time. Prior
to the Effective Time, STAR shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
operations.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF PROXY STATEMENT: STOCKHOLDERS MEETINGS.
(a) As promptly as reasonably practicable following the date
hereof, WAXS and STAR shall prepare (in form and substance reasonably
satisfactory to each of WAXS and STAR) and file with the SEC proxy materials
which shall constitute the joint proxy statement and prospectus in connection
with the WAXS Stockholders Meeting and the STAR Stockholders Meeting (such
proxy statement and prospectus, and any amendments or supplements thereto,
the "JOINT PROXY STATEMENT/PROSPECTUS") and WAXS shall prepare (in form and
substance reasonably satisfactory to each of WAXS and STAR) and file a
registration statement on Form S-4 with respect to the issuance of WAXS
Common Stock in the Merger (the "REGISTRATION STATEMENT"). The Joint Proxy
Statement/Prospectus will be included in and will constitute a part of the
Registration Statement as WAXS's prospectus. The Registration Statement and
the Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder. Each of WAXS and STAR
shall use reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as reasonably practicable after filing with
the SEC and to keep the Registration Statement effective as long as is
necessary to consummate the Merger and the actions contemplated thereby. WAXS
and STAR shall, as promptly as practicable after receipt thereof, provide the
other party copies of any written comments and advise the other party of any
oral comments, with respect to the Joint Proxy Statement/Prospectus received
from the SEC. WAXS will provide STAR with a reasonable opportunity to review
and comment on any amendment or supplement to the Registration Statement
prior to filing such with the SEC, and will provide STAR with a copy of all
such filings made with the SEC. Notwithstanding any other provision herein to
the contrary, no amendment or supplement (including by incorporation by
reference) to the Joint Proxy Statement/Prospectus or the Registration
Statement shall be made without the approval of both parties, which approval
shall not be unreasonably withheld or delayed; PROVIDED, that with respect to
documents filed by a party which are incorporated by reference in the
Registration Statement or Joint Proxy Statement/Prospectus, this right of
approval shall apply only with respect to information relating to the other
party or its business, financial condition or results of operations. WAXS
will use reasonable efforts to cause the Joint Proxy Statements/Prospectus to
be mailed to WAXS's stockholders, and STAR will use reasonable efforts to
cause the Joint Proxy Statement/Prospectus to be mailed to STAR's
stockholders, in each case as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. WAXS shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of WAXS Common Stock and STAR shall furnish all
information concerning STAR and the holders of STAR Common Stock as may be
reasonably requested in connection with any such action. Each party will
advise the other party, promptly after it receives notice thereof, of the
time when the Registration Statement has become effective, the issuance of
any stop order, the suspension of the qualification of the WAXS Common Stock
issuable in connection with the Merger for offering
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or sale in any jurisdiction, or any request by the SEC for amendment of the
Joint Proxy Statement/Prospectus or the Registration Statement. If at any
time prior to the Effective Time any information relating to WAXS or STAR, or
any of their respective affiliates, officers or directors, should be
discovered by WAXS or STAR which should be set forth in an amendment or
supplement to any of the Registration Statement or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, the party which discovers such information
shall promptly notify the other party hereto and, to the extent required by
law, rules or regulations, an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and disseminated to the
stockholders of WAXS and STAR.
(b) Subject to Section 5.4, STAR shall, as promptly as
reasonably practicable following the execution of this Agreement, duly take
all lawful action to call, give notice of, convene and hold a meeting of its
stockholders (the "STAR STOCKHOLDERS MEETING ") (which meeting the parties
intend to be held no later than thirty (30) days following the date on which
the Registration Statement has been declared effective by the SEC) for the
purpose of obtaining the Required STAR Vote with respect to the actions
contemplated by this Agreement and shall take all lawful action to solicit
the adoption of this Agreement by the Required STAR Vote. Subject to Section
5.4, the Board of Directors of STAR shall recommend adoption of this
Agreement by the stockholders of STAR to the effect as set forth in Section
3.2(f), and shall not withdraw, modify or materially qualify in any manner
adverse to WAXS such recommendation or take any action or make any statement
in connection with the STAR Stockholders Meeting materially inconsistent with
such recommendation (collectively, an "ADVERSE CHANGE IN THE STAR
RECOMMENDATION"); provided, however, that the foregoing shall not prohibit
accurate disclosure of factual information regarding the business, financial
condition or results of operations of WAXS or STAR or the fact that an
Acquisition Proposal has been made, the identity of the party making such
proposal or the material terms of such proposal (provided, that the Board of
Directors of STAR does not withdraw, modify or materially qualify in any
manner adverse to WAXS its recommendation) in the Registration Statement or
the Joint Proxy Statement/Prospectus, to the extent such information, facts,
identity or terms is required to be disclosed therein under applicable law.
(c) WAXS shall, as promptly as reasonably practicable
following the execution of this Agreement, duly take all lawful action to call,
give notice of, convene and hold a meeting of its stockholders (the "WAXS
STOCKHOLDERS MEETING") (which meeting the parties intend to be held no later
than thirty (30) days following the date on which the Registration Statement has
been declared effective by the SEC) for the purpose of obtaining the Required
WAXS Vote with respect to the transactions contemplated by this Agreement and
shall take all lawful action to solicit the approval of the transactions
contemplated hereby by the Required WAXS Vote. The Board of Directors of WAXS
shall recommend approval of the transactions contemplated hereby by the
stockholders of WAXS to the effect as set forth in Section 3.1(f), and shall not
withdraw, modify or materially qualify in any manner adverse to STAR such
recommendation or take any action or make any statement in connection with the
WAXS Stockholders Meeting materially inconsistent with
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such recommendation; provided, however, that the foregoing shall not prohibit
accurate disclosure of factual information regarding the business, financial
condition or operations of WAXS or STAR.
5.2 ACCESS TO INFORMATION. Upon reasonable notice, each of STAR and
WAXS shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other party hereto reasonable access during normal business hours, during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, each of
STAR and WAXS shall (and shall cause its Subsidiaries to) furnish promptly to
the other party hereto (a) a copy of each report, schedule, registration
statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of federal or state securities
laws, as applicable (other than documents which such party is not permitted to
disclose under applicable law), and (b) consistent with its legal obligations,
all other information concerning it and its business, properties and personnel
as such other party may reasonably request; provided, however, that either STAR
or WAXS may restrict the foregoing access to the extent that any law, treaty,
rule or regulation of any Governmental Entity applicable to such party requires
such party or its Subsidiaries to restrict access to any properties or
information. The parties will hold any such information which is non-public in
confidence to the extent required by, and in accordance with, the provisions of
the Confidentiality Agreement, dated December 17, 1999, between STAR and WAXS
(the "CONFIDENTIALITY AGREEMENT"). Any investigation by WAXS or STAR shall not
affect the representations and warranties made herein of STAR or WAXS, as the
case may be.
5.3 REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each
party will use reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate the Merger and the other
transactions contemplated by this Agreement as soon as practicable after the
date hereof, including (i) preparing and filing as promptly as practicable
all documentation to effect all necessary applications, notices, petitions,
filings, and other documents and to obtain as promptly as practicable all
consents, waivers, licenses, orders, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement and (ii) taking all
reasonable steps as may be necessary to obtain all such material consents,
waivers, licenses, registrations, permits, authorizations, tax rulings,
orders and approvals. The parties each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or
other communications received by it or any of its Subsidiaries or affiliates
from any Governmental Entity or third party with respect to the Merger or any
of the other transactions contemplated by this Agreement, in each case, to
the extent permitted by law or regulation or any applicable confidentiality
agreements existing on the date hereof.
(b) Promptly following execution of this Agreement, STAR and
WAXS shall promptly prepare and file any required notifications with the
United States Department of Justice and
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the Federal Trade Commission as required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"). The parties shall
cooperate with each other in connection with the preparation of such
notifications and related matters, including sharing information concerning
sales and ownership and such other information as may be needed to complete
such notification, and providing a copy of such notifications to the other
prior to filing; provided, that WAXS and STAR shall have the right to redact
any dollar revenue information from the copies of such notifications provided
to the other parties. The parties shall keep all information about the other
obtained in connection with the preparation of such notification confidential
pursuant to the terms of the Confidentiality Agreement. Each Person shall pay
the filing fee required under the regulations promulgated pursuant to the HSR
Act with respect to its own filing thereunder.
5.4 ACQUISITION PROPOSALS. Without the prior written consent of
WAXS, pending the Effective Time or earlier termination of this Agreement
pursuant to Section 7.1, STAR agrees that neither it nor any of its
Subsidiaries shall, and that it shall use its reasonable efforts to cause its
employees, officers, directors, affiliates, agents and representatives
(including any investment banker, financial advisor, attorney or accountant
retained by any of them) not to, directly or indirectly, initiate, solicit,
encourage or knowingly facilitate (including by way of furnishing information
or engaging in discussions or negotiations) any inquiries or the making of
any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar action involving STAR, or any purchase or sale of a
material portion of the assets of (including stock of Subsidiaries) of STAR,
taken as a whole, or any purchase or sale of, or tender or exchange offer
for, a material portion of the equity securities of STAR (any such proposal
or offer being hereinafter referred to as an "ACQUISITION PROPOSAL"). STAR
further agrees that neither it nor any of its Subsidiaries shall, and that it
shall use its reasonable efforts to cause it and its Subsidiaries' officers,
directors, affiliates, employees, agents and representatives (including any
investment banker, financial advisor, attorney or accountant retained by it
or any of its Subsidiaries) not to, directly or indirectly, have any
discussion with or provide any confidential information or data to any Person
relating to an Acquisition Proposal, or engage in any negotiations concerning
an Acquisition Proposal, or knowingly facilitate any effort or attempt to
make or implement an Acquisition Proposal or accept an Acquisition Proposal.
STAR agrees that it and its Subsidiaries will, and will cause its officers,
directors, affiliates, employees, agents and representatives to, immediately
cease and cause to be terminated any activities, discussions or negotiations
existing as of the date of this Agreement with any parties conducted
heretofore with respect to any Acquisition Proposal. STAR agrees that it will
promptly inform its directors, officers, affiliates, key employees, agents
and representatives of the obligations undertaken in this Section 5.4.
Notwithstanding anything contained in this Section 5.4 or otherwise in this
Agreement to the contrary, STAR or its Board of Directors shall be permitted
to (A) in response to an unsolicited bona fide written Acquisition Proposal
by any Person, recommend approval of such an unsolicited bona fide written
Acquisition Proposal to its stockholders or effect an Adverse Change in the
STAR Recommendation or (B) engage in any discussions or negotiations with, or
provide any information to, any person in response to an unsolicited bona
fide written Acquisition Proposal by any such Person, if and only to the
extent that, in any such case as is referred to in clause (A) or (B), (i) the
STAR Stockholders Meeting shall not have occurred, (ii) its Board of
Directors (x) in the case of clause (A) above, concludes in good faith
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that such Acquisition Proposal constitutes a Superior Proposal (as defined in
Section 8.12) and terminates this Agreement pursuant to Section 7.1 (h) or
(y) in the case of clause (B) above concludes in good faith that such
Acquisition Proposal could reasonably be expected to result in a Superior
Proposal, (iii) prior to providing any information or data to any Person in
connection with an Acquisition Proposal by any such Person, its Board of
Directors receives from such Person an executed confidentiality agreement
containing confidentiality terms at least as stringent as those contained in
the Confidentiality Agreement, and (iv) prior to providing any information or
data to any Person or entering into discussions or negotiations with any such
Person regarding such Acquisition Proposal, its Board of Directors notifies
WAXS promptly of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to
be initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms
and conditions of any inquiries, proposals or offers. STAR agrees that it
will promptly keep WAXS informed of the status and terms of any such
proposals or offers and the status and terms of any such discussions or
negotiations. STAR agrees that it will, and will cause its officers,
directors and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the
date of this Agreement with any parties conducted heretofore with respect to
any Acquisition Proposal. STAR agrees that it will promptly inform its
directors, officers, key employees, agents and representative of the
obligations undertaken in this Section 5.4. Nothing in this Section 5.4 shall
(x) permit STAR or WAXS to terminate this Agreement (except as specifically
provided in Article VII hereof) or (y) affect any other obligation of STAR or
WAXS under this Agreement.
5.5 FEES AND EXPENSES. All Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses. As used in this Agreement, "EXPENSES" includes all
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement and the transactions contemplated hereby.
5.6 PUBLIC ANNOUNCEMENTS. Neither WAXS nor STAR shall, without the
prior consent of the other party, issue a press release or any other public
statement with respect to this Agreement or the transactions contemplated hereby
except pursuant to a joint communications plan, unless otherwise required by
applicable law or by obligations pursuant to any listing agreement with, or
rules of, any securities exchange, in which case the parties shall use
reasonable efforts to consult with each other before issuing any press release
or otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
5.7 LISTING. So long as WAXS Common Stock is quoted on the Nasdaq or
listed on any national securities exchange, WAXS, prior to the Effective Time,
will cause to be quoted or listed, upon official notice of issuance, and keep
quoted or listed on such system or exchange, all WAXS Common Stock issuable
pursuant to Article I hereof.
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5.8 TERMINATION OF TAX SHARING AGREEMENT. As of the Effective Time,
STAR shall cause all Tax Sharing Agreements to which STAR or any of its
Subsidiaries is a party to be terminated and of no further force and effect
after the Effective Time, thereby extinguishing any rights or obligations of any
party thereunder.
5.9 MANAGEMENT SERVICES. Subject to obtaining any necessary regulatory
or third party consents and to the extent permitted under applicable law, WAXS
and STAR intend to enter into a management agreement pursuant to which WAXS will
provide, under the supervision and direction of the STAR board of directors,
certain management services to STAR. Neither party shall have any obligation
under this Section 5.9 and the provision of the foregoing services shall be
subject to the negotiation of a definitive agreement satisfactory to each of
WAXS and STAR in its sole discretion.
5.10 NEW DIRECTOR OF WAXS. WAXS shall take all appropriate action such
that, immediately following the Effective Time, and without further action by
WAXS, one (1) designee of STAR shall be elected to the Board of Directors of
WAXS. Such STAR designee shall be Christopher E. Edgecomb, or such other person
designated by STAR and agreed to by WAXS prior to the Effective time.
5.11 FURTHER ASSURANCES. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of STAR or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
STAR or Merger Sub, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all rights, properties,
or assets acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
5.12 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) From the Effective Time through the sixth (6th)
anniversary of the date on which the Effective Time occurs, WAXS shall
indemnify and hold harmless each present (as of the Effective Time) or former
officer or director of STAR and its Subsidiaries (the "INDEMNIFIED PARTIES"),
against all claims, losses, liabilities, damages, judgments, fines and
reasonable fees, costs and expenses, including attorneys' fees and
disbursements (collectively, "COSTS"), incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to (i) the fact
that the Indemnified Party is or was an officer or director of STAR or any of
its Subsidiaries or (ii) matters existing or occurring at or prior to the
Effective Time (including this Agreement and the transactions and actions
contemplated hereby), whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent permitted under applicable law;
PROVIDED that no Indemnified Party may settle any such claim without the
prior approval of WAXS (which approval shall not be unreasonably withheld or
delayed). Each Indemnified Party will be entitled to advancement of expenses
incurred in the defense of any claim, action, suit, proceeding or
investigation from WAXS within ten (10) business days of receipt by WAXS from
the Indemnified Party of a request therefor; PROVIDED that any person
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to whom expenses are advanced provides an undertaking, to the extent required
by the DGCL, to repay such advances if it is ultimately determined that such
person is not entitled to indemnification.
(b) WAXS shall maintain, at no expense to the beneficiaries,
in effect for six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by STAR with respect to
matters existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement); PROVIDED that WAXS may substitute
therefor policies of at least the same coverage containing terms and conditions
which are not materially less advantageous to any beneficiary thereof; and
PROVIDED, FURTHER, that in no event shall WAXS be required to pay annual
premiums for such insurance in excess of 125% of the annual premiums currently
paid by STAR for such insurance.
(c) Notwithstanding anything herein to the contrary, if any
claim, action, suit, proceeding or investigation (whether arising before, at or
after the Effective Time) is made against any Indemnified Party, on or prior to
the sixth (6th) anniversary of the Effective Time, the provisions of this
Section 5.12 shall continue in effect until the final disposition of such claim,
action, suit, proceeding or investigation.
(d) The covenants contained in this Section 5.12 are intended
to be for the benefit of, and shall be enforceable by, each of the Indemnified
Parties and their respective heirs and legal representatives and shall not be
deemed exclusive of any other rights to which an Indemnified Party is entitled,
whether pursuant to law, contract or otherwise.
(e) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors or assigns of the Surviving
Corporation or the purchaser of such properties and assets shall succeed to the
obligations set forth in this Section 5.12.
5.13 CONFIDENTIALITY. The parties each agree that the Confidentiality
Agreement shall continue in full force and effect until the Effective Time, and
if this Agreement is terminated or if the Merger is not consummated for any
reason whatsoever, such Confidentiality Agreement shall thereafter remain in
full force and effect in accordance with its terms.
5.14 COMPLIANCE WITH DISSENTERS' RIGHTS STATUTE. STAR shall comply with
all procedures and requirements applicable to it under Section 262 of the DGCL.
5.15 INTERIM FINANCING. The parties have agreed that WAXS will make
available up to $25,000,000 in secured financing to STAR and up to $10,000,000
in secured financing to STAR's subsidiary, STAR Telecommunications GmbH,
(collectively, the "Interim Financing") pursuant to the terms of the Loan
Documents (as defined below). The Interim Financing will mature at the earlier
of one year from the date hereof and ninety (90) days after any termination of
this Agreement
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(other than a termination due to STAR's breach or default under this
Agreement which will result in the Interim Financing becoming immediately due
and payable). The Interim Financing will be made pursuant to, and subject to
the finalization of, appropriate loan and security documents (the "Loan
Documents") substantially in the form of, and as contemplated by, the draft
Loan Documents distributed to STAR on or prior to the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of STAR and WAXS to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(b) STOCKHOLDER APPROVAL. WAXS shall have obtained the Required
WAXS Vote in connection with the approval of this Agreement and the Merger
and STAR shall have obtained the Required STAR Vote in connection with the
approval of this Agreement and the Merger.
(c) REGISTRATION STATEMENT. The Registration Statement shall
have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of WAXS or STAR, threatened by the SEC.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WAXS. The obligations of
WAXS to effect the Merger are subject to the satisfaction of, or waiver by WAXS,
on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of STAR set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent in either case that such
representations and warranties speak as of another date, in which case any
such representations and warranties shall be true and correct as of such
date), except where any failures to be true and correct would not have a
Material Adverse Effect on WAXS or the Surviving Corporation, and WAXS shall
have received a certificate of the chief executive officer and the chief
financial officer of STAR to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF STAR. STAR shall have
performed or compl ied in all material respects with all material agreements
and covenants required to be performed by it under this Agreement at or prior
to the Closing Date, and WAXS shall have received a certificate of the chief
executive officer and the chief financial officer of STAR to such effect.
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(c) CONSENTS AND APPROVALS. Other than the filing provided for
under Section 1.3, all consents, approvals and actions of, filings with and
notices to any Governmental Entity required to consummate the Merger and the
other transactions contemplated hereby, or of any other third party required
of STAR or any of its Subsidiaries to consummate the Merger and the other
transactions contemplated hereby, the failure of which to be obtained or
taken would have a Material Adverse Effect on WAXS or the Surviving
Corporation, shall have been obtained; provided, however, that the provisions
of this Section 6.2(c) shall not be available to WAXS, if its failure to
fulfill its obligations pursuant to Section 5.3 shall have been the cause of,
or shall have resulted in, the failure to obtain such consent or approval.
(d) NO MATERIAL CHANGE. STAR and its Subsidiaries, taken as a
whole, shall not have suffered, since the date hereof, a Material Adverse
Effect, other than any change, circumstance or effect relating (i) to the
economy or financial markets in general, (ii) in general to the industries in
which STAR operates and not specifically relating to STAR or (iii) the trading
price of STAR Common Stock.
(e) OPINION OF COUNSEL TO STAR. WAXS shall have received from
Riordan & McKinzie an opinion, dated the Closing Date, in form and substance
reasonably satisfactory to WAXS.
(f) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No laws shall have
been adopted or promulgated, and no temporary restraining order, preliminary
or permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect (i) having
the effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger or (ii) which otherwise would have a Material Adverse Effect on
WAXS or the Surviving Corporation; provided, however, that the provisions of
this Section 6.2(f) shall not be available to WAXS if its failure to fulfill
its obligations pursuant to Section 5.3 shall have been the cause of, or
shall have resulted in any such order or injunction.
(g) DISSENTERS' RIGHTS. STAR shall have complied with all
procedures and requirements applicable to it under Section 262 of the DGCL,
the period for exercising dissenters' rights of appraisal pursuant to the
DGCL in connection with the Merger shall have expired, and holders of less
than one percent (1%) of the shares of STAR Common Stock issued and
outstanding immediately prior to the Closing shall have exercised such
dissenters' rights of appraisal, and WAXS shall have received a certificate
from an officer of STAR to all such effects.
(h) SALE OF PT-1. STAR shall have consummated the sale of the
capital stock of PT-1 Communications, Inc. ("PT-1"), or the assets of PT-1 on a
substantially equivalent basis, for Net PT-1 Sale Proceeds (as defined in
Section 8.12 ) of at least $150,000,000 pursuant to an agreement in form and
substance reasonably satisfactory to WAXS (the "PT-1 Sale"); PROVIDED, HOWEVER,
if (i) the PT-1 Sale has not been consummated prior to the Closing Date, (but
STAR has entered into a definitive agreement, in form and substance satisfactory
to WAXS, for the PT-1 Sale)
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and (ii) WAXS determines in its sole discretion to waive compliance with this
Section 6.2(h) and proceed with the Merger, then WAXS and STAR agree that in
such event, they shall amend this Agreement to provide that (A) the formula
used to determine the Exchange Ratio shall be modified by deleting "Z"
therefrom and (B) a holder of STAR Common Stock and STAR Stock Options
immediately prior to the Effective Time shall have a right to receive such
holder's pro rata share of an aggregate number of additional "contingent"
shares of WAXS Common Stock, if and when the PT-1 Sale is consummated
pursuant to such definitive agreement (or, in the case of a holder of STAR
Stock Option, when such option is exercised), equal to the PT-1 Excess
Proceeds DIVIDED BY twenty (20) (the "Contingent Shares") and that the
provisions of any such amendment to this Agreement concerning the issuance of
such Contingent Shares will satisfy the requirements of Section 3.03 of IRS
Revenue Procedure 77-37, as it has been amplified and superseded, which
established the circumstances under which the Internal Revenue Service
previously issued advanced rulings on contingent stock arrangements in
mergers intended to qualify as "reorganizations" under Section 368(a) of the
Code.
(i) STAR shall have provided evidence satisfactory to WAXS that
any and all obligations of STAR (or any of its affiliates) relating to or
arising in connection with the China-U.S. Cable Network were fully satisfied
by the reclamation of STAR's capacity in such network and neither STAR nor
any of its affiliates has any further obligation or liability with respect
thereto, including without limitation payment of the amounts claimed and
owing by STAR according to that letter dated January 11, 2000 from Kou
Yinsen, Director, CBP to Jim Kolsrud.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF STAR. The obligations of
STAR to effect the Merger are subject to the satisfaction of, or waiver by STAR,
on or prior to the Closing Date of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of WAXS set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent in either case that such
representations and warranties speak as of another date, in which case any
such representations and warranties shall be true and correct as of such
date), except where any failures to be true and correct would not have a
Material Adverse Effect on WAXS, and STAR shall have received a certificate
of the chief executive officer and the chief financial officer of WAXS to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF WAXS. WAXS shall have
performed or complied in all material respects with all material agreements
and covenants required to be performed by it under this Agreement at or prior
to the Closing Date, and STAR shall have received a certificate of the chief
executive officer and the chief financial officer of WAXS to such effect.
(c) CONSENTS AND APPROVALS. Other than the filing provided for
under Section 1.3, all consents, approvals and actions of, filings with and
notices to any Governmental Entity required to consummate the Merger and the
other transactions contemplated hereby, or of any other third
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party required of WAXS or any of its Subsidiaries to consummate the Merger
and the transactions contemplated hereby, the failure of which to be obtained
or taken would have a Material Adverse Effect on WAXS, shall have been
obtained; provided, however, that the provisions of this Section 6.3(c) shall
not be available to STAR if its failure to fulfill any of its obligations
pursuant to Section 5.3 shall have been the cause of, or shall have resulted
in, the failure to obtain such consent or approval.
(d) NO MATERIAL CHANGE. WAXS shall not have suffered, since the
date hereof, a Material Adverse Effect, other than any change, circumstance
or effect relating (i) to the economy or financial markets in general, (ii)
in general to the industries in which WAXS operates and not specifically
relating to WAXS or (iii) the trading price of WAXS Common Stock.
(e) OPINION OF COUNSEL TO WAXS. STAR shall have received from
Long Aldridge & Norman LLP an opinion, dated the Closing Date, in form and
substance reasonably satisfactory to STAR.
(f) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No laws shall
have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect (i) having the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger or (ii) which otherwise would have a Material Adverse Effect on WAXS
after giving effect to the Merger; provided, however, that the provisions of
this Section 6.3(g) shall not be available to STAR if its failure to fulfill its
obligations pursuant to Section 5.3 shall have been the cause of, or shall have
resulted in any such order or injunction.
(g) EXCHANGE FUND. An officer of the Exchange Agent shall have
certified in writing to STAR that the deposit required to be made by WAXS into
the Exchange Fund pursuant to Section 2.1 has been made in connection with the
establishment thereof.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties:
(a) By mutual written consent of WAXS and STAR;
(b) By either WAXS or STAR, if the other party shall have
failed to comply in any material respect with any of its material covenants
or agreements contained in this Agreement, which failure to so comply has not
been cured within ten (10) business days following receipt by such other
party of written notice of such failure to comply; provided, however, that if
any such
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breach is curable by the breaching party through the exercise of the
breaching party's reasonable efforts and for so long as the breaching party
shall be so using its reasonable efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to this
paragraph; and PROVIDED, FURTHER, that no party shall have the right to
terminate this Agreement pursuant to this Section 7.1(b) if such party is
then failing to comply in any material respect with any of its covenants or
agreements contained in this Agreement;
(c) By either WAXS or STAR, if there has been a breach by the
other party of any representations or warranties, which breach has not been
cured within ten (10) business days following receipt by such other party of
written notice of such failure to comply; provided, however, that if any such
breach is curable by the breaching party through the exercise of the
breaching party's reasonable efforts and for so long as the breaching party
shall be so using reasonable efforts to cure such breach, the non-breaching
party may not terminate this Agreement pursuant to this paragraph; and
provided further, that this provision shall not apply to such breaches which
would not have a Material Adverse Effect on WAXS or the Surviving Corporation;
(d) By either STAR or WAXS, if the Effective Time shall not
have occurred on or before September 30, 2000 (the "TERMINATION DATE");
provided, however, that the right to terminate this Agreement under this
Section 7.1(d) shall not be available to any party whose action or failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date and any such action or failure constitutes a breach of this
Agreement by such party;
(e) By either STAR or WAXS if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which the
parties shall have used their reasonable efforts to resist, resolve or lift,
as applicable, in accordance with Section 5.3) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling, or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree
or ruling or to take any other action (which order, decree, ruling or other
action the parties shall have used their reasonable efforts to obtain, in
accordance with Section 5.3), which, in the case of each of (i) and (ii) is
necessary to fulfill the conditions set forth in Section 6.2(f) with respect
to WAXS or Section 6.3(g) with respect to STAR, and such denial of a request
to issue such order, decree, ruling or take such other action shall have
become final and nonappealable; provided, however, that the right to
terminate this Agreement under this Section 7.1(e) shall not be available to
any party whose action or failure to fulfill any obligation under this
Agreement has been the cause of such action or inaction and any such action
or failure constitutes a breach of this Agreement by such party;
(f) By WAXS or STAR if the adoption of this Agreement by the
stockholders of WAXS or the stockholders of STAR shall not have been obtained
by reason of the failure to obtain the Required WAXS Vote or the Required
STAR Vote, as applicable, in each case upon the taking of such vote at a duly
held meeting of stockholders of WAXS or STAR, or at any adjournment thereof;
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(g) By WAXS if the Board of Directors of STAR, prior to the
Required STAR Vote, shall make an Adverse Change in the STAR Recommendation
(other than in connection with STAR's termination of this Agreement pursuant
to Section 7.1(b)) or approve or recommend a Superior Proposal pursuant to
Section 5.4 or shall resolve to take any such actions;
(h) By STAR, at any time prior to the Required STAR Vote upon
three (3) business days' prior notice to WAXS, if its Board of Directors
shall have determined as of the date of such notice that an Acquisition
Proposal is a Superior Proposal; provided, however, that (i) STAR shall have
complied with Section 5.4, (ii) prior to such termination, STAR shall, if
requested by WAXS in connection with a revised proposal by it, negotiate in
good faith for such three (3) business day period with WAXS and (iii) the
Board of Directors of STAR shall have concluded in good faith, as of the
effective date of such termination, after taking into account any revised
proposal by WAXS during such three (3) business day period, that an
Acquisition Proposal is a Superior Proposal; and provided, further, that it
shall be a condition to termination by STAR pursuant to this Section 7.1(h)
that STAR shall have made the payment of the fee to WAXS pursuant to Section
7.2(b);
(i) By WAXS, if (X) either STAR or any of its material
Subsidiaries (1) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (2)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of STAR or any of
its Subsidiaries or for all or a material portion of the property or assets of
STAR or any of its Subsidiaries or (3) effects any general assignment for the
benefit of creditors or (Y) a Governmental Entity having jurisdiction enters a
decree or order for (a) relief in respect of STAR or any of its material
Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, (b) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
STAR or any of its Subsidiaries or for all or a material portion of the property
and assets of STAR or any of its Subsidiaries or (c) the winding up or
liquidation of the affairs of STAR or any of its material Subsidiaries and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; or
(j) By WAXS if there has been an Event of Default under the
Credit Agreement, of even date herewith, between WAXS and STAR.
7.2 EFFECT OF TERMINATION.
(a) In the event of any termination of this Agreement by either
STAR or WAXS, as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of WAXS
or STAR or their respective officers or directors except with respect to
Section 3.1(m), Section 3.2(l), the second sentence of Section 5.2, Section
5.5, Section 5.6, this Section 7.2, and Article VIII, which provisions shall
survive such termination and except that, notwithstanding anything to the
contrary contained in this Agreement, neither WAXS nor STAR
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shall be relieved or released from any liabilities or damages arising out of
its breach of this Agreement;
(b) If this Agreement is terminated by STAR pursuant to Section
7.1(h), STAR shall, prior to such termination, pay to WAXS $14,000,000 in
immediately available funds (the "TERMINATION FEE");
(c) If this Agreement is terminated by WAXS pursuant to Section
7.1(g), STAR shall, within three (3) days following such termination, pay to
WAXS the Termination Fee; and
(d) If this Agreement is terminated by WAXS or STAR pursuant to
Section 7.1(f) because STAR's stockholders have failed to adopt this
Agreement by the Required Star Vote and STAR enters into a definitive
agreement with respect to a Business Combination within twelve (12) months
following such termination, then STAR shall pay to WAXS the Termination Fee
prior to or at the consummation thereof.
7.3 AMENDMENT. This Agreement may be amended by STAR and WAXS, by
action taken or authorized by their respective Boards of Directors or
representatives or authorized officers, at any time before or after approval of
the matters presented in connection with the Merger by the stockholders of STAR
and WAXS (including, without limitation, an amendment as described in Section
6.2(h)), but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of any relevant stock exchange or automatic
quotations system requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of STAR and WAXS.
7.4 EXTENSION, WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, representatives or authorized officers, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None
of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time and
this Article VIII.
8.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or facsimile, upon confirmation of receipt,
(b) on the first business day following the date of dispatch if delivered by a
recognized next day courier service, or (c) on the tenth business day following
the date of mailing if delivered by registered or certified mail return receipt
requested, postage prepaid All notices hereunder shall be delivered as set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:
(a) If to WAXS or Merger Sub, to:
World Access, Inc.
Resurgens Plaza, Suite 2210
945 East Paces Ferry Road
Atlanta, Georgia 30326
Facsimile No.: (404) 233-2280
Attention: John D. Phillips
with a copy to
Long Aldridge & Norman LLP
303 Peachtree Street, Suite 5300
Atlanta, Georgia 30308
Facsimile No.: (404) 527-4198
Attention: H. Franklin Layson
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(b) If to STAR to:
STAR Telecommunications, Inc.
223 East De La Guerra
Santa Barbara, California 93101
Facsimile No.: (805) 884-1137
Attention: Christopher E. Edgecomb
with a copy to
Riordan & McKinzie
Twenty-Ninth Floor
300 South Grand Avenue
Los Angeles, California 90071
Facsimile No.: (213) 229-8550
Attention: Richard J. Welch
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits, the WAXS Disclosure Schedule or the STAR Disclosure
Schedule, such reference shall be to a Section of or Exhibit or schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation". All
Exhibits, the WAXS Disclosure Schedule and the STAR Disclosure Schedule are
incorporated herein and made a part hereof.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement and the Confidentiality Agreement constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral, including, without limitation, that certain Letter of
Intent, dated December 17, 1999, between WAXS and STAR, among the parties
with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, except
as provided for in Section 5.12.
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8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to
choice of law principles thereof).
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the actions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
8.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of WAXS and STAR
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Chancery or other Courts of the State of Delaware, and
each of WAXS and STAR hereby irrevocably submits with regard to any such action
or proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of WAXS and STAR hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (i) any right to trial by jury with respect to
any action, suit or proceeding arising out of or relating to this Agreement, the
Merger or any other transaction contemplated hereby, (ii) any claim that it is
not personally subject to the jurisdiction of the above named courts for any
reason other than the failure to lawfully serve process, (iii) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (iv) to the fullest extent permitted by
applicable law, that (a) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (b) the venue of such suit, action or
proceeding is improper and (c) this Agreement, or the subject matter hereof, may
not be enforced in or by such courts.
8.10 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
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8.11 HEADINGS. The headings contained in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
8.12 DEFINITIONS. As used in this Agreement:
(a) "BENEFICIAL OWNERSHIP" or "BENEFICIALLY OWN" shall have the
meaning under Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(b) "BOARD OF DIRECTORS" means the Board of Directors of any
specified Person and any committees thereof.
(c) "BUSINESS COMBINATION" means (i) a merger, reorganization,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving a party as a result
of which either (A) such party's stockholders prior to such transaction (by
virtue of their ownership of such party's shares) in the aggregate cease to
own at least 65% of the voting securities of the entity surviving or
resulting from such transaction (or the ultimate parent entity thereof) or,
regardless of the percentage of voting securities held by such stockholders,
if any Person shall beneficially own, directly or indirectly, at least 20% of
the voting securities of such ultimate parent entity, or (B) the individuals
comprising the board of directors of such party prior to such transaction do
not constitute a majority of the board of directors of such ultimate parent
entity, (ii) a sale, lease, exchange, transfer or other disposition of at
least 50% of the assets of such party and its Subsidiaries, taken as whole,
in a single transaction or a series of related transactions, or (iii) the
acquisition, directly or indirectly, by a Person of beneficial ownership of
20% or more of the common stock of such party whether by merger,
consolidation, share exchange, business combination, tender or exchange offer
or otherwise.
(d) "DISSENTERS' SHARES" means shares of STAR Common Stock for
which dissenter's rights of appraisal have been exercised pursuant to the DGCL.
(e) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(f) "GAAP" means United States generally accepted accounting
principles.
(g) "KNOWN" OR "KNOWLEDGE" means, with respect to any party,
the knowledge of such party's executive officers after reasonable inquiry.
(h) "MATERIAL ADVERSE EFFECT" means, with respect to any
entity, any change, circumstance or effect or any breach of the provisions of
this Agreement that, individually or in the aggregate with all other changes,
circumstances and effects or breaches, is or would reasonably be expected to be
materially adverse to (i) the business, financial condition or results of
operations of such entity and its Subsidiaries taken as a whole, or (ii) the
ability of such entity (or the party owning such entity) to consummate the
transactions contemplated by this Agreement.
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(i) "NASDAQ" means the National Market System of the NASDAQ
Stock Market.
(j) "NET PT-1 PROCEEDS" means the cash proceeds received by
STAR at the consummation of the PT-1 Sale, net of all Taxes, fees, expenses and
costs incurred in connection with the PT-1 Sale, including, without limitation:
(1) fees or expenses for investment banking or other
financial services;
(2) agency, brokerage, finder's or other similar fees or
commissions;
(3) legal, accounting, consulting or other professional
fees or expenses;
(4) the cost of any remedial or corrective actions or
measures;
(5) the costs associated with the transfer or termination
of any PT-1 employees; or
(6) the costs of any right or obligation the vesting of
which is accelerated by the PT-1 Sale.
(k) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(l) "PRE-CLOSING PRICE" means the closing price of WAXS Common
Stock as reported on the Nasdaq for the trading day (in which such shares are
traded on the Nasdaq) ending at the close of trading on the second (2nd)
trading day preceding the Closing.
(m) "PT-1 EXCESS PROCEEDS" means the Net PT-1 Proceeds in
excess of $150,000,000.
(n) "SEC" means the Securities and Exchange Commission.
(o) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(p) "SUBSIDIARY", when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the voting interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or
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indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(q) "SUPERIOR PROPOSAL" means a written proposal made by a
Person unaffiliated with STAR which is for (I) (i) a merger, reorganization,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving STAR as a result of
which either (A) STAR's stockholders prior to such action (by virtue of their
ownership of STAR's shares) in the aggregate cease to own at least 50% of the
voting securities of the entity surviving or resulting from such transaction
(or the ultimate parent entity thereof) or (B) the individuals comprising the
board of directors of STAR prior to such transaction do not constitute a
majority of the board of directors of such ultimate parent entity, (ii) a
sale, lease, exchange, transfer or other disposition of at least 50% of the
assets of STAR and its Subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or (iii) the acquisition,
directly or indirectly, by a Person of beneficial ownership of 50% or more of
the common stock of STAR whether by merger, consolidation, share exchange,
business combination, tender or exchange offer or otherwise, and which is
(II) otherwise on terms which the Board of Directors of STAR in good faith
concludes (after consultation with its financial advisors and outside legal
counsel), taking into account among other things, all legal, financial,
regulatory and other aspects of the proposal and the Person making the
proposal, (i) would, if consummated, result in a transaction that is more
favorable to its stockholders (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated by this Agreement
and (ii) is reasonably capable of being completed.
(r) "TAX" (and, with correlative meaning, "TAXES" shall mean:
(i) all taxes, charges, fees, levies or other assessments, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of
any such government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes (including, but not
limited to, federal income taxes and state income taxes), payroll and
employee withholding taxes, unemployment insurance, social security taxes,
sales and use taxes, ad valorem taxes, excise taxes, employer tax, estimated,
severance, telecommunications, occupation, goods and services, capital,
profits, value added taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp
taxes, environmental taxes, transfer taxes, workers' compensation, Pension
Benefit Guaranty Corporation premiums and other governmental charges, and
other obligations of the same or of a similar nature to any of the foregoing,
which the Person is required to pay, withhold or collect; and (ii) any
liability for the payment of any amounts described in clause (i) as a result
of being a successor to or transferee of any individual or entity or a member
of an affiliated, consolidated or unitary group for any period
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(including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions
of state, local or foreign tax law); and (iii) any liability for the payment
of amounts described in clause (i) or clause (ii) as a result of any express
or implied obligation to indemnify any Person or as a result of any
obligations under agreements or arrangements with any Person.
(s) "TAX ASSET" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce Taxes (including, without
limitation, credits related to alternative minimum Taxes).
(t) "TAX RETURN" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns (including
any attached schedules) or similar statement relating to, or required to be
filed in connection with, any Taxes, including information returns or reports
with respect to backup withholding and other payments to third parties.
(u) "TAX SHARING AGREEMENT" shall mean any and all existing Tax
sharing agreements, or arrangements written or unwritten, express or implied,
binding two or more Persons with respect to the payment of Taxes, including
any agreements or arrangements which afford any other Person the right to
receive any payment from one or more other Persons in respect to any Taxes or
the benefit of any Tax Asset of one or more other Persons or require or
permit the transfer or assignment of any income, revenue, receipts or gains.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, WAXS, Merger Sub and STAR have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first above written.
WAXS:
WORLD ACCESS, INC.
By:
-----------------------------------------------
Name: John D. Phillips
Title: Chairman and Chief Executive Officer
STAR:
STAR TELECOMMUNICATIONS, INC.
By:
-----------------------------------------------
Name:
Title:
MERGER SUB:
STI MERGER CO.
By:
-----------------------------------------------
Name: John D. Phillips
Title: Chairman and Chief Executive Officer
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RECEIVABLES SALE AGREEMENT
Dated as of
November 30, 1999
by and between
STAR TELECOMMUNICATIONS, INC.,
THE ENTITIES LISTED ON THE SIGNATURE PAGE TO THIS AGREEMENT,
individually and collectively as Seller and Subservicer, and
RFC CAPITAL CORPORATION,
as Purchaser
<PAGE>
RECEIVABLES SALE AGREEMENT (the "Agreement"), dated as of November 30,
1999, by and between STAR TELECOMMUNICATIONS, INC. ("STAR"), THE ENTITIES LISTED
ON THE SIGNATURE PAGE TO THIS AGREEMENT ("OTHER SELLERS"), Star and the Other
Sellers, each together with its respective successors and assigns, individually
and collectively, as Seller and Subservicer, and RFC CAPITAL CORPORATION, a
Delaware corporation, as Purchaser.
WITNESSETH:
WHEREAS, the Seller desires to sell certain of its telecommunication
receivables and the Purchaser is a corporation formed for the purpose of
purchasing certain telecommunication receivables from time to time;
WHEREAS, the Purchaser shall retain the complete right and ultimate
authority to perform certain servicing, administrative and collection functions
in respect of the receivables purchased by the Purchaser under this Agreement;
WHEREAS, the Purchaser desires that the Subservicer be appointed to
perform certain servicing, administrative and collection functions in respect of
the Purchased Receivables; and
WHEREAS, the Seller has been requested and is willing to act as the
Subservicer.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I - DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. The capitalized terms used in this
Agreement shall have the respective meanings set forth on Exhibit A to this
Agreement.
Section 1.2. OTHER TERMS. All accounting terms not specifically defined
in this Agreement shall be construed in accordance with generally accepted
accounting principles. All terms defined in Article 9 of the UCC, and not
specifically defined in this Agreement, are used in this Agreement as defined in
such Article 9 of the UCC.
ARTICLE II - PURCHASE AND SALE; ESTABLISHMENT OF ACCOUNTS
Section 2.1. OFFER TO SELL. Seller shall offer to sell, transfer,
assign and set over to Purchaser those Eligible Receivables selected for sale by
Seller, in its sole discretion, and to be set forth on a list of such Eligible
Receivables which list shall be delivered by the Seller to the Purchaser no
later than three (3) Business Days prior to each Purchase Date; provided,
notwithstanding the foregoing, Seller agrees to offer for Purchase to the
Purchaser Eligible Receivables in an amount not less than twenty percent (20.0%)
of the Purchase Commitment during any ninety (90) day period during the term of
this Agreement.
Section 2.2. PURCHASE OF RECEIVABLES. (a) Until the occurrence of a
Termination Date, upon receipt of the list of Eligible Receivables and offer to
sell pursuant to Section 2.1, the Purchaser, in its sole discretion, will
confirm which of the Eligible Receivables offered by Seller that the Purchaser
will Purchase. The Purchase of such Receivables shall occur upon payment of the
applicable Purchase Price, as provided at Section 2.3 of this Agreement. Upon
Purchase of the Receivables, Seller will have sold, transferred, assigned, set
over and conveyed to Purchaser, without recourse except as expressly provided
herein, all of Seller's right, title and interest in and to the Purchased
Receivables, and title to such Purchased Receivables shall have passed to
Purchaser at such time. If, in the event the Purchaser determines, in its sole
discretion, not to Purchase Eligible Receivables of like character and quality
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those previously purchased under this Section 2.2, and provided there has not
occurred any Event of Seller Default or material adverse change in the business
or financial condition of the Seller, the Purchaser shall provide the Seller
with notice of the same within five Business Days of Purchaser's receipt of the
Seller's list of Eligible Receivables pursuant to Section 2.1 and if, as a
result thereof, Seller elects to provide written notice to the Purchaser of its
intention to terminate this Agreement, resulting in the occurrence of a
Termination Date, then the Seller shall not be obligated to pay to the Purchaser
a Termination Fee.
(b) The Seller shall not take any action inconsistent with such
ownership and, from and after the date of such transfer, shall not claim any
ownership in any Purchased Receivable. The Seller shall indicate in its Records
that ownership interest in any Purchased Receivable is held by the Purchaser. In
addition, the Seller shall respond to any inquiries with respect to ownership of
a Purchased Receivable by stating that it is no longer the owner of such
Purchased Receivable and that ownership of such Purchased Receivable is held by
the Purchaser. Documents relating to the Purchased Receivables shall be held in
trust by the Seller and the Subservicer, for the benefit of the Purchaser as the
owner of the Purchased Receivables, and possession of any Required Information
relating to the Purchased Receivables so retained is for the sole purpose of
facilitating the servicing of the Purchased Receivables and carrying out the
terms of this Agreement. Such retention and possession is at the will of the
Purchaser and in a custodial capacity for the benefit of the Purchaser only,
except to the extent necessary for the Seller's enforcement of its rights under
this Agreement.
Section 2.3. PURCHASE PRICE AND PAYMENT. The Purchase Price for
Receivables purchased on any Purchase Date and paid by the Purchaser to the
Seller shall be an amount equal to the aggregate Net Values of such Purchased
Receivables and shall be paid by the Purchaser to the Seller by wire transfer on
such respective Purchase Date. The Purchase Price to be paid on such Purchase
Date shall be reduced by (a) the Program Fees as of such Purchase Date, (b) the
amount, if any, by which the Seller Credit Reserve Account (net of withdrawals
required hereunder) is less than the Specified Credit Reserve Balance as of such
Purchase Date, (c) any Rejected Receivable Amount, and (d) other amounts due the
Purchaser in accordance with this Agreement. At any time the aggregate Net Value
of all Purchased Receivables shall not exceed the Purchase Commitment.
Section 2.4. ESTABLISHMENT OF ACCOUNTS; CONVEYANCE OF INTERESTS
THEREIN; INVESTMENTS. (a) One or more Lockbox Accounts will be established or
assigned, as the case may be, for the benefit of the Purchaser into which all
Collections from Payors with respect to Receivables shall be deposited. The
Lockbox Accounts will be maintained at the expense of the Seller. The Seller, or
the Subservicer, as the case may be, agrees to deposit all Collections it
receives with respect to Receivables in said Lockbox Accounts and will instruct
all Payors to make all payments on Receivables to said Lockbox Accounts. All
funds in said Lockbox Accounts will be remitted to the Collection Account as
instructed by the Purchaser.
(b) The Purchaser has established and shall maintain the "Collection
Account" (the "Collection Account"), the "Purchase Account" (the "Purchase
Account") and the "Seller Credit Reserve Account" (the "Seller Credit Reserve
Account").
(c) The Seller does hereby sell, transfer, assign, set over and convey
to the Purchaser all right, title and interest of the Seller in and to all
amounts deposited, from time to time, in the Lockbox Accounts, the Collection
Account and the Seller Credit Reserve Account. Any Collections relating to
Receivables held by the Seller or the Subservicer pending deposit to the Lockbox
Accounts as provided in this Agreement, shall be held in trust for the benefit
of the Purchaser until such amounts are deposited into the Lockbox Accounts. All
Collections in respect of Purchased Receivables received by the Seller and not
deposited directly by the Payor in the Lockbox Accounts shall be remitted to the
Lockbox Accounts on the day of receipt or the following Business Day if the day
of receipt is not a Business Day, and if such Collections are not remitted by
Seller on a timely basis, in addition to its other remedies hereunder, the
Purchaser shall be entitled to receive a late charge (which shall be in addition
to the
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Program Fee) equal to 15% per annum of such Collections or the maximum
rate legally permitted if less than such rate, calculated as of the first
Business Day of such delinquency.
Section 2.5. GRANT OF SECURITY INTEREST. It is the intention of the
parties to this Agreement that each payment of the Purchase Price by the
Purchaser to the Seller for Purchased Receivables to be made under this
Agreement shall constitute payment of consideration for a purchase of such
Purchased Receivables and not a loan. In the event, however, that a court of
competent jurisdiction were to hold that the transaction evidenced by this
Agreement constitutes a loan and not a purchase and sale, it is the intention of
the parties that this Agreement shall constitute a security agreement under the
UCC and any other applicable law, and that the Seller shall be deemed to have
granted to the Purchaser a first priority perfected security interest in all of
the Seller's right, title and interest in, to and under the Purchased
Receivables; all payments of principal of or interest on such Purchased
Receivables; all amounts on deposit from time to time in the Lockbox Accounts,
the Collection Account and the Seller Credit Reserve Account; all other rights
relating to and payments made under this Agreement, and all proceeds of any of
the foregoing.
Section 2.6. FURTHER ACTION EVIDENCING PURCHASES. The Seller agrees
that, from time to time, at its expense, it will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or appropriate, or that the Purchaser may reasonably request, in order
to perfect, protect or more fully evidence the transfer of ownership of the
Purchased Receivables or to enable the Purchaser to exercise or enforce any of
its rights hereunder.
ARTICLE III - CONDITIONS OF PURCHASES
Section 3.1. CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase from
the Seller by the Purchaser shall be subject to the conditions precedent that as
of each Purchase Date, the satisfaction of which will be determined by the
Purchaser in good faith:
(a) No Event of Seller Default has occurred and the Seller is in
compliance in all material respects with any representation, warranty or
covenant provided under this Agreement or any other agreement or certificate
relating to the transactions contemplated hereby;
(b) The Seller shall have delivered to the Purchaser as of such
Purchase Date or on any previous Purchase Date a complete copy of each of the
then current Carrier Agreements, Clearinghouse Agreements and Billing and
Collection Agreements and any amendment or modification of such agreements and a
copy of each material written notice (e.g., termination, delinquent payment,
threat of suspended service, etc.) delivered by or received by either the
Carrier, Billing and Collection Agent, Clearinghouse Agent or the Seller with
respect to any Carrier Agreement, Clearinghouse Agreement and/or the Billing and
Collection Agreement;
(c) Purchaser shall have received, in form and substance satisfactory
to Purchaser, all consents, waivers, acknowledgments, releases, terminations and
other agreements and documents from third persons which Purchaser may deem
necessary in order to permit, protect and perfect its rights, ownership or
otherwise, in the Purchased Receivables and liens upon any collateral or to
effectuate the provisions or purposes of this Agreement;
(d) The Termination Date shall not have occurred;
(e) The Seller shall have taken such other action, including but not
limited to the delivery of an opinion of counsel prior to the initial Purchase
Date in the form of Exhibit D hereto, or delivered such other approvals,
opinions or documents to the Purchaser, as the Purchaser may reasonably request;
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(f) Chris Edgecomb shall continue to (i) hold at least such title and
authority as held as of the Closing Date and (ii) be a full time employee of
Seller, unless a reasonably acceptable replacement is identified and meets with
Purchaser's written approval within ninety (90) days thereafter;
(g) The Seller shall not (i) have made any material change in the
nature of the business that Seller presently conducts or change its name or the
location of its chief executive office or the location of the office where
records are kept, (ii) merge or consolidate with any other corporation (where
the Seller will not be the surviving entity without the Purchaser's written
consent), or purchase any stock or assets of any other party, other than assets
used by Seller in the ordinary course of its business;
(h) The Seller's Tangible Net Worth (as defined in this Section) shall
be not less than $60,000,000. "Tangible Net Worth" means the stockholders'
equity of Seller and Seller's subordinated debt, reduced by intangible assets of
Seller, amounts owing to Seller by any interested party or Seller Affiliate and
all other assets of Seller not readily convertible into money, as reasonably
determined by Purchaser.
(i) The Seller's ratio of its current assets to its current liabilities
shall be not less than 0.45 to 1.0; provided, however, that in the event all or
substantially all of the assets or capital stock of any individual Seller hereto
is sold, transferred, assigned or conveyed to any third party, such ration shall
be not less than 1.0 to 1.0;
(j) Other than the $80,000,000 capital expenditure related to the
Indefeasible Right to Use Agreement by and between Qwest Communications
Corporation and Helvey Com, Inc. dated September 15, 1998, and the $40,000,000
capital expenditure related to Seller's participation in China-U.S. Cable
Network, LLC, the Seller shall not have made capital expenditures of any kind or
nature, including leases of property which are required to be capitalized on
Seller's balance sheet, in an aggregate amount in excess of $120,000,000 during
the period commending as of the Closing Date and ending on two year anniversary
of such Closing Date;
(k) the Seller's ratio of Net Value to monthly Collections shall not be
greater than 1.5 to 1.0 with respect to Receivables purchased hereunder which
are not International Receivables;
(l) the Seller's ratio of Net Value to monthly Collections shall not be
greater than 1.0 to 1.0 with respect to Receivables purchased hereunder which
are International Receivables;
(m) the outstanding Net Value of International Receivables purchased
pursuant to this Agreement at any time shall not exceed ten percent (10.0%) of
the Net Value of all Receivables purchased pursuant to this Agreement;
(n) the Purchaser shall have successfully syndicated or participated
out a not less than $55,000,000 of the Purchase Commitment as determined by the
Purchaser in its sole and exclusive discretion;
(o) the Purchaser shall have determined, in good faith, that it has
received any and all consents, documents, items or agreements reasonably
necessary and in a form acceptable to the Purchaser which pertain to any
International Receivables or the Purchaser's contemplated purchase thereof;
(p) the Seller shall (i) timely file all tax returns which Seller is
required by law to file or has obtained valid extensions therefor and all taxes
and other sums owing by Seller to any governmental authority have been fully
paid, (ii) maintain adequate reserves to pay such tax liabilities as they
accrue, (iii) delivered to Purchaser satisfactory evidence that Seller is in
good standing and material compliance with any and all relevant taxing,
administrative, regulatory and/or Governmental Authorities; and
(q) As of the initial Purchase Date, the Purchaser shall have received
background checks on certain of Seller's shareholders, directors, officers or
manages, the results of which shall be satisfactory to the Purchaser in its sole
discretion.
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ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
Section 4.1. REPRESENTATIONS, WARRANTIES AND COVENANTS AS TO THE
SELLER. The Seller represents and warrants to the Purchaser, as of the date of
this Agreement and as of each subsequent Purchase Date, as follows:
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and is duly qualified
to do business and is in good standing in each jurisdiction in which it is doing
business, except where the failure to be so qualified would not result in a
material adverse effect on the Seller or its business or financial condition,
and has the power and authority to own and convey all of its properties and
assets and to execute and deliver this Agreement and the Related Documents and
to perform the transactions contemplated thereby; and each is the legal, valid
and binding obligation of the Seller enforceable against the Seller in
accordance with its terms;
(b) The execution, delivery and performance by the Seller of this
Agreement and the Related Documents and the transactions contemplated thereby
(i) have been duly authorized by all necessary corporate or other action on the
part of the Seller, (ii) do not contravene or cause the Seller to be in default
under (A) any contractual restriction contained in any loan or other agreement
or instrument binding on or affecting the Seller or its property; or (B) any
law, rule, regulation, order, writ, judgment, award, injunction, or decree
applicable to, binding on or affecting the Seller or its property and (iii) does
not result in or require the creation of any Adverse Claim upon or with respect
to any of the property of the Seller (other than in favor of the Purchaser as
contemplated hereunder);
(c) There is no court order, judgment, writ, pending or threatened
action, suit or proceeding, of a material nature against or affecting the
Seller, its officers or directors, or the property of the Seller, in any court
or tribunal, or before any arbitrator of any kind or before or by any
Governmental Authority (i) asserting the invalidity of this Agreement or any of
the Related Documents, (ii) seeking to prevent the sale and assignment of any
Receivable or the consummation of any of the transactions contemplated thereby,
(iii) seeking any determination or ruling that might materially and adversely
affect the Seller, this Agreement, the Related Documents, the Receivables, the
Contracts or any LOA, or (iv) asserting a claim for payment of money in excess
of $100,000;
(d) The primary business of the Seller is the provision of
telecommunication services and/or equipment. All license numbers issued to the
Seller by any Governmental Authority are set forth on Schedule 1 and the Seller
has complied in all material respects with all applicable laws, rules,
regulations, orders and related Contracts and all restrictions contained in any
agreement or instrument binding on or affecting the Seller, and has and
maintains all permits, licenses, certifications, authorizations, registrations,
approvals and consents of Governmental Authorities or any other party necessary
for the business of the Seller and each of its Subsidiaries;
(e) The Seller (i) has filed on a timely basis all tax returns
(federal, state, and local) required to be filed and has paid or made adequate
provisions for the payment of all taxes, assessments, and other governmental
charges due from the Seller; (ii) the financial statements of the Seller, copies
of which have been furnished to the Purchaser, fairly present the financial
condition of the Seller, all in accordance with generally accepted accounting
principles(1) consistently applied except as noted in footnotes thereto; (iii)
since September 30, 1999, there has been no material adverse change in any such
condition, business or operations; and (iv) the Seller has delivered to the
Purchaser (a) within 45 days after the end of each subsequent three-month period
the financial statements, including balance sheet and income statement prepared
in accordance with generally accepted accounting principles, of the Seller as of
the end of such
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(1)References herein to the preparation of financial statements in
accordance with GAAP shall be deemed, in the case of unaudited financial
statements, to refer to GAAP, subject to the absence of notes and to normal
year-end audit adjustments.
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three-month period, certified by an officer of the Seller and accompanied by a
management narrative summarizing circumstances and issues underlying such
financial statements and facing the Seller going forward and (b) within 90 days
after the end of the fiscal year of the Seller the financial statements,
including balance sheet and income statement prepared by Arthur Andersen, LLP,
or such other accounting firm of national repute;
(f) All written or printed information furnished by or on behalf of the
Seller to the Purchaser in connection with this Agreement is true and complete
in all material respects and does not omit to state a material fact and the
sales of Purchased Receivables under this Agreement are made by the Seller in
good faith and without intent to hinder, delay or defraud present or future
creditors of the Seller;
(g) The Lockbox Accounts is the only Lockbox Accounts to which Payors
have been or will be instructed to direct Receivable proceeds and each Payor of
an Eligible Receivable has been directed upon its receipt of the notice attached
hereto as Exhibit B, which such notice was mailed or provided to such Payors
prior to the initial Purchase Date, to remit all payments with respect to such
Receivable for deposit in the Lockbox Accounts;
(h) The principal place of business and chief executive office of each
respective Seller are located at the address of such Seller set forth under its
signature below and there are not now, and during the past four months there
have not been, any other locations where such Seller is located (as that term is
used in the UCC) or keeps Records except as set forth in the designated space
beneath its signature line in this Agreement and at such office locations set
forth on the attached Schedule 4.1(h);
(i) The legal name of the Seller is as set forth at the beginning of
this Agreement and the Seller has not changed its legal name in the last six
years, and during such period, the Seller did not use, nor does the Seller now
use any tradenames, fictitious names, assumed names or "doing business as" names
other than those appearing on the signature page of this Agreement;
(j) The Seller has not done anything to impede or interfere with the
collection by the Purchaser of the Purchased Receivables and has not amended,
waived or otherwise permitted or agreed to any deviation from the terms or
conditions of any Purchased Receivable or any related Carrier Agreement,
Clearinghouse Agreement, Billing and Collection Agreement, Contract or LOA so as
to (i) create an Adverse Claim with respect to any Receivable or (ii) materially
affect the ability of Subservicer or the Purchaser to act in its capacity as
such; and has not allowed any invoice due and owing by the Seller relating to
any Carrier Agreement, Clearinghouse Agreement or Billing and Collection
Agreement to become any more than thirty (30) days past due;
(k) For federal income tax reporting and accounting purposes, the
Seller will treat the sale of each Purchased Receivable pursuant to this
Agreement as a sale of, or absolute assignment of its full right, title and
ownership interest in such Purchased Receivable to the Purchaser;
(l) All computer software, equipment and/or related systems that either
relate to the Purchased Receivables, include imbedded date sensitive software or
are utilized by Seller in connection with and are material to the operation of
its business are "Year 2000 Compliant." For purposes hereof, "Year 2000
Compliant" shall mean that the applicable computer software will (a) function
properly and without material interruption before, during, and immediately after
January 1, 2000; (b) accurately process date and time data (including
calculating, comparing, and sequencing) between the twentieth and twenty-first
centuries and between the years 1999 and 2000; (c) will respond to two-digit
year input in a way that resolves ambiguity as to century in a defined and
predetermined manner; and (d) will store and provide output of date information
in ways that are unambiguous as to century.
(m) The assets of the Seller, collectively, represent substantially all
of the assets associated with Star Telecommunications, Inc., its Affiliates or
any entity related thereto.
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Section 4.2. REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO
PURCHASED RECEIVABLES. With respect to each Purchased Receivable sold pursuant
to this Agreement the Seller represents and warrants, as of the date hereof and
as of each subsequent Purchase Date, as follows:
(a) Such Purchased Receivable (i) includes all the Required
Information; (ii) is the obligation of an Eligible Payor, provided, that, unless
the Purchaser otherwise agrees in writing, the obligation of each respective
Payor to the Seller does not comprise more than five percent (5.0%) of the Net
Value of all Purchased Receivables or more than $200,000 except for those
Receivables to be purchased from entities listed on Schedule 3 (which, to the
extent a Receivable is purchased by the Purchaser, the Purchaser shall be deemed
to have provided its written consent to the Seller); (iii) was created by the
provision or sale of telecommunication services or equipment by the Seller in
the ordinary course of its business; (iv) has a Purchase Date no later than 90
days from its Billing Date; (v) is not a Purchased Receivable which with respect
to which, as of any Determination Date, payment by the Payor of such Receivable
has been received and is not duplicative of any other Receivable; and (vi) is
owned by the Seller free and clear of any Adverse Claim, and the Seller has the
right to sell, assign and transfer the same and interests therein as
contemplated under this Agreement and no consent other than those secured and
delivered to the Purchaser on or prior to the Closing Date from any Governmental
Authority, the Payor, a Carrier, the Billing and Collection Agent, the
Clearinghouse Agent or any other Person shall be required to effect the sale of
any such Purchased Receivable;
(b) The Billed Amount of such Purchased Receivable is payable in United
States Dollars and the Eligible Receivable Amount with respect thereto, unless
the Purchaser and Seller otherwise agree in writing, is not in excess of
$200,000 with respect to any one individual Payor of any Payor Class other than
an Eligible Receivable payable under a Billing and Collection Agreement as set
forth on the attached Schedule 3, and is net of any adjustments or other
modifications contemplated by any Carrier Agreement, Clearinghouse Agreement,
Billing and Collection Agreement or otherwise and neither the Receivable nor the
related Carrier Agreement, Clearinghouse Agreement, Billing and Collection
Agreement or Contract has been compromised, adjusted, extended, satisfied,
subordinated, rescinded, set-off or modified by the Seller, the Payor, the
Carrier, the Clearinghouse Agent or the Billing and Collection Agent, and is not
subject to compromise, adjustment, termination or modification, whether arising
out of transactions concerning the Contract, any Carrier Agreement,
Clearinghouse Agreement, Billing and Collection Agreement or otherwise; and
(c) There are no procedures or investigations pending or threatened
before any Governmental Authority (i) asserting the invalidity of such
Receivable, Carrier Agreement, Clearinghouse Agreement, Billing and Collection
Agreement, LOA or such Contract, (ii) asserting the bankruptcy or insolvency of
the related Payor, (iii) seeking the payment of such Receivable or payment and
performance of the related Carrier Agreement, Clearinghouse Agreement, Billing
and Collection Agreement, or such other Contract or LOA, or (iv) seeking any
determination or ruling that might materially and adversely affect the validity
or enforceability of such Receivable or the related Carrier Agreement,
Clearinghouse Agreement, Billing and Collection Agreement, or such other
Contract or LOA.
Section 4.3. NEGATIVE COVENANTS OF THE SELLER. The Seller shall not,
without the written consent of the Purchaser, which such consent shall not be
unreasonably withheld:
(a) Sell, assign or otherwise dispose of, or create or suffer to exist
any Adverse Claim or lien upon its capital stock, any Receivable and related
Contracts, its Customer Base, the Lockbox Accounts, the Collection Account, or
any other account in which any Collections of any Receivable are deposited, or
assign any right to receive income in respect of any Receivable;
(b) Submit or permit to be submitted to Payors any invoice for
telecommunication services or equipment rendered by or on behalf of Seller which
contains a "pay to" address other than the Lockbox Accounts;
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(c) Make any change to (i) the location of its chief executive office
or the location of the office where Records are kept or (ii) its corporate name
or use any tradenames, fictitious names, assumed names or "doing business as"
names;
(d) Enter into or execute any Clearinghouse Agreement or Billing and
Collection Agreement (other than those listed on Schedule 3 hereof) or any
amendment or modification thereof; or
(e) In the event Seller has failed to timely pay any amounts due and
owing Purchaser hereunder and the expiration of any applicable cure period,
other than as relates to Collections in respect of Purchased Receivables, the
Seller shall not pay to or compensate any of the following executive officers:
Chris Edgecomb, Mary Casey, Vaughn Crumley, Jim Colsund or Kelly Enos, or any
member of such person's family, any additional compensation in the form of a
bonus, stock options or other similar incentive compensation, and shall suspend
any then existing bonus and incentive compensation payment structure, until such
time as all amounts then due and owing Purchaser have been satisfied.
Section 4.4. REPURCHASE OBLIGATIONS. Upon discovery by any party to
this Agreement of a breach of any representation or warranty in Sections 4.1 or
4.2 of this Article IV which materially and adversely affects the value of a
Purchased Receivable or the interests of the Purchaser therein (herein a
"Rejected Receivable"), the party discovering such breach shall give prompt
written notice to the other parties to this Agreement. Thereafter, on the next
Purchase Date, the Net Value of the Rejected Receivables shall be deducted from
the amount otherwise payable to the Seller pursuant to Section 2.3 and deposited
in the Collection Account in satisfaction of the Rejected Receivable Amount and,
provided the full Net Value of such Rejected Receivables is deposited in the
Collection Account, such Rejected Receivables shall then be considered to have
been repurchased by the Seller. In the event that the full Net Value of such
Rejected Receivables is not deposited in the Collection Account pursuant to the
foregoing sentence, the Purchaser shall deduct any such deficiency from the
Excess Collection Amount or make demand upon the Seller to pay any such
deficiency to the Purchaser for deposit to the Collection Account. Upon full
payment of the amounts set forth above to the Collection Account, the Seller
will be deemed to have repurchased such Rejected Receivable.
ARTICLE V - ACCOUNTS ADMINISTRATION
Section 5.1. COLLECTION ACCOUNT. The Purchaser acknowledges that
certain amounts deposited in the Collection Account may relate to Receivables
other than Purchased Receivables and that such amounts continue to be owned by
the Seller. All such amounts shall be administered in accordance with Section
5.3.
Section 5.2. DETERMINATIONS OF THE PURCHASER. On each Determination
Date, the Purchaser will determine, in good faith, the following:
(a) the Net Value of all Purchased Receivables which have become
Rejected Receivables since the prior Purchase Date and which have not been
repurchased or offset in the manner set forth in Section 4.4 (the "Rejected
Receivable Amount");
(b) the amount of Collections up to the Purchase Price of all Purchased
Receivables received since the prior Determination Date (the "Paid Receivables
Amount");
(c) the Net Value of all Purchased Receivables which have become
Defaulted Receivables since the prior Purchase Date (the "Defaulted Receivable
Amount" or "Credit Deficiency");
(d) the aggregate amount deposited in the Collection Account in excess
of the Purchase Price of each Purchased Receivable, including Collections
pertaining to Receivables not purchased under this Agreement, since the prior
Determination Date (the "Excess Collection Amount");
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(e) the Net Value of all Purchased Receivables less the Rejected
Receivable Amount and the Defaulted Receivable Amount as of the current
Determination Date; and
(f) the amount of any accrued and unpaid Program Fee.
The Purchaser's determinations of the foregoing amounts shall be made
in good faith and shall be deemed conclusive in the absence of manifest error.
The Purchaser shall notify the Seller of such good faith determinations.
Section 5.3. DISTRIBUTIONS FROM ACCOUNTS. (a) On each Determination
Date, following the determinations set forth in Section 5.2, the Purchaser will
make the following withdrawals and deposits:
(i) withdraw the Paid Receivables Amount and the Rejected
Receivable Amount plus any outstanding Rejected Receivable Amount applicable to
any prior period, to the extent such Rejected Receivable Amount is not paid to
the Purchaser as a reduction in Purchase Price to be paid to the Seller, from
the Collection Account and deposit such amount in the Purchase Account;
(ii) withdraw the Defaulted Receivable Amount from the Seller
Credit Reserve Account and deposit such amount in the Purchase Account;
(iii) withdraw the Excess Collection Amount from the
Collection Account and deposit such amount in the Seller Credit Reserve Account
to the extent that the Seller Credit Reserve Account is less than the Specified
Credit Reserve Balance; and
(iv) withdraw the balance of the Excess Collection Amount from
the Collection Account and, subject to any offset required under Section 5.3(b)
of this Agreement, remit such amount by wire transfer to an account designated
by the Seller; PROVIDED, HOWEVER, with respect to Receivables processed or
cleared pursuant to any Carrier Agreement, Clearinghouse Agreement or Billing
and Collection Agreement, if applicable, any Excess Collection Amount shall be
retained by the Purchaser in the Collection Account until such time that the
Seller's billing cycle (or batch) to which such Excess Collection Amount applies
is deemed closed by the Purchaser which, absent the occurrence of an Event of
Seller Default and provided that the Purchaser has received information in
sufficient form and format to allow the Purchaser to properly apply and/or post
Collections against Purchased Receivables, will occur no later than the next
immediate Purchase Date following such determination.
(b) The full amount of the Purchase Price before any offsets shall be
withdrawn from the Purchase Account and paid and administered as follows: (i)
the Program Fee due and owing as of each respective Purchase Date shall be paid
to the Purchaser, (ii) the amount, if any, by which the Seller Credit Reserve
Account is less than the Specified Credit Reserve Balance as of such respective
Purchase Date shall be deposited in the Seller Credit Reserve Account, (iii) the
amount, if any, due and owing the Purchaser pursuant to Section 9.4 of this
Agreement shall be paid to the Purchaser, and (iv) any remaining amount shall be
paid to the Seller in accordance with Section 2.3 of this Agreement.
(c) Until the Termination Date, with commercially reasonable best
efforts on each Purchase Date or in any event within two Business Days of each
Purchase Date, the Purchaser shall withdraw all amounts deposited hereunder (net
of withdrawals required hereunder) from the Seller Credit Reserve Account which
are in excess of the Specified Credit Reserve Balance and shall pay to the
Purchaser all amounts due and owing the Purchaser in accordance with Sections
2.3, 4.4, 5.3, 8.1, 9.4 and any applicable Termination Fee, and pay the balance,
if any, by wire transfer to an account designated by the Seller.
Section 5.4. ALLOCATION OF MONEYS FOLLOWING TERMINATION DATE. (a) Upon
the occurrence of a Termination Date hereunder, the Purchaser shall administer
and monitor the Lockbox Accounts and any
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<PAGE>
and all Collections and apply the amount of such Collections to the outstanding
Net Value of Purchased Receivables. Following the Termination Date and the
Purchaser's receipt of the Termination Fee, if applicable, from the Seller,
the Purchaser shall, to the extent funds deposited hereunder (net of withdrawals
required hereunder) are sufficient, withdraw an amount equal to the Program
Fee from the Seller Credit Reserve Account on each Purchase Date and deposit
it in the Purchase Account. To the extent that such funds do not equal the
Program Fee, the Seller shall deposit in the Purchase Account the balance of
the Program Fee within five Business Days following demand therefor. To the
extent any Purchased Receivable becomes a Defaulted Receivable, the Purchaser
may withdraw an amount equal to such Defaulted Receivable Amount from the
Seller Credit Reserve Account and deposit such amount in the Collection
Account, PROVIDED, HOWEVER, that such recourse is expressly limited to the
monies which comprise the Seller Credit Reserve Account at the time of the
Termination Date which shall not at any time exceed the Specified Credit
Reserve Balance. Thereafter, any Excess Collection Amount may not be used for
deposit to the Seller Credit Reserve Account and shall be otherwise administered
in accordance with this Agreement.
(b) In any event, following the Termination Date and the Purchaser's
receipt of the Termination Fee, if any, the Seller may, at its option,
repurchase all previously Purchased Receivables which have not been fully paid
by the respective Payors thereof by depositing with the Purchaser the then
aggregate Net Value of such Purchased Receivables. Following such payment and
any other amount due and owing the Purchaser under this Agreement, this
Agreement shall be deemed terminated.
(c) On the first Determination Date on which the aggregate Net Value of
all Purchased Receivables (other than Defaulted Receivables) (i) is less than
10% of the aggregate Net Value of Purchased Receivables (other than Defaulted
Receivables) on the Termination Date and (ii) is less than the aggregate amount
remaining in the Seller Credit Reserve Account, the Purchaser shall withdraw an
amount equal to such aggregate Net Value from such accounts and deposit it in
the Purchase Account. Thereupon the Purchaser shall disburse all remaining
amounts held in the Seller Credit Reserve Account to the Seller and all
interests of the Purchaser in all Purchased Receivables owned by the Purchaser
shall be reconveyed by the Purchaser to the Seller. Following such disbursement
and reconveyance, this Agreement shall be deemed terminated.
ARTICLE VI - APPOINTMENT OF THE SUBSERVICER
Section 6.1. APPOINTMENT OF THE SUBSERVICER. Subject to Section 6.5, as
consideration for the Seller's receipt of that portion of the Excess Collection
Amount relating to Purchased Receivables, the Purchaser hereby appoint the
Seller and the Seller hereby accepts such appointment to act as Subservicer
under this Agreement. The Subservicer may, with the prior consent of the
Purchaser, which consent shall not be unreasonably withheld, subcontract with a
subservicer for billing, collection, servicing or administration of the
Receivables. Any termination or resignation of the Subservicer under this
Agreement shall not affect any claims that the Purchaser may have against the
Subservicer for events or actions taken or not taken by the Subservicer arising
prior to any such termination or resignation.
Section 6.2. DUTIES AND OBLIGATIONS OF THE SUBSERVICER. (a) The
Subservicer shall service the Purchased Receivables and enforce the Purchaser's
respective rights and interests in and under each Purchased Receivable and each
related Contract or LOA; and shall take, or cause to be taken, all such actions
as may be necessary or advisable to service, administer and collect each
Purchased Receivable all in accordance with (i) customary and prudent servicing
procedures for telecommunication receivables of a similar type, and (ii) all
applicable laws, rules and regulations; and shall serve in such capacity until
the termination of its responsibilities pursuant to Section 6.4 or 7. 1. The
Subservicer shall at any time permit the Purchaser or any of its representatives
to visit the offices of the Subservicer and examine and make copies of all
Servicing Records;
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<PAGE>
(b) The Subservicer shall notify the Purchaser of any action, suit,
proceeding, dispute, offset, deduction, defense or counterclaim that is or may
be asserted by any Person with respect to any Purchased Receivable.
(c) The Purchaser shall not have any obligation or liability with
respect to any Purchased Receivables which may arise out of a related Contract,
nor shall it be obligated to perform any of the obligations of the Subservicer
hereunder.
Section 6.3. SUBSERVICING EXPENSES. The Subservicer shall be required
to pay for all expenses incurred by the Subservicer in connection with its
activities hereunder (including any payments to accountants, counsel or any
other Person) and shall not be entitled to any payment or reimbursement
therefor.
Section 6.4. SUBSERVICER NOT TO RESIGN. The Subservicer shall not
resign from the duties and responsibilities hereunder except upon determination
that (a) the performance of its duties hereunder has become impermissible under
applicable law and (b) there is no reasonable action which the Subservicer could
take to make the performance of its duties hereunder permissible under
applicable law evidenced as to clause (a) above by an opinion of counsel to such
effect delivered to the Purchaser.
Section 6.5. AUTHORIZATION OF THE PURCHASER. The Seller hereby
acknowledges that the Purchaser (including any of its successors or assigns),
shall retain the authority to take any and all reasonable steps in its name and
on its behalf necessary or desirable in the determination of the Purchaser to
collect all amounts due under any and all Purchased Receivables, process all
Collections, commence proceedings with respect to enforcing payment of such
Purchased Receivables and the related Contracts, and adjusting, settling or
compromising the account or payment thereof. The Seller shall furnish the
Purchaser (and any successors thereto) with any powers of attorney and other
documents necessary or appropriate to enable the Purchaser to carry out its
servicing and administrative duties under this Agreement, and shall cooperate
with the Purchaser to the fullest extent in order to facilitate the
collectibility of the Purchased Receivables.
ARTICLE VII - EVENTS OF SELLER DEFAULT
Section 7.1. EVENTS OF SELLER DEFAULT. If any of the following events
(each, an "Event of Seller Default") shall occur and be continuing:
(a) The Seller (either as Seller or Subservicer) shall materially fail
to perform or observe any term, covenant or agreement contained in this
Agreement for a period of ten days after delivery of notice from the Purchaser,
or such longer period as may be required to enable such failure to be cured so
long as the Seller commences the cure of such failure and notifies the Purchaser
of such commencement within such ten day period and thereafter continues without
interruption diligently to prosecute such cure to completion; provided, however,
that if such failure (i) consists of or involves any diversion of funds in
violation of this Agreement, (ii) poses an imminent threat of suspension or
termination of services pursuant to any Carrier Agreement, or (iii) poses an
imminent threat to the validity, effectiveness or priority of any of the
Purchaser's ownership or security interests created pursuant to this Agreement,
then, and in any of the circumstances specified in the immediately preceding
clauses (i), (ii) and/or (iii), the period within which such failure may be
cured shall be limited to three business days following Seller's actual or
constructive knowledge of same;
(b) The Seller or any Affiliate defaults: (i) whether as primary or
secondary obligor, in the payment of any principal or interest on any obligation
for borrowed money beyond any applicable grace period or, if such obligation is
payable on demand, fails to pay such obligation upon demand; or (ii) in the
observance of any covenant, term or condition contained in any agreement, if the
effect of such default is
10
<PAGE>
to cause, or to permit any other party to such obligation to cause, all or
part of such obligation to become due before its stated maturity;
(c) An Insolvency Event shall have occurred and which has not been
cured within thirty (30) days of such Insolvency Event;
(d) There is a material breach of any of the representations and
warranties of the Seller as stated in Sections 4.1 or 4.2 that has remained
uncured for a period of 30 days, or, as such breach may pertain to a Purchased
Receivable, has not been cured pursuant to Section 4.4;
(e) Any Governmental Authority shall file notice of a lien with regard
to any of the assets of the Seller or with regard to the Seller which remains
undischarged for a period of 30 days;
(f) As of the first day of any month, the aggregate Net Value of
Purchased Receivables which became Defaulted Receivables or Rejected Receivables
during the prior three month period shall exceed 10.0% of the Net Value of all
Purchased Receivables then owned by the Purchaser at the end of each of such
three months;
(g) This Agreement shall for any reason cease to evidence the transfer
to the Purchaser (or its assignees or transferees) of the legal and equitable
title to, and ownership of, the Purchased Receivables;
(h) The termination of any Clearinghouse Agreement, if applicable,
and/or any Carrier Agreement or Billing and Collection Agreement for any reason
whatsoever absent the consummation of a substitute Clearinghouse Agreement,
Carrier Agreement and/or Billing and Collections Agreement, as the case may be,
within ten Business Days of the termination thereof, and/or, any invoice due and
owing by the Seller relating to any Carrier Agreement, Clearinghouse Agreement
or Billing and Collection Agreement has become more than thirty days past due;
or
(i) The amount deposited hereunder (net of withdrawals required
hereunder) in the Seller Credit Reserve Account has remained at less than the
Specified Credit Reserve Balance for fourteen consecutive days;
then and in any such event, the Purchaser may, by notice to the Seller declare
that an Event of Seller Default shall have occurred and, the Termination Date
shall forthwith occur, without demand, protest or further notice of any kind,
and the Purchaser shall make no further Purchases from the Seller. The
Purchaser, in addition to all other rights and remedies under this Agreement,
all other rights and remedies provided under the UCC and other applicable law,
which rights shall be cumulative.
ARTICLE VIII - INDEMNIFICATION AND SECURITY INTEREST
Section 8.1. INDEMNITIES BY THE SELLER. (a) Without limiting any other
rights that the Purchaser or any director, officer, employee or agent of the
Purchaser (each an "Indemnified Party") may have under this Agreement or under
applicable law, the Seller hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses, liabilities, obligations, damages,
penalties, actions, judgments, suits, and related costs and expenses of any
nature whatsoever, including reasonable attorneys' fees and disbursements (all
of the foregoing being collectively referred to as "Indemnified Amounts") which
may be imposed on, incurred by or asserted against an Indemnified Party in any
way arising out of or relating to this Agreement or the ownership of the
Purchased Receivables or in respect of any Receivable or any Contract,
excluding, however, Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of any Indemnified Party.
(b) Any Indemnified Amounts subject to the indemnification provisions
of this Section shall be paid to the Indemnified Party within five Business Days
following demand therefor, together with
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<PAGE>
interest at the lesser of 10% per annum or the highest rate permitted by law
from the date of demand for such Indemnified Amount.
Section 8.2 SECURITY INTEREST. The Seller hereby grants to the
Purchaser a first priority perfected security interest in the Seller's Customer
Base, including but not limited to, all past, present and future customer
contracts, lists, agreements, LOA's or arrangements relating thereto; all of the
Seller's right, title and interest in, to and under all of the Seller's
Receivables not sold to the Purchaser hereunder, including all rights to
payments under any related Contracts, contract rights, instruments, documents,
chattel paper, general intangibles, LOA's or other agreements with all Payors
and all the Collections, Records and proceeds thereof; any other obligations or
rights of Seller to receive any payments in money or kind; all cash or non-cash
proceeds of the foregoing; all of the right, title and interest of the Seller in
and with respect to the goods, services or other property which gave rise to or
which secure any of the foregoing as security for the timely payment and
performance of any and all obligations the Seller or the Subservicer may owe the
Purchaser under Sections 2.3, 4.4, 5.3, 8.1, 9.4 and any applicable Termination
Fee and Purchase Commitment Fees, but excluding recourse for unpaid Purchased
Receivables. This Section 8.2 shall constitute a security agreement under the
UCC and any other applicable law and the Purchaser shall have the rights and
remedies of a secured party thereunder. Such security interest shall be further
evidenced by Seller's execution of appropriate UCC-1 financing statements
prepared by and acceptable to the Purchaser, and such other further assurances
that may be reasonably requested by the Purchaser from time to time.
Section 8.3. FURTHER ASSURANCES. Seller covenants to execute such other
assignments, security agreements, financing statements, and other documents that
Purchaser may reasonably deem necessary to further evidence the obligations
provided for herein or under this Agreement, or to perfect, extend, or clarify
Purchaser's rights in the Purchased Receivables, including but not limited to
International Receivables, or under this Agreement.
ARTICLE IX - MISCELLANEOUS
Section 9.1. NOTICES, ETC. All notices, shall be in writing and mailed
or telecommunicated, or delivered as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall not be effective until
received by the party to whom such notice or communication is addressed.
Section 9.2. REMEDIES. No failure or delay on the part of the Purchaser
to exercise any right hereunder shall operate as a waiver or partial waiver
thereof. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 9.3. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Seller, the Subservicer, the
Purchaser and their respective successors and permitted assigns. Neither the
Seller nor the Subservicer may assign any of their rights and obligations
hereunder or any interest herein without the prior written consent of the
Purchaser. Purchaser shall have the right, from time to time, without notice to
Seller, to sell, assign or otherwise transfer its interest in this Agreement and
the Purchased Receivables, either in whole or in part, to any other party or
enter into participation arrangements with any other party. Seller authorizes
Purchaser to deliver to potential assignees or participants Seller's financial
information and all other information delivered to Purchaser pursuant to the
terms of this Agreement so long as the potential transferee agrees in writing to
comply with the confidentiality provision of this Agreement. This Agreement
shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until its
termination; PROVIDED, that the rights and remedies with respect to any breach
of any representation and warranty made by the Seller pursuant to Article IV and
the indemnification and payment provisions of Article VIII shall be continuing
and shall survive any termination of this Agreement.
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<PAGE>
Section 9.4. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification under Article VIII, the Seller agrees to pay upon demand, all
reasonable costs and expenses in connection with this Agreement and the other
documents to be delivered hereunder, including, without limitation: (i) the
periodic auditing of the Seller and the modification or amendment of this
Agreement; (ii) the reasonable fees and out-of-pocket expenses of counsel for
the Purchaser with respect to (A) advising the Purchaser as to its rights and
remedies under this Agreement or (B) the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement or the other
documents to be delivered hereunder; (iii) any and all accrued Program Fee and
amounts related thereto not yet paid to the Purchaser; (iv) any and all Purchase
Commitment Fees and amounts related thereto not yet paid to the Purchaser; and
(v) any and all stamp, sales, excise and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing or
recording of this Agreement or the other agreements and documents to be
delivered hereunder, and agrees to indemnify and save each Indemnified Party
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
(b) If the Seller or the Subservicer fails to pay any Lockbox Accounts
fees or other charges or debits related to such accounts, or to pay or perform
any agreement or obligation contained under this Agreement, the Purchaser may
pay or perform, or cause payment or performance of, such agreement or
obligation, and the expenses of the Purchaser incurred in connection therewith
shall be payable by the party which has failed to so perform.
Section 9.5. AMENDMENTS; WAIVERS; CONSENTS. No modification, amendment
or waiver of, or with respect to, any provision of this Agreement or the Related
Documents, shall be effective unless it shall be in writing and signed by each
of the parties hereto. This Agreement, the Related Documents and the documents
referred to therein embody the entire agreement among the Seller, the
Subservicer and the Purchaser, and supersede all prior agreements and
understandings relating to the subject hereof, whether written or oral.
Section 9.6. GOVERNING LAW; CONSENT TO JURISDICTION. (a) THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF OHIO, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE PURCHASER IN THE
PURCHASED RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF,
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF OHIO.
(b) THE SELLER AND THE SUBSERVICER HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF OHIO AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE SOUTHERN DISTRICT OF OHIO, AND EACH WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S.
MAILS, POSTAGE PREPAID. THE SELLER AND THE SUBSERVICER EACH HEREBY WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS
SECTION SHALL AFFECT THE RIGHT OF THE PURCHASER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE PURCHASER TO BRING
ANY ACTION OR PROCEEDING AGAINST THE SELLER OR ITS PROPERTY, OR THE
SUBSERVICER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. THE
SELLER AND THE SUBSERVICER EACH HEREBY AGREE THAT THE EXCLUSIVE AND
APPROPRIATE FORUMS FOR ANY DISPUTE HEREUNDER ARE
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<PAGE>
THE COURTS OF THE STATE OF OHIO AND THE UNITED STATES DISTRICT COURT LOCATED
IN THE SOUTHERN DISTRICT OF OHIO AND AGREE NOT TO INSTITUTE ANY ACTION IN ANY
OTHER FORUM.
Section 9.7. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which when taken together shall
constitute one and the same agreement. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 9.8. CONFIDENTIALITY. The Purchaser and Seller understand and
agree to keep confidential, and shall cause its respective directors, officers,
shareholders, employees, agents, and attorneys to keep confidential the terms
and conditions of this Agreement, all documents referenced herein and the
respective terms thereof, and any communication between the parties regarding
this Agreement or the services to be provided hereunder hereby, except to the
extent that (a) any party makes any disclosure to his or its auditors, attorneys
or other professional advisors, (b) any disclosure is otherwise required by law
or pursuant to any rule or regulation of any federal, state or other
governmental authority or regulatory agency, provided that Seller provides prior
written notice thereof or (c) any party is in receipt of the prior written
consent of the other with respect to any compromise of the confidentiality
contemplated hereunder. Purchaser and Seller further understand and agree that
the violation by a party of the foregoing shall entitle the other party, at its
option, to obtain injunctive relief without a showing of irreparable harm or
injury and without bond.
Section 9.9. THIRD PARTY CONSULTATION. The Seller hereby agrees and
acknowledges that it has had the opportunity to seek out and consult with legal
counsel and/or independent business advisors of its own choosing in connection
with the negotiation, execution and delivery of this Agreement. This Agreement
shall be construed without regard to any presumption or rule requiring that it
be construed against the party causing this Agreement, or any part hereof, to be
drafted.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
STAR TELECOMMUNICATIONS, INC., a Delaware
corporation, as Seller and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: President
Address at which the chief executive office
is located:
Address: 223 East De La Guerra
Santa Barbara, CA 93101
Attention: John Pasini
Phone number: 805/889-1962
Telecopier number: 805/889-2972
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
See Schedule 4.1(h)
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
Star Vending, Inc.
PT-1 LONG DISTANCE, INC., a Delaware, as Seller
and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: Chief Executive Officer
Address at which the chief executive office
is located:
Address: 30-50 Whitestone Expressway
Flushing, NY 11354
Attention: Mary Casey
c/o STAR Telecommunications, Inc.
223 E. De La Guerra
Santa Barbara, CA 93101
Phone number: 805/889-1962
Telecopier number: 805/889-2972
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
See Schedule 4.1(h)
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
None
15
<PAGE>
PT-1 COMMUNICATIONS, INC., a New York corporation,
as Seller and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: Chief Executive Officer
Address at which the chief executive office
is located:
Address: 30-50 Whitestone Expressway
Flushing, NY 11354
Attention: Mary Casey
c/o STAR Telecommunications, Inc.
223 E. De La Guerra
Santa Barbara, CA 93101
Phone number: 805/889-1962
Telecopier number: 805/889-2972
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
See Schedule 4.1(h)
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
None
HELVEY COM, INC., a California corporation, as Seller
and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: President
Address at which the chief executive office
is located:
Address: 223 E. De La Guerra
Santa Barbara, CA 93101
Attention: Mary Casey
Phone number: 805/889-1962
Telecopier number: 805/889-3842
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
None
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
None
16
<PAGE>
CEO CALIFORNIA TELECOMMUNICATIONS, INC., a
California corporation, as Seller and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: President
Address at which the chief executive office
is located:
Address: 223 E. De La Guerra
Santa Barbara, CA 93101
Attention: Mary Casey
Phone number: 850/889-1962
Telecopier number: 850/889-3842
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
See Schedule 4.1(h)
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
CEO Telecom
AS TELECOMMUNICATIONS, INC., an Arizona corporation,
as Seller and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: Chief Financial Officer
Address at which the chief executive office
is located:
Address: 3030 North Central Avenue, Suite 702
Phoenix, AZ 85012
Attention: Mary Casey
c/o STAR Telecommunications, Inc.
223 E. De La Guerra
Santa Barbara, CA 93101
Phone number: 850/889-1962
Telecopier number: 850/889-3842
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
See Schedule 4.1(h)
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
ALLSTAR Telecom
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<PAGE>
CEO TELECOMMUNICATIONS, INC., a California
corporation, as Seller and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: President
Address at which the chief executive office
is located:
Address: 12440 Firestone Blvd., Suite 3000
Norwalk, CA 90650
Attention: Mary Casey
c/o STAR Telecommunications, Inc.
223 East De La Guerra
Santa Barbara, CA 93101
Phone number: 850/889-1962
Telecopier number: 850/889-3842
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
See Schedule 4.1(h)
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
CEO Telecom
STAR EUROPE, LIMITED, organized under the laws of the United
Kingdom, as Seller and Subservicer
By:
-------------------------------------
Name: Mary Casey
Title: President
Address at which the chief executive office
is located:
Address: Kingsgate House
536 Kings Road
4th Floor
London, SW10 United Kingdom
Attention: Mary Casey
c/o STAR Telecommunications, Inc.
223 East De La Guerra
Santa Barbara, CA 93101
Phone number: 850/889-1962
Telecopier number: 850/889-3842
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
None
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
18
<PAGE>
STAR Europe
STAR TELECOMMUNICATIONS DEUTSCHLAND,
GmbH, organized under the laws of Germany, as
Seller and Subservicer
By:
-------------------------------------
Name: Kelly Enos
Title: Chief Financial Officer
Address at which the chief executive office
is located:
Address: Voltatrasse 1a
Frankfurt am Main, Germany
Attention: Mary Casey
c/o STAR Telecommunications, Inc.
223 East De La Guerra
Santa Barbara, CA 93101
Phone number: 850/889-1962
Telecopier number: 850/889-3842
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
----------------------------------------------
----------------------------------------------
----------------------------------------------
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
STAR Germany
RFC CAPITAL CORPORATION
By:
-------------------------------------
Name: Mark D. Quinlan
Title: Vice President
Address: 130 East Chestnut Street
Suite 400
Columbus, OH 43215
Attention: Mark D. Quinlan
Phone number: (614) 229-7979
Telecopier number: (614) 229-7980
19
<PAGE>
Exhibit 10.55
AMENDMENT NUMBER FOUR TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NUMBER FOUR TO EMPLOYMENT AGREEMENT (this "Amendment")
is effective as of _______________, 1999, between STAR TELECOMMUNICATIONS, INC.,
a Delaware corporation ("STAR"), and MARY CASEY ("EXECUTIVE").
RECITALS:
A. STAR (or STAR Vending, Inc., a Nevada corporation, predecessor in
interest to STAR) and Executive are parties to that certain Employment Agreement
effective as of July 14, 1995, as amended by that certain Amendment Number One
to Employment Agreement effective as of January 1, 1996, that certain Amendment
Number Two to Employment Agreement effective as of July 15, 1996, and that
certain Amendment Number Three to Employment Agreement effective as of July 1,
1997 (collectively, the "Employment Agreement"), pursuant to which Executive is
employed by STAR.
B. The parties desire to modify certain terms of the Employment
Agreement, as set forth in this Amendment.
AGREEMENTS:
NOW, THEREFORE, the parties agree to amend the Employment Agreement as
follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings ascribed to them in the Employment
Agreement. From and after the date hereof, the term "Agreement" as used in the
Employment Agreement will mean the Employment Agreement as amended by this
Amendment, unless and until such Employment Agreement may again be amended.
2. AMENDMENT OF SECTION 7. Section 7 of the Employment Agreement is
hereby amended to read in its entirety as follows:
"7. TERMINATION.
7.1 METHODS OF TERMINATION. This Agreement and the
employment of Executive may be terminated at any
time:
A. By mutual agreement of the parties.
B. By STAR if Executive dies or becomes
physically or mentally disabled (the term
"disabled" shall mean any mental or physical
illness or disability that renders the
Executive unable to perform the essential
functions of her position, after reasonable
accommodation of such disability by STAR).
-1-
<PAGE>
C. By STAR, for cause, if Executive (a) has
committed any material act of dishonesty,
fraud or misrepresentation or any act of
moral turpitude; (b) is in default in the
performance of Executive's material
obligations, services or duties under this
Agreement; or (c) has failed to execute
specific instructions from STAR's Board of
Directors or executive officers, which
failure is not corrected by Executive after
reasonable notice from STAR.
D. By STAR, without cause, at any time
during the term of this Agreement.
E. By the Executive if STAR is in default of
its material obligations or duties under
this Agreement.
F. By the Executive, without cause, at any
time during the term of this Agreement.
7.2 CONSEQUENCES OF TERMINATION. Executive shall be
entitled to the following compensation in the event
of a termination:
A. In the event of any termination under
Sections 7.1A, 7.1B, 7.1C, or 7.1F,
Executive (or, in the event of Executive's
death, her estate) shall be entitled to
receive compensation accrued and payable to
her as of the date of termination or death,
and all other amounts payable under this
Agreement shall thereupon cease.
B. In the event of any termination under
Section 7.1D or Section 7.1E, then Executive
shall continue to receive the compensation
provided in this Agreement until the
expiration of this Agreement. Any amounts
earned by her (other than through her
personal investment activities) prior to
such expiration by virtue of other
employment shall be deducted from amounts to
which she is entitled under this Agreement.
7.3 IRC VIOLATIONS. Any provision in this Agreement
to the contrary notwithstanding, in no event will
Executive receive a payment which would trigger the
excise taxes and disallowance of deductions
contemplated by Sections 280G and 4999 of the
Internal Revenue Code of 1986, as amended (the
"Code"). In the event that any amount calculated
would result in such a payment, such amount shall be
reduced to the largest amount that would not result
in such a payment. This reduction shall apply to any
and all compensation, including compensation pursuant
to stock option grants governed by separate agreement
between STAR and Executive. If, at the time of any
such payment, no stock of STAR is readily tradeable
on an established securities market or otherwise,
then STAR agrees to use its best efforts to cause
such payment to meet the exemption set forth in
Sections 280G(b)(5)(A)(ii) and (B) of the Code, so
that no reduction will be required under this
Agreement."
-2-
<PAGE>
3. CONFIRMATION. Except as specifically amended by this Amendment, the
Employment Agreement will continue unchanged, and the terms and conditions of
the Employment Agreement, as amended by this Amendment, are ratified and
confirmed.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first set forth above.
"STAR"
STAR TELECOMMUNICATIONS, INC.,
a Delaware corporation
By:
--------------------------------------
Christopher E. Edgecomb,
Chief Executive Officer
"EXECUTIVE"
--------------------------------------
Mary Casey
-3-
<PAGE>
Exhibit 10.56
AMENDMENT NUMBER TWO TO EMPLOYMENT AGREEMENT
--------------------------------------------
THIS AMENDMENT NUMBER TWO TO EMPLOYMENT AGREEMENT (this "Amendment") is
effective as of _______________, 1999, between STAR TELECOMMUNICATIONS, INC., a
Delaware corporation (the "COMPANY"), and KELLY ENOS ("EMPLOYEE").
RECITALS:
--------
A. The Company (or STAR Vending, Inc., a Nevada corporation,
predecessor in interest to the Company) and Employee are parties to that certain
Employment Agreement effective as of December 2, 1996, as amended by that
certain Amendment Number One to Employment Agreement effective as of November
12, 1997 (collectively, the "Employment Agreement"), pursuant to which Employee
is employed by the Company.
B. The parties desire to modify certain terms of the Employment
Agreement, including the monthly base salary payable to Employee under the
Employment Agreement, as set forth in this Amendment.
AGREEMENTS:
----------
NOW, THEREFORE, the parties agree to amend the Employment Agreement as
follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings ascribed to them in the Employment
Agreement. From and after the date hereof, the term "Agreement" as used in the
Employment Agreement will mean the Employment Agreement as amended by this
Amendment, unless and until such Employment Agreement may again be amended.
2. AMENDMENT OF SECTION 3.1. Section 3.1 of the Employment Agreement is
hereby amended to read in its entirety as follows:
"3.1 BASE SALARY. The Company shall pay Employee a monthly
salary during the term of this Agreement. This salary shall be
$15,000.00 per month. Employee's salary shall not be reduced
at any time during the term of this Agreement, but the
foregoing shall not limit the Company's rights under Section
7."
3. AMENDMENT OF SECTION 7. Section 7 of the Employment Agreement is
hereby amended to read in its entirety as follows:
-1-
<PAGE>
"7. TERMINATION.
7.1 METHODS OF TERMINATION. This Agreement and the
employment of Employee may be terminated at any time:
A. By mutual agreement of the parties.
B. By the Company if Employee dies or
becomes physically or mentally disabled (the
term "disabled" shall mean any mental or
physical illness or disability that renders
the Employee unable to perform the essential
functions of her position, after reasonable
accommodation of such disability by the
Company).
C. By the Company, for cause, if Employee
(a) has committed any material act of
dishonesty, fraud or misrepresentation or
any act of moral turpitude; (b) is in
default in the performance of Employee's
material obligations, services or duties
under this Agreement; or (c) has failed to
execute specific instructions from the
Company's Board of Directors or executive
officers, which failure is not corrected by
Employee after reasonable notice from the
Company.
D. By the Company, without cause, at any
time during the term of this Agreement.
E. By the Employee if the Company is in
default of its material obligations or
duties under this Agreement.
F. By the Employee, without cause, at any
time during the term of this Agreement.
7.2 CONSEQUENCES OF TERMINATION. Employee shall be
entitled to the following compensation in the event
of a termination:
A. In the event of any termination under
Sections 7.1A, 7.1B, 7.1C, or 7.1F, Employee
(or, in the event of Employee's death, her
estate) shall be entitled to receive
compensation accrued and payable to her as
of the date of termination or death, and all
other amounts payable under this Agreement
shall thereupon cease.
B. In the event of any termination under
Section 7.1D or Section 7.1E, then Employee
shall continue to receive the compensation
provided in this Agreement until the
expiration of this Agreement. Any amounts
earned by her (other than through her
personal investment activities) prior to
such expiration by virtue of other
employment shall be deducted from amounts to
which she is entitled under this Agreement.
7.3 IRC VIOLATIONS. Any provision in this Agreement
to the contrary notwithstanding, in no event will
Employee receive a payment which would trigger the
excise taxes and disallowance of deductions
contemplated by Sections 280G and
-2-
<PAGE>
4999 of the Internal Revenue Code of 1986, as
amended (the "Code"). In the event that any amount
calculated would result in such a payment, such
amount shall be reduced to the largest amount that
would not result in such a payment. This reduction
shall apply to any and all compensation, including
compensation pursuant to stock option grants governed
by separate agreement between the Company and
Employee. If, at the time of any such payment, no
stock of the Company is readily tradeable on an
established securities market or otherwise, then the
Company agrees to use its best efforts to cause such
payment to meet the exemption set forth in Sections
280G(b)(5)(A)(ii) and (B) of the Code, so that no
reduction will be required under this Agreement."
4. CONFIRMATION. Except as specifically amended by this Amendment, the
Employment Agreement will continue unchanged, and the terms and conditions of
the Employment Agreement, as amended by this Amendment, are ratified and
confirmed.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first set forth above.
"COMPANY"
STAR TELECOMMUNICATIONS, INC.,
a Delaware corporation
By:
------------------------------------
Mary Casey, President
"EMPLOYEE"
------------------------------------
Kelly Enos
-3-
<PAGE>
Exhibit 10.57
AMENDMENT NUMBER ONE TO
-----------------------
SECOND RESTATEMENT OF EMPLOYMENT AGREEMENT
------------------------------------------
THIS AMENDMENT NUMBER ONE TO SECOND RESTATEMENT OF EMPLOYMENT AGREEMENT
(this "Amendment") is effective as of _______________, 1999, between STAR
TELECOMMUNICATIONS, INC., a Delaware corporation ("STAR"), and JAMES KOLSRUD
("EMPLOYEE").
RECITALS:
--------
A. STAR (and/or STAR Vending, Inc., a Nevada corporation, predecessor
in interest to STAR) and Employee are parties to that certain Employment
Agreement effective as of September 14, 1996, as amended and restated by that
certain First Restatement of Employment Agreement effective as of December 18,
1996, as amended and restated by that certain First Restatement of Employment
Agreement effective as of June 16, 1997, as amended and restated by that certain
Second Restatement of Employment Agreement effective as of April 1, 1998
(collectively, the "Employment Agreement"), pursuant to which Employee is
employed by STAR.
B. The parties desire to modify the monthly base salary payable to
Employee under the Employment Agreement, as set forth in this Amendment.
AGREEMENTS:
----------
NOW, THEREFORE, the parties agree to amend the Employment Agreement as
follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings ascribed to them in the Employment
Agreement. From and after the date hereof, the term "Agreement" as used in the
Employment Agreement will mean the Employment Agreement as amended by this
Amendment, unless and until such Employment Agreement may again be amended.
2. AMENDMENT OF SECTION 3.1. Section 3.1 of the Employment Agreement is
hereby amended to read in its entirety as follows:
"3.1 BASE SALARY. STAR shall pay Employee a monthly salary
during the term of this Agreement. This salary shall be
$20,000.00 per month. Employee's salary shall not be reduced
at any time during the term of this Agreement, but the
foregoing shall not limit STAR's rights under Section 7."
3. CONFIRMATION. Except as specifically amended by this Amendment, the
Employment Agreement will continue unchanged, and the terms and conditions of
the Employment Agreement, as amended by this Amendment, are ratified and
confirmed.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first set forth above.
"STAR"
STAR TELECOMMUNICATIONS, INC.,
a Delaware corporation
By:
------------------------------------
Mary Casey, President
"EMPLOYEE"
------------------------------------
James Kolsrud
-2-
<PAGE>
Exhibit 10.58
AMENDMENT NUMBER TWO TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NUMBER TWO TO EMPLOYMENT AGREEMENT (this "Amendment") is
effective as of _______________, 1999, between STAR TELECOMMUNICATIONS, INC., a
Delaware corporation (the "COMPANY"), and DAVID VAUN CRUMLY ("EMPLOYEE").
RECITALS:
A. The Company (or Star Vending, Inc., a Nevada corporation,
predecessor in interest to the Company) and Employee are parties to that
certain Employment Agreement effective as of January 1, 1996, as amended by
that certain Amendment Number One to Employment Agreement effective as of
November 11, 1997 (collectively, the "Employment Agreement"), pursuant to
which Employee is employed by the Company.
B. The parties desire to modify certain terms of the Employment
Agreement, as set forth in this Amendment.
AGREEMENTS:
NOW, THEREFORE, the parties agree to amend the Employment Agreement as
follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings ascribed to them in the Employment
Agreement. From and after the date hereof, the term "Agreement" as used in the
Employment Agreement will mean the Employment Agreement as amended by this
Amendment, unless and until such Employment Agreement may again be amended.
2. AMENDMENT OF SECTION 7. Section 7 of the Employment Agreement is
hereby amended to read in its entirety as follows:
"7. TERMINATION.
7.1 METHODS OF TERMINATION. This Agreement and the
employment of Employee may be terminated at any time:
A. By mutual agreement of the parties.
B. By the Company if Employee dies or
becomes physically or mentally disabled (the
term "disabled" shall mean any mental or
physical illness or disability that renders
the Employee unable to perform the essential
functions of his position, after reasonable
accommodation of such disability by the
Company).
C. By the Company, for cause, if Employee
(a) has committed any material act of
dishonesty, fraud or misrepresentation or
any act of moral turpitude; (b) is in
default in the performance of Employee's
material
-1-
<PAGE>
obligations, services or duties
under this Agreement; or (c) has failed to
execute specific instructions from the
Company's Board of Directors or executive
officers, which failure is not corrected by
Employee after reasonable notice from the
Company.
D. By the Company, without cause, at any
time during the term of this Agreement.
E. By the Employee if the Company is in
default of its material obligations or
duties under this Agreement.
F. By the Employee, without cause, at any
time during the term of this Agreement.
7.2 CONSEQUENCES OF TERMINATION. Employee shall be
entitled to the following compensation in the event
of a termination:
1. In the event of any termination under
Sections 7.1A, 7.1B, 7.1C, or 7.1F, Employee
(or, in the event of Employee's death, his
estate) shall be entitled to receive
compensation accrued and payable to him as
of the date of termination or death, and all
other amounts payable under this Agreement
shall thereupon cease.
G. In the event of any termination under
Section 7.1D or Section 7.1E, then Employee
shall continue to receive the compensation
provided in this Agreement until the
expiration of this Agreement. Any amounts
earned by him (other than through his
personal investment activities) prior to
such expiration by virtue of other
employment shall be deducted from amounts to
which he is entitled under this Agreement.
7.3 IRC VIOLATIONS. Any provision in this Agreement
to the contrary notwithstanding, in no event will
Employee receive a payment which would trigger the
excise taxes and disallowance of deductions
contemplated by Sections 280G and 4999 of the
Internal Revenue Code of 1986, as amended (the
"Code"). In the event that any amount calculated
would result in such a payment, such amount shall be
reduced to the largest amount that would not result
in such a payment. This reduction shall apply to any
and all compensation, including compensation pursuant
to stock option grants governed by separate agreement
between the Company and Employee. If, at the time of
any such payment, no stock of the Company is readily
tradeable on an established securities market or
otherwise, then the Company agrees to use its best
efforts to cause such payment to meet the exemption
set forth in Sections 280G(b)(5)(A)(ii) and (B) of
the Code, so that no reduction will be required under
this Agreement."
3. CONFIRMATION. Except as specifically amended by this Amendment, the
Employment Agreement will continue unchanged, and the terms and conditions of
the Employment Agreement, as amended by this Amendment, are ratified and
confirmed.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first set forth above.
"COMPANY"
STAR TELECOMMUNICATIONS, INC.,
a Delaware corporation
By:
-----------------------------------
Mary Casey, President
"EMPLOYEE"
-----------------------------------
David Vaun Crumly
-3-
<PAGE>
Exhibit 10.59
AMENDMENT NUMBER THREE TO EMPLOYMENT AGREEMENT
This AMENDMENT NUMBER THREE TO EMPLOYMENT AGREEMENT, (the "AMENDMENT")
is effective as of November 11, 1999 (the "EFFECTIVE DATE"), between STAR
TELECOMMUNICATIONS, INC., a Delaware corporation (the "COMPANY") and DAVID VAUN
CRUMLY (the "EMPLOYEE").
RECITALS:
A. The Company (or STAR Vending, Inc. a Nevada corporation, predecessor
in interest to the Company) and Employee are parties to that certain Employment
Agreement effective January 1, 1996, as amended by Amendment Number One to
Employment Agreement effective as of November 11, 1997 and by Amendment Number
Two to Employment Agreement effective as of April 21, 1999 (collectively the
"Employment Agreement"), pursuant to which Employee is employed by the Company.
B. The parties desire to modify certain terms of the Employment
Agreement, as set forth in this Amendment.
AGREEMENT:
NOW, THEREFORE, the parties agree to amend the Employment Agreement as
follows:
1. DEFINED TERMS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings ascribed to them in the Employment
Agreement. From and after the date hereof, the term "Agreement" as used in the
Employment Agreement will mean the Employment Agreement as amended by this
Agreement, unless and until such Employment Agreement may again be amended.
2. AMENDMENT OF EXHIBITS A, B AND D. Exhibits A, B and D are hereby
amended in their entirety as set forth in Exhibits A, B and D attached hereto
and incorporated herein.
3. CONFIRMATION. Except as specifically amended by the Amendment, the
Employment Agreement will continue unchanged, and the terms and conditions of
the Employment Agreement, as amended by this Amendment, are ratified and
confirmed.
[signature page to follow]
Third Amendment to Employment Agreement
Page 1
<PAGE>
IN WITNESS WHEREOF, that parties have executed this Amendment effective
as of the date first set forth above.
"COMPANY"
STAR TELECOMMUNICATIONS, INC.,
A Delaware corporation
By:
---------------------------------------
Mary Casey
President
"EMPLOYEE"
---------------------------------------
David Vaun Crumly
Third Amendment to Employment Agreement
Page 2
<PAGE>
Exhibit 10.60
REVOLVING LINE OF CREDIT PROMISSORY NOTE
1. FUNDAMENTAL PROVISIONS
The following terms will be used as defined terms in this Note:
DATE OF THIS NOTE: April 12, 1999
<TABLE>
<S><C>
BORROWER: KELLY ENOS
LENDER: STAR TELECOMMUNICATIONS, INC., a Delaware corporation
PRINCIPAL AMOUNT: One Hundred Thousand Dollars ($100,000.00)
INTEREST RATE: Eight percent (8%) per annum, or the maximum
rate permitted by law, whichever is less
</TABLE>
2. PROMISE TO PAY
For good and valuable consideration, Borrower promises to pay to
Lender, or order, the Principal Amount, or so much thereof as is advanced
(pursuant to the terms of this Note) and outstanding, with interest at the
Interest Rate from the dates of the respective advances by Lender, until paid,
in accordance with the terms contained herein. The unpaid balance of this
obligation at any time shall be the total amounts advanced hereunder less the
amount of payments made hereon by or for Maker, which balance may be endorsed
from time to time by Holder at EXHIBIT A hereto. Interest shall be computed on
the basis of a three hundred sixty (360) day year and the actual number of days
elapsed. Should any interest not be paid when due, it shall thereafter accrue
interest as principal.
3. LIMITATIONS ON ADVANCES
Advances of the Principal Amount shall be made by Lender to Borrower
at any time and from time to time at the written request of Borrower ("Advance
Request"); provided, however, in no event shall the outstanding Principal Amount
exceed in the aggregate the amount of One Hundred Thousand Dollars
($100,000.00). Advances shall be paid to Borrower within ten (10) business days
following the receipt by Lender of the Advance Request. Notwithstanding the
-1-
<PAGE>
foregoing, no advances shall be made hereunder following the delivery by
Lender to Borrower of the Maturity Date Notice or a Default Notice.
4. INTEREST
Interest shall be payable monthly on or before the first (1st) day of
each calendar month during the term hereof, commencing on the first day of the
first full calendar month following the initial advance of the Principal Amount
made hereunder. The monthly payments of interest shall be based upon estimates
of the actual amounts of interest payable with respect to the outstanding
Principal Amount, as increased from time to time by the advances, and reduced
from time to time by the repayments, made in accordance herewith. Lender shall
deliver to Borrower on a quarterly basis a statement ("Interest Statement") of
the actual interest payable by Borrower under this Note for the preceding
calendar quarter. In the event that the aggregate amount of interest paid by
Borrower during a calendar quarter exceeds the actual amount of interest payable
for said calendar quarter, as specified in the Interest Statement, such excess
shall be applied to reduce the Principal Amount outstanding effective as of the
end of said calendar quarter. In the event that the aggregate amount of interest
paid by Borrower during a calendar quarter is less than the actual amount of
interest payable for said calendar quarter, as specified in the Interest
Statement, such deficiency shall be paid by Borrower, together with the next
monthly payment of interest due hereunder.
5. MATURITY DATE
The Principal Amount (as advanced hereunder from time to time) and all
accrued and unpaid interest shall be due and payable on the date of the
expiration of the one (1) year period following the delivery by Lender to
Borrower of a written demand for payment of all outstanding indebtedness
hereunder, including all outstanding amounts of the Principal Amount and all
accrued and unpaid interest ("Maturity Date Notice").
6. APPLICATION OF PAYMENTS
All payments shall be applied first to accrued interest, and then to
the Principal Amount.
7. PLACE AND MANNER OF PAYMENT
All payments shall be made to Lender at 223 East De La Guerra Street,
Santa Barbara, California 93101, or at such other place as Lender may from time
to time designate. All payments shall be made
-2-
<PAGE>
in lawful money of the United States. Checks will constitute payment only
when collected.
8. PREPAYMENTS
The Principal Amount or any portion thereof may be prepaid at any time
and from time to time without penalty.
9. EVENT OF DEFAULT
At the option of Lender, it shall be an "Event of Default" hereunder if
(i) Borrower fails to pay when due any sum payable under this Note; (ii)
Borrower fails to perform any obligation or commits a breach of any agreement
set forth in this Note; (iii) any event of default by Borrower under any other
agreement between Borrower and Lender or any other promissory note or instrument
executed by Borrower in favor of Lender; or (iv) any of the following: (a) an
application by Borrower for, or her consent to, the appointment of a trustee,
receiver, or custodian of her assets is filed; (b) an order for relief with
respect to Borrower is filed in proceedings under the United States Bankruptcy
Code, as amended or superseded from time to time; (c) Borrower makes a general
assignment for the benefit of creditors; (d) an order, judgment, or decree by
any court of competent jurisdiction appointing a trustee, receiver, or custodian
of the assets of Borrower is entered, unless the proceedings and the person
appointed are dismissed within ninety (90) days; (e) Borrower fails generally to
pay her debts as the debts become due within the meaning of Section 303(h)(1) of
the United States Bankruptcy Code, as determined by the Bankruptcy Court; or (f)
Borrower admits in writing her inability to pay her debts as they become due.
10. ACCELERATION
Upon the occurrence of an Event of Default, then, at the option of
Lender, the entire sum of the outstanding Principal Amount and all accrued and
unpaid interest shall become immediately due and payable within sixty (60) days
following the delivery to Borrower of written notice thereof ("Default Notice").
11. ATTORNEYS' FEES
If Lender refers this Note to an attorney to enforce, construe or
defend any provision hereof, or as a consequence of any Event of Default
hereunder, with or without the filing of any legal action or proceeding,
Borrower shall pay to Lender upon demand the amount of all attorneys' fees,
costs and other expenses incurred by Lender in connection therewith, together
with interest thereon from the date of demand at the Interest Rate. The
reference to "attorneys' fees" in this Paragraph shall include without
limitation such
-3-
<PAGE>
amounts as may then be charged by Lender for legal services furnished by
attorneys in the employ of Lender at rates not exceeding those that would be
charged by outside attorneys for comparable services.
12. WAIVER OF DEFAULTS
No delay or omission of Lender in exercising any right or power arising
in connection with any Event of Default shall be construed as a waiver or as an
acquiescence therein, nor shall any single or partial exercise thereof preclude
any further exercise thereof. Lender may, at its option, waive any of the
conditions herein and no such waiver shall be deemed to be a waiver of Lender's
rights hereunder, but rather shall be deemed to have been made in pursuance of
this Note and not in modification thereof. No waiver of any Event of Default
shall be construed to be a waiver of or acquiescence in or consent to any
preceding or subsequent Event of Default.
13. WAIVER OF NOTICES
Except as provided in this Note, Borrower, and all endorsers, all
guarantors and all persons liable or to become liable on this Note waive
presentment, protest, demand, notice of protest, dishonor or non-payment of this
Note, and any and all other notices or matters of a like nature, consent to any
and all renewals and extensions of the time of payment hereto, and agree further
that at any time and from time to time without notice, the terms of payment
hereof may be modified, or any security at any time securing this Note may be
released in whole or in part, or increased, changed or exchanged by agreement
between Lender and any owner of any collateral affected thereby, without in any
way affecting the liability of Maker under this Note, or any endorser, any
guarantor, or any person liable or to become liable with respect to any
indebtedness evidenced hereby.
14. MISCELLANEOUS PROVISIONS
No provision of this Note may be amended, modified, supplemented,
changed, waived, discharged or terminated unless Lender consents thereto in
writing. In case any one or more of the provisions contained in this Note should
be held to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. This Note shall be binding upon
and inure to the benefit of Borrower, Lender, and their respective successors
and assigns. This Note is not assumable. Lender shall have the right to sell,
assign or otherwise transfer, either in part or in its entirety, this Note,
without Borrower's consent, with any such transferee being entitled
-4-
<PAGE>
to be treated in all favorable respects as a holder or holders in due course.
Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein. This Note shall be governed by and
construed in accordance with the laws of the State of California. If Borrower
consists of more than one person or entity, the obligations of Borrower shall
be the joint and several obligations of all such persons or entities, and any
married person who executes this Note agrees that recourse may be had against
his or her separate property for satisfaction of his or her obligations
hereunder.
IN WITNESS WHEREOF, Borrower has executed this Note on the Date of this
Note.
BORROWER:
- ---------------------------------------
KELLY ENOS
-5-
<PAGE>
Exhibit 10.61
REVOLVING LINE OF CREDIT PROMISSORY NOTE
----------------------------------------
1. FUNDAMENTAL PROVISIONS
----------------------
The following terms will be used as defined terms in this Note:
<TABLE>
<CAPTION>
DATE OF THIS NOTE: April 12, 1999
<S> <C>
BORROWER: JAMES KOLSRUD
LENDER: STAR TELECOMMUNICATIONS, INC., a Delaware
corporation
PRINCIPAL AMOUNT: One Hundred Thousand Dollars ($100,000.00)
INTEREST RATE: Eight percent (8%) per annum, or the maximum
rate permitted by law, whichever is less
</TABLE>
2. PROMISE TO PAY
--------------
For good and valuable consideration, Borrower promises to pay to
Lender, or order, the Principal Amount, or so much thereof as is advanced
(pursuant to the terms of this Note) and outstanding, with interest at the
Interest Rate from the dates of the respective advances by Lender, until paid,
in accordance with the terms contained herein. The unpaid balance of this
obligation at any time shall be the total amounts advanced hereunder less the
amount of payments made hereon by or for Maker, which balance may be endorsed
from time to time by Holder at EXHIBIT A hereto. Interest shall be computed on
the basis of a three hundred sixty (360) day year and the actual number of days
elapsed. Should any interest not be paid when due, it shall thereafter accrue
interest as principal.
3. LIMITATIONS ON ADVANCES
-----------------------
Advances of the Principal Amount shall be made by Lender to Borrower
at any time and from time to time at the written request of Borrower ("Advance
Request"); provided, however, in no event shall the outstanding Principal Amount
exceed in the aggregate the amount of One Hundred Thousand Dollars
($100,000.00). Advances shall be paid to Borrower within ten (10) business days
following the receipt by Lender of the Advance Request. Notwithstanding the
-1-
<PAGE>
foregoing, no advances shall be made hereunder following the delivery by Lender
to Borrower of the Maturity Date Notice or a Default Notice.
4. INTEREST
--------
Interest shall be payable monthly on or before the first (1st) day of
each calendar month during the term hereof, commencing on the first day of the
first full calendar month following the initial advance of the Principal Amount
made hereunder. The monthly payments of interest shall be based upon estimates
of the actual amounts of interest payable with respect to the outstanding
Principal Amount, as increased from time to time by the advances, and reduced
from time to time by the repayments, made in accordance herewith. Lender shall
deliver to Borrower on a quarterly basis a statement ("Interest Statement") of
the actual interest payable by Borrower under this Note for the preceding
calendar quarter. In the event that the aggregate amount of interest paid by
Borrower during a calendar quarter exceeds the actual amount of interest payable
for said calendar quarter, as specified in the Interest Statement, such excess
shall be applied to reduce the Principal Amount outstanding effective as of the
end of said calendar quarter. In the event that the aggregate amount of interest
paid by Borrower during a calendar quarter is less than the actual amount of
interest payable for said calendar quarter, as specified in the Interest
Statement, such deficiency shall be paid by Borrower, together with the next
monthly payment of interest due hereunder.
5. MATURITY DATE
-------------
The Principal Amount (as advanced hereunder from time to time) and all
accrued and unpaid interest shall be due and payable on the date of the
expiration of the one (1) year period following the delivery by Lender to
Borrower of a written demand for payment of all outstanding indebtedness
hereunder, including all outstanding amounts of the Principal Amount and all
accrued and unpaid interest ("Maturity Date Notice").
6. APPLICATION OF PAYMENTS
-----------------------
All payments shall be applied first to accrued interest, and then to
the Principal Amount.
7. PLACE AND MANNER OF PAYMENT
---------------------------
All payments shall be made to Lender at 223 East De La Guerra Street,
Santa Barbara, California 93101, or at such other place as Lender may from time
to time designate. All payments shall be made
-2-
<PAGE>
in lawful money of the United States. Checks will constitute payment only
when collected.
8. PREPAYMENTS
-----------
The Principal Amount or any portion thereof may be prepaid at any time
and from time to time without penalty.
9. EVENT OF DEFAULT
----------------
At the option of Lender, it shall be an "Event of Default" hereunder if
(i) Borrower fails to pay when due any sum payable under this Note; (ii)
Borrower fails to perform any obligation or commits a breach of any agreement
set forth in this Note; (iii) any event of default by Borrower under any other
agreement between Borrower and Lender or any other promissory note or instrument
executed by Borrower in favor of Lender; or (iv) any of the following: (a) an
application by Borrower for, or his consent to, the appointment of a trustee,
receiver, or custodian of his assets is filed; (b) an order for relief with
respect to Borrower is filed in proceedings under the United States Bankruptcy
Code, as amended or superseded from time to time; (c) Borrower makes a general
assignment for the benefit of creditors; (d) an order, judgment, or decree by
any court of competent jurisdiction appointing a trustee, receiver, or custodian
of the assets of Borrower is entered, unless the proceedings and the person
appointed are dismissed within ninety (90) days; (e) Borrower fails generally to
pay his debts as the debts become due within the meaning of Section 303(h)(1) of
the United States Bankruptcy Code, as determined by the Bankruptcy Court; or (f)
Borrower admits in writing his inability to pay his debts as they become due.
10. ACCELERATION
------------
Upon the occurrence of an Event of Default, then, at the option of
Lender, the entire sum of the outstanding Principal Amount and all accrued and
unpaid interest shall become immediately due and payable within sixty (60) days
following the delivery to Borrower of written notice thereof ("Default Notice").
11. ATTORNEYS' FEES
---------------
If Lender refers this Note to an attorney to enforce, construe or
defend any provision hereof, or as a consequence of any Event of Default
hereunder, with or without the filing of any legal action or proceeding,
Borrower shall pay to Lender upon demand the amount of all attorneys' fees,
costs and other expenses incurred by Lender in connection therewith, together
with interest thereon from the date of demand at the Interest Rate. The
reference to "attorneys' fees" in this Paragraph shall include without
limitation such
-3-
<PAGE>
amounts as may then be charged by Lender for legal services furnished by
attorneys in the employ of Lender at rates not exceeding those that would be
charged by outside attorneys for comparable services.
12. WAIVER OF DEFAULTS
------------------
No delay or omission of Lender in exercising any right or power arising
in connection with any Event of Default shall be construed as a waiver or as an
acquiescence therein, nor shall any single or partial exercise thereof preclude
any further exercise thereof. Lender may, at its option, waive any of the
conditions herein and no such waiver shall be deemed to be a waiver of Lender's
rights hereunder, but rather shall be deemed to have been made in pursuance of
this Note and not in modification thereof. No waiver of any Event of Default
shall be construed to be a waiver of or acquiescence in or consent to any
preceding or subsequent Event of Default.
13. WAIVER OF NOTICES
-----------------
Except as provided in this Note, Borrower, and all endorsers, all
guarantors and all persons liable or to become liable on this Note waive
presentment, protest, demand, notice of protest, dishonor or non-payment of this
Note, and any and all other notices or matters of a like nature, consent to any
and all renewals and extensions of the time of payment hereto, and agree further
that at any time and from time to time without notice, the terms of payment
hereof may be modified, or any security at any time securing this Note may be
released in whole or in part, or increased, changed or exchanged by agreement
between Lender and any owner of any collateral affected thereby, without in any
way affecting the liability of Maker under this Note, or any endorser, any
guarantor, or any person liable or to become liable with respect to any
indebtedness evidenced hereby.
14. MISCELLANEOUS PROVISIONS
------------------------
No provision of this Note may be amended, modified, supplemented,
changed, waived, discharged or terminated unless Lender consents thereto in
writing. In case any one or more of the provisions contained in this Note should
be held to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. This Note shall be binding upon
and inure to the benefit of Borrower, Lender, and their respective successors
and assigns. This Note is not assumable. Lender shall have the right to sell,
assign or otherwise transfer, either in part or in its entirety, this Note,
without Borrower's consent, with any such transferee being entitled
-4-
<PAGE>
to be treated in all favorable respects as a holder or holders in due course.
Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein. This Note shall be governed by and
construed in accordance with the laws of the State of California. If Borrower
consists of more than one person or entity, the obligations of Borrower shall
be the joint and several obligations of all such persons or entities, and any
married person who executes this Note agrees that recourse may be had against
his or her separate property for satisfaction of his or her obligations
hereunder.
IN WITNESS WHEREOF, Borrower has executed this Note on the Date of this
Note.
BORROWER:
---------------------------------------
JAMES KOLSRUD
-5-
<PAGE>
Exhibit 10.62
CHASE EQUIPMENT LEASING, INC.
THIS MASTER LEASE PURCHASE AGREEMENT dated as of February 20, 1998 (hereinafter
referred to as "Lease") by and between Chase Equipment Leasing, Inc., a New York
corporation, with a place of business located at One Chase, Rochester, NY 14643
(hereinafter referred to together with its assigns, if any, as "Lessor") and
PHONETIME TECHNOLOGIES, INC., a (corporation / partnership / proprietorship /
limited liability company) organized and existing under the laws of the State of
with its mailing address and chief place of business at 30-50 Whitestone
Expressway, Flushing, New York 11354 (hereinafter referred to as "Lessee").
The Parties hereto for good and valuable consideration and intending to be
legally bound hereby agree as follows:
1. PROCEDURE FOR LEASING:
(a) SCHEDULES. Subject to the terms and conditions set forth herein, Lessor
agrees to lease to Lessee and Lessee agrees to lease from Lessor such unit or
units of equipment (the "Equipment" and individually sometimes "Item" or "Item
of Equipment") described in any Master Lease Schedule (a "Schedule") from time
to time executed by the parties pursuant hereto, and any and all such Schedules
are deemed a part hereof. Each Schedule incorporates by reference this Lease and
shall constitute, subject to Section 9 hereof, a separate lease. Capitalized
terms not otherwise defined herein have the meaning provided for in any
Schedule.
(b) CONDITIONS PRECEDENT. The obligation of Lessor to purchase Equipment
from the manufacturer or supplier thereof ("Supplier") and to lease the same to
Lessee under any Schedule is subject to receipt by Lessor prior to the
Commencement Date with respect to the Schedule of each of the following
documents in form and substance satisfactory to Lessor: (i) a Schedule relating
to the Equipment then being leased hereunder, (ii) a purchase order assignment,
(iii) a Certificate of Acceptance and Closing Certificate, (iv) a certificate of
Insurance which complies with the requirements of Section 4(f) and the Schedule,
and (v) a bill of sale transferring title to each Item to Lessor and such other
documents and conditions as Lessor may reasonably require including Lessor's
determination that there has been no material adverse change in the financial
condition of Lessee or any Guarantor. Lessor hereby appoints Lessee its agent
for inspection and acceptance of each Item from the Supplier. Upon execution by
Lessee of the Certificate of Acceptance, each Item described therein will be
deemed to have been delivered to, and irrevocably accepted by Lessee for lease
hereunder.
2. TERM AND RENT:
The lease of and rent for Equipment will commence on the day specified in
the related Schedule as the Commencement Date, and will continue for the period
specified as the "term" therein as the same may be extended pursuant to the
terms hereof. Lessee promises to make each payment of rent during the term on
the due dates and in the amounts set forth in each Schedule without notice or
demand at Lessor's address set forth above or as otherwise directed by Lessor in
writing and no payment of rent will be refunded for any cause or reason
whatsoever. The parties hereto intend that the rents and other amounts payable
by Lessee hereunder will continue to be payable in all events unless the
obligation to pay same is terminated pursuant to the terms hereof. If any
payment hereunder falls due on a day on which Lessor is not open for business,
such payment shall be due and payable on the next preceding day on which Lessor
is open for business. To secure all obligations of Lessee under each Schedule,
Lessee hereby grants to Lessor a security interest in: (i) any security deposit
or advance rent paid by Lessee
<PAGE>
hereunder, each of which shall be in all cases non-interest bearing; and (ii)
all other funds, balances, accounts, proceeds of collateral and/or other
property of any kind of Lessee or in which Lessee has an interest now or
hereafter in the possession, custody, or control of Lessor or The Chase
Manhattan Bank and any of its direct or indirect affiliates and subsidiaries,
including without limitation Chase Securities, Inc.
3. LATE CHARGE:
If any rent or any other amount due hereunder from Lessee other than the
amounts due under this Section 3 is not paid within five (5) days after the due
date, Lessee agrees to pay a late charge equal to five percent (5%) on the
amount of such delinquent rent or other payment, but not exceeding the maximum
amount permissible under applicable law. The failure of Lessor to collect any
late charge will not constitute a waiver of Lessor's right with respect thereto.
Late charges will be due and payable on the due date for the next following
payment of rent.
4. LESSEE REPRESENTATIONS AND COVENANTS:
Lessee represents and warrants, and covenants and agrees, as follows and
each such representation, warranty and covenant shall be deemed made and renewed
as of the date hereof and as of the Commencement Date under each Schedule
without the necessity of any further act or instrument:
(a) GENERAL. (i) Lessee is duly organized and validly existing under the
laws of the state indicated at the outset; this Lease and each Schedule and all
instruments delivered in connection herewith and therewith have been duly
authorized by all necessary action, and duly executed and delivered and
constitute valid, legal and binding agreements, enforceable in accordance with
their terms except to the limited by applicable bankruptcy and insolvency laws;
and no such document nor Lessee's performance thereunder will conflict with
Lessee's performance thereunder will conflict with Lessee's organizational
documents or with any indenture, contract or agreement by which Lessee is bound
or with any statute, judgment, decree, rule or regulation binding upon Lessee;
(ii) no consent or approval of any trustee or holder of any indebtedness or
obligation of Lessee, and no consent or approval of any governmental authority,
is necessary for Lessee's execution or performance of this Lease; (iii) there is
no litigation or other proceeding pending, or to the best of the Lessee's
knowledge, threatened against or affecting Lessee which, if decided adversely to
Lessee, would adversely affect or impair the title of Lessor to the Equipment or
which, if decided adversely to Lessee would materially adversely affect the
business operations or financial condition of Lessee; (iv) all balance sheets,
statements of profit and loss and other financial data that have been delivered
to Lessor with respect to Lessee are complete and correct in all material
respects, fairly present the financial condition of the Lessee on the dates for
which, and the results of its operations for the periods for which, the same
have been furnished and have been prepared in accordance with generally accepted
accounting principles consistently applied; and (v) there has been no material
adverse change in the condition of Lessee, financial or otherwise, since the
date of the most recent financial statements delivered to Lessor.
(b) NO ABATEMENT. This is a net Lease and Lessee's promise to pay rent and
all other amounts hereunder is irrevocable and independent and not subject to
cancellation, termination, modification, repudiation, excuse or substitution
without the written consent of Lessor. Lessee agrees to pay all such amounts
when due by acceleration or otherwise without abatement, irrespective of any
claims, demands, set-offs, actions, suits, or proceedings that it may have or
assert against Lessor or any Supplier or manufacturer of Equipment. Lessor will
have no liability to Lessee upon the failure of any Supplier, manufacturer or
one or more others to perform any obligations at any time due to Lessor,
<PAGE>
Lessee or any other person and, in all such events, Lessee waives any right
in any suit, action or proceeding to any exemplary, punitive or consequential
damages whatsoever.
(c) LIENS AND ENCUMBRANCES. THE EQUIPMENT IS FREE AND CLEAR FROM ALL
CLAIMS, LIENS AND ENCUMBRANCES WHATSOEVER; LESSEE WILL DEFEND THE EQUIPMENT
AGAINST ALL LIENS AND WILL NOT SELL, ASSIGN, SUBLET, MORTGAGE, OR ALTER ANY OF
THE EQUIPMENT LEASED HEREUNDER OR ANY INTEREST IN THIS LEASE, NOR WILL LESSEE
REMOVE ANY OF THE EQUIPMENT FROM THE LOCATION SPECIFIED IN THE SCHEDULE WITHOUT
THE PRIOR WRITTEN CONSENT OF LESSOR, AND ANY ATTEMPT TO SO SELL, ASSIGN, SUBLET,
MORTGAGE, HYPOTHECATE, ALTER OR REMOVE WILL CONSTITUTE A DEFAULT HEREUNDER AND
SUCH SALE, ASSIGNMENT, SUBLEASE, MORTGAGE, OR HYPOTHECATION WILL BE VOID AND
WITHOUT EFFECT. In order to secure all obligations of Lessee hereunder, Lessee
assigns and grants to Lessor a security interest in all rights, powers and
privileges under any sublease of the Equipment hereafter authorized in writing
by Lessor.
(d) USE AND OPERATION. Lease will at all times use the Equipment only in
compliance with applicable laws and consistent with the instructions supplied
and use intended for such Equipment by the Supplier and manufacturer thereof.
Lessee will not use the Equipment to carry, contain or produce directly or
indirectly any hazardous substances as defined under applicable federal, state
or local law or regulation. Lessee will not without the prior written consent of
Lessor affix or install any accessory, equipment or device on any Equipment
leased hereunder if such addition will impair the originally intended function
or use of such Equipment. All additions, repairs, parts, supplies, accessories,
equipment and devices furnished, attached or fixed to any Equipment will
thereupon without further act or instrument become the property of Lessor
(except such as may be removed without in any way affecting or impairing the
originally intended function, condition or use of such Item). Further, Lessee
will not, without the prior written consent of Lessor and subject to such
conditions as Lessor may impose for its protection, affix to or install any
Equipment in any other personal property or in real property.
(e) SERVICE AND MAINTENANCE. Lessee will at its sole expense at all times
maintain all Equipment in good operating order, repair, condition and appearance
and keep all Equipment protected from the elements, except during use in the
normally contemplated manner. At Lessor's request, Lessee will at its expense
affix in a prominent position on each Item of Equipment plates, tags or other
identifying labels showing ownership of the Equipment by Lessor. Lessor will at
all reasonable times have the right to inspect the Equipment and Lessee's
maintenance records related thereto. Lessee at its sole expense will make all
alterations and modifications with respect to the Equipment that may at any time
during the term of this Lease or any Schedule hereunder be required to comply
with any applicable law or any governmental rule or regulation.
(f) INSURANCE. Lessee hereby assumes all risks of damage, loss, theft, or
destruction, partial or complete, with respect to each Item of Equipment during
the term of the Lease and during any storage period until Lessee has returned or
disposed of the Equipment as provided for herein. Lessee will at its own expense
keep each Item of Equipment insured for an amount at least equal to the
Stipulated Loss Value of the Equipment as set forth in the Schedule against all
risks with extended coverage and insurance companies acceptable to Lessor with
Lessor named as loss payee. Lessee agrees to obtain and maintain at its expense
with insurance companies acceptable to Lessor general public liability insurance
naming Lessor as an additional insured together with Lessee, as their interests
may appear, in no event less than One Million Dollars (1,000,000) or such
greater amount, if any, as specified in the related Schedule against
<PAGE>
claims for bodily injury, death or property damage arising out of the use,
ownership, possession, operation or condition of the Equipment. Each insurer
will agree, by endorsement upon the policy or policies issued by it, or by
independent instruments furnished to Lessor, that Lessor will have the power
to file claims against the insurer under said policy, that it will give
Lessor thirty (30) days written notice before the policy or policies in
question will be altered, expired or canceled, and that no act or default of
any person other than Lessor, its agents, or those claiming under Lessor,
will affect Lessor's right to recover under such policy or policies in case
of loss. Although any and all obligations imposed on the insured shall be
obligations solely of Lessee, Lessee will deliver to Lessor the policies or
evidence of insurance satisfactory to Lessor prior to the Commencement Date
and thirty (30) days prior to each expiration date thereof for each Item of
Equipment. The failure of Lessee to secure or maintain such insurance will
constitute a default under this Lease. In the event of such breach, Lessor
may, but will not be obligated to, obtain such insurance. In the event that
Lessor obtains such insurance, an amount equal to the cost of such insurance
will be deemed supplemental rent to be paid forthwith by Lessee. In the event
that any policies insuring against liability risks described above shall now
or hereafter provide coverage on a "claims made" basis, Lessee shall continue
to maintain such policies in effect for a period of not less than three years
after the expiration of the Lease term of any Schedules.
(g) DISPOSITION OF EQUIPMENT. Upon termination of any Schedule under the
Lease by expiration of the term hereof, except as provided for in Section 9,
Lessor will, upon satisfaction of all Lessee's obligations to Lessor with
respect to any particular Item of Equipment and provided Lessee is not otherwise
then in default hereunder or under any other Schedule, transfer title to such
Item to Lessee.
5. TRANSFER OF WARRANTIES:
To the extent permitted by law and contract, Lessor will pass through
without representation to Lessee the benefit of all warranties, if any, of the
Supplier of the Equipment and, so long as there is no default hereunder, Lessee
will have the right to, and will, directly avail itself of all warranties by the
Supplier with respect to the Equipment. Lessor will not take any action which
prejudices Lessee's right to, or under the terms of, any such warranty. If
subsequent to the Commencement Date Lessee shall determine that the Equipment is
unsatisfactory for any reason including any failure of the Equipment to conform
to the specifications set forth in any purchase order, Lessee shall make any
claim on account thereof solely against the Supplier and Lessee will give Lessor
notice of any such claim made by Lessee against any Supplier and any cash
settlement of any such claim will be payable solely to Lessor.
6. LOSS OR DAMAGE:
(a) Lessee hereby assumes and is solely responsible for the entire risk of
use and operation of the Equipment and for each and every accident or hazard
resulting therefrom and all losses and damages associated therewith howsoever
arising.
(b) In the event of total loss, destruction, theft, confiscation or damage
beyond repair (determined without reference to the remaining term with respect
thereto) to the Equipment or any Item (a "Casualty Occurrence"), Lessee will pay
to Lessor on the next due date for rent following the Casualty Occurrence or on
the last day of the term thereof, whichever first occurs, any unpaid rent due
with respect to such Equipment plus an amount determined by application of the
liquidated damage provision in the third paragraph of Section 9 hereof. Upon
payment of such amounts, and provided no default exists hereunder, Lessee will
be entitled to recover possession of such Item and title thereto will vest in
Lessee free and clear of the right and interest of Lessor.
(c) In the event of damage to any Item of Equipment which does not amount
to a Casualty Occurrence, Lessee will give prompt notice of such damage to
Lessor and at
<PAGE>
Lessee's sole cost and expense promptly repair such Item to its previous
condition which assumes Lessee has met all of its obligations required for
maintenance hereunder. Provided Lessee is not in breach or default of this
Lease, any proceeds of insurance received by Lessor with respect to any such
loss will be paid over by Lessor to Lessee to the extent necessary to
reimburse Lessee for costs incurred and paid by Lessee in repairing such
damaged Equipment, but only upon evidence satisfactory to Lessor that such
repairs have been accomplished.
7. FIRST PRIORITY LIEN:
Lessee represents and warrants to Lessor for each Schedule that upon the
filing of the financing statements delivered to Lessor on or prior to the
respective Commencement Date in the jurisdiction(s) where the Equipment is
located as indicated in the related Schedule, then Lessor shall have a first
prior perfected security interest in the Equipment free and clear of all other
liens and encumbrances except the interest of Lessee hereunder.
8. INDEMNIFICATION:
LESSEE ACKNOWLEDGES THAT IT ALONE SELECTS THE EQUIPMENT AND THE SUPPLIER(S)
THEREOF. LESSEE UNDERSTANDS AND AGREES THAT LESSOR MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESSED OR IMPLIED, WITH RESPECT TO THE EQUIPMENT
INCLUDING THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND, AS TO LESSOR, LESSEE LEASES THE EQUIPMENT AS IS. NO
DEFECT OR UNFITNESS OF THE EQUIPMENT SHALL RELIEVE LESSEE OF THE OBLIGATION TO
PAY RENT OR OF ANY OTHER OBLIGATION UNDER THIS LEASE. Accordingly, Lessee agrees
to indemnify, save and keep harmless Lessor, its agents, employees, successors
and assigns from and against any and all losses, damages, expenses (including
legal expenses), penalties, injuries, claims, actions and suits of whatsoever
kind and nature, in contract or tort, howsoever arising from any cause
whatsoever including, but not limited to, Lessor's strict liability in tort, or
otherwise arising out of (i) the selection, manufacture, purchase, financing,
acceptance or rejection of Equipment, the ownership of Equipment during the term
of the Lease, and the delivery, lease, possession, maintenance, uses, condition,
return or operation of Equipment (including without limitation, latent and other
defects, whether or not discoverable by Lessor or Lessee and any claim for
patent, trademark or copyright infringement); or (ii) the condition of Equipment
sold or disposed of after use by Lessee, any sublessee or employee of Lessee.
Lessee will, upon request, at its expense, defend any and all actions base on,
or arising out of, any of the foregoing. This indemnification shall survive the
expiration or cancellation of the Lease.
9. DEFAULT; REMEDIES:
Each of the following will constitute a default hereunder; (a) Lessee fails
to pay rent within five (5) days from and after the date such payment of rent is
due and payable or Lessee fails to pay any other amount when due under any
Schedule; (b) Lessee fails to maintain the insurance required hereunder or
breaches any other term, provision, obligation or covenant hereof (including
without limitation any Schedule) or commits any other act of default specified
in this Lease; (c) any representation or warranty of Lessee contained herein or
in any other document or instrument delivered in connection herewith or made
from time to time hereafter is false or misleading when made; (d) Lessee or any
guarantor, surety, endorser or pledgor of property given to secure Lessee's
obligations hereunder ("Guarantor") becomes insolvent, ceases to do business as
a going concern, or transfers or sells all or substantially all of its assets
without the prior written consent of Lessor; (e) the Equipment or any Item is
abused, illegally used, or misused; (f) the death, dissolution , merger,
consolidation or reorganization of Lessee or any Guarantor; (g) Lessee or any
Guarantor makes any assignment for the benefit of
<PAGE>
creditors, or if a petition in bankruptcy, reorganization, insolvency,
receivership or the like is filed with respect to Lessee or any Guarantor or
property of Lessee or any Guarantor is attached or a receiver, trustee or
liquidator is appointed for Lessee or any Guarantor or any of Lessee's or
Guarantor's property or whenever Lessor may deem itself insecure hereunder;
(h) the transfer of more than a 25% ownership interest in Lessee or any
Guarantor by shareholders, partners, members or proprietors thereof in any
year without Lessor's prior written consent, (i) Lessee or any Guarantor (x)
incurs any accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended from time to time and the
regulations thereunder, equal to 5% of Lessee's consolidated tangible net
worth (as defined by generally accepted accounting principles), or (y) incurs
any liability of comparable size to the pension Benefit Guaranty Corporation,
(j) Lessee or any material subsidiary or any Guarantor fails to comply with
the provisions of the Fair Labor Standards Act of 1938, as amended, (k)
Lessee or any Guarantor fails to pay or perform or observe any term,
covenant, agreement or condition contained in, or there shall occur any
payment or other default under or as defined in, any other agreement
applicable to Lessee or any Guarantor or by which Lessee or any Guarantor is
bound (as used herein, an "Other Agreement") involving a liability,
indebtedness or performance obligation of Lessee or any Guarantor with a
potential liability to Lessee or any Guarantor in an amount equal to or in
excess of $50,000, which shall not be remedied within the period of time (if
any) within which such Other Agreement permits such default to be remedied,
regardless of whether such default (i) is waived by any other party to such
Other Agreement or (ii) produces or results in the cancellation of such Other
Agreement or the acceleration of such liability, indebtedness or other
obligation; (l) attachment, distraint, levy, execution or final judgment for
the payment of money aggregating in excess of $50,000 will be outstanding
against Lessee or its property for more than sixty (60) days from the date of
entry and will not have been discharged in full or stayed or fully bonded;
(m) Lessee or any Guarantor shall suffer the loss of any material license or
franchise when Lessor shall reasonably conclude that such loss fairly impairs
Lessee's or such Guarantor's ability to perform its obligations required
hereunder or with respect hereto; or (n) Lessee or any Guarantor shall
violate any financial covenant contained in any agreement for borrowed money
applicable to Lessee or Guarantor as of the Commencement Date of any Schedule
and all such financial covenants shall survive the satisfaction of debt
applicable thereto and shall be deemed incorporated herein by reference and
remain fully applicable to Lessee's obligations hereunder.
Upon any such default, Lessor, at its option, may do any one or more of the
following: (1) declare this Lease and any or all Schedules in default upon
notice to Lessee, whereupon the entire amount of rent and all other amounts
remaining to be paid over the balance of the term of all Equipment then leased
thereunder, computed from the date of Lessee's default, will become immediately
due and payable and be accelerated; (2) proceed by appropriate court action or
actions to enforce Lessee's performance of this Lease and/or to recover damages
for the breach thereof; (3) cancel this Lease and any or all Schedules upon
notice to Lessee; (4) whether or not this Lease or any Schedules be so
cancelled, and without notice to Lessee, repossess the Equipment wherever found,
with or without legal process, and for this purpose Lessor and/or its agents may
enter upon any premises of or under control or jurisdiction of Lessee or any
agent of Lessee without liability for suit, action or other proceeding by Lease
(any damages occasioned by such repossession being hereby expressly waived by
Lessee except for damages occasioned by gross negligence or willful misconduct)
and remove the Equipment therefrom. Lessor's remedies as provided herein are not
exclusive but are cumulative and in addition to all other remedies in Lessor's
favor at law, in equity or in bankruptcy. The receipt and
<PAGE>
acceptance by Lessor of any rent or other payment after a default will not be
deemed to be a waiver of such default by Lessor. Lessor shall not, by any
act, delay, omission, or otherwise, be deemed to have waived any default or
any of its rights or remedies hereunder unless such waiver be in writing,
signed by the Lessor, and then only to the extent therein set forth. In the
event that any court determines that any provision in this Lease is invalid
or unenforceable in whole or in part, such determination will not prohibit
Lessor from establishing its damages as a result of any breach of this Lease
in any action in which Lessor seeks to recover such damages. Any repossession
or resale of any Equipment will not bar an action for damages for breach of
this Lease, and the bringing of an action or the entry of judgment against
Lessee will not bar Lessor's right to repossess any or all Equipment. Upon
cancellation of any Schedule upon default, Lessee will, at its sole cost and
expense, cease using the Equipment, store the Equipment for up to ninety (90)
days while maintaining the insurance required above, promptly return the
Equipment to Lessor when directed to do so F.O.B. the destination specified
by Lessor, in the same condition as received, reasonable wear and tear and
normal depreciation excepted. Lessee shall pay on demand holdover rent equal
to a full monthly rent for each month or any day thereof during which Lessee
fails to return the Equipment when so directed by Lessor and this obligation
is without limitation to any consequential damages for which Lessee may be
responsible as a result of such failure to return the Equipment.
With respect to any Equipment returned to Lessor, or repossessed by Lessor
pursuant to provision (4) above, Lessor may hold or use such Equipment for any
purpose whatsoever or either sell same at private or public sale, for cash or
credit, or re-lease same for such term and upon such rental as will be solely
determined by Lessor. In the event that Lessor is able to sell or re-lease all
or any Equipment returned to Lessor then the proceeds of any sale or re-leasing
of such Equipment, after first deducting therefrom all costs and expenses of
repossession, storage, repairs, reconditioning, sale, re-leasing, attorneys'
fees and collection fees with respect to such Equipment, shall be deducted from
the damages for which Lessee is obligated hereunder. In the event of the sale or
re-leasing by Lessor of any such Equipment after default hereunder or in the
event of a Casualty Occurrence under Section 6 hereof, then Lessee will be
liable for, and Lessor may forthwith recover from Lessee as liquidated damages
for breach or termination of this Lease, and not as a penalty, an amount equal
to the sum of (X) the entire amount of rent which would have accrued for the
balance of the term for such Equipment computed from the date of Lessee's
default or, in the case of a Casualty Occurrence, computed as of the rent
payment date immediately preceding the date of the Casualty Occurrence
discounted in each case as provided for hereinafter plus (Y) any final payment
due under the Schedule discounted as provided for hereinafter, less (Z) the
proceeds, if any, of any sale or re-leasing of such Equipment, after first
deducting therefrom all costs and expenses of repossession, storage, repairs,
reconditioning, sale, re-leasing, attorney's fees and collection fees with
respect to such Equipment provided, however, the amount for which Lessee shall
be obligated as liquidated damages shall in no event be an amount less than 10%
of Lessor's Cost. If Lessee fails to deliver any Equipment to Lessor or Lessor
is unable, for any reason, to effect repossession of any Equipment, then with
respect to such Equipment, Lessee will be liable for, and Lessor may forthwith
recover from Lessee as liquidated damages for breach or termination of this
Lease, and not as a penalty, an amount equal to the sum of the amounts specified
in items (X) and (Y) above for such Equipment. Whether or not any Equipment is
returned to, or repossessed by Lessor, as aforesaid, Lessee will also be liable
for, and Lessor may forthwith recover from Lessee, all unpaid rent and other
unpaid sums that accrued prior to the date of Lessee's default. In addition to
the foregoing, Lessor may also recover from Lessee all costs and expenses,
including without limitation fees of collection agencies and
<PAGE>
reasonable attorney's fees, including the allocated costs and fees of
Lessor's in-house legal counsel, incurred by Lessor in exercising any of its
rights or remedies hereunder. Since pursuant to the foregoing Lessor may
receive or recover payment of the amounts specified in clause (1) of the
preceding paragraph or the amounts specified in items (X) and (Y) above
earlier than Lessor would otherwise be entitled to receive or recover same
but for Lessee's default, such amounts will be discounted to their then
present value at the rate of six percent (6%) per annum, and there will be
added to such amounts after such discount, interest at the rate specified in
Section 12 hereof from the date Lessee's default up to the date of the
payment of such amounts to Lessor. Lessee irrevocably consents to the in
personam jurisdiction of the federal and/or state courts located in the State
of New York over controversies arising from or relating to this Lease or any
obligation with respect thereto and waives the right to impose any
counterclaim or offset of any nature in any such litigation. Lessee
irrevocably appoints each and every owner, partner, member and/or officer of
Lessee as its attorney upon whom may be served certified mail any process,
notice or pleading in any action or proceeding against it under this Lease or
related thereto.
10. ASSIGNMENTS:
LESSOR MY WITHOUT LESSEE'S CONSENT ASSIGN OR OTHERWISE TRANSFER OR GRANT A
SECURITY INTEREST IN ITS RIGHT AND INTEREST IN ANY ITEM OR SCHEDULE AND THE RENT
DUE OR TO BECOME DUE THERUNDER AND WHEN SO ASSIGNED, TRANSFERRED OR ENCUMBERED,
EACH SCHEDULE WILL BE FREE OR ANY COUNTERCLAIM, SET-OFF, DEFENSE, OR CROSSCLAIM
BY LESSEE AS AGAINST LESSOR OR SUCH ASSIGNEE WHENEVER ARISING, BEFORE OR AFTER
SUCH SALE, ASSIGNMENT, TRANSFER OR SECUTIRY GRANT BUT NO SUCH ACTION WILL
INCREASE LESSEE'S OBLIGATIONS HEREUNDER, EXCEPT THAT UPON NOTICE TO LESSEE
THEREOF, LESSEE AGREES TO DIRECT ALL PAYMENTS HEREUNDER, IF REQUESTED, TO
LESSOR'S ASSIGNEE. Lessor may provide lease information on a confidential basis
to any prospective purchaser, assignee or participant.
11. PAYMENT OF TAXES:
Lessee agrees to pay promptly when due, and to indemnify and hold Lessor
harmless from, all license, title and registration fees whatsoever, all levies,
imposts, duties, charges or withholdings whatsoever, and all sales, use,
personal property, franchisee (howsoever calculated), and other taxes whosoever
(together with any penalties, fines, or interest thereon) whether assessed,
levied or imposed by any governmental or taxing authority against or upon Lessor
or otherwise, with respect to any Equipment or the purchase, acquisition,
ownership, delivery, leasing, possession, use, operation, control, return, or
other disposition thereof, or the rents, receipts or earnings arising therefrom,
or with respect to the Lease, excluding, however, (i) any such taxes or charges
to the extent they are included in Lessor's Cost, (ii) any federal taxes levied
on Lessor's net income, or (iii) state or local taxes levied on Lessor's net
income, as net income is determined under and at rates which do not exceed those
originally imposed by the jurisdiction in which the Equipment is located as
specified in the related Schedule. In the event any such fees, levies, imposts,
duties, charges or taxes are paid by Lessor, or if Lessor be required to collect
or pay any thereof, Lessee will reimburse Lessor therefor (plus any penalties,
fines, interest thereon) promptly upon demand. Until Lessor notifies Lessee to
the contrary, Lessee will promptly before any penalty attaches, prepare and file
in Lessor's name or on Lessor's behalf all personal property tax returns
covering the Equipment and Lessee will pay the personal property taxes or
assessed therein directly to the levying authority. If Lessor timely notifies
Lessee that Lessor will prepare and/or file any such
<PAGE>
return, Lessee will, promptly upon being involved by Lessor, reimburse Lessor
for the full amount of such personal property taxes so paid by Lessor. If any
capital adequacy requirements are imposed upon Lessor or its parent which
require the maintenance of additional capital or impose additional expenses
as a result of this Lease, and the effect of such requirements is to reduce
Lessor's expected rate of return hereunder, Lessee shall pay to Lessor such
amount or amounts as may be necessary to compensate Lessor for such
reduction. The indemnification obligation of Lessee under this Section will
continue in full force and effect notwithstanding the expiration or other
cancellation hereof. Lessee will either provide Lessor a copy of all property
and other tax returns field hereunder by Lessee in Lessor's name or on
Lessor's behalf or provided to Lessor an affidavit of a responsible corporate
officer certifying that the property taxes so identified therein have been
reported and are current. The amount which Lessee shall be required to pay to
Lessor with respect to any obligation which is subject to indemnification
under this Section 11 shall be an amount sufficient to restore to the same
position after considering the effect of the receipt of such indemnification
on it United States federal income taxes and state and city income taxes or
franchise taxes based on net income, that it would have been in had such
indemnification not been required hereunder.
12. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS:
In case of failure of Lessee to comply with any provision of this Lease or
any Schedule, Lessor will have the right, but will not be obligated, to effect
such compliance in whole or in part, and all money spent by expenses of Lessor
will be paid by lessee forthwith and will bear interest at the daily equivalent
of eighteen percent (18%) per annum from the date said obligation was due.
Lessor's action in effecting such compliance will not be a waiver of Lessee's
default. All such money spent by and expenses of Lessor and any other obligation
assumed or incurred by Lessor in effecting such compliance will constitute
additional rent payable to Lessor with the next rent payment.
13. NOTICES:
All notices required or permitted to be given hereunder will be in writing
and will be deemed given and receive three (3) days after first deposit in the
United States mail if sent by registered or certified mail to the address of
Lessor or Lessee stated herein or in any Schedule or to such other place as
either party may in writing direct pursuant to the Section. Notice by hand
delivery shall be deemed given and receive upon delivery. Notice by overnight
courier shall be deemed given and received on the date scheduled for delivery.
14. FINANCIAL INFORMATION AND REPORTING:
(a) Lessee shall annually, within ninety (90) days after the close of
Lessee's first fiscal year, furnish to Lessor an audit report of financial
statements of Lessee (including a balance sheet as of the close of such year and
statements of income, changes in financial condition and shareholder's equity
for such year) prepared in accordance with generally accepted accounting
principles and certified by Lessee's independent public accountants. Lessee
shall also provide quarterly financial statements of Lessee similarly prepared
for each of the three quarters of each fiscal year, which shall be certified
(subject to normal year-end adjustments) by Lessee's chief financial officer and
furnished within forty-five (45) days following the end of the quarter.
(b) Lessee will furnish Lessor with any and all information regarding
Lessee's business, condition or operations, financial or otherwise, which Lessee
furnishes to any other creditor. This information shall be furnished to Lessor
at the same time it is furnished to such other creditor.
<PAGE>
(c) Lessee will immediately furnish Lessor with such further information
regarding Lessee's business, condition, property, assets or operations,
financial or otherwise, as Lessor may from time to time reasonably request, all
prepared in form and detail reasonably satisfactory to Lessor.
(d) Lessee will at all times maintain true and complete records and books
of account including, without limiting the generality of the foregoing,
appropriate reserves for possible losses and liabilities, all in accordance with
generally accepted accounting principles consistently applied.
(e) Lessee shall permit, and cause any subsidiary to permit,
representatives of Lessor to visit and inspect any of the properties of Lessee
or any Subsidiary, to examine its or their corporate or partnership books and
records, to make extracts or copies of such books and records, and to discuss
its or their affairs, finances and accounts with its or their officers or
partners, as applicable. The foregoing may be done at any time within regular
business hours.
(f) Lessee will promptly notify Lessor in writing of the commencement of
any litigation to which Lessee or any of its subsidiaries or affiliates may be a
party (except for litigation in which Lessee's (or the affiliate's) contingent
liability is fully covered by insurance) which, if decided adversely to Lessee
would adversely affect or impair the title of Lessor to the Equipment or which,
if decided adversely to Lessee would materially adversely affect the business
operations or financial condition of Lessee. In addition, Lessee will
immediately notify Lessor, in writing, of any judgment against Lessee if such
judgment would have the effect described in the preceding sentence.
15. ADDITIONAL DOCUMENTS
Lessee agrees to execute or obtain and deliver to Lessor at Lessor's
request such additional documents as Lessor may reasonably deem necessary to
protect Lessor's interest in the Equipment and this Lease including, without
limitation, financing statements, and Lessee hereby authorizes Lessor to execute
in Lessee's name as Lessee's attorney-in-fact any financing statements and
amendments thereto necessary or appropriate to protect Lessor's interest
hereunder. Lessee will pay, or reimburse Lessor on demand, for any filing fees
or expenses incurred by Lessor in connection with any such additional documents.
Lessee will obtain, at Lessee's sole expense, from each owner, landlord,
mortgage or other person having an encumbrance, lien or other interest on or in
the premises in which the Equipment is or will be located, all necessary
consents to the installation and use of the Equipment therein and the removal
thereof in accordance with the terms of the Lease, together with waivers of
claim with respect to the Equipment, and record the same when and where
necessary. Lessee hereby designates Lessor its attorney-in-fact and authorizes
and empowers Lessor to execute, endorse, and complete in Lessee's name and on
Lessee's behalf all instruments representing the proceeds or any security or
insurance for the Lease or Equipment thereunder, all financing statements and
other documents including Schedules and Riders and to insert thereon all dates,
amounts and serial numbers as necessary or appropriate to provide to Lessor the
benefits anticipated by any Schedule.
16. MISCELLANEOUS
The validity, construction and performance of this Lease and each Schedule
will in all respects be governed by the laws of the State of New York without
reference to conflict of law provisions. The Lease will not be binding on Lessor
until executed by an authorized officer of Lessor. LESSOR AND LESSEE WAIVE ALL
RIGHTS TO TRIAL BY JURY IIN ANY LITIGATION ARISING HEREFROM OR RELATED HERETO.
Any provision herein contained which may be illegal, unenforceable, or
inconsistent with applicable law or any governmental rule or regulation will be
deemed modified or altered to conform thereto, or otherwise omitted but shall in
no way impair
<PAGE>
the legality or enforceability of the remaining Lease provisions. Lessee
shall promptly pay (or reimburse, as Lessor may elect) all costs and expenses
including reasonable attorney's fees, including the allocated costs and fees
of Lessor's in-house legal counsel, which Lessor has or may hereafter incur
in connection with the negotiation and preparation of the Lease and any
amendment, modification, consent or waiver hereunder. If more than one party
executes this Lease as Lessee, each party shall be jointly and severally
bound by the terms and provision of this Lease. Any person who signs as an
officer or agent for a corporation, partnership or other entity warrants that
he has the authority from such corporation, partnership or other entity to
enter into this Lease on its behalf. Each Item of Equipment delivered
pursuant to this Lease to a subsidiary of Lessee or to any entity or person
designated by Lessee, whether at the request of Lessee or such subsidiary,
entity or person shall be Equipment for all purposes of this Lease, and
Lessee shall be and remain primarily liable for the obligations under this
lease with respect to such Equipment. Lessor shall not be obligated to
purchase and deliver any Item of Equipment unless Lessor has executed a
Schedule covering the Equipment.
17. ENTIRE AGREEMENT
This lease and any instrument referred to herein together with any
Schedule(s), Attachment(s) or Rider(s) signed by the parties or delivered in
connection herewith constitute the entire agreement of the parties with respect
to the subject matter hereof and will collectively constitute the Lease with
respect to an Item of Equipment and supersede all negotiations and prior written
or oral agreement of the parties with respect thereto. No agent or employee of
the Supplier is authorized to bind Lessor to the Lease, to waive or alter any
term or condition herein or add any provision hereto. No modification of the
Lease or waiver of any of its provisions or conditions will be valid unless in
writing and signed by Lessor and Lessee.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the date
set forth above.
Chase Equipment Leasing, Inc. (Lessor) PHONETIME TECHNOLOGIES, INC.
(Lessee)
By: /DANIEL J. QUINLISK 2ND VP BY: /DOUGLAS BARLEY CFO & SECRETARY/
------------------------------- -----------------------------------
(Signature) (Title) (Signature) (Title)
<PAGE>
AMENDMENT
TO
MASTER LEASE AGREEMENT DATED FEBRUARY 20, 1998 BETWEEN CHASE EQUIPMENT LEASING,
INC. ("LESSOR") AND PHONETIME TECHNOLOGIES, INC. (LESSEE)
The following modifications are hereby incorporated in and made a part of the
above referenced Master Lease Agreement effective as of the date first written
above. Capitalized terms used herein shall have the meaning attributable to them
in the Master Lease Agreement. In the event of any conflict between the terms of
the Master Lease Agreement and this Amendment, this Amendment shall govern.
Lessee and Lessor hereby agree as follows:
1. Section 9: DEFAULT: REMEDIES: Delete default (h) in its entirety.
In the 2nd paragraph at the 6th line down, after the phrase, "or without legal
process," insert "without trespass,"
CHASE EQUIPMENT LEASING, INC. PHONETIME TECHNOLOGIES, INC.
(LESSOR) (LESSEE)
BY: /Daniel J. Quinlisk/ BY: /Douglas Barley/
------------------------ ----------------------
TITLE: 2nd Vice President TITLE: CFO & Secretary
---------------------- -------------------
<PAGE>
SECOND AMENDMENT
TO
MASTER LEASE PURCHASE AGREEMENT DATED FEBRUARY 20, 1998
BETWEEN CHASE EQUIPMENT LEASING, INC. AS LESSOR
AND PHONETIME TECHNOLOGIES, INC. AS LESSEE
(HEREINAFTER, THE "LEASE")
This Second Amendment is incorporated by reference into the above referenced
Lease as if set forth at length and Lessee and Lessor confirm all the terms and
provisions thereof except as specifically set forth herein to the contrary.
Effective MAY 14, 1999 the above Lease and all Schedules and ancillary documents
thereunder are hereby amended as follows:
The term "Lessee" now means individually and collectively, PHONETIME
TECHNOLOGIES, INC., PT-COMMUNICATIONS, INC. and STAR TELECOMMUNICATIONS, INC.,
all New York corporations having their mailing address and chief place of
business at 30-50 Whitestone Expressway, Flushing, NY 11354. Each Lessee hereby
assumes, ratifies and confirms all Schedules now in existence or hereafter
entered into.
Except as expressly modified hereby, all terms and provisions of the Lease shall
remain in full force and effect. The parties hereto have caused their duly
authorized officers to execute this Second Amendment effective this 14th day of
May 1999.
CHASE EQUIPMENT LEASING, INC. PHONETIME TECHNOLOGIES, INC.
(LESSOR) (LESSEE)
By: /Daniel J. Quinlisk/ By: /Mary Casey/
------------------------ -------------------------
Title: Asst. VP Title: CEO
--------------------- ----------------------
PT-1 COMMUNICATIONS, INC.
(LESSEE)
By: /Mary Casey/
-------------------------
Title: CEO
----------------------
STAR TELECOMMUNICATIONS, INC.
(LESSEE)
By: /Mary Casey/
-------------------------
Title: President
----------------------
<PAGE>
EXHIBIT 10.63
AGREEMENT OF LEASE made as of this 8th day of April, 1997
between GOLDEN UNION, LLC, having its principal office c/o ALMA REALTY CO.,
28-18 31st Street, Astoria, New York 1 1102
(hereinafter referred to as "Landlord"), and
PHONETIME, INC, having its principal office at 30-60 Whitestone Expressway,
Flushing, New York 11354
(hereinafter referred to as "Tenant").
WITNESSETH Landlord and Tenant hereby covenant and agree as
follows
SPACE
1. Landlord is the fee owner of the Building and the parcel of real
property on which the Building is located (which includes the Building
Parking Area as defined below). Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord approximately 2,700 square feet on the ground
floor, approximately 15,600 square feet, which is the entire second floor and
approximately 9,000 square feet on the third floor substantially as shown on
the Rental Plan initialed by the parties and made part hereof as Exhibit I
("Demised Premises") in the building known as the Whitestone Executive Plaza,
30-50 Whitestone Expressway, Flushing, New York 11354, (hereinafter referred
to as the 'Building"). The Demised Premises currently contains approximately
27,300 rentable square feet which currently constitutes 43.86 percent of the
rentable area of the Building. In addition to occupying the Demised Premises,
Tenant, during the entire term of this Lease shall have the right to use in
common with others, at no additional expense to Tenant a) all common areas
and public portions of the Building, b) all remaining available space on the
roof of the Building, whereby Tenant shall install telecommunications
equipment; and c) space located in the parking lot or adjoining the Building,
whereby Tenant shall install/house an electrical generator
TERM
2. The term of this lease shall commence April 1, 1997 hereinafter referred
to as the "Term Commencement Date", and shall terminate on March 31, 2002,
hereinafter referred to as the "Expiration Date". The term of this Lease is
subject to extensions as provided for below
Should the Term Commencement Date be a date other than the first day of
the month, the Tenant shall pay a pro rata portion of the rent from such date
through and including the last day of such month. Should the Expiration Date
be a date other than the last day of the month, the Tenant shall pay a pro
rate portion of the base rent from the first day of such month through and
including such Expiration Date
In consideration of Tenant entering this Lease, Landlord hereby waives
(i) the payment of
<PAGE>
all rent for the second and third floor for the months of
April 1, thru June 30, 1997 and (ii) all rent for the 2,700 square feet of
the first floor until the later to occur of (a) June 30,1997 or (b) the
completion of all construction work to be performed b) Landlord on such first
floor space to Tenant's reasonable satisfaction.
RENT
3. The basic annual rental rate is as follows:
<TABLE>
<CAPTION>
LEASE YEAR ANNUAL RENT MONTHLY RENT
---------- ----------- ------------
<S> <C> <C>
1st $480,000.00 $40,000.00
2nd 499,200.00 41,600.00
3rd 519,168.00 43,264.00
4th 539,934.72 44,994,57
5th 561,532.11 46,794.34
</TABLE>
During the term of this Lease, the basic annual rental shall be as cited
above, payable in equal monthly installments as listed above, which Tenant
agrees to pay in lawful money of the U.S. which shall be legal tender in
payment of the debts and dues, public and private, at the time of payment, in
advance on the first day of each calendar month during the Demised Term at
the Office of the Landlord, except that Tenant shall pay the first monthly
installment on the signing of this Lease and, subject to the rent concessions
set forth in paragraph 2 above, each month thereafter from the "Term
Commencement Date". Tenant shall pay the rent as above and as hereinafter
provided, without any set off or deduction whatsoever, except as set forth
herein.
3.1 RENEWAL OPTION
Provided that Tenant is not then in default beyond any applicable cure
period of any of the covenants and conditions of this Lease, Landlord hereby
grants to Tenant an option to continue leasing the Leased Premises for One
(1) Five (5) Year Option Period commencing on the day following the last day
of the initial Lease Term. Tenant shall exercise this renewal option by
giving to Landlord, at least one hundred eighty (180) days prior to the
expiration of the respective preceding Lease Term, written notice from Tenant
stating that Tenant intends to exercise said renewal option. In the event
that Tenant fails to exercise its renewal option hereunder, or such renewal
notice from Tenant is not timely given, the renewal option provided for
herein shall immediately cease and be thereafter null and void.
During the renewal Lease Term, the terms and provisions of this Lease,
including those terms relating to additional rent, shall remain unchanged,
except that tins Article 3.1 shall be deleted. The Base Rent for such renewal
term shall be as follows:
<TABLE>
<CAPTION>
ANNUAL RENT MONTHLY RENT
----------- ------------
<S> <C> <C>
1st $583,993.40 $48,666.12
2nd 607,353.14 50,612.76
<PAGE>
3rd 631,647.25 52,637.27
4th 656,913.15 54,742.76
5th 683,189.68 56,932.47
</TABLE>
3.2 TERMINATION OF LEASE
Provided that Tenant is not in default beyond any applicable cure
period of any of the covenants and conditions of tins Lease, Landlord hereby
grants to Tenant the right to terminate this Lease at any time, but, only
during the Option Period of this Lease.
In order to exercise the termination option, Tenant must first notify
Landlord in writing of its option to terminate and the effective date of
termination. This notice must be given to Landlord at least three (3) months
prior to the effective date of termination.
An additional requirement in order for Tenant to exercise its
Termination Option shall be that Tenant must pay to Landlord an amount equal
to six (6) months base rent for the six (6) month period that follows the
effective date of Tenant's termination. (For example, if Tenant notifies
Landlord that July 1, 2004 shall be the effective date of termination, Tenant
must be current with its rent through June 30, 2004 and must pay to Landlord
the six (6) month Lease buy-out for months covering July 1, 2004 through
December 31, 2004 at $50,612.76/month * six (6) months = $303,676~56)
Once Landlord receives the six (6) months of the Lease buy-out, payable
ONLY by certified funds, and Tenant vacates the Premises and leaves same in
broom clean condition, Landlord and Tenant shall execute a Surrender of Lease
Agreement and thereafter Tenant shall not be liable for any of the remaining
Lease term or any obligations of this Lease.
USE
4. The Tenant shall use and occupy the Demised Premises only for General
Office use and for the installation and maintenance of a telecommunication
switching facility and related equipment and for no other purpose. Tenant
shall also have the tight to install and maintain, at Tenant's expense,
conduits both inside the Building and from the generator into the Building in
connection with the use of its equipment.
SERVICES
5. Landlord will provide heat and air conditioning to the Demised Premises
(subject to the conditions set forth in "Schedule C" attached hereto and made
part hereof) during business hours of 8:00 a.m. to 6:00 p.m. on weekdays and
from 9:00 a.m. to 6:00 p.m. on Saturdays; excluding all legal holidays.
Tenant will pay proportionate share of utility charges as it relates to the
Demised Premises as billed by Landlord. Tenant's proportionate share will be
43.86% of the Building's bill for the aforementioned charges, which
proportionate share is subject to change based upon any change in the square
footage of the Building or the Demised Premises. Landlord
<PAGE>
will manage the Building in accordance with building standards for similarly
situated first class office buildings.
Charges for heat, air conditioning and utilities for common areas shall
be prorated to the Tenant in accordance with the percentage of the building's
rentable space occupied by the Tenant. Landlord will furnish copies of all
such bills to Tenant promptly upon receipt thereof.
6. Landlord will provide cleaning services which will be performed between
the hours 5:00 p.m. and 6:00 a.m. on Monday through Friday, legal holidays
excepted, as set forth in Schedule "D", attached hereto and made part hereof.
7. Landlord will furnish elevator service to the Demised Premises during
business hours at no charge to Tenant.
8. Landlord will furnish adequate hot and cold tempered water for lavatory,
drinking and cleaning services at no charge to Tenant.
9. At any hours other than the aforementioned business hours at the Tenant'
s request and upon Landlord's agreement, not to be unreasonably withheld or
delayed, any services heretofore enumerated will be provided at the Tenant's
expense as overtime services, except that there will be no charge for
overtime service for moving in and out of the Demised Premises
Heat and Air Conditioning overtime charge is $25.00 per hour or any part
thereof. This charge will escalate annually at the rate of five percent
(5%/year).
Except for the months expressly payable by Tenant under this Article
entitled "Services" as well as amounts payable by Tenant under Article 17
below, Tenant shall not be responsible for the payment of any other operating
expenses incurred by the Landlord in connection with the Building or the
Property.
10. Any diminution services required by Federal, State or Municipal Law or
by virtue of any code or regulation or directive of any Environmental Agency
or Conservation Program of the Federal State, City, County or local
government body of any nature whatsoever, shall not entitle the Tenant to any
diminution, abatement or refund of rent or other charges due under the
provisions of this Lease except if it renders the Demised Premises unusable.
LANDLORD'S REPAIRS
11. (A) Landlord at its expense, will make all the repairs to and provide
the maintenance for the Demised Premises (excluding painting and decoration)
and for all public areas and facilities, and to the roof and structure to the
Building and to the building systems including but not limited to plumbing,
electrical, HVAC and mechanical servicing the Demised Premises and to the
windows of the building in a manner appropriate for a first class office
building in Flushing, New York, except such repairs and maintenance as may be
necessitated by the negligence, improper care or use of such premises and
facilities by Tenant, its agents, employees, licensees or invitees,
<PAGE>
which will be made by Landlord at Tenant's expense. Landlord represents that
all systems function, roof does not leak and there are no structural defects
in the building
(B) Notwithstanding the aforementioned, Landlord shall provide the
following to Tenant at no cost to Tenant: a) paint and plaster the Demised
Premises prior to Tenant's occupancy of same; b) Landlord shall clean and
repair the carpet in the Demised Premises as needed; c) Landlord shall
install a swipe system that can print details of users access at the front
entrance and at the entrance of Tenant's space on each of the three floors;
d) Landlord shall install two sets of glass doors for the second floor rear
elevators with a card access swipe lock; e) Landlord shall install a security
system comprising of cameras, intercoms and buzzers for all three floors; f)
Landlord shall pave the driveway; g) construct a loading dock; h) Landlord
shall build-out Tenant's space located on the first floor in accordance with
reasonable plans and specifications to be submitted by Tenant to Landlord;
and (i) Landlord shall remove the two offices and closets located on the
third floor space and install a secure double door in accordance with
reasonable plans and specifications provided by Tenant to Landlord, all of
which work shall be completed by Landlord lien free arid in a good and
workmanlike manner in accordance with all applicable laws and regulations
Landlord shall provide the following at Tenant's sole cost: a) security
bars/gates for the first (1") floor space; and b) Landlord to provide Tenant
with an adequate exterior location (mutually agreed upon by both parties)
whereby Tenant shall install/house a generator. No additional rent shall be
payable on account of such space
Landlord represents that the Building of which the Demised Premises
forms a part of shall be cable ready by the time Tenant occupies same.
PARKING FIELD
12. Tenant shall have the right at no additional cost to Tenant or its
employees or invitees, to self-park in 125 reserved parking spaces for the
reserved parking of automobiles of the Tenant, its employees and invitees, in
the parking area reserved for tenants of the Building (hereinafter sometimes
referred to as "Building Parking Area") subject to the Rules and Regulations
now or hereafter reasonably adopted by Landlord. Said parking spaces shall be
marked as Reserved PT1. Landlord shall have no obligation to police said
parking spaces, but shall be obligated to maintain the Building Parking Area.
DIRECTORY
13. Landlord will furnish in the lobby of the Building a directory which
will contain a Tenant List. Tenant shall have the right to install its
own directory in the lobby of each floor of the Building in which Tenant
occupies space but must first obtain Landlord's consent, which consent
shall not be unreasonably withheld or delayed.
TENANT'S REPAIRS
<PAGE>
14. Tenant shall take good care of the Demised Premises and, subject to the
provisions hereof, Landlord after fifteen (15) days notice to Tenant, except
in an emergency, at the expense of Tenant shall make as and when needed as a
result of misuse or neglect by Tenant or Tenant's servants, employees, agents
or licensees, all repairs in and about Demised Premises necessary to preserve
them in good order and condition. When caused by misuse or neglect by Tenant
or Tenant's servants, employees, agents, licensees or invitees, except as
provided in Article 36 hereof there shall be no allowance to Tenant for a
diminution of rental value and no liability on the part of Landlord by reason
of inconvenience, annoyance or injury to business arising from Landlord,
Tenant or others making any repairs, alterations, additions or improvements
in or to any portion of the Building or of Demised Premises, or in or to the
fixtures, appurtenances or equipment thereof, except for Landlord's own
negligence or that of its agents, contractors or employees. Landlord agrees
to use its best efforts to not interfere with Tenant's business. Landlord
shall not be obligated to do work at "premium hours."
FLOOR LOADING
15. The placement of any equipment which will impose an evenly distributed
floor load in excess of 50 pounds per square foot live load shall be done
only after written permission is received from the Landlord which shall not
be unreasonably withheld. Such permission will be granted only after adequate
proof is furnished by a professional engineer that such floor loading will
not endanger the structure
INSURANCE
16. Tenant, at its expense, shall maintain at all times during the term of
this Lease, public liability insurance in respect of the Demised Premises and
the conduct or operation of business therein, with Landlord as an additional
named insured, and with not less than $1,000,000 for property damage and not
less than $1,000,000 for bodily injury or death to any number of persons in
any one occurrence under a customary property insurance policy.
Tenant shall promptly deliver to Landlord a Certificate of Insurance for
such fully paid for policies prior to occupancy, and Tenant shall deliver to
Landlord such Certificate of Insurance for renewal policy at least thirty
(30) days before the expiration of any existing policy. All such policies
shall be issued by companies licensed to do business in the State of New York
and all such policies shall contain a provision whereby the same cannot be
canceled or materially modified unless Landlord is given at least twenty (20)
days prior written notice of such cancellation or material modification,
including, without limitation, any cancellation resulting from the
non-payment of premiums.
Landlord, at its expense, shall maintain at all tunes public liability
insurance coverage of $3,000,000.00 on the Building and also have the
Building insured for its full replacement value
REAL ESTATE TAX ESCALATION
17. (A) For purposes of this Article 17, the following definitions shall
apply:
<PAGE>
(a) The term "Tax Year" shall mean the City of New York fiscal year,
July 1 to June30 (or such other fiscal year as hereafter may be duly adopted
by the City of New York as the fiscal year for real estate tax purposes).
(b) The term "Escalation Year" shall mean any Tax Year during the term
of this Lease commencing with Tax Year commencing July 1,1998.
(c) The term "Base Tax Year' shall mean the July 1, 1997 to June30, 1998
Tax Year.
(d) The term 'Base Taxes" shall mean the Taxes computed by the taxing
jurisdiction for the Base Tax Year
(e) The term "Taxes" shall be deemed to include all real estate taxes
upon or with respect to the tax lot upon which the building is situated and
imposed by the City of New York, County of Queens, or any other taxing
authority, provided that the tax assessed by any other taxing authority is to
create a new or additional source of revenue through taxation of real estate
as such. If, due to any change in the method or taxation, or other tax shall
be substituted for, or levied against Landlord or any owner of the Budding or
the Real Property, in lieu of any real estate taxes or assessments upon or
with respect to the Real Property, such tax shall be included in the term
Taxes for the purposes of this Article, except taxes such as franchise,
income, or revenue tax on Landlord's rental income receipts.
Landlord hereby represents that there are no other improvements on the
tax lot other than the Building and Building Parking Area.
(B) If taxes payable in any Escalation Year shall be in such amount as shall
constitute an increase above or decrease below Base Taxes, Tenant shall pay
"Tenant's Proportionate Share", (i e currently 43 86%) of such increase or
Tenant shall receive its proportionate share of any decrease &Tenant's
Proportionate Share shall mean the fraction, the denominator of which is the
net rentable area of the Building (currently 62,260 square feet) and the
numerator of which is the Demised Premises area (currently 27,300 square
feet).
Increases in taxes, payable by reason of reductions in Landlord's tax
abatement shall be deemed tax increases subject to provision of this
Escalation Clause.
(1) INTENTIONALLY OMITTED.
(2) If the sum of the installments of Taxes payable by Landlord in any
Escalation Year exceeds the Landlord's Base Taxes for the Base Tax Year, the
annual rental reserved hereunder for such Escalation Year shall be increased
by Tenant's Proportionate Share of the amount of such excess and shall be
payable during such Escalation Year in monthly amounts equal to 1/12th of tie
amount of such increase (as reasonably estimated by Landlord if not finally
determinable on the first day of such Tax Year, subject to later adjustment).
<PAGE>
(3) If a final determination shall be rendered reducing the assessed
valuation of the land and/or Building for the Landlord's Base Tax Year, the
assessed valuation as so reduced shall, for all purposes be the assessed
valuation used in computing the Landlord's Base Taxes under section (d) of
subparagraph (A) above. If said determination is rendered subsequent to the
submission by Landlord to Tenant of any statements referred to in sub
paragraph (5) below, Landlord shall submit revised statements to Tenant based
upon the reduced assessed valuation and Tenant shall, within thirty (30) days
after submission of said revised statements, pay Landlord any additional rent
due by reason of such recomputations which computation shall be adequately
set forth in the said revised statements.
(4) If Landlord shall receive a refund of Taxes for any Tax Year with
respect to which Tenant paid additional rent by reason of an increase in
Taxes, Landlord shall set forth in the first statement thereafter submitted
to Tenant pursuant to subparagraph (5) below the amount of such refund and
the amount of the legal fees and other expenses incurred in connection with
the collection of the refund; and, provided that Tenant is not in arrears,
credit for Tenant's Proportionate Share of the refund maybe taken against the
installment or installments of rent next falling due equal to Tenants
Proportionate Share of the amount by which the refund exceeds said fees and
expenses. In no event shall such fees and expenses exceed the refund.
(5) Landlord shall from time to time during the term of this Lease,
after the respective amounts of taxes for the period in question become
ascertainable, submit to Tenant statements setting forth the computation of
any increase or decrease in rental. Landlord's failure to submit a statement
or statements pursuant to this sub-paragraph (5) or sub-paragraph (2) above
shall not constitute a waiver of any rent increases payable by Tenant under
this paragraph, provided however, that such additional rental shall only
become due and payable following Tenant's receipt of such statement from
Landlord. Landlord may submit its statements (or estimates thereof)
separately and at different times, but the payment of additional rent shall
nevertheless he made in the manner and within the time limits herein above
set forth with respect to each statement so submitted
(6) If the term of this Lease expires on a day other than the last day
of the Tax Year, rental increases pursuant to subparagraph (2) above shall be
pro-rated as of said expiration date.
(7) In the event of a taking, pursuant to the power of eminent domain,
of a portion of the Building under such circumstances as shall not result in
a termination of this Lease then from and after the date of such taking (i)
the Base Tax Amount shall be deemed reduced in proportion to the reduction in
the number of square feet of rentable space in the Building resulting from
such taking, and (ii) Tenant's Proportionate Share shall be adjusted so as to
be equal to a fraction of which the denominator is the reduced number of
square feet of rentable space in the building and the numerator is the number
of square feet of space leased to Tenant following such taking.
(8) The provisions of this paragraph shall survive the expiration or
termination of this Lease until a final adjustment has been made for the Tax
Year in which the Expiration Date occurs.
(9) The statements of the adjustment to be furnished by Landlord as
provided in
<PAGE>
subdivision (5) shall be based on data submitted by Landlord to a firm of
Certified Public Accountants (who may be the firm now or then currently
employed by Landlord for the audit of its accounts). In the accountant's
opinion based on the date submitted, such statements shall present fairly the
escalation adjustment for the periods represented thereby.
(10) Any delay or failure of Landlord, beyond January of any year, in
computing the billing for the rent adjustments herein above provided, shall
not constitute a waiver of or in any way impair the continuing obligation of
Tenant to pay such rent adjustments hereunder upon Tenant's receipt of such
statements
(11) Notwithstanding any expiration or termination of this Lease prior
to the Lease expiration dare (except in the case of a cancellation by mutual
agreement, termination upon casualty or condemnation or upon termination by
Tenant in accordance with Article 3.2) Tenant's obligation to pay rent as
adjusted under this Article shall continue and snail cover all periods up to
the Lease expiration date, and shall survive an expiration or termination of
this Lease until such amounts previously accruing have been paid.
18. If the first or final lease year during which escalations may occur
shall contain less than twelve (12) months, the additional rental under this
Lease shall be prorated.
MISCELLANEOUS
19. Landlord shall upon Tenant's request execute a Memorandum of Lease in
recordable form.
20. THIS SPACE IS INTENTIONALLY OMITTED.
21. THIS SPACE IS INTENTIONALLY OMITTED.
22. In the event the Tenant shall fail to pay Landlord the charges and
expenses as required by the terms of this Lease, the Landlord shall have the
same rights and remedies as those provided for in the Lease with regard to
the Tenant's failure to pay an installment of the annual base rent.
23. The term "Lease Interest Rate" shall mean interest at the rate of ten
(10%) percent per annum provided such rate does not violate the usury laws of
New York State. If such rate violates such usury laws, then it shall be 1/2%
below the maximum permissible rate.
FIXTURES & INSTALLATIONS
24. All appurtenances, fixtures, improvements, additions and other property
attached to or built into the Demised Premises, by Landlord at Landlord' s
expense, shall be and remain the property of Landlord, except that any such
fixtures, improvements, additions and other property installed at the expense
of Tenant may be removed by Tenant on the condition that Tenant shall repair
at its expense any damage to the Demised Premises or the Building resulting
from such
<PAGE>
removal. Notwithstanding anything herein to the contrary, all equipment
installed by Tenant shall remain the property of Tenant in all events. Except
as otherwise provided for herein, all the outside walls of the Demised
Premises including corridor walls and the outside entrance doors to the
Demised Premises, any balconies, terraces or roofs adjacent to the Demised
Premises and any space of the Demised Premises used for shafts, stacks,
pipes, conduit ducts or other building facilities, and the use thereof as
well as access thereto upon notice and accompanied by Tenant in and through
the Demised Premises for the purpose of operation, maintenance, decoration
and repair, are expressly reserved to Landlord, and Landlord does not convey
any rights to Tenant therein, provided the area demised to Tenant is not
reduced thereby or the use of the Demised Premises by Tenant is not
restricted or interfered with thereby. Notwithstanding the foregoing, Tenant
shall enjoy full right of access to the Demised Premises through the public
entrances, public corridors and public areas within the Building.
ALTERATIONS
25. (A) After completion of the Demised Premises, except items that can be
removed at the end of term the installation of winch do not require permits,
Tenant shall make no structural alterations, decorations, installations,
additions or improvements in or to the Demised Premises without Landlord's
prior written consent (which consent shall not be unreasonably withheld or
delayed) and then only by contractors or mechanics who do not interfere with
Landlord's work in the Building by labor disharmony
(B) All installations or work done by Tenant shall at all times comply
with:
(1) Laws rules, orders and regulations of governmental authorities
having jurisdiction thereof.
(2) Reasonable rules and regulations of the Landlord.
(3) Plans and specifications prepared by and at the expense of
Tenant shall he submitted to Landlord for its prior written approval which
approval will not be unreasonably withheld or delayed; no installations or
work shall be undertaken, started, or begun by Tenant, its agents, servants
or employees, until Landlord has approved such plans and specifications, and
no material amendments or additions to such plans and specifications shall be
made without prior written consent of Landlord, which will not be
unreasonably withheld or delayed. Tenant agrees That it will not either
directly or indirectly, use any contractors and/or labor and/or materials
that would or will create any labor disharmony with any contractors and/or
labor engaged by Landlord in the construction, maintenance and/or operation
of the Building or any part thereof.
(4) The indemnity contained in Article 34 (B) shall apply to any
claim arising out of the performance of said Tenant's work. Tenant shall
supply Landlord with workmen's compensation certificates for all persons
and/or contractors performing work for Tenant at the Demised Premises, a
public liability insurance policy in the sum of Two Million ($2,000,000 00)
Dollars for personal injuries and death claims and Five Hundred Thousand
($500,000.00) Dollars
<PAGE>
for property damage. In the event any mechanics lien shall be filed against
the Building by any of the Tenant's contractors, subcontractors or material
men, for work done on behalf of Tenant, Tenant shall discharge the lien by
bond, payment or otherwise, within thirty (30) days of filing thereof after
notice to Tenant and upon Tenant's failure to so discharge any lien, Landlord
may, at its option, remove the lien by bonding and charge the Tenant with the
cost thereof, together with reasonable attorneys' fees.
REQUIREMENTS OF LAW
26. (A) Tenant, at Tenant's sole cost and expense shall comply with all
applicable laws, orders and regulations of Federal, State, County and
Municipal authorities, and with all directions, pursuant to law, of all
public officers, which shall impose any duty upon Tenant with respect to the
special use or occupation of the Demised Premises by Tenant, except that
Tenant shall not be required to make any structural alterations in order so
to comply unless such alterations shall be necessitated or occasioned, by the
improper acts, omissions, or negligence of Tenant or any person claiming
through or under Tenant or any of their employees, contractors, agents,
invitees or licensees.
(B) Tenant shall not do anything, or permit anything to be done, in the
Demised Premises which shall (i) invalidate or be in conflict with the
provisions of any fire or other insurance policies covering the Building or
any property located therein, or (ii) result in a refusal by fire insurance
companies of good standing to insure the Building or any such property, or
(iii) cause any increase in the fire insurance rates applicable to the
Building or property located therein at the beginning of the Demised Term or
at any time thereafter Tenant at Tenant's expense, shall comply with all the
rules, orders, regulations or requirements of the New York Board of Fire
Underwriters and the New York Fire Insurance Rating organization or any
similar body. Landlord represents that the use of the Demised Premises as
general offices and the installation and maintenance of a telecommunication
switching facility and related equipment will not give rise to sub-paragraph
(i) through (iii) above being effective.
(C) In any action or proceeding wherein Landlord and Tenant are parties,
a schedule or "make-up" of rates applicable to the Building or property
located therein issued by the New York Fire Insurance Rating Organization or
other similar body fixing such fire insurance rates, shall be conclusive
evidence of the facts therein stated and of the several items and charges in
the fire insurance rates then applicable to the Building or property located
therein.
(D) Landlord shall be responsible for curing any notices of violation
not arising out of Tenant's acts issued by any governmental agency affecting
the Demised Premises and the Building and Property and otherwise complying
with all applicable laws and regulations affecting the Building and the
Property.
END OF TERM
27. Upon the expiration or other termination of the term of this Lease,
Tenant shall quit and
<PAGE>
surrender to Landlord the Demised Premises broom clean, in good order and
condition, ordinary wear and casualty excepted, and Tenant shall remove all
if its property and shall repair all damage to the Demised Premises or the
Building occasioned by such removal. Any property not removed from the
premises shall be deemed abandoned by Tenant and may be disposed of in any
manner deemed appropriate by the Landlord, unless otherwise agreed to in
writing (i.e extension of time to remove). Tenant expressly waives, for
itself and for any person claiming through or under Tenant, any rights which
Tenant or any such person may have under the provisions of Section 221 of the
Real Property Actions and Proceedings Law and of any successor law of like
import then in force in connection with any holdover or summary proceedings
which Landlord may institute to enforce the foregoing provisions of this
Article at the end of the term as expressed herein. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of the term of this lease. If the last day of the term of this
lease or any renewal hereof falls on a Sunday or a legal holiday this lease
shall expire on the business day immediately preceding.
QUIET ENJOYMENT
28. Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing arid performing all the terms,
covenants and conditions on Tenant's part to be observed and performed,
Tenant may peaceably and quietly enjoy the Demised Premises during the term
of this lease without hindrance or molestation by anyone claiming by or
through Landlord subject, nevertheless, to the terms, covenants and
conditions of this Lease including, but not limited to Article 37.
SIGNS
29. a) No sign or lettering of any nature may be put on or in any window,
nor on the exterior of the Building or elsewhere within the Demised Premises
such as shall be visible from the sweet, except with the written approval of
the Landlord.
b) Notwithstanding the aforementioned in paragraph 29 (a) above, upon
receiving Landlord's approval which approval shall not be unreasonably
withheld or delayed, Tenant shall have the exclusive right to erect/post one
(1) sign on each side of the Building, one (I) sign on the rear of the
Building. Tenant shall not erect/post any sign(s) on the front of the
Building. In addition hereto, Tenant shall have the exclusive right to
erect/post one (1) sign in the ground level of the Building. Tenant must
provide Landlord with a design/sketch of the sign(s) to be erected, which
said sign(s) Landlord shall permit Tenant to install upon Landlord's
approval, on the rear, and both sides of the exterior of the Building signs
identifying Tenant. Tenant will be solely responsible for the fees and costs
associated with erecting the sign on the exterior of the Building and for the
future removal of the sign, if any, if and when the Tenant ceases to occupy
the Demised Premises at the Building
c) Tenant's sign(s) shall not exceed the dimensions of the existing
signs on the Building, i. e. that of the Long Island Savings Bank, Omnipoint
Communications and Enterprise Rent-A-Car.
<PAGE>
d) Tenant, after complying with the provisions of 29 (a & b) above,
shall have the right to install an illuminated rotating sign on the roof of
the Building. The location of this rotating sign will be restricted to the
roof of the mechanical/elevator room located on the roof of the Building.
e) Tenant shall have the right to maintain all of such signs in their
approved locations during the term of this Lease and Landlord shall not grant
any rights to any other tenant of the Building or any third party which would
interfere with the visibility of any such sign
RULES AND REGULATIONS
30. Tenant and Tenant's agents, employees, invitees, and licensees shall
faithfully comply with the Rules and Regulations set forth on Schedule "E"
annexed hereto and made part hereof, and with such further reasonable Rules
and Regulations as Landlord at any time may make and communicate in writing
to Tenant which, in Landlord's reasonable judgement shall be necessary for
the reputation, safety, care or appearance of the Building and the land
allocated to it or the preservation of good order therein, or the operation
or maintenance of the Building, and such land, its equipment, or the more
useful occupancy or the comfort of the tenants or others in the Building.
Landlord shall not be liable to Tenant for the violation of any of said Rules
and Regulations, or the breach of any covenant or condition in any lease by
any other tenant in the Building, provided such are applied in an equal and
non-discriminatory manner. In the event of a conflict between this Lease and
the Rules and Regulations, terms of this Lease shall prevail. Landlord shall
not enforce any of the Rules and Regulations in a manner discriminatory to
Tenant.
ASSIGNMENT AND SUBLETTING
31. (A) Tenant, for itself, its successors and assigns, expressly covenants
that it shall not assign, mortgage or encumber this Agreement nor under let
the Demised Premises or any part thereof or license or permit the Demised
Premises or any part thereof to be used by others, without the prior written
consent of the Landlord, such consent not to be unreasonably withheld or
delayed in each instance and upon due compliance with the provisions of this
Article 31.
(B) The Tenant shall have no right to assign this Lease or sublet all or
any portion of the Demised Premises for a period of less than one (1) year,
unless assignment or subletting is to an affiliate entity.
(C) Prior to requesting the approval of Landlord to an assignment or
subletting as herinafter provided, Tenant shall offer to terminate this lease
as of the last day of calendar month which is at least sixty (60) days from
the date of Tenant's notice, during the term hereof, which day shall be prior
to the effective date of such proposed assignment or subletting and to vacate
and surrender the Demised Premises to Landlord. Simultaneously with said
offer to terminate this lease, Tenant shall advise the Landlord of all the
terms, covenants and conditions of the Tenant's proposed sublease or
assignment. A sublease of less than 40% of the Demised Area shall not
<PAGE>
give rise to Landlord's recapture rights herein. The provisions of this
subsection 30 (c) shall not be applicable during the initial term of this
Lease, provided (i) in the case of a sublease(s) in excess of forty (40%)
percent of the demised Area, fifty (50%) percent of all rent and additional
rent received by Tenant for sublease(s) in excess of the rent and additional
rent received herein, shall be paid to Landlord within fifteen (15) days of
receipt, as additional rent, and (ii) in the case of an assignment, fifty
(50%) percent of any consideration paid to Tenant for said assignment, except
that which is paid for Tenant's furniture, fixtures, equipment leasehold
improvements and goodwill shall be paid to Landlord within fifteen (15) days
of receipt. In either of the foregoing cases, Tenant shall first deduct its
expenses, including brokerage fees, before submitting to Landlord
(D) With respect to any proposed subtenant or assignee who is not an
"Affiliated Entity" (as defined below) Tenant shall submit to Landlord the
most recent fiscal year's financial statements of such entity as well as a
description of the business of the entity. Upon Tenant's due compliance with
the aforesaid provisions of this Article 31, Landlord agrees not to
unreasonably withhold its consent to an assignment or subletting) provided
that the Tenant is not then in default beyond any cure period under this
Lease and that the proposed assignee or undertenant is (a) financially
responsible (b) credit worthy and (c) of good reputation.
(E) No such assignment shall be effective until duplicate originals of
such Assignment and Assumption Agreement wherein Assignee agrees to perform
all the obligations of the Tenant under this lease in form appropriate for
recording and delivered to Landlord.
(F) No sub-letting of the Demised Premises shall release or discharge
the Tenant hereunder from any of its obligations to be performed under this
Lease, unless otherwise agreed upon by the parties herein. Any assignment of
the Lease approved by Landlord shall release Tenant from all obligations
arising from and after the effective date of such assignment.
(G) Notwithstanding anything contained in this Lease to the contrary)
Landlord shall not be obligated to entertain or consider any request by
Tenant to consent to any proposed assignment of this Lease or sublease unless
each request by Tenant is accompanied by non-refundable fee by certified
check not to exceed $1,500.00 to cover Landlord's reasonable legal fees and
related costs to process the proposed assignment. Neither Tenant's payment
nor Landlord's acceptance of the foregoing fee shall be construed to impose
any obligation whatsoever upon Landlord to consent to Tenant's request.
(H) Notwithstanding anything to the contrary herein, Tenant may (i)
assign this Lease to any successor by merger, purchase, reorganization,
acquisition or consolidation, subsidiary, parent or affiliate (hereinafter
called collectively "Affiliated Entity ) provided that a copy of said
assignment, in recordable form, is delivered to the Landlord containing full
assumption by the assignee of all the Tenant's obligations hereunder) or (ii)
sublease the Demised Premises or any portion thereof to an Affiliated Entity.
LANDLORD'S ACCESS TO PREMISES
<PAGE>
32. (A) Landlord or Landlord's agents shall have the right to enter and/or
pass through the Demised Premises at all times after reasonable notice and
during normal business hours and accompanied by Tenant; except in an
emergency) to examine the same, and to show them to mortgagees, ground
lessors, prospective purchasers or lessees or mortgagees of the Building, and
to make such repairs, improvements or additions as Landlord may deem
necessary and Landlord shall be allowed to make all material into and upon
and/or through said Demised Premises that may be required therefore, provided
thc same does not interfere with Tenant's business operation. During the six
months prior to the expiration of the term of the this lease, or any renewal
term, Landlord may exhibit, upon notice, the Demised Premises to prospective
tenants or purchasers at all reasonable hours and without unreasonably
interfering with Tenant's business. If Tenant shall not be personally present
to open and permit an entry into said premises at any time when for any
reason an entry therein shall be necessary in an emergency, Landlord or
Landlord's agents may enter the same by a master key without rendering
Landlord or such agent liable therefore (if during such entry Landlord or
Landlord's agents shall accord reasonable care to Tenant's property) Landlord
shall not have access to secure areas designated by Tenant, as such, except
in an emergency.
(B) Landlord shall also have the right at any time, to change the
arrangement and/or location of entrances or passageways, doors and doorways,
and corridors, elevators, stairs, toilets and other public parts of the
Building, provided, however, the Landlord shall make no change in the
arrangement and/or location of entrances or passageways or other public parts
of the Building which will adversely affect in any manner Tenant's use and
enjoyment of the Demised Premises as set forth in Article 4 herein and
provided the same does not diminish Tenant's usable area or obstruct Tenants
access to the Demised Premises, or visibility of the Demised Premises
(C) Provided the Landlord complies with the terms hereof, the exercise
by Landlord or its agents of any right reserved to Landlord in this Article
32 shall not constitute an actual or constructive eviction, in whole or in
part, or entitle Tenant to any abatement or diminution of rent, or relieve
Tenant from any of its obligations under this Lease, or impose any liability
upon Landlord, or its agents, or upon any lessor under any ground or
underlying lease, by reason of inconvenience or annoyance to Tenant, or
injury to or interruption of Tenant's business, or otherwise Landlord agrees
to use its best efforts to minimize interference with Tenant's business
SUBORDINATION
33. (A) Subject to the delivery of the Subordination and Non-Disturbance
Agreement described below, this Lease is subject and subordinate in all
respects to all ground leases and/or underlying leases and to all first
mortgages which may now be placed on or affect such leases and/or the real
property of which the Demised Premise forms a part, or any part of parts of
such real property and/or Landlord's interest or estate therein, and to each
advance made and/or hereafter to be made under any such mortgages, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
In confirmation of such subordination, Tenant shall execute and deliver
promptly any reasonable certificate that Landlord and or any mortgagee and/or
the lessor under any ground or underlying lease and/or their respective
successors in interest may reasonably request subject to the delivery of the
Subordination and Non-Disturbance Agreement referred to
<PAGE>
below. A Subordination Non-Disturbance Agreement in form and content
reasonably satisfactory to Tenant shall be delivered by all current and
future mortgagees and ground lessors, as a precondition to such subordination.
(B) Without limitation of any of the provisions of this Lease, in the
event that any mortgagee or its assigns shall succeed to the interest of
Landlord or of any successor Landlord and/ shall have become lessee under a
new ground or underlying lease then, this Lease shall nevertheless continue
in full force and effect and Tenant shall and does hereby agree to attorn to
sorb mortgagee or its assigns and recognize such mortgagee or its respective
assigns as its Landlord provided A Subordination Non-Disturbance Agreement
was received.
(C) Tenant shall, at any time and from time to time upon not less than
fifteen (15) days prior notice by Landlord, execute, acknowledge and deliver
to Landlord a statement in writing certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating the modification and
the dates to which the rent, additional rent and other charges have been paid
in advance, if any, and stating whether or not to the best knowledge of the
signer of such certificate that Landlord is in default in performance of any
covenant; agreement, term, provision or condition contained in this lease,
and if so, specifying each such default of which the signer may have
knowledge, it being intended that any such statement delivered pursuant
hereto may be relied upon by any mortgagee, prospective purchaser or lessee
of said real property or any interest or estate therein, any prospective
mortgagee thereof or any prospective assignee of any mortgage thereof.
PROPERTY LOSS, DAMAGE REIMBURSEMENT
34. (A) Landlord or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the Building, nor
for the loss of or damage to, any property of Tenant by theft or otherwise,
unless caused by negligence or misconduct of Landlord, its agents,
contractors, servants and/or employees. Landlord or its agents shall not be
liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electrical, electrical disturbance,
water, rain or snow or leaks from any part of the Building or from the pipes,
appliances or plumbing works or from the roof, street or subsurface or from
any other place or by dampness or by any other cause whatsoever nature,
unless caused by or due to the negligence or willful misconduct of Landlord,
its agents, servants, contractors or employees; nor shall Landlord or its
agents be liable for any such damage caused by other tenants or persons in
the Building or caused by operations of construction or any private, public
or quasi-public work. If at any time any windows of the Demised Premises are
temporarily closed or darkened incident to or for the purpose of repair,
replacement, maintenance and/or cleaning in, on or about the Building or any
part or parts thereof Landlord shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation
therefore nor abatement of rent nor shall the same release Tenant from
obligations hereunder nor constitute an eviction, provided Landlord uses its
best efforts to restore the same, unless caused by Landlord, agent employee
or contractor negligence. Tenant shall reimburse and compensate Landlord as
additional rent for all expenditures made by, or damages or fines sustained
or incurred by
<PAGE>
Landlord due to Tenant's non-performance or non compliance with or breach or
failure to observe any term, covenants or conditions of this Lease, on
Tenant's part to be kept, observed, performed or complied with, after notice
to Tenant with an opportunity to cure. Landlord shall reimburse and
compensate Tenant for all expenditures made by, or damages or fines sustained
or incurred by Tenant due to nonperformance of or non-compliance with or
breach or failure to observe any terms, covenants or conditions of this tease
on Landlord's part to be kept, observed, performed or complied with, after
notice to Landlord, with an opportunity to cure. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Building or of defects
therein or in any fixtures or equipment of which Tenant has knowledge,
provided no liability or obligation shall be imposed upon Tenant for failure
to so notify Landlord with respect to the Building and not the Demised
Premises.
TENANT'S INDEMNITY
(B) Except if caused by negligence or willful act of Landlord, its
agents, contractors or employees, Tenant shall indemnify and hold harmless
Landlord against and from any and all claims by or on behalf of any person or
persons, firm or firms, corporation or corporations arising from the omission
of any Tenant work or thing whatsoever done by Tenant (other than by Landlord
or its contractors or the agents or employees of either) in and on the
Demised Premise during the term of this Lease and during the period of time,
if any, prior to the specified commencement date that Tenant may have been
given access to the Demised Premises for the purpose of making installations,
and will further indemnify and save harmless Landlord against and from any
and all claims arising from any condition of the Demised Premises due to or
arising from any willful misconduct or breach of Lease or negligence of
Tenant or any of its agents, contractors servants, employees, licensees or
invitees and against and from all reasonable costs, expenses, and liabilities
incurred in connection with any such claim or claims or action or proceeding
brought thereon; and in case any action or proceeding be brought against
Landlord by reason of any such claim Tenant, upon notice from Landlord,
agrees that Tenant, at Tenant's expense will resist or defend such action or
proceeding and will employ counsel therefore
LANDLORD'S INDEMNITY
(C) Except if caused by negligence or willful act of Tenant, its agents,
contractors, employees or invitees, Landlord shall indemnify and save
harmless Tenant against and from any and all claims by or on behalf of any
person or persons, firm or firms, corporation or corporations arising from
the omission of any Landlord work or thing whatsoever done by Landlord (other
than by Tenant or its agents, contractors or employees of either) in and on
the Demised Premises, the common areas and the Building during the term of
this Lease and during the period of time, if any, prior to the specified
commencement date that Landlord may have had access to the Demised Premises
for the purpose making installations, and will further indemnify and save
harmless Tenant against and from any and all claims arising from any
condition of the Demised Premises due to or arising from any willful
misconduct or breach of Lease or negligence of Landlord or any of its agents,
contractors or employees and against and from all reasonable costs, expenses,
and liabilities incurred in connection with any such claim or claims or
action or proceeding brought thereon, and in case any action or proceeding be
brought against
<PAGE>
Tenant by reason of such claim, Landlord, upon nonce from Tenant, agrees that
Landlord, at Landlord's expense will resist or defend such action or
proceeding and will employ counsel therefore
DESTRUCTION - FIRE OR OTHER CASUALTY
35. If the Demised Premises shall be damaged by fire or other casualty
Landlord, at Landlords expense, shall promptly repair such damage but in all
events, within 120 days of fire or casualty to substantially the same
condition as existed prior to such casualty. However, Landlord shall have no
obligation to repair any damage to, or to replace, Tenant's personal property
or any other property or effect of Tenant except if such fire or casualty was
caused by the negligence or willful misconduct of Landlord or its agents,
contractors or employees. If the entire Demised Premises shall be rendered
untenantable by reason of any such damage, the rent and additional rent shall
abate for the period from the date of such damage to the date when such
damage shall have been repaired, and if only a part of the Demised Premises
shall be so rendered untenantable, the rent and additional rent shall abate
for such period in the proportion which the area of the part of the Demised
Premises so rendered untenantable bears to the total area of the Demised
Premises. However, if, prior to the date when all of such damage shall have
been repaired any part of the Demised Premises so damaged shall be rendered
tenantable and shall be used or occupied by Tenant or any person or persons
claiming through or under Tenant, the amount by which the rent and additional
rent shall abate shall be equitably apportioned for the period from the date
of any such use or occupancy to the date when all such damage shall have been
repaired. Tenant hereby expressly waives the provisions of Section 227 of the
New York Real Property Law and of any successor law of like import then in
force and Tenant agrees that the provision of this Article shall govern and
control in lieu thereof. Notwithstanding the foregoing provisions of this
Section, if, prior to or during the Demised Term (i) the Demised Premises
shall be totally damaged or rendered wholly untenantable by fire or other
casualty, and if Landlord shall decide not to restore the Demised Premises,
or (ii) the Building shall be so damaged by fire or other casualty that total
alteration, demolition or reconstruction of the Building shall be required,
such that restoration would take 120 days or more (whether or not the Demised
Premises shall be damaged or rendered untenantable), then, in any such
events, Landlord, at Landlord's option, may give to Tenant within forty-five
(45) days after such fire or other casualty, a thirty (30) days notice of
termination of this lease and, in the event such notice is given, this Lease
and the Demised Term shall come to an end and expire (whether or not said
term shall have commenced) upon the expiration of said thirty (30) days with
the same effect as if fire date of expiration of said thirty (30) days were
the Expiration Date, the rent and additional rent shall be apportioned and
any prepaid portion of rent and additional rent for any period after such
date shall be refunded by Landlord to Tenant
In the event that the Demised Premises shall be damaged to such an
extent that (i) Tenant reasonably determines that they cannot be restored
within ninety (90) days of the occurrence of such damage, or ii) if Landlord
does not restore the Demised Premise within said ninety (90) days to
substantially the same condition as existed prior to the casualty, Tenant
shall have the option of canceling this Lease, on notice to landlord, at the
end of such ninety (90) day period, or immediately under (i).
<PAGE>
SUBROGATION
36. Each of the parties hereto and their successors or assigns hereby waives
any and all rights of action against the other party hereto which may
hereafter arise for damage to the premises or to property therein resulting
from any fire or other casualty of the kind covered by standard fire
insurance policies with extended coverage, carried by such respective
parties. Both parties agree to obtain and maintain a waiver of subrogation
from their respective carrier and to carry insurance covering their
respective interests in the Building and the Demised Premises.
EMINENT DOMAIN
37. (A) In the event that the whole of the Demised Premises or access
thereto or a material part of the parking area is taken without substitution
of comparable parking space located within a three (3) block radius of the
Building, shall be lawfully condemned or taken in any manner for any public
or quasi-public use, this Lease and the term and estate hereby granted shall
forthwith cease and terminate as of the date of vesting of title. In the
event that a material part of the Demised Premises shall be so condemned or
taken, then effective as of the date of vesting of title, rent and additional
rent hereunder shall be abated in an amount thereof apportioned according to
the area of the Demised Premises so condemned or taken. In the event that a
material part of the Building (in excess of 40%) shall be so condemned or
taken, then (a) Landlord (whether or not the Demised Premises be affected)
may, at its option terminate this Lease and the term and estate hereby
granted as of the date of such vesting of title by notifying Tenant in
writing of such termination within forty-five (45) days following date on
which Landlord shall have received notice of vesting of title, and (b) if
such condemnation or taking shall be of a substantial part of the Demised
Premises (in excess of 25% of the Demised Premises) or a substantial part
(25% or more) of the means of access thereto or of the parking, Tenant shall
have the right, by delivery of notice in writing to Landlord within sixty
(60) days following the date on which Tenant shall have received notice of
vesting of title, to terminate this Lease and the term and estate hereby
granted as of the date of vesting of title or, (c) if neither Landlord nor
Tenant elects to terminate this Lease, as aforesaid, this Lease shall be and
remain unaffected by such condemnation or taking, except that the rent and
additional rent shall be abated to the extent, if any, herein above provided
in this Article 36. In the event that only a part of the Demised Premises
shall be so condemned or taken and this Lease and the term and estate hereby
granted are not terminated as hereinbefore provided, Landlord will, at its
expense, promptly (but lii all events in less than 120 days) restore the
remaining portion of the Demised Premises as nearly as practicable to the
same condition as it was in prior to such condemnation or taking. In the
event Landlord fails to restore the Demised Premises, Tenant shall have the
right, upon ten (10) days' notice to Landlord, to terminate this Lease.
(B) In the event of a termination in any of the cases herein above
provided, this lease and the term and estate granted shall expire as of the
date of such termination with the same effect as if that were the date
hereinbefore set forth for the expiration of the term of this Lease, and the
rent and additional rent hereunder shall be apportioned as of such date.
(C) In the event of any condemnation or taking herein above mentioned of
all or a part of the Building, Landlord shall be entitled to receive the
entire award made for the value of the
<PAGE>
estate vested by this Lease in Tenant, except that the Tenant may file a
claim for any taking of removable fixtures owned by Tenant and for moving
expenses incurred by Tenant.
WASTE
38. Tenant will not do or suffer any waste or damage, disfigurement or
injury to the Building or any part thereof.
CERTIFICATE OF OCCUPANCY
39. Tenant will not at any time use or occupy the Demised Premises in
violation of the Certificate of Occupancy (temporary or permanent) issued for
the Building or portion thereof of which the Demised Premises form a part. If
Tenant does not use the premises in accordance with the Certificate of
Occupancy, such shall constitute a default hereunder upon notice of default
and fifteen (15) days notice to cure. This Article is without prejudice to
Landlord's rights by reason of Tenant's default or as otherwise set forth
herein and without obligation on the part of the Landlord to recompense
Tenant. Nothing herein this Article 39 shall relieve Tenant of its obligation
to pay base rent and additional rent for the term hereof.
Landlord represents that the permitted use described in paragraph four
(4) does not violate the Certificate of Occupancy and will furnish a copy of
same to Tenant.
DEFAULT
40. (A) Upon the occurrence, at any time prior to or during the Demised Term
of any one or more of the following events (referred to as "Events of
Default"):
(i) If Tenant shall default in the payment when due of any installment
of rent or in the payment when due of any additional rent, and such default
shall continue for a period of fifteen (15) days after notice by Landlord to
Tenant of such default; or
(ii) If Tenant shall default in the observance or performance of any
term, covenant or condition of this Lease on Tenant's part to be observed or
performed (other than the covenants for the payment of rent and additional
rent) and Tenant shall fail to remedy such default within thirty (30) days
after notice by Landlord to Tenant of such default, or if such default is of
such a nature that it cannot be completely remedied within said period of
thirty (30) days and Tenant shall not commence curing such default within
said period of thirty (30) days, or shall not thereafter diligently prosecute
to completion all steps necessary to remedy such default; or
(iii) If Tenant shall file a voluntary petition in bankruptcy or
insolvency, or shall be adjudicated bankrupt or become insolvent or shall
file any petition seeking any reorganization, arrangement, composition,
readjustment, liquidation dissolution or similar relief under the present or
any future federal bankruptcy act or any other present or future applicable
federal, state or other statute of law, or shall make an assignment for the
benefit of creditors or shall seek or consent to, or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant or of all or any
part of Tenant's property; or
<PAGE>
(iv) If within seventy-five (75) days after the commencement of any
proceeding against Tenant, whether by the filing of a petition or otherwise
seeking any reorganization, arrangement composition, liquidation, dissolution
or further relief under the present or any future federal bankruptcy act or
any other present or future applicable federal, state or other statute or
law, such proceedings shall not have been dismissed, or if within
seventy-five (75) days after the appointment of any trustee, receiver or
liquidator of Tenant or of all or any part of Tenant's property, without the
consent or acquiescence of Tenant such appointment shall not have been
vacated or otherwise discharged, or if any execution or attachment shall be
issued against Tenant or any of Tenants property pursuant to which the
Demised Premises shall be taken or occupied or attempted to be taken or
occupied and not dismissed within seventy-five (75) days; or
(v) If the Demised Premises shall become vacant, deserted or abandoned
and Tenant ceases to pay rent; or
(vi) If Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as expressly
permitted under Article 31; then upon the occurrence, at any time prior to or
during the Demised Term, of any one or more of such Events of Default,
Landlord, at any time thereafter, at Landlord's option, may give to Tenant a
five (5) days notice of termination of this Lease after fifteen (15) days
notice to cure said default during which period there was no cure and, in the
event such notice is given, this Lease and the Demised Term shall come to an
end and expire (whether or not said term shall have commenced) upon the
expiration of said five (5) days with the same effect as if the date of
expiration of said five (5) days were the Expiration Date but Tenant shall
remain liable for damages as provided in Article 43
Any monies received by Landlord from or on behalf of Tenant during the
pendency of any proceeding of the types referred to in said subsections (iii)
and (iv) shall be deemed paid as compensation for the use and occupancy of
the Demised Premises and the acceptance of any such compensation by Landlord
shall not be deemed a waiver on the part of Landlord of any rights under this
Article 40
(B) In the event Landlord shall default in the performance of or
observance of any material term, covenant or condition of this lease on
Landlord's part to be performed and Landlord shall fail to remedy such
default within thirty (30) days after notice by Tenant to Landlord of such
default, or if such default is of such a nature that it cannot be completely
remedied within said period of thirty (30) days and landlord shall not
commence curing such default within such thirty (30) days, or shall not
thereafter diligently prosecute to completion the cure of such default then,
in such event, Tenant shall have the right to pursue whatever remedies it may
have under this Lease or all rights and remedies at law or in equity to which
Tenant may be entitled
41. (A) 1f Tenant shall default in the payment when due of any installment
of rent or in the payment when due for any additional rent and such default
shall continue for a period of fifteen (15) days after notice by Landlord to
Tenant of such default or if this Lease and the Demised Term shall expire and
come to an end as provided in this Article 41.
<PAGE>
i. Landlord and its agents and servants may immediately or at any time
after such Event of Default or after the date upon which the Lease and the
Demised Term shall expire and come to an end, re-enter the Demised Premises
or any part thereof, with notice, only by summary proceedings or by any other
applicable action or proceeding and after obtaining an order of a court of
competent jurisdiction authorizing same, and may repossess the Demised
Premises and dispossess Tenant and any other persons from the Demised
Premises and remove any and all of their property and effects from the
Demised Premises; and
ii. Landlord at Landlord's option, may relet the whole or any part or
parts of the Demised Premises from time to time either in the name of
Landlord or otherwise, to such tenant or tenants, for such term or terms
ending before, on or after the Expiration Date at such rental or rentals and
upon such other conditions, which may include concessions and free rent
periods, as Landlord, in its reasonable discretion, may determine. Landlord
shall have use commercially reasonable efforts to relet the Demised Premises
or any part thereof but shall in no event be liable for refusal or failure to
relet the Demised Premises or any part thereof, where such refusal was
commercially reasonable under the circumstances, or, in the event of any such
reletting, for refusal or failure to collect any rent due upon any such
reletting, and no such refusal or failure shall operate to relieve Tenant of
any liability under this Lease where such refusal was commercially reasonable
under the circumstances. Provided Landlord treats the Demised Premises, like
the balance of its available space inventory, Landlord at Landlord's option,
may make such repairs, replacements, alterations, additions, improvements,
decorations and other physical changes in and to the Demised Premises as
Landlord, in its reasonable discretion considers advisable or necessary in
connection with any such reletting without relieving Tenant of any liability
under this Lease or otherwise affecting any such liability. Landlord shall
use commercially reasonable efforts to relet the Demised Premises.
(B) Tenant, on its own behalf and on behalf of all persons claiming
through or under Tenant, including all creditors, does hereby waive any and
all rights which Tenant and all such persons might otherwise have under any
present or future law to redeem the Demises Premises, or to reenter or
repossess the Demised Premises, or to restore the operation of this Lease,
after (i) Tenant shall have been dispossessed by a judgement or by warrant of
any court or judge or (ii) and re-entry by Landlord, or (iii) any expiration
or termination of this Lease and the Demised Term, whether such dispossess,
re-entry, expiration or termination shall be by operation of law or pursuant
to the provisions of this Lease.
SPRINKLERS
42. Anything elsewhere in this Lease to the contrary notwithstanding, if the
New York Board of Fire Underwriters or New York Fire Insururance Exchange or
any bureau, department, official of the federal, state or city government
require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment
be made or supplied in an existing sprinkler system solely by reason of
Tenant's business, or if any such sprinkler system installations changes,
modifications, alterations, additional sprinkler heads or other such
equipment become necessary to prevent the imposition of a penalty or charge
against the full allowance for a sprinkler system in the fire insurance rate
set by any said Exchange or
<PAGE>
any fire insurance company, Tenant shall, at Tenant's expense, promptly make
such sprinkler system installations, change, modifications, alterations, and
supply additional sprinkler heads or other equipment as required.
DAMAGES
43. (A) If this Lease and the Demised Term shall expire and come to an end
as provided in Article 27 or by or under any summary proceeding, or any other
action or proceeding or if Landlord shall re-enter the Demised Premises as
provided in Article 40 by or under any summary proceedings or any other
action or proceeding then in any of said events:
i. Tenant shall pay to Landlord all rent, additional rent and other
charges payable under this Lease by Tenant to Landlord to the date upon which
this Lease and the Demised Term shall have expired and come to an end or to
the date of re-entry upon the Demised Premises by Landlord, as the case
maybe; and
ii. Tenant shall also be liable for, and shall pay to Landlord, as
liquidated and agreed final damages, any deficiency (referred to as
"Deficiency") which is the sum equal to the amount by which the rent and
additional rent reserved in the Lease for the period which otherwise would
have constituted the unexpired portion of the Demised Term (excluding any
unexercised extension option) exceeds the net amount, if any, of rents
collected under any re letting effected pursuant to the provision of Section
41(A) for any part of such period (first deducting from the rents collected
under any such re-letting all of Landlord's reasonable and actual expenses
regarding such re-letting including, but not limited to, all repossession
costs, brokerage commissions, reasonable legal expenses reasonable attorneys'
fees, alteration costs and other expenses of preparing the Demised Premises
for such re-letting). Any such Deficiency shall be paid in monthly
installments by Tenant on the days specified in this Lease for payment of
installments of rent. Landlord shall be entitled to recover from Tenant each
monthly Deficiency as the same shall arise, and no suit to collect the amount
of the Deficiency for any month shall prejudice Landlord's rights to collect
the Deficiency for any subsequent month by a similar proceeding.
(B) If the Demised Premises, or any part thereof, shall be relet
together with other space in the Building, the rent collected or reserved
under any such re-letting and the expenses of any such re-letting shall be
equitably apportioned for the purpose of this Article 43. Tenant shall in no
event be entitled to any rents collected or payable under any re-letting,
whether or not such rents shall exceed the rent reserved in this Lease.
Solely for the purposes of this Article, the term "rent" as used in Section
43 A shall mean the rent in effect immediately prior to the date upon which
this Lease and the Demised Term shall have expired and come to an end, or the
date of re-entry upon the Demised Premises by Landlord, as the case may be,
plus any additional rent payable pursuant to the provisions of Article 17A
(i) immediately preceding such event.
SUMS DUE LANDLORD
44. (A) If Tenant shall default after notice and the expiration of any
applicable cure period, in
<PAGE>
the performance of any covenants on Tenant's part to be performed in this
Lease contained, Landlord may immediately, or at any time thereafter, after
thirty (30) days notice, perform the same for the account of the Tenant,
except in an emergency. If Landlord at any time is compelled to pay or elects
to pay any sum of money, or do any act which will require the payment of any
sum of money, by reason of the failure of Tenant to comply with any provision
hereof, or, if Landlord is compelled to do or does incur any reasonable
expense including reasonable attorney's fees, instituting, prosecuting and/or
defending any action or proceeding instituted by reason of any default of
Tenant hereunder, the sum or sums so paid by Landlord with all interest and
reasonable costs, shall be deemed to be additional rent hereunder and shall
be due from Tenant to Landlord on the first day of the month following the
incurring of such respective expenses, or at Landlords option on the first
day of any subsequent month. Any sum of money (other than rent) accruing from
Tenant to Landlord pursuant to Schedule "C", whether prior to or after the
Term Commencement Date, may, at Landlord's option, be deemed additional rent,
and Landlord shall have the same remedies for Tenant's failure to pay any
item of additional rent when due as for Tenants failure to pay any
installment of rent when due. Tenant's obligations under this Article shall
survive the expiration or sooner termination of the Demised Term. In any case
in which the base rent or additional rent is not paid within fifteen (15)
days of notice that it was not paid upon the day when same is due, Tenant
shall pay a late charge equal to 5 cents for each dollar so due
(B) If Landlord shall default, after notice from Tenant and the
expiration of thirty (30) days, except in the event of an emergency, in which
case Tenant shall only be obligated to provide such notice as is reasonable
under the circumstances, in any of its obligations or covenants on Landlord's
part to be performed in this Lease contained, Tenant may immediately (but
shall be under no obligation to) perform the same for the account of
Landlord. If Tenant at any time is compelled to pay or elects to pay any
reasonable sum of money by reason of failure of Landlord to comply with any
provision hereof, or if Tenant is compelled to do or does incur any
reasonable expense including reasonable attorneys fees instituting,
prosecuting and/or defending any action or proceeding instituted by reason of
a default by Landlord hereunder, the sum or sums shall be due from Landlord
to Tenant on the first day of the month following the incurring of such
expenses and Tenant shall have the right to offset such amounts against the
next installments of basic rent due and payable hereunder. Landlord's
obligations hereunder shall survive the expiration or termination of this
Lease. Amounts not paid to Tenant hereunder within fifteen (15) days of the
due date shall bear interest at Lease Interest Rate.
NO WAIVER
45. (A) No act or thing done by Landlord or Landlord's agents during the
term hereby demised shall be deemed an acceptance or surrender of said
Demised Premises and no agreement to accept such surrender of the Demised
Premises shall be valid unless in writing signed by Landlord. No employee of
Landlord or of Landlord's agents shall have any power to accept the keys of
said Demised Premises prior to the termination of this Lease. The delivery of
keys to any employee of Landlord or of Landlord's agents shall not operate as
a termination of this Lease or a surrender of the Demised Premises. In the
event of Tenant at any time desiring to have Landlord under let the Demised
Premises for Tenant's account, Landlord or Landlord's agents are authorized
to receive
<PAGE>
said keys for such purposes without releasing Tenant from any liability for
loss of or damage to any of Tenants effects in connection with such under
letting, except if due to Landlord negligence. The failure of either party to
seek redress for violation of, or to insist upon the strict performance of,
any covenants or conditions of this Lease, or any of the Rules and
Regulations annexed hereto and made part hereof or hereafter reasonably
adopted by Landlord, shall not prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of
an original violation. The failure by Landlord to enforce any of the Rules
and Regulations annexed hereto and made part hereof, or hereafter reasonably
adopted, against Tenant and/or any other tenant in the Building shall not be
deemed a waiver of any such Rules and Regulations. No provision of this Lease
shall be deemed to have been waived by Landlord or Tenant, unless such waiver
be in writing signed by Landlord and Tenant. No payment by Tenant or receipt
by Landlord of a lesser amount than the monthly rent herein stipulated shall
be deemed to be other than on account of the earliest stipulated rent nor
shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other remedy in this
Lease provided.
(B) Landlord's failure to timely render a Landlord's Statement with
respect to any Escalation Year Per Article 18 shall not prejudice Landlord's
right to render a Landlord's Statement with respect to any Escalation Year,
provided such statement is rendered within twenty-four (24) months of the end
of the Escalation Year. The obligation of Landlord and Tenant under the
provisions of Article 18 with respect to any additional rent payable by
Tenant thereunder for any Escalation Year shall survive thc expiration or any
sooner termination of the Demised Term, for two (2) years after the term of
this Lease.
WAIVER OF TRIAL BY JURY
46. To the extent such waiver is permitted by law, Landlord and Tenant
hereby waive trial by jury in any action, proceeding or counterclaim brought
by Landlord or Tenant against the other on any matter whatsoever arising out
of or in any way connected with this Lease, the relationship of Landlord and
Tenant, the use or occupancy of the Demised Premises by Tenant or any person
claiming through or under Tenant, any claim of injury or damage, and any
emergency or other statutory remedy, except personal injury claim. The
provisions of the foregoing sentence shall survive the expiration or any
sooner termination of the Demised Term. If Landlord commences any summary
proceeding for nonpayment of rent, Tenant agrees not to interpose any
non-compulsory counterclaim of whatever nature or description in any such
proceeding. Nothing herein shall prohibit Tenant from bringing a separate
action against the Landlord.
BILLS AND NOTICES
47. Except as otherwise expressly provided in this Lease, any bills,
statements, notices, demands, requests or other communications given or
required to be given under this Lease shall
<PAGE>
be effective only if rendered or given in writing, sent by Registered or
Certified Mail (return receipt requested), addressed (A) to Tenants at
Tenant's address set forth in this Lease if mailed prior to Tenant's taking
possession of the Demised Premises, and to (B) Landlord at Landlord's address
set forth in this Lease, with a copy to (C) Mihos & Karabelas, Esqs., 2818
31St Street, Suite 202, Astoria, New York 11102 or (D) addressed to such
other address as either Landlord or Tenant may designate as its new address
for such purpose by notice given to the other in accordance with the
provisions of this Article. Any such bills, statements, notices, demands,
requests or other communications shall be deemed to have been rendered or
given on the date when it shall have been mailed as provided in this Article.
INABILITY TO PERFORM
45. (A) If by reason of strikes or other labor disputes, fire or other
casualty, accidents orders or regulations of any Federal, State, County or
municipal authority or any other cause beyond Landlord's reasonable control,
whether or not such other cause shall be similar in nature to those
hereinbefore enumerated, Landlord is unable to furnish or is delayed in
furnishing any utility or service required to be furnished by Landlord under
the provisions of this Lease or any collateral instrument, or is unable to
perform or make or is delayed in performing or making any installations,
decorations, repairs, alterations, additions or improvements, whether or not
required to be performed or made under this Lease or under any collateral
instrument, or is unable to fulfill or is delayed in fulfilling any of
Landlord's other obligations under this Lease, or any collateral instrument,
no such inability or delay shall constitute an actual or constructive
eviction, in whole or in part or entitle Tenant to any abatement or
diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord or its agents by reasons of the
inconvenience or annoyance to Tenant, or injury to, or interruption of
Tenant's business, or otherwise, but only for so long a. such force majeure
conditions exist provided, however that in the event such condition renders
the Demised Premises untenantable, Tenant shall be entitled to a rental
abatement for the period in which such condition exists. If Tenant is unable
to fulfill its obligations hereunder by reason of the conditions specified in
this Section 48A Tenant shall not be deemed to be in default hereunder by
reason thereof.
INTERRUPTION OF SERVICE
(B) Landlord reserves the right to stop the services of the air
conditioning, elevator, escalator, plumbing, electrical or other mechanical
systems or facilities in the Building when necessary by reason of accident or
emergency, or for repairs, alterations, replacements or improvement, which,
in the reasonable judgement of Landlord are necessary, until said repairs,
alterations, replacements or improvements shall have been completed, provided
Landlord (i) uses its best efforts to restore such services as quickly as
possible and (ii) perform such work at times and in a reasonable manner so as
to minimize interference with Tenant's business. The exercise of such rights
by Landlord shall not constitute an actual or constructive eviction, in whole
or in part, or entitle Tenant to any abatement or diminution of rent, or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord or its agents by reason of inconvenience or annoyance
to Tenant or injury to or interruption of Tenant's business or otherwise
except if due to the negligence of Landlord, its agents, contractors or
employees.
<PAGE>
Notwithstanding the aforementioned, if the interruption of services continues
for more than five (5) days, Tenant will receive a rent abatement for each
day services are interrupted. If the interruption of services continues for
more than fifteen (15) days, Tenant may cancel this Lease
CONDITIONS OF LANDLORD'S LIABILITY
(C) i. Tenant shall not be entitled to claim a constructive eviction
from the Demised Premises unless Tenant shall have First notified Landlord of
the condition or conditions giving rise thereto, and unless Landlord shall
have failed to remedy such condition within a reasonable time after receipt
of such notice,
ii. If Landlord shall be unable to give possession of the Demised
Premises on any date specified for the commencement of the term by reason of
the fact that the premises have not been sufficiently completed to make the
premises ready for occupancy, or for any other reason which is not the fault
of the Landlord, Landlord shall not be subject to any liability for the
failure to give possession on said date, nor shall such failure in any way
affect the validity of this Lease or the obligations of Tenant hereunder.
iii. Notwithstanding the aforementioned, in the event Landlord shall
be unable to give possession to the Demised Premises within one hundred
twenty (120) days after execution of this Lease, Tenant at its sole option
may terminate this Lease which time period shall be extended to the extent
any such delays are directly attributable to the Tenant.
TENANT'S TAKING POSSESSION
(D) i. Tenant by entering into occupancy of the premises shall be
conclusively deemed to have agreed that Landlord up to the time of such
occupancy had performed all of its obligations hereunder and that the
premises were in satisfactory condition as of the date of such occupancy,
except for latent defects, and punch list items of which Tenant shall have
given written notice to Landlord within ninety (90) days of occupancy
specifying such punch list items, all of which shall be promptly repaired by
Landlord
ii. If Tenant shall use or occupy all or any part of the Demised
Premises for the conduct of business prior to the Term Commencement Date,
such use or occupancy shall be deemed to be under all of the terms, covenants
and conditions of this Lease, excluding the covenant to pay rent and
additional rent except those charges payable pursuant to Schedule 'C' hereof,
for the period from the commencement of said use or occupancy to the Term
Commencement Date.
ENTIRE AGREEMENT
49. This Lease contains the entire agreement between the parties and all
negotiations and agreements are merged herein, except as set forth herein.
Neither party has made any representations or statements, or promises, upon
which the other has relied regarding any matter or thing relating to the
Building, (including the parking area) or the Demised Premises, or any other
matter whatsoever, except as is expressly set forth in this Lease, including
but without limiting the
<PAGE>
generality of the foregoing, any statement, representation or promise as to
the fitness of the Demised Premises for any particular use, the services to
be rendered to the Demised Premises or the prospective amount of any item of
additional rent. No oral statement, representation or promise whatsoever with
respect to the foregoing or any other matter made by Landlord or Tenant,
their agents or any broker, whether contained in an affidavit, information
circular, or otherwise shall be binding upon the Landlord or Tenant unless
licenses are or shall be acquired by Tenant by implication or otherwise or
unless expressly set forth in this Lease. This Lease may not be changed,
modified or discharged, in whole or in part, orally and no agreement shall be
effective to change, modify or discharge, in whole or in part, this Lease or
any obligation under this Lease, unless such agreement is set forth in a
written instrument executed by the party against whom enforcement of the
change, modification or discharge is sought. All references in this Lease to
the consent or approval of Landlord shall be deemed to mean the written
consent of Landlord, or the written approval of Landlord, as the case may be,
and no consent or approval of Landlord shall be effective for any purpose
unless such consent or approval is set forth in a written instrument executed
by Landlord. Landlord's consent or approval shall in no events, under any of
the provisions of the Lease be unreasonably withheld or denied.
VAULT, VAULT SPACE, AREA
50. No vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the Building is leased hereunder, anything
contained in or indicated on any sketch, blueprint or plan, or anything
contained elsewhere in this Lease to the contrary notwithstanding. Landlord
makes no representation as to the location of the property line of the
Building. All vaults and vault space and all such areas not within the
property line of the Building, which Tenant may be permitted to use and/or
occupy, is to be used and/or occupied under a revocable license, and if any
such license be revoked, or if the amount of such space or area be diminished
or required by any federal, state or municipal authority or public utility
Landlord shall not be subject to any liability nor shall Tenant be entitled
to any compensation or diminution or abatement of rent, nor shall such
revocation, diminution or requisition be deemed constructive or actual
eviction. Any tax, fee or charge of municipal authorities for such vault or
area shall be paid by Tenant, provided Tenant continues to use or occupy same.
SECURITY
51. Tenant shall deposit with Landlord the sum of $80,000.00 as security for
the faithful performance and observance by Tenant of the terms, provisions
and conditions of this Lease; it is agreed that in the event Tenant defaults
in respect of any of the terms, provisions and conditions of this Lease,
including, but not limited to the payment of rent and additional rent,
Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional
rent or any other sum as to which Tenant is in default or for any sum which
Landlord expended by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this lease, including but not limited to,
any damages Or deficiency in the re-letting of the premises, whether such
damages or deficiency accrued before
<PAGE>
or after summary proceedings or other re-entry by Landlord. In the event that
Tenant shall fully and faithfully comply with all the terms, provisions,
covenants and conditions of this Lease, the security with the interest
thereon, if any, to which the Tenant is entitled shall be returned to Tenant
promptly after the date fixed as the end of the Lease and after delivery of
entire possession of the Demised Premises to Landlord. In the event of a sale
of the land and building or leasing of the building, of which the Demised
Premises form a part, Landlord shall have the right to transfer the security
to the vendee or lessee and Landlord shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look
solely to the new landlord for the return of said security; and it is agreed
that the provisions hereof shall apply to every transfer or assignment made
of the security to a new landlord. Tenant further covenants that it will not
assign or encumber or attempt to assign or encumber the monies deposited
herein as security and that neither Landlord nor its successors or assigns
shall be bound by any such assignment, encumbrance, attempted assignment or
attempted encumbrance. For purposes of recording security, Tenant's I.D.
number is:_______________________.
In the event Tenant is not in default of this Lease beyond any
applicable cure period, Landlord shall apply $40,000.00 of the security
towards Tenant's rental payment due for the 13th month of this Lease.
Thereafter, if Tenant is not in default of this Lease beyond any applicable
cure period, Landlord shall apply the remaining $40,000.00 towards Tenant's
rental payment due for the 25th month of this Lease. Tenant shall pay
Landlord the difference in the rental payment due for the 13th and 25th
month(s) at the time such payments become due hereunder.
DEFINITIONS
52. The term "Landlord" as used in this Lease means only the owner, or the
mortgagee in possession, for the time being of the land and Building (or the
owner of a Lease of the Building or of the land and Building) of which the
Demised Premises form a part, so that in the event of any sale or sales of
said land and Building or of said Lease, or in the event of a lease of the
Building, or of the land and Building, the said Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing after the date of such sale or lease, and it shall be
deemed and construed as a covenant running with the land without further
agreement between the parties or their successors in interest, or between the
parties and the purchaser, at any sale, or the lessee of the Building, or of
the land and Building, that the purchaser or the lessee of the Building
assumes and agrees to carry out any and all covenants and obligations of
Landlord hereunder. The words "re-enter" and "re-entry", and "re-entered" as
used in this Lease are not restricted to their technical legal meanings. The
term "business days" as used in this Lease shall exclude Saturdays (except
such portion thereof as is covered by specific hours in Article 5 hereof),
Sundays and all days observed by State or Federal Government as legal
holidays (which shall not include days when the New York Stock Exchange is
open for trading). The terms 'person" and "persons" as used in this Lease
shall be deemed to include natural persons, firms corporations, associations
and any other private or public entities, whether any of the foregoing are
acting on their behalf or in a representative capacity
PARTNERSHIP TENANT
53. If Tenant is a partnership (or is comprised of two (2) or more persons,
individually and as
<PAGE>
co-partners of a partnership) or if Tenant's interest in this Lease shall be
assigned to a partnership (or to two (2) or more persons individually and as
co-partners of a partnership) pursuant to any provision herein, (any such
partnership and such persons are referred to in this section as "Partnership
Tenant"), the following provisions of this Section shall apply to such
Partnership Tenant; (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several and (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any modifications of this Lease which may hereafter be made and by
any notices, demands requests or other communications which may hereafter be
given by Partnership Tenant or by any of the parties comprising Partnership
Tenant, and (c) any bills, statements, notices, demands, requests and other
communications given or rendered to Partnership Tenant or to any of the
parties comprising Partnership Tenant shall be deemed given or rendered to
Partnership Tenant and to all parties comprising partnership tenant and shall
be binding upon Partnership Tenant and all such parties, add (d) if
Partnership Tenant shall admit new general partners, all of such new partners
shall, by their admission to Partnership Tenant be deemed to have assumed
performance of all of the terms covenants and conditions of this Lease on
Tenant's part to be observed and performed, and (e) Partnership Tenant shall
give prompt notice to Landlord of the admission of any such new partners.
SUCCESSORS, ASSIGNS, ETC
54. The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributees, executors, administrators, Successors, and except as
otherwise provided in this Lease their respective assigns
APPLICATION OF INSURANCE PROCEEDS, WAIVER OF SUBROGATION
55. In any case in which Tenant shall be obligated under any provisions of
this Lease to pay to Landlord any loss, cost, damage, liability or expense,
provided that the allowance of such offset does not invalidate or prejudice
the policy or policies, Landlord shall allow to Tenant as an offset against
the amount thereof the net proceeds of any insurance collected by Landlord
for or on account of such loss, cost, damage, liability or expense, provided
that the allowance of such offset does not invalidate or prejudice the policy
or policies under which such proceeds were payable.
BROKER
56. Both parties represent and warrant that Alma Realty Co was the sole
Broker brought about this transaction. Tenant agrees to indemnify and hold
Landlord harmless from any claims of any other Broker with respect to this
Lease. Landlord agrees to pay Broker pursuant to separate agreement and to
indemnify and hold Tenant harmless from any claims of any other broker with
respect to this Lease.
CAPTIONS
57. The captions are included only as a matter of convenience and for
reference, and in no
<PAGE>
way define, limit or describe the scope of this Lease nor the intent of any
provisions thereof.
NONLIABILITY OF LANDLORD
58. If Landlord or a successor in interest is an individual (which term as
used herein includes aggregates of individuals, such as joint ventures,
general or limited partnerships or associations) such individual shall be
under no personal liability with respect to any of the provisions of this
Lease, and if such individual hereto is in breach or in default with respect
to its obligations under this Lease, Tenant shall look solely to the equity
of such individual in the land and Building of which the Demised Premises
form a part for the satisfaction of Tenant's remedies and in no event shall
Tenant attempt to secure any personal judgement against any partner, employee
or agent of Landlord by reason of such default by Landlord
RIGHT OF FIRST REFUSAL
59. Provided that Tenant is not then in default of any of the covenants of
this Lease, Landlord hereby grants to Tenant during the term of this Lease,
the right of first refusal to lease from Landlord any space located in the
Building which becomes vacant and available. Tenant shall have fifteen (15)
days after notice from Landlord to accept the vacant space pursuant to
Landlord's terms and conditions which shall be no less favorable than the
terms being offered to a third party.
GOVERNING LAW
60. This Lease shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
JURISDICTION
61. For purposes of settling any and all disputes hereunder, each party
hereto submits itself to the personal jurisdiction of any court1 federal or
state, sitting in the State of New York, hereby waives all objections to the
venue of any such court and further hereby waives trial by jury.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed this
Lease as of the day and year first written above
Witness for Landlord: Golden Union, LLC
Landlord
<PAGE>
by: /George Mitropoulos/
- ------------------------- ----------------------------
Cooper Enterprises, Inc. Member
George Mitropoulos, President
Witness for Tenant PHONETIME, INC.
Tenant
by: /Sam Tawfik/
- ------------------------- ----------------------------
Sam Tawfik, CEO President
<PAGE>
Exhibit 10.64
OFFICE LEASE
AGREEMENT OF LEASE, MADE THE DAY OF OCTOBER, 1997, BETWEEN EVERGREEN AMERICA
CORPORATION, a New Jersey Corporation, (hereinafter called the "Landlord") and
PT-1 COMMUNICATIONS, INC., "Tenant", as hereinafter defined.
ARTICLE I -- CERTAIN TERMS
1.01 The following terms shall have the meanings set forth opposite
each of them, then provided that if "None" is set forth opposite any term, then
the provision of the Lease applicable to such term shall be considered deleted
and of no force and effect.
"TENANT" -
a corporation organized under the laws of the State of New
York, and authorized to do business in the State of New
Jersey having its principal office at 30-50 Whitestone
Expressway, Whitestone, New York 11354
"TERM" --
The period beginning on the Commencement Date and ending
at noon on the Expiration Date.
"COMMENCEMENT DATE" --
January 1, 1998 or sixty (60) days from the signing of
this Lease, whichever is sooner.
"EXPIRATION DATE" --
The last day of the calendar month in which occurs the end
of a ten (10) year period from the Commencement Date (if
the Commencement Date shall occur on a day other than the
first day of a calendar month such period shall run and be
measured from the first day of the calendar month
following the Commencement Date) or ending on an earlier
date on which this Lease may expire or be cancelled or
terminated pursuant to the terms of this Lease.
"FIXED RENT" --
Years One (1) through Five (5) One Hundred Forty Seven
Thousand Four Hundred Sixty Eight Dollars ($147,468.00)
per year, payable in monthly installments of $12,289.90,
(as adjusted in accordance with this Lease).
Years Six (6) through Ten (10) - One Hundred Sixty Four
Thousand One Hundred Sixty Dollars ($164,160.00) per year,
payable in monthly insta1lments of $l3,680.00, (as
adjusted in accordance with this Lease).
"BUILDING"
The Building located in the city of Jersey City, County of
Hudson and State of New Jersey and known as One Evertrust
Plaza, Jersey City, New Jersey.
"DEMISED PREMISES" -
That space on the twelfth (12th) floor of the Building
delineated on the floor plan attached hereto as Exhibit
A, the total area of which is the Tenant's Floor Space.
"TENANT'S FLOOR SPACE" --
The total number ot square feet of space in the Demised
Premises, which, for purposes of this Lease, the parties
agree and stipulate is 5,565 square feet.
"TOTAL BUILDING FLOOR SPACE" --
The total number of square feet of space in the
Building, which, for purposes of this Lease, the parties
agree and stipulate is 314,503 square feet.
"TENANT'S SHARE" --
1.77%; which is the percentage resulting from dividing
the Tenant's Floor Space by the Total Building Floor
Space.
"SECURITY DEPOSIT" --
$24,578.00 deposited pursuant to Article 15 hereof.
"PERMITTED USE" -
Telecommunication equipment site.
"A.C. CHARGE" --
$75.00 per hour for additional air conditioning pursuant
to Article 8.01 hereof.
<PAGE>
"H. CHARGE" --
$75.00 per hour additional heating pursuant to Article
8.01 hereof.
"BROKER" --
Dolan Realty, Inc. and Archie Schwartz company which
Tenant represents and warrants are the only Brokers with
whom it has dealt in this transaction, and based
thereupon Landlord agrees to pay a brokerage commission
in accordance with a separate agreement between Landlord
and Brokers.
"REGULAR BUSINESS HOURS" --
8:00 a.m. to 6:00 p.m. Monday through Friday; 8:30 a.m.
to l2:30 p.m. on Saturday, except where such days are
observed by the Federal or the New Jersey State
government as legal holidays, or as union holidays.
"NUMBER OF PARKING SPACES" -
Tenant shall have the right to lease three (3) exterior
parking spaces at additional rent of $125.00 for each
parking space, payable monthly. Notwithstanding the
foregoing, Landlord may increase the rent for exterior
parking spaces from time to time during the term of this
Lease after the first year of the Term of this Lease. In
the event Landlord builds a parking structure, Tenant's
parking shall be relocated to such parking structure and
Tenant shall have the right to lease up to the same
number of exterior parking spaces leased by Tenant prior
to the building of the parking structure at additional
rent as determined by Landlord for each parking space,
payable. monthly. Notwithstanding the foregoing,
Landlord may increase the rent for parking spaces in a
parking structure from time to time during the term of
this Lease after the first year of operation of the
parking structure.
1.02 Electrical energy consumed by Tenant in the Demised
Premises through wall and floor outlets, for lighting
and business equipment shall be purchased by Tenant as
provided in article 7.
ARTICLE 2 - DEMISED PREMISES
2.01 Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises for the Term, for the rents hereinafter reserved
and upon and subject to the conditions (including limitations, restrictions and
reservations) and covenants hereinafter provided. Each party hereto agrees to
observe and perform a11 of the conditions and covenants herein contained on its
part to be observed and performed.
2.02 The general location, substantially the size and layout of the
Demised Premises are outlined on Exhibit A, but Exhibit A shall not be deemed to
be a warranty, representation or agreement on the part of Landlord that the
Demised Premises and the Building will be exactly as indicated on exhibit A.
2.03 Nothing herein contained shall be construed as a grant or demise by
Landlord to Tenant of the roof or exterior walls of the Building, of the space
above and below the Demised Premises, of the parcel of land on which the Demised
Premises are located, and/or of any parking or other areas adjacent to the
Building.
ARTICLE 3 -- PREPARATION OF THE DEMISED PREMISES
3.01 Tenant shall cause to be substantially performed all the work in the
Demised Premises as set forth in Exhibit C annexed hereto and hereby made a part
hereof (the "Work"), upon the terms and conditions specified therein, at
Tenant's sole cost and expense.
All of Tenant's duties and obligations set forth in Article 12 (relating
to Tenant's duties and obligations in making Tenant's Changes) shall be
applicable to and binding upon Tenant with respect to any such work.
3.02 Prior to the commencement of Tenant's work, Tenant shall furnish to
Landlord final plans, specifications and drawings for approval by Landlord,
which approval shall not be unreasonably withheld or delayed, and upon
Landlord's written approval shall be attached hereto as Exhibit C.
3.03 Upon the signing of this Lease by all parties and the payment of the
Security Deposit, Tenant shall be allowed access to the Demised Premises to
perform Tenant's work to prepare the Demised Premises for Tenant's occupancy.
ARTICLE 4-- WHEN DEMISED PREMISES ARE DEEMED READY FOR OCCUPANCY
AND COMMENCEMENT DATE
4.01 On the Commencement Date or at such time as Tenant shall take actual
possession of the whole or part of the Demised Premises, whichever shall be
earlier, it shall be conclusively presumed that the same were as of the
Commencement Date or the date or dates of such taking of possession, in the
<PAGE>
condition in which Landlord was required to deliver the Demised Premises under
this Lease, unless within thirty (30) days after such date Tenant shall have
given Landlord notice specifying in which respects the Demised Premises were not
in satisfactory condition. However, nothing contained in this Section shall be
deemed to relieve Landlord from, and Landlord shall perform its obligation to
complete, with reasonable speed and diligence, such details of construction,
mechanical adjustment and decoration, if any, as Landlord shall be required to
perform under this Lease and as shall have been unperformed at the tine Tenant
took actual possession, but Tenant shall not be entitled to any rent abatement
on account of any such incomplete work.
4.02 Unless the Commencement Date is a date certain specified in Article 1
hereof, on the Commencement Date Landlord and Tenant shall execute and deliver
to each other duplicate originals of a Commencement Date Statement, which shall
specify the Commencement and Expiration Dates of the Term. Upon execution and
delivery, the Commencement Date Statement shall be deemed a part of this Lease.
4.03 If prior to the Commencement Date, Tenant shall enter the Demised
Premises to make any installations of its equipment, fixtures and furnishings,
Landlord shall have no liability or obligation for the care or preservation of
Tenant's property and Tenant shall not interfere with Landlord or Landlord's
contractors.
4.04 Landlord agrees to provide access by the telephone company during the
course of construction to permit Tenant's installation of telephones.
Notwithstanding the foregoing, the parties agree that the failure by the
telephone company to complete the telephone installation and to provide service
on the date that the Demised Premises are otherwise substantially complete (as
hereinabove defined) or occupied by Tenant1 shall not delay or defer the
determination of the Commencement Date and the obligation to pay rent
thereafter.
ARTICLE 5 -- RENT
5.01 Tenant shall pay to Landlord without notice or demand and without
abatement, deduction or set-off, in lawful money of the United States of
America, at the office of the Landlord as set forth in Article l hereof, or at
such other place as landlord may designate, the Fixed Rent reserved under this
Lease for each year of the Term, payable in equal monthly installments in
advance on the first day of each and every calendar month during the Term; and
additional rent consisting of all such other sums of money as shall become due
from and payable by Tenant to Landlord hereunder (for default in payment of
which Landlord shall have the same remedies as for a default in payment of Fixed
Rent).
5.02 Tenant shall pay the Fixed Rent and additional rent herein reserved
promptly as and when the same shall become due and payable under this Lease and
shall be liable to the Landlord for an administrative charge of 4% for rent paid
five (5) days subsequent to the date set in Article 5.01. If the Commencement
Date shall occur on a day other than the first day of a calendar month the Fixed
Rent and additional rent shall be prorated for the period from the Commencement
Date to the last day of the said calendar month and shall be due and payable on
the Commencement Date. Notwithstanding the provisions of the next preceding
sentence, Tenant shall pay on account toward the first full calendar month
installment(s) of Fixed Rent, on the execution of this Lease, the Rent
Prepayment specified in Article 1 hereof.
5.03 Whenever used in this Lease, the term (insofar as it pertains to this
Lease) "fixed rent", "minimum rent", "base rent", or "basic rent", or any such
term using the word "rental", "rents", or "rentals" in lieu of "rent", shall
mean Fixed Rent; and whenever used in this Lease, the term (insofar as it
pertains to this Lease) "rent", "rental", "Rent" or the plural of any of them,
shall mean Fixed Rent and additional rent.
ARTICLE 6 -- EXPENSE ESCALATION
6.01 Tenant shall pay to Landlord, as additional rent, Expense Escalation
in accordance with this Article:
A. Definitions: for the purpose of this Article, the following definitions
shall apply:
(i) The term "Expense Base Factor" shall mean the Expenses as hereinafter
defined for the calendar year 1998.
(ii) The term "comparative year" shall mean the full calendar year in
which the terra of this Lease commences, and each subsequent calendar year
during the Term of this Lease.
(iii) The term "Expenses shall mean the total of all the costs and
expenses incurred or borne by Landlord with respect to the operation and
maintenance of the Building and the services provided tenants therein
including, but not limited to, the costs and expenses incurred for and with
respect to: water rates and sewer rents; air-conditioning, ventilation and
heating; any and all electricity costs for common areas, exclusive of meeting
rooms and the cafeteria; maintenance of the Building's exterior surfaces;
elevator cabs, lobby maintenance and cleaning; protection and security; lobby
decoration and interior and exterior landscape maintenance; repairs,
replacements and improvements which are appropriate for the continued
operation of the Building as a first-class office Building; maintenance;
painting of non-tenant areas; insurance; supplies; employee salaries and
benefits; administrative expenses; and the annual fee for management of the
Building.
The term Expenses shall also include any increases in payments in lieu
of taxes or service charges that may be made by Landlord pursuant to the
Financial Agreement between Landlord and the city of Jersey City entered into
as part of the Fox Lance Tax Abatement granted to landlord for the Building
in
<PAGE>
excess of the payments made in lieu of taxes or service charges for the first
year of said tax abatement, provided that the said Fox Lance Act is amended
to allow the City of Jersey city to increase said payments in lieu of taxes
or service charges from time to time.
Provided, however, that the foregoing costs and expenses shall exclude or
have deducted from them, as the case may be and as shall be appropriate:
(a) leasing commissions and other leasing expenditures;
(b) expenditures of capital improvements except those which under
generally accepted real estate practice are expensed or regarded as deferred
expenses and except for capital expenditures required by law, in either of
which case the cost thereof shall be included in Expenses for the comparative
year in which the costs are incurred and subsequent comparative years1 on a
straight line basis, to the extent that such items are amortized over an
appropriate period, but not more than five years, with an interest factor
equal to the prime rate of Citibank at the time of Landlord's having incurred
said expenditure.
(c) amounts received by Landlord through proceeds of insurance to
the extent that the proceeds are compensation for expenses which would be or
were previously included in Expenses hereunder;
(d) cost of repairs or replacements incurred by reason of fire
or other casualty or eminent domain;
(e) advertising and promotional expenditures;
(f) legal fees for disputes with tenants and legal and auditing
fees, other than legal and auditing fees reasonably incurred in connection
with the maintenance and operation of the Building or in connection with the
preparation of statements required pursuant to additional rent or lease
escalation provisions; and
(g) costs incurred in performing work or furnishing services for
individual tenants (including Tenant) at such tenant's expense to the extent
that such work or service is in excess of any work or service Landlord at its
expense is obligated to furnish to Tenant;
If Landlord shall purchase any item of capital equipment or
make any capital expenditure designed to result in savings or reductions in
Expenses, then the costs for same shall be included in Expenses. The costs of
capital equipment or capital expenditures are so to be included in Expenses
for the comparative year in which the costs are incurred and subsequent
comparative years, on a straight line basis, to the extent that such items
are amortized over such period of time as reasonably can be estimated as the
time in which such savings or reductions in Expenses are expected to equal
Landlord's costs for such capital equipment or capital expenditure, with an
interest factor equal to the prime rate of Citibank at the time of Landlord's
having incurred said costs. If Landlord shall lease any such item of capital
equipment designed to result in savings or reductions in Expenses, then the
rentals and other costs paid pursuant to such leasing shall be included in
Expenses for the comparative year in which they were incurred.
6.02 Commencing with the second comparative year, if the Expenses
estimated in the manner provided in Article 6.03 for a comparative year shall
be greater than Expense Base Factor, Tenant shall pay to Landlord, additional
rent for such comparative year, in the manner hereinafter provided, an amount
equal to The Tenant's Share of the excess of the Expenses for such
comparative year over the Expense Base Factor (such amount being hereafter
called the "Expense Payment").
6.03 Commencing with the second comparative year, and each year
thereafter for the balance of the Lease term, thirty (30) days prior to the
commencement of each comparative year, Landlord will submit to Tenant
Landlord's Certified Public Accountant's estimate of projected expenses for
such year as provided in Article 6.04. The estimate shall also set forth the
total projected expenses, if any, due to Landlord from Tenant for such year
pursuant to Article 6.02. The rendition of such estimate shall constitute
prima facie proof of the accuracy thereof. If such statement shows an Expense
Payment due to Landlord with respect to the forthcoming comparative year,
one-twelfth of this amount shall be payable monthly as additional rent,
commencing with the first month of such comparative year.
No later than sixty (60) days after the conclusion of each
comparative year Landlord shall deliver to Tenant a final statement from its
Certified Public Accountant as provided in Article 6.04 setting forth the
actual Expenses for the preceding year. Within thirty (30) days of Tenant's
receipt of such statement Landlord and Tenant will make an appropriate cash
adjustment for any underestimate or overestimate of Landlord's Expenses for
the preceding comparative year (which underestimate shall result in
additional rent payable as herein provided).
6.04 The estimated and final statements of Expenses to be furnished
by Landlord as provided above shall be certified by Landlord, and shall be
prepared in reasonable detail for the Landlord by a Certified Public
Accountant (who may be the Certified Public Accountant now or then employed
by Landlord for the audit of its accounts); said Certified Public Accountant
may rely on Landlord's allocations and estimates wherever operating cost
allocations or estimates are needed for this Article. The statements thus
furnished to Tenant shall constitute a final determination as between
Landlord and Tenant of the Expenses for the period represented thereby,
unless Tenant within sixty (60) days after they are furnished shall give a
notice to Landlord that it disputes their accuracy or their appropriateness,
which notice shall specify the particular respects in which the statement is
accurate. Pending the resolution of such dispute, Tenant as herein provided
shall pay the additional rent to Landlord in accordance with the statements
furnished by Landlord After payment of said additional rent, Tenant
<PAGE>
shall have the right, during reasonable business hours and upon not less than
five (5) business days' prior written notice to Landlord, to have Tenant's
Certified Public Accountant examine Landlord's books and records with respect
to the foregoing, provided such examination is commenced within thirty (30)
days and concluded within sixty (60) days following the rendition of the
statement in question.
6.05 In any such dispute as to said statement Landlord and Tenant or
their respective Certified Public Accountants shall select a national "Big six"
accounting firm whose determination shall be conclusive in the resolution of the
dispute. If the dispute shall be determined in Tenant's favor, Landlord shall
forthwith pay to Tenant the amount of Tenant's overpayment resulting from
compliance with Landlord's statement and shall pay for tbe cost of the
accounting firm. In the event overpayment is greater than five (5%) percent,
Landlord shall pay interest to Tenant on such overpayment at the rate of 2% in
excess of the prime interest rate as set forth from time to time by Citibank,
N.A. from the date of payment of such amounts by Tenant until repayment of such
overpayment by Landlord. If the dispute shall be determined in Landlord's favor,
Tenant shall pay for the costs of the accounting firm.
6.06 Real Estate Tax Increase Payment.
(1) For each Tax Year (hereinafter defined) during the Term after the
ending December 31, 2001 Term, Tenant shall pay, as additional rent, the Tax
Payment (hereinafter defined) for such Tax Year.
(2) Tax Definitions:
(a) The term "Real Estate Taxes" shall mean the sum of the real estate
taxes and assessments and special assessments imposed upon the Building and the
plot of land on which the Building stands (the "Land") and any rights or
interests appurtenant thereto payable by Landlord during any Tax Year or any
service charges or other payments in lieu of taxes imposed by any tax abatement
granted the Landlord and payable by the Landlord. If at any time during the Term
the methods of taxation prevailing at the time of the commencement thereof shall
be altered so that in lieu of or as an addition to or as a substitute for the
whole or any part of the taxes, assessments, levies, impositions or charges now
levied, assessed or imposed, there shall be levied, assessed or imposed a tax,
assessment, levy, imposition or charge wholly or partially as a capital levy or
on the rents, licenses or other charges received with respect to the Term, the
Land or the Building, then all such taxes, assessments, levies, imposition or
charges payable shall be deemed to be included within the term "Real Estate
Taxes" for the purposes hereof. A copy of the tax bill of The City of Jersey
City or other taxing authority imposing Real Estate Taxes on the Land or the
Building shall be sufficient evidence of the amount of Real Estate Taxes.
Notwithstanding the fact that the aforesaid additional rent is measured by Real
Estate Taxes, such amount is additional rent and shall be paid by Tenant as
provided herein regardless of the fact that Tenant may be exempt, in whole or in
part, from the payment of any Real Estate Taxes by reason of Tenant's diplomatic
status or for any other reason whatsoever.
(b) The term "Base Tax Year" shall mean the tax year ending December
31, 2001.
(c) The term "Tax Year" shall mean each real estate fiscal tax
year of the City of Jersey City, New Jersey, following the Base Tax Year, any
portion of which occurs during the Term.
(d) The term "Tax Payment" shall mean Tenant's Share for the Demised
Premises of the amount by which the Real Estate Taxes payable for a Tax Year
exceed the Real Estate Taxes payable for the Base Tax Year, whether such
increase results from a higher tax rate or an increase in the assessed
valuation of the Land or the Building, or both or from any other cause or
reason whatsoever. Notwithstanding the foregoing, if there is an increase in
assessed valuation of the Building resulting from an addition or improvement
to the Building by another tenant, then any increase in Real Estate Taxes
attributable to such increase shall not be included in the computation of Tax
Payment hereunder.
(3) With respect to each Tax Year occurring in whole or in part
during the term of the Term, Tenant shall pay to Landlord the Tax Payment, in
equal monthly installments during the calendar year in which such Tax Year
commences in the manner hereinafter described. At any time during the
calendar year in which a Tax Year commences, Landlord may furnish to Tenant a
written estimate (a "Tax Estimate") of the Tax Payment for such Tax Year
("Estimated Tax Payment") Such estimate shall be determined by Landlord by
applying to the most recently announced assessed value of the Land and
Building (whether final or otherwise) such tax rate as Landlord shall
anticipate is the tax rate to be finally determined for such Tax Year, but
such rate shall in no event exceed by more than ten (10%) percent the then
current tax rate. Subject to adjustment as hereinafter provided, Tenant shall
pay to Landlord on the first day of each calendar month during such calendar
year, an amount equal to one-twelfth (1/12) of the Estimated Tax Payment for
the Tax Year commencing during such calendar year. If Landlord furnishes a
Tax Estimate for a Tax Year subsequent to the commencement of the calendar
year in which such Tax Year begins, then
(a) until the first day of the month following the month in which the
Tax Estimate is furnished to Tenant, Tenant shall continue to pay to Landlord
on the first day of each month an amount equal to the monthly sum payable by
Tenant to Landlord with respect to the next previous Tax Year.
(b) promptly after the Tax Estimate is furnished to Tenant, Landlord
shall give notice to Tenant stating whether the amount previously paid by
Tenant to Landlord during such calendar year was greater or less than the
installments of the Estimated Tax Payment to be paid during such calendar
year in accordance with the Tax Estimate, and
(i) if there, shall be a deficiency, Tenant shall pay the amount thereof
within ten (10) days after demand therefor, or
<PAGE>
(ii) if there shall have been an overpayment, Landlord
shall credit the amount thereof against the next monthly installments of the
Fixed Annual Rent payable under this lease, and
(c) on the first day of the month following the furnishing of Tenant
of the Tax Estimate, and monthly thereafter until the rendering to Tenant of
a Tax Statement (hereinafter defined) for such Tax Year, Tenant shall pay to
Landlord an amount equal to one twelfth (1/12) of the amount shown on such
Tax Estimate. Promptly after the amount of Real Estate Taxes is established
for a Tax Year,
(i) Landlord shall furnish to Tenant a written statement (a "Tax
Statement") setting forth the Tax Payment for such Tax Year, and stating
whether the sum of the installments previously paid by Tenant to Landlord
pursuant to the Tax Estimate or otherwise for such Tax Year was greater or
less than the sum of the installments of the Tax Payment to be paid for such
Tax Year in accordance with the Tax statement,
(ii) any deficiency or overpayment shall be disposed of in the manner
of a deficiency or overpayment in Estimated Tax Payment, and
(iii) on the first day of the month following the month in
which the Tax Statement is furnished to the Tenant, and monthly thereafter
until a new Tax Estimate or Tax Statement is furnished to Tenant, Tenant
shall pay to Landlord an amount equal to one-twelfth (1/12) of the Tax
Payment shown on the Tax Statement.
(4) The Tax Estimates and Tax Statements to be furnished by Landlord as
provided above shall be certified by Landlord and a statement thus furnished
to Tenant shall constitute a final determination aS between Landlord and
Tenant of the Estimated Tax Payment or Tax Payment, as the case may be, for
the period represented thereby, unless Tenant within sixty (60) days after
the statement is furnished shall qive a notice to Landlord that Tenant
disputes the reasonableness, accuracy or appropriateness of such statement,
which notice shall specify the particular respects in which the statement is
unreasonable, inaccurate or inappropriate. Pending the resolution of such
dispute, Tenant as herein provided shall make the Estimated Tax Payment or
Tax Payment, as the case may be, to landlord without prejudice to Tenant's
position. In any such dispute as to a Tax Estimate or Tax Statement, Landlord
and Tenant shall, within ten (10) days after the giving of Tenant's notice
disputing the reasonableness, accuracy or appropriateness of such statement,
select a national "Big Six" accounting firm whose determination shall he
conclusive in the resolution of the dispute. If the dispute shall be
determined in Tenant's favor, Landlord shall forthwith pay to Tenant the
amount of Tenant's overpayment resulting from compliance with Landlord's
statement and shall pay for the cost of the accounting firm. In the event
overpayment is greater than five (5%) percent, Landlord shall pay interest to
Tenant on such overpayment at the rate of 2% in excess of the prime interest
rate as set forth from time to time by Citibank, N.A from the date of payment
of such amounts by Tenant until repayment of such overpayment by Landlord. If
the dispute shall be determined in Landlord's favor, Tenant shall pay for the
costs of the accounting firm.
(5) Only Landlord shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation of the Land or the Building.
Should Landlord be successful in any such reduction proceedings and obtain a
rebate for any Tax Year for which Tenant has paid installments of the Tax
Payment, Landlord, after deducting the expenses incurred in obtaining such
rebate including, without limitation, attorneys' fees1 court, or other
administrative costs and disbursements, shall credit Tenant's Share of such
rebate against the next monthly installment of the Fixed Annual Rent payable
under this Lease or in the case of the last month of the Term, pay such
amount to Tenant. In the event that the assessed valuation which had been
utilized in computing the Real Estate Taxes payable for the Base Tax Year is
reduced (as a result of settlement, final determination of legal proceedings
or otherwise) then
(i) the Real Estate Taxes for the Base Tax Year shall be retroactively
adjusted to reflect such reduction;
(ii) the monthly installments of Additional Rent shall be adjusted
accordingly; and
(iii) all retroactive Additional Rent resulting from such
adjustment shall be payable by Tenant within twenty (20) days after the
rendition of a bill therefor.
6.07 In no event shall the Fixed Rent due under this Lease be reduced by
virtue of this Article.
6.08 If the Commencement Date of tbe term of this Lease is
not the first day of the first comparative year, then the additional rent due
hereunder for such first comparative year shall be a proportionate share of
said additional rent for the entire comparative year, said proportionate
share to be based upon the length of time that the Lease term shall have been
in existence during such first comparative year. Upon the date of any
expiration or termination of this Lease (except termination because of
Tenant's default) whether the same be the date hereinabove set forth for the
expiration of the Term or any prior or subsequent date, a proportionate share
of said additional rent for the comparative year during which such expiration
or termination occurs shall immediately become due and payable by Tenant to
Landlord, if it was not theretofore already billed and paid. The said
proportionate share shall be based upon the length of time that this lease
shall have been in existence during such comparative year.
6.09 Landlord's and Tenant's obligation to make the
adjustments referred to in this Article shall survive any expiration or
termination of this Lease.
6.10 Any delay or failure of Landlord in billing any expense escalation
hereinabove provided shall not constitute a waiver of or in any way impair
the continuing obligation or Tenant to pay such expense escalation hereunder.
<PAGE>
ARTICLE 7 -- ELECTRICAL ENERGY
7.01 Electrical energy consumed by Tenant in the Demised Premises
through wall and floor outlets, for lighting and business equipment shall be
separately metered and purchased by Tenant from the utility supplying
electricity to the Building. Tenant shall install as part of Tenant's Work on
the electrical meter for the Demised Premises. Landlord shall install at its own
cost the risers, to the Demised Premises sufficient to provide the Demised
Premises with electrical energy, in a safe and suitable manner, equal to 1000
amps. Electricity for heating, ventilating and air conditioning including for
any fan used in connection therewith during Regular Business Hours shall not be
included on such meter and shall be paid for by the Landlord. Tenant shall pay
to Landlord, as additional rent, the cost of electricity for heating,
ventilating and air conditioning including for any fan used in connection
therewith, in the Demised Premises during other than Regular Business Hours
pursuant to Article 8.01.
7.02 Landlord's and Tenant's obligations to make the adjustments and
payments referred to in this Article shall survive any expiration or termination
of this Lease.
7.03 Tenant covenants and agrees that at all times its use of
electrical current shall not exceed the capacity of existing feeders to the
Building or the risers, conduits, or wiring installation in the Building, and
Tenant shall not use any electrical equipment which, in Landlord's opinion
reasonably exercised, will overload such installations or interfere with the use
thereof by other tenants of the Building. In this connection, Landlord agrees,
at Tenant's cost and expense, as an item of extra material and work, to supply
and jnstall an electric meter or meters to measure Tenant's consumption of
electrical energy throughout the Demised Premises.
7.04 Tenant may purchase from Landlord, at Landlord's option, all
replacements of electric fluorescent tubing and shall pay Landlord for
installing same.
7.05 Tenant shall be provided access to Landlord's Emergency Stand-by
Electric Generator ("ESEG") sufficient to furnish 200 KW of electric energy from
the Building's ESEG. Tenant acknowledges that the Building's ESEG is intended to
supply electric energy to the Demised Premises only in the event of a temporary
failure of the supply of electric energy to the Building provided by the public
electric utility supplier. Tenant further acknowledges that Landlord does not
warranty, guarantee or has ever represented that the Building's ESEG will in
fact operate to supply the Demised Premises with temporary electric energy in
the event of temporary failure of the supply of electric energy to the Building
by the public electric utility supplier. Neither Landlord nor any agent or
employee of Landlord shall be liable to Tenant, its employees, agents,
contractors and licensees, and Tenant shall hold Landlord harmless from any
injury or damage to Tenant, including by way of example and not limitation,
damage, loss or injury to Tenant's computer hardware, software or computer
stored data or interruption of Tenant's business, in the event that the
Building's ESEG fails to provide temporary electric energy in the event of a
temporary emergency failure of the electric power supply to the Building and the
Demised Premises by the public electric utility supplier.
7.06 Landlord, at Tenant's cost and expense, shall cause the Demised
Premises to be connected with the Building's ESEG for use in the event of a
temporary emergency failure to the electric power supply to the Building and the
Demised Premises provided by the public utility supplier. In addition to the
connection charge, Tenant stall pay directly to the Landlord, as and for
Additional Rent under the Lease, $40,000.00 for access to the Building's ESEG,
payable $3,333.33 per month commencing on the Commencement Date and ending on
the Lease Expiration Date (the "ESEG Charge"). The ESEG Charge shall be subject
to adjustment upward from time to time if the cost of providing same is
increased to the Landlord with an appropriate adjustment to the monthly payment
of the ESEG Charge.
ARTICLE 8 -- VENTILATION AND AIR CONDITIONING
8.01 There shall be installed in the Demised Premises, as part of the
work provided for in Section 3.01, the Building heating, ventilating and
air-conditioning systems described and designed to substantially meet the
following performance specifications:
INSIDE CONDITION
Cooling Season 75 degrees F.D.B.
Heating Season 68 degrees F
OUTSIDE CONDITION
Cooling season 91 degrees F.D.B./76 degrees FWB
Heating Season 10 degrees F.
Landlord shall be under no liability to Tenant if such performance
specifications should not be able to be met prior to the said systems being
balanced. Landlord, at its expense, shall maintain and operate such systems and
shall furnish heat, ventilation and air-conditioning in the Demised Premises
through such systems, subject to Article 9.07, in compliance with such
performance specifications, during Regular Business Hours. If Tenant shall
require ventilating and air-conditioning service or heating service at any other
time other than Regular Business Hours (hereinafter called "after hours"),
Landlord shall furnish after hours ventilating and air-conditioning service or
heating service upon reasonable advance notice from Tenant, and Tenant shall pay
Landlord therefore, as additional rent upon rendition of a bill, the
<PAGE>
A.C. charge and the H. charge. The A.C. charge and the H. charge shall be
subject to adjustment upward from time to time.
8.02 Landlord will not be responsible for the failure of the
air-conditioning system to meet the performance specifications set forth above
if such failure results from the occupancy of the Demised Premises with more
than an average of one person for each 150 square feet of Tenant's Floor Space
or if Tenant installs and operates machines and appliances, the installed
electrical load of which when combined with the load of all lighting fixtures
exceeds 3.5 watts per square foot of Tenant's Floor Space in any one room or
other area. If due to use of the Demised Premises in a manner exceeding the
aforementioned occupancy and electrical load criteria, or due to rearrangement
of partitioning after the initial preparation of the Demised Premises,
interference with normal operation of the air-conditioning in the Demised
Premises results, necessitating changes in the air-conditioning system servicing
the Demised Premises, such changes shall be made by Landlord upon written notice
to Tenant at Tenant's sole cost and expense. Tenant agrees to lower and close
window coverings when necessary because of the sun's position whenever the said
air conditioning system is in operation, and Tenant agrees at all times to
cooperate fully with Landlord and to abide by all the regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of the said air-conditioning system. Landlord throughout the Term,
shall have free and unrestricted access to any and all air-conditioning
facilities in the Demised Premises.
8.03 Any damage caused to heating, air-conditioning, and ventilating
equipment, appliances or appurtenances thereto as a result of the negligence of,
or careless operation of, the same by Tenant or its agents, servants, employees,
licensees, invitees, or visitors, shall be repaired by Landlord, and the cost
and expenses thereof shall be paid by Tenant as additional rent, within ten (10)
days after being billed therefor.
ARTICLE 9 -- LANDLORD'S OTHER SERVICES
9.01 Landlord shall provide public elevator service to the floor(s) on
which the Demised Premises are situated during Regular Business Hours, and shall
have at least one elevator subject to call at all other times. The elevator(s),
or any or all of them, if more than one, may be operated by automatic control
and/or by manual control, as Landlord shall determine at any time or from time
to time. Landlord shall not be obligated to furnish an operator for any
automatic elevator and shall have no liability to Tenant for discontinuing the
service of any operator theretofore furnished. If Tenant shall require after
hours service of elevator(s) or of the loading area in the Building under such
circumstances as, in Landlord's reasonable judgment will require service or
attention by Landlord's personnel, Tenant shall pay Landlord, or demand, a
reasonable charge attributable to such service or attention.
9.02 Landlord shall not be required to clean the Demised Premises
provided that Tenant shall keep the Demised Premises in good order.
9.03 Landlord, at its expense, shall furnish adequate hot and cold
water at ordinary lavatory temperature to each floor of the Building for
drinking, lavatory, and cleaning purposes, together with soap, towels and toilet
tissue for each lavatory. If Tenant uses water for any other purpose Landlord,
at Tenant's expense, may install meters to measure Tenant's consumption of cold
water and/or hot water for such other purposes and/or steam, as the case may be.
Tenant shall pay for the quantities of cold water and hot water shown on such
bills therefor. In connection with permitted kitchen use, the amount of hot
water demand shall not exceed the excess Building design capacity.
9.04 Landlord, at its own expense, and at Tenant's request, shall
insert initial listings on the Building Directory of the names of Tenant, and
any affiliate, and the names of any of their officers and employees, provided
that the names so listed shall not take up more than Tenant's proportionate
share of the space on the Building Directory. All Building Directory changes
made at Tenant's request after the Tenant's initial listings have been placed on
the Building Directory shall be made by Landlord at the expense of Tenant, and
Tenant agrees to promptly pay to Landlord as additional rent the cost of such
changes within ten (10) days after Landlord has submitted an invoice therefor.
9.05 With respect to parking of vehicles (if parking is provided under
Article 1 hereof):
A. Landlord represents that throughout the Term there will be a paved,
illuminated parking area for the Building with the number of Parking Spaces
specified in Article 1. If Landlord so elects, Tenant shall require its
personnel and visitors to park their vehicles only in Parking spaces designated
by Landlord for Tenant's use for its personnel and visitors on a "first come,
first served" basis. Landlord reserves the right at all times to redesignate
such Parking spaces. Tenant, its personnel and visitors shall not at any time
park any trucks or delivery vehicles in any of the parking areas.
B. All Parking Spaces and any other parking areas used by Tenant, its
personnel and visitors will be at their own risk, and Landlord shall not be
liable for any injury to person or property, or for loss or damage to any
automobile or its contents, resulting from theft, collision, vandalism or any
other cause whatsoever.
C. Tenant shall agree to all requests by Landlord that Tenant and its
employees and visitors remove their vehicles from the Parking Spaces to another
parking area provided by Landlord at reasonable periods for purposes of cleaning
and maintenance of such spaces or as required for purposes of snow removal,
provided that Landlord will perform such cleaning, maintenance and snow removal
and make such Parking Spaces available to Tenant and its employees and visitors
as promptly as possible.
9.06 Landlord shall keep and maintain the public areas and the public
facilities of the Building and the grounds clean and in good order, and the
sidewalks and parking areas adjoining the Building shall be kept free of
accumulation of snow and ice (except any overnight parking area) or unlawful
obstruction.
<PAGE>
9.07 Landlord reserves the right, without any liability to Tenant;
except as otherwise expressly provided in this Lease, and without being in
breach of any covenant of this Lease, to stop, interrupt or suspend service of
any of the heating, ventilating, air conditioning, electric, sanitary, elevator
or other Building systems serving the Demised Premises, or the rendition of any
other services required of Landlord under this Lease, whenever and for so long
as may be necessary, by reason of accidents, emergencies, the making of repairs
or changes which Landlord is required by this Lease or by law to make or in good
faith deems advisable, or by reason of unavoidable delays. In each instance
Landlord shall exercise reasonable diligence to eliminate the cause of stoppage
and to effect restoration of service and shall give Tenant reasonable notice,
when practicable, of the commencement and anticipated duration of such stoppage,
and if any work is required to be performed in or about the Demised Premises for
such purpose, the provision of Section 14.03 shall apply. Tenant shall not be
entitled to any diminution or abatement of rent or other compensation nor shall
this Lease or any of the obligations of Tenant be affected or reduced by reason
of the interruption, stoppage or suspension of any of the Building systems or
services arising out of the causes set forth in this Section.
ARTICLE 10 -- USE
10.01 The "Permitted Use" of the Demised Premises for the purposes
specified in Article 1 hereof shall not in any event be deemed
to include, and Tenant shall not use, or permit the use of,
the Demised Premises or any part thereof for:
(a) sale of, or traffic in, any spirituous liquors, wines, ale or beer kept in
the Demised Premises;
(b) sale at retail of any other products or materials kept in Demised Premises,
by vending machines or otherwise, demonstrations to the public, except as may be
specifically agreed to by Landlord in writing;
(c) manufacturing, printing or electronic data processing, except for the
operation of normal business office reproducing and printing equipment, business
machines and electronic data processing equipment incidental to the conduct of
Tenant's business and for tenant's own requirements at the Demised Premises,
provided that such use shall not exceed that portion of the mechanical or
electrical capabilities of the building equipment allocable to the Demised
Premises;
(d) the rendition of medical, dental or other diagnostic or therapeutic services
(e) the conduct of a public auction of any kind;
(f) the conduct of a banking, trust company, savings bank, safe deposit, savings
and loan association or loan company business;
(g) the issuance and sale of traveler's checks, foreign drafts, letters of
credit, foreign exchange or domestic money orders (except as incidentally
required in conduct of Tenant's normal business activity);
(h) the receipt of money for transmission (except as is incidentally required in
conduct of Tenant's normal business activity); or
(i) a restaurant, bar, or the sale of confectionery, tobacco, newspapers,
magazines, soda, beverages, sandwiches, ice cream, baked goods or similar items,
or the preparation, dispensing or consumption of food and beverages in any
manner whatsoever.
10.02 Tenant shall not suffer or permit the Demised Premises or any part thereof
to be used in any manner, or anything to be done therein, or suffer or permit
anything to be brought into or kept therein, which would in any way (i) violate
any of the provisions of any grant, least or mortgage to which this lease is
subordinate, (ii) violate any laws or requirements of public authorities, (iii)
make void or voidable any fire or liability insurance policy then in force with
respect to the Building (iv) make unobtainable from reputable insurance
companies authorized to do business in New Jersey at standard rates any fire
insurance with extended coverage, or liability, elevator or boiler or other
insurance required to be furnished by Landlord under the terms of any tease or
mortgage to which this lease is subordinate, (v) cause or in Landlord's opinion
be likely to cause physical damage to the building or any part thereof, (vi)
constitute a public or private nuisance, (vii) impair, in the reasonable opinion
of the Landlord, the appearance, character or reputation of the Building, (viii)
discharge objectionable fumes, vapors or odors into the Building air
conditioning system or into Building flues or vents not designed to receive them
or otherwise in such a manner as say unreasonably offend other occupants (ix)
impair or interfere with any of the Building services or tie proper and economic
heating, cleaning, air conditioning or other servicing of the Building or the
Demised Premises or impair or interfere with or tend to impair or interfere with
the use of any of the other areas of the Building by, or occasion annoyance or
inconvenience to, Landlord or any of the other tenants or occupants of the
Building, or (x) cause Tenant to default in any of its other obligations under
this Lease. The provisions of this section, and the application thereof, shall
not be deemed to be limited in any way to or by the provisions or any of the
following sections of this Article or any of the Rules and Regulations referred
to in Article 20 or exhibit attached hereto, except as may therein be expressly
otherwise provided
10.03 If any governmental license or permit, other than a certificate of
Occupancy for the Building, shall be required for the proper and lawful conduct
of Tenant's business in the Demised Premises, or any part thereof, and it
failure to secure such license or permit would in any way affect Landlord, then
Tenant, at its expense, shall duly procure and thereafter maintain such license
or permit, but in no event shall failure to procure and maintain same by Tenant
affect Tenant's obligations hereunder. Tenant shall not at my time use or
occupy, or suffer or permit anyone to use or occupy the Demised Premises, or do
or permit anything to be done in the Demised Premises, in violation of the
certificate of Occupancy for the Demised Premises or for the Building.
<PAGE>
10.04 Tenant shall not place a load upon any floor of the Demised Premises
exceeding the floor load per square foot which such floor was designed to carry
and which is allowed by certificate, rule, regulation, permit or law. Landlord
reserves the right to prescribe the weight and position of all safes and vault;
which must be placed by Tenant, at Tenant's expense. Business machines and
mechanical equipment shall be positioned and maintained by Tenant, at Tenant's
expense, in such manner as shall be sufficient in Landlord's judgment to absorb
and prevent vibration, noise and annoyance.
ARTICLE 11 - ACCESS CHANGES IN
BUILDING FACILITIES, NAME
11.01 All walls, windows and doors bounding the Demised Premises (including
exterior Building walls, core corridor walls and doors and any core corridor
entrance, except the inside surfaces thereof, any terraces or roofs adjacent to
the Demised Premises, and space in or adjacent to the Demised Premises used for
shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities,
sinks or other Building facilities, and the use thereof, as well as access
thereto through the Demised premises for the purposes of operating, maintenance,
decoration and repair, are reserved to Landlord.
11.02 Tenant shall permit Landlord to install, use and maintain pipes, ducts and
conduits with in or through the Demised Premises, or through the walls, columns
and ceiling therein, provided that the installation work is performed at such
times and by such methods as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises, or damage the appearance thereof, reduce
the Tenant's Floor space by more than two (2%) percent (without an appropriate
adjustment in rent) or materially affect Tenant's layout. Where access doors are
required for mechanical trades in or adjacent to the Demised Premises, Landlord
shall furnish and install such access doors at its expense, and confine their
location wherever practical to closets, coat rooms, toilet rooms, corridors, and
kitchen or pantry rooms. Landlord and Tenant shall cooperate with each other in
the location of Landlord's and Tenant's facilities requiring such access doors.
11.03 Landlord or Landlord's agents or employees shall have the right upon
request made on reasonable advance notice to Tenant, or to an authorized
employee of Tenant at the Demised Premise, to enter and/or pass through the
Demised Premises or any part thereof, at reasonable times during reasonable
hours, (i) to examine the Demised Premises, or to show them to lessors of
superior leases, holders of mortgages, insurance carriers, or prospective
purchasers, mortgagees or lessees of the land or the Building, or prospective
tenants, and (ii) for the purpose of making such repairs or changes in or to the
Demised Premises or in or to the Building or its facilities as may be provided
for by this Lease or as Landlord may deem necessary or as Landlord may be
required to make by law or in order to repair and maintain the Building or its
fixtures or facilities. Landlord shall be allowed to take into and store upon
the Demised Premises all materials which nay be required for such repairs,
changes or maintenance. However, Landlord's rights under this Section shall be
exercised in such manner as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises. Landlord, its agents or employees, shall
also have the right to enter on and/or pass through the Demised Premises, or any
part thereof without notice at such tines as such entry shall be required by
circumstances of emergency affecting the Demised Premises or the Building
11.04 Landlord reserves the right, at any time after completion of the Building,
without incurring any liability to Tenant therefor to make such changes in or to
the Building and the fixtures and equipment thereof, as well as in order to the
street entrances, halls passages, elevators and stairways thereof, as it may
deem necessary or desirable; provided that there be no unreasonably lengthy
interference with the use of the Demised Premises or in the services furnished
to the Demised Premises, and no reduction in the Tenant's Floor Space in excess
of two (2%) percent without an appropriate adjustment in rent.
11.05 Landlord may limit and restrict, as provided in the Rules and Regulations
attached hereto as Exhibit B, the means of access to the Demised Premises
outside of Regular Business Hours, so long as Tenant's employees and authorized
agents have reasonable access to all parts of the Demised Premises. Tenant, and
its agents, employees and visitors shall be entitled to access from the Demised
Premises to, and the right to use, the toilets, lavatories and powder rooms only
on the floor (or floors) on which the Demised Premises are located.
11.06 Landlord reserves the right to select a name for the Building and to make
such change or changes of name as it may deem appropriate during Tenant's
occupancy, and Tenant agrees not to refer to the Building by any other name than
(i) the name as selected by Landlord, or (ii) the postal address approved by the
U.S. Post Office.
ARTICLE 12-- TENANT'S CHANGES
12.01 Tenant may, at any time and from time to time during the Term, at its sole
expense, make such other alterations, additions, installations, substitutions,
improvements and decorations (hereinafter collectively called "Changes" and as
applied to changes provided for in this Article, "Tenant's Changes") to the
Demised Premises, excluding structural changes and changes affecting the
mechanical systems, on the following conditions, and providing such changes will
not result in a violation of or require a change in the certificate of occupancy
applicable to the Demised Premises: (a) The outside appearance, character or use
of the Building shall not be affected, and no Tenant's Changes shall weaken or
impair the structural strength or, in the opinion of Landlord, lessen the value
of the Building; (b) No part of the Building outside of the Demised Premises
shall be physically affected; (c) The proper functioning or any of the
mechanical, electrical, sanitary and other service systems of the Building shall
not be adversely affected; (d) In performing the work involved in making such
changes Tenant shall be bound by and observe all of the conditions and covenants
contained in this Article; (e) At the Expiration Date, Tenant shall on
Landlord's written request restore the Demised Premises to their condition prior
to the making of any of the changes permitted by this Article, reasonable wear
and tear excepted, and Landlord shall be entitled to additional security
pursuant to Article 15 for the performance of Tenant's obligation; (f) At
<PAGE>
least thirty (30) days prior to proceeding with any change (exclusive of
changes in items constituting "Tenant's Property" as defined in Article 13).
12.02 All Tenant's changes shall at all times comply with laws, orders and
regulations of governmental authority having jurisdiction thereof, and all rules
and regulations of Landlord and Tenant, at its expense, shall obtain all
necessary governmental permits and certificates for the commencement and
prosecution of Tenant's Changes and for final approval thereof upon completion,
and shall cause Tenant's changes to be performed in compliance therewith and
with all applicable requirements of insurance belies, and in good and first
class workmanlike manner, using materials and equipment at least equal in
quality and class to the original installations of the Building. Tenant's
Changes shall be performed in such manner as not to interfere with the occupancy
of any other tenant in the Building nor delay, or impose any additional expense
upon Landlord in the construction, maintenance or operation of the Building, and
shall be performed by contractors or mechanics approved by Landlord and in
accordance with the Building Rules and Regulations for Trades Conducting
Operations, attached hereto as Exhibit C-1 and Insurance Requirements for Trades
Conducting Operations in the Building, attached hereto as Exhibit C-2.
Throughout the performance of Tenant's Changes, Tenant, at its expense, shall
carry, or cause to be carried, workmen's compensation insurance in statutory
limits, and general liability insurance for any occurrence on, in or about the
Building, in which Landlord and its managing agent shall be named as parties
insured, in such limits as Landlord may reasonably prescribe (but not less than
those specified in Section l6~02), with insurers reasonably satisfactory to
Landlord. Tenant shall furnish Landlord with reasonably satisfactory evidence
that such insurance is in effect at or before the commencement of Tenant's
Changes and, on request, at reasonable intervals thereafter during the
continuance of Tenant's Changes. No Tenant's Changes shall involve the removal
of any fixtures, equipment or other property in the Demised Premises which are
not "Tenant's Property" (as defined in Article 13), unless Landlord's prior
written consent is first obtained and unless such fixtures, equipment or other
property shall be promptly replaced, at Tenant's expense and free of superior
title, liens and claims, with fixtures, equipment or other property (as the case
may be) of like utility and at least equal value (which replaced fixtures,
equipment or other property shall thereupon become the property of Landlord,
unless Landlord shall otherwise consent in writing.
12.03 Tenant, at its expense, and with diligence and dispatch, shall procure the
cancellation or discharge of all notices of violation arising from or otherwise
connected with Tenant's Changes which shall be issued by the appropriate
department of the municipality in which the Building is located or any other
public authority having jurisdiction. Tenant shall defend, indemnify and save
harmless Landlord against any and all mechanics and other liens in connection
with Tenant's Changes, repairs or installations, including but not limited to
the liens of any conditional sales of, or chattel mortgages upon, any materials,
fixtures, or articles so installed in and constituting part of the Demised
Premises and against all costs, attorney's fees, fines, expenses and liabilities
reasonably incurred in connection with any such lien, conditional sale or
chattel mortgage or any action or proceeding brought thereon. Tenant, at its
expense, shall procure the satisfaction or discharge of all such liens within
thirty (30) days of the filing of such liens against the Demised Premises or the
Building. If Tenant shall fail to cause such lien to be discharged within the
period aforesaid, then, in addition to any other right or remedy, Landlord may,
but shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such lien by deposit or by
bonding proceedings, and in any such event Landlord shall be entitled, if
Landlord so elects to compel the prosecution of any action for the foreclosure
of such lien by the lienor and to pay the amount of the judgment in favor of the
lienor with interest, costs and allowances. Any amount so paid by Landlord and
all costs and expenses incurred by Landlord in connection therewith, together
with interest thereon at the lesser of the maximum permitted by law or 1 1/2%
per month or portion thereof from the respective dates of Landlord's making of
the payment or incurring of the cost and expense shall constitute additional
rent payable by Tenant under this Lease and shall be paid by Tenant on demand.
If Tenant makes any such payment it shall not be entitled to any set-off against
rent due hereunder. Tenant agrees that it will not at any time prior to or
during the Term, either directly or indirectly, use any contractors, labor or
materials in the Demised Premises, if the use of such contractors, labor or
materials would, in the Landlord's reasonable opinion, create any difficulty
with other contractors or labor engaged by Tenant or Landlord or would in any
way disturb harmonious labor relations in the construction, maintenance or
operation of the Building or any part thereof or any other building owned or
operated by Landlord or any affiliate of Landlord.
12.04 If Tenant requires Landlord to perform work during other than Regular
working Hours, or if Tenant desires to perform work through its contractors,
agents or employees during other than Regular Working hours, Tenant shall pay as
additional rent, the cost of employing such additional help as shall be required
under the rules and regulations of unions employed in connection with the
Building. Payment shall be made by Tenant to Landlord within ten (10) days after
being billed therefor.
12.05 In the event Landlord does not perform the work for Tenant, Tenant shall
pay to Landlord a supervisory fee (which shall include the cost of review of the
proposed Tenant's Changes) equal to Landlord's actual out-of-pocket expenses for
such supervision.
ARTICLE 13 - TENANT'S PROPERTY
13.01 All fixtures, equipment, improvements and appurtenances attached to or
built into the Demised Premises, shall be deemed the property of Landlord and
shall not be removed by Tenant except as hereinafter in this Article expressly
provided.
13.02 All fixtures, furnishings and equipment, exclusive of work performed by
Landlord at Landlord's cost and expense pursuant to the provisions of Article 3
hereof, whether or not attached to or built into the Demised Premises which are
installed in the Demised Premises by or for the account of Tenant, may be
removed by it at any time during the Term; provided that if any of Tenant's
Property is removed, Tenant shall repair or pay the cost of repairing any damage
to the Demised Premises or to the
<PAGE>
Building resulting from such removal. Any fixture, equipment or other
property for which Landlord shall have granted any allowance to the Tenant as
a credit or substitution in kind shall not be deemed to have been installed
by or for the account of the Tenant without expense to Landlord, and shall
not be considered Tenant's Property. Landlord shall not be obligated to
return and/or reinstall any partitions supplied to tenant which are returned
by Tenant to Landlord due to enlargement, reduction or change in the Demised
Premises.
13.03 At or before the expiration of this Lease, Tenant shall
remove, at its expense, from the Demised Premises, all of Tenant's property and
shall repair any damage and make any replacements to the Demised Premises or the
Building resulting from or necessitated by such removal, and shall pay all other
costs of such removal.
l3.04 Any items of Tenant's Property which shall remain in the Demised
Premises after the expiration of this Lease, may, at the option of
the Landlord, be deemed to have been abandoned, and in such case either may
be retained by Landlord as its property or may be disposed of, without
accountability to Tenant in such manner as Landlord may see fit. Tenant
agrees to reimburse landlord for the costs of removal and for the cost of
repairing any damage to the Demised Premises or the Building arising out of
Tenant's failure to remove Tenant's Property pursuant to the terms of this
Lease.
ARTICLE 14 -- REPAIRS AND MAINTENANCE
14.01 Tenant shall take good care of the Demised Premises and the fixtures and
appurtenances therein, and at its sole cost and expense shall make all repairs
thereto, as and when needed to preserve them in good working order and condition
except as otherwise provided in Section 14.02 hereof. In addition, Tenant, at
its expense, shall promptly make all repairs, ordinary or extraordinary,
interior or exterior, structural or otherwise, in and about the Demised Premises
and the Building as shall be required by reason or (i) the performance or
existence of work by Tenant necessary to suit the Demised Premises to Tenant's
initial occupancy or in connection with Tenant's changes, (ii) the installation,
use or operation of Tenant's Property in the Demised Premises, (iii) the moving
of Tenant's Property in or out of the Building, or (iv) the misuse or neglect of
Tenant or any of its employees, agents or contractors. Tenant shall not be
responsible, and Landlord shall be responsible, for any repairs to the Demised
Premises as are required by reason of Landlord's neglect or other fault in the
manner of performing any work provided for in Article 2 which Landlord is to
perform in Tenant's changes which may be undertaken by Landlord for Tenant's
account or are otherwise required by reason of neglect or other fault of
Landlord or its employees, agents or contractors.
14.02 Landlord shall keep and maintain the Building and its fixtures,
appurtenances, systems and facilities (including the heating, ventilating and
air-conditioning systems and the central or core elevator and plumbing systems),
serving the Demised Premises, in good working order, condition and repair and
shall make all structural repairs, interior and exterior, except as indicated in
the second sentence of Section 14.01, as and when needed in the Building, except
for those repairs for which Tenant is responsible pursuant to any other
provisions of this Lease, and subject to all other provisions of this Lease,
including but not limited to the provisions of Article 22.
l4.03 Except as expressly otherwise provided in this Lease, Landlord shall have
no liability to Tenant by reason of any inconvenience, annoyance, interruption
or injury to business arising from Landlord or any tenant making any repairs or
changes or performing maintenance services, whether or not Landlord is required
or permitted by this Lease or by law to make such repairs or changes or to
perform such services in or to any portion of the Building or Demised Premises
or in to the fixtures, equipment or appurtenances of the Building or the Demised
Premises provided that Landlord shall be reasonably diligent with respect
thereto and shall perform such work, except in case of emergency, at times
reasonably convenient to Tenant and otherwise in such manner and to the extent
practical as will not unreasonably interfere with Tenant's use and occupancy or
the Demised Premises.
14.04 When used in this Lease the term "repair" shall be deemed to include
restoration and replacements as may be necessary to achieve and/or maintain good
working order and condition.
ARTICLE 15 -- SECURITY DEPOSIT
Tenant has deposited with Landlord $24,578.00 as security for the punctual
performance by Tenant of each and every obligation of it under this Lease,
including the restoration of the Premises pursuant to Article 12.01. In the
event of any default by Tenant, Landlord may apply or retain all or any part of
the security to cure the default or to reimburse Landlord for any sum which
Landlord may spend by reason of the default. In the case of every such
application or retention Tenant shall, on demand, pay to Landlord the sum so
applied or retained which shall be added to the Security Deposit so that the
same shall be restored to its original amount. If at the end of the Term Tenant
shall not be in default under this Lease, the Security Deposit, or any balance
thereof, shall be returned to Tenant, within thirty (30) days after the
Expiration Date. In the event of a sale of the land and Building or leasing of
the Building, of which the Demised Premises form a part, Landlord shall have the
right to transfer the security to the vendor or lessee and Landlord shall
thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look to the new Landlord solely for the return of
said security; and it is agreed that the provision hereof shall apply to every
transfer or assignment of the security to a new Landlord. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and neither the Landlord nor its
successors or assign shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
ARTICLE 16-- INSURANCE
<PAGE>
16.01 Tenant shall not violate, or permit the violation of, any condition
imposed by the standard fire insurance policy then issued for office
Buildings in the area in which the Building is located and shall not
do, or permit anything to be done, or keep or permit anything to be
kept in the Demised Premises which would increase the fire or other
casualty insurance rate on the Building or the property therein over
the rate which would otherwise than be in effect (unless Tenant pays
the resulting increased amount of premium) or which would result in
insurance companies of good standing refusing to insure the Building or
any of such property in amounts and at normal rates reasonably
satisfactory to Landlord. However, Tenant shall not be subject to
liability or obligation under this Section by reason of the proper use
of the Demised Premises for executive and administrative offices.
16.02 Tenant shall obtain and keep in full force and effect during the Term at
its own cost and expense, Public Liability insurance, such insurance to afford
protection in an amount of not less than $1,000,000.00 for injury or death to
any one person, $3,000,000.00 for injury or death arising out of any one
occurrence, and $500,000.000 for damage to property, protecting the Landlord and
the Tenant as insureds against any and all claims for personal injury, death or
property damage occurring in, upon, adjacent or connected with the Demised
Premises and ANY part thereof. Said insurance is to be written by insurance
companies admitted to do business in the state of New Jersey which shall he
reasonably satisfactory to the Landlord. The original insurance policies or
appropriate certificates shall be deposited with Landlord together with any
renewals, replacements or endorsements to the end that said insurance shall be
in full force and effect for the benefit of the Landlord during the Term. In the
event Tenant shall fail to procure and place such insurance, the Landlord may,
but shall not be obligated to, procure and place same, in which event the amount
of the premium paid shall be paid by Tenant to Landlord upon demand and shall in
each instance be collectible on the first day of the month or any subsequent
month following the date of payment by Landlord, in the same manner as though,
and same shall be considered to be additional rent reserved hereunder.
16.03 In the event that any dispute should arise between Landlord and Tenant
concerning insurance rates, a schedule or "makeup" of rates for the Building or
the Demised Premises, as the case may be, issued by the Fire insurance Rating
Organization of New Jersey or other similar body making rates for fire insurance
and extended coverage for the premises concerned, shall he presumptive evidence
of the facts therein stated and of the several items and charges in the fire
insurance rates with extended coverage then applicable to such premises.
16.04 Each party agrees to use its best efforts to include in each of its
insurance policies insuring the Building and Landlord's property therein and
rental value thereof, in the case of Landlord and insuring Tenant's Property and
business interest in the Demised Premises (business interruption insurance) in
the case of Tenant, against loss, damage or destruction by fire or other
casualty, a waiver of the insurer's right of subrogation against the other
party, or if such waiver should be unobtainable or unenforceable (a) an express
agreement that such policy shall not be invalidated it the insured waives the
right of recovery against any party responsible for a casualty covered by the
policy before the casualty or (b) any other form of permission for the release
of the other party. If such waiver, agreement or permission shall not be, or
shall cease to be, obtainable without additional charge or at all, the insured
party shall so notify the other party promptly after learning thereof. In such
case, if the other party shall so elect shall pay the insurer's additional
charge therefore, such waiver, agreement or Permission shall be included in the
policy, or the other party shall be named as an additional insured in the
policy, but not the loss payee. Each such policy which shall so name a party
hereto as an additional insured shall contain agreements by the insurer that the
policy will not be cancelled without at least twenty (20) days prior notice to
both insureds and that the act or omission of one insured will not invalidate
the policy as to the other insured. Any failure by Tenant, if named as an
additional insured promptly to endorse to the order of Landlord, without
recourse, any instrument for the payment of money under or with respect to the
policy of which Landlord is the owner or original or primary insured, shall be
deemed a default under this Lease.
l6.05 Each party hereby releases the other party with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party for loss, damage or destruction with respect to its property
(including rental value or business interruption) occurring during the Term and
with respect and to the extent to which it is insured under a policy or policies
containing a waiver of subrogation or permission to release liability or naming
the other party as an additional insured as provided in Sections 16.04. If
notwithstanding the recovery of insurance proceeds by either party for loss,
damage or destruction of its property (or rental value or business interruption)
the other party is liable to the first party with respect thereto or is
obligated under this Lease to make replacement, repair or restoration or
payment, then provided the first party's right of full recovery under its
insurance policies is not thereby prejudiced or otherwise adversely affected,
the amount of the net proceeds of the first party's insurance against such loss,
damage or destruction shall be offset against the second party's liability to
the first party therefor, or shall be made available to the second party to pay
for replacement, repair or restoration, as the case may be.
16.06 The waiver of subrogation or permission for release referred to in Section
16.04 shall extend to the agents of each party and its and their employees and,
in the case of Tenant, shall also extend to all persons and entities occupying,
using or visiting the Demised Premises in accordance with the terms of this
Lease, but only if and to the extent that such waiver or permission can be
obtained without additional charge (unless such party shall pay much charge).
The releases provided for in section 16.05 shall likewise extend to such agents,
employees and other persons and entities, if and to the extent that such waiver
or permission is effective as to them. Nothing contained in section 16.05 shall
be deemed to relieve either party of any duty imposed elsewhere in this Lease to
repair, restore or rebuild or to nullify any abatement of rents provided for
elsewhere in this Lease. Except as otherwise provided in section 16.02, nothing
contained in section 16.04 and 16.05 shall be deemed to impose upon either party
any duty to procure or maintain any of the kinds of insurance referred to
therein or any particular amounts or limits of any such kinds of insurance.
<PAGE>
ARTICLE 17 -- SUDORDINATI0N, ATTORNMENT,
NOTICE TO LESSOR ANO MORTGAGEES
17.01 Landlord shall cause the mortgagees under all existing and future superior
mortgages (as hereinafter defined) and the lessors under all existing and future
superior leases (as hereinafter defined) to enter into subordination,
non-disturbance and Attornment agreements with Tenant in the form of Exhibit D
annexed hereto (the "Subordination, Non-Disturbance and Attornment Agreement").
The Subordination Non-Disturbance and Attornment Agreement with respect to the
mortgage encumbering the Building on the date hereof shall be delivered to
Tenant no later than sixty (60) days after the execution and delivery of this
Lease. Provided the provisions of the foregoing sentence are complied with, this
Lease and all rights of Tenant hereunder, are and shall be subject and
subordinate in all respects to all present and future ground leases, over-riding
leases and underlying leases and/or grants of terms of the land and/or the
Building or the portion thereof in which the Demised Premises are located in
whole or in part now or hereafter existing ("superior leases") and to all
mortgages and Building loan agreements, which may now or hereafter affect the
land and/or the Building and/or any of such leases ("superior mortgages")
whether or not the superior leases or superior mortgages shall also cover other
lands and/or Buildings, to each and every advance made or hereafter to be made
under the superior mortgages, and to all renewals, modifications, replacements
and extensions of the superior leases and superior mortgages and spreaders,
consolidations and correlations of the superior mortgages. This Section shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute and deliver at
its own cost and expense any instrument, in recordable form if required, that
Landlord, the lessor of any superior lease or the holder of any superior
mortgage or any of their respective successors in interest may request to
evidence such subordination, and Tenant hereby constitutes and appoints Landlord
attorney-in-fact for Tenant to execute any such instrument for and on behalf of
Tenant.
17.02 In the event that the lessor of a superior lease or the holder of a
superior mortgage shall succeed to the rights of the Landlord under this Lease
whether through possessory or foreclosure action or proceeding or through
delivery of a new lease, then at the request of any such party, the Tenant shall
attorn to and recognize such party as its Landlord under this Lease. In an such
event, this Lease shall continue in full force and effect as if it were a direct
lease between such party and the Tenant upon all of the terms covenants and
conditions set forth in this Lease and shall be applicable after such
attornment, except that such party shall not (a) be obligated to perform any
work in the Building, including the Demised Premises or prepare them for
occupancy; (b) be obligated to repair replace, rebuild or restore the Building,
or the Demised Premises in the event of damage or destruction, beyond such
repair, replacement, rebuilding or restoration as CAN reasonably be accomplished
from the net proceeds of insurance actually received by, or made available to,
such party; (c) be liable for any previous act or omission by Landlord; (d) be
subject to any liability or offset which shall theretofore accrue to the Tenant
against Landlord; (e) be bound by any previous modification or extension of this
Lease unless filed with such party and made at arms length, in good faith and in
the honest exercise of reasonable business judgment; (f) be bound by any
previous pre-payment of more than one month's fixed rent or other charge, or (g)
be bound by any cancellation or surrender of this Lease or any eviction of the
Tenant by Landlord unless made at arms length, in good faith and in the honest
exercise of reasonable business judqnent.
17.03 Provided Tenant has received the subordination Non- Disturbance
and Attornment Agreement as required under 17.01 thereof, Tenant agrees to waive
the provisions of any statute or rule or law now or hereafter in effect which
may give or purport to give Tenant any right of election to terminate this Lease
or to surrender possession of the Demised Premises in the event a superior lease
is terminated or a superior mortgage is foreclosed, and that unless and until
said lessor, or holder, as the case may be, shall elect to terminate this Lease,
this Lease shall not be affected in any way whatsoever by any such proceeding or
termination, and Tenant shall take no steps to terminate this Lease without
giving written notice to said lessor under the superior lease, or holder of a
superior mortgage and a reasonable opportunity to cure (without such lessor or
holder being obligated to cure), any default on the part of the Landlord under
this Lease,
ARTICLE 18 - ASSIGNMENT, MORTGAGING, SUBLETTING
18.01 Neither this Lease nor the Term and estate hereby granted, nor any part
hereof or thereof, nor the interest of Tenant in any sublease or the rentals
thereunder, shall be assigned, mortgaged, pledged, encumbered or otherwise
transferred by Tenant by operation of law or otherwise, and neither the Demised
Premises nor any part thereof, shall be encumbered in any manner by reason of
any act or omission on the part of the Tenant; or anyone claiming under or
through Tenant, or shall be sublet or be used or occupied or permitted to be
used or occupied, or utilized for desk space or for mailing privileges, by
anyone other than Tenant or for any purpose other than as permitted by this
Lease, without the prior written consent of Landlord in every case, except as
expressly otherwise provided in this Article which consent shall not be
unreasonably withheld.
18.02 If this Lease be assigned, whether or not in violation of the provisions
of this lease, Landlord may collect rent from the assignee. If the Demised
Premises or any part thereof be sublet or be used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default try
<PAGE>
Tenant, and expiration of Tenant's time to cure such default,
collect rent from the subtenant or occupant. In either event,
Landlord may apply the net amount collected to the rents herein
reserved, but no such assignment, subletting, occupancy or
collection shall be declared a waiver of any of the provisions of
section 18.01, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of tenant from the further
performance by tenant if Tenant's obligations under this Lease. The
consent by Landlord to assignment, mortgaging or subletting, or use
of occupancy by others shall in no wise by considered to relieve
Tenant from obtaining the express written consent of Landlord to
any other or further assignment, mortgaging, or subletting or use
of occupancy by others not expressly permitted by this Article.
1.2 Tenant agrees to pay to Landlord reasonable counsel fees incurred by
Landlord in connection with any proposed assignment of Tenant's interest in this
Lease or any proposed subletting of the Demised Premises or any part thereof,
References in this Lease to use or occupancy by others, that is anyone other
than Tenant, shall not be construed as limited to subtenants and those claiming
under or through Tenant, immediately or remotely.
18.03 Tenant may, upon written notice to Landlord, but without Landlord's
written consent, permit any corporations or other business entities which
control, are controlled by, or are under common control with Tenant (herein
called "related corporations") to use the whole or part of Demised Premises for
any purposes permitted to Tenant, subject however to compliance with Tenant's
obligations under the Lease. Such use shall not be deemed to vest in any such
related corporation any right or interest in this Lease or in the Demised
Premises, nor shall such use release, relieve, discharge or modify any of
Tenant's obligations hereunder.
18.04 With respect to any proposed assignment of this Lease or proposed
subletting at all or a portion of the Demised Premises:
(A) Tenant shall submit to the Landlord a request for consent to such assignment
or sublease together with the name and address of the proposed assignee or
sublessee and such information as to its financial responsibility and standing
as Landlord may require upon receipt or such request and upon the furnishing of
such information by the Tenant, Landlord shall have the option to cancel and
terminate this Lease (i) completely, if the request was for an assignment of
this Lease or subletting of all of the Demised Premises, or (ii) if such request
was for a subletting of a portion of the Demised Premises, then with respect to
such portion.
(B) Landlord shall exercise such option to cancel and terminate by notice in
writing to that effect to Tenant within ten (10) days from receipt of Tenant's
request and the information set forth above, and Landlord's notice shall set
forth the date of cancellation, which date shall be no less then sixty (60) nor
more than ninety (90) days from the date of the service of Landlord's notice. If
such option is so exercised, then upon such date of cancellation the lease for
the entire Demised Premises or specified portion thereof, as the case may be,
shall cease and terminate with the same force and effect as though the date set
forth in the notice were the date set forth in this Lease at the expiration of
the Term, and the Tenant shall surrender possession of the entire Demised
Premises, or portion thereof, as the case may be, in accordance with the
provisions of the Lease relating to surrender of the Demised Premises at the
expiration of the Term. If Landlord exercises the option to cancel the Lease, as
to a portion of the Demised Premises only, the terms of this Lease shall remain
in full force as to the remainder of the Demised Premises, for the balance of
the Term, except to the extent that the area of the Demised Premises is reduced
with a proportionate reduction in rent.
(C) If Landlord does not exercise its option to cancel as aforementioned than
Tenant may assign or sublet all or a portion of the Demised Premises, provided
that Landlord has given its prior written consent and provided further that: (i)
the Tenant is not then in default hereunder; (ii) the rental provided for in
such assignment or sublease is not less than the rental provided for herein;
(iii) the Demised Premises are to be used for executive offices only by a
person, firm or corporation engaged in a lawful commercial business (other than
a business operating data processing machinery in the Demised Premises larger
than desk top size), or for a similar use as Tenant's, but not for the practice
of medicine, (iv) such assignee or sublessee shall be financially responsible
and of good reputation; (v) the business of such assignee or sublessees or the
use to which such Demised Premises shall be put shall not be violation of any
restriction against competition contained in any other lease to which Landlord
is a party; (vi) the assignee or sublessee is not engaged in the containerized
shipping business or as a governmental agency of a communist agency and (vii) a
duplicate original of an instrument in writing assigning this Lease or
subletting the Demised Premises, duly executed by the assignor or sublessor and
assignee or sublessee, as the case may be, in recordable form, containing
therein an assumption by said assignee or an agreement by said sublessee to take
subject to (and an agreement by Tenant to remain liable to Landlord for) all the
terms and conditions of this Lease on the part of the Tenant to be performed
(D) The provisions of this Article 18 shall apply to each such proposed
subletting, none of which shall be effective until all of the foregoing shall
have been complied with. Notwithstanding any subletting, Tenant and any future
sublessor shall remain liable for the full performance of all the terms and
conditions of this lease on the part of the Tenant to be performed.
18.05 Tenant shall not offer to assign or sublet either the entire Demised
Premises or a specified portion thereof to any other Tenant in the Building or
to any party in negotiations with Landlord to lease a portion of the Building.
<PAGE>
ARTICLE 19 -- COMPLIANCE WITH LAWS AND REQUIREMENTS
OF PUBLIC AUTHORITIES: RULES & REGULATIONS
19.01 Tenant shall promptly notify Landlord of any written notice it
receives of the violation of any law or requirements which shall, with respect
to the Building or the Demised Premises or the use and occupation thereof or the
abatement of any nuisance, impose any violation, order or duty on Landlord or
Tenant, arising from (i) Tenant's use of the Demised Premises, (ii) the manner
of conduct of Tenant's business or operation of its installations, equipment or
other property therein, (iii) any cause or condition created by or at the
instance of Tenant, or (iv) breach of any of Tenant's obligations hereunder
19.02 Tenant shall promptly furnish to Landlord all information
requested by Landlord which may be required for all reports to be filed by
Landlord in accordance with any directives of the Secretary of the United States
Department of Housing and Urban Development or any statute, rule or regulation
of the United States Department of Housing and Urban Development in connection
with the Urban Development Action Grant used to finance part of the construction
of the Building.
19.03 Tenant and its employees and agents shall faithfully observe and
comply with the Rules and Regulations annexed hereto as Exhibit "B" and such
reasonable changes therein (whether by modification, elimination or addition) as
Landlord at any time or times hereafter may make and communicate in writing to
Tenant, which do not unreasonably affect the conduct of Tenant's business in the
Demised Premises; provided, however, that in case of any conflict or
inconsistency between the provisions of this Lease and any Rules and Regulations
changed subsequent to the date of this Lease the provisions of this Lease shall
control.
19.04 Nothing in this Lease contained shall be construed to impose upon
Landlord any duty or obligation to Tenant to enforce the Rules and Regulations
or the terms, covenants or conditions in any other lease, as against any other
tenant unless requested to do so by Tenant, but Landlord shall not be liable to
Tenant for violation of the same by any other tenant or its employees, agents or
visitors.
ARTICLE 20 -- QUIET ENJOYMENT
20.01 Landlord covenants that if, and so long as, Tenant pays all of the Fixed
Rent and additional rent due hereunder, and keeps and performs each and every
covenant, agreement, term, provision and condition herein contained on the part
and on behalf of Tenant to be kept and performed, Tenant shall quietly enjoy the
Demised Premises without hinderance or molestation by Landlord or any other
person lawfully claiming the same, subject to the covenants, agreements, terms,
provisions and conditions of this Lease and to any superior leases and/or
superior mortgages.
ARTICLE 21-- NON-LIABILITY & INDEMNIFICATION
21.01 Neither Landlord nor any agent or employee of Landlord shall be
liable to Tenant, its employees, agents, contractors and licensees, and Tenant
shall hold Landlord harmless from any injury or damage to Tenant or to any other
persons for any damage to, or loss (by theft or otherwise) of, any property of
Tenant and/or of any other person, irrespective of the cause of such injury,
damage or loss, unless caused by or due to the gross negligence of Landlord, its
agents or employees without contributory negligence on the part of Tenant.
Landlord shall not be liable in any event for loss of, damage to, any property
entrusted to any of Landlord's employees or agents by Tenant without Landlord's
specific written consent.
21.02 Tenant shall defend, indemnify and save harmless Landlord and
its agent and employees against and from all liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including reasonable experts'
and attorneys' fees, which may be imposed upon or incurred by or asserted
against Landlord and/or its agents by reason of any of the following occurring
during the Term, or during any period of time prior to the Commencement Date
that Tenant may have been given access to or possession of all or any part of
the Demised Premises: (a) any work or thing done in on or about the Demised
Premises or any part thereof by or at the instance of Tenant, its agents,
contractors, subcontractors, servants, employees, licensees or invitees; (b) any
negligence or otherwise wrongful act or omission on the part of Tenant or any of
its agents, contractors, subcontractors, servants, employees, subtenants,
licensees, or invitees; (c) any accident, injury or damage to any person or
property occurring in on or about the Demised Premises or any part thereof, or
vault, passageway or space adjacent thereto; (d) any failure on the part of
Tenant to perform or comply with any of the covenants, agreements, terms,
provisions, conditions or limitations contained in this Lease on its part to be
performed or complied with. In case any action or proceeding is brought against
Landlord by reason of any such claim, Tenant upon written notice from Landlord
shall at Tenant's expense resist or defend such action or proceeding by counsel
approved by Landlord in writing, which approval Landlord shall not unreasonab]y
withhold.
21.03 Whenever either party shall be obligated under the terms of this Lease to
indemnify the other party, the indemnifying party may select legal counsel
(subject to the consent of the indemnified party, which consent shall not be
unreasonably withheld) and shall keep the indemnified party fully appraised at
all times of the status of such defense. Legal counsel of the insurer for either
party is hereby deemed
<PAGE>
satisfactory to both parties.
21.04 Except as otherwise expressly provided herein, this Lease and the
obligations of Tenant to pay rent hereunder and perform all of the other
covenants, agreements, terms, provisions and conditions hereunder on the part of
Tenant to be performed shall in no wise be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is delayed in supplying any service, express or implied, to
be supplied or is unable to make or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of any
Unavoidable Delays, as defined in Section 3.02 hereof; provided that Landlord
shall in each instance exercise reasonable diligence to effect performance when
and as soon as possible. However, nothing contained in this Section shall be
deemed to extend or otherwise modify or affect any of the time limits and
conditions set forth in Section 22.03.
ARTICLE 22 -- DESTRUCTION AND DAMAGE
22.01 If the Demised Premises and/or access thereto shall be partially or
totally damaged or destroyed by fire or other casualty, then, Landlord shall,
subject to its rights under Section 22.03 hereof, repair the damage and restore
and rebuild the Demised Premises and/or access thereto as nearly as may be
reasonably practical to its condition and character immediately prior to such
damage or destruction, with reasonable diligence after notice to it of the
damage or destruction.
22.02 If the Demised Premises and/or access thereto shall be partially or
totally damaged or destroyed by fire or other casualty not attributable to the
fault, negligence or misuse of the Demised Premises by the Tenant, its agent or
employees under the provisions of this Lease, the rents payable hereunder shall
be abated to the extent that the Demised Premises shall have been rendered
untenantable from the date of such damage or destruction to the date the damage
shall be substantially repaired or restored or rebuilt. Should Tenant reoccupy a
portion of the Demised Premises during the period that the repair, restoration,
or rebuilding is in progress and prior to the date that the same are made
completely tenantable, rents allocable to such portion shall be payable by
Tenant from the date of such occupancy to the date the Demised Premises are made
tenantable.
22.03 In case of substantial damage or destruction of the Demised Premises,
Tenant may terminate this Lease by notice to Landlord, if Landlord has not
completed the making of required repairs and restored and rebuilt the Demised
Premises and/or access thereto within 12 months from the date of such damage or
destruction, and such additional time after such date (but in no event exceed 9
months) as shall equal the aggregate period Landlord may have been delayed in
doing so by adjustment of insurance or Unavoidable Delays.
In case the Building shall be so damaged by such fire or other casualty that
substantial renovation, reconstruction or demolition of the Building shall, in
Landlord's opinion, be required (whether or not the Demised Premises shall have
been damaged by such fire or other casualty), then Landlord may, at its option,
terminate this Lease and the Term and estate hereby granted, by notifying Tenant
of such termination, within sixty (60) days after the date of such damage. If at
any time prior to Landlord giving tenant the aforesaid notice of termination or
commencing the repair and restoration pursuant to Section 22.01, the holder of a
superior mortgage or the lessor of a superior lease or any person claiming under
or through the holder of such superior mortgage or the lessor of such superior
lease takes possession of the Building through foreclosure or otherwise, such
holder, lessor, or person shall have a further period of sixty (60) days from
the date of so taking possession to terminate this Lease by appropriate written
notice to Tenant. In the event that such a notice of termination shall be given
pursuant to either of the next two preceding sentences, this Lease and the Term
and estate hereby granted shall expire as of the date of such termination with
the same effect as if that were the date hereinabove set for the expiration of
the Term, and the Fixed Rent and additional rent due and to become due hereunder
shall be apportioned as of such date if not earlier abated pursuant to Section
22.02. Nothing contained in this Section 22.03 shall relieve Tenant from any
liability to Landlord or to its insurers in connection with any damage to the
Demised Premises or the Building by fire or other casualty if Tenant shall be
legally liable in such respect.
22.04 No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the Building pursuant
to this Article. Landlord shall use its best efforts to effect such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's use and occupancy.
22.05 Landlord will not carry insurance of any kind on Tenant's Property, and,
except as provided by law or its breach of any of its obligations hereunder,
shall not be obligated to repair any damage thereto or replace the same.
22.06 The provisions of this Article shall be considered an express agreement
governing any case of damage or destruction of the Demised Premises by fire or
other casualty, and any statute or regulation providing for such a contingency
in the absence of, an express agreement, now or hereafter in force, shall have
no application in such case.
<PAGE>
22.07 Landlord shall maintain appropriate insurance for the Building.
Notwithstanding any of the foregoing provisions of this Lease if Landlord or the
lessor of any superior lease or the holder of any superior mortgage shall be
unable to collect all of the insurance proceeds (including rent insurance
proceeds) applicable to damage or destruction of the Demised Premises or the
Building by fire or other cause, by reason of some action or inaction on the
part of Tenant or any of its employees, agents or contractors, then, without
prejudice to any other remedies which may be available against Tenant, the
abatement of Tenant's rents provided for in this Article shall not be effective
to the extent of the uncollected insurance proceeds.
ARTICLE 23 -- EMINENT DOMAIN
23.01 In the event that the land, Building or any part thereof, or the Demised
Premises or any part thereof, shall be taken in condemnation proceedings or by
the exercise of any right of eminent domain or by agreement between any superior
lessors and lessees and/or Landlord on the one hand and any governmental
authority authorized to exercise such right on the other hand, Landlord shall be
entitled to collect from any condemnor the entire award or awards that may be
made in any such proceeding without deduction therefrom for any estate hereby
vested in or owned by Tenant, to be paid out as in this Article provided. Tenant
hereby expressly assigns to Landlord all of its right, title and interest in or
to every such award (with the exception of that portion of the award
specifically allocated as Tenant's moving expenses, to the extent that the same
does not decrease Landlord's award) and also agrees to execute any and all
further documents that may be required in order to facilitate the collection
thereof by Landlord,
23.02 At any time during the Term if title to the whole or substantially all of
the land, Building and/or Demised Premises shall be taken in by condemnation
proceedings or by the exercise of any right of eminent domain or by agreement
between any superior lessors and lessees and/or Landlord on the one hand and any
governmental authority authorized to exercise such right on the other hand, this
Lease shall terminate and expire on the date of such taking and the Fixed Rent
and additional rent provided to be paid by Tenant shall be apportioned and paid
to the date of such taking.
23.03 However, if substantially all of the land or Building is not so taken and
if only a part of the entire Demised Premises shall be so taken, this Lease
nevertheless shall continue in full force and effect, except that either party
may elect to terminate this Lease if that portion of the Demised Premises then
occupied by Tenant shall be reduced by more than 25%, by notice of such election
to the other party given not later than thirty (30) days after (i) notice of
such taking is given by the condemning authority, or (ii) the date of such
taking, whichever occurs later. Upon the giving of such notice this Lease shall
terminate on the date of service of such notice and the Fixed Rent and
additional rent due and to become due, shall be prorated and adjusted as of the
date of the taking. If both parties fail to give such notice upon such partial
taking, and this Lease continues in force as to any part of the Demised Premises
not taken, the rents apportioned to thc part taken shall be prorated and
adjusted as of the date of taking and from such date the Fixed Rent and
additional rent shall be reduced to the amount apportioned to the remainder of
the Demised Premises, and the Tenant's Share shall be recomputed to reflect the
number of square feet of Tenant's Floor Space remaining in the Demised Premises
in relation to the number of square feet of Total Building Floor Space remaining
in the Building.
23.04 Notwithstanding the foregoing provisions of this Article and subject to
the interest of any mortgagees or lessor or grantor under any superior mortgage
or superior lease, Tenant shall be entitled to appear, claim, prove and receive
in the proceedings relating to any taking mentioned in the preceding Sections of
this Article, such portion of each award made therein as represents the then
value of Tenant's Property.
23.05 In the event of any such taking of less than the whole of the Building
which does not result in a termination of this Lease, Landlord, at its expense,
shall proceed with reasonable diligence to repair, alter and restore the
remaining part of the Building and the Demised Premises to substantially the
same condition as it was in immediately prior to such taking to the extent that
the same may be feasible, so as to constitute a tenantable Building and Demised
Premises, providing that Landlord's liability under this Section shall be
limited to the amount received by Landlord as an award arising out of such
taking.
ARTICLE 24 -- SURRENDER
24.01 On the last day of the Term, or upon any earlier termination of this
Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall
quit and surrender the Demised Premises to the Landlord broom clean, in good
order, condition and repair except for ordinary wear and tear and damage by fire
or other insured casualty, restored as provided in Section 12.01.
<PAGE>
24.02 Prior to such surrender, Tenant shall (a) remove Tenant's
Property subject to the provisions of Article 13 hereof, (b) at Landlord's
request remove from the Demised Premises all improvements, alterations,
additions, fixtures and equipment (sometimes herein called "additional work")
other than Tenant's work attached hereto as Exhibit C, whether such additional
work was performed by Tenant or by Landlord on Tenant's behalf, and whether such
additional work consisted of extra or special work or additional items or
quantities of Building standard work, and (c) at Landlord's request, repair any
damage and make any replacements to the Building or the Demised Premises
resulting from or necessitated by such removal, and restore those parts of the
Demised Premises from which the removal referred to in subparagraphs (a) and (b)
above occurred, to a condition which will blend with and be comparable to
adjacent areas. Tenant's removal and repair obligations hereunder with respect
to the Demised Premises shall extend to the core area or any other part of the
Building where any additional work was performed by or on behalf of Tenant. If
Tenant shall fail to perform as provided in this Section 24.02, Landlord shall
have the right to do so at Tenant's cost and expense, without further notice or
demand upon Tenant, and Tenant shall indemnify Landlord against all loss or
liability resulting therefrom, including, without limitation, any delay in
granting occupancy of the Demised Premises to a future occupant.
ARTICLE 25-- CONDITIONS OF LIMITATION
25.01 This Lease and the estate hereby granted are subject inter alia to the
limitation that whenever Tenant shall make an assignment for the benefit of
creditors, or shall file a voluntary petition under any bankruptcy or insolvency
law, or an involuntary petition alleging an act of bankruptcy or insolvency is
filed against Tenant, or whenever a petition shall be filed by or against Tenant
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or any future federal bankruptcy
act or any other present or future applicable federal, state or other statute or
law, or shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any substantial part of its
properties, or whenever a permanent or temporary receiver of Tenant or of, or
for, the property of Tenant shall be appointed, or if Tenant shall plead
bankruptcy or insolvency as a defense in any action or proceeding, then,
Landlord, (a) at any time after receipt of notice of the occurrence of any such
event, or (b) if such event occurs without the acquiescence of Tenant, at any
time after the event continues for sixty (60) days, may give Tenant a notice of
intention to end the Term at the expiration of five (5) days from the service of
such notice of intention, and upon the expiration of said five (5) day period
Lease and the Term and estate hereby granted, whether or not the Term shall
theretofore have commenced, shall terminate with the same effect as if that day
were the Expiration Date, but Tenant shall remain liable for damages as provided
as in Article 27.
25.02 This Lease and the Term and estate hereby granted and subject to
the further limitation that, (a) whenever Tenant shall default in the payment
of any installment of Fixed Rent, or in the payment of any additional rent,
on any day upon which the same shall be due and payable and such default
shall continue for five (5) days after the giving of notice thereof by
Landlord, or (b) whenever Tenant shall do or permit anything to be done,
whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Tenant within fifteen (15) days after Landlord shall have given to Tenant a
notice specifying the same, or, in the case of a happening or default which
cannot with due diligence be cured within a period of fifteen (15) days and
the continuance of which for the period required for cure will not subject
Landlord to the risk of criminal liability or termination of any superior
lease or foreclosure of any superior mortgage, if Tenant shall not duly
institute within such fifteen (15) day period and promptly and diligently
prosecute to completion all steps necessary to remedy the same, or (c)
whenever any event shall occur or any contingency shall arise whereby this
Lease or any interest therein or the estate hereby granted or any portion
thereof or the unexpired balance of the Term hereof would, by operation of
law or otherwise, devolve upon or pass to any person, firm or corporation
other than Tenant, except as expressly permitted by Article 18 or (d)
whenever Tenant shall abandon the Demised Premises, or a substantial portion
of the Demised Premises shall remain vacant for a period of ten (10)
consecutive days, unless such vacancy arises as a result of a casualty; then
in any such event covered by subsections a, b, c or d of this Section 25.2 at
any time thereafter, Landlord may give to Tenant a notice of intention to end
the Term of this Lease at the expiration of three (3) days from the date of
the service of such notice of intention, and upon the expiration of said
three (3) days this Lease and the Term and the estate hereby granted, whether
or not the Term shall theretofore have commenced, shall terminate with the
same effect as if that day were the Expiration Date, but Tenant shall remain
liable for damages as provided in Article 27.
ARTICLE 26-- RE-ENTRY BY LANDLORD --DEFAULT
PROVISIONS
26.01 If this Lease shall terminate for any reason whatsoever, Landlord or
Landlord's agents and employees may, without further notice, immediately or at
any time thereafter, enter upon and re-enter the Demised Premises, or any part
thereof, and possess or repossess itself thereof either by summary dispossess
proceedings, ejectment or by any suitable action or proceeding at law, or by
agreement, or by force or otherwise, and may dispossess and remove Tenant and
all other persons and property from the Demised Premises without being liable to
indictment, prosecution or damages therefor, and may repossess the same, and may
remove any persons therefrom, to the end that Landlord may have, hold and
<PAGE>
enjoy the Demised Premises and the right to receive all rental income again
as and of its first estate and interest therein. The words "enter" or
"re-enter", "possess" or "repossess" as herein used, are not restricted to
their technical legal meaning. In the event of the termination of this Lease,
or of re-entry by summary dispossess proceedings, ejectment or by any
suitable action or proceeding at law, or by agreement, or by force or
otherwise by reason of default hereunder on the part of Tenant, Tenant shall
thereupon pay to Landlord the Fixed Rent and additional rent due up to the
time of such termination of this Lease or of such recovery of possession of
the Demised Premises by Landlord, as the case may be, and shall also pay to
Landlord damages as provided in Article 27.
26.02 In the event of any breach or threatened breach by Tenant of any
of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings, and other remedies
were not provided for in this Lease.
26.03 Each right and remedy of Landlord provided for in this Lease
shall be cumulative and shall be in addition to every other right or remedy
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by
Landlord of any one or more of the right or remedies provided for in this lease
or now or hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by Landlord of any or all
other rights or remedies provided for in this Lease or now or hereafter existing
at law or in equity or by statue or otherwise,
26.04 If this Lease shall terminate under the provisions of Article 25,
or if Landlord shall re-enter the Demised Premises under the provisions of this
Article 26, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
advance rent, security or otherwise, but such monies shall be credited by
Landlord against any Fixed Rent or additional rent due from Tenant under Article
27 or pursuant to law.
ARTICLE 27 -- DAMAGES
27.01 If this Lease is terminated under the provisions of Article 25, or if
Landlord shall re-enter the Demised Premises under the provisions of Article 26
or in the event of the termination of this Lease, or of re-entry by summary
dispossess proceedings, ejectment or by any suitable action or proceeding at
law, or by agreement, or by force or otherwise, by reason of default hereunder
on the part of Tenant, Tenant shall pay to landlord as damages, at the election
of Landlord, on demand either,
(a) a sum which at the time of such termination of this Lease or at the time of
any such re-entry by Landlord, as the case may be, represents the excess of (1)
the aggregate of the Fixed Rent and the additional rent payable hereunder which
would have been payable by Tenant (conclusively presuming the additional rent to
be the same as was payable for the year immediately preceding such termination)
for the period commencing with such earlier termination of this Lease or the
date of any such re-entry, as the case may be, and ending with the expiration of
the Term, had this Lease not so terminated or had Landlord not so re-entered the
Demised Premises over (2) the aggregate rental value (calculated as of the date
of such termination or re-entry) of the Demised Premises for the same period,
or,
(b) a sum equal to the Fixed Rent and the additional rent (as above presumed)
payable hereunder which would have been payable by Tenant had this Lease not so
terminated, or had Landlord not so re-entered the Demised Premises, payable
quarterly or otherwise upon the terms therefor specified herein following such
termination or such re-entry and until the expiration of the Term, provided,
however, that if Landlord shall relet the Demised Premises or any portion or
portions thereof during said period, Landlord shall credit Tenant with the net
rents such net rents to be determined by first deducting from the gross rents as
and when received by Landlord from such reletting the expenses incurred or paid
by Landlord in terminating this Lease or in re-entering the Demised Premises and
in securing possession thereof, as well as the expenses of reletting, including
altering and preparing the Demised Premises or any portion or portions thereof
for new tenants, brokers' commissions, advertising expenses, attorneys' fees,
and all other expenses properly chargeable against the Demised Premises and the
rental therefrom; it being understood that any such reletting may be for a
period shorter or longer than the remaining Term of this Lease, but in no event
shall Tenant be entitled to receive any excess of such net rents over the sums
payable by Tenant to Landlord hereunder, nor shall Tenant be entitled in any
suit for the collection of damages pursuant to this Subsection to a credit in
respect of any net rents from a reletting, except to the extent that such net
rents are actually received by Landlord, If the Demised Premises or any part
thereof should be relet in combination with other space, then proper
apportionment shall be made of the rent received from such reletting and of the
expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for the
unexpired portion of the Term, or any part thereof, before presentation of proof
of such damages to any court, commission, or tribunal, the amount of rent
payable upon such reletting shall, prima facie, be the fair and reasonable
rental value for the Demised Premises or any part thereof or evidence of damage
for failure to collect any rent due upon any such reletting.
<PAGE>
27.02 Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under the provision of Article 26, or under any provision of law,
or had landlord not re-entered the Demised Premises. Nothing herein contained
shall be construed to limit or preclude recovery by Landlord against Tenant of
any sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder or
otherwise on the part of Tenant. Nothing herein contained shall be construed to
limit or prejudice the right of the Landlord to prove and obtain as damages by
reason of the termination of this Lease or re-entry on the Demised Premises for
the default of Tenant under this Lease, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved whether or not such amount
be greater, equal to, or less than any of the sums referred to Section 27.01.
27.03 Anything in this Lease to the contrary notwithstanding, if Tenant
shall at any time be in default hereunder, and if Landlord shall institute an
action or summary proceeding against Tenant based upon such default, or if such
default results from non-payment of Fixed Rent or additional rent whether or not
such an action or proceeding is instituted, then Tenant shall reimburse
Landlord, as additional rent, for the expense of attorneys' fees and
disbursements thereby incurred by Landlord, so far as the same are reasonable.
ARTICLE 28 -- WAIVERS
28.01 Tenant, for itself, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds, does hereby waive and
surrender all right and privilege so far as is permitted by law, which they or
any of them might have under or by reason of any present or future law, of the
service of any notice of intention to re-enter and also waives any and all right
of redemption or re-entry or repossession in case Tenant shall be dispossessed
or ejected by process of law, or in case of re-entry or repossession by
Landlord, or in case of any expiration or termination of this Lease as herein
provided.
28.02 Tenant waives Tenant's rights, if any, to designate the items
against which any payments made by Tenant are to be credited, and Tenant agrees
that Landlord may apply any payments made by Tenant to any items against which
any such payments shall be credited.
28.03 Tenant waives Tenant's rights, if any, to assert a counterclaim
in any summary proceeding brought by Landlord against Tenant, and Tenant agrees
to assert any such claim against Landlord only by way of a separate action or
proceeding.
28.04 To the extent permitted by applicable law, Landlord and Tenant
hereby waive trial by jury in any action, proceeding or counterclaim brought by
either against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, or Tenant's
use of occupancy of the Demised Premises, or any emergency or other statutory
remedy with respect thereto.
28.05 The provisions of Article 8 and 9 shall be considered express
agreements governing the services to be furnished by Landlord, and Tenant agrees
that any laws and/or requirements of public authorities, now or hereafter in
force, shall have no application in connection with any enlargement of
Landlord's obligations with respect to such services.
ARTICLE 29 -- NO OTHER WAIVERS OR MODIFICATIONS
29.01 The failure of Landlord to insist on any one or more instances
upon the strict performance of any one or more of the agreements, terms,
covenants, conditions or obligations of this Lease, Exhibits and Riders thereto,
or to exercise any right, remedy or election herein contained, shall not be
construed as a waiver or relinquishment for the future of the performance of
such one or more obligations of this Lease or of the right to exercise such
election, but the same shall continue and remain in full force and effect with
respect to any subsequent breach, act or omission. The manner of enforcement or
the failure of Landlord to enforce any of the Rules and Regulations set forth
herein, or hereafter adopted against the Tenant and/or any other tenant in the
Building shall not be deemed a waiver of any such Rules and Regulations. No
executory agreement hereafter made between Landlord and Tenant shall be
effective to change, modify, waive, release, discharge, terminate or affect an
abandonment of this Lease, in whole or in part, unless such executory agreement
is in writing, refers expressly to this Lease and is signed by the party against
whom enforcement of the change, modification, waiver, release, discharge or
termination or effectuation of the abandonment is sought.
29.02 The following specific provisions of this Section shall not be
deemed to limit the generality of the foregoing provision of this Article:
(a) no agreement to accept a surrender of all or any part of the Demised
Premises shall be valid unless in writing and signed by Landlord. The delivery
of keys to an employee of Landlord or of its agent shall
<PAGE>
not operate as a termination of this Lease or a surrender of the Demised
Premises. If Tenant shall at any time request Landlord to sublet the Demised
Premises for Tenant's account, Landlord or its agent is authorized to receive
said keys for such purposes without releasing Tenant from any of its
obligations under this Lease, and Tenant hereby releases Landlord from any
liability for loss or damage to any of Tenant's Property in connection with
such subletting.
(b) the receipt or acceptance by Landlord of rents with knowledge of breach by
Tenant of any term, agreement, covenant, condition or obligation of this Lease
shall not be deemed a waiver of such breach.
(c) no payment by Tenant or receipt by Landlord of a lesser amount than the
correct Fixed Rent or additional rent due hereunder shall be deemed to be other
than a payment on account, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment be deemed to affect or evidence
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance or pursue any other
remedy in this Lease or provided at law.
(d) if, in connection with obtaining, continuing or renewing financing for which
the Building, land or a leasehold or any interest therein represents collateral
in whole or in part, a bank, insurance company or other lender shall request
reasonable
<PAGE>
modifications of this Lease as a condition of such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or adversely
affect to a material degree the Tenant's leasehold interest hereby created.
ARTICLE 30-- CURING TENANT'S DEFAULTS, ADDITIONAL RENT
30.01 If Tenant shall default in the performance of any of its
obligations under this Lease, Landlord, without thereby waiving such default,
may (but shall not be obligated to) perform the same for the account and at the
expense of Tenant, without notice, in a case of emergency, and in any other
case, only if such default continues after the expiration of ten (10) days from
the date Landlord gives Tenant notice of intention so to do.
30.02 Bills for any expenses incurred by Landlord in connection with
any such performance by it for the account of Tenant, and bills for all costs,
expenses and disbursements of every kind and nature whatsoever, including
reasonable counsel fees, involved in collecting or endeavoring to collect the
fixed rent or additional rent or any part thereof or enforcing or endeavoring to
enforce any rights against Tenant, under or in connection with this Lease, or
pursuant to law, including any such cost, expense and disbursement involved in
instituting and prosecuting summary proceedings, as well as bills for any
property, material, labor or services provided, furnished, or rendered, by
Landlord may be sent by Landlord to Tenant monthly, or presented immediately, at
Landlord's option, and, shall be due and payable in accordance with the terms of
such bills.
ARTICLE 31-- NOTICES -- SERVICE OF PROCESS
31.01 Any notice, statement, demand, request or other communication
required or permitted pursuant to this Lease or otherwise shall be in writing
and shall be deemed to have been properly given if sent by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
other party at the address hereinabove set forth (except that after the
Commencement Date, Tenant's address, unless Tenant shall give notice to the
contrary, shall be the Building), and shall be deemed to have been given on the
expiration of five (5) business days after mailing. Either party may, by notice
as aforesaid, designate a different address or addresses for notices,
statements, demands or other communications intended for it. However, notices
requesting after hours service pursuant to Sections 8.01 and 9.01 may be given,
provided they are in writing, by delivery to the Building Superintendent or any
other person in the Building designated by Landlord to receive such notices, and
notice of fire, accident or other emergency shall be given by telegram or by
personal delivery of written notice to that address designated for this purpose
from time to time by the respective parties hereto,
31.02 Whenever either party shall consist of more than one person or
entity, any notice, statement, demand, or other communication required or
permitted, or any payment to be made shall be deemed duly given or paid if
addressed to or by (or in the case of payment by check, to the order of) any
such persons or entities who shall be designated from time to time as the
authorized representative of such party. Such party shall promptly notify the
other of the identity of such person or entity who is so to act on behalf of all
persons and entities then comprising such party and of all changes in such
identity.
31.03 Tenant agrees to give any Mortgagee, by Certified Mail, a copy of
any Notice of Default served upon the Landlord by Tenant provided that prior to
such notice Tenant has been notified, in writing, (by way of Notice of
Assignment of Rents and Leases, or otherwise) of the address of such Mortgagee.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Mortgagee shall have an
additional thirty (30) days within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
if within such thirty (30) days, any Mortgagee has commenced and is diligently
pursuing the remedies necessary to cure such default, (including but not limited
to commencement of foreclosure proceedings, if necessary to effect such cure) in
which event this lease shall not be terminated while such remedies are being so
diligently pursued.
ARTICLE 32 -- ESTOPPEL CERTIFICATE, MEMORANDUM
32.01 Tenant agrees, at any time and from time to time, as requested by
Landlord, upon not less than ten (10) days' prior notice, to execute and deliver
without cost or expense to the Landlord a statement certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect except as modified and stating the
modifications), certifying the dates to which the Fixed Rent and additional rent
have been paid, and stating whether or not, to the best knowledge of the Tenant,
the Landlord is in default in performance of any of its obligations under this
Lease, and, if so, specifying each such default of which the Tenant may have
knowledge, it being intended that any such statement delivered pursuant thereto
may be relied upon by any other person with whom the Landlord may be dealing.
The foregoing obligation shall be deemed a substantial obligation of the
tenancy, the breach of which shall give Landlord those remedies herein provided
for an event of default.
<PAGE>
32.02 Tenant agrees not to record this Lease. At the request of either
party, Landlord and Tenant shall promptly execute, acknowledge and deliver a
memorandum with respect to this Lease sufficient for recording which Tenant may
record. Such memorandum shall not in any circumstances be deemed to change or
otherwise affect any of the obligations or provision of this Lease.
ARTICLE 33 -- NO OTHER REPRESENTATIONS,
CONSTRUCTION, GOVERNING LAW
33.01 Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease, is
not relying upon any warranties, representations, promises or statements, except
to the extent that the same are expressly set forth in this Lease or in any
other written agreement which may be made and executed between the parties
concurrently with the execution and delivery of this Lease and shall expressly
refer to this Lease. This Lease and said other written agreement(s) made
concurrently herewith are hereinafter referred to as the "lease documents". It
is understood and agreed that all understandings and agreements heretofore had
between the parties are merged in the Lease documents, which alone fully and
completely express their agreements and that the same are entered into after
full investigation, neither party relying upon any statement or representation
not embodied in the Lease documents, made by the other.
33.02 If any of the provisions of this Lease, or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
vault space and all such areas not within the property line of the Building,
which Tenant may be permitted to use and/or occupy, is to be used and/or
occupied under a revocable license, and if any such license be revoked, or if
the amount of such space or area be diminished or required by any federal, state
or municipal authority or public utility, Landlord shall not be subject to any
liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent nor shall such revocation diminution or requisition be deemed
constructive or actual eviction. Any tax fee or charge of municipal authorities
for such vault or area shall be paid by Tenant.
ARTICLE 37 -- INABILITY TO PERFORM
This Lease and the obligation of Tenant to pay rent hereunder and perform all of
the other covenants and agreements hereunder on part of Tenant to be performed
shall in no wise be affected, impaired or excused because Landlord is unable to
fulfill any of its obligations under this lease or to supply or is delayed in
supplying any service expressly or impliedly to be supplied or is unable to
make, or is delayed in making any repair, additions, alterations or decorations
or is unable to supply or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from so doing by reason of strike or labor
troubles or any cause whatsoever including but not limited to, government
preemption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
ARTICLE 38 -- LIABILITY OF LANDLORD
Tenant shall look solely to the estate and interest of landlord, its successors
and assigns, in the land and Building for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any
default by Landlord hereunder, and no other property or assets of Landlord shall
be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to either' this Lease,
the relationship of Landlord and Tenant hereunder or Tenant's use and occupancy
of the Demised Premises. Neither the partners comprising Landlord (the
"Partners"), nor the partners, shareholders, directors and officers of Landlord
or the Partners shall be liable for the performance of Landlord's obligations
under this Lease,
ARTICLE 39--BROKERAGE
Tenant represents and warrant that it has dealt only with Dolan Realty, Inc, and
Archie Schwartz Company in connection with this Lease and Tenant does hereby
agree to indemnify and hold harmless the Landlord of and from any and all loss,
costs, damage or expense (including, without limitation, attorneys' fees and
disbursements) incurred by the Landlord by reason of any claim of or liability
to any other broker who shall claim to have dealt with Tenant in connection with
this Lease.
ARTICLE 40--EARLY TERMINATION OPTION
40.01 At any time subsequent to the end of the sixtieth (60) month of the Term
of the Lease, Tenant, at Tenant's option may terminate this Lease upon (i) at
least three (3) months prior written notice by Tenant
<PAGE>
of Tenant's intent to terminate the Lease at specified date (hereinafter the
"Early Termination Date") and (ii) payment by Tenant to Landlord of an Early
Lease Termination Fee equal to all unamortized costs of Landlord, for
brokerage commissions and attorneys fees and costs associated with the Lease
plus a sum equal to twenty-five (25%) percent of the Fixed Rent for the
remaining term of the Lease,
40.02 All of Tenant's duties and responsibilities set forth in Article 24
shall be binding upon Tenant in the event of an early termination of this Lease
pursuant to this Article 40.
ARTICLE 41--MISCELLANEOUS PROVISIONS
41.01 All work, including but not limited to, waxing or additional cleaning that
Tenant does or shall do in the Demised Premises, shall be done by contractors
employing union labor, approved in writing by Landlord and shall at all times
conform to the standards of the Building and shall comply with all laws and/or
requirements of public authorities. Tenant, as additional rent, shall indemnify
and hold harmless Landlord against any loss or damage Landlord may sustain by
reason of, and against, any order, decrees, judgments, attorney's fees and
expenses resulting from, failure of Tenant to comply with the provisions hereof.
41.02 The Article headings in this Lease and the Table of Contents prefixed to
this Lease are inserted only as a matter of convenience or reference, and are
not to be given any effect whatsoever in construing this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this instrument the day and
year first above written.
LANDLORD:
EVERGREEN AMERICA CORPORATION
By: __________________________
Witness for Landlord
TENANT:
PT-1 COMMUNICATIONS, INC.
By: __________________________
Its: __________________________
(Title)
Witness for Tenant
<PAGE>
- -------------------------------------------------------------------------------
OFFICE LEASE
"NEW WORLD TOWER" - 100 N. BISCAYNE BOULEVARD
LANDLORD:
NWT PARTNERS, LTD. SUCCESSORS IN INTEREST TO PEOPLES SOUTHWEST
REAL ESTATE LIMITED PARTNERSHIP
TENANT:
STAR TELECOMMUNICATIONS, INC.
PREMISES:
SUITE 2000
- --------------------------------------------------------------------------------
<PAGE>
BASIC TERM SHEET
OFFICE LEASE
"NEW WORLD TOWER" - 100 N. BISCAYNE BOULEVARD
The following provisions and terms are incorporated as Sections 1.2 and 1.3 in
the Lease between Landlord and Tenant.
1.1.1 - LANDLORD: NWT Partners, Ltd., successors in
interest to Peoples Southwest Real
Estate Limited Partnership
1.1.2 - TENANT: Star Telecommunications Inc., a
Delaware corporation authorized to do
business in Florida
1.1.3 - BUILDING: 100 N. Biscayne Blvd.
Miami, Florida 33132
which is currently known as New World
Tower and which includes the adjacent
parking garage.
1.1.4 - PREMISES: Suite 2000, having a gross leasable
area measured in accordance with
Section 1.4.
1.1.5 - USE OF PREMISES: general offices, telecommunications
or Internet switch facility and other uses consistent
therewith, subject to reasonable rules and
requirements of Landlord in regard to such switch.
1.1.6 - TENANT'S TRADE NAME: N/A
1.1.7 - LEASE TERM: ten (10) year(s) from the Lease
Commencement Date, unless otherwise extended or
shortened (if the Lease Commencement Date is other
than the first day of a calendar month, the first,
partial month shall be added to the following twelve
months to comprise the first year of the Lease Term).
1.1.8 - LEASE COMMENCEMENT DATE (SECTION 1.6) ): earlier of
(a) October 1, 1997, or (b) date of Substantial
Completion of Tenant's Initial Improvements. LEASE
EXPIRATION DATE (SECTION 1.6): Ten (10) years from
the Lease Commencement Date.
1.1.9 - RENT COMMENCEMENT DATE (SECTION 1.7): the Lease
Commencement Date
1.1.10 - FIXED MINIMUM RENT (SECTION 2.1): the aggregate sum
of $2,126,250.00 for the entire Lease Term (plus any
partial Lease month), payable the first of each
month as follows, plus all applicable taxes:
<TABLE>
<CAPTION>
First Lease Year
<S> <C> <C> <C>
(plus any partial month) $18.00 $189,000.00 /yr 15,750.00 /mo
Second Lease Year $18.50 $194,250.00 /yr 16,187.50 /mo
Third Lease Year $19.00 $199,500.00 /yr 16,625.00 /mo
Fourth Lease Year $19.50 $204,750.00 /yr 17,062.50 /mo
Fifth Lease Year $20.00 $210,000.00 /yr 17,500.00 /mo
Sixth Lease Year $20.50 $215,250.00 /yr 17,937.50 /mo
Seventh Lease Year $21.00 $220,500.00 /yr 18,375.00 /mo
Eighth Lease Year $21.50 $225,750.00 /yr 18,812.50 /mo
Ninth Lease Year $22.00 $231,000.00 /yr 19,250.00 /mo
Tenth Lease Year $22.50 $236,250.00 /yr 19,687.50 /mo
----------
Total $2,126,250.00
</TABLE>
------------------------/-----------------------
LANDLORD TENANT
<PAGE>
1.1.11 - Fixed Minimum Rent Increase(s)-CPI N/A
Adjustment Dates (Section 2.2):N/A
Basic Standard (Base Month):N/A
1.1.12 - Construction Plans Submission Date:___________
1.1.13 - Landlord's Contribution: $12.00 per square foot. Upon
the execution of this Lease, the parties shall
establish a checking account in the SunTrust Bank,
1111 Lincoln Road, Miami Beach, Florida Branch for
the purpose of paying for Tenant's Initial
Improvements, and Tenant shall deposit therein the
sum of $20,000.00 and Landlord shall deposit therein
the sum of $10,000.00. Such bank account (the
"Improvements Payment Account") shall require two
signatures on each check. One signatory shall be a
nominee of Landlord and one signatory shall be a
nominee of Tenant. The details shall be as set forth
in Section 5.3 of this Lease.
1.1.14 - Security Deposit (Section 10.1): $ 25,000.00
1.1.15 - Tenant's Participation In Operating Expenses and
Taxes (Section 4.1):
Proportionate Share: 4%
Base Operating Year: 1997; Base Tax Year: 1997
First Operating Expense Adjustment Payment Date:
First anniversary of Lease Commencement Date.
First Tax Adjustment Payment Date: First anniversary
of Lease Commencement Date.
1.1.1.16 Addresses for Notices (Section 12.1)
Tenant: Star Telecommunications, Inc.
233 E. De La Guerra Street
Santa Barbara, CA 93101
Attention: Keely Cormir
With a copy to:
David Reese, Esq.
Seed, Mackall & Cole, LLP
1332 Anacapa Street, Suite 200
Santa Barbara, CA 93111
and after the Lease Commencement Date,
the Premises, too
Landlord: NWT Partners, Ltd., a Florida
Limited Partnership
1111 Lincoln Road
Suite 800
Miami Beach, Florida 33139
Attn.: David Garfinkle
With a copy to:
Building Manager
New World Tower
100 N. Biscayne Blvd.
Miami, FL 33132
1.1.17 - Guarantors: N/A
1.1.18 - Additional Terms:
PARKING: Tenant shall have the right (but no
obligation to use) six (6) parking spaces in the
Building parking facilities, at the then-standard
rate for the parking in such facilities. The rate at
the time of execution of this instrument is $85.00
per space per month, plus applicable taxes. Tenant
may elect, by notice duly given to Landlord, to
reduce the number of spaces which it
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LANDLORD TENANT
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is allotted but, if it does so, Landlord shall not be
obligated to increase the number of spaces in the
future.
MOVING EXPENSE: Tenant shall have the right to engage
a moving company of its choice for moving furniture,
telephone systems, equipment, supplies and other
tangible personal property into or out of the
Premises at the beginning of the initial Lease Term
and the termination of the Lease; in connection with
such moving in of equipment, Landlord shall provide
Tenant free access to the freight elevator for all of
the equipment of Tenant at reasonable times, not to
conflict with other tenants' uses.
ASSIGNMENT: Tenant may assign this Lease or sublet
all or part of the Premises to an affiliated entity
without Landlord's prior written approval, provided
it delivers evidence of the assignment or sublease to
Landlord. Tenant may not assign or sublet all or any
part of the Premises to unaffiliated third parties
without the Landlord's prior written consent, which
consent shall not be unreasonably withheld or
delayed. If Tenant requests Landlord's consent to
assignment or subletting to an unaffiliated third
party, Landlord shall not have a right to recapture
the Premises. Landlord shall be entitled to fifty
percent (50%) of Tenant's profits (after payment of
reasonable transaction expenses) from subleases or
assignments to third parties. For the purposes of
this Lease, "an affiliate" or "an affiliated entity"
shall mean any party which is controlled by,
controlling or under common control with Tenant and
where the term control has the meaning attached to it
under the Internal Revenue Code.
SIGNAGE: In the event that Tenant lease the entire
20th floor, Tenant may install its logo or other
reasonable signage on the walls of the elevator lobby
on the 20th floor and on the entrance doors to the
space under lease by Tenant, subject to Landlord's
prior approval which shall not be unreasonably
withheld.
SEE RIDER
1.2 - Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Rules and Regulations
RIDER AND EXHIBIT A, EQUIPMENT AND OPERATING RIGHTS.
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LANDLORD TENANT
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TABLE OF CONTENTS
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PAGE
<S> <C> <C>
ARTICLE I
LANDLORD COVENANTS; PRIMARY LEASE PROVISIONS;
EXHIBITS; PREMISES; USE OF PREMISES; TERM
Section 1.1 COVENANTS OF LANDLORD'S AUTHORITY AND QUIET ENJOYMENT................................1
Section 1.2 PRIMARY LEASE PROVISIONS.............................................................1
Section 1.3 EXHIBITS.............................................................................1
Section 1.4 PREMISES LEASED BY TENANT............................................................1
Section 1.5 USE OF PREMISES......................................................................1
Section 1.6 LEASE TERM...........................................................................1
Section 1.7 RENT COMMENCEMENT DATE...............................................................2
Section 1.8 LEASE YEAR...........................................................................2
Section 1.9 ACCEPTANCE OF PREMISES...............................................................2
ARTICLE II
RENT
Section 2.1 FIXED MINIMUM RENT...................................................................2
Section 2.2 FIXED MINIMUM RENT INCREASE..........................................................2
Section 2.3 LATE PAYMENT ADMINISTRATIVE FEE......................................................2
Section 2.4 ADDITIONAL RENT - DEFINITION.........................................................3
Section 2.5 SALES TAX............................................................................3
ARTICLE III
SERVICES
Section 3.1 SERVICES OF LANDLORD.................................................................3
Section 3.2 SERVICES OF TENANT...................................................................4
Section 3.3 NO EVICTION..........................................................................4
Section 3.4 SECURITY.............................................................................5
Section 3.5 PARKING..............................................................................5
ARTICLE IV
OPERATING EXPENSES AND TAXES
Section 4.1 TENANT'S PARTICIPATION IN OPERATING EXPENSES AND TAXES...............................5
Section 4.2 DEFINITION OF OPERATING EXPENSES.....................................................6
Section 4.3 TENANT'S TAXES.......................................................................7
Section 4.4 TAXES INCLUDED.......................................................................7
Section 4.5 RECEIPT OF NOTICES...................................................................7
ARTICLE V
TENANT'S INITIAL IMPROVEMENTS
Section 5.1 CONSTRUCTION PLANS...................................................................7
Section 5.2 PLANS REVIEW.........................................................................9
Section 5.3 PAYMENT..............................................................................9
Section 5.4 TENANT DELAY........................................................................10
Section 5.5 SUBSTANTIAL COMPLETION..............................................................10
Section 5.6 EARLY OCCUPANCY.....................................................................10
Section 5.7 REVISIONS...........................................................................11
Section 5.8 COMPLETION DUE DILIGENCE............................................................11
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LANDLORD TENANT
(i)
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ARTICLE VI
ADDITIONS, ALTERATIONS, REPLACEMENTS, AND TRADE FIXTURES
Section 6.1 BY LANDLORD.........................................................................12
Section 6.2 BY TENANT...........................................................................12
Section 6.3 CONSTRUCTION INSURANCE AND INDEMNITY................................................13
Section 6.4 MECHANIC'S LIENS AND ADDITIONAL CONSTRUCTION........................................13
Section 6.5 TRADE FIXTURES......................................................................14
Section 6.6 RIGHT OF ENTRY......................................................................15
ARTICLE VII
INSURANCE AND INDEMNITY
Section 7.1 TENANT'S INSURANCE..................................................................15
Section 7.2 EXTRA HAZARD INSURANCE PREMIUMS.....................................................16
Section 7.3 INDEMNITY...........................................................................17
ARTICLE VIII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 8.1 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY.....................................17
Section 8.2 CONDEMNATION........................................................................18
ARTICLE IX
DEFAULT, REMEDIES
Section 9.1 DEFAULT.............................................................................19
Section 9.2 REMEDIES............................................................................20
Section 9.3 TERMINATION.........................................................................20
Section 9.4 NO REINSTATEMENT AFTER TERMINATION..................................................20
Section 9.5 RETENTION OF SUMS AFTER TERMINATION.................................................21
Section 9.6 RE-ENTRY............................................................................21
Section 9.7 SUMS COLLECTED UPON RELETTING.......................................................22
Section 9.8 NO EFFECT ON SUIT...................................................................22
Section 9.9 WAIVER OF RIGHTS OF REDEMPTION......................................................22
Section 9.10 USE OF WORD "RE-ENTRY"..............................................................22
Section 9.11 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS..........................................22
Section 9.12 LANDLORD'S EXPENSES.................................................................23
ARTICLE X
SECURITY
Section 10.1 SECURITY DEPOSIT....................................................................23
Section 10.2 PERSONAL PROPERTY...................................................................24
ARTICLE XI
ADDITIONAL TENANT AGREEMENTS
Section 11.1 MORTGAGE FINANCING AND SUBORDINATION................................................24
Section 11.2 ASSIGNMENT OR SUBLETTING............................................................24
Section 11.3 TENANT'S NOTICE TO LANDLORD OF DEFAULT..............................................25
Section 11.4 SHORT FORM LEASE....................................................................25
Section 11.5 SURRENDER OF PREMISES AND HOLDING OVER..............................................25
Section 11.6 ESTOPPEL CERTIFICATE................................................................25
Section 11.7 DELAY OF POSSESSION.................................................................25
Section 11.8 COMPLIANCE WITH LAW.................................................................25
Section 11.9 RULES AND REGULATIONS...............................................................27
Section 11.10 ABANDONMENT.........................................................................28
Section 11.11 LANDLORD'S LIEN.....................................................................28
(ii)
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LANDLORD TENANT
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 NOTICES.............................................................................28
Section 12.2 ENTIRE AND BINDING AGREEMENT........................................................28
Section 12.3 PROVISIONS SEVERABLE................................................................28
Section 12.4 CAPTIONS............................................................................28
Section 12.5 RELATIONSHIP OF THE PARTIES.........................................................28
Section 12.6 ACCORD AND SATISFACTION.............................................................29
Section 12.7 BROKER'S COMMISSION.................................................................29
Section 12.8 CORPORATE AND PARTNERSHIP STATUS....................................................29
Section 12.9 MISCELLANEOUS.......................................................................29
Section 12.10 FINANCIAL STATEMENTS................................................................30
Section 12.11 RELOCATION..........................................................................31
Section 12.12 NON-WAIVER PROVISIONS...............................................................31
Section 12.13 RADON GAS...........................................................................31
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LANDLORD TENANT
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(iii)
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OFFICE LEASE
"NEW WORLD TOWER" - 100 N. BISCAYNE BOULEVARD
THIS LEASE ("Lease") is made and entered into as of this ___________
day of _______________________________, 19__ by and between Landlord and Tenant.
Landlord demises and rents to Tenant, and Tenant leases from Landlord,
the Premises now existing in Landlord's Building, upon the terms, covenants
and conditions contained herein.
ARTICLE I
LANDLORD COVENANTS; PRIMARY LEASE PROVISIONS;
EXHIBITS; PREMISES; USE OF PREMISES; TERM
Section 1.1 COVENANTS OF LANDLORD'S AUTHORITY AND QUIET ENJOYMENT.
Landlord represents and covenants that (a) prior to commencement of the
Lease Term, it has good title to the land and Building of which the Premises
form a part, and (b) upon performing all of its obligations under this Lease,
Tenant shall peacefully and quietly have, hold and enjoy the Premises for the
Lease Term.
Section 1.2 PRIMARY LEASE PROVISIONS.
The provisions and terms of Sections 1.2.1 through 1.2.18 of the Basic
Term Sheet are incorporated in this Lease as a part of this Section 1.2, and
are subject to the additional provisions of this Lease.
Section 1.3 EXHIBITS.
The exhibits, riders and attachments described on the Basic Term Sheet
are incorporated in and made part of this Lease as part of this Section 1.3.
Section 1.4 PREMISES LEASED BY TENANT.
1.4.1 The Premises are leased by Tenant from Landlord. The
approximate boundaries and location of the Premises are outlined on the Site
Plan diagram of the Building (Exhibit "B"), which sets forth the general
layout of the Building but which shall not be deemed to be a warranty,
representation, or agreement upon the part of the Landlord that the Building
and layout will be exactly as indicated on said diagram.
1.4.2 The portion of the Building to be leased by Tenant. shall be
measured upon substantial completion of the Tenant's Initial Improvements
using the American Standard Z65.1-1996 as published by the Building Owners
and Managers Association International to determine the precise square
footage of the Premises. Within ten (10) days following completion of such
measurements, Landlord and Tenant shall complete and initial an addendum
stating the total number of square feet in the Premises, the total square
footage of the Building, and the Tenant's percentages of the Building and the
Common Area.
Section 1.5 USE OF PREMISES.
The Premises shall be used and occupied only for the Use specified in
the Basic Term Sheet, and for no other purpose or purposes without Landlord's
prior written consent, which consent shall not be unreasonably withheld,
delayed or conditioned. Tenant shall, at its own risk and expense, obtain all
governmental licenses and permits necessary for such use.
Section 1.6 LEASE TERM.
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LANDLORD TENANT
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The Lease Commencement Date, the Lease Term and the Lease Termination
Date shall be for the period specified in the Basic Term Sheet, unless sooner
terminated or extended as provided in this Lease.
Section 1.7 RENT COMMENCEMENT DATE.
Tenant shall commence payment of Rent at the earlier of (a) the date
specified in the Basic Term Sheet, or (b) the date when Tenant shall occupy
the Premises for business; the Rent Commencement Date shall be specified by
both parties in writing no later than five (5) days after Tenant opens for
business, upon request of either party. If the Rent Commencement Date falls
on a day other than the first day of a calendar month, the Fixed Minimum Rent
for such month shall be prorated on a per diem basis, calculated on the basis
of a thirty (30) day month.
Section 1.8 LEASE YEAR.
For purpose of this Lease, the term "Lease Year" is defined to mean a
calendar year (beginning January 1 and extending through December 31 of any
given year). Any portion of a year which is less than a Lease Year, that is,
from the Lease Commencement Date through the next December 31, and from the
last January 1 falling within the Lease Term through the last day of the
Lease Term, shall be defined as a Partial Lease Year.
ARTICLE II
RENT
Section 2.1 FIXED MINIMUM RENT.
2.1.1 The total Fixed Minimum Rent for the Lease Term as specified
in the Basic Term Sheet shall be payable by Tenant as specified in the Basic
Term Sheet.
2.1.2 The phrase "Fixed Minimum Rent" shall be the Fixed Minimum
Rent specified above, payable monthly in advance on the first day of each
month, without prior demand therefor and without any deduction or setoff
whatsoever. Tenant reserves the right to make payment under protest if any
charges are in dispute. In addition, Tenant covenants and agrees to pay
Landlord all applicable sales or other taxes which may be imposed on the
above specified rents or payments hereinafter provided for to be received by
Landlord when each such payment is made.
Section 2.2 Intentionally left blank.
Section 2.2 LATE PAYMENT ADMINISTRATIVE FEE.
If a Rent payment is not received within five (5) days after its due
date, administrative fees and late charges of $50.00, plus an ongoing charge
of 18% (annual rate, which shall accrue on the unpaid Rent including
Additional Rent) shall become immediately due and payable from Tenant to
Landlord, without notice or demand. This provision for administrative fees
and late charges is not, and shall not be deemed, a grace period. In the
event any check, bank draft or negotiable instrument given for any payment
under this Lease shall be dishonored at any time for any reason whatsoever
not attributable to Landlord, Landlord shall be entitled, in addition to any
other remedy that may be available, to an administrative charge of Two
Hundred Dollars ($200.00). Such administrative fees and late charges are
neither penalties nor interest charges, but liquidated damages to defray
administrative, collection, and related expenses due to Tenant's invalid
payment or to Tenant's failure to make such Rent payment when due. An
additional administrative fee and late charge shall become immediately due
and payable on the first day of each month for which all or a portion of a
Rent payment (together with any administrative fee and late charge) remains
unpaid. Landlord, at its option, may deduct any such charge from any Security
Deposit held by Landlord and, in such event, Tenant shall immediately deposit
a like amount with Landlord in accordance with the terms
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LANDLORD TENANT
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of Section 10.1. All sums which Tenant shall be obligated to pay to Landlord
from time to time pursuant to this Lease shall be deemed part of the Rent. In
the event of the nonpayment by Tenant of such sums, Landlord shall have the
same rights and remedies by reason of such nonpayment as if Tenant had failed
to pay any Rent.
Section 2.3 ADDITIONAL RENT - DEFINITION.
In addition to the foregoing Fixed Minimum Rent and Fixed Minimum Rent
Increase, all payments to be made under this Lease by Tenant to Landlord
shall be deemed to be and shall become Additional Rent hereunder and,
together with Fixed Minimum Rent, shall be included in the term "Rent"
whenever such term is used in this Lease. Unless another time is expressly
provided for the payment thereof, any Additional Rent shall be due and
payable on demand or together with the next succeeding installment of Fixed
Minimum Rent, whichever shall first occur, together with all applicable State
taxes and interest thereon at the then prevailing legal rate, and Landlord
shall have the same remedies for failure to pay the same as for non-payment
of Fixed Minimum Rent. Landlord, at its election, shall have the right to pay
or do any act which requires the expenditure of any sums of money by reason
of the failure or neglect of Tenant to perform any of the provisions of this
Lease, and in the event Landlord elects to pay such sums or do such acts
requiring the expenditure of monies, all such sums so paid by Landlord,
together with interest thereon, shall be deemed to be Additional Rent and
payable as such by Tenant to Landlord upon demand.
Section 2.4 SALES TAX.
Together with each payment of Rent or other sum on which such tax may be
due, Tenant shall pay to Landlord a sum equal to any applicable sales tax,
tax on rents, and any other charges, taxes, and/or impositions now in
existence or subsequently imposed based upon the privilege of renting the
Premises or upon the amount of rent collected. Tenant's liability for such
taxes and/or impositions shall be payable whether assessed at the time the
Rent payment is made or retroactively, and shall survive the termination or
expiration of this Lease.
ARTICLE III
SERVICES
Section 3.1 SERVICES OF LANDLORD.
3.1.1 Landlord shall maintain the public and common areas of the
Building, including without limitation, lobbies, stairs, elevators, corridors
and restrooms, the windows in the Building, the mechanical, plumbing, life
safety and electrical equipment serving the Building, and the structure
itself in reasonably good order and condition except for damage occasioned by
the act of Tenant, which damage shall be repaired by Landlord at Tenant's
expense.
3.1.2 Landlord shall furnish the Premises with (a) electricity for
lighting and the operation of standard office machines, (b) heat and air
conditioning to the extent reasonably required for the comfortable occupancy
by Tenant in its use of the Premises during the period from 8:00 a.m. to 6:00
p.m. on weekdays and from 9:00 a.m. to 1:00 p.m. on Saturdays, except for
holidays declared by the Federal government, or such shorter period as may be
prescribed by any applicable policies or regulations adopted by any utility
or governmental agency, (c) elevator service, if applicable, (d) lighting
replacement (for building standard lights), (e) standard restroom supplies,
(f) window washing with reasonable frequency, (g) and daily janitor service
five (5) days a week during the times and in the manner that such services
are customarily furnished in comparable office buildings in the area.
Landlord shall not be in default hereunder or be liable for any damages
directly or indirectly resulting from, nor shall the rental herein reserved
be abated by
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LANDLORD TENANT
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reason of (i) the installation, use or interruption of use of any equipment
in connection with the furnishing of any of the foregoing service, except as
a result of Landlord's gross negligence or willful misconduct, (ii) failure
to furnish or delay in furnishing any such services when such failure or
delay is caused by accident or any condition beyond the reasonable control of
Landlord or by the making of necessary repairs or improvements to the
Premises or to the Building, or other cause other than Landlord's gross
negligence or willful misconduct, or (iii) the limitation, curtailment,
rationing or restrictions on use of water, electricity, gas or any other form
of energy serving the Premises or the Building. Landlord shall use reasonable
efforts diligently to remedy any interruption in the furnishing of such
services.
3.1.3 Whenever heat generating equipment or lighting other than
Building standard lights are used in the Premises by Tenant which materially
affect the temperature otherwise maintained by the air conditioning system,
Landlord shall have the right, after three (3) days notice to Tenant, to
install supplementary air conditioning facilities in the Premises or
otherwise modify the ventilating and air conditioning systems serving the
Premises, and the cost of such facilities and modifications shall be borne by
Tenant as Additional Rent. Tenant shall also pay, as Additional Rent, the
cost of providing all cooling and heat energy to the Premises in excess of
that required for normal office use or during hours requested by Tenant when
air conditioning or heat is not otherwise furnished by Landlord. If Tenant
installs lighting requiring power in excess of that required for normal
office use in the Building, or if Tenant installs equipment requiring power
in excess of that required for normal desk-top office equipment or normal
copying equipment, Tenant shall pay for the cost of such excess power as
Additional Rent, together with the cost of installing any additional risers
or other facilities that may be necessary to furnish such excess power to the
Premises.
Section 3.2 SERVICES OF TENANT.
Tenant shall, at Tenant's own expense, keep the Premises in good repair
and tenantable condition during the Term, except only for reasonable wear and
tear. Tenant shall, at Tenant's expense but under the direction of Landlord,
promptly repair (and make replacements where necessary) any injury or damage
to the Building and the property of which it is a part ("Property"),
including, but not limited to, any and all broken glass, caused by Tenant or
Tenant's officers, personnel, agents, employees, servants, licensees,
invitees, guests, patrons, or customers. Tenant shall shampoo and replace
carpeting, wash walls and ceilings, and otherwise maintain the appearance of
the Premises and contents thereof at Tenant's expense as necessary to
maintain the Premises in good repair and tenantable condition.
Section 3.3 NO EVICTION.
The services described in this Article III shall be provided as long as
this Lease is in full force and effect, subject to interruption caused by
unavoidable delay, force majeure or acts of God, and conditions and causes
beyond the control of Landlord. Furthermore, Landlord reserves the right to
stop the service of the air-cooling, elevator, electrical, plumbing or other
mechanical systems or facilities in the Building when necessary, by reason of
accident or emergency, or for repairs, additions, alterations, replacements,
decorations or improvements desirable or necessary to be made in the
reasonable judgment of Landlord, until such repairs, alterations,
replacements or improvements shall have been completed. Landlord shall
undertake to diligently commence and work toward completion of all necessary
repairs. All discretionary repairs shall be done in a manner and at times,
whenever reasonably appropriate, so as not to unnecessarily interfere with
Tenant's Use and shall only be undertaken after giving Tenant three (3) days
prior written notice. Landlord shall have no responsibility or liability for
interruption, curtailment or failure to supply cooled or outside air, heat,
elevator,
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LANDLORD TENANT
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plumbing or electricity when prevented by exercising its right to stop
service or by any cause whatsoever beyond Landlord's control or by human
occupancy factors, or by failure of independent contractors to perform, or by
Legal Requirements, or by mandatory energy conservation, or if Landlord
elects voluntarily to cooperate in energy conservation at the request of any
Legal Authority. The exercise of such right or such failure by Landlord shall
not constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any compensation or to any abatement or diminution of Base
Rent or Additional Rent, or relieve Tenant from any of its obligations under
this Lease, or impose any liability upon Landlord or its agents by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of
Tenant's business, or otherwise.
Section 3.4 SECURITY.
Tenant acknowledges that Landlord shall not and does not have any
responsibility for the security of Tenant's officers, personnel, agents,
employees, servants, licensees, invitees, guests, patrons, customers, and all
others who come on or about the Property related to Tenant or Tenant's Use.
Section 3.5 PARKING.
If any parking is made available to Tenant by Landlord, Landlord shall
not be liable for any damage of any nature whatsoever to, or any theft of,
automobiles or other vehicles or the contents of them, while in or about such
parking areas, unless such damage is caused by Landlord's gross negligence or
willful misconduct.
ARTICLE IV
OPERATING EXPENSES AND TAXES
Section 4.1 TENANT'S PARTICIPATION IN OPERATING EXPENSES AND
TAXES.
4.1.1 Commencing on the First Adjustment Payment Date, Tenant
shall, on the first day of each month in advance pay to Landlord pro rata
monthly installments on account of the amount reasonably projected by
Landlord for Tenant's Share of increases in Operating Expenses and for
Tenant's Share of increases in Taxes over the Base Operating Year and over
the Base Tax Year, respectively, based upon the most recent data available to
Landlord, from time to time, for Operating Expenses and for Taxes. By April 1
of each Lease Year, Landlord shall submit to Tenant statement(s) showing the
actual amounts which should have been paid by Tenant with respect to
increases in Operating Expenses and with respect to increases in Taxes for
the past calendar year, the amount of those expenses actually paid during
that year by Tenant and the amount of the resulting balance due on either or
both of those expenses, or overpayment of either of both of them, as the case
may be. Tenant may object to such statements if, and only if, Tenant, within
thirty (30) days of receipt by Tenant of such statement, sends a written
notice to Landlord objecting to such statement and specifying the respects in
which such statement is claimed to be incorrect. If such notice is sent, the
parties recognize, as to the Operating Expenses, the unavailability of
Landlord's books and records because of the confidential nature thereof and
hence agree that either party may refer the decision of the issues raised to
a reputable independent firm of certified public accountants selected by
Landlord and Tenant (and not previously having performed services for either
party), and the decision of such accountants shall be conclusively binding
upon the parties. The fees and expenses involved in such decision shall be
borne by Tenant unless Landlord's charges are found to be in error by more
than five percent (5%). Notwithstanding anything to the contrary in this
paragraph, if the amount in dispute is less than $1000 for a calendar year,
no third parties shall be utilized, by Landlord or Tenant, whose cost shall
be subject to reimbursement by the other party, in which case, Tenant shall
have the right to
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LANDLORD TENANT
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audit Landlord's books at Tenant's expense. Any balance shown to be due
pursuant to said statement shall be paid by Tenant to Landlord within thirty
(30) days following Tenant's receipt of the statement and any overpayment
shall be immediately credited against Tenant's obligation to pay Rent, and/or
expected Additional Rent in connection with anticipated increases in
Operating Expenses or anticipated increases in Taxes or, if by reason of any
termination of this Lease no such future obligations exist, shall immediately
be refunded to Tenant. Anything in this Lease to the contrary
notwithstanding, Tenant shall not delay or withhold payment of any balance
shown to be due pursuant to a statement rendered by Landlord to Tenant,
pursuant to the terms of this Lease, because of any objection which Tenant
may raise with respect to the statement.
4.1.2 If this Lease expires during a Partial Lease Year, Tenant
shall be responsible for its estimated pro rata share of Operating Expenses
and of Taxes for the Partial Lease Year. Tenant shall remit full payment to
Landlord immediately. If Tenant fails to remit such full payment to Landlord,
Landlord in its sole discretion may deduct the amount due from Tenant's
Security Deposit and be entitled to all other rights and remedies under this
Lease for Tenant's default.
Section 4.2 DEFINITION OF OPERATING EXPENSES.
The term "Operating Expenses" shall mean (a) all costs of management,
operation and maintenance of the Building, including, without limitation,
wages, salaries and payroll expense of employees, janitorial, maintenance,
guard and other services, reasonable Building management office rent or
rental value, power, fuel, water, waste disposal, landscaping care, premiums
for liability, fire, hazard and other property related insurance, parking
area care and management, fees for energy saving programs, administrative
costs, including management fee, and (b) the cost (amortized over such
reasonable period as Landlord shall determine) of any capital improvements
made to the Building by Landlord after the date of this Lease that are
intended to reduce the Operating Expenses or that are required under any
governmental law or regulation, not to exceed useful life as determined for
Federal Income Tax purposes; provided, however, that Operating Expenses shall
not include real property taxes or assessments (which are included in
"Taxes"), depreciation on the Building, costs of tenant improvements, real
estate brokers' commissions, interest and capital items other than those
referred to in clause (b) above. Operating costs shall not include the
following: (a) Costs of the original construction of the Building or altering
the Building in the future (except as otherwise set forth herein), water or
sewer connection fees payable in connection with the original construction of
the Building, costs of structural repairs to the Building, costs of repairing
latent defects or inadequacies in the design or construction of the Building,
the Premises, and/or costs of any other capital nature (including, without
limitation, capital improvements, and capital repairs); (b) Costs of leasing
commissions, legal fees, space planning, and architecture or engineering
fees, construction allowances and costs, permit and license fees, moving
expenses, other leasing concessions, or other expenses incurred in procuring
or retaining tenants for the Building; (c) Salaries, wages, or other
compensation paid to officers, executives, or employees of the Landlord or
the Building's managing agent above the level of building manager or who are
not otherwise engaged full time in working at the Building (if any employee
at or below the level of building manager works less than full time at the
Building, such employee's salary, wages, and other compensation shall be
equitably apportioned based upon the time spent at the Building and such
equitably apportioned amount shall be included as an Operating Expense); (d)
costs incurred in connection with disputes with actual or prospective tenants
or other occupants of the Building, or with actual or prospective employees,
consultants, management agents, leasing agents, purchasers, ground lessors or
mortgagees of the Building or the land on which it is located; (e) Costs
incurred in connection with the sale, financing, refinancing, or change of
ownership (directly or
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indirectly) of the Building or the land on which it is located; (f) Amounts
paid to any affiliate, parent, or subsidiary of Landlord, or to any
representative, employee or agent of Landlord, to the extent such amount
exceeds the competitive market rates that would be charged by third parties
for similar services of comparable quality, provided, however, that an
affiliate of Landlord is the management company, and Landlord agrees that the
management fee paid such affiliated company shall never be at a higher
percentage rate than that charged Landlord for the Base Operating Year;
Payment of principal and interest or any other finance charges made on any
debt and rental payments made on any ground or underlying lease, except for
any interest payments on capital improvements made pursuant to Section 4.2(b)
hereof; (h) Non cash items, such as deductions for bad debt losses, rent
losses and reserves, and depreciation and amortization, interest on capital
investments except for any depreciation, amortization and interest on capital
improvements made pursuant to Section 4.2 (b) above; and (i) Costs of any
items for which Landlord receives reimbursement from insurance proceeds or
any third party.
Section 4.3 TENANT'S TAXES.
Tenant covenants and agrees to pay promptly when due all taxes imposed
upon its business operations, its personal property situated in the Premises,
and any and all Occupational License Fees. Tenant shall be entitled to
contest any such tax or fee upon posting a bond in amount reasonably
satisfactory to Landlord.
Section 4.4 TAXES INCLUDED.
Should any governmental taxing authority, acting under any present or
future law, ordinance, or regulation, levy, assess or impose a tax, excise
and/or assessment (other than income or franchise tax) upon or against or in
any way related to the land and buildings comprising the Building, either by
way of substitution or in addition to any existing tax on land and building
otherwise, Tenant shall be responsible for and shall pay to Landlord its
Proportionate Share as set forth above of such tax, excise and/or assessment.
Section 4.5 RECEIPT OF NOTICES.
Failure of Landlord to furnish in a timely manner a statement of actual
increases in Operating Expenses or Taxes or to give notice of an adjustment
to rent under this Article IV shall not prejudice or act as a waiver of
Landlord's right to furnish such statement or to give such notice at a
subsequent time or to collect any adjustment to or recalculation of the
Additional Rent for any preceding period, provided that such notice is given
within one year of the applicable period. Tenant recognizes that Landlord's
statements showing the estimate of increases in Operating Expenses and Taxes
for any calendar year may be rendered at the end of the previous calendar
year or the beginning of such calendar year, or later. If Landlord's
statement is rendered subsequent to the beginning of a calendar year, Tenant
shall continue to pay the increase in the Operating Expenses and in the Taxes
for the prior calendar year and, should a deficiency result by virtue of an
increase in Landlord's estimate of the Operating Expenses or Taxes for the
current year, Tenant shall pay the amount of such deficiency, if any, in
full, in addition to the next monthly rent payment.
ARTICLE VARTICLE V TENANT'S INITIAL IMPROVEMENTSARTICLE V
TENANT'S INITIAL IMPROVEMENTSARTICLE V TENANT'S INITIAL
IMPROVEMENTS
TENANT'S INITIAL IMPROVEMENTS
Section 5.1 CONSTRUCTION PLANSSection 5.1 CONSTRUCTION
PLANSSection 5.1 CONSTRUCTION PLANSSection 5.1 CONSTRUCTION
PLANS.
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Tenant shall complete or cause the completion of Tenant's Initial
Improvements as shown on the Final Plans and as more fully described in this
Section. At Tenant's sole cost and expense, Tenant shall submit to Landlord its
complete and detailed architectural, structural, mechanical and engineering
plans and specifications prepared by an architect or engineer, showing Tenant's
Initial Improvements ("Construction Plans") within thirty (30) days after the
execution of this Lease (time being of the essence) for Landlord's approval. If
applicable, Tenant's Construction Plans shall include all information necessary
to reflect Tenant's requirements for the installation of any supplemental air
conditioning system and ductwork, heating, electrical, plumbing and other
mechanical systems and all work necessary to connect any special or non-standard
facilities to the Building's base mechanical, electrical and structural systems.
Tenant's submission shall include not less than one (1) set of sepias and five
(5) sets of black and white prints. Tenant's Construction Plans shall include,
but not be limited to, indication or identification of the following:
5.1.1 locations and structural design of all floor area
requiring live load capacities in excess of 75 pounds per square foot;
5.1.2 the density of occupancy in large work areas;
5.1.3 the location of any food service areas or vending
equipment rooms;
5.1.4 areas requiring 24-hour air conditioning;
5.1.5 any partitions that are to extend from floor to underside
of structural slab above;
5.1.6 location of rooms for telephone equipment;
5.1.7 locations and types of plumbing, if any, required for
toilets (other than core facilities), sinks, drinking fountains, etc.;
5.1.8 light switching of offices, conference rooms, etc.;
5.1.9 layouts for specially installed equipment, including
computers, size and capacity of mechanical and electrical services required
and heat projection of equipment;
5.1.10 dimensioned location of: (a) electrical receptacles (120
volts), including receptacles for wall clocks, and telephone outlets and
their respective locations (wall or floor), (b) electrical receptacles for
use in the operation of Tenant's business equipment which requires 208 volts
or separate electrical circuits, (c) electronic calculating and CRT systems,
etc., (d) special audiovisual requirements, and (e) other special electrical
requirements;
5.1.11 special fire protection equipment and raised flooring;
5.1.12 reflected ceiling plan;
5.1.13 information concerning air conditioning loads, including,
but not limited to, air volume amounts at all supply vents;
5.1.14 materials, colors and designs of wall coverings and
finishes;
5.1.15 painting and decorative treatment required to complete all
construction;
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5.1.16 swing of each door, and schedule for doors (including
dimensions for undercutting to clean carpeting) and frames and hardware;
5.1.17 modifications of the front door and surrounding area, if
any, as may be required for handicapped use; and
5.1.18 all other information reasonably necessary to make the
work complete and in all respects ready for operation.
Section 5.2 PLANS REVIEWSection 5.2 PLANS REVIEWSection
5.2 PLANS REVIEWSection 5.2 PLANS REVIEW.
Landlord or Landlord's consultant shall respond to Tenant's request for
approval of Tenant's Construction Plans within ten (10) business days of their
submission, prepared in accordance with the terms of this Lease. In the event
Landlord or Landlord's Consultant shall reasonably disapprove of all or a
portion of Tenant's Construction Plans, it shall set forth its reasons therefor
in reasonable detail, in which event Tenant shall revise its Construction Plans
and resubmit same to Landlord within five (5) business days thereafter, time
being of the essence. Upon Landlord's written final approval of such plans (the
"Final Plans")(notice of such approval, or of disapproval, shall be given by
Landlord within five (5) business days of receipt of the Construction Plans),
Tenant may proceed with Tenant's Initial Improvements, which shall be performed
in accordance with the provisions of this Article V. Landlord's failure to
approve or disapprove Tenant's plans within such five (5) business day period
shall be deemed to be approval thereof. Material Change orders by Tenant (which
are defined as any change order which is in excess of $2,500 cost of
construction) shall be similarly subject to Landlord's review and approval or
disapproval, and notice of either shall be given Tenant within five (5) business
days of Landlord's receipt of them. Neither the recommendation or designation of
an architect, any general contractor, any subcontractors or materialmen as
provided for in Section 5.3, nor the approval of the Construction Plans by
Landlord shall be deemed to create any liability on the part of Landlord with
respect to the design, construction, functionality and/or specifications set
forth in the Final Plans.
Section 5.3 PAYMENTSection 5.3 PAYMENTSection 5.3
PAYMENTSection 5.3 PAYMENT.
Landlord shall pay for the work depicted on the Final Plans, to the
extent and only to the extent the cost of such work shall not exceed Landlord's
Contribution. Tenant shall be responsible for and pay all other costs. Promptly
following Landlord's approval of the Final Plans, Tenant shall cause the Final
Plans to be submitted for bid. Landlord shall assist Tenant in obtaining bids by
giving to Tenant a list of general contractors, sub-contractors and materialmen
for Tenant to use in soliciting bids. Promptly following Tenant's receipt of the
bids, Tenant shall submit to Landlord the estimate of the cost of Tenant's
Initial Improvements which exceeds Landlord's Contribution ("Tenant's Extra
Cost"). Tenant shall either approve or disapprove the estimate of Tenant's Extra
Cost within five (5) business days after submission to Landlord. If Tenant shall
disapprove all or a portion of the estimate of the Tenant's Extra Cost, Tenant
shall revise the Final Plans to the extent required and resubmit same to
Landlord for approval. After approval by Landlord, Tenant shall within five (5)
business days resubmit the revised Final Plans to the applicable subcontractors
for revised bids. This process shall continue until Tenant approves Tenant's
Extra Cost estimate. Tenant's approval of Tenant's Extra Cost shall be evidenced
by the payment by Tenant into the Improvements Payment Account of one-half of
the Tenant's Extra Cost. At the same time, upon such payment by Tenant, the
Landlord shall pay into the Improvement Payment Account an amount of Landlord's
Contribution equal to the sum derived by multiplying Landlord's Contribution by
a fraction where the numerator is one half of Tenant's Extra Cost and the
denominator is the cost of the
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Tenant's Initial Improvements. The remainder of Tenant's Extra Cost and
Landlord's Contribution shall be remitted to the Improvements Payment Account
pari passu on an "as-in-place" draw basis subsequent to the application of
Landlord's Contribution and Tenant's first one-half payment. Time shall be of
the essence with respect to Tenant's obligations hereunder. Tenant shall pay
Landlord (which Landlord may pay out of Landlord's Contribution) five percent
(5%) of the total cost of Tenant's Initial Improvements for Landlord's
coordination and administration, not to exceed $6,000.00 in any event.
Section 5.4 TENANT DELAYSection 5.4 TENANT DELAYSection
5.4 TENANT DELAYSection 5.4 TENANT DELAY.
Landlord shall not be responsible or liable for Tenant Delay. Tenant
Delay includes without limitation any of the following:
5.4.1 Tenant's failure to furnish plans, drawings, and
specifications in accordance with and at the times required pursuant to this
Article V; or
5.4.2 any delays resulting from the reasonable disapproval
by Landlord or Landlord's consultant of all or a portion of Tenant's revised
plans and specifications as resubmitted after initial submission; or
5.4.3 any delays resulting from Tenant's disapproval of the
cost of Tenant's Extra Cost, which delay shall be deemed to commence upon the
date of Tenant's disapproval of the cost of Tenant's Extra Cost and end on the
date of Tenant's final approval of such cost; or
5.4.4 Tenant's request for materials, finishes or
installations which are not readily available at the time Landlord is ready to
install same; or
5.4.5 Tenant's changes in drawings, plans, specifications,
or construction submitted to Landlord including at any time subsequent to
Landlord's approval of the Final Plans, including any Revisions which Tenant
submits to Landlord which result in a delay; or
5.4.6 the performance of work by a person, firm or
corporation employed by Tenant and delays in the completion of the said work by
said person, firm or corporation; or
5.4.7 Tenant's failure to pay timely for the Tenant's Extra
Cost.
If Landlord believes that any Tenant Delay can be mitigated or eliminated by the
expenditure of additional money or the performance of overtime work, Landlord
shall so notify Tenant, and Tenant shall have the right, at its expense, to
require such additional expenditure and/or overtime work, provided Tenant pays
for same in advance.
Section 5.5 SUBSTANTIAL COMPLETION.
If the anticipated Substantial Completion Date, as more particularly
described in this Article V, shall be delayed by reason of Tenant Delay, the
Premises shall be deemed substantially completed for the purposes of the
Commencement Date as of the date that the Premises would have been substantially
completed but for any such Tenant Delay as determined by Landlord in its
reasonable discretion. Tenant shall pay for any additional cost in completing
Tenant's Initial Improvements resulting from any Tenant Delay. Any such sums
shall be in addition to any sums payable pursuant to Section 5.30 and shall be
paid into the Improvements Payment Account within ten (10) days after Landlord
submits an invoice to Tenant therefor. Such costs shall be collectible in the
same manner as Additional Rent whether or not the Term shall have commenced, and
if Tenant defaults in the payment of such cost, Landlord shall have no
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obligation to continue or pay for the performance of Tenant's Initial
Improvements until Tenant shall have cured such default. Such default shall
be deemed a default under Article IX of this Lease.
Section 5.6 EARLY OCCUPANCYSection 5.6 EARLY
OCCUPANCYSection 5.6 EARLY OCCUPANCYSection 5.6 EARLY
OCCUPANCY.
Except for the purpose of supervising Tenant's Initial Improvements,
and as hereinafter provided, neither Tenant nor its agents, employees, invitees
or independent contractors shall enter the Premises during the performance of
Tenant's Initial Improvements. Upon the granting of consent by Landlord, which
shall not be unreasonably withheld, delayed or conditioned, Tenant or its agents
may enter the Premises prior to the Commencement Date to perform such decorative
or other tenant finishing work as it may desire provided that such work in no
way interferes with the performance of Tenant's Initial Improvements and such
entry shall be deemed under all the terms, covenants and conditions of this
Lease, except the covenant to pay Base Rent. In the event Landlord, in its sole
discretion, determines that the performance by Tenant or any of its agents of
any such Tenant finish work is impeding or impairing in any way the performance
of Tenant's Initial Improvements, then, upon notice to Tenant, Tenant shall
cease or cause the cessation of all such work until the receipt of notification
from Landlord that Tenant may once again enter the Premises in order to perform
such work. Tenant shall indemnify and save Landlord harmless from and against
any and all loss, liability, damage, cost and expense, including without
limitation, reasonable attorneys' fees and disbursements at all trial and
appellate levels, claimed or actually arising from, growing out of or related to
(a) any act, neglect or failure to act of Tenant or anyone entering the Premises
or Building with Tenant's permission, (b) the performance of such Tenant's
finish work, or (c) any other reason whatsoever arising out of said entry upon
the Premises or Building. The provisions of this Section 5.6 shall survive the
termination of this Lease.
Section 5.7 REVISIONSSection 5.7 REVISIONSSection 5.7
REVISIONSSection 5.7 REVISIONS.
Tenant shall have the right to make revisions to the Final Plans
("Revisions"). All Revisions shall be subject to Landlord's prior written
approval, which shall not be unreasonably withheld, delayed or conditioned,
provided the Revisions are non-structural in nature. Landlord shall either
approve or disapprove the Revisions within five (5) business days after
Landlord's receipt of the submission thereof by Tenant. Landlord's failure to
either approve or disapprove such revisions within such five (5) day period
shall be deemed to be approval thereof. Without limiting the generality of the
foregoing, no Revision will be approved unless (a) all changes to and
modifications from Tenant's Final Plans are circled or highlighted as per
standard industry practices and (b) said Revisions conform with the requirements
of Article V. Tenant shall notify Landlord in writing of the cost of the
Revisions, and any Tenant Delay that the performance of the same may entail. If
Landlord agrees with the cost and delay of such Revisions, Landlord shall
acknowledge Landlord's approval in writing within five (5) business days after
Tenant's notice thereof to Landlord. If Landlord fails to approve of the cost of
such Revisions within five (5) business days, Tenant shall not make such
Revisions. The cost of any Revisions shall be borne solely by Tenant. An
additional fee based on such costs shall be payable in the manner and at the
times set forth in Section 5.3.
Section 5.8 COMPLETION DUE DILIGENCESection 5.8
COMPLETION DUE DILIGENCESection 5.8 COMPLETION DUE
DILIGENCESection 5.8 COMPLETION DUE DILIGENCE.
Tenant shall, subject to any other cause beyond Tenant's reasonable
control, use due diligence to complete Tenant's
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Initial Improvements as soon as may be practicable. Tenant shall notify
Landlord of the date of the substantial completion of Tenant's' Initial
Improvements ("Substantial Completion Date") at least five (5) days prior
thereto. The phrase "substantial completion" shall mean that, with the
exception of punch-list items, Tenant's Initial Improvements shall have been
completed in accordance with the Final Plans and all mechanical systems
serving or affecting the Premises shall then be in working order. Landlord
and Tenant shall thereupon set a mutually convenient time for Tenant and
Landlord or Landlord's consultant to inspect the Premises, at which time
Tenant shall prepare and submit to Landlord a punch list of items to be
completed. Upon completion of the inspection, Tenant shall acknowledge in
writing that substantial completion has occurred, subject to any punch list
items to be completed. Tenant shall diligently complete the approved work on
the punch list items. In the event Tenant shall fail to confer with Landlord
with respect to the Substantial Completion of Tenant's Initial Improvements
within five (5) days of Tenant's notice setting forth the Substantial
Completion Date, (a) Tenant shall have no right to enter the Premises for the
purposes of conducting its business therefrom until Tenant meets with
Landlord in the Premises and prepares a punch list of incomplete items, if
applicable, and (b) Tenant's Initial Improvements shall be deemed completed
and satisfactory in all respects, and (c) the Commencement Date shall be
deemed to have occurred on the date set forth in Tenant's notice as the
substantial completion date. In the event of any dispute as to when and
whether the work performed or required to be performed by Landlord has been
substantially completed, the certificate of an independent A.I.A. registered
architect or a temporary or final certificate of occupancy or completion (as
may be applicable) issued by the local government authority shall be
conclusive evidence of such completion, effective on the date of the issuance
of such certificate to Tenant.
ARTICLE VI
ADDITIONS, ALTERATIONS, REPLACEMENTS, AND TRADE FIXTURES
Section 6.1 BY LANDLORD.
Landlord reserves the right at any time to make alterations or
additions to the Building in which the Premises are contained and to build
additional stories thereon. Landlord also reserves the right to construct other
buildings or improvements in the Building or Common Areas from time to time and
to make alterations thereof or additions thereto and to build additional office
space on any such building or buildings so constructed. Nothing in this section
will be construed to permit Landlord to change the leasehold improvements,
dimensions, or location of the Premises, or materially adversely affect access
to the Premises.
Section 6.2 BY TENANT.
6.2.1 Upon receipt of Landlord's prior written approval,
Tenant may from time to time after completion of Tenant's Initial Improvements,
at its own expense, alter, renovate or improve the interior of the Premises
provided the same be performed in a good and workmanlike manner, in accordance
with accepted building practices, in full compliance with all applicable
building codes and the ADA, with Tenant procuring at its sole cost and expense
all permits required for such work, and so as not to weaken or impair the
strength or lessen the value of the Building in which the Premises are located.
No changes, alterations or improvements affecting the exterior of the Premises
or the Building or the Building systems shall be made by Tenant without the
prior written approval of Landlord, which may be unreasonably withheld. Any work
done by Tenant under the provisions of this Section shall not interfere with the
use by the other tenants of their premises in the Building. Tenant also agrees
to pay 100% of any increase in the Real Estate Taxes or
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Landlord's Personal Property Taxes resulting from such improvements by or for
Tenant.
6.2.2 All alterations, decorations, additions and
improvements made by Tenant, or made by Landlord on Tenant's behalf as
provided in this Lease, shall remain the property of Tenant for the Lease
Term or any extension or renewal thereof, but they shall not be removed from
the Premises without the prior written consent of Landlord, which consent
shall not be unreasonably withheld, delayed or conditioned.
6.2.3 Upon obtaining the prior written consent of Landlord,
Tenant shall remove such alterations, decorations, additions and improvements
and restore the Premises as provided in Section 6.5, and if Tenant fails to do
so and moves from the Premises, all such alterations, decorations, additions and
improvements shall become the property of Landlord, who may charge Tenant for
storing or disposing of any or all of such property.
6.2.4 Notwithstanding any other provision of this Article VI,
Tenant shall be permitted to make alterations to the interior improvements of
the Premises with Landlord's prior written consent not being unreasonably
withheld, delayed or conditioned if (a) the proposed alteration is
non-structural in nature, and (b) the proposed alteration does not cost more
than $10,000. Notwithstanding any other provision of this Section, when Tenant
requests Landlord's consent to a proposed alteration, Tenant may ask Landlord in
writing whether Landlord will require that the alteration be removed on
expiration or earlier termination of this Lease. Landlord shall respond to this
inquiry in writing within fifteen (15) business days of receipt thereof from
Tenant. If Landlord does not respond to such inquiry or states in its response
that it will not require removal, then Tenant shall not be required to remove
such alteration. Any such alteration, renovation or improvement shall be
performed in a good and workmanlike manner, in accordance with accepted building
practices, in full compliance with all applicable building codes and the ADA,
with Tenant procuring at its sole cost and expense all permits required for such
work
Section 6.3 CONSTRUCTION INSURANCE AND INDEMNITY.
6.3.1 Tenant shall indemnify and hold Landlord harmless from
any and all claims for loss or damages or otherwise based upon or in any manner
growing out of any alterations, removals or construction undertaken by Tenant
under the Lease Term, including, but not limited to, Tenant's Initial
Improvements, and including all costs, damages, expenses, court costs and
reasonable attorneys' fees and costs attendant thereto, at all trial and
appellate levels, incurred in or resulting from claims made by any person or
persons, by other tenants of premises in the Building, their subtenants, agents,
employees, customers and invitees.
6.3.2 Before undertaking any alterations or construction,
including, but not limited to, Tenant's Initial Improvements, Tenant shall
obtain and pay for a public liability and workers' compensation insurance policy
insuring Landlord and Tenant against any liability which may arise on account of
such proposed alterations and construction work in limits of not less than
$1,000,000.00 for any one person, $2,000,000.00 for more than one person in any
one accident and $2,000,000.00 for property damage; and a copy of such policy
shall be delivered to Landlord prior to the commencement of such proposed work.
Tenant shall also maintain at all times fire insurance with extended coverage in
the name of Landlord and Tenant as their interests may appear in an amount
adequate to cover the cost of replacement of all alterations, decorations,
additions or improvements in and to the Premises and all trade fixtures therein,
in the event of fire or extended coverage loss. Tenant shall deliver to Landlord
copies of such fire insurance policies which shall contain a clause requiring
the insurer to give Landlord ten (10) days' notice of cancellation of such
policies. In no event shall such
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insurance be required if the alterations do not cost more than $10,000. As
used within this Article VI, such reference to alterations not costing more
than $10,000 shall include all alterations made by or for Tenant in any
thirty (30) day period, looking forward and backward.
Section 6.4 MECHANIC'S LIENS AND ADDITIONAL CONSTRUCTION.
6.4.1 If by reason of any alteration, repair, labor performed
or materials furnished to the Premises for or on behalf of Tenant any mechanic's
or other lien shall be filed, claimed, perfected or otherwise established or as
provided by law against the Premises, Tenant shall discharge or remove the lien
by bonding or otherwise, within fifteen (15) days after Tenant receives notice
of the filing of same. Notwithstanding any provision of this Lease seemingly to
the contrary, Tenant shall never, under any circumstances, have the power to
subject the interest of Landlord in the Premises or the Building to any
mechanics' or materialmen's liens or liens of any kind, nor shall any provision
contained in this Lease ever be construed as empowering Tenant to encumber or
cause Landlord to encumber the title or interest of Landlord in the Premises.
6.4.2 Tenant hereby expressly acknowledges and agrees that,
except as indicated under Article V, no alterations, additions, repairs or
improvements to the Premises of any kind are required or contemplated to be
performed as a prerequisite to the execution of this Lease.
6.4.3 Landlord and Tenant expressly acknowledge and agree
that neither Tenant nor any one claiming by, through or under Tenant,
including without limitation contractors, sub-contractors, materialmen,
mechanics and laborers, shall have any right to file or place any mechanics'
or materialmen's liens of any kind whatsoever upon the Premises nor upon any
building or improvement thereon; on the contrary, any such liens are
specifically prohibited. All parties with whom Tenant may deal are hereby put
on notice that Tenant has no power to subject Landlord's interest in the
Premises to any claim or lien of any kind or character and any persons
dealing with Tenant must look solely to the credit of Tenant for payment and
not to Landlord's interest in the Premises or otherwise. All contracts of
Tenant, including those for extras and change orders, for the construction of
any alteration, addition, decoration or improvement including, but not
limited to, the contracts of subcontractors and materialmen, shall contain
the agreement of the contractor, subcontractor or materialman agreeing to
look solely to the Tenant and Tenant's interest in the Premises for payment
and waiving any right to a lien on Landlord's interest in the Building or the
Premises. Such contracts shall also require the contractor, subcontractor or
materialman to provide in recordable form, a waiver and release of lien upon
final payment at the completion of construction and a waiver and release of
upon progress payment during the construction thereof. Landlord shall be
advised by Tenant, in writing, at least ten(10) days prior to the date that
work by or for Tenant is to commence or the date of anticipated commencement
in order to allow Landlord to post notices of non-responsibility on the
Premises. Tenant agrees to allow such notices to remain posted in the
Premises throughout the construction period and to notify Landlord is such
notices are damaged or removed. The construction work shall be scheduled in
such a manner so as to create the minimum disturbance to other tenants in the
Building. Any construction causing or resulting in unreasonable noise, dust
or other disturbance of other tenants shall be scheduled and performed during
the hours of 7:00 p.m. and 7:00 a.m. No building materials, construction
tools and equipment shall be stored in the Common Areas of the Building. All
trash and construction debris shall be promptly removed and deposited
lawfully off the property, or, if a dumpster has been approved for the
deposit of trash and construction debris, then such trash and construction
debris shall be deposited into the approved dumpster. No dumpster shall be
brought on the Property unless the size and location thereof has been
approved by the Landlord in writing, which
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approval shall not be unreasonably withheld, conditioned or delayed.
6.4.4 Any lien filed against the Premises in violation of
this Section 6.4 shall be null and void and of no force or effect. In addition,
Tenant shall cause any lien filed against the Premises in violation of this
paragraph to be canceled, released, discharged and extinguished within
fifteen (15) days after Tenant receives notice of filing of the same and
shall indemnify and hold Landlord harmless from and against any such lien and
any costs, damages, charges and expenses, including but not limited to,
attorney's fees, incurred in connection with or with respect to any such lien.
Section 6.5 TRADE FIXTURES.
6.2.4 Provided Tenant is not in default under this Lease,
Tenant shall have the right, at the termination of this Lease, to remove any and
all trade fixtures, equipment and other items of personal property not
constituting a part of the Building which it may have stored or installed in the
Premises including, but not limited to, counters, shelving, showcases, chairs,
and movable machinery purchased or provided by Tenant and which are susceptible
of being moved without damage to the Building and the Premises, provided this
right is exercised before the Lease is terminated or during the ten (10) day
period immediately following such termination and provided that Tenant, at its
own cost and expense, shall repair any damage to the Premises or Building caused
thereby. The right granted Tenant in this Section 6.5 shall not include the
right to remove any plumbing or electrical fixtures or equipment, heating or air
conditioning equipment, floor coverings (including wall-to-wall carpeting) glued
or fastened to the floors or any paneling, tile or other materials fastened or
attached to the walls or ceilings, all of which shall be deemed to constitute a
part of the Building, and, as a matter of course, shall not include the right to
remove any fixtures or machinery that were furnished or paid for by Landlord.
The Premises and the immediate areas in front, behind and adjacent to it shall
be left in a broom-clean condition. Should Tenant fail to comply with this
provision, Landlord may deduct the cost of clean-up from Tenant's Security
Deposit. If Tenant shall fail to remove its trade fixtures or other property at
the termination of this Lease or within ten (10) days thereafter, or upon
cessation of Tenant's business in the Premises or upon termination of Tenant's
rights to possession of the Premises, such fixtures and other property not
removed by Tenant shall be deemed abandoned by Tenant, and, at the option of
Landlord, shall become the property of Landlord; Landlord may store, sell, or
otherwise dispose of such property at Landlord's sole discretion (subject to
applicable legal requirements) but at Tenant's expense. Any such removal or
alteration shall be performed in a good and workmanlike manner, in accordance
with accepted building practices, in full compliance with all applicable
building codes and the ADA, with Tenant procuring at its sole cost and expense
all permits required for such work. This section shall be subject to the
provisions of Section 6.3.1 of this Lease.
Section 6.6 RIGHT OF ENTRY.
Landlord or its representatives shall have the right, upon 48 hours
prior notice to Tenant and with and escort provided by Tenant, without
liability, to enter the Premises at reasonable hours during the Lease Term to
(a) show the Premises to prospective purchasers, lenders and tenants (who are
not Tenant's competitors, except during the last three (3) months of the term of
the Lease or any renewal thereof), or (b) ascertain if the Premises are in
proper repair and condition, and make repairs, additions or alterations thereto
or to the Building in which the same are located, including the right to take
the required materials therefor into and upon the Premises without the same
constituting an eviction of Tenant in whole or part, and the Rent shall not
abate while such repairs, alterations, replacements or improvements are being
made by reason of loss or interruption of
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Tenant's business due to the performance of any such work. If Tenant shall
not be personally present to permit an entry into the Premises at the time
specified in Landlord's notice or in the case of an emergency, Landlord may
enter the Premises by a master key or by the use of force without rendering
Landlord liable therefore and without in any manner affecting Tenant's
obligations under this Lease.
ARTICLE VII
INSURANCE AND INDEMNITY
Section 7.1 TENANT'S INSURANCE.
Tenant shall maintain, at its own cost and expense, in responsible
companies (all of which shall be licensed to do business in the State of
Florida) reasonably approved by Landlord, combined single limit public liability
insurance, insuring Landlord and Landlord's agents and Tenant, as their
interests may appear, against all claims, demands or actions for bodily injury,
personal injury or death of any one person in an amount of not less than
$1,000,000.00; and for bodily injury, personal injury or death of more than one
person in any one accident in an amount of not less than $2,000,000.00; and for
damage to property in an amount of not less than $2,000,000.00. Landlord shall
have the right to direct Tenant to increase such amounts whenever any such
increase is recommended or required by the underwriters of insurance on the
Building, upon thirty (30) days prior written notice to Tenant. Such liability
insurance shall also cover and include all exterior signs maintained by Tenant.
The policy of insurance may be in the form of a general coverage or floater
policy covering these and other premises, provided that Landlord and Landlord's
agents are specifically insured therein. Tenant shall carry like coverage
against loss or damage by boiler or compressor or internal explosion of boilers
or compressors, if there is a boiler or compressor in the Premises. Tenant shall
maintain insurance covering all glass forming a part of the Premises including
plate glass in the Premises and fire insurance against loss or damage by fire or
windstorms, with such endorsements for extended coverage, vandalism, malicious
mischief and special extended coverage as Landlord may require, covering 100% of
the replacement costs of any items of value, including but not limited to signs,
stock, inventory, fixtures, improvements, floor coverings, machinery and
equipment. All of said insurance shall be in form and in responsible companies
licensed to do business in the State of Florida, reasonably satisfactory to
Landlord, and shall provide that it will not be subject to cancellation,
termination or change except after at least thirty (30) days' prior written
notice to Landlord. Any insurance procured by Tenant as herein required shall
contain an express waiver of any right of subrogation by the insurance company
against Landlord and its agents. The policies, together with satisfactory
evidence of the payment of the premiums thereon, shall be deposited with
Landlord on the day Tenant begins operations. Thereafter, Tenant shall provide
Landlord with evidence of proof of payment upon renewal of such policy, not less
than thirty (30) days prior to expiration of the term of such coverage. In the
event Tenant fails to timely obtain or maintain the insurance required
hereunder, Landlord may (but is not required to) obtain same and any costs
incurred by Landlord in connection therewith shall be payable by Tenant as
Additional Rent upon demand. Landlord shall carry public liability insurance
covering the common areas of the Building, including but not limited to the
sidewalks, malls and parking lot.
Section 7.2 EXTRA HAZARD INSURANCE PREMIUMS.
Tenant shall not keep, use, sell or offer for sale in or upon the
Premises any article or permit any activity which may be prohibited by the
standard form of fire or public liability insurance policy. Tenant shall not
knowingly use or occupy the Premises or any part thereof, or suffer or permit
the same to be used or occupied for any business or purpose deemed extra
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hazardous on account of fire, environmental hazard or otherwise. In the event
Tenant's use and/or occupancy causes any increase of any insurance premium above
the rate for the permitted use in the Premises, Tenant shall pay such additional
premium on any policy, as Additional Rent, including but not limited to fire,
extended coverage, public liability or any insurance that may be carried by
Landlord for its protection against rent loss through fire. Bills for such
additional premiums shall be rendered by Landlord to Tenant at such times as
Landlord may elect, and shall be due from and payable by Tenant when rendered in
writing, but such increases in the rate of insurance shall not be deemed a
breach of this covenant by Tenant. Failure to pay amounts due hereunder shall be
a breach of the Lease. In determining whether increased premiums are the result
of Tenant's use of the Premises, a schedule, issued by the organization making
the insurance rate on the Premises, showing various components of such rate,
shall be conclusive evidence of the several items and charges which make up the
fire and public liability insurance rate on the Premises.
Section 7.3 INDEMNITY by Tenant.
Tenant shall indemnify and save harmless Landlord and its agents from
and against any and all claims and demands, including, but not limited to,
attorneys' fees and costs attendant thereto, at all trial and appellate levels,
whether for injuries to persons or loss of life, or damage to property,
occurring within the Premises and immediately adjoining the Premises and arising
out of the use and occupancy of the Premises or Building by Tenant, or
occasioned wholly or in part by any act or omission of Tenant, its subtenants,
agents, contractors, employees, servants, licensees or concessionaires,
excepting however such claims and demands, whether for injuries to persons or
loss of life, or damage to property, caused solely by the gross negligence or
willful misconduct of Landlord. If, however, any liability arises in the Common
Areas because of the negligence of Tenant, Tenant's subtenants, agents,
employees, contractors, invitees, customers or visitors, then in such event
Tenant shall hold Landlord and its agents harmless. In case Landlord or its
agents shall, without fault on its part, be made a party to any litigation
commenced by or against Tenant, then Tenant shall protect and hold Landlord and
its agents harmless and shall pay all costs, expenses and reasonable attorneys'
fees and costs attendant thereto, at all trial and appellate levels, incurred or
paid by Landlord or its agents in connection with such litigation. Tenant shall
also pay all costs, expenses and reasonable attorneys' fees that may be incurred
or paid by Landlord or its agents in enforcing the covenants and agreements of
this Lease.
Section 7.4 Indemnity by Landlord
Landlord shall indemnify and save harmless Tenant from and against any
and all claims and demands, including, but not limited to, attorneys' fees and
costs attendant thereto, at all trial and appellate levels, whether for injuries
to persons or loss of life, or damage to property, occurring within the Premises
and immediately adjoining the Premises and arising out of the ownership, use and
occupancy of the Premises or Building by Landlord, or occasioned wholly or in
part by any act or omission of Landlord, its agents, contractors, employees,
servants, licensees or concessionaires, excepting however such claims and
demands, whether for injuries to persons or loss of life, or damage to property,
caused solely by the gross negligence or willful misconduct of Tenant. If,
however, any liability arises in the Common Areas because of the negligence of
Landlord, Landlord's agents, employees, contractors, invitees, customers or
visitors, then in such event Landlord shall hold Tenant harmless. In case Tenant
shall, without fault on its part, be made a party to any litigation commenced by
or against Landlord, then Landlord shall protect and hold Tenant harmless and
shall pay all costs, expenses and reasonable attorneys' fees and costs attendant
thereto, at all trial and appellate levels, incurred or paid by Tenant in
connection with such litigation.
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ARTICLE VIII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 8.1 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY.
8.1.1 Tenant shall give prompt notice to Landlord in case of fire or
other damage to the Premises or the Building. In the event the Premises are
damaged by fire, explosion, flood, tornado or by the elements, or through any
casualty, or otherwise, after the commencement of the Lease Term, the Lease
shall continue in full force and effect at Landlord's election. If Landlord
elects to continue the Lease, the damage shall promptly be repaired by
Landlord at Landlord's expense, provided that Landlord shall not be obligated
to so repair if such fire, explosion or other casualty is caused directly by
the negligence or malfeasance of Tenant, Tenant's subtenants, permitted
assignees, permitted concessionaires, or its or their agents, servants or
employees, and provided further that Landlord shall not be obligated to
expend for such repair an amount in excess of the insurance proceeds
recovered as a result of such damage, and that in no event shall Landlord be
required to replace Tenant's stock in trade, fixtures, furniture,
furnishings, floor coverings, machinery and equipment. Landlord may elect
either to repair or rebuild the Premises, or the Building, or to terminate
this Lease upon giving notice of such election to Tenant within sixty (60)
days after the occurrence of the event causing the damage. If the anticipated
period for repairing the Premises exceeds 180 days from the date of the
casualty, then Tenant may elect to terminate this Lease by providing written
notice to Landlord effective 30 days after delivery of such notice.
8.1.2 If the casualty, repairing, or rebuilding shall render the
Premises untenantable, in whole or in part, and the damage shall not have
been due to the default or neglect of Tenant, a proportionate abatement of
the Fixed Minimum Rent and Tenant's Share of Operating Expenses and Taxes
shall be allowed from the date when the damage occurred until the date
Landlord completes the repairing or rebuilding, said proportion to be
computed on the basis of the relation which the gross square foot area of the
space rendered untenantable bears to the floor area of the Premises. If
Landlord is required or elects to repair the Premises as herein provided,
Tenant shall repair or replace its stock in trade, fixtures, furniture,
furnishings, floor coverings and equipment, and if Tenant has closed for
business, Tenant shall promptly reopen for business upon the completion of
such repairs.
8.1.3 In the event the Premises or the Building shall be damaged in
whole or in substantial part within the last twenty-four (24) months of the
original term, or within the last twenty-four (24) months of the last renewal
term, if renewals are provided for in this Lease, Landlord and Tenant shall
have the option, exercisable within Ninety (90) days following such damage,
of terminating this Lease, effective as of the date of Tenant's receipt of
notice from Landlord or Landlord's receipt of notice from Tenant. If any such
termination occurs during the initial Lease Term, any options for renewal
shall automatically be of no further force or effect.
8.1.4 No damage or destruction of the Premises or the Building shall
allow Tenant to surrender possession of the Premises nor affect Tenant's
liability for the payment of Rent or any other covenant contained herein,
except as may be specifically provided in this Lease. Notwithstanding any of
the provisions herein to the contrary, Landlord shall have no obligation to
rebuild the Premises or the Building and may at its own option cancel this
Lease unless the damage or destruction is a result of a casualty covered by
Landlord's insurance policy.
Section 8.2 CONDEMNATION.
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In the event the entire Premises shall be appropriated or taken under
the power of eminent domain by any public or quasi-public authority, this
Lease shall terminate and expire as of the date of title vesting in such
proceeding, and Landlord and Tenant shall thereupon be released from any
further liability hereunder. If any part of the Premises shall be taken as
aforesaid, and such partial taking shall render that portion not so taken
unsuitable for the business of Tenant, as determined by an independent
Florida licensed architect appointed by Landlord and Tenant, and whose fees
and expenses shall be paid equally by Landlord and Tenant, then this Lease
and the Lease Term herein shall cease and terminate as aforesaid. If such
partial taking is not extensive enough to render the Premises unsuitable for
the business of Tenant, then this Lease shall continue in effect, except that
the Fixed Minimum Rent shall be reduced in the same proportion that the floor
area of the Premises taken bears to the original floor area leased and
Landlord shall, upon receipt of the award in condemnation, make all necessary
repairs or alterations to the Building in which the Premises are located so
as to constitute the portion of the Building not taken as a complete
architectural unit, but such work shall not exceed the scope of the work to
be done by Landlord in originally constructing said Building, nor shall
Landlord, in any event, be required to spend for such work an amount in
excess of the amount received by Landlord as damages for the part of the
Premises so taken. "Amount received by Landlord" shall mean that part of the
award in condemnation which is free and clear to Landlord of any collection
by mortgagee for the value of the diminished fee. If more than twenty percent
(20%) of the floor area of the Building in which the Premises are located
shall be taken as aforesaid, Landlord may, by written notice to Tenant,
terminate this Lease, such termination to be effective as aforesaid. If this
Lease is terminated as provided in this paragraph, the Rent shall be paid up
to the date that possession is so taken by public authority and Landlord
shall make an equitable refund of any Rent paid by Tenant in advance. Tenant
shall not be entitled to and expressly waives all claim to any condemnation
award for any taking, whether whole or partial, and whether for diminution in
value of the leasehold or to the fee although Tenant shall have the right, to
the extent that the same shall not reduce Landlord's award, to claim from the
condemnor, but not from Landlord, such compensation as may be recoverable by
Tenant in its own right for damage to Tenant's business, fixtures and
improvements installed by Tenant at its expense.
ARTICLE IX
DEFAULT, REMEDIES
Section 9.1 DEFAULT.
The occurrence of any of the following during the Term shall constitute
an Event of Default by Tenant:
9.1.1 Tenant shall fail to pay when due all or any portion of
any Rent within five (5) days of the due date thereof;
9.1.2 Tenant shall fail to pay when due any other sums, fees,
charges, costs, or expenses which are payable under this Lease within five
(5) days of the due date thereof;
9.1.3 Tenant shall, other than in the manner permitted under this
Lease, make or permit or suffer to occur any assignment (including any
transfer of interest in Tenant which is deemed to be an assignment under this
Lease), sublease or occupancy arrangement, conveyance, transfer, conditional
or collateral assignment, pledge, hypothecation, or other encumbrance,
whether by operation of law or otherwise, of this Lease or any interest in
this Lease;
9.1.4 Tenant shall fail in any other way in the performance or
observance of any of the terms and conditions of this Lease and within ten
(10) days shall not have cured such
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default or, if impossible of cure within such time but possible of cure
within sixty (60) days, begun and diligently pursued such cure to completion;
9.1.5 There shall be filed by or against Tenant in any court or
other tribunal a petition in bankruptcy or insolvency proceedings or for
reorganization or for the appointment of a receiver or trustee of all or
substantially all of Tenant's property, unless such petition shall be filed
against Tenant and Tenant shall in good faith promptly thereafter commence
and diligently prosecute any and all proceedings appropriate to secure the
dismissal of such petition and shall secure such dismissal within thirty (30)
days of its filing;
9.1.6 Tenant shall be adjudicated a bankrupt or an insolvent or take
the benefit of any federal reorganization or composition proceeding, make an
assignment for the benefit of creditors, or take the benefit of an insolvency
law;
9.1.7 A trustee in bankruptcy or a receiver shall be appointed or
elected or had for Tenant, whether under federal or state laws;
9.1.8 Tenant's interest under this Lease shall be sold under any
execution or process of law;
9.1.9 the Premises shall be abandoned or deserted or Tenant shall
fail to make continuous use of the Premises for twenty (20) business days for
the Use or Tenant shall have failed to complete the Initial Tenant
Improvements and open for business within four (4) months after the execution
of this Lease by both parties to it; or
9.1.10 Tenant shall fail to maintain current, duly issued
occupational licenses, or any other permit or license required by an
applicable Legal Authority for its operations at the Premises, or Tenant
shall fail to meet the insurance requirements of this Lease and provide
certificates of insurance (and binders and policies, if required) evidencing
such compliance.
Section 9.2 REMEDIES.
In the event of the occurrence of an Event of Default by Tenant,
Landlord, at Landlord's option, may elect to do one or more of the following:
9.2.1 accelerate all of the remaining Rent for the Lease Term, in
which event all Rent shall become immediately due and payable, discounted to
the current value thereof as of the date of default, by using the interest
rate on U.S. Treasury securities with a maturity date equal to the number of
months from the date of default until the normal expiration of the Term;
9.2.2 terminate this Lease as provided by this section and re-enter
the Premises and remove all persons and property from the Premises, either by
summary proceedings or by any other suitable action or proceeding at law, or
otherwise; or
9.2.3 without terminating this Lease, re-enter the Premises and
remove all persons and property from the Premises, either by summary
proceedings or by any other suitable action or proceeding at law, or
otherwise, and relet all or any part of the Premises.
Section 9.3 TERMINATION.
If Landlord elects to terminate this Lease after a default by Tenant:
9.3.1 Landlord shall give notice of such termination, which shall
take effect ten (10) days after such notice is given, or such greater number
of days as is set forth in such notice, fully and completely as if the
effective date of
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such termination were the date originally set forth in this Lease for the
expiration of the Lease Term;
9.3.2 Tenant shall quit and peacefully surrender the Premises
to Landlord, without any payment by Landlord for doing so, on or before the
effective date of termination; and
9.3.3 All Rent, including accelerated Rent, shall become due
and shall be paid up to the effective date of termination, together with such
expenses, including attorneys' fees and costs attendant thereto, at all trial
and appellate levels, as Landlord shall incur in connection with such
termination.
Section 9.4 NO REINSTATEMENT AFTER TERMINATION.
No receipts of monies by Landlord from Tenant after termination of this
Lease shall reinstate, continue, or extend the Term, affect any Notice
previously given by Landlord to Tenant, or operate as a waiver of the right of
Landlord to enforce the payment of Rent.
Section 9.5 RETENTION OF SUMS AFTER TERMINATION.
If Landlord shall terminate this Lease, Landlord shall be entitled to
retain, free of trust, all sums then held by Landlord pursuant to any of the
provisions of this Lease. In the interim following such termination until the
retention of such sums by Landlord free of trust, such sums shall be available
to Landlord, but not to Tenant, pursuant to and for the purposes provided by the
terms and conditions of this Lease.
Section 9.6 RE-ENTRY.
In the event of any re-entry and/or dispossession by summary
proceedings or otherwise without termination of this Lease:
9.6.1 all Rent shall become due and shall be paid up to the
time of such re-entry and/or dispossession, together with such expenses,
including attorneys' fees and costs attendant thereto, at all trial and
appellate levels, as Landlord shall incur in connection with such re-entry
and/or dispossession by summary proceedings or otherwise; and
9.6.2 all Rent for the remainder of the Lease Term may be
accelerated and due in full, the collection of such sums being subject to the
provisions of Section 9.6.3.3; and
9.6.3 Landlord may relet all or any part of the Premises,
either in the name of Landlord or otherwise, for a term or terms which may, at
Landlord's option, be equal to, less than, or greater than the period which
would otherwise have constituted the balance of the Term. In connection with
such reletting:
9.6.3.1 Tenant or Tenant's representative shall pay, as
Additional Rent, to Landlord, as they are incurred by Landlord, such
reasonable expenses as Landlord may incur in connection with reletting,
including, without limitation, legal expenses, attorneys' fees and costs
attendant thereto, at all trial and appellate levels, brokerage commissions,
and expenses incurred in altering, repairing, and putting the Premises in
good order and condition and in preparing the Premises for reletting;
9.6.3.2 Tenant or Tenant's representative shall pay to
Landlord, in monthly installments on the due dates for Rent payments for each
month of the balance of the Term, the amount by which any Rent payment
exceeds the net amount, if any, of the rents for such period collected on
account of the reletting of the Premises; any suit brought to collect such
amount for any month or months shall not prejudice in any way the rights of
Landlord to collect the deficiency for any subsequent month or months by a
similar action or proceeding;
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9.6.3.3 at Landlord's option exercised at any time, Landlord
shall be entitled to recover immediately from Tenant, in addition to any
other proper claims, but in lieu of and not in addition to any amount which
would thereafter become payable under the preceding subsection, a sum equal
to the amount by which the sum of the Rent for the balance of the Lease Term,
compound discounted at the current value as of the date of default (in the
manner described in Section 9.2.1.), exceeds the net rental value of the
Premises, compound discounted at the same annual rate to its then-present
worth, for the balance of the Lease Term. In determining such net rental
value of the Premises, the rent realized by any reletting of the Premises, if
such reletting is upon terms (other than rental amounts) generally comparable
to the terms of this Lease, shall be deemed to be such net rental value; and
9.6.3.4 at Landlord's option, Landlord may make such
alterations and/or decorations in or upon the Premises as Landlord, in
Landlord's sole judgment, considers advisable and necessary for the purpose
of reletting the Premises, provided that any such alterations or decorations
are not materially inconsistent with the standard of Tenant's alterations and
decorations under Article V hereof; the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from
liability under this Section; the cost of all such alterations and/or
decorations shall be paid by Tenant to Landlord as Additional Rent.
Section 9.7 SUMS COLLECTED UPON RELETTING.
Landlord shall have, receive, and enjoy as Landlord's sole and absolute
property, any and all sums collected by Landlord as rent or otherwise upon
reletting the Premises after Landlord shall resume possession of the Premises
as provided by this Lease, including, without limitation, any amounts by
which the sum or sums so collected shall exceed the continuing liability of
Tenant under this Lease. If Landlord shall have accelerated Rent payments and
collected same from Tenant, and subsequently shall have relet the Premises,
then Landlord, after deducting all costs related to reletting, including, but
not limited to, those described or anticipated in this Section 9.7 and in
Section 9.11, and any other sums due from Tenant to Landlord, shall pay to
Tenant the amount remaining which is collected as Rent for each month, to the
extent Landlord shall have previously received the Rent for such month from
Tenant (but Landlord may retain any such amount, for application to future
amounts not yet paid but which may become due).
Section 9.8 NO EFFECT ON SUIT.
Landlord and Tenant agree that after the commencement of suit for
possession of the Premises or after final order or judgment for the possession
of the Premises, Landlord may demand, receive, and collect any monies due or
coming due without in any manner affecting such suit, order, or judgment. All
such monies collected shall be deemed to be payments on account of the use and
occupation of the Premises, or, at the election of Landlord, on account of
Tenant's liability under this Lease.
Section 9.9 WAIVER OF RIGHTS OF REDEMPTION.
Tenant waives all rights of redemption which may otherwise be provided
by any Legal Requirement in the event that Landlord shall, because of the
occurrence of an Event of Default by Tenant, obtain possession of the
Premises under legal proceedings, or pursuant to present or future law or to
the terms and conditions of this Lease.
Section 9.10 USE OF WORD "RE-ENTRY".
The words "re-enter" and "re-entry", as used in this Section, are not
and shall not be restricted to their technical legal meaning, but are used in
the broadest sense.
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Section 9.11 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS.
Whenever and as often as Tenant shall fail or neglect to comply with the
terms and conditions of this Lease, Landlord, at Landlord's option and upon
ten (10) days' Notice to Tenant (or upon shorter Notice, or with no Notice at
all, if reasonable to meet an emergency or a time limitation imposed by Legal
Authorities), may, in addition to all other remedies available to Landlord,
perform, or cause to be performed, such work, labor, services, acts, or
things, and take such other steps, including, but not limited to, entry onto
the Premises, as Landlord may deem advisable, to comply with and perform any
such term or condition. Tenant shall reimburse Landlord upon demand, and from
time to time, for all costs and expenses suffered or incurred by Landlord in
so complying with or performing such term or condition, which shall be deemed
Additional Rent. The commencement of any work or the taking of any other
steps or performance of any other act by Landlord pursuant to this Section
shall not be deemed to obligate Landlord to complete the curing of any term
or condition which is in default.
Section 9.12 LANDLORD'S EXPENSES.
In the event of a default by Tenant, Tenant shall reimburse Landlord
upon demand for all reasonable expenses, including attorneys' fees and costs
for negotiation, trial, or appellate work (including fees for the services of
paralegals and similar persons) incurred by Landlord in connection with (a)
any litigation or dispute in which Landlord becomes a party or otherwise
becomes involved related to the Premises or Landlord's rights or obligations
under this Lease (except to the extent Landlord is found to be at fault); (b)
all costs of reletting the Premises in the event of Tenant's default,
including, but not limited to, brokers' charges, and the proportionate share
of the original broker's fees, if any, for which Tenant has not paid all
Rent, (c) the enforcement or collection of any judgments, settlements or
court awards, and (d) if the leasehold interest of Tenant under this Lease
shall be held by more than one person or entity, and if litigation shall
arise by reason of a dispute among such persons or entities, then Landlord's
reasonable expenses incurred if Landlord is made a party to, or incurred
otherwise in connection with, such litigation.
ARTICLE X
SECURITY
Section 10.1 SECURITY DEPOSIT.
10.1.1 Tenant has deposited with Landlord the sum specified in the
Basic Term Sheet to be retained by Landlord without liability for interest,
as security for the payment of all Rent and other sums of money which shall
or may be payable for the full stated term of this Lease, and any extension
or renewal thereof, and for the faithful performance of all the terms of this
Lease to be observed and performed by Tenant.
10.1.2 The Security Deposit shall not be mortgaged, assigned,
transferred or encumbered by Tenant without the prior written consent of
Landlord and any such act on the part of Tenant shall be without force or
effect and shall not be binding upon Landlord. If any of the Rent herein
reserved or any other sum payable by Tenant to Landlord shall be overdue and
unpaid or should Landlord make payments on behalf of Tenant, or if Tenant
shall fail to perform any of the terms of this Lease, then Landlord may, at
its option and without prejudice to any other remedy which Landlord may have
on account thereof, appropriate and apply said entire deposit or so much
thereof as may be necessary to compensate Landlord toward the payment of Rent
or Additional Rent or loss or damage sustained by Landlord due to breach on
the part of Tenant; and Tenant shall promptly upon demand restore said
security to the original sum deposited. If Tenant should be overdue in the
payment of monthly Rent or other sums payable to Landlord on at least two or
more occasions during
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a year, Landlord, at its option, may require Tenant to increase the amount of
Security Deposit now held by Landlord by an amount sufficient to cover at
least two months' Rent. In this event, upon receipt of the additional
security sum, Landlord and Tenant shall evidence such receipt by a letter
signed and acknowledged by both Landlord and Tenant to be incorporated as
part of this Lease amending the Basic Term Sheet, stating the "New Total
Amount" so held without liability for any interest. Within sixty (60) days
after the expiration of the tenancy hereby created, whether by lapse of time
or otherwise, provided Tenant shall not be in default hereunder and shall
have complied with all the terms, covenants and conditions of this Lease,
including the yielding up of immediate possession to Landlord, Landlord
shall, upon being furnished with affidavits and other satisfactory evidence
by Tenant that Tenant has paid all bills incurred by it in connection with
its performance of the terms, covenants and conditions of this Lease, return
to Tenant said sum on deposit or such portion thereof then remaining on
deposit with Landlord as set forth herein. In the event Tenant has not
complied with all the obligations provided for hereunder, Landlord may
appropriate a part or all of the Security Deposit as liquidated damages to
satisfy Tenant's obligations.
ARTICLE XI
ADDITIONAL TENANT AGREEMENTS
Section 11.1 MORTGAGE FINANCING AND SUBORDINATION.
This Lease and all of Tenant's rights hereunder are and shall be
subordinate to the present and any future mortgage upon the Building, as well
as to any existing ground lease, however, Tenant shall, upon request of
either Landlord, the holder of any mortgage or Deed of Trust now or hereafter
placed upon the Landlord's interest in the Premises or future additions
thereto, and to any ground lease now or hereafter affecting the Premises,
execute and deliver upon demand, any such further instruments subordinating
this Lease to the lien of any such mortgage or mortgages, and such ground
lease, provided such subordination shall be upon the express condition that
this Lease shall be recognized by the mortgagees and ground lessors and that
the rights of Tenant shall remain in full force and effect during the Lease
Term and any extension thereof, notwithstanding any default by the mortgagors
with respect to the mortgages or any foreclosure thereof, or any default by
the ground lessee, so long as Tenant shall perform all of the covenants and
conditions of this Lease. Tenant agrees to attorn to the mortgagee or
purchaser or successor or ground lessor, and agrees to execute all agreements
required by Landlord's mortgagee or ground lessor or any purchaser at a
foreclosure or sale in lieu of foreclosure by which agreements Tenant will
attorn to the mortgagee or purchaser or successor or ground lessor.
Section 11.2 ASSIGNMENT OR SUBLETTING.
11.2.1 The subject of assignment or subletting is set forth in
Section 1.2.18 of this Lease
11.2.2 Any assignment or sublease by Tenant shall be only for the
permitted Use or general office use, and for no other purpose, and in no
event shall any assignment or sublease of the Premises release or relieve
Tenant from any obligations of this Lease.
11.2.3 In the event that Tenant shall seek Landlord's permission to
assign this Lease or sublet the Premises or allow additional occupants,
Tenant shall provide to Landlord the name, address, financial statement and
business experience resume for the immediately preceding two (2) years of the
proposed assignee or subtenant or occupant and such other information
concerning such proposed assignee or subtenant or occupant as Landlord may
require. This information shall be in writing and shall be received by
Landlord no less than thirty
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(30) days prior to the effective date of the proposed assignment or sublease
or occupancy
11.2.4 If Tenant is a corporation or partnership and any transfer,
sale, pledge or other disposition of more than fifty percent (50%) of the
common stock or partnership interests shall occur, or voting control or power
to vote the majority of the outstanding capital stock or partnership
interests be changed, such action shall be deemed an assignment under the
terms of this Lease and shall be subject to all the terms and conditions
thereof. Any breach of the assignment clause by Tenant will constitute a
default under the terms of this Lease and Landlord shall have all rights and
remedies available to it as set forth herein.
Any proposed assignee or subtenant of Tenant shall assume Tenant's
obligations hereunder and deliver to Landlord an assumption agreement in form
reasonably satisfactory to Landlord no less than ten (10) days prior to the
effective date of the proposed assignment or sublease.
Notwithstanding any of the foregoing provisions, if Tenant is in default
under any of the terms of this Lease, Tenant may not assign or sublet the
Premises in whole or in part.
Section 11.3 TENANT'S NOTICE TO LANDLORD OF DEFAULT.
Should Landlord be in default under any of the terms of this Lease,
Tenant shall give Landlord prompt written notice thereof in the manner
specified in Section 12.1, and Tenant shall allow Landlord a reasonable
length of time in which to cure such default, which time shall not in any
event be less than thirty (30) days from the date of receipt of such notice.
Section 11.4 SHORT FORM LEASE.
Tenant agrees not to record this Lease without the express written
consent of Landlord.
Section 11.5 SURRENDER OF PREMISES AND HOLDING OVER.
At the expiration of the tenancy, Tenant shall surrender the Premises in
good condition, reasonable wear and tear excepted, and damage by unavoidable
casualty (except to the extent that the same is covered by Landlord's fire
insurance policy with extended coverage endorsement), and Tenant shall
surrender all keys for the Premises to Landlord at the place then fixed for
the payment of Rent and shall inform Landlord of all combinations on locks,
safes and vaults, if any, in the Premises. Tenant shall remove all its trade
fixtures and any alterations or improvements, subject to the provisions of
Section 6.5, before surrendering the Premises, and shall repair, at its own
expense, any damage to the Premises caused thereby. Tenant's obligations to
observe or perform this covenant shall survive the expiration or other
termination of the Lease Term. In the event Tenant remains in possession of
the Premises after the expiration of the tenancy created hereunder, whether
or not with the consent or acquiescence of Landlord, and without the
execution of a new lease, Tenant, at the option of Landlord, shall be deemed
to be occupying the Premises as a tenant at will on a week-to-week tenancy
and in no event on a month-to-month or on a year-to-year tenancy. The rent
during this week-to-week tenancy shall be payable weekly at twice the Fixed
Minimum Rent, and twice all other charges due hereunder, and it shall be
subject to all the other terms, conditions, covenants, provisions and
obligations of this Lease, and no extension or renewal of this Lease shall be
deemed to have occurred by such holding over. Tenant's obligations to observe
or perform this covenant shall survive the expiration or other termination of
the Lease Term.
Section 11.6 ESTOPPEL CERTIFICATE.
Each party shall provide at any time, within ten (10) days of the other
party's written request, a statement certifying that
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this Lease is unmodified and in full force and effect or, if there have been
modifications, that same are in full force and effect as modified and stating
the modifications, and the dates to which the Fixed Minimum Rent and other
charges have been paid in advance, if any. For Landlord's benefit. it is
intended that any such statement delivered pursuant to this paragraph may be
relied upon by any prospective purchaser or mortgagee of the Premises. For
Tenant's benefit, it is intended that any such statement delivered pursuant
to this paragraph may be relied upon by any prospective purchaser of or
lender to Tenant.
Section 11.7 COMPLIANCE WITH LAW.
11.7.1 At all times during the Lease Term, Tenant shall, at
Tenant's own cost and expense, fully perform and comply with any law,
statute, code, rule, regulation, ordinance, order, judgment, decree, writ,
injunction, franchise, permit, certificate, license (including any beer, wine
or liquor license), authorization, registration, or other direction or
requirement of any domestic or foreign federal, state, county, municipal, or
other government or governmental or quasi-governmental department,
commission, board, bureau, court, agency, or instrumentality having
jurisdiction or authority over Landlord, Tenant, and/or all or any part of
the Premises ("Legal Authority"), which is now or in the future applicable to
the Tenant's particular use of the Premises, including those not within the
present contemplation of the parties ("Legal Requirements"), and applicable
insurance underwriters' rules, regulations, decrees or requirements, whether
or not they shall necessitate ordinary or extraordinary structural changes,
improvements, replacements, or repairs to the Premises, or cause any
interference with the Use. Tenant acknowledges that the Building is not newly
constructed, and Tenant shall cooperate with Landlord in asbestos removal or
any other matter which may be necessary or advisable in connection with Legal
Requirements.
11.7.2 At all times during the Term, Tenant shall not do, permit,
or suffer to be done any act, or cause, permit, or suffer to exist any
condition upon the Premises, which may (a) be dangerous, unless safeguarded
as provided for by Legal Requirements; (b) constitute a public or private
nuisance; (c) make any Insurance void or voidable or cause any increase in
Insurance premiums; or (d) involve invasive medical procedures including but
not limited to the use of syringes. Landlord may enforce this provision in
different ways from time to time, and the permitting by Landlord of certain
activities on one or more occasions shall not alter Landlord's rights to
prohibit or modify such activities at other times. Tenant acknowledges and
agrees that Landlord shall have the right to provide for the comfort of
others in the Building and that such right is a significant consideration and
inducement to Landlord to enter into this Lease.
11.7.3 Tenant shall:
11.7.3.1 neither cause nor permit the Premises to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, or process Hazardous Materials, except in compliance with
all Legal Requirements;
11.7.3.2 neither cause nor permit a release or threatened
release of Hazardous Materials onto the Premises, the air, water or any other
property as a result of any intentional or unintentional act or omission on
the part of Tenant;
11.7.3.3 comply with all applicable Legal Requirements related
to Hazardous Materials;
11.7.3.4 conduct and complete all investigations, studies,
sampling, and testing, and all remedial, removal, and other actions on, from,
or affecting the Premises in accordance with such applicable Legal
Requirements and to the satisfaction of Landlord;
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11.7.3.5 allow access to the Premises by Landlord and
applicable regulatory authorities so that they may assure compliance with
this Section 11.8;
11.7.3.6 upon the expiration or termination of this Lease,
deliver the Premises to Landlord free of all Hazardous Materials; and
11.7.3.7 defend, indemnify, and hold harmless Landlord and
Landlord's employees and other agents from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs, or expenses of
any kind or nature, known or unknown, contingent or otherwise (including,
without limitation, accountants' and attorneys' fees (including fees for the
services of paralegals and similar persons), consultant fees, investigation
and laboratory fees, court costs, and litigation expenses at the trial and
all appellate levels), arising out of, or in any way related to (a) the
presence, disposal, release, or threatened release, by or caused by Tenant or
its agents, of any Hazardous Materials which are on, from, or affecting the
air, soil, water, vegetation, buildings, personal property, persons, animals,
or otherwise; (b) any personal injury, including wrongful death, or damage to
property, real or personal, arising out of or related to such Hazardous
Materials; (c) any lawsuit brought, threatened, or settled by Legal
Authorities or other parties, or order by Legal Authorities, related to such
Hazardous Materials; and/or (d) any violation of Legal Requirements related
in any way to such Hazardous Materials. For the purposes of this Lease
"Hazardous Materials" means any flammable explosives, radioactive materials,
oil or petroleum products and their by-products, asbestos,
polychlorobiphenyls, hazardous materials, hazardous wastes, hazardous or
toxic substances, or related materials as defined under or regulated by any
Legal Requirements, including, without limitation, the following statutes and
the regulations promulgated under their authority: (a) the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Sections 9601 et seq.); (b) the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801 et seq.); and (c) the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C. Sections 6901 et
seq.). The provisions of this Section 11.7 shall survive the expiration or
termination of this Lease. Tenant shall, however, have the right to use and
store on the Premises materials (such as cleaning fluids, "white out" and
similar substances) used in the ordinary course of its business, subject to
compliance with Legal Requirements.
Section 11.8 Landlord Compliance
Landlord shall defend, indemnify, and hold harmless Tenant and Tenant's
employees from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs, or expenses of any kind or nature,
known or unknown, contingent or otherwise (including, without limitation,
accountants' and attorneys' fees (including fees for the services of
paralegals and similar persons), consultant fees, investigation and
laboratory fees, court costs, and litigation expenses at the trial and all
appellate levels), arising out of, or in any way related to (a) the presence,
disposal, release, or threatened release, by or caused by Landlord or its
agents, of any Hazardous Materials which are on, from, or affecting the air,
soil, water, vegetation, buildings, personal property, persons, animals, or
otherwise; (b) any personal injury, including wrongful death, or damage to
property, real or personal, arising out of or related to such Hazardous
Materials; (c) any lawsuit brought, threatened, or settled by Legal
Authorities or other parties, or order by Legal Authorities, related to such
Hazardous Materials; and/or (d) any violation of Legal Requirements related
in any way to such Hazardous Materials. For the purposes of this Lease
"Hazardous Materials" means any flammable explosives, radioactive materials,
oil or petroleum products and their by-products, asbestos,
polychlorobiphenyls, hazardous materials, hazardous wastes, hazardous or
toxic substances, or related materials as defined under or regulated by any
Legal Requirements, including,
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without limitation, the following statutes and the regulations promulgated
under their authority: (a) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601
et seq.); (b) the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801 et seq.); and (c) the Resource Conservation and Recovery
Act of 1976, as amended (42 U.S.C. Sections 6901 et seq.). The provisions of
this Section 11.8 shall survive the expiration or termination of this Lease
Section 11.9 RULES AND REGULATIONS.
Tenant's use of the Premises shall be subject, at all times during the
Lease Term, to Landlord's right to adopt in writing, from time to time,
modify and/or rescind reasonable Rules and Regulations not in conflict with
any of the express provisions hereof governing the use of the parking areas,
walks, driveways, passageways, common areas, signs, exterior of Building,
lighting and other matters affecting other tenants in and the general
management and appearance of the Building of which the Premises are a part,
but no such rule or regulation shall discriminate against Tenant. The current
Rules and Regulations are attached as Exhibit "C".
Section 11.10 ABANDONMENT.
Tenant shall not vacate or abandon the Premises at any time during
the Lease Term, nor permit the Premises to remain unoccupied for a period
longer than twenty (20) consecutive days during the Lease Term. If Tenant
shall abandon, vacate or surrender the Premises, or be dispossessed by
process of law or otherwise, any personal property belonging to Tenant left
on the Premises shall, at the option of the Landlord, be deemed abandoned,
and Landlord may sell, store, or dispose of it at Tenant's expense.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 NOTICES.
Whenever notice shall or may be given to either of the parties by the
other, each such notice shall be either delivered in person or sent by
nationally recognized overnight delivery service, or certified or registered
mail, in each case with return receipt requested. Notices to Landlord shall
be sent to the address specified in the Basic Term Sheet. Notices to Tenant
shall be sent to the address specified in the Basic Term Sheet. Any notice
under this Lease shall be deemed to have been given at the time it is
received or refused by the addressee.
Section 12.2 ENTIRE AND BINDING AGREEMENT.
This Lease contains all of the agreements between the parties hereto,
and it may not be modified in any manner other than by agreement in writing
signed by all parties hereto or their successors in interest. The terms,
covenants and conditions contained herein shall inure to the benefit of and
be binding upon Landlord and Tenant and their respective heirs, successors
and permitted assigns, except as may be otherwise expressly provided in this
Lease.
Section 12.3 PROVISIONS SEVERABLE.
If any term or provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be illegal, invalid or
unenforceable, the remainder of this Lease, or the application of such term
or provision to persons or circumstances other than those to which it is held
illegal, invalid or unenforceable shall not be affected hereby and each term
and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
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Section 12.4 CAPTIONS.
The captions contained herein are for convenience and reference only and
shall not be deemed as part of this Lease or construed as in any manner
limiting or amplifying the terms and provisions of this Lease to which they
relate.
Section 12.5 RELATIONSHIP OF THE PARTIES.
Nothing herein contained shall be deemed or construed as creating the
relationship of principal and agent or of partnership or joint venture
between the parties hereto; it being understood and agreed that neither the
method of computing rent nor any other provision contained herein nor any
acts of the parties hereto shall be deemed to create any relationship between
the parties other than that of Landlord and Tenant.
Section 12.6 ACCORD AND SATISFACTION.
No payment by Tenant or receipt by Landlord of a lesser amount than the
Rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated Rent nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as Rent be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue
any other remedy provided for in this Lease or available at law or in equity.
Section 12.7 BROKER'S COMMISSION.
Each party warrants to the other that it has not engaged any Real Estate
Broker or Realtor, except for Cushman & Wakefield (which represents Tenant)
and Codina Bush KleinxONCOR International (which represents Landlord) in
connection with such party's execution of this Lease and agrees to indemnify
and save the other party harmless from any liability that may arise from such
claim, including reasonable attorneys' fees by any other broker, realtor or
finder.
Section 12.8 CORPORATE AND PARTNERSHIP STATUS.
12.8.1 If Tenant is a corporation or partnership, tenant's
corporate or partnership status shall continuously be in good standing and
active and current with the state of its incorporation and reincorporation,
and is qualified to do business in the State of Florida at the time of
execution of the Lease and at all times thereafter. Tenant shall keep its
corporate status active and current throughout the Lease Term or any
extensions or renewals. Tenant shall, when requested, provide Landlord a
current copy of the Certificate of Good Standing under Seal. Failure of
Tenant to keep its corporate or partnership status active and current shall
constitute a default under the terms of the Lease. In the event this Lease is
signed on behalf of Tenant by a person in a representative capacity, each of
the person or persons signing in such capacity represents and warrants to the
Landlord and its successors and assigns that:
12.8.1.1 Their execution and delivery of this lease has been
duly and validly authorized and all requisite actions have been taken to make
it valid and binding on the entity they represent.
12.8.1.2 The entity they represent will, on the date of the
commencement of and at all times during the term of this Lease, be duly
organized, validly existing and in good standing in the state of its
organization and entitled to conduct its business in the state where the
Premises is located.
Section 12.9 MISCELLANEOUS.
12.9.1 Landlord shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling materials, steam,
gas, electricity, water, rain or leaks
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from any part of the Premises or from the pipes, appliances or plumbing works
or from the roof, street or subsurface or from any other place or by dampness
or by any other cause of whatsoever nature, unless caused by the gross
negligence or willful misconduct of Landlord. All property of Tenant,
including merchandise and furnishings, kept or stored on the Premises shall
be so kept or stored at the risk of Tenant only and Tenant shall hold
Landlord harmless from any and all claims arising out of damage to same. If
Landlord is required to make repairs by reason of any act, omission or
negligence of Tenant, any permitted subtenants, concessionaires or their
respective employees, agents, invitees, licensees or contractors, the cost of
such repairs shall be borne by Tenant and shall be due and payable
immediately upon receipt of Landlord's notification of the amount due.
12.9.2 At Tenant's request, if Landlord provides any miscellaneous
services and/or supplies to Tenant or Tenant's Premises (including by way of
example, but not limited to: keys, directory strips, carpet cleaning,
non-standard light bulbs, repairs, locks, parking) all charges for these
services imposed by Landlord shall be billed to Tenant and payable by Tenant
as Additional Rent. Landlord shall have the same remedies for failure to pay
the same as for non-payment of Fixed Minimum Rent. Tenant covenants and
agrees to pay Landlord all applicable sales tax or other taxes which may be
imposed on the above Additional Rent.
12.9.3 It is specifically understood and agreed that there shall be
no personal liability on Landlord, or any of its general or limited partners,
in respect to any of the covenants, conditions or provisions of this Lease;
in the event of a breach or default by Landlord of any of its obligations
under this Lease, Tenant shall look solely to the equity of Landlord in the
Building for the satisfaction of Tenant's remedies. In the event of a sale or
transfer of the Building or any portion thereof which includes the Premises,
or in the event of the making of the lease of the Building or of any portion,
or in the event of a sale or transfer of the leasehold estate under any such
underlying lease, the grantor, transferor or Landlord, as the case may be,
shall thereafter be entirely relieved of all terms, covenants and obligations
thereafter to be performed by Landlord under this Lease to the extent of the
interest or portion so sold, transferred or leased, and it shall be deemed
and construed, without further agreement between the parties and the
purchaser, transferee or Tenant, as the case may be, has assumed and agreed
to carry out any and all covenants of Landlord hereunder.
12.9.4 The parties hereby waive trial by jury in any action,
proceeding or counter claim brought by either of the parties hereto against
the other or any matters whatsoever arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises, and/or claim of injury or damage.
12.9.5 In the event of a breach by Tenant of any of the covenants
or provision hereof, Landlord shall have, in addition to any other remedies
which it may have, the right to invoke any remedy allowed at law or in
equity, including injunctive relief, to enforce Landlord's rights or any of
them, as if re-entry and other remedies were not herein provided for.
12.9.6 In the event of any litigation arising out of enforcement of
this Lease, the prevailing party in such litigation shall be entitled to
recovery of all costs, including reasonable attorneys' fees at all trial and
appellate levels.
12.9.7 Notwithstanding anything in this Lease to the contrary,
Landlord reserves all rights which any state or local laws, rules,
regulations or ordinances confer upon a Landlord against a Tenant in default.
This article shall apply to any renewals or extensions of this Lease.
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12.9.8 This agreement shall be deemed to have been made in Dade
County, Florida and shall be interpreted, and the rights and liabilities of
the parties here determined, in accordance with the laws of the State of
Florida. The parties agree that jurisdiction and venue for any litigation
concerning or arising out of this Lease shall be maintained in the Courts of
Dade County, Florida or the U.S. District Court for the Southern District of
Florida, and Tenant agrees that service of process in any such litigation may
be served upon it, in addition to those procedures set forth in Florida law,
in the manner set forth in Section 12.1 of this Lease.
Section 12.10 FINANCIAL STATEMENTS.
Tenant shall furnish Landlord, within ten (10) business days after
Landlord's request therefor, a, current unaudited financial statement of
Tenant (provided, that if Tenant becomes at any time during the term of this
Lease or any renewal thereof, a publicly held entity, Tenant shall deliver
instead a copy of its audited financial statement), but Landlord shall not be
entitled to make such request under this section more frequently than twice
annually. Unless Landlord has reason to believe there has been a material
reduction in the financial worth of any of such parties, such financial
statement(s) shall not be required to be furnished more than twice each
calendar year as to Tenant.
Section 12.11 NON-WAIVER PROVISIONS.
12.11.1 The failure of Landlord to insist upon a strict
performance of any of the terms, conditions and covenants herein shall not be
deemed to be a waiver of any rights or remedies that Landlord may have and
shall not be deemed a waiver of any subsequent breach or default in the
terms, conditions and covenants herein contained except as may be expressly
waived in writing.
12.11.2 The maintenance of any action or proceeding to recover
possession of the Premises or any installment or installments of rent or any
other monies that may be due or become due from Tenant to Landlord shall not
preclude Landlord from thereafter instituting and maintaining subsequent
actions or proceedings for the recovery or possession of the Premises or of
any other monies that may be due or become due from Tenant including all
expenses, court costs and attorneys' fees and disbursements incurred by
Landlord in recovering possession of the Premises and all costs and charges
for the care of the Premises while vacant. Any entry or re-entry by Landlord
shall not be deemed to absolve or discharge Tenant from liability hereunder.
12.11.3 If Landlord is delayed or prevented from performing any of
its obligations under this Lease by reason of strike, labor disputes, or any
cause whatsoever beyond Landlord's reasonable control, the period of such
delay or such prevention shall be deemed added to the time herein provided
for the performance of any obligation by Landlord.
Section 12. RADON GAS.
Pursuant to F.S. 404.056(8), Tenant is hereby notified that radon is a
naturally occurring radioactive gas that, when it has accumulated in a
building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public
health unit. In no event shall Landlord be liable for direct or indirect,
consequential or incidental damages arising from the existence or discovery
of radon in the Premises.
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IN WITNESS WHEREOF, Landlord and Tenant above duly executed
this Lease as of the day and year first above written, each
acknowledging receipt of an executed copy hereof.
WITNESSES: LANDLORD:
NWT PARTNERS, LTD., a _______
limited partnership
BY: NWT, Inc., a Florida
- --------------------------------------- corporation, as General
Name: Partner
- ---------------------------------------
Name:
By:
--------------------------------
Vice President
[Corporate Seal]
TENANT:
STAR TELECOMMUNICATIONS,
INC, a Delaware
corporation qualified to
do business in Florida
- ---------------------------------------
Name:
By:
-----------------------------
- ---------------------------------------
Name: Name/Title:
---------------------
[Corporate Seal
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EXHIBIT A
LEGAL DESCRIPTION
PARCEL I: Lots 1, 2 and 3 of Smith Subdivision of Lots 4, 5 and 6 in Block
102 North, City of Miami, according to the plat thereof recorded in Plat Book
3, page 5, Public Records of Dade County, Florida.
PARCEL II: Non-exclusive right-of-way and easement for a term of years for
ingress and egress from Parcel I to Northeast Third Avenue on and over Lot 6,
less North 28 ft. thereof, of Smith Subdivision of Lots 4,5 and 6, of Block
102 North, City of Miami, according to the plat thereof in Plat Book 3 at
page 5, Public Records of Dade County, Florida, as created by Right-of-Way
and Easement Agreement dated September 27, 1979, filed September 28, 1979
under CF 79R275271 and recorded in O.R. Book 10527 at pages 1401-1405, and as
assigned by assignment in O.R. Book 10527, page 1394, and as assigned by
assignment in O.R. Book 10971, page 1866, and as conveyed by Warranty Deed in
O.R. Book 12001, page 960, Public Records of Dade County, Florida.
PARCEL III: The South 24.00 feet of Lot 2 and all of Lot 3, in Block 102
North, City of Miami, A.L. Knowlton Map of Miami, according to the Plat
thereof recorded in Plat Book B, at page 41, of the Public Records of Dade
County, Florida.
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EXHIBIT "C"
RULES AND REGULATIONS
1. At all times during the terms of this Lease, the Landlord shall
have the right by themselves, their agents, and employees, to enter into and
upon the Premises during reasonable business hours upon reasonable prior oral
or written notice to Tenant for the purpose of examining and inspecting the
same and determining whether the Tenant shall have complied with his
obligation under the Lease and the rules and regulations contained herein, in
respect to the care and maintenance of the Premises and the repair or
rebuilding of the improvements thereon, when necessary as modified by Section
6.6 of the Lease.
2. Tenant shall not use the name of the Building for any purpose
other than Tenant's business address and shall never use a picture or
likeness of the Building or Premises in any advertisement, notice or
correspondence without Landlord's advance written consent hereto, which
consent shall not be unreasonably withheld, delayed or conditioned.
3. Tenant shall not make or permit any noise or odor that is
objectionable to the public, to other occupants of the Building, or to
Landlord to emanate from the Premises and shall not create or maintain a
nuisance thereon and shall not disturb, solicit or canvass any occupant and
shall not do any act tending to injure the reputation of the Building or
Premises.
4. Except as otherwise specifically provided in Exhibit A-1,
Tenant shall not place or permit any radio antenna, loud speakers, sound
amplifiers, or similar devices on the roof or outside of the Building, or
within the core area.
5. The sidewalks, entrances, passages, elevators, vestibules,
stairways, corridors and halls must not be obstructed or encumbered or used
for any purpose other than ingress and egress to and from the Premises.
6. With the exception of initially moving into or completely
moving out of the Tenant's Premises, supplies, goods, materials, packages,
furniture and all such items of every kind are to be delivered at the
entrance point provided therefor, through service elevators or dumbwaiters to
the Tenant, or in such manner as the Landlord may provide and the Landlord is
not responsible for the loss or the damage of any such property.
7. The Landlord may retain a pass key to the Premises, solely for
use in accordance with Section 6.6 of the Lease. The Tenant shall not alter
any lock or install a new lock or a knocker on any door of the Premises
without written consent of the Landlord or the Landlord's agent, provided, in
case such consent is given, the Tenant shall make provisions that the lock is
compatible with the Landlord keying system pursuant to the Landlord's right
of access to the Premises.
8. Tenant shall, upon termination of the Lease or of Tenant's
possession, surrender all keys of the Premises to landlord at the Building
office and shall make known to Landlord the explanation of all combination
locks on safes, cabinets, and vaults in the Premises.
9. Tenant shall not install any concession or vending machines in
the Premises, and shall not sell from the Premises the following items:
cigars, cigarettes, tobacco, pipes, candies, newspapers, magazines, or
greeting cards.
10. Landlord reserves the right to: (1) change the street address
of the Building; (2) install and maintain a sign or signs on the exterior or
interior of the Building; (3) designate all sources furnishing sign painting
and lettering and, and (4) take all measures as may be necessary or desirable
for the safety, protection or preservation of the Premises of the Building.
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Landlord Tenant
<PAGE>
11. All persons entering or leaving the Building after normal
Building operating hours, 7:00 A.M. - 7:00 P.M.; Monday through Friday, or at
any time during Saturdays, Sundays and holidays, may be required to do so
under such regulations as Landlord may impose.
12. Draperies and other window coverings installed by Tenant will
be of either non-combustible material such as fiberglass, metal mesh, etc. or
in lieu thereof have fabric treated with a flame retardant material.
13. Drapery traverse mechanisms shall be so arranged as to permit
the full opening of draperies and to provide sufficient over-travel that the
stacked draperies in the full open position shall have at least a clearance
of either window jam.
14. The Tenant shall not penetrate the exterior walls for any
reason. All penetrations of interior walls for book shelves, pictures, or any
other reason must have the prior written consent of the Landlord, which shall
not be unreasonably withheld, delayed or conditioned.
15. The Landlord at all times shall have the right to reasonably
amend, modify or waive any of the foregoing rules and regulations and to make
such other and further rules and regulations as the landlord may adopt, but
no such amendments or modifications shall be binding upon Tenant until 10
days after Tenant's receipt thereof.
The failure of the Landlord to seek redress for violation of, or insist
upon the strict performance of, any covenant or conditions of this Lease or
any of the rules and regulations set forth above or hereafter adopted by
Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation. The receipt by Landlord of Rent with knowledge of
the breach of any covenant of this Lease or breach of these rules and
regulations shall not be deemed a waiver of such breach. The failure of
Landlord to enforce any of these rules and regulations as set forth above or
hereafter adopted against the Tenant and/or any other tenant in the Building
shall not be deemed a waiver of any such rules and regulations.
Landlord shall not be liable to Tenant for violations of any said rules
and regulations or the breach of any covenant or condition in any Lease by
any other tenant in the Building.
No act or thing done or omitted to be done by Landlord or Landlord's
agents during the term of the Lease which is necessary to enforce these rules
and regulations shall constitute an eviction by Landlord. No employee of
Landlord or Landlord's agent shall have any power to accept the keys of said
Premises prior to the termination of the Lease. The delivery of keys to any
employee of Landlord or Landlord's agents shall not operate as a termination
of the Lease or a surrender of the Premises.
The rules and regulations shall be binding upon heirs, successors,
representatives and assigns of the Tenant.
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Landlord Tenant
<PAGE>
RIDER TO LEASE BETWEEN STAR TELECOMMUNICATIONS AND
NWT PARTNERS, LTD., FOR SUITE 2000
NEW WORLD TOWER, MIAMI, FLORIDA
R.1. OPTION TO RENEW.
1.01 So long as this Lease is in full force and effect and Tenant is
not in default under any of the Lease provisions, and no condition exists
which with notice or passage of time would constitute a default by Tenant
under this Lease, Landlord grants to Tenant an option to renew the Lease
("Option to Renew") for three Option Periods of five (5) years each, subject
to the following provisions.
(a) Tenant shall provide written notice to Landlord of Tenant's
intent to renew the Lease not less than twelve (12) months and not more than
twenty-four (24) months prior to the expiration date of the then-current
Lease Term.
(b) The Option to Renew shall be void if at any time during the
last twenty four (24) months of the then current Lease Term (including, but
not limited to, the period of time between the date of the exercise of the
Option and the date upon which the then current Lease Term would normally
expire) the Landlord, in order to enforce its rights under the Lease has in
good faith and with reasonable basis under this Lease and applicable law (i)
brought an action to collect Rent from Tenant, or (ii) brought an action to
recover possession of the Premises from Tenant; or (iii) brought an action to
dispossess Tenant.
(c) All other terms and conditions of the Lease shall remain
unchanged with the exceptions that (i) there shall be no further option to
renew other than the three options which are specified in this provision, and
(ii) there shall be no further option to renew if Tenant does not duly
exercise its first option to renew, and (iii) there shall be no Tenant's
Initial Improvements or other matters specific to the initial leasing of the
Premises, and (iv) Fixed Minimum Rent shall be subject to increase during the
then-applicable Option Period as follows: Landlord and Tenant agree to adopt
as a standard for measuring fluctuations of the purchasing power of its
rental income the Consumer Price Index (for all urban consumers)-All Items
(1982-1984-100) issued by the Bureau of Labor Statistics of the U.S.
Department of Labor ("CPI"). The Fixed Minimum Rent for each year during such
Option Periods shall be adjusted to reflect increases in the cost of living
as set forth by the CPI figure or any successor or substituted index
appropriately adjusted. The CPI Figure for the first month of the last year
of the preceding Lease Term is referred to as the "Basic Standard". The CPI
for each anniversary date of the Basic Standard is referred to as the "New
Index Figure". Adjustments shall be made annually on the first day of each
year during the term of each Option Period. These adjustments shall be made
and the adjusted monthly Fixed Minimum Rent ("New Rental") for the ensuing
year shall be arrived at by multiplying the monthly Fixed Minimum Rent for
the first full month of the last year of Initial Lease Term, as described in
the Basic Term Sheet, and, after the end of the Initial Lease Term, by
multiplying the first month of the preceding lease year, by a fraction, the
numerator of which shall be the New Index Figure and the denominator of which
shall be the Basic Standard. Landlord shall notify Tenant in writing of the
amount of the New Rental and the same shall be due on the first day of the
month beginning that same adjustment period and each month thereafter until
adjusted again under this Lease, provided however that in each year of the
respective Option period, the maximum annual increase in Fixed Minimum Rent
payable shall be five (5%) percent and the minimum annual increase in Fixed
Minimum Rent shall be three (3%) percent; and, in no event shall the rental
due and payable hereunder be less than the annual Fixed Minimum Rent for each
preceding year of the Lease Term, regardless of the value of the dollar as
reflected by said CPI figure. In the event the amount of the CPI figure
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Landlord Tenant
<PAGE>
increase is not known until after the first month of the period for which the
adjustment is to be made, due to delay in publication of the CPI figure, or
any other reason notification has not been made by Landlord, then, upon
notification of the increase by Landlord, Tenant shall pay the full amount of
the increase which is due for any prior months during the adjustment period,
within fifteen (15) days following receipt of Landlord's written notice of
the amount due.
R.2. CONSTRUCTION OF TENANT IMPROVEMENTS.
2.01. Tenant shall receive a total construction allowance in
the amount of $12.00 per square foot of the Premises (the "Allowance"), which
shall be applied towards leasehold improvements over the base Building. For
purposes of this paragraph, leasehold improvements may specifically include,
but not be limited to, construction of Tenant improvement, the cost of
Tenant's architectural design services, plans, engineering costs, Tenant's
purchase and installation of equipment including telephone and computer
equipment and cabling, (provided that none of such equipment and cabling used
for by Tenant the purpose of providing its telecommunications business to its
customers shall be eligible for such allowance), and costs of Tenant's
construction coordinator, and any other applicable internal and/or external
costs incurred by Tenant. Tenant may hire its own interior designer/architect
to be compensated out of the Allowance. In addition, the cost of any
electrical, mechanical, and structural engineering, including all plans,
permits, licenses, and fees that are related to the development of the
Premises may be paid by Tenant out of the Allowance. The cost of construction
of the leasehold improvements shall be paid monthly by Landlord out of the
Allowance based upon the draw schedule and work in place. Tenant and Tenant's
construction coordinator shall receive a copy of each monthly requisition. To
the extent that any portion of the Allowance to be contributed by Landlord
under this paragraph does not apply to the initial construction of Tenant's
Improvements to the Premises, the remaining funds shall be credited against
the first payment of Rent coming due under this Lease. All such payments
shall be subject to receipt by Landlord of appropriate waivers of liens by
all contractors, subcontractors and materialmen on progress payments and
final payment.
R.3. COMPLETE STATEMENT OF LANDLORD WORK.
3.01 Landlord shall perform the following work with due diligence, at Landlord's
sole cost and expense.
(a) upgrade common areas on the 20th floor to comply
with applicable codes and ADA; such work shall
include the washrooms.
(b) (b) the existing buildout in the Premises shall be
removed and the Premises made broom clean.
(c) lock off the elevators to the 20th Floor.
(d) remove the asbestos mastic tape on the 20th
Floor HVAC duct work.
Except as set forth in this section, Tenant is taking the Premises in its
"as-is" condition, existing as of the execution of this Lease, which Tenant
acknowledges that Tenant has inspected.
R.4. SUBMETERING.
4.01 Tenant shall obtain and pay for at its own expense Tenant's entire supply
of electric current by submeter arrangement whereby Tenant's monthly kilowatt
hour usage shall be paid by Tenant. Tenant shall pay for the installation of
such submeter. Landlord shall read the submeter at the end of each calendar
month and forward to Tenant an invoice detailing the amount of money necessary
to reimburse Landlord for the cost of electricity used by Tenant for each such
month, which amount shall be deemed
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Landlord Tenant
<PAGE>
Additional Rent. Tenant shall pay Landlord this amount within ten (10) days
of receipt of such invoice.
R.5. ALTERATIONS.
5.01 The following provisions supplement but do not replace the provisions of
this Lease related to alterations and repairs of the Premises by Tenant, now or
afterward; where these provisions conflict with the other provisions of the
Lease, however, the following provisions shall control.
(a) Landlord shall have the right to approve the general
contractor, construction manager, subcontractor, architect and engineer which
Tenant may select; for electrical work connecting to Landlord's core
electrical systems, however, Tenant shall utilize Landlord's contractor(s),
provided their pricing is reasonably competitive with other bids, such
decision to be made by Tenant within ten (10) days after submission of
Tenant's receipt of bids. If Landlord's contractors' prices are not
reasonably competitive with other bids, then Tenant shall have the right to
solicit independent bids from electrical contractors reasonably satisfactory
to Landlord.
(b) Landlord shall be entitled only to a five percent (5%)
construction coordination fee, not in excess of $6,000, based upon the cost
of Tenant's contractors' charges for alterations and repairs.
(c) Prior to commencing any alterations, Tenant shall submit
plans and specifications to Landlord , which shall be approved or disapproved
within thirty (30) business days after submission to Landlord. Landlord
hereby notifies Tenant, and Tenant hereby agrees to be bound by such
notification, that all fixtures and equipment built or installed by Tenant in
the Premises and on the Roof shall be required to be removed by Tenant at the
end of the Lease Term, at Tenant's sole cost and expense, in a manner that
shall comply with all applicable terms and conditions for the original
installation thereof as are in effect at the time of such removal leaving the
said Premises and Roof in the same condition as they were at the commencement
of this Lease ordinary wear and tear excepted.
R.6. EQUIPMENT AND OPERATING RIGHTS; LICENSE FOR ACCESS.
6.01 So long as this Lease is in full force and effect and Tenant is not in
default under any of its provisions, Tenant shall, subject to the provisions of
this Lease and License and to Landlord's reasonable rules and regulations
therefor as promulgated from time to time, have a nonexclusive license (the
"License") (a) to install, operate, maintain, repair and replace fiber optic
cable within vertical and horizontal shafts of the Building; (b) have the
nonexclusive use of the Building risers at such locations as may be required for
Tenant's business needs and as reasonably approved by Landlord from time to
time; (c) have the right to install at Tenant's sole cost and expense up to Four
(4) four-inch conduit risers in the central core area of the Building, to run
the height of the Building for the purpose of installing the fiber optic cable
described in (a); (d) install one antenna on the Building roof; (e) install one
generator and fuel tank; (f) install up to 80 tons of HVAC equipment as set
forth on Exhibit A; (g) install electrical system as set forth on Exhibit A; (h)
install certain structural changes for the Premises in the Building as set forth
on Exhibit A; and (i) install certain life safety systems as set forth on
Exhibit A; all of (a) through (i) being for the purpose of Tenant providing
telecommunications services to its customers. All of the shafts, risers, roof
location and other areas designated by Landlord for such License use are
referred to in this Section R6 as the "License Area" and are subject to and
shall be installed, operated, maintained, repaired, replaced and removed in
accordance with the terms and conditions of Exhibit A, Equipment and Operating
Rider, annexed hereto.
6.02 Subject to Tenant's receipt of all applicable governmental
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Landlord Tenant
<PAGE>
permits and licenses required by law, prior to installation, and at Tenant's
sole cost, following notice to and approval by Landlord, Tenant shall have a
right to construct in the License Area, where necessary for such purposes,
conduit facilities for the provision of public utility telecommunications
services in the Building. Such conduits shall be limited in size and location
so as not to interfere with the Building systems and to allow other uses
deemed reasonable or necessary by Landlord in the vertical and horizontal
shafts and all other areas of the Building.
6.03 The license granted in this Rider is not exclusive. Landlord reserves the
right to grant, renew or extend similar licenses, and unrelated licenses and
agreements for use, to others. Landlord will maintain the Roof in such a manner
so as to avoid interference by one tenant of another tenant's rights to the use
of the Roof, including, but not limited to, the manner in which any antennae are
installed, maintained and aimed. Nothing contained in this Rider shall be
construed as granting to Tenant any property or ownership rights in the Building
or to create a partnership or joint venture between Landlord or Tenant. Tenant's
rights as to all areas of the Building other than the Premises are granted as a
license only, and Tenant (notwithstanding the fact that the term "Tenant" is
used in reference to it) is a licensee only with no additional rights as might
accrue to a tenant under landlord/tenant or any other law.
6.04 Tenant shall use the License Area and Tenant's facilities within it only
for the provision of telecommunications services and for no other purpose. If
any electrical panels or meters for such facilities are required, they shall be
installed only with Landlord's prior consent, which shall not be unreasonably
withheld, delayed or conditioned, in accordance with all terms and provisions of
this Lease and License, and at Tenant's sole cost and expense, for initial
installation, maintenance, ongoing costs, and (unless Landlord requires that
such facilities not be removed) removal.
6.05 Prior to the commencement of any work in the License Area, Tenant shall, at
its sole cost and expense, prepare and deliver to Landlord working drawings,
plans and specifications (the "Plans"), detailing the location, size and type of
any facilities and improvements to be constructed or installed in the License
Area. Landlord shall approve all such Plans in writing, and no construction or
installation shall occur without such approval. All construction and
installation shall be done in a safe manner consistent with the highest
generally accepted construction standards; shall be done in a manner which will
prevent interference with the operation of the Building; shall not begin until
all applicable federal, state, and local permits, licenses and approvals have
been obtained and all applicable insurance coverage has been obtained and paid
for; and shall be in accord with all provisions and terms of the Lease.
6.06 Tenant shall promptly and satisfactorily repair all damage to the Building
and its contents caused by or related to or growing out of Tenant's use of this
License. Tenant shall comply with all federal, state, and local laws, orders,
rules and regulations applicable to the facilities and the License Area and
Tenant's use of them. Tenant shall not disrupt, adversely affect, or interfere
with other providers of services in the Building or with any of the Building's
occupants' use and enjoyment of its premises or of the common areas of the
Building. Notwithstanding that the License Area is subject to Tenant's use under
a license agreement, Tenant's use thereof is subject to all provisions of the
Lease as anticipated or described for the Premises and, accordingly, all
references in the Lease to the Premises (except for the provisions which provide
that the Premises are leased to Tenant) shall be deemed to include the License
Area to the extent that Tenant utilizes such area in any way. By way of
illustration but not of limitation, all insurance required of Tenant as to the
Premises shall also include the License Area.
6.07 In the event of a default under the Lease, including this Rider, Landlord
may, but shall not be obligated to, exercise any
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Landlord Tenant
<PAGE>
or any combination of rights which it has, as to the License Area, the
Premises, or both, as licensor and/or as landlord, in law, in equity and/or
under this Lease.
6.08 The License granted in this Section 6 is granted for the additional
consideration of $700.00 per month, plus applicable taxes (subject to a CPI
adjustment after the first year of the Lease Term and in any extension terms
beyond the initial lease term in the manner set forth in Section 1.01 (c) of
this Rider).
6.09 All of the above installations except the generator shall become the
property of Landlord and surrendered with the Premises upon the termination of
this License or Tenant's right to possession under it, or if Landlord elects in
its sole discretion shall be removed at Tenant's sole cost and expense.
Notwithstanding anything to the contrary in this Lease, a termination of the
Lease shall be a termination of this License, and a termination of Tenant's
right of possession under the Lease shall be a termination of Tenant's right of
possession under this License.
7. REPRESENTATIONS AND WARRANTIES OF TENANT.
7.01 Tenant represents and warrants to Landlord as follows:
1. Tenant is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, in good standing and is
duly qualified to transact business in every jurisdiction in which the
conduct of its business requires it to be so qualified, and shall take
appropriate steps to be qualified to do business in the State of Florida
prior to the date upon which it enters into a contract for any construction
in the Premises.
2. Tenant has the full corporate power and authority to enter into this Lease
(and all exhibits and schedules hereto) and all agreements contemplated
herein, to perform its obligations hereunder and thereunder, and to carry
out the transactions contemplated hereby and thereby. The Board of
Directors of Tenant has taken all actions required by law, its Certificate
of Incorporation, its by-laws or otherwise, to authorize the execution and
delivery of this Lease, and performance of its obligations hereunder and
thereunder. None of the execution and delivery of this Lease by the Tenant,
the performance by Seller of its obligations hereunder, the consummation of
the transactions contemplated under this Lease will violate any provision
of Tenant's Articles of Incorporation or by-laws, violate, or be in
conflict with, or constitute a default under or breach of, or permit the
termination of, or cause the acceleration of the maturity of, any
indenture, mortgage, contract, commitment, debt or obligation of the
Tenant, or violate any statute, law, judgment, decree, rule, regulation or
order of any court or governmental authority to which Tenant and its
activities are subject, or result in the loss of any material license,
privilege or certificate benefiting the Tenant. No consent, approval, or
authorization of, or declaration, filing, or registration with, any
governmental or regulatory authority is required to be made or obtained by
the Tenant in connection with the execution, delivery and performance of
this Lease by the Tenant.
3. Tenant is presently engaged in an Initial Public Offering of its shares of
capital stock under the Securities Laws of the United States. No statement
made by or on behalf of Tenant in the documents and instruments by which
such offering is to be made is false, misleading or misrepresents any
material fact; and all acts done by or on behalf of Tenant in connection
with such offering have or shall be done in accordance with all applicable
Federal and State securities laws. The financial representations contained
in all such documents and instruments are true, correct and complete in all
respects.
4. Tenant is not a subsidiary of any other entity, does not have any
subsidiaries, and is not a member of a group of companies under common
control.
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Landlord Tenant
<PAGE>
FIRST ADDENDUM TO LEASE BETWEEN
STAR TELECOMMUNICATIONS, INC.
AND NWT PARTNERS, LTD.
DATED JULY 1, 1997
THIS ADDENDUM to Lease, dated as of July; 7, 1997, by and between Star
Telecommunications, Inc., a Delaware corporation, as Tenant, and NWT Partners,
Ltd., a Florida Limited Partnership, as Landlord, modifies and amends that
certain Lease between and among Tenant and Landlord dated July 1, 1997 (the
"Lease") as follows:
1. On Page 10 of the Lease, in Section 5.5, the reference on line 10 to
Section 5.30 should be replaced by a reference to Article V.
2. On Page 13 of the Lease, in Section 6.3, on lines 4 & 5, the word "Term"
should be deleted from the phrase "Lease Term".
3. On Page 14 of the Lease, in Section 6.4.3, on line 31, the word "is" should
be replaced by the word "if".
4. On Page 15 of the Lease, in Section 6.6, on line 2, the word "and" should
be replaced by the word "an".
5. On Page 18 of the Lease, in Section 8.1.2, on line 9, the words "gross
square" should be added before the words "floor area".
6. On Page 25 of the Lease, in Section 11.6, on line 10, the word "Premises"
should be replaced by the word "Building".
7. On Page 26 of the Lease, in Section 11.7.3, on line 3, the reference to
Section 11.8 should be replaced by a reference to Section 11.7.
8. On Page 30 of the Lease, in Section 12.9.4, on line 3, the word "or" should
be replaced by the word "for".
9. On Page 30 of the Lease, in Section 12.9.8, on line 3, the word "here"
should be replaced by the word "hereto".
10. On Page 4 of the Rider to the Lease, in Section 2, on line 6, the word
"improvement" should be replaced by the word "improvements".
11. On Page 4 of the Rider to the Lease, in Section 2, on line 22, the phrase
"pursuant to the terms of Sections 1.2.13 and 5.3 of the Lease" should be
added at the end of the sentence ending on line 22.
12. On Page 7 of the Rider to the Lease, in Section 6.09, on line 2, the word
"be" should be added before the word "surrendered".
13. As hereby modified, amended and supplemented, the Lease and all Riders and
Exhibits thereto are hereby confirmed and ratified in all respects.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First Addendum
to the Lease as of the day and year written opposite their respective signatures
below, each acknowledging receipt of an executed copy hereof.
WITNESSES: LANDLORD:
___________________ NWT PARTNERS, LTD., a Florida
Print Name _________ limited partnership, by NWT,
Inc., a
___________________ Florida corporation, as its general
partner
Print Name _________ By: ______________________
David Garfinkle, as Vice President
TENANT:
___________________ STAR TELECOMMUNICATIONS, INC.,
Print Name__________ a Delaware corporation,
qualified to do
___________________ business in Florida
Print Name__________ By: ______________________
Name_____________________
Title _____________________
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Landlord Tenant
<PAGE>
ADDENDUM TO LEASE AGREEMENT
---------------------------
THIS ADDENDUM TO LEASE AGREEMENT is made as of this 1st day of May, 1998, by and
between NWT Partners, Ltd. ("Landlord") and Star Telecommunications, Inc.
("Tenant").
WITNESSETH:
WHEREAS, Landlord is the successor in interest to People Southwest Real Estate
Limited Partnership; and
WHEREAS, Tenant and Landlord have entered into a lease dated July 1, 1997 (the
"Lease"), pursuant to which Landlord leased certain space, Suite 2000, to Tenant
in Landlord's building commonly known as 100 N. Biscayne Blvd., Miami, Florida
33132 (the "Building"), which Lease has been twice amended in the First Addendum
thereto dated July 7, 1997 and the Lease Modification Agreement dated March __,
1998; and
WHEREAS, the tenant wishes to take additional space in the Building, to wit,
Suite 1700, comprising 10,071 square feet on the 17th Floor of the Building; and
Tenant and Landlord wish to amend the Lease so as to provide for the additional
space and the manner in which Tenant shall take such additional space:
NOW THEREFORE, in consideration of the mutual promises herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, Landlord and Tenant agree that the Lease is hereby further amended
but only as follows:
1. All defined terms in this Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Lease.
2. Effective on the Additional Premises Lease Commencement Date, as defined
below, the Premises as defined in Section 1.2.4 shall include both the existing
premises, Suite 2000 (the "Existing Premises") and the additional premises,
Suite 1700 (the "Additional Premises").
3. Effective upon the Additional Premises Lease Commencement Date, the Lease
Term, as defined in Section 1.2.7 of the Lease, shall be modified to be for ten
(10) years from the Additional Premises Lease Commencement Date and the Lease
Expiration Date shall be modified to be ten (10) years from the Additional
Premises Lease Commencement Date.
4. The Rent Commencement Date for the Additional Premises shall be four (4)
months from the Additional Premises Lease Commencement Date.
5. The Additional Premises Lease Commencement Date shall be the date five (5)
business days after Landlord shall have given Tenant prior written notice of the
anticipated Additional Lease Commencement Date. Landlord agrees to abate all
asbestos, if any, currently in the Additional Premises at its sole cost and
expense prior to the Additional Premises Lease Commencement Date.
6. The existing Section 1.2.10 shall be renamed as Section 1.2.10 A. The new
Section 1.2.10 A shall be modified by adding thereto at the end thereof the
following language: "Eleventh Year\$23.00\$241,500.00/yr\$20,125.00/mo". The
following Section 1.2.10 B shall be added to the Lease as follows: "1.2.10 B.
Effective upon the Rent Commencement Date for the Additional Premises, the Fixed
Minimum Rent for the Additional Premises shall be the aggregate sum of
$2,309,054.55 for the entire Lease Term (plus any partial Lease month), payable
the first of each month as follows, plus all applicable taxes:
<TABLE>
<CAPTION>
Lease Year Annual Rent Monthly Rent
<S> <C> <C>
First Lease Year $201,420.00 $17,785.00
Second Lease Year $207,462.60 $17,288.55
Third Lease Year $213,686.48 $17,807.21
Fourth Lease Year $220,097.07 $18,341.42
Fifth Lease Year $226,699.98 $18,891.67
Sixth Lease Year $233,500.98 $19,458.41
Seventh Lease Year $240,506.01 $20,042.17
Eighth Lease Year $247,721.19 $20,643.43
Ninth Lease Year $255,152.83 $21,262.74
</TABLE>
- 9 -
---------------/--------------
Landlord Tenant
<PAGE>
<TABLE>
<S> <C> <C>
Tenth Lease Year $262,807.41 $21,900.62
Total
</TABLE>
All Tenant's Improvements for the Additional Premises shall be constructed by
the Tenant at its sole cost and expense. Tenant has fully inspected the
Additional Premises and Tenant is taking the Additional Premises "As-Is",
"Where-Is" and, notwithstanding any language contained in Section R 3 of the
Rider to the Lease or in any other part of the Lease to the contrary, without
any obligation on Landlord's part to prepare the Additional Premises or to do
any work of any kind or nature therein. Nothing has been brought to the
attention of Landlord concerning the physical state of the Additional Premises
that would materially adversely affect the use thereof hereunder by Tenant;
including, but not limited to, the absence of any leaks in any of the windows
therein.
7.. The Landlord's Contribution for the construction by the Tenant of the
Additional Premises shall be $9.50 per square foot ($95,674.50 in the
aggregate); and such Landlord's Contribution shall be paid in the manner set
forth in Sections 1.2.13 of the Lease as modified in Section III of the Lease
Modification Agreement .
8. The Security Deposit set forth in Section 1.2.14 of the Lease shall be
increased to $50,000.00 and the increase of $25,000.00 over the amount currently
held by Landlord shall be payable by Tenant to Landlord upon the execution of
this Addendum by Tenant. At the end of the second year after the Rent
Commencement Date for the Additional Premises, unless during such two year
period Tenant has been overdue in the payment of monthly Rent or other sums
payable to Landlord (beyond any applicable grace period) on at least two (2) or
more occasions, the Security Deposit shall be reduced by $12,500.00 and Landlord
shall refund the sum of $12,500.00 to Tenant.
9. Tenant's Proportionate Share as set forth in Section 1.2.15 of the Lease
shall be increased to 8% effective on the Additional Premises Lease Commencement
Date and the Base Operating Year and Base Tax Year for the Additional Premises
shall be 1998 in Section 1.2.15 of the Lease. The First Operating Expense
Adjustment Payment Date and the First Tax Adjustment Payment Date for the
Additional Premises shall be the first anniversary of the Additional Premises
Lease Commencement Date.
10. Effective on the Additional Premises Lease Commencement Date the number of
parking spaces which Tenant shall have the right, but no obligation, to use
subject to the terms of Section 1.2.18 of the Lease shall be increased to 12.
11. The clause relating to Signage in Section 1.2.18 of the Lease shall be
modified to refer also to the 17th Floor.
12. Subsections (a), (b) and (g) of Section 3.1.2 of the Lease shall be deleted
as to both the Premises and the Additional Premises, provided, however, that
upon Tenant's written request given no later than thirty (30) days prior
thereto, and effective as of any annual anniversary date of the Lease,
subsection 3.1.2 (g) janitorial services shall be reinstated as to the Premises
only, with any and all work necessary to be done to restore such services to be
done at Tenant's sole cost and expense, and subject also to Tenant's agreement
to hold Landlord harmless from and indemnify it with respect to any claims by
Tenant, or any third party claiming by or through Tenant, including, but not
limited to, any equipment lessor or equipment financier to Tenant, and all
expenses and costs with respect thereto, including, but not limited to,
attorneys' fees and court costs attendant thereto, at all pre-trial, trial and
appellate levels, arising out of or in connection with the provision of such
janitorial service by Landlord or by an independent contractor contracted for by
Landlord, it being understood and agreed by Tenant that Landlord assumes no
responsibility whatever for any breach of the security of the telecommunications
switches and other equipment in the Premises which may arise through the use of
any such janitorial service, excepting only Landlord's willful misconduct in
connection with such janitorial service.
13. The last phrase of the first sentence of Section 6.3.2 of the Lease shall be
changed to read as follows:"...and a copy of such pre paid policy or a
certificate from the insurer on Form ACORD 27, shall be delivered to Landlord
prior to the commencement of such proposed work." The third and fourth sentences
from the end
- 10 -
---------------/--------------
Landlord Tenant
<PAGE>
of Section 7.1 of the Lease shall be changed to read as follows: "The
policies or a certificate from the insurer on Form ACORD 27, together with
satisfactory evidence of the payment of premiums thereon, shall be deposited
with Landlord prior to the day Tenant begins operations. Thereafter, Tenant
shall provide Landlord with a certificate from the insurer on Form ACORD 27
and evidence of proof of payment upon renewal of such policy, not less than
thirty (30) days prior to expiration of the term of such coverage."
14. Section 6.6 of the Lease shall be amended by adding thereto at the end
thereof the following language: "Notwithstanding anything contained herein to
the contrary, Landlord shall have unimpeded access at all times to the low
rise elevator mechanical area on the 17th Floor (which area is specifically
not included in the definition of the Additional Premises), with Landlord
using its reasonable efforts to give reasonable oral advance notice of such
access to Tenant, with no advance notice to Tenant required in emergencies."
15. Section 12.7 of the Lease shall be modified by adding the following
language at the end of the current Section 12.7: "With respect to the
Additional Premises, Each party warrants to the other that it has not engaged
any Real Estate Broker or Realtor, except for Cushman & Wakefield (which
represents Tenant) and Abood & Associates, Inc. (which represents Landlord)
in connection with such party's execution of this Addendum and agrees to
indemnify and save the other party harmless from any liability that may arise
from such claim, including reasonable attorneys' fees by any other broker,
realtor or finder."
16. The following section shall be added to the Lease as Section 12. 13:
"Section 12.13 Limitations on Liability. In no event shall Landlord be
responsible to Tenant, or to any party claiming by or through Tenant, whether
under this Lease or otherwise, for any consequential, special, indirect or
punitive damages, except to the extent any such liability for damages on the
part of Landlord shall be proven to be based solely on Landlord's gross
negligence or willful misconduct. This Lease contains all agreements and
understandings between Landlord and Tenant on the use and occupancy of the
Premises and the relationship of Landlord and Tenant as landlord and tenant.
Any agreement of any nature, oral or written, between Landlord and Tenant,
including, but not limited to, any one based on custom, usage, acceptance or
waiver, purportedly entered into prior to or subsequent to the execution of
this Lease is null and void and of no affect whatsoever, unless such
purported agreement is specifically set forth in writing in this Lease or in
a written instrument executed by both Landlord and Tenant."
17. Section 6.01 (c) of R 6 of the Rider to the Lease and Section 1 (a) of
Exhibit A thereto shall be modified to provide Tenant with the right to
install at Tenant's sole cost and expense an additional two (2) four (4")
inch telecommunications conduits; in the existing chases in the central core
area of the Building at an aggregate additional monthly fee, effective from
and after June 1, 1999, of Five Hundred ($500.00) Dollars (subject to annual
increases in the manner set forth in Section 6.08 of R 6 of the Rider)
payable together with the Fixed Minimum Rent due under Article II of the
Lease.
18. Section 3 a of Exhibit A to the Rider shall be modified by adding thereto
the following language which shall have effect solely with respect to the
Additional Premises: "For the Additional Premises only, Tenant will be
provided the right and access to 800 Amps of primary electrical power from
the Building, which service Tenant agrees to take. Tenant shall pay $125.00
per Amp for such 800 Amps payable in two equal payments of $50,000.00 each,
(the first due on June 1, 1998 and the second due on the Rent Commencement
Date for the Additional Premises) for the cost of such power availability,
including, but not limited to, bringing dedicated electric power
- 12 -
---------------/--------------
Landlord Tenant
<PAGE>
from the Building electrical vault to the third floor main electrical
distribution panels of the Building (which are currently under construction)
for normal power usage. In addition, Tenant hereby agrees that it shall be
responsible for all costs and expenses to bring such electrical service to
its Additional Premises from the third floor main electrical distribution
panels and for the use of such electrical service, subject to the
requirements of the National Electric Code, any Legal Authority, FPL or any
other supplier of electricity. Tenant shall be given access (at no additional
charge to Tenant) for installation of two additional four inch conduits, the
installation of which shall be at Tenant's sole cost and expense, to run
Tenant's primary electrical power from the main primary power distribution
panel located on the third floor of the Building to the Tenant's Additional
Premises. Tenant's use of such access shall be subject to the terms of the
Lease and generally shall be effected without any danger or inconvenience to
the Landlord or to any other tenants in the Building, and shall not adversely
affect the use or value of any conduit and cable currently or hereafter
installed in the Building by the Landlord or by any other tenant. Tenant
shall supply, at its sole cost and expense, any additional equipment, labor
and installation that may be necessary, such as, but not limited to,
automatic transfer switches and a main distribution panel circuit breaker of
appropriate size, design and manufacturer for the Building main power switch
gear, that may be necessary for a complete electrical distribution system.
Landlord shall supply a main distribution panel circuit breaker at its cost
and expense."
19. Section 3 of Exhibit A to the Rider shall be modified by adding thereto
subsection 3 (e) which shall have effect solely with respect to the
Additional Premises. "(e) Tenant shall install, at Tenant's sole cost and
expense, connections to Landlord's 1500 KW diesel Backup Generator power
system which Landlord is currently installing. Tenant shall be given access
for installation of two additional four inch conduits (at no additional
charge to Tenant), the installation of which shall be at Tenant's sole cost
and expense, to run Tenant's backup electrical power from the main backup
power distribution panel located on the third floor of the Building to the
Tenant's Additional Premises. The automatic transfer switch shall be located
within the Tenant's Additional Premises and shall be installed at the
Tenant's sole cost and expense, subject to the Landlord's reasonable approval
that such equipment is compatible with the Building electrical and backup
electrical systems. Landlord shall provide at its sole cost and expense, the
main backup power circuit breaker. Tenant's use of such access shall be
subject to the terms of the Lease and generally shall be effected without any
danger or inconvenience to the Landlord or to any other tenants in the
Building, and shall not adversely affect the use or value of any conduit and
cable currently or hereafter installed in the Building by the Landlord or by
any other tenant. The terms and conditions of use of the Backup Generator are
as follows: (1) Tenant is granted the right to use 400 kilowatts of backup
power from such Backup Generator, which service Tenant agrees to take,
commencing on the date such Backup Generator is fully operational (such date
to be determined by Landlord in its reasonable discretion) in the event of an
interruption of normal electrical service to the Additional Premises during
the Lease Term, provided that: (a) Tenant pays Landlord a one time fee in an
amount equal to $500.00 per kilowatt of backup power so reserved, payable
$100,000.00 on June 1, 1998, and $100,000.00 upon the date such Backup
Generator is fully operational and prior to connection of Tenant to such
Backup Generator; and (b) Tenant pays Landlord as Additional Rent under the
Lease a monthly sum in an amount to be reasonably determined by Landlord in
good faith based upon the amount of backup power reserved by Tenant, and
Landlord's costs of operation, use, maintenance, fuel, oil, governmental
permits, licenses and fees, insurance, Landlord's profit and administration
and other expenses relating to the Backup Generator. The monthly amount of
the Additional Rent described in item (b) initially shall be $1.20 per
kilowatt reserved per month. In the event backup power is required for
extended periods of time (in excess of one 24 hour continuous outage per
year)
- 12 -
---------------/--------------
Landlord Tenant
<PAGE>
there will be additional charges for the cost of fuel that will be allocated
on a pro rated basis. (2) Each such payment described in subparagraph 3. e
(1) (b)above shall be due on the first day of each month with Tenant's other
Rent payments, with the first such payment due on the Rent Commencement Date.
Such monthly amount may be adjusted annually, in Landlord's reasonable
discretion, during the term of the Lease and any extensions thereof. (3)
Tenant's use of such backup power shall be in accordance with such reasonable
rules and regulations as may be established by Landlord from time to time.
(4) Landlord shall repair and maintain the Backup Generator in accordance
with the manufacturer's recommendations and industry standards, provided that
Tenant shall reimburse Landlord upon demand, as Additional Rent hereunder,
for the cost of any repairs or extraordinary maintenance for the Backup
Generator necessitated by acts of Tenant or Tenant's employees, contractors,
agents, licensees, invitees, assignees or sublessees. (5) The provision of
Backup Generator service by Landlord to Tenant shall be subject to the
provisions of Article III of the Lease. The Backup Generator may only be used
in connection with functional power outages in the primary FPL service. Any
other use is not permitted and shall be deemed an act of default under the
Lease. In the event of such unpermitted use, Landlord may take immediate
action to terminate the ability of Tenant to use such backup power."
20. Section 1 of Exhibit A to the Rider shall be modified by adding thereto
subsection 1 (d) which shall have effect solely with respect to the
Additional Premises. "In addition to the terms and conditions of this section
and of the Lease and the Rider to the Lease, Tenant shall also have the right
to run conduits, the number and the location of which shall be reasonably
designated by Landlord, stemming from the Tenant's Premises to connect to
such other telecommunications tenants or licensees which parties have
mutually agreed in writing to such connections, (a copy of each such
agreement shall be delivered to Landlord as a condition precedent to each
such connection being installed) in the "Meet Me Room" on the third floor of
the Building, where Tenant shall rent an area approximately four feet by six
feet (4' x 6') for Tenant to place its connection equipment. Tenant agrees to
use the Meet Me Room only for the purpose of facilitating interconnections
between Tenant's telecommunications systems and the telecommunications
systems of such other tenants and licensees of Landlord. Tenant agrees not to
keep any equipment of any nature in the Meet Me Room for any other purpose.
Tenant agrees not to cause nor to permit its employees, contractors or
invitees to cause any interference with or damage to any of the property or
equipment of Landlord or of any other tenant or licensee in the Meet Me Room.
All installations by Tenant in the Meet Me Room shall be made by Tenant at
its sole cost and expense in accordance with the provisions of this Lease for
Tenant Improvements. Landlord shall have the right, in its reasonable
discretion, to enforce such security measures for the Meet Me Room as it
deems appropriate, provided, however, that Landlord shall have no liability
to Tenant for any damage or interference caused by any other party to
Tenant's equipment or other property installed or located in the Meet Me Room
(except to the extent attributable to Landlord's gross negligence or willful
misconduct). Tenant shall also pay Landlord a monthly license fee (the
"Monthly License Fee") for use of the Meet Me Room, which shall be $750.00
per month subject to an annual 3% increase after the first year of the Lease
and in any extension terms beyond the initial lease term in the manner set
forth in Section R 1 of the Rider to the Lease.
21. Tenant shall have the right to install 80 tons of HVAC equipment for the
Additional Premises. All of the provisions of Section 2 (HVAC Systems) of
Exhibit A ("Equipment and Operating Rights") to the Rider to the Lease shall
be effective also as to the Additional Premises as if more fully set forth
herein at length, except that the references therein to the 20th Floor shall
be changed herein to the 17th Floor.
22. All terms, conditions and provisions of the Lease not expressly amended
hereby shall remain in full force and effect, and the Lease as hereby amended
is hereby specifically approved, ratified and confirmed. Each party confirms
that the
- 13 -
---------------/--------------
Landlord Tenant
<PAGE>
Lease remains in full force and effect, that the other party is in compliance
with the Lease provisions, and that each party has no defenses, claims or
offsets against the other party. Except as specifically modified in this
instrument, the Lease as initially executed and as modified and amended from
time to time, remains in full force and effect as of the date originally
executed and the Lease as hereby amended and modified is hereby specifically
approved, ratified and confirmed. This instrument shall become effective only
upon execution of it by both Landlord and Tenant.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Addendum to Lease as of this 1st day of April, 1998.
WITNESS: LANDLORD: NWT PARTNERS, LTD.
BY NWT, INC, AS GENERAL PARTNER
- ------------------- By:
-----------------------------------
- ------------------- David Garfinkle, as Vice President
- ------------------- TENANT: STAR TELECOMMUNICATIONS, INC.
WITNESS: By:
-----------------------------------
- ------------------- -----------------------------------
Print Name and Office
- -------------------
- 14 -
---------------/--------------
Landlord Tenant
<PAGE>
Commercial Lease
Between
Prinzenpark GbR
Kanzlerstr. 4
40472 Dusseldorf
- hereinafter referred to as Lessor -
arid
Star Telecommunications
Deutschland GmbH
BeethovenstraBe 8 - 10
60325 Frankfurt/Main
- hereinafter referred to as Lessee -
the following 1ease is signed:
SECTION 1
LEASED PROPERTY
1. ACCORDING TO THE GROUND PLAN ATTACHED AS APPENDIX, which forms part of
this Lease, Lessor grant Lessee a Lease of the following areas for the
establishment of an office Business) within the building Prinzenallee
7, erected on the premises Prinzenallee 5- 21/Hansaallee 101, 40549
Duesseldorf:
A) PRINZENALLEE 7, OFFICE AREA ON THE GROUND FLOOR OF APPROX. 1,122.12
M(2)
B) PRINZENALLEE 7, OFFICE AREA IN THE BASEMENT OF APPROX. 112,09 M(2)
C) PRINZENALLEE 7, STORAGE AREA IN THE BASEMENT OF APPROX. 124.76 M(2)
D) 6 PARKING SPACES IN THE UNDERGROUND CAR PARK (NOS. 391 TO 396)
E) 2 PARKING PACES OUTSIDE (NO.29 AND 30)
2. In the ground plans attached AS APPENDIX, the leased areas according to
sub-paragraph 1 A) TO C) are marked in red outline and determined by
the area between the inside of the demarcation walls of the building,
so that possibly existing movable lightweight or partition walls and
interior stairs as well as other similar building components are not
deducted but regarded as leased area Non-usable traffic areas arid
suchlike have been taken into consideration when calculating the amount
of rent.
The areas mentioned in sub-paragraph 1 D) AND E) are determined
bindingly by the two parties, so that the location can be taken from
plans as well.
If a later measurement results in deviations of less than 2.5%, none of
the two parties shall be entitled to demand an adjustment of rent for
this reason.
3. The ground p1an serves exclusively for determining the situation of the
Leased Property.
<PAGE>
4. The Leased Property is provided ACCORDING TO THE GROUND PLAN ATTACHED
AS APPENDIX, interior works completed.
Lessor reserves the right of minor alterations which do not interfere
with Lessee's business operation or which are advisable on the basis of
conditions imposed by the authorities or technical requirements.
Lessee shall take into account the necessary escape routes when
establishing and operating the Leased Property - if necessary according
to Lessor's instructions - and to keep them permanently clear for
unhindered passage.
On the occasion of handing over, a handing over protocol shall be
prepared. Any possible defects, considerably reducing the Leased
Property's suitability for contractual use, are to be listed therein.
These defects are to be remedied by Lessor within a reasonable period
of time.
By taking over, Lessee agrees that in other respects, the Leased
Property is in a condition suitable for contractual use.
5. To the extent that Lessee requires alterations to the Leased Property
exceeding those of the present equipping and of the GROUND PLAN
ATTACHED AS APPENDIX, these alterations are subject to Lessor's prior
written consent in each individual case Consent may be denied for
substantial reasons only. If consent is granted, Lessee may carry out
these alterations at its own expense.
Lessee shall have these works carried out in accordance with Lessor's
supervision of works. Lessor is entitled to make its consent dependent
on compliance with supplimentary terms.
6 Lessor does not warrant that the leased area have been designed
according to ground plan down to the last detail.
7 The carrying capacity of the ceilings is:
- on the ground floor = 500 kg/m(2)
- on the first floor to upper story = 350 kg/m(2)
including Allowance for partition walls,
SECTION 2
BEGINNING OF LEASE
1. The Lease begins on the handing over date, probably on
JANUARY 1ST, 1998
2. The contractual relationship shall begin on signing the contract, the
Lease on handing over.
3. The construction period required for special facilities and special
requests of Lessee is to be regarded as rental period, unless its
execution runs parallel to the completion to be effected by Lessor
requiring additional time.
<PAGE>
SECTION 3
DURATION OF LEASE
1. The Lease is contracted for a duration of ten years. It begins on
handing over.
2. LESSOR GRANTS LESSEE THE OPTION TO RENEW THE LEASE FOR ANOTHER FIVE
YEARS. LESSEE'S DECLARATION TO EXERCISE ITS RIGHT OF OPTION HAS TO BE
RECEIVED BY LESSOR NOT LATER THAN 12 MONTHS PRIOR TO EXPIRY OF THE
TENTH YEAR OF CONTRACT. THE DECLARATION MUST BE MADE IN WRITING.
3. WHEN LESSEE REMAINS IN POSSESSION OF THE LEASED PROPERTY AFTER EXPIRY
OF THE LEASE, THE LEASE IS NOT TO BE REGARDED AS RENEWED. SECTION 568
GERMAN CIVIL CODE BGB IS NOT APPLICABLE. CONTINUATION OR RENEWAL OF
LEASE AFTER ITS TERMINATION MUST BE AGREED IN WRITING.
SECTION 4
CANCELLATION
1. Lessor is entitled to terminate the Lease without notice, if and when
a) Lessee is in arrears with the payment of rent and/or payment of costs
according to Section 6 of this contract despite written reminder, with
a sum REACHING the amount of two monthly rents (see Section 6,
sub-paragraph 1) or, in the case of incidental expenses, the quarterly
payment.
b) Lessee continues to use the property in a manner contrary to the terms
of the Lease, or it, Lessee otherwise considerably or lastingly
infringes the rights of Lessor or other lessees, or leaves the Property
to a third party without authorization, and if it fails to take
corrective action despite written caution by registered letter
specifying a reasonable time limit.
c) a petition in bankruptcy or for the institution of composition
proceedings has been filed with respect to Lessee's assets, or if a
petition in bankruptcy is dismissed for lack of assets or if Lessee has
otherwise suspended payments or enters into extrajudicial composition
proceedings.
d) the contractually agreed type of use is changed without Lessor's
consent and no corrective action is taken despite written caution by
registered letter specifying a reasonable time limit.
2. LESSEE IS ENTITLED TO TERMINATION OF LEASE WITHOUT NOTICE, PROVIDED
LESSOR FAILS TO COMPLY WITH ESSENTIAL CONTRACTUAL OBLIGATIONS DESPITE
WRITTEN CAUTION SPECIFYING A REASONABLE TIME LIMIT OR IF CIRCUMSTANCES
AS DESCRIBED UNDER SECTION 4, SUBPARAGRAPH 1.C) ARE APPLICABLE TO
LESSOR.
3. The notice of termination must be given in writing. It becomes
effective on receipt.
4. In the case of premature termination of Lease subject to Lessee's
responsibility, Lessee shall be liable for the loss of rent, incidental
expenses and other payments for the contractual duration of Lease as
well as for any other loss suffered by Lessor due to the premature
cancellation of Lease with respect to the Leased area, unless Lessor is
indemnified by a new, adequate lease of the rooms. THE COSTS ACCRUED IN
THIS RESPECT (IN PARTICULAR INSERTION EXPENSES AND BROKER'S COMMISSION)
ARE TO BE BORNE BY LESSEE. LESSOR SHALL MAKE ANY EFFORT TO FIND A
SUITABLE NEW LESSEE. IT WILL ACCEPT A NEW LESSEE PRESENTED BY
<PAGE>
LESSEE, PROVIDED THE NEW LESSEE EQUALS LESSEE WITH RESPECT TO KIND OF
BUSINESS AND FINANCIAL SOUNDNESS.
SECTION 5
OBLIGATIONS ON TERMINATION OF LEASE
1. On termination of Lease on any legal ground whatsoever, Lessee shall
return the Leased Property to Lessor in an expertly renovated and
cleaned condition, not later than on the last calendar day of the rental
period. The obligation to renovate does not refer to normal wear and
tear regarding roof and compartment of the Property. IN OTHER RESPECTS,
IT ONLY REFERS TO THOSE ITEMS CLASSIFIED AS SUBJECT TO DECORATIVE
REPAIRS ACCORDING TO SECTION 28, SUB-PARAGRAPH 4, SENTENCE 5 II OF THE
OPERATING AGREEMENT BV (AS AMENDED ON OCT.12, 1990), AND TO CARPETS, IF
THESE HAD BEEN PROVIDED BY LESSOR ON MOVE.
2. By the end of the rental period, Lessee shall have removed any
installations and structural alterations executed by Lessee prior to or
after moving in, and Lessee shall restore the state of the building
originally planned or existing. If and to such an extent as allowed by
Lessor, Lessee is entitled not to remove installations or structural
alterations. In this case, Lessor is entitled to acquire them wholly or
in part, against payment of a reasonable compensation. THIS DOES NOT
APPLY TO ANY OBJECTS SUBJECT TO LESSOR'S CONTRIBUTION TO EXPENSES ON
FITTING OUT UNDER SECTION 17, SUB-PARAGRAPH 1 OF THIS LEASE. The
obligation to execute decorative repairs according to Section 10 remains
unaffected.
3. Additionally, Lessee shall indemnify for any loss suffered by Lessor due
to delayed return of the leased rooms.
4. On Lessor's demand to remove the installations/alterations Lessee is
obligated to restore the original condition, or the condition originally
agreed, at its own expense, including each and every necessary secondary
work.
SECTION
SUBLEASING
1. Lessor is entitled to sublease or sublet the Leased Property subject to
Lessor's prior written consent, but only
a) for the same or similar purposes of use, for which the rooms are leased
to Lessee and
b) to a sublessee convenient to Lessor. Lessor may reject a sublessee
only, if sublessee's person, branch of business or company gives
substantial cause for such a rejection.
2. Subleasing for the purpose of a changed use of the Leased Property
Acquires Lessor's special written consent.
SECTION 7
AMOUNT OF RENT AND INCIDENTAL EXPENSES
1. The monthly rent for the leased areas shown in Section I amounts to
<PAGE>
a) approx l,122.l2 m(2) x DM 27.50 = DM 30,858,30
b) approx l12.09 m(2) x DM 20.00 = DM 2,241.80 (offices)
c) approx l24.76 m(2) x DM 12.00 = DM 1,497.12 (storage area 1)
d) 6 parking spaces undergr. c. p. x DM 110.00 = DM 660.00
e) 2 PARKING SPACES OUTSIDE x DM 60.00 = DM 120/00
---------------------------------------------------------------------------
total = DM 35,377.22
LESSOR ALLOWS LESSEE THE USE OF THE LEASED PROPERTY FREE OF RENT FOR THE FIRST
THREE MONTHS OF LEASE AFTER HANDING OVER (POSSIBLY EARLIER REGARDING PARTIAL
AREAS), NOT LONGER, HOWEVER, THAN UNTIL MARCH 31ST, 1998. THE ADVANCE PAYMENT
FOR THE OPERATING EXPENSES IS DUE ON HANDING OVER OF THE RESPECTIVE LEASED AREA
(INCLUDING PARTIAL AREAS).
2. The incidental expenses listed in the following are not covered by the
rent payment:
real estate and building insurance
real property tax
cost of water and waste water
cleaning expenses streets, paths and squares
upkeep of decorative elements and of general green areas including
purchasing costs of new plants
costs of fire alarm and extinguishing systems, safety contrivances
of all kinds (if available)
costs of caretaker or in-house technician costs of house cleaning
costs of the heating system including consumption
general current, lamps
metering and accounting expenses of consumption elevator costs
refuse collection - unless separate agreement cost of ventilation,
air conditioning equipment
wide band supply
upkeep and repair of interior and exterior general areas, except
for roof, outer facades and
load-bearing elements
house management
Lessee shall bear these costs according to actual consumption or to the
corresponding expenses incurred.
Industrial waste, e.g. office paper, overstepping the mark, is to be
removed by Lessee.
<PAGE>
To the extent that costs are apportioned, Lessee shall be treated as
equivalent to the other lessees (applying the same basis for
allocation), irrespective of the operating expenses.
A monthly advance payment of DM 5.50 per M(2) shall be collected for
the above mentioned incidental expenses for the offices and the
supplementary area. This advance payment is to be effected together
with the rent payment. In the case of a change of these incidental
expenses or if new real property liens arise, Lessor shall be entitled
to reassess the advance payments.
Settlement of accounts with respect to the advance payments will be
effected once a year. If the settlement of accounts shows an
overpayment a corresponding credit note in favor of Lessee will be
issued. If the costs to be settled exceed the advance payments, Lessor
shall claim a corresponding payment. Provided economically justifiable
corresponding supply meters are to be installed for the determination
of consumption. Unless a direct determination of such costs is
possible, Lessee shall be charged with these costs in proportion of its
leased area to the overall leased area of the Property. In the case of
a breakdown of the metering devices or if such devices do not work
properly, Lessor is entitled to allocate costs by way of assessment.
The accounting documents shall he available for inspection according to
Lessor's provisions for one month after dispatch of the settlement of
accounts to the lessees.
3. Lessee shall pay a monthly flat charge of 1% of the net rent agreed
under Section 7, sub-paragraph 1, for the proportionate administrative
expenses.
4. In addition to the rent, any value added tax to the extent assessed and
due shall be owed by Lessee. This also applies to incidental and
administrative expenses listed above.
SECTION 8
PAYMENT OF RENT AND INCIDENTAL EXPENSES
1. The rent and the advance payment for incidental and administrative
expenses are to be paid to Lessor or to a person or institution
authorized by Lessor for acceptance monthly in advance not later than
on the third working day of the respective month. For the first time,
these payments are to be effected for the period from the day of
handing over the Leased Property.
2. On delay in payment, Lessor is entitled to charge default interest of
4% above the respective discount rate of the Deutsche Bundesbank as
well as dunning costs to the extent of DM 5.00 PER REMINDER. The
assertion of further damages caused by delay remains unaffected.
3. In the case of partial payments on the part of Lessee, Lessor is
entitled to offset according to Section 366 II German Civil Code BGB,
irrespective of any statements by Lessee.
4. Lessor shall not pay any interests on advance payments for incidental
expenses.
5. THE RETENTION OF PAYMENTS TO BE EFFECTED BY THE PARTIES UNDER THIS
CONTRACT AND THEIR OFFSET AGAINST ANY CLAIMS IS EXCLUDED, UNLESS
ACKNOWLEDGED OR RECOGNIZED BY DECLARATORY JUDGMENT BY THE OTHER PARTY.
LESSEE'S RIGHT TO CLAIM REDUCTION OF RENT REMAINS UNAFFECTED.
<PAGE>
Lessor's banking connection
Bayerische Landesbank
Account no. 58 301
bank identification no BLZ 700 500 00
SECTION 9
RENT ADJUSTMENT / VALUE GUARANTY
1. The tent agreed under Section 6, sub-paragraph 1 is to be considered as
fixed until December 31st, 1998. After that date, it shall be increased
or reduced in percentages for the following year according to
cost-of-living index of an employee's family of four with an average
income of the sole breadwinner, as published by the Statistisches
Landesamt NRW (Land Statistical Office of North Rhine-Westphalia) on
the basis of 1991 = 100 points, with 75 % corresponding to the increase
or decrease of the index.
A FIRST ADJUSTMENT OF RENT WILL BE EFFECTED ON JANUARY 1ST, 1999. THE
CHANGE OF INDEX FROM DECEMBER 1997 (BASE INDEX) TO DECEMBER 1998 IS
AUTHORITATIVE FOR THIS ADJUSTMENT. SUBSEQUENTLY, THE RENT ADJUSTMENT
SHALL BE EFFECTED ON JANUARY 1ST OF EACH YEAR OF LEASE, ALSO ACCORDING
TO THE RESPECTIVE CHANGE OF INDICES FROM DECEMBER OF THE PREVIOUS YEAR
IN RELATION TO DECEMBER OF THE YEAR BEFORE.
In the following years of Lease, a corresponding adjustment of rent
shall be effected on January 1st, respectively.
2. If in future this adjustment becomes legally impossible for any reason
whatsoever, e.g. because this index is no longer officially determined
or published or if the connection hereto becomes legally impossible for
any reason whatsoever, the contracting parties are bound to come to an
agreement on a reasonable adjustment of rent which is permitted by
statute and the content of which is economically as similar as possible
to the value clause agreed hereunder.
3. The contracting parties are aware of the fact that the legal effect of
the above value clause is dependent on the approval by the Land central
bank. Lessor will endeavor immediately to obtain such approval. The
legal effect of the other provisions of this contract remain
unaffected, as long as the approval by the Land central bank has not
been obtained or if it is denied. In that ease, the contracting parties
are bound to work on a permissible wording in order to achieve a
corresponding rent restriction to the development of the cost of
living.
SECTION 10
MAINTENANCE AND REPAIR
1. On beginning of contract, the leased rooms are handed over to Lessee in
a new, perfect condition. Prior to move, any possible defects are
recorded in a handing over protocol. During the rental period, the
leased rooms are to be kept in a proper unobjectionable condition and
are to be treated with care.
2. During the rental period, Lessee shall additionally be responsible for
all repairs within the Leased Property caused by its own fault or by
inexpert handling (repair, maintenance) and for all the interior
decorative repairs. Lessee shall perform expert interior decorative
repairs at its own
<PAGE>
expense at reasonable intervals, not later than every 3 years.
3. Lessee shall remove immediately any damages, he is responsible for. If
Lessee fails to comply with this provision within a reasonable period
of time, Lessor may have the necessary works executed at Lessee's
expense.
4. In the case of damages causing any imminent dangers or in the case of
unknown abode of Lessee, a written caution or the fixing of time limit
is not required. In such cases, Lessor is entitled to execute damage
removal at Lessee's expense.
SECTION 11
INSURANCE, LIABILITY
1. Insurance of Lessee's fittings and of stored assets against fire,
water, burglary and housebreaking or other damages is within Lessee's
responsibility.
2. In particular, Lessee is liable for the following damages to the Leased
Property:
a) any damages to the fittings and other objects brought in by Lessee,
caused by fire or tap water, including the risks of sewage water and
inappropriate penetration of sprinkler water;
b) any personal injury and damage to property to an extent customary in
Lessee's line of business
c) broken glass
d) any damages resulting from burglary and housebreaking.
3. Lessee shall effect insurances covering the risks mentioned under a-d.
Lessor may demand presentation of corresponding insurance policies in
regular intervals, including a written declaration by the insurance
company confirming that a corresponding examination has not shown a
case of underinsurance.
4. Lessor assumes no liability whatsoever for any possible damages to
fittings, unless the damage has been NEGLIGENTLY caused by Lessor or by
its vicarious agents. LESSOR, HOWEVER, SHALL BE LIABLE FOR ANY DEFECTS,
LESSEE IS EXPRESSLY NOT LIABLE FOR ACCORDING TO THE FOLLOWING.
5. In the case of subleasing, Lessee shall indemnify Lessor against any
claims to such an extent as such claims against Lessor are excluded for
Lessee itself according to the terms of this contract. This also
applies to non-contractual foundations for claims.
6. LESSEE IS LIABLE FOR ANY DAMAGES NEGLIGENTLY CAUSED BY ITS FAILURE TO
EXERCISE PROPER CARE, INCLUDING WITHOUT LIMITATION, IN PARTICULAR,
INEXPERT HANDLING OF SUPPLY PIPES OR DRAINS, TOILETS AND HEATING PLANTS
OR OF ELECTRICAL EQUIPMENT WITHIN THE LEASED ROOMS, AND FAILURE TO
PROTECT THEM SUFFICIENTLY FROM FROST OR OTHER INFLUENCES. AT ALL
EVENTS, OCCLUSIONS OF PIPES ARE TO BE REMOVED BY LESSEE UP TO THE MAIN
PIPE AT ITS OWN EXPENSE.
<PAGE>
7. IN THE SAME WAY, LESSEE IS LIABLE FOR ANY DAMAGES NEGLIGENTLY CAUSED TO
THE PROPERTY BY ITS EMPLOYEES OR SUBLESSEES. IF SUCH DAMAGE IS CAUSED
BY LESSEE'S OR SUBLESSEE'S VISITORS OR SUPPLIERS, LESSEE IS LIABLE
ONLY, IF IT FAILS TO INFORM LESSOR ABOUT THE FULL NAME AND ADDRESS OF
THE VISITOR OR SUPPLIER (SPECIFIC EXECUTING PERSON).
LESSEE SHALL MAINTAIN ANY PIPES AND PLANTS RELATING TO ELECTRICITY, GAS
AND SANITATION, LOCKS, BLINDS, AND SIMILAR EQUIPMENT IN A SERVICEABLE
CONDITION.
LESSEE IS FURTHER LIABLE FOR ANY DAMAGE CAUSED BY INEXPERT HANDLING OR
WATER, LIGHT AND POWER MAINS, AND FOR ANY DAMAGE TO TOILETS, SANITATION
OR HEATING PLANT AS WELL AS VENTILATION, SMOKE ALARMS AND ACOUSTIC
EQUIPMENT (IF AVAILABLE) CAUSED BY LEAVING DOORS OPEN, BY STRUCTURAL
MEASURE TAKEN BY LESSEE, BY ADVERTISING EQUIPMENT INSTALLED BY LESSEE
OR BY FAILURE TO COMPLY WITH THE OTHER OBLIGATIONS ASSUMED BY LESSEE.
Lessee is liable to Lessor for any damages to buildings, doors, gates,
elevators, parking lots, traffic ways etc, caused by delivery traffic
and exceeding customary wear and tear.
8. AT ALL EVENTS, LESSOR SHALL REPLACE AT ITS OWN EXPENSE ANY DAMAGED
GLASS PANES AND MIRRORS IF NECESSARY, LESSOR SHALL EFFECT A GLASS
INSURANCE. NOT CLOSING TOILETS AND SINKS, CAUSING WATER TO FLOW
CONTINUOUSLY THROUGH LEAKY VALVES THUS RESULTING IN CONSIDERABLE WATER
CONSUMPTION, ARE IMMEDIATELY TO BE REPORTED TO LESSOR. DELAYED REPORTS
MAY RESULT IN DAMAGE CLAIMS. ON REQUEST, ANY POSSIBLE CLAIMS AGAINST
THIRD PARTIES AT FAULT ARE ASSIGNED TO LESSOR BY LESSEE.
9. Lessee is responsible for not exceeding the indicated carrying capacity
of the bearing plate.
10. Lessee shall immediately remove any damages it is responsible for
according to the above provisions at its own expense. On Lessee's
failure to do so despite written caution and fixing of an appropriate
time limit by Lessor, Lessor may have the corresponding work executed
at Lessee's expense. In the case of damages causing any imminent
dangers or in the case or unknown abode of Lessee, a written caution of
fixing of time line is not required.
11. Lessor shall arrange for the examination of plants jointly used by
several leases or belonging to the commonly used facilities. Lessor is
entitled to sign the appropriate fully comprehensive maintenance
agreements. Costs shall be apportioned to the lessees. The required
examination of plants exclusively used by Lessee or installed by Lessee
is to be arranged for by Lessee at its own expense. Lessee is obligated
to observe and comply with each and every statutory or public law
provision with respect to its place of business.
12. Plats and components left for Lessee's sole use are to be maintained,
attended to and kept up in such a way, that they are returned in a
serviceable condition after termination of contract.
SECTION 8
PREMATURE TERMINATION OF LEASE
1. Lessor generally agrees to give its consent to annulment of contract in
the case that Lessee demands early termination of contract for
substantial reasons, provided that
<PAGE>
Lessee presents an equivalent and solvent new lessee with whom a
contract of lease is entered into, in which the new lessee succeeds
to each and every right and obligation under this contract.
The new Lessee's use of the Leased Property for other than the previous
purposes is subject to Lessor's consent. Lessor may deny such consent,
if any non-competitive clauses agreed by Lessor or justified interests
of other lessees or the mixture of branches are adverse to such use.
2. Additionally, a precondition for Lessor's consent is that Lessee or the
new lessee binds itself by contract with Lessor to bear all the
expenses involved in the change of lessee (including commercial agency
charges) and finally that Lessee assumes the absolute guaranty for the
performance of the financial obligations of the new lessee against
Lessor for the time up to the first possible date of termination.
SECTION 13
STRUCTURAL ALTERATIONS ARID INSTALLATIONS BY LESSEE
1. Prior to and during the rental period, any structural alterations
within and outside the leased rooms are subject to Lessor's written
consent. Lessee is entitled to install advertising writings or signs in
areas of the Leased Property earmarked by Lessor. In order to achieve a
uniform design of the overall property, however, Lessee is obligated to
have such exterior advertising approved by Lessor in advance. Any
possible official permits are required to be obtained in advance by
Lessee at its own expense. Even if Lessor grants it consent to
structural alterations and installations, Lessee is obligated to remove
such installations and to restore the original condition on termination
of Lease.
Subject to Lessor's consent, Lessee may leave any objects affixed to
the building to Lessor free of charge. Lessee may also have its company
name installed in the entrance area of the building at its own expense,
uniform with the other users of the building and in accordance with
Lessor (a uniform sign board is planned for all the lessees, divided up
into individual signs).
Lessee is entitled to equip the rooms at its own expense with
additional installations and special facilities which are useful and
necessary for the performance of its business.
As soon as possible after completion of the contract, Lessee shall draw
up a catalogue with such items and submit it to Lessor for approval.
Planning, installation or delivery of Lessee's special facilities is
within Lessee's responsibility. In agreement with Lessor's architect,
however, it may make use of his expert assistance against payment of a
reasonable remuneration,
2. Regarding the electric installations required and ordered by Lessee,
which arc subject to VDE/TUV, Lessee is obligated to entrust an expert
company. Upon Lessor's demand, Lessee shall present the electricity
plans.
SECTION 14
REPAIR AND STRUCTURAL ALTERATIONS BY LESSOR
1. Even without Lessee's consent, Lessor may perform any repairs and
structural alterations becoming necessary for the maintenance of the
building or of the Leased Property, for averting
<PAGE>
imminent dangers, for the removal of damages or because of other
lessees moving in/out.
This shall also apply to works which are not necessary but useful, as
for instance modernization of the building and of the Leased Property.
DURING THE FIRST TEN YEARS OF LEASE, A MODERNIZATION OF LESSEE'S ROOMS
IS SUBJECT TO LESSEE'S PRIOR CONSENT. Lessee shall maintain accessible
the rooms concerned. Lessee must not hinder or delay the execution of
the works.
2 Provided Lessee is bound to tolerate the works, it is not entitled to
rent reduction nor to exercise a right of retention. Lessor, however,
is obligated to have such works executed outside Lessee's usual
business hours, if possible, in order to avoid a substantial
interference with Lessee's business operation.
SECTION 15
JURISDICTION AND PLACE OF PERFORMANCE
1. Place of jurisdiction and place of performance is Dusseldorf.
SECTION 16
SECURITY FOR RENT
1. Lessee shall provide a guaranty to the extent of SIX NET MONTHLY RENTS
to provide security for its obligations under this contract. This
guaranty may be effected in the form of a bank guaranty issued for an
unlimited period of time. On termination of Lease, the security is
returned to the full extent, provided this contract of Lease is
perfectly fulfilled and all other obligations in connection with this
Lease are complied with. Otherwise the security provided shall be set
off against Lessor's claims.
Lessor may demand that the suretyship is increased corresponding to a
rent increase as per Section 8 of this contract. Accordingly, the
security is to be increased on I4essor's first demand in such a way,
that it always matches SIX current net monthly rent payments.
2. If the security or an appropriate guaranty is not received by Lessor
within 14 days after handing over of contract, Lessor is entitled to
withdraw from contract after another written caution of 14 days.
SECTION 17
SPECIAL CONDITIONS
1. LESSEE IS GRANTED AN ADDITIONAL CONTRIBUTION TO EXPENSES ON FITTING OUT
IN THE GROSS AMOUNT OF DM 350,000.00, IN ADDITION TO THE CONVENTIONAL
DESIGN.
THIS CONTRIBUTION MAY BE USED FOR FALSE FLOOR, AIR CONDITIONING IN
VARIOUS AREAS, ADDITIONAL STEEL DOORS AND FOR ADDITIONAL LAMPS AND
OTHER SPECIAL REQUIREMENTS, WHICH ARE NOT INCLUDED IN THE STANDARD
BUILDING SPECIFICATIONS.
2. Lessor assumes the obligation of cleaning the pavement including snow
removal and gritting in icy weather of the pavements and pedestrian
areas in front of the building, complying with the municipality's
provisions. The corresponding expenses will be apportioned to the
lessees in accordance with Section 6, sub-paragraph 2.
<PAGE>
3. Lessee agrees furthermore to clean windows and window frames regularly.
This also applies to sun protection facilities. If cleaning contractors
are entrusted with attending to the overall property, Lessee may join
such an agreement provided it bears the proportionate expenses.
4 The house regulations attached from part of this Lease and shall be
signed by the two parties as well. The legal provisions shall apply
supplementary to these terms of contract.
5. Annulment, amendments and supplements to this contract must be made in
writing. Any verbal agreements, in particular on cancellation of the
written form, are ineffective. EACH PARTY IS ENTITLED TO AFFIX ANY
AGREEMENTS ON AMENDMENTS OR SUPPLEMENTS REGARDING THIS LEASE TO THIS
DEED.
6. If any provisions of this contract prove to be or become legally
ineffective, the validity of the o other provisions of this lease shall
remain unaffected. The contracting parties, however, agree to ensure
that the ineffective provisions are replaced by other, economically
equivalent, effective provisions, if possible.
7. The following appendices form part of this contract:
a) BUILDING SPECIFICATIONS DD. OCTOBER 23RD, 1997
b) GROUND PLANS OF OFFICE AND STORAGE AREA
c) House regulations
- -------------------------------------------------------------------------------
Dusseldorf Frankfurt, October 31st, 1997
- --------------------------- ---------------------------
Lessor Lessee
<PAGE>
Appendix to the Lease
- -------------------------------------------------------------------------------
HOUSE REGULATIONS
1. Lessee shall handle the leased areas and common rooms with care and
instruct its employees accordingly. This applies, in particular, to the
interior of the elevators, to the entrance area, and to the handling of
mail boxes, the bell system, and of the windows and facilities for the
protection against the sun.
2. The building is opened by the janitor at a time to be agreed with the
majority of lessees, at 7:00 o'clock in the morning closed at 18:30 in
the evening. Lessee or the employee opening the entrance facilities
earlier in the morning or later in the evening by means of a key, is
obligated to relock these doors.
3. Within its area of lease, Lessee shall provide a sufficient number of
ashtrays, in order to avoid burn holes in the carpets. In the general
area it has to be taken care that the ashtrays provided are used.
4. Plantings which are only accessible through Lessee's leased area, are
to be attended to by Lessee, i.e. regular watering, at least once a
week.
5. Any transports of furniture or other, which may require a locking of
the elevator, are necessarily to be agreed with the house management in
advance and may only be executed in the presence of the competent
janitor.
6. The stairwell areas, entrance facilities, basement and outer areas
including glass parts are jointly attended to. The respective expenses
are apportioned together with the incidental expenses to the individual
lessees. Special outer entries (exclusively used by Lessee) are to be
maintained and kept free from Snow by Lessee.
7. The usual refuse is collected in a garbage skip and disposed of by the
fleet of the municipality of Duesseldorf. Exceptional refuse as for
instance larger amounts of paper, are to be disposed of by Lessee
itself. If necessary, Lessee shall obtain a paper pressing plant. If
several lessees intend to use such a plant together, this may be
arranged for by the house management.
Dusseldorf Frankfurt, October 31st, 1997
- --------------------------- -----------------------------
Lessor Lessee
<PAGE>
Appendix 1 to the Lease
- -------------------------------------------------------------------------------
BUILDING SPECIFICATION AS TO DESIGN
GENERAL On the premises Dusseldorf-Heerdt,
Prinzewnallee/Hansaallee, several office buildings are
constructed, one of them designed as multi-story office
building. This refers to the 1st and 2nd phase of
construction of an administration center at the corner
Prinzewnallee/Hansaallee.
Parking lots and a part of the required technical rooms
are planned to be housed in the basements.
In general, an up-to-date and well-appointed design of
unobjectionable workmanship corresponding to the state
of the art, to the DIN standards and to VOB (contract
procedure for building works) shall be realized,
completely serviceable, and in compliance with all the
regulations.
FOUNDATION SOIL Gravel, sand, pressure according to ground certificate
LOAD CAPACITIES On all office floors, a working load of 350 kg/m(2)
including allowance for partition walls is planned,
on the ground floor 500 kg/m(2)
PEDESTALS Reinforced concrete according to static requirements.
TYPE OF CONSTRUCTION Reinforced concrete framework construction in large
grid of 7.50/7.50 m,, made of site-mixed concrete or
partly site-mixed concrete. The framework of the
building is designed to minimize the number of bearers
reducing the rooms.
A grid of 1.50 m is planned for the facade so that a
division into individual offices of different sizes
and connections to partition walls is possible in
this grid. Axial measure of individual rooms is 3.00
m, of two-man offices 4.50 m. Open-plan and functional
rooms are possible, but will require the ventilating
system to be complemented or the installation of an
air conditioning plant.
Parapets and lintel aprons of solid concrete on the
outside assembly units and heat insulation of 10 cm
Window units as pivot hung windows in high-quality
aluminum/timber work construction (outside aluminum,
inside timberwork, sides facing the street equipped
with sound-insulating glazing.
All the widows can be opened for cleaning and airing.
The windows are thermically separated and equipped
with special insulating glass
<PAGE>
The semicircular building is cased by a structural
glazing facade of high-quality dark glass.
The facade shall be equipped with top-hung sash
windows for opening. Parapets consist of single-layer
mirror glass as cold facade with high-quality
insulation.
The window systems consist of insulating glass with
shading on the outside (gathering-up shutters for
shading, to be operated individually.) and a parapet
base with eased heating units or convectors installed
behind.
HEIGHT BETWEEN FLOORS
1st basement 3.52 m
ground floor 3.60 m /2.75 m clearance
1st to 5th/6th upper floor 3.60 m / 2.75 m clearance
ROOFS All the roofs, except for ceiling of the underground
car park are constructed as roofs without vapor
barrier insulation with repeated waterproof
sheltings, heat insulation and pepple covering. The
connections are fixed with connecting two-piece
aluminum profiles and sealed.
CEILINGS Ceilings of solid reinforced concrete on all floors.
The individual office floors shall be equipped with a
suspended aluminum sheet grid ceiling consisting of
perforated aluminum sheet panels. Elevator anterooms
and the entrance area are designed with a suspended
gypsum plaster board ceiling with sound protection
mats inserted.
FLOORS On the ground floor floating floor with heat
insulation according to DIN standards. On the upper
floors wash floor with an additional built-in
multiple duct in the floor along the windows for
future requirements by lessee. All the rooms shall be
equipped with an upper floor covering of
high-quality, roller chair resistant, antistatic
carpeted floor (supposed price DM 36.00/m(2)).
The semicircular building shall be equipped with a
false floor; 60 mm thick (total construction height:
110 mm).
All the sanitation rooms and toilets shall be
equipped with wall and floor tiles with decorative
coloring. The wall tiles are laid from floor to
ceiling. The kitchens shall be equipped with a
laminate floor covering.
WALLS Outer walls of the basements built with concrete
according to static requirements. On the outside
insulated from moisture, Sound insulation of not less
than 27 dBA.
Room partition walls are designed as high-quality,
flexible partition wall system with plastic-laminated
surface (for each m(2) of leased area, 0.5 m(2) of
wall are supplied), with edges and door frames
rounded, and with painted solid wooden doors.
<PAGE>
Lessor provides 0.5 m(2) of office partition wails
for each 1 m(2) of leased office space. If this
amount exceeds lessee's requirements, no credit note
can be issued, as a following lessee may assert its
claim to a more comprehensive equipment.
The entrance halls will convey a prestigious
impression. Glass cloth and natural stone coverings
will be used as wall covering.
Non load-bearing walls of the basement are
constructed as fair-faced brickwork and painted with
binder (ceilings as well).
Stairwell walls and pillars on the individual floors
shall also be equipped with fiber glass wallpaper and
painted. This also applies to the inner side of the
parapets.
FACADE The facade consists of concrete assembly units,
coated white and special steel cord shall serve as
railing. The gable sides of the building are covered
with glassed granite plates.
DOORS The entrance doors to the floors are provided in
glass with door handles made of special steel.
Construction according to official conditions. The
rooms' internal doors are laminated with white
plastic and will have a steel frame. The other doors
according to official provision
FITTING Built-in cupboards, furniture and curtains are not
part of the fitting provided.
DOMESTIC TECHNIQUE All the installation systems are to be
designed to enable a change of rise of the offices
without requiring major changes to the basic
installation
ELECTRIC INSTALLATION Supply: feed line 4 x 16 mm(2) separately for each
lessee.
DISTRIBUTION: (within the leased area) each lessee
obtains its own subdistribution with a connected load
of 30 kVA for the electric power supply of lighting
and current outlets in the window sill duct or false
floor (circular building).
A triple window sill duct run (170 mm steel sheet)
will be installed under the windows on the office
floors. -duct gait 1 and 2 (with front cover of
plastic) to provide space for current wall outlets
and connector boxes for telephone and EDP. -duct part
3 (with front cover of steel sheet) for the
separation of data cables In the circular building)
the installation is laid in the false floor.
Lessor installs one double current wall outlet for
each double window. It is for Lessee to provide
connector boxes for telephone and EDP.
SWITCHING: Each individual office is equipped with a
series switch with a current wall outlet for
cleaning purposes.
<PAGE>
BELL AND COMMUNICATOR SYSTEM: Each lessee obtains one
station (entrance/reception) and a bell key button at
the entrance of the building, and at the entrance of
the leased area) respectively.
TELEPHONE: Within the leased area (near the current
distribution), a vacancy is provided for the
installation of a telephone splitter. Cabling (from
main splitter to lessee's splitter) and the number of
individual lines is within lessor's responsibility
and to be agreed with "Telecom". The space required
for cabling is provided in the form of lines and
shafts for risers. Ordering, expenses and the overall
installation involved in the operation of the
telephone system and providing the telephone system
is within lessee's responsibility as well.
EDP: Ordering expenses and overall installation with
respect to the operation of an EDP system is within
lessee's responsibility as well.
ANTENNA: In the basement of each building, a
connection to cable TV is provided.
EQUIPOTENTIAL BONDING: In the individual leased
areas, near the sub-distribution, there is an
equipotential busbar with a NYAF cable of 25 mm. Any
expenses and ordering of an equipotential bonding
(unless part of domestic technique) and other
protective measures (e.g. against excess voltage) and
screens of whatever kind, including but not limited
to telephone and/or EDP system are generally to be
borne by lessee. A lightening protection system
exists.
STAIRWELL: Continuous safety lighting. Auxiliary
lamps are switched on additionally by means of key
buttons/ motion detectors. Illumination not less
than 100 lux.
FITTINGS Lessor provides 50% of the required large field lamps
of 2 x 36 watts and installation according to the
grid of the ceiling.
ELEVATORS The semicircular building houses 4 panoramic
elevators located in glass towers. All the office
buildings are equipped with amply dimensioned
interior elevators. The floors within the elevators
arc designed in granite. The walls are sheathed with
special steel sheets or a minor wall. Halogen spot
lighting is fitted into the ceiling. Elevators are
equipped with a special steel railing.
At the facade of the tower building, two glazed
elevators run freely up and down. The cages are cased
with polished special steel sheets or sheathed with a
mirror.
<PAGE>
The floor is covered with granite. Position indicator
and control board are sheathed with a special steel
covering.
Cage doors;
Two-part, all-automatic sliding doors.
The cages are sheathed with special steel sheets.
Cage walls are glazed. Lighting by halogen spots,
installed even with the ceiling. The floor is covered
with granite Doors and portals are built in with
polished special steel sheets. The cages are equipped
with a special steel railing.
PORTALS AND ENTRANCES
Portals and entrances are constructed as windscreen
system, in part two-story, in aluminum flame
construction, interior doors of the entrance area as
glass-only facilities. The floors of the entrances
are to be equipped with a designed granite floor
covering with integrated doormat.
STAIRWELLS Stairwells are designed as stairwells open to the
elevator anterooms, allowing an easy,
organizationally important connection between the
floors
Railings are built as architecturally designed
special steel railings.
The internal stairs are covered with high-quality
granite tiles. The escape stairs are covered with
high-quality Quarella tiles and steps.
HEATING Heat generation is effected by an all-automatic
heating installation with gas-operated
low-temperature heating furnaces. The heating system
is complemented by a weather dependent flow
temperature controller, Staefa with Wilo-pumps. A
heat reduction in the night and a weekend program are
planned. At each window center line of 1.50 m, modern
convectors, equipped with thermostatic valves, are
planned to serve as heating units. These heating
units dispose of a smooth and elegant front plate,
fitting; optically well into these window axis and
providing a flexible division of the rooms.
SANITATION The cold water pipes are designed in copper. In the
room of the house connections, a filter is supposed
to keep away any penetrating impurities. Current
supply lines are laid to the washstands for warm
water supply of the lavatory basins. The installation
of a no-pressure hot-water apparatus is to be
provided by lessee if so required.
All the installations are planned in white color
Lavatory basins (56 cm), toilet with plastic lid and
built-in flushing box. Each washstand is equipped
with a mixing faucet with cam type closure, crystal
mirror and chromium-plated towel-rails. In each water
closet, a coat hook is planned. In the small kitchens
on each floor, kitchen supply is provided for. Here
again, a current feeding line is planned for a
hot-water apparatus.
<PAGE>
Drainage of the roof is effected by special roof
inlets and drain pipes leading into a well drain.
From there, through a pipe system in the ground, the
rain water trickles away. In the technical and
connection rooms, inlets are planned.
VENTILATION All the rooms are mechanically ventilated. Change of
air: approx. triple. Additionally, the offices will
be equipped with heating units for static basic
heating. All the outgoing air gets out through air
evacuation valves, ducts and ventilating devices. In
the ventilating device, the residual heat of the
outgoing air is used by means of heat recovery. This
heat is delivered to the fresh air. Each ventilating
device disposes of a heater and a cooler, so that
according to the outdoor temperature warmed or cooled
air is insufflated through the air valves in the
intermediate ceiling.
COOLING An air cooling plant is provided, which guarantees
basic cooling (approx. 4 K below outdoor temperature)
corresponding to ventilation. Full cooling of the
offices can be retrofitted by lessee at lessee's
expense, requiring a comparably small effort. For the
purpose of such retrofitting or of EDP cooling,
cooling water systems are preinstalled on the office
floors. The cooling water system is lead up to the
individual floors as closed system including
recooling plant, pumps and pipe network. At the
transfer spot, a later connection of secondary
cooling plants is possible at any time.
GROUNDS Parks and gardens with a lot of large trees, numerous
bushes, lawns, fountains and works of art in the open
countryside, roofs are planted with plants.
Amended; October 23rd, 1996
<PAGE>
Appendix 2 to the Lease (Additional agreement), Prinzenpark with the company
Star Telecommunications Deutschland GmbH
- ------------------------------------------------------------------------------
Additionally, Lessor shall assume:
1. False floor of the technical area on the ground floor Prinzenallee 7 at
Lessee's choice.
2. The large field lamps (2 x 36 watts) according to the regulations on
work places (Arbeitsstatten-Richtlinien) are provided in full and
installed by Lessor.
3. On the ground floor to the right, a steel door (cased) is installed and
a mobile ramp is provided.
4. As Lessee wishes to bring in its own carpet with its own logo, Lessor
shall credit DM 50.00 per m(2). This only refers to the commercial area
on the ground floor (not exceeding 300 m(2).
5. A distribution box for the electric installations is supplied and
installed.
6. Lessor guarantees Lessee a grounding of [less than or equal to] 1ohm.
7. Lessor provides Lessee a current supply with 3 phases of 65 KW each,
but only until Lessee is provided with an own transformer by the city's
department of works (Stadtwerke).
8. With respect to infrastructure suppliers, Lessor allows Lessee that the
company ISIS or the Telcom are authorized to perform core drillings, in
order to be able to insert supply lines. Lessee is obligated to assume
the liability for any damages caused by such core drillings.
<PAGE>
EXHIBIT 10.67
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Rentax Gesellschaft Fur Grundbesitzan-Lagen GmbH,
Gewerbehof Athen, 30519 Hannover, Germany, for property located at Alboinstrasse
36-42, 12103 Berlin, Germany. The lease term is for a minimum of 10 years
beginning on April 1, 1999 and ending on April 1, 2009. STAR GmbH incurs rental
charges of approximately 34,565 DM per month and approximately 6,318 DM per
month in additional expenses. The leased property is approximately 6,719 square
feet.
<PAGE>
DIENSTLEISTUNGS-SERVICE-UND-BUROFLACHEN-MIETVERTRAG
Zwischen
GfW Gesellschaft fur Wohnbesitz mbH & Co. KG
Robert-Heuser-StraBe 15
50968 Koln
vertreten durch:
Rentax Gesellschaft fur Grundbesitzanlagen mbH
RosenstraBe 1 - 3
1O178 Berlin
- im folgenden Vermieter genannt-
und STAR Telecommunications Deutschland GmbHP.
VoltastraBe 1 a
60486 Frankfurt
- im folgenden Mieter genannt-
wird folgender Mietvertag geschlossen:
SECTION 1 MIETERNUMMER
Der Mieter erhalt fur diesen Vertrag die Mieternummer
--------------------
--------------------
wird spater bekannt gegeben
Der Mieter wird gebeten, diese Mieternummer bei samtlichem Schriftverkehr und
allen Zahlungen diesen Vertrag betreffend anzugeben.
SECTION 2 MIETOBJEKT
1. Der Mieter mietet ausschlieBlich zum Zwecke der Buro- und techniknutzung
in der AlboinstraBe 36-42, die nachfolgend beschriebenen Gewerbeflachen:
<PAGE>
Linkes Vorderhaus EG
Haupttrakt EG rechts
Bauteil C
Beschreibung der Flache einschl Nebenraumen (siehe Anlage 1)
Die angemietete Gewerbeflache inkl. der Nebenraume wird im folgenden
"Mietobjekt" genannt.
2. Die FlachenaufmaBe werden anerkannt mit:
<TABLE>
<S> <C>
a) Mietflache Buro 599m(2)
b) Mietflache Techni 1.449 m(2)
c) Stellpplatz (3 in der TG und 2 5 Stck
auf dem Hof
d) Betriebskostenflache 2.048 m(2)
e) Heizkostenflache 599 m(2)
</TABLE>
Die GrundriBzeichnung/der tageLageplan mit den gekennzeichneten Flachen
ist Bestandteil dieses Mietvertrages (Anlage 1). Die GrundriBzeichnung/der
Lageplan dient allein zur Festlegung der Lage des Mietobjektes, eventuell
eingezeichnete Einrichtungsgegenstande, Trennwande, Turen, Fenster, sind
nur Vorschlage des Architekten, der Vermieter ist nicht verpflichtet, die
Raume so auszustatten.
Beide Mietertragsparteien vereinbaren ein gemeinsames AufmaB auf der
Grundlage der beigefugten Anlage 2 (Flachenberechnungsmethode) vor Bezug.
Das Ergebnis des AufmaBes wird dann zur Grundlage der Mietzinsberechnung
genommen.
3. Sonstige Gebaude- oder Grundstucksteile darf der Mieter nur nach
vorheriger schriftlicher Zustimmung des Vermieters Benutzen.
SECTION 3 MIETZEIT
1. Das Mietverhaltnis beginnt am 01.04.1999 und lauft von da an auf die Dauer
von 10 Jahren bis zum 31.03.2009.
2. Dem Mieter wird ein Optionsrecht von weiteren 5 Jahren nach Ablauf der
Festmietzeit eingeraumt Der Mieter hat dieses Optionsrecht mittels
eingeschriebenen Brief gegenuber dem Vermieter mit einer Frist von 12
Monaten vor Ablauf der usprunglichen Vertragszeit auszuuben.
3. Eine stillschweigende Verlangerung des beendeten Mietverhaltnisses gemaB
Section 568 BGB scheidet aus. Der Mieter verzichtet fur sich und seine
Erben auf das auBerordentilche Kundi-gungsrecht gemaB Section 569 I BGB.
<PAGE>
4. Dem Mieter ist bekannt, daB an dem Gesamtobjekt noch Um-bzw.
Ausbauarbeiten stattfinden.
Dem Vermieter wird bemuht sein, diese Arbeiten so durchzufuhren, daB die
Belange des Mieters dabei moglichst wenig tangiert werden.
SECTION 4 AUBERORDENTLICHES KUNDIGUNGSRECHT
1. Der Vemieter kann das Mietverhaltnis ohne Einhaltung einer Kundigungsfrist
mit sofortiger Wirkung kundigen.
a) wenn der Mieter fur zwei aufeinanderfolgende Termine mit der
Entrichtung des Mietzinses oder eines nicht unerheblichen Teils des
Mietzinses in Verzug ist oder in einem Zeitraum, der sich uber meher
als zwei Termine erstreckt, mit der Entrichtung des Mietzinses in
der Hohe eines Betrages in Verzug gekommen ist, der den Mietzins fur
zwei Monate erreicht;
b) wenn der Mieter seinen Verpflichtungen aus diesem Vertrag gegenuber
dem Venrmieter oder in Bezug auf die anderen Mieter des Hauses grob
zuwider handelt und diese Zuwiderhandlungen trotz Abmahnung durch
den Vermieter vorgesetzt werden;
c) wenn der Mieter die fur seinen Gewerbebetrieb geltenden
offentlich-rechtlichen Vor-schriften nicht einhalt oder behordlichen
Auflagen/Anordnungen nicht folgt;
d) wenn gegen den Mieter als Schuldner die Abgabe der eidesstatt lichen
Versicherung uber sein Vermogen beantragt wird;
e) wenn der Mieter die Versicherungsnachweise nicht innerhalb von 14
Tagen nach Auf-forderung nachweist
2. Die Kundigung hat schriftlich zu erfolgen.
3. Kundigt der Vermieter das Mietverhaltnis fristlos so ist er berechtigt,
vom Mieter Ersatz jeglichen Schadens, insbesondere Mietausfall bis zum
Ablauf der vorhergesehenen Vertragszeit, der ihm durch die vorzeitig
Auflosung des Mietverhaltnisses entsteht, zu verlangen. Die Zahlungen sind
zuzuglich Mehrwertsteuer zu erbringen.
4. Falls ein Antrag auf Eroffnung eines Insolvenzverfahrens uber das Vermogen
einer Partei gestellt wird, hat die andere Partei ein auBerordenliches
Kundigungsrecht.
SECTION 5 MIETZINS
1. Der Mietzins setzt sich zusammen aus der Grundmiete, den Betriebs- und
Verwaltungskosten jeweils zuzuglich der gultigen gesetzlichen
Mehrwertsteuer
<PAGE>
(Bruttomeite). Der Mieter hat auf die Betriebskosten Vorauszahlungen zu
erbringen. Unter Betriebskosten werden auch die Heizkosten verstanden,
sofern nicht die Heizungskosten im Nachfolgenden gesondert behandelt
werden. Die Verwaltungskosten werden als Pauschale bezhalt.
2. Der Mieter hat ab Vertragsbeginn folgende monatliche Leistungen zu
erbringen:
<TABLE>
<CAPTION>
PREIS/M(2) FLACHE/M(2) NETTOMIETE z.ZT. 16% MwSt BRUTTOMIETE
<S> <C> <C> <C> <C> <C>
Grundmiete
* Mietflache Buro 19,00 DM 599 11.381,00 DM 1.820,96 DM 13.201,96 DM
* Mietflache Technik 16,00 DM 1,449 23.184,00 DM 3.709,44 DM 26.893,44 DM
Stellplatze/Stuck 90,00 DM 5 450,00 DM 72,00 DM 522,00 DM
Betriebskostenvorauszahlung:
2,00 DM 2,048 4.096,00 DM 655,36 DM 4.751,36 DM
Heizkostenvorauszahlung:
2,00 DM 599 1.198,00 DM 191,68 DM 1.389,68 DM
Verwaltungskostenpauschale:
0.50 DM 2.048 1.024,00 DM 163,84 DM 1.187,84 DM
INSGESAMT 41.333,00 DM 6.613,28 DM 47.946,28 DM
</TABLE>
3. Index: Jeweils nach Ablauf eines Vertragsjahres andert sich die
Grundmiete und die Verwaltungskostenpauschale insoweit, als sich der
vom Statistischen Bundesamt ermittelte Preisindex fur die Lebenshaltung
aller privaten Haushalte (Basis 1991=100) seit unterschrifticher
Vollziehung dieses Vertrages bzw. der jeweiligen Neufestsetzung des
Mietzinses verandert hat. Die Geltendmachung der Anderung ist nicht an
eine Frist gebunden. Die erste Mietzinsanpassung findet im Jahr nach
Vertragsbeginn (Section 3 Ziff.1) statt. Der Vermieter legt diesen
Vertrag der zustandigen Landeszentralbank zu Genehmigung dieser
Indexvereinbarung vor.
4. Sollte die Option gem. Section 3 Ziffer 2 ausgeubt werden so
vereinbaren die Parteien, daB uber die Hohe der Grundmiete,
Betriebskostenvorauszahlung und der Verwaltungspauschale neu verhandelt
wird. Die Parteien verpflichten sich, im Falle der Ausubung der Option
gleichzeitig in Vertragsverhandlungen hinsichtlich der Hohe der
Grundmiete einzutreten.
Kommt eine Einigung zwischen den Parteien nicht innerhalb von 3 Monaten
nach Ausubung des Optionsrechtes zustande, so vereinbaren schon jetzt
beide Parteien, daB jeder berechtigt ist, einen vereidigten
Sachverstandigen einer Industrie- und Handelskammer zu benennen, der
dann verbindlich berechtigt ist, einen angemessenen Grundmietzins/die
angemessene Verwaltungs-kostenpauschale fur das erste Jahr der Option
zu bestimmen, das als Grundlage fur die weiteren jahrlichen Zahlungen
dient.
<PAGE>
Die Panrteien sind sich daruber einig, daB in diesem Falle die
Grundmiete fur das erste Optionsjahr nicht niedriger sein darf als der
Mietzins im zehnten Vertragsjahr. Dabei haben die Sachverstandigen
insbesondere die Ausstattung, Lage und Funktionalitat der Raume sowie
das Mietpreisniveau in Berlin zu berucksichtigen Kommen die beiden
Sachverstandigen nicht zu einem einheitlichen Ergebnis, bestimmen die
Sachverstandigen einen Obmann. Diese Entscheidung soll dann gelten
Konnen die beiden Sachverstandigen sich nicht auf einen Obmann einigen,
soll der Prasident der Industrie- und Handelskammer Berlin den Obmann
ernennen.
SECTION 6 OBJEKTUBERGABE
Die Ubergabe des Mietobjektes erfolgt im besichtigten und bekannten Zustand.
AnlaBlich der Ubergabe wird ein schriftliches Ubergabeprotokoll erstellt.
Eventuelle Mangel der Mietsache sind bei der Ubergabe der Mietraume zu
protokollieren.
Festgestellte berech tigte Mangel sind unverzuglich zu beseitigen. Ein
Kundigungsrecht ist diesbezuglich ausgeschlossen.
SECTION 7 FALLIGKEIT DER ZAHLUNGEN
1. Die monatliche Grundmiete zuzuglich Betriebs- und Verwaltungskosten
sowie der Mehrwertsteuer mussen spatestens bis zum 03. Werktag eines
jeden Monats im voraus bei dym Vermieter entweder in bar oder durch
Gutschrift auf dessen Konto spesenfrei eingegangen sein. Die
Bankverbindung des Vermieters lautet:
Bankinstitut: DePfa Bank Bau Bodenbank
K()litontimmer: 43 83 11
Bankltitrj hI: 100 104 24
2. Die erste Bruttomiete hat der Mieter vor Ubergabe des Mietobjektes zu
zahlen. Nichtzahlung trotz Mahnung rechtfertigen den Vermiete, vorn
Vertrag zurukzutreten.
3. Bei verspateter Zahlung ist der Vermieter berechtigt, Verzugszinsen in
Hohe von 2% Zinsen uber dem jeweiligen Diskontsatz der Deutschen
Bundesbank sowie Mahnkosten pro Mahnung in Hohe von DM 10,00 zu
erheben. Aus standiger unpunktlicher Zahlung kann der Mieter keine
Rechte herleiten.
4. Alle Zahlungen des Mieters werden in nachfolgender Reihenfolge
verrechnet Kaution, sonstige Kosten aus dem Mietverhaltnis, Kosten
etwaiger Rechtsverfolgung einschlieBlich Mahnkosten und ProzeBzinsen,
Forderungen aus Betriebs und ggf. Heizkostenkostenabrechnungen, fallige
Betriebs-/Heizkosten(voraus)zahlungen, Verwaltungskostenpauschale
laufende Miete, ruckstandige Miete, sonstige Kosten Entgegenstehende
Bestimmungen und Erklarungen des Mieters sind unverbindlich.
SECTION 8 BETRIEBS-, HEIZ- UND VERWALTUNGSKOSTEN
<PAGE>
1. Alle auf das in Section 2 genannte Mietobjekt entfallenden
Betriebskosten gemaB der jeweils gultigen Fassung der Anlage 3 zu
Section 27 II. Berechnungsverordnung gehen zu Lasten des Mieters. Die
Anlage 3 zu Section 27 II Berechnungsverordnung in der derzeit gultigen
Fassung ist diesem Vertrag beigefugt, sie ist Vertragsbestandteil
(Anlage 3). Neu entstehende Betriebskosten, die das Mietobjekt oder das
Gebaude, in dem das Mietobjekt liegt, betreffen, sind ab Entstehung
dieser Kosten vom Mieter zu tragen. Soweit infolge der Benutzung durch
den Mieter besondere, nur auf diesen Mieter zuruckzufuhrende Kosten
entstehen, werden diese Kosten zusatzlich in voller Hohe auf den Mieter
umgelegt.
2. Der Mieter verpflichtet sich, auf die Betriebs- und Heizkosten zusammen
mit der Grundmiete monatliche Vorauszahlungen in Hohe von 1/12 des
voraussichtlich auf ihn jahrlich entfallenden Anteils zu zahlen
Vorbehaltlich der jahrlichen Abrechnung werden diese zunachst auf DM
2,00 je m(2) Betriebskostenflache und DM 2,00 je m(2) Heizkostenflache
festgesetzt. Hinzu kommt die jeweils gultige Mehrwertsteuer Es ergibt
sich folgende Vorauszahlung.
<TABLE>
<CAPTION>
NETTO 16%MWST BRUTTO
<S> <C> <C> <C> <S> <S>
Betreibskostenvorauszahlung 2,00 DM 2.048 4.096,00 DM 655~36CM 4 .751,36 DM
Heizkostenvorauszahlung 2,00 DM 599 1.198,00 DM 131 68CM 1.389,68 DM
</TABLE>
3. Ferner tragt der Mieter alle auf das in Section 2 genannte Mietobjekt
enfallenden Verwaltungskosten.
Die Parteien vereinbaren einen Veralwtungskostenpauschalbetrag von
monatlich DM 0,56 je m(2) Mietflache zuzuglich der jeweils geltenden
gesetzlichen Mehrwertsteuer
<TABLE>
<CAPTION>
NETTOPAUSCHALE 16% MwSt BRUTTO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Verwaltungskostenpauschale 0,50 DM 2.048 1.024,00 DM 163.84 DM 1.187,84 DM
</TABLE>
Uber diesen Betrag ist nicht abzurechnen.
4. Die Betriebskostenvorauszahlung und ggf. die Heizkostenvorauszahlung
konnen vom Vermieter je nach Hohe der tatsachlichen Kosten jederzeit
angemessen herauf- und herabgesetzt werden. Neu entstehende
Betriebskosten konnen ab Entstehung angesetzt werden.
5. Uber die Betriebs- und, Heizkosten wird kalenderjahrlich abgerechnet.
Sollte sich aus der zu erstellenden Abrechnung eine vom Mieter zu
leistende Nachzahlung ergeben, ist diese zu dem auf die Abrechnung
folgenden 1. Mietzahlungstermin zu begleichen. Ein
<PAGE>
etwaiges Guthaben des Mieters wird zu dem gleichen Termin vom
Vermieter erstattet. Soweit nach Verbrauch abgerechnet wird und die
Ablesegerate einen Defekt erleiden, ist der Vermieter berechtigt,
die Betriebs-/Heizkosten zu schatzen und entsprechend umzulegen.
Diese Vereinbarung entbindet den Vermieter nicht, die defekten
Ablesegerate kurzfristig instand setzen zu lassen.
6. Wird das Mietverhaltnis innerhalb eines Kalenderjahres gelost, so zahlt
der Mieter die Betriebs- und Heizkosten in diesem Falle nur
zeitanteilig fur die Dauer des Bestehens des Mietverhaltnisses, wobei
der Anteil auf folgender Berechnungsgrundlage ermittelt wird:
Jahresbetriebskosten X Anzahl der Monate Vertragsdauer im Kalenderjahr
-----------------------------------------------------------------------
12 Monate
Der Vermieter ist im Falle der Beendigung des Vertrages berechtigt, bis zum auf
den Beendigungszeitpunkt folgenden nachsten Abrechnungszeitpunkt - zur Deckung
etwaiger Betriebs- kostennachforderungen fur das laufende Abrechnungsjahr- einen
Betrag in Hohe eines zweifachen monatlichen Betriebskostenvorschusses als
Sicherheit von der Kaution oder einer sonstigen Sicherheit zuruckbehalte.n
SECTION 9 MIETSICHERHEIT
I
1. Der Mieter sichert die Anspruche des Vermieters aus diesem Vertrag
unwiderruflich entweder durch Zahlung einer mit 2% verzinslichen
Barkaution in Hohe von 3 Monatsgrundmieten zuzugglich
Betriebskostenvorauszahlung, Verwaltungskosten jeweils gultiger
gesetzlicher Mehrwertsteuer (143.838,84 D) an den Vermieter oder durch
Hinterlegung einer selbstschuldnerischen, unwiiderruflichen,
unbefristeten und unbedingten Bankburgschaft in gleicher Hohe bei dem
Vermieter. Die Bank muB sich daruber hinaus verpflichten, auf erste
Anforderung zu zahlen.
2. Kaution oder Bankburgschaft sind wie folgt fallig:
a) Betragt der Zeitraum zwischen unterschriftlicher Vollziehung
des Mietvertrages und Mietvertragsbeginn (Section 2, Ziff. 1)
weniger als sechs Monate sofort.
Betragt der Zeitraum zwischen unterschriftlicher Vollziehung
des Mietvertrages und Mietvertragsbeginn (Section 2 Ziff. 1)
mehr als sechs Monate, so ist die Sicherheit spatestens 6
Wochen vor Mietvertragsbeginn fallig.
3. Der Mieter hat keinen Anspruch auf Ubergabe des Mietobjektes vor
Erbringung der Sicherheit. Die Miete ist trotzdem fallig.
4. Ruckzahlung oder Ruckgabe der Sicherheit erfolgen innerhalb von 6
Wochen nach Beendigung des Mietverhaltnisses und dessen ordnungsgemaBer
Erfullung durch den
<PAGE>
Mieter Section 8 Ziff. 8 ist bei Vorliegen der Voraussetzung
anzuwenden.
5. Die Burgschaft muB der jeweils geltenden Bruttomiete entsprechen. Die
geltende Hohe wird gemaB Section 5 Ziffer 2,3 oder 4 des Vertrages
ermittelt. Der mieter ist auf Anforderung verpflichtet, die Burgschaft
zu erhohen, wenn die summe der Burgschaft unter drei erhohte
Bruttomieten sind.
SECTION 10 UNTERVERMIETUNG /FIRMENWECHSEL
1. Eine entegeltliche oder unentgeltliche Untervermietung des ganzen oder
eines Teiles des Mietobjeketes ist nur mit schriftlicher Zustimmung des
Vermieters moglich. Der abgeschlossene Untermietvertrag ist dem
Vermieter in Kopie zu ubergeben.
2. Der Vermieter ist berechtigt, die ereilte Zustimmung zur
Untervermietung jederzeit zu widerrufen. Der Widerruf der Zustimmung
setzt voraus, daB dem Vermieter Grunde bekannt geworden sind, die ihn
gemaB Section 549 BGB berechtigt haben wurden, die Zustimmung nicht zu
erteilen.
3. Eine einmal erteilte Zustimmung zur Untervermietung verpflichtet den
Vermieter nicht, spater bei einer vom Mieter erneut geplanten
Untervermietung seine Zustimmung zu erteilen.
Der Mieter ist verpflichtet, den Untermieter vertraglich dzu
verpflichten, fur eine weitere Untervermietung durch den Untemieter die
Zustimmung des Vermieters einzuholen.
4. Fur den Fall, daB das Mietverhaltnis zwischen Vermieter und Mieter
endet und der Untermieter noch im Mietobjekt ist, tritt der Mieter
bereits jetzt seine Mietzinsanapruche gegen den Untermieter in voller
Hohe an den Vermieter ab. Daruber hinausgehende Nutzungsentschadigungs-
oder Schadensersatzanspruche des Vermieters bleiben unberuhrt.
5. Bei unbefugter Untervermietung oder sonstiger Gebrauchsuberlassung des
Mietobjektes oder von teilen des Mietobjektes an Dritte gilt folgendes:
Der Vermieter kann verlangen, daB der Mieter das Untermietverhaltnis
unverzuglich kundigt. Ist der Mieter hiermit mehr a;s sieben Tage in
Verzug, ist der Vermieter unwiderruflich bevolmachtigt, das
Untermieteverhaltnis im Namen des Mieters zu kundigen und alle Rechte
aus der Kundugung im Namen des Mieters geltend zu machen, notfalls
gerichtlich, und zwar auf Kosten des Mieters.
Unabhangig davon ist der Vermieter zur fristlosen Kundigung des
Hauptmietverhaltnisses berechtigt.
Hat der Mieter unberechtigt untervermietet, tritt er bereits jetzt
samtliche Mietzinsanspruche gegen den Untermieter ab. Diese stehen dem
Vermieter neben der
<PAGE>
vom Mieter geschuldeten Miete in voller Hohe zu. Hat der Untermieter
in Unkenntnis der Abtretung bereits an den Hauptmieter gezahlt, ist
der Hauptmieter insoweit zur Herausgabe verpflichtet.
Im Falle einer Untervermietung tritt der Mieter dem Vermieter schon
jetzt die ihm gegen den Untermieter zuztehenden Forderungen nebst
Pfandrecht - bis zur Hoe der Forderungen des Vermieters -
sicherungshalber ab.
6. Bei Firmen gilt ein Wechsel des Inhabers bzw. Eines personlich
haftenden Gesellschafters oder eine Anderung der Rechtsform als
Uberlassung an Dritte, die der Zustimmung des Vermieters bedarf. Die
Zustimmung darf nicht ohne sachlichen Grund versagt werden. Im Falle
des Uberganges des Mietvertrages haftet der bisherige Mieter fur die
bestehenden und kunftigen Forderungen neben dem Rechtsnachfolger als
Gesamtsh=chuldner weiter. Im ubrigen gilt daz zur Untervermietung
Ausgefuhrte. Solche Vorange sowie mogliche Anderungen bezuglich
eventuell notwendiger offtenlich-rechtlicher Erlaubnis oder in anderen
fur das Mietverhaltnis wichtigen Zusammenhangen hat der Mieter dem
Vermieter unverzuglich schriftlich mitzuteilen und die erforderlichen
Zustimmungen einzuholen.
7. Im Falle der VerauBerung des Betriebes durch den Mieter gilt die
voraufgefuhrte Ziffer entsprechend.
8. Gestattet der Vermieter schriftlich die Untervermietung, so ist der
Mieter verpflichet, bei der Abfassung des Untermietvertrages disen
Untermietvertrag zeitlich der Dauer des Hauptmietvertrages anzupassen.
Bei Beendigung des Hauptmietverhaltnisses ist das Untermietverhaltnis
ebenfalls zeitgleich zu beenden.
SECTION 11 ZUTRITTSRECHT
Dem Vermieter oder dessen Vertreter steht jederzeit das recht zu, wahrend der
ublichen Geschaftsstunden die vermieteten Raumlichkeiten zu besichtigen. Isr das
Mietverhaltnis gekundigt oder will der Vermieter das Grundstuck verkaufen, darf
ver Vermieter wahrend der ublichen Geschaftszeiten jederzeit das Mietobjekt mit
Interessenten nace Vorankundigung betreten. Der Mieter hat dafur Vorkehrungen zu
treffen, daB das Mietobjekt wahrend seiner/einer langeren Abwesenheit durch den
Vermieter betreten werden kann.
SECTION 12 ZUSTAND DES MIETOBJEKTES WAHREND BESTEHENDEN MIETVERHALTNISSES
I
1. Der Mieter wird alle Schonheitsreparaturen im Mietobjekt auf eigene
Kosten fachgerecht durchfuhren oder durchfuhren lassen. Die Parteien
sind sich daruber einig, daB diese Schonheitsreparaturen wegen der
hohen Abnutzung im gewerblichen Bereich spatestens alle 3 Jahre
insegesamt durchgefuhrt werden mussen, gegebenenfalls fruher, falls der
Grad der Abnutzung die Durchfuhrung von Schonheitsreparaturen ganz oder
teilweise
<PAGE>
unter Berucksichtigung des Geschaftszweiges des Mieters dies erfordert.
Die Schonheitsreparaturen umfassen insbesondere samtliche
Innenanstriche, das Tapezieren, Kalken oder Anstreichen von Wanden und
Decken, das Anstreichen bzw. Lackieren von Heizkorpern, Heizrohren,
sonstigen Versorgungsleitungen, der innenturen beidseitig, Fenster und
AuBenturen jeweils von innen und auBen. Die vom Mieter in den
Buroraumen verlegten Teppichboden werden von diesem in angemessenen
Zeitraumen erneuert.
2. Die Mieter hat auf seine Kosten alle erforderlichen Wartungs- und
PflegemaBnahmen bei Elektrogeraten und Heizstrangen innerhalb des
Mietobjektes durchzufuhren. Die Wartung hat jahrlich durch einen
Fachmann zu erfolgen und ist dem Vermieter auf Verlangen nachzuweisen.
Fur Betriebsunterbrechungen aller Art und die darus enstehenden Schaden
am Eigentum des Mieters durch die Nichteinhaltrung dieser Vorschriften
haftet der Vermieter nicht.
3. Reparaturen im und am Mietobjekt und an den Glasscheiben gehn zu Lasten
des Mieters.
Daruber hinausgehende Reparaturen gehen zu Lasten des vermieters.
4. Samtliche Arbeiten sind sach- und fachgerecht durchzufuhern.
UnterlaBt der Mieter trotz Fristsetzung mit Ablehnungsandrohung die
Durchfuhrung der notwendigen Schonheits- und Reparaturarbeiten, ist der
Vermieter berechtigt, diese Arbeiten auf Kosten des Mieters durchfuhren
zu lassen. Der Mieter ist verpflichtet, fur diesen Fall dem Vermieter
einen KostenvorschuB in angemessener Hohe auf Anforderung zu zahlen.
Weitergehende Rechte des Vermieters bleiben hiervon unberuhrt. Bei
Gefahr in Verzug oder bei unbekanntem Aufenthalt des mieters bedarf as
einer Fristsetzung mit Ablehnungsandrohung nicht.
5. Etwaige Anspruche gegen Dritte, die die Mietsache beschadigt haben,
tritt der Vermieter an den Mieter ab, wenn diesser die Mietsache wieder
in den vertragsgemaBen, gebrauchsfahigen Zustand versetzt hat.
SECTION 13 BAULICHE VERANDERUNGEN
1. Der Vermieter darf Ausbesserungen bauliche Veranderungen
(einschlieBlich Einbauten) im Bereich des Mietobjektes, die zur
Erhaltung und/oder Moderisierung des Grundstucks und/oder der Mietraume
und/oder zur Abwendung drohendor Gefahren und/oder zur Beseitigung von
Schaden notwendig werden, auch ohne Zustimmung des Mieters jederzeit
vornehmen. Er ist weiterhin zu allen Anderungen des Mietobjektes
befugt, wenn diese Anderungen auf behordlichen Auflagen und/oder
Anweisungen beruhen. Diese Regelungen gelten sinngemaB fur
ErschlieBungs- und AusbaumaBnahmen an Verkehrsflachen, Versorgungs- und
Enstorgungsanlagen einschlieBlich der Hausanschlusse solcher
Einrichtungen im und am Mietobjekt.
<PAGE>
Der Mieter hat hierzu die angemieteten Flachen zuganglich zu halten,
die Ausfuhrung der Arbeiten darf von ihm nicht behindert oder verzogert
werden. Der Vermieter ist gehalten, zwecks Durchfuhrung der Arbeiten
eine zeitliche Abstimmung mit dem mieter zu suchen.
Soweit der Mieter die Arbeiten dulden mub, kann er weder die Miete
mindern, noch ein Zuruckbehaltungsrecht ausuben, noch Schadensersatz
verlangen, es sei denn, der Vermieter hat Vorsatz oder grobe
Fahrlassigkeit zu vertreten. Er darf die Arbeiten weder behindern noch
verzogern, andernfalls haftet er fur die dadurch enstehenden Mehrkosten
sowie fur etwaige weitere Schaden.
Eine Mietminderung kann der Mieter nur dann verlangen, wenn es sich um
Arbeiten handelt, die den Gebrauch der betreffenden Raume ganz
ausschlieBen und erheblich beeintrachtigen und die Arbeiten langer als
zwei Wochen andauren.
2. Bauliche Veranderungen der Mietsache durch den Mieter, insbesondere Um-
und einbauten, Installationen, Vergitterung der Fenster, Herstellung
und Veranderung von Feuerstatten etc. bedurfen der schriftlichen
Zuztimmung des Vermieters. Die Kosten treffen allien den Mieter. Dieser
ist auch allein verantwortlich dafur, daB die erforderlichen
gesetzlichen Bestimmungen eingehalten werden. Der Mieter hat dem
Vermieter einen schriftlichen Kostenvoranschlag sowie die Plane fur die
geplanten UmbaumaBnahmen zur Genehmigung vorzulegen.
Als bauliche Veranderungen gelten auch Veranderungen der vorhandenen
Leitungsnetze fur alle Versorgungsleistungen.
3. Dem Mieter ist bekannt, daB der Vermieter etwa ab Beginn der Mietzeit
folgende Arbeiten im Gesamtobjekt durchfuhrt:
a) Einbau von neuen Treppenhausern (auBerhalb des Mietbereiches)
b) Instandsetzung und Erneuerung der Haustechnik
c) Teilweise Sanierung der AuBenfassade
d) Einbau von mieterspezifischen Wunschen in den daneben und daruber
befindlichen Mieteinheiten
Hieraus kann der mieter keine Anspruche geltend machen, wenn die
Nutzung des Mietobjektes hiedurch nicht wesentlich beeintrachtigt wird.
SECTION 14 HAFTUNG
1a) Schadensersatzanspruche des Mieters wegen anfanglicher oder
nachtraglicher Mangel der Mietsache sind ausgeschlossen, es sei denn,
daB der Vermieter oder grobe Fahrlassig-keit
<PAGE>
zu vertreten hat. Auch im ubrigen haftet der Vermieter nur fur Vorsatz
und grobe Fahrlassigkeit, einschlieBlich des Verhaltens seines
Vertreters oder Erfullungsgehilfen. Hiervon unberuhrt bleiben
Erfullungsanspruche des Mieters sowie sein gesetzliches Recht zur
fristlosen Kundigung.
1b) Der Vermieter haftet nicht fur schaden, die dem Mieter an dem ihm
gehorenden Waren und Einrichtungsgegenstanden durch
Feuchtigkeitseinwirkung entstehen, gleich welcher Art, Herkunft und
dauer und welchen umfangs die Feuchtigkeitseinwirkung ist; es sei denn,
daB der Vermieter den Schaden vorsatzlich oder grobfahrlassig
herbeigefuhrt hat. Im ubrigen ist die Haftung des Vermieters
grundsatzlich auf die Hohe der Haftpflichtversicherungssumme begrenzt.
2a) Der mieter haftet dem Vermieter wegen Beschadigung der Mietraume und
des Gebaudes/ sowie der zu den Mietraumen oder zu dem Gebaude
gehorenden Einrichtungen und Anlagen, die durch ihn, die zu seinem
Betrieb gehorenden Personen, Besucher, Kunden, Lieferanten sowie von
ihm beauftragte Handwerker und ahnliche Personen vorsatzlich oder
grobfahrlassig verursacht worden sind, soweit er dies zu vertreten hat.
Leistet der Mieter dem Vermieter Schadensersatz, so ist dieser
verpflichtet, dem Mieter seine etwaigen Anspruche gegen den Verrsacher
des Schadens abzutreten.
2b) Der Mieter haftet Dritten gegenuber aus Beschadigungen, die sich aus
seinem Gewerbe- betrieb, der eventuellen Installation von Geraten,
Apparaturen oder Anlagen ergibt. Der Mieter stellt den Vermieter von
allen Anspruchen Dritter frei, die gegen den Verimieter aus einer
Verletzung dieser Verpflichtung erhoben werden konnten.
4. Vor der aufstellung von schweren Gegenstanden in den Mietraumen hat der
Mieter sich zu vergewissern, daB die zulassige Belastrung des Bodens
bzw. Der Stockwerkdecken nicht uber-schritten wird. Eine hierzu im
Einzelfall erforderliche statische Berechnung hat er auf eigene Kosten
erstellen zu lassen und dem Vermieter auf Verlangen vorzulegen.
SECTION 15 VERKEHRSSICHERHEIT
1. Der Mieter ubernimmt die Verkehrssicherungspflicht auf seine Kosten
hinichtlich der von ihm eingebrachten Gegenstande, nicht nur im Bereich
des Mietobjektes, sondern auch auf den Flachen, die von ihm zusatzlich
zum Aufstellen von Waren, Werb etragern, - oder sonstigen zu seinem
Betrieb gehorenden Einrichtungen genutzt werden. Der Mieter stelt dem
Vermieter von allen anspruche frei, die gegen den Vermieter aus einer
Verletzung der Verkehrssicherungspflicht erhoben werden.
SECTION 16 KONKURRENZKLAUSEL
Vertraglicher oder gesetzlicher Konkurrenzschutz ist ausgeschlossen. Er wird von
dem Mieter weder gegenuber dem Vermieter noch gegenuber den ubrigen Mietern des
Hauses in Anspruch genommen.
<PAGE>
SECTION 17 ABFALLBESEITIGUNG / EMISSIONSSCHUTZ
1. Abfuhr von Leergut und Mull erfolgt nach MaBgabe der vom Vermieter
erlassenen Anweisungen. Die Kosten dieser ausschlieBlich den Mieter
betreffenden Mullabfuhr/Beseitigung des Leerguts gehen zu seinen
Lasten. Soweit der Vermieter die Abfallbeseitigung fur alle Mieter
durchfuhern laBt, werden die entstehenden Kosten im Rahme der
Betriebskosten auf die Mieter umgelegt.
2. Sofern sich aus dem Geschaftsbetrieb des Vermieters besondere
Anforerungen ergeben, tragt dieser fur die Abfallbeseitigung ergeben,
tragt dieser fur die Einhaltung der Bestimmungen des
Abfallbeseitigungsgesetze sorge. Soweit dieser Abfall nicht dazu
geeignet ist, im Rahmen der von dem Verimieter zur Verfugung gestellten
Mullbeseitigung entsorgt zu werden, ist der Mieter verpflichtet, dafur
Sorge in tragen, daB dieser Abfall bestimmungsgemaB entsprcechend
Jeweils den geltenden gesetzlichen Bestimmungen/behordlichen
Verordnungen entsorgt wird und nicht in die zur allgemeinen
Abfallbeseitigung vorhandenen Einrichtungen gelangt. Der Mieter stellt
den Vermieter von allen gegen diesen gerichteten Anspruchen frei, er
leistet Sicherheit, sofern der Vermieter in Anspruch genommen wird.
3. Auf dem Grundstuck, auf dem der Mieter das Mietobjekt anmietet, sind
nur Anlagen zugeslassen, die keine erheblichen verfahrenstechnisch
bedingten Ableitungen in form von Gasen, Dampfen, Stauben (RuBen),
Aerosolen, Geruche und Larm besitzen . Zugelassen sind Anlagen, von
denen nur larm in einer solchen Laustarke ausgeht, daB die in der
TA-Larm festgelegten Lautstarkenwerte eingehlaten werden.
Daruber hinaus sind Betriebe mit Enissionen, die sich nicht mit einer
Wand-an-Wand-Anordung vereinbaren lassen, nicht zugelassen. Unabhangig
davon kann der Vermieter auch daruber hinaus verlangen, daB der Mieter
die nachbarrechtlichen Belange wahrt.
Sollten im Geschaftsbetrieb des Mieters Emissionen verusacht werden,
fur die es gesonderte gewerberechtliche oder sonstige gesetzlichen
Auflagen gibt, ist der Mieter verpflichtet, die Auflagen einzuhalten.
SECTION 18 VERSICHERUNGEN
1. Der Mieter ist verpflichtet, in seinen Risikobereich fallende
Verischerungsvertrage abzuschlieBen.
SECTION 19 VER- /ENTSSORGUNG
Die Vorhandenen Leitungsnetze fur Elektrizitat, gas, Wasser, Abwasser, durfen
vom Mieter nur in dem Umfang in Anspruch genommen werden, daB keine Uberlastung
der Netze eintritt. Anderungen der vorhandenen Leitungsnetze sind nur mit
Zustimmung des Vermieters und/oder
<PAGE>
des Betreibers des, Leitungsnetzes zulassig. Eine Veranderung der
Energieversorgung durch den Betreibe des Leitungsnetzes berechtigt den Mieter
nicht zu Ersatzanspruchen gegnuber dem Vermiete. Fur die Elektroversorgung
der Technikbereche stellt der Mieter vertragliche Direktbeziehungen zum
Versorgungsunternehmen her. Dazo installiert der Mieter in der daufur
Vorgesehenen Mietflache (Keller) seine dazu erforderliche Trafostation.
SECTION 20 BEENDIGUNG DES MIETVERHALTNISSES
1. Das Mietobjekt ist bei Beendigung der Mietzeit vollstandig geraumt,
gereinigt und mit samtlichen Schlusseln, Codekarten etc. zuruckzugeben.
Weiter schuldet der Mieter dem Vermieter die Herrichtung der
ubernommenen Raumlichkeiten in dem zur Ubernahme des Mietobjekets
vorhandenen Zustand. Samtliche Arbeiten sind sach- und fachgerecht
durch Fachfirmen durchzufuhren.
2. Hat der Mieter ohne schriftliche Einverstandniserklarung des Vermieters
bauliche Veranderungen vorgenomm, so muB er auf Verlangen des
Vermieters den rsprunglichen Zustand der ihm uberlassenen
Raumlichkeiten auf eigene Kosten wiederherstellen. Besteht der
Vermieter nicht auf einen Ruckbau, so verzichtet der mieter gegnuber
dem Vermieter bereits jetzt auf Erstattungsanspruche fur von ihm
aufgewandte Kosten baulicher Veranderungen.
SECTION 21 MINDERUNG, AUFRECHNUNG , ZURUCKBEHALTUNGSRECHT
1. Der Mieter kann gegenuber den Mietzinszahlungsanspruchen des Vermieters
weder aufrechnen noch ein Zuruckbehaltungsrecht ausuben oder die Miete
mindern. Hiervon ausgenommen sind Forderungen des Mieters wegen
Schadenersatz fur Nichterfullung oder Aufwendungsersatz infolge eines
anfanglichen oder nachtraglichen Mangels der Mietsache, den der
Vermieter wegen Vorsatz oder grober Fahrlassigkeit zu vertreten hat.
Mit unbestrittenen oder rechtskraftig festgestellten Forderungen dem
Mietverhaltnis kann dcr Mieter aufrechnen bzw. ein
Zuruckbehaltungsrecht ausuben.
2. Die Aufrechnung oder die Ausubung des Zuruckbehaltuunsrechts ist nur
zulassig, wenn der Mieter sein Absicht dem Vermieter mindestens einen
Monat vor Falligkeit der Miete schriftlich angezeigt hat. Die
Aufrechnung darf 40% der monatlichen Grundmiete nicht ubersteige, sie
hat daher gegebenenfalls in Teilbertragen zu erfolgen.
3. Eine Aufrechnung gegen Betriebs- und Verwaltungskosten oder eine
Minderung der Betriebe- und Verwaltungskosten durch den Mieter ist
unzulassig.
SECTION 22 BENUTZUNG DER MIETSACHE
1. Der Mieter darf die Mietsache in einem anderen als in Section 2 Ziff. 1
vorgesehenen Zweck nicht ohne eine vorherige schriftliche Zustimmung
des Vermieters nutzen. Der Mieter ist verpflichtet, wahrend dee
gesamten Mietzeit den Geschaftsbetrieb aufrecht zu erhalten.
<PAGE>
2. Der Mieter ist verpflichtet, rechtzeitig vor VertragsabschluB auf
eigene Kosten zu prufen, ob er den angestrebten Nutzungszweck in dem
angemieteten Mietobjekt durchfuhren kann; es obliegt ihm, alle
erforderlichen offentlich-rechtlichen Genehmigungen und Erlaubnisse
einzuholen und wenn eforderlich - durch alle Instanzen zu erstreiten,
Anzeigepflichten und behordliche Auflagen/Bedingungen zu erfullen. Der
Mieter hat die Voraussetzungen fur den Betrieb des Gewerbes in der
vertraglich vorgesehenen Nutzungsart selbst auf eigene Kosten zu
schaffen und zu erhalten.
Soltie die Konzession beziehungsweise Erlaubnis aus Grunden, die der
Vermieter zu vertreten hat, nicht erteilt bzw. spater widerrufen
werden, so wird dieser Vertrag mit der versagung/dem Widerruf
unwirksam, ohne daB der Mieter hieraus Schadensersatzanspruche
herleiten kann.
3. Andere Versagungsgrunde insbesondere alle Grunde die in dcr Sphare des
Mieters liegen, beruhren die Wiiksamkeit des Vectrages nicht. Sie
berechtigen den Vermieter auch ohne Verschulden des Mieters zur
fristlosen Kundigung des Mietverhaltnisses. In diesem Fall ise der
Mieter veipflichet, dem Vermieter den daraus entstandenen Schaden zu
ersetzen.
4. Der Vermieter ubernimmt keine Gewahr fur die Erlaubnisfahigkeit des
angemieteten Objektes fur den angestrbten Nutzungszweck.
5. Der Mieter darf den Mietzweck nur dergestalt verfolgen, daB weder
offentlich-rechtliche noch privatrechtliche Belange Dritter
beeintrachtigt werden.
6. Grundsatzlich gelten folgende Nutzungseinschrankungen:
a) Es durfen keinesfalls O1, sonstige Schmierstoffe oder andere,
das Grundwasser verunreinigenden Flussigkeiten in das Erdreich
gelangen.
b) Wasch-, Wartungs- und Reparaturarbeiten durfen nur dann
durchgefuhrt werden, wenn ordnungsemaBe Einrichtungen nach den
gesetzlichen Vorschriften vorhanden sind ( z.B. Olabscheider)
c) Eventuelle Kosten fur die mit den Buchstaben a und b
zusammenhangenden MaBnahmen tragt der Mieter
7. Der Mieter hat jederzeit dafur zu sorgen, daB sich das Mietobjekt
jederzeit in einem ordentlichen und sauberen Zustand befindet.
SECTION 23 WERBEEINRICHTUNGEN
1. Im Interesse einer auf den Gesamtcharakter des Gewerbezentrus
abgestimmten Werbung bedarf die Anbringung und Ausgestaltung von
Einrichtungen, die der Werbung oder der Ver- kaufsforderung dienen
(z.B. Firmenschilder, Schaukasten, Verkaufsautomaten usw.) auBerhalb
des Mietobjektes der vorherigen schriftlichen Zustimmung des
Vermieters. Eine einmal erteilte Zustimmung kann aus wichtigen Grunden
widerrufen werden. Bei
<PAGE>
Beedigung des Mietverhalnisses und bei Widerruf der Genehmigung ist der
Mieter verpflichtet, anf seine Kosten den alten Zustand
wiederherzustellen. Die gesetzlichen und stadtebaulichen Bestirmungen
hat der Mieter zu beachten, die erforderlichen Genehmigungen sind vom
Mieter einzuholen, die anfallenden Kosten gehen zu seinen Lasten.
2. Hat der Vermieter eine einheitliche Beschilderungsanlage bereitgestellt
oder errichtet er wahrend der Laufzeit des Mietverhaltnisses eine
solche, ist der Mieter verpflichtet, diese aus schlieBlich zu benutzen.
Wird die Beschilderungsanlage wahrend der Laufzeit des Vertrages
geandert, ist der Mieter verpflichtet, bei den erforderlchen Anderungen
mitzuwirken. Die Kosten fur die Benutzung der Anlage hat der Mieter zu
tragen.
3. Der Mieter ist verpflichtet, die Werbeeinrichtungen bei Beendigung des
Mietverhaltnisses auf seine Kosten abzubauen und den ursprunglichen
Zustand wieder herzustellen.
SECTION 24 PERSONENMEHRHEITEN
1. Mehrere Personen als Mieter, auch Ehegatten haften fur alle
Verpflichtungen aus diesem Vertrag als Gesamtschuldner.
2. Tatsachen, die fur eine Person bei Personenmehrheit eine Verlangerung
oder Verkurzung des Vertragsverhaltnisses herbeifuhren oder gegen ihn
einen Schadenersatz- oder sonstigen Anspruch begrunden wurden, haben
fur die anderen Personen die gleiche Wirkung.
3. Sind mehrere Personen Mieter oder Vermieter, so bevollmachtigen sie
sich hiermit gegenseitig Willenserklarungen der anderen Vertragspartei
mit Wirkung fur den anderen/die anderen entgegenzunehmen oder von ihrer
Seite abzugebende Erklarungen, mit Wirkung fur alle, gegenuber der
anderen Vertragspatei abzugeben. Fur die Wirksamkeit einer Erklarung
der Vermieterseite oder der Mieterseite genugt es, wenn sie gegenuber
einem der Mieter oder einem der Vermieter abgegeben wird.
4. Die Parteien vereinbaren unwiderruflich, daB Zustellanschrift fur alle
Erklarungen der Vermieterin auch die angemieteten Gewerberaume
beziehungsweise die hierfur vorgesehenen Briefkasten sein.
SECTION 25 UBERTRAGUNG DER VERMIETERRECHTE
Fur den fall, daB Vermieter das Mietvertragsverhaltnis wahrend der
Vertragslaufzeit auf einen Dritten als Vermieter ubertragen will, erteilt der
Mieter bereits jetzt dazu seine Zustimmung. Hierbei muB der Vermieter
sicherstellen, daB bei Ubertragung des Mietverhaltnisses uber die Mietsicherheit
abgerechnet wird. Die Mietsicherheit - soweit nicht verbraucht - ist dem
Vertragsnachfolger zu ubergeben bzw. auf sonstge Weise mit ihm zu verrechnen.
Sobald dies erfolgt ist, endet die Haftung des Vermieters in Bezug auf die
Mietsicherheit. Etwaige
<PAGE>
Anspruche des Mieters auf Entschadigung oder wegen Verwendungsersatz richten
sich gegen den Erwerber.
SECTION 26
SONSTIGES
1. Der Mieter verpflichtet sich, die von dem Vermieter aufgestellte
beziehungsweise noch aufzustellende Hausordnung zu beachten. Diese
ist/wird Bestandteil des Vertrages. Gleiches gilt fur eine eventuell
vom Vermieter aufgestellte Brandschutzordnung.
2. Vertraglichcr oder gesetzlicher Konkurrenzschutz ist ausgeschlossen. Er
wird von dem Mieter weder gegenuber dem Vermieter noch gegenuber den
ubrigen Mietern des Hauses in Anspruch genommen.
Der Vermieter haftet auch nicht dafur, daB die Ausubung des vom Mieter
beabsichtigten Vertragszweckes nicht gegen allgemeine
Konkurrenzschutzbestimmungen verstoBt. Dies gilt auch, wenn die
betroffenen Objekte samtliche Vermietungsobjekte des Vermieters sind.
3. Samtliche Zahlungen des Mieters einschlieBlich Zahlungen auf
Schadensersatz und Nut-zungsentschadigung haben zuzuglich der jeweils
geltenden Mehrwertsteuer in erfolgen.
SECTION 27 ERFULLUNGSORT UND GERICHTSSTAND
Erfullungsort und erichtsstand ist - soweit gesetzlich zulassig - Berlin.
SECTION 28 SCHLUBBESTIMMUNGEN
Sollten Bestimmungen dieses Vertrages unwirksam oder werden, oder sollte sich in
diesem Vertrag eine Lucke herausstellen, so soll hierdruch die Gultigkeit der
ubrigen Bestimmungen nicht beruhrt werden. Anstelle der unwirksamen Bestimmungen
oder zur Ausfullung der Lucke soll eine angemessene Regeunng gelten, die soweit
rechtlich moglich - dem am nachsten kommt, was die Vertragsparteien gewollt
haben oder nach dem Sinn und Zweck dieses Vertrages gewollt hatten wenn sie den
Punkt bedacht hatten.
Mundliche Nebenabreden zu diesem Vertrag sind nicht getroffen worden. Anderungen
und Erganzungen zu diesem Vertrag bedfuren zu ihrer Wirksamkeit der Schrifiform.
Dieser Vertrag ist doppelt und gleichlautend ausgefertigt selbst gelesen,
uberall genehmigt und eigenhandig unterschrieben. Beide Vertragsparteien haben
eine Ausfertigung nebst Anlagen erhalten.
<PAGE>
ANLAGEN:
- --------
Anlage 1 - Zeichnung gemaB Section 2 Absaz 1
Anlage 2 - Flachenbergechnungsmethode
Anlage 3 - Anlage3 zu Section 27 II BVO
Anlage 4 - Vereinbarung zur Mietsache
Berlin, den 05.02.99
- ---------------------- -------------------------
Vermieter Mieter
Rentax STAR Telecommunications
Gesellaschaft fur Grundbesitzanlagen mbH Deutschland GmbH
RosenstraBe 1-3 10178 Berlin 60486 Frankfurt am Mian
<PAGE>
EXHIBIT 10.68
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Gewerbehof Athen, 30519 Hannover, Germany, for property
located at Am Eisenwerk 29, 30519 Hannover, Germany. The lease term is for a
minimum of 15 years beginning on March 1, 1999 and ending on March 1, 2014. STAR
GmbH incurs rental charges of approximately 19,869 DM per month and
approximately 1,300 DM per month in additional expenses. The leased property is
approximately 5,857 square feet.
1
<PAGE>
MIETVERTRAG
fur gewerblich genutzte Raume und Grundstucke
Zwischen
Frau Lucia Athen
Gewerbehof Athen
Am Eisenwerk 11
30519 Hannover
Tel. 05118791030 Fax 8790035
Als Vermieterin
und
Firma
STAR Telecommunications Deutschland GmbH
Prinzenstr. 7
40459 Dusseldorf
als Mieter
SECTION 1 MIETSACHE
(1) Vermietet werden auf dem Grundstuck
30519 Hannover
Am Eisenwerk 11-51 / Am Mittelfelde 27 - 45
das Gebaude mit der Hausnummer: Am Eisenwerk 29, im Gesamtgrundrissplan - Anlage
1 - rot umrandet. Es sollen Geschafts und Technikraume eingerichtet werden und
insbesondere sollen Telekommunikationsvernmitt lungseinrichtungen aufgestellt
werden. Die Raumlichkeiten haben eine Nutzflache von ca 1.785 qm. Das Gebaude
wird noch umgebaut. Die Baubeschreibung ist als Anlage 3 beigefugt.
(2) weiterhin werden 6 Parkplatze - grun eingezeichnet - mitvermietet.
(3) Mitbenitzt werden durfen:
(a) die Grundstuckseinfahrten "Am Eisenswerk" und "Am Mittefelde".
(b) die Oststrasse (Bahndamm)die Werkstrasse, die Nordstrasse,
und die Strasse unter der Hochbrucke.
(c) ausser auf den gekennzeichneten Parkplatze durfen auf den Strassen
bzw. Freiflachen keine Fahrzeuge abgestellt oder Waren gelargert werden.
Alle Mieter sind zure Offenhalten der Verkehrswege verpflichtet.
SECTION 2 MIETZEIT / KUNDIGUNG
(1) Das Mieteverhaltnis beginnt am
01 03 1999
und wird mit auf 15 Jahre fest abgeschlossen. Es lauft somit am 28. 2. 2014 ab,
sofern es mit einer Frist von 6 Monaten zu diesem Zeitpunkt gekundigt wird.
Ansonsten verlangert es sich um jeweils weitere 5 Jahre.
(2) Die Kundigung muss schriftlich bis zum 3. Werktag des 1. Monats der
Kundigungfrist erfolgen.
(3) Schadensersatzanspruche des Mieters bei nicht rechtzeitiger. Freimachnung
oder nicht rechtzeitiger Fertigstel
2
<PAGE>
lung der Mietsache sind ausgeschlossen.
MIETVERTRAG: LUCIA ATHEN - STAR TELECOM - AM EISENWERK 29 -
30519 HANNOVER
SECTION 3 AUSSERORDENTLICHES KUNDIGUNGSrECHT
(1) Fur die Ausserordentliche Kundigung gelten
grundsatzlich die gesetzlichen Bestimmungen.
(2) Die Vermieterin kann den Mietvertrag aus wichtigen Grunden
mit sofortiger Wirkung insbesondere dann kundigen, wenn:
(a) die Mieterin mit der Zahlung eines nicht unerheblichen
Teil des Mietzinses langer als 2 Monate im Ruckstand ist,
(b) die mieterin oder die fur diese tatigen Personen sich
erheblicher Belastigungen gegenuber der Vermieterin, anderen
Mietern oder den fur diese tatigen Personen schuldig macht,
(c) die Mieterin den vertragswidrigen Gebrauch der Mietsache
oder ihre unbefugte Uberassung an dritte Personnen trotz
Mahnung der Vermieterin fortsetzt,
(d) die Mieterin ihren sonstigen vertraglichen
Verpflichtungen trotz schriflicher Mahnung nicht innerhalb
angemessner Frist nachkommt.
(3) Falls ein antrag auf Eroffnung eines Insolvenverfahrens
uber das Vermogen einer Partei gestellt wird, ein
ausserordentliches, der Schuldenregulierung dienendes
Verfahren eingeleitet wird oder eine dieser Parteien ihre
Zahlungen einstellt, hat die andere Partei ein
ausserordentliches Kundigugnsrecht.
(4) Fur den Fall der ausserordentlichen Kundigung
umfasst der Mietzins auch der Betriebskosten und Zuschlage
(Nebenkosten). Der Mieter haftet fur den Miet- und
Nebenkostenausfall sowie fur alle weiteren Schaden, die die
Vermieterin durch die vortzeitige Beendigung des Mietvertrages
erleidet. Als Mindestschaden kann die Fortzahlung des
vereinbarten Mietzins und evtl. Der Nebenkosten bis zum Ablauf
der Vertragsdauer verlangt werden, soweit die Vermieterin
nicht durech anderweitige Vermietung des Mietobjektes schadlos
gestellt wird.
SECTION 4 MIETZINS
(1) Der Mietzins betragt mtl.:
Zu Section 1 Abs. Halle 1.455 qm 9,80 = 14.259,00 DM
Buro 330 qm 17,00 = 5.610, 00 DM
Zu Section 1 Abs. 2 0,00 DM
Zu Section 1 Abs. 3 kostenlos
Alle Betrage zzgl. MWSt.
(2) Die Nebenkosten - Wasser, Kanal, Strom, Aussenlicht,
Heizung - Gas, Warmwasser, Wartungs- und Reparaturarbeiten der
Heizungsanlage, Schornsteinfeger, Mullabfuhr, Grundsteuer,
Strassenreinugung, Versicherungen aller Art einschl.
Brandversichering, Hausmeister - sind vom Mieter zu tragen.
Die Kosten werden nach einem noch zu bestimmenden Schlussel
auf die Mieter umgelegt. Auf diese Kosten ist eine mtl.
Abschlagszahlung von DM 1.300,00 zzgl. MWSt zu entrichten, die
per 31.12. eines jeden Jahres abgerechnet wird. In diesem
Betrag ist eine Vorauszahlung auf die Hiezkosten (Gas) i. H.
v. 300,00 DM enthalten.
(3) Der Mieter ist verpflichtet, fur Schaden an eigenen
Vermogensgegenstanden entsprechende Versicherungen
abzuschliessen. Die Haftung des Vermieters fur Vermieters
fur Schaden jeglicher Art ist, soweit rechtlich zulassig,
unter Ausschluss weitegehender Schadensersatzansspruche -
gleich aus welchem Rechtsgrund - dem
3
<PAGE>
Grund und der Hohe nach auf die Deckung der
Haftpflichtversichering der Vermieterin wird einen
entsprechenden Versicherungsschutz auf Anfordering nachweisen.
MIETVERTRAG: LUCIA ATHEN - STAR TELECOM - AM EISENWERK 29 - 30519
HANNOVER
SECTION UMWELTSCHUTZ
(1) Auf das Erfordernis der Einhaltung gesetzlicher Auflagen und
dergleichen zum Schutz der Umwelt wird hingewiesen.
Hierzu gehoren insbesondere:
Bundes-Immissions-Schutzgesetz / Gesetze zum Schutz von samtlichen
Umwelteinwirkungen durch Luftverunreinigungen, Gerausche,
Erschutterungen und ahnliche Vorange / Abfallbeseitigungsgesetz mit
Abfallnachweisverordnung, Abfallbeforderingsverordung, Abfalleinfuhr-VO
/ Technische Anleitung zur Reinhaltung der Luft (TA Luft) /
Wasserhaushaltsgesetz
Die Mietering verpflichtet sich, die gesetzlichen Bestimmungen zu
beachten und evtl. Auflagen auf ihre Kosten fristgemass zu
erfullen.
Fur eine Inanspruchnahme der Vermeiterin, die durch Nichtbeachtung der
gesetzlichen Bestimmungen oder Auflagen seitens der Mieterin verursacht
wird, ist die Mieterin in vollem Umfang regresslflichtig.
Die Kosten fur die Beseitigung von Industrie- und Buromull ubernimmt
die Mietrin.
SECTION 6 ZAHLUNG DES MIETZINSES
(1) Der Mietzins ist spatestens am 3. Tage eines jeden Monats an den
Vermieter oder die von ihm zur Entgegennahme jeweils ermachtige Person
oder Stelle, hier
Vereins- und Westbank AG, Hannover
BLZ 200 300 00 / Kto.: 7537418
Kostenfrei im voraus zu zahlen. Soweit Nebenkosten angefordert werddn
sind sie binnen einer Woche zu zahlen Befindet sich der Mieter mit der
Zahlung de Mietzins im Ruckstand, sind Zahlungen, trotz
entgegenstehender Bestimmung zunachst auf etwaige Anspruche, deren
Verjahrung droht, dann auf etwaige Kosten, Zinsen und ubrige Schulden
anzurechnen.
(2) Bie Mietruckstanden werden ab der 2 Mahnung 15, -- DM zzgl. USt
und fur jeden angefangenen Monat des Mietruckstandes 1,0%
Verzugszinsen berechtnet.
SECTION 7 MINDERUNG, AUFRECHNUNG, UND ZURUCKBEHALTUNG
(1) Der Mieter kann ein Minderungsrecht am Mietzins nur austuben, wenn
er dieses mindestens einen Monat vor Falligkeit dem Vermieter
schriftlich angekundigt hat. Bei Ubergabe der Mietsache wird ein von
beiden Seiten unterzeichenetes Protokoll erstellt, in dem der Zustand
der Mietsache festgehalten wird. Sofern in diesem Protokoll nichts
anderes vermerkt ist, erkennt der Mieter zu dem Zietpunkt der
Uberlassung der Mietsache deren ordnungs und vertragsgemassen
Zustand an und dass ihm Mietminderungsanspruche wegen etwaiger
Mangel im Zeitpunkt der Uberlassung nicht zustehen.
(3) Ersatzanspruche nach Section 538 BGB sind ausgeschlossen.
SECTION BENUTZUNG DER MIETSACHE, GEBRAUSCHSUBERLASSUNG
(1) Der Mieter ist zu einer Untervermietung oder Gebrauchsuberlassung
an Dritte im Rahmen seines Geschftsbetriebes berechtigt.
(2) Der Mieter tritt dem Vermeiter schon fur den Fall der
Untervermietung / Gebrauchsuberlassung die
4
<PAGE>
ihm gegen den Untermieter zustenhende Forderung nebst Pfandrecht
in Hohe der Mieterforderung des Vermieters zur Sicherheit ab.
(3) Dem Mieter ist das Verkaufen und Abieten von Erzeugnissen, die ein
anderer Mieter bereits im Hause vertriebt, untersagt.
5
<PAGE>
MIETVERTRAG: LUCIA ATHEN - STAR TELECOM - AM EISENWERK 29 -
30519 HANNOVER
SECTION 9 SCHILDER, REKLAMEANLAGEN
(l) Der Mieter hat, soweit Platz vorhanden, Anspruch auf
Anbringung eines Firmenschildes. Der Vermieter weist dafur
einen Platz an geeigneter Stelle un geeigneter Form an. Die
Ermietrung und benutzung der Aussenwande
einschliesslich der Gestaltung der Fenster bedarf
gesonderten Vereinbarung.
(2) Ist die bEntfernung von Reklameanlagen am Grundstuck
erforderlich, so tragt der Mieter die Kosten der Entfernung,
Lagerung und notwendige. Wiederanbringung einschliesslich
der hierdurch erfordlichen Reparatur an der Anlage. Dem Mieter
obliegt die Verkehrssicherungspflict.
SECTION 10 BEHORDLICHE GENEHMIGUNGEN
Der Vermeiter ubernimmt keine Haftung dafur, dass
Genehmigungen mit Ausnahme der baurechtlichen, fur den
vorgesehenen Beitrieb und seine Anlagen erteilt bzw. erteilte
Genebmigungen forthestehen. Das gilt insbesondere fur
Konzessionen. Der Mieter hat auf seine Kosten samtliche
Voraussetzungen fur den Betrieb seines Gerwerbes zu schaffen
und aufrecht zu erhalten. Dieses gilt auch fur Reklameanlagen
usw. die Nichterteilung von Genehmigungen kann nicht als Grund
fur eine ausserordentliche Kundigung herangezogen werden.
SECTION INSTANDHALTUNG DER MIETSACHE
(1) Der Mieter hat in der mIetsache fur ausreichend Reinigung, Luftung
und Heizung zu sorgen und die Raume und die darin befindlichen Anglen
und Einrichtungen pfleglich zu behandeln und von Ungeziefer
freizuhalen.
(2) Fur die Beschadigungen der Mietsache oder zu dem Gebaude gehorigen
Anlagen ist der Mieter ersatzverpflichtet, soweit sie von ihm oder zu
seinem Betrieb gehorigen Personen sowie Untermietern, besuchern,
Lieferanten, Handwerkern usw. grob fahrlassig oder vorsatzlich
verursacht worden sind. Lasst sich bei einer Verstopfung von
Abflussleitungen nicht festellen, welcher Mieter sie verursacht
hat, so lasst der Vermieter den Schaden beseitigen. Die Kosten
tragen in diesem Falle alle Mieter anteilig, die an dem betrettenden
Abflussstrang angschlossen sind mit Ausnahme desjenigen Mieters,
der nachweist, dass er die Verstopfung nicht verursacht haben kann.
(3) Der Mieter ist insbesondere verpflichtet, auf seine Kosten
Schonheitsreparaturen (das Tapezieren, Anstreichen, Kalken der Wande
und Decken, das Streichen der Fussboden, Heizkorper einschl.
Heizohre, der Innenturen sowie der Fenster und Aussenturen von
innen in den Mietraumen in angemessesnen Zeitraumen ausfuhren zu
lassen, sowie die Rolladen, Rolltore, Licht- und Klingelanlagen,
Warmemesser, Schlosser, Wasserhahne, Klosettspuler, Wasch - und
Abflussbecken einschl. Der Zu- und Ableitungen, Ofen, herde, Gas-
und Elektrogerate und ahnliche Einrichtungen und
Warmwasserbereitungsanlagen die ausschliesslich der Versorgung des
Mieters dienen, zu warten verpflichtet, beschadigte Glasschieben
auszuwechseln, soweit eigenes Verschulden vorliegt.
(4) Naturlasiertes Holwerk darf nicht mit Farbe behandelt werden.
(5) Der Mieter ist verpflichtet, die fachgemasse Wartung,
Reinigung, und Uberprufung von Durchlauferhitzern,
Warmwasserbereitungsanlagen, Ofen und Herden, Elektroanlagen und
Rolltoren mindestens jahrlich durchzufuhren.
(6) Bei Beendigung des Mietverhaltnis hat der Mieter Mietsache im
fachgerechten Zustand zu ubergeben.
6
<PAGE>
MIETVERTRAG: LUCIA ATHEN - STAR TELECOM - AM EISENWERK 29 - 30519
HANNOVER
SECTION 12 AUSBESSERUNGEN UND BAULICHE VERANDERUNGEN DURCH DEN
VERMIETER
(1) Der Vermieter darf Ausbesserungen und bauliche Veranderungen, die
zur Erhaltung der Gebaude und der Mietraume oder zur Abwendung
drohender Gefahren oder zur Beseitigung von Schaden notwendig werden
auch ohne Zustimmung des Mieters vornehmen. Dies gilt auch dann fur
Arbeiten, die zwar nicht notwendig, aber zweckmass sind, z.B.
Modernisierung des Gebaudes und der Mietraume. Der Mieter hat die
betreffenden Mietraume zu den Geschaftszeiten zuganglich zu halten. Die
Ausfuhrung der Arbeiten darf von ihm nicht verzorgert oder verhindert
werden.
(2) Der Vermieter ist verpflichtet, die Durchfuhrung von Ausbesserungen
und baulichen Veranderungen vorab so rechtzeitig mit dem Mieter
abzustimmen, dass etwaige Storungen des Geschaftsbetriebes des
Mieters auf ein vertragliches Mindestmass reduziert werden.
SECTION 13 BAULICHE VERANDERUNGEN DURCH DEN MIETER
(1) Bauliche Anderungen durch den Mieter, insbesondere um-und
Einbauten, Installationen, auch die Vergitteerung der Fenster und
die Herstellung oder Veranderung von Feuerstatten, durfen nur mit
schriftlicher Einwilligung des Vermieters vorgenommen werden.
Ertleit der Vermieter eine solche Einwilligung, so ist der Mieter
fur die Einholung der bauaufsichtlichen bzw. amtlichen Genehmigung
verantwortlich und hat alle Kosten hierfur zu tragen.
(2) Etwaiger vom Vermieter ubernommene Betriebs und sonstige
Einrichtungen (Werbung) gelten als nicht zur Mietsache gehorig und
als vom Vermietereingebaut bzw. eingebraucht.
(3) Einrichtungen mit denen der Mieter die Raume eingerichtet hat,
kann er wegnehmen. Der Vermieter kann aber auch verlangen,
dass die Sachen bei beendigung des Mietverhaltnisses in den
Raumen zuruckgelassen werden, wen der Vermieter soviel zahlt, als
dem Zeitwert - unter Berucksichtigung der wirtschaftlichen
Abnutzung und des technischen Fortschritts - entrsprecht. Meiter
und Vermieter haben sich so rechtzeitig zu erklaren, dass
Vereinbarungen hieruber noch vor der Raumung getroffen werden
konnen. Ubernimmt der Vermieter vom Mieter eingebaute
Einrichtungen nicht, so hat letztere bis zum Vetragsblauf den
fruheren Zustand einschliesslich aller hierzu erforderlichen
Nebenarbeiten wiederherzustellen.
(4) Die Anbringung von Aussenantennen bedarf des Abschlusses
eines Antennenvertrages.
(5) Der Mieter haftet fur alle von im grob fahrlassig oder vorsatzlich
verursachte Schaden, die im Zuzammenhang mit dem von ihm
vorgenommenen Baumassnahmen entstehen.
(6) Der Werkshutz fur den von der mietering ubernommenen Bereich
ubernimmt die Mieterin.
(7) Die erforderlichen Feuerschutzeinrichtungen sind vom Mieter zu
stellen.
(8) Der Vermieter stellt einen Wasseranschuss zur Verfugung. Die
Abrechnung des Wasserverbrauchs erfolgt uber eine Wasseruhr mit
dem Vermieter. Die Instandhaltung der Wasserzu - und ablaufe ab
der Uhr ist Angelegenheit des Mieters.
(9) Der Vermieter stellt einen Gasanschluss zur Verfugung. Die
Gaskosten werden uber Gasuhr mit dem Vermieter abgerechnet.
SECTION 14 BETRETEN DER MIETRAUME DURCH DEN VERMIETER
(1) Der Vermieter und sein Beauftragter konnen die Mietraume wahrend
der Geschaftszeiten zur Prufung ihres Zustandes oder anderen
wichtigen Grunden betreten. Bei Gefahr ist ihnen Zutritt zu jeder
Tag - und Nachtzeit gesttet.
(2) Will der Vermieter das Grund stuck verkaufen, so darf er oder sein
Beauftragter die Mietraume zusammen mit Kauflustigen wahrend der
Geschaftszeit betreten. Ist das Mietverhaltnis gekundigt, so darf
er oder/und sein Beauftragter die Raume zusammen mit dem
Mietlustigen wahrend der Geschaftszeit betreten.
(3) Der Mieter muss dafur sorgen, dass die Raume auch wahrend
seiner Abwesenheit betreten werden konnen. Bei langerer
Abwesenheit z.B. Betriebsferein hat er den Schlussel an einer
schnell erreichbaren Stelle unter entsprechender Benachrichtigung
des Vermieters zu hinterlegen.
7
<PAGE>
MIETVERTRAG: LUCIA ATHEN - STAR TELECOM - AM EISENWERK 29 - 30519
HANNOVER
SECTION 15 BEENDIGUNG DER MIETZEIT
Die Mietraume sind bei Beendigung der Mietzeit dem Vermieter im
besenreinen Zustand und mit allen, auch von ihm selbst beschafften
Schlusseln, ohne Auspruch auf Entgelt, dem Vermieter zu ubergeben.
Anderfalls ist der Vermieter berechtigt, auf Kosten des Mieters die
Mietraume offnen, reinigen und neue Schlosser und Schlussel anfertigen
zu lassen.
SECTION 16 MEHRERE PERSONEN ALS MIETER ODER VERMIETER
Vermieter und Mieter haften als Gesamtschulder, sofern es sich um
mehrere Personen handelt.
SECTION 17 WEITERE VEREINBARUNGEN
(1) Die Mullbeseitigung ubdernimmt der Mieter.
(2) Die in Zusammenhang mit dem Mietobjekt bestehende allgemeine
Verkehrssicherungspflicht obliegt der Mieterin. Diese ubernimmt
insbesondere die gelb eingezeichneten Bereiche unmittelbar vor dem
Gebaude "Am Eisenwerk 29" zu reinigen, von Schnee zu raumen und
gegen Glatteis zu streuen, diese Arbeiten werden von der
Hausverwaltung ubernommen und im Wege der Umlagen abgerechtnet.
(3) Die Mieterin stellt hiermit die Vermieterin frei von allen
Anspruchen Dritter, die aus einer Verletzung der
Verkehrssicherungspflicht herruhren.
(4) Anderungen und Erganzungen dieses Vertrages gelten nur bei
schriftlicher Vereinbarung.
SECTION 18 SALVATORISCHE KLAUSEL
Sollte eine der Bestimmungen dieses Vertrages ganz oder teilweise
rechtsunwirksam sein oder werdden, so wird die Gultigkeit der ubrigen
Bestimmungen dadurch nicht beruhrt. In einem solchen Fall ist der
Vertrag vielmehr seinem Sinne gemass zur Durchfuhrung zu bringen.
Beruht die Ungultigkeit auf einer Leistung oder Tatbestimmung, so tritt
an ihrer Stelle das gestzlich zulassig Mass.
SECTION 19 GERICHTSSTAND
Als Gerichsstand wird Hannover vereinbart.
SECTION 20 INKRAFTTRETEN
Dieser Vertrag tritt mit Vertragsabschluss
SECTION WERTSICHERUNGSKLAUSEL
Steigt oder fallt der vom Statistischen Bundesamt ermittelte Preisindex
fur die Lebenshaltung von Vier-Personen-Arbeitnehmer-Haushalten mit
mitterlem Einkommen (auf der Basis von 1991 = 100%) wahrend der Dauer
des Mietvertrages um 10% gegenuber dem fur den 03.99 ermittelten Index,
so sind der Vermieter oder der Mieter berechtigt, den Mietzins
(Kaltmeite) durch einseitige Erklarung entersprechend der Abweichung zu
erhohon bzw. zu ermassigen. Erhohung bzw. Ermassigung treten
mit dem Monat in Kraft, welcher dem Eingang der jeweiligen Erklarung
mittels eingeschriebenen Briefes bei dem Mieter bzw.
Vermieter folgt.
Der erhohte bzw. ermassigte Mietzins (Kaltmiete) kann nach dieser
Regelung immer wieder um 10% erhoht bzw. ermassigt werden, sobald
der Index, der die jeweils vorausgegangene Erhohung bzw.
Ermassigugn ausgelost hat, abermals um 10% gestiegen oder gefallen
ist.
8
<PAGE>
SECTION WESENTLICHE BESTANDTEIL
Wesentlicher Bestandteil dieses Vertrages sind folgende Anlagen:
Anlage 1 Gesamtgrundriss
Anlage 2 Einzelgrundiss
Anlage 3 Baubeschreibung
Hannover /3.02/ 1999 Frankfurt /03.02/ 1999
------------------ ---------------------
/XXXXXXXXXX/ /XXXXXXXXXXX/
------------------------------ ---------------------------
(Vermieter) (Mieter)
GEWERBEHOF ATHEN STAR TELECOMMUNICATIONS
AM EISENWERK 11- 51 DEUTSCHLAND GmbH
AM MITTELFELDE 37-43 VOLTASTRA(BETA)e 1 A
30519 HANNOVER 60486 FRANKFURT AM MAIN
9
<PAGE>
EXHIBIT 10.69
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Hamm & Co., Allersberger Str. 185, 90461 Nurnberg,
Germany, for property located at Allersberger Str. 185, 90461 Nurnberg, Germany.
The lease term is for a minimum of 10 years beginning on June 1, 1999 and ending
on June 1, 2009. STAR GmbH incurs rental charges of approximately 18,516 DM per
month and approximately 4,987 DM per month in additional expenses. The leased
property is approximately 5,454 square feet.
<PAGE>
MIETVERTRAG
fur gewerbliche Nutzung
Zwischen HAMM & CO.
In 90461 NURNBERG, ALLERSBERGER STRABE 185 als Vermieter
vertreten durch
und STAR TELECOMMUNIKATIONS DEUTSCLAND GMBH
in 60486 FRANKFURT AM MAIN, VOLTASTRABE 1A als Mieter
wird folgender Vertrag qeschlossen:
SECTION 1
MIETRAUME
Vermietet werden auf dem Grunstuck 90461 NURNBERG, ALLERSBERGER STRABE 185
1. folgende Raume im Vorder- Ruck - Seitengebaude Stockwerk (rechts -
mitte - links)
GEBAUDE O, EG
SIEHE ANLAGE 1 MIETFLACHENBERECTNUNG / SIEHE ANLAGE 2 GRUNDRISSE
ZUM BETRIEB EINES IN DER BETRIEBSBESCHREIBUNG (ANLAGE 3) NAHER BEZEICHNETEN
GEWERBES
und folgende Nebenraume:
2. folgende unbebaute Grunstuckflachen
DIE HOFFLACHEN SIND NICHT VERMIETET UND DURFEN NICHT ALS ZWISCHENLAGER FUR
MULL, KARTONAGEN, WAREN ALLER ART BENUTZT WERDEN, ES SEI DENN, ES BESTEHT
EINE SCHRIFTLICHE VEREINBARUNG. GLEICHES GILT FUR FLACHEN AUBERHALB DER
MIETFLACHEN UND FUR DIE GEMEINSCHAFTSFLACHEN.
zum Betrieb:
3. folgende Inventargegenstande:
4. Ferner werden vermiettt Garage(n) 6 Kfz-Stellplatze
5. Dem Mieter werden fur die Mietzeit folgende Schlussel ausgenhandigt:
SIEHE GESONDERTE SCHLUSSELQUITTUNGEN. DIE KOSTEN FUR DIE SCHLUSSEL
UBERNIMMT DER MIETER. DIE ZOGANGE ZU TECHNISCHEN EINRICHTUNGEN DURFEN NUR
MIT SCHLIEBZYLINDERN DER DORMA~SCHLIEBANLAGE VERSPERRT WERDEN.
<PAGE>
6. Schlussel die der Mieter sich auf seine Kosten zusatzlich hat anfertinen
lessen, sind nach Beendigung der Mietzeit gegen Erstattung der Kosten fur
die Anfedigung an den Vermieter abzuliefern. Andernalls ist ihre
Vernichtung nachzuwesen. Die Anfertigung von zusatzlichen Schlusseln zu
gemeinschaftlich genutzten Raumen durch den Mieter ist nur mit
ausdrucklicher Erlaubnis des Vermieters gestattet.
SECTION 2
MIETZEIT
Das Mietverhaltnis beginnt*/hat begonnen am 1.JUNI 1999 (SIEHE DAZU AUCH
BEILAGE ZUR ANLAGE 8)
1. Vertragsdauer.
Der Vertrag lauft auf bestimmte Dauer.
Das Mietverhaltnis wird auf die Dauer von 10 Jahren, also bis 31.MAI 2009
abgeschlossen. Wird es nicbt 6 Monate vor Vertragsende gekundigt, so
verlangert es sich jedesmal um 5 Jahr(e). (wegen einer Option siehe Anlage
5)
2. Die Kundigung bedarf der Schriftform und muB dem anderen Vertragsteil bis
zum dritten Werktag eines Kalenderviertljahres fur den Ablauf des nachsten
Kalenderviertljahres zugegangen sein.
3. Fur den Fall der Beendigung der Mietverhaltnisses vereinbaren die
Vertragsteile, daB entgegen der Regelung des Section 568 BGB bei
Nichtabgabe einer Willenserklarung im Sinne der vorgenannten Bestimmung der
Mietvertrag nicht als auf unbestimmte Zeit verlegert gilt.
SECTION 3
MIETPREIS
1. Der Mietpreis betragt monatlich DM (AUFSCHLUSSELUNG SIEHE ANLAGE 1)
Zusatzlich ist vom Mieter die Mehrwertsteuer zum jeweils gultigen,
gesetzlichen Steuersatz zu zahlen. Daneben werden folgende BETRIEBS-
UND NEBENKOSTEN umgelegt und durch VORAUSZAHLUNG (MIT ABRECHNUNG) ODER
PAUSCHALEN (OHNE ABRECHNUNG) ERHOBEN:
alle Betribskosten, wie in Alage 3 zu Section 27 II.
Berechnungsverordnung in der jeweils gultigen
Fassung aufgefuhrt u. unserer erganzenden Liste,
beides Anlsqe 6
Hierin enthalten ist eine Vorauszahlung, fur Zentrale Warm- Order
folgende Betriebskosten.
2. Soweit Nebenkosten vereinbart sind, gelten fur deren Umfang bestehende
gestehende gesetzliche Bestimmungen entsprechend, insbesondere Alage 3
zu Section 27, 2. Berechningsverordnung und erganzend die
Heizkostenverordnung n der jeieils gultigen Fassung.
3. Sowiet nicht anderes vereinbart, handelt es sich bei den monatlichen
Nebenkostenleistungen un VORAUSZAHLUNGEN.
4. SIND VORAUSZAHLUNGEN VEREINBART, SO WIRD UBER SIE JAHRLICH EINMAL
ABGERECHNET. Der Mieter ist berrechtiht, in angemessener Zeit nach
Zugang der Abrechnung die Unterlagen einzusehen. Eine etwaige Differenz
aufgrund der Abrechnung zugunsten des Vermieters (Mieters) hat der
Mieter (Vermieter) innerhalb von einem Monat nach Zugang der Abrechnung
an den Vermieter (Mieter) zu zuhlen. Im Falle des Auszugs eines Meiters
wahrend einer Abrechnungsperiode erfolgt die Verteilung bei der
nachstfalligen Abrechnung im Verhaltnis der Mietzeit der
Abrechnungsperiode. Die Kosten fur Zwischenable sungen tragt der
ausziehende Mieter
Die Bestimmung des Verteilerschussels bei der Umlage der
Betriebskosten steht im billigem Emerssen des Vermieters, soweit der
Verteilerschussel nicht vertraglich oder gesetzlich bestimmt ist. Bei
einer Veranederung der Sachlage ist der Vermieter
<PAGE>
berechtigt, den festgelegten Verteilerschlussel an die neuen
Verhaltnisse anzupassen.
Der Vermeter ist berechtigt, eine Erhohung der Vorauszahlungen unter
Zugrundelegung der Abrechnungsergebnisse das voraugsgegangenen
Wirtschaftsjahres vorzunehmen. Im Falle eitner Erhohung oder Senkung
von Betriebskosten sind die Vorauszahlungen neu festzusetzen.
5. Sofern eine Brutto- oder Teilinrklusivmiete vereinbart ist, ist der
Vermeiter berechtigt fur in der Miete beihaltete Betriebskosten
Erhohungen anteilig umzulegen. Vereinbarungen nach Section 5 bleiben
von dieser Festlegung unberuhrt.
6. Werden offentliche Abgaben neu eingefuhrt oder entstehen Betriebskosten
neu, so ist der Mieter verpflichtet, vom Zeitpunkt der Entstehung an,
den anteiligen Mehrebetrag zu bezahlen.
7. Fuhrt der Vermieter Wertverbesserungen oder andere bauliche Anderungen
surch, so kann er eine Erhohung der jahrlichen Miete um elf von Hundert
der fur die Mietsache aufgewendeten Kosten verlangen. Entsprechendes
gilt fur offentlich-rechliche Verpflichtungen, die das Grundstuck
betreffen, bei einer Erfullung durch den Vermieter.
SECTION 4
ZAHLUNG DES MIETPREISES
1. Der Mietpreises ise spatestens am 3. Werktag eines jeden Monats an den
Vermeiter oder an die von ihm sur Entgegennahme ermachtigten Person
oder bezeichnete Stelle (Bankkonto)
DER MIETER ERTEILD DEM VERMEITER EINE EINSUGSERMACHTIGUNG FUR DIE
MIETZAHLUNGEN, WELCHE DIESEM VERTRAG BEILIEGT.
kostenfrei im voraus zu zahlen. Die Nebenkosten sind zugleich mit em
Mietzins su entrichten. Dies gilt auch fur den Fall, daB
Nutzungsentschadigung geschuldet ist. Fur die Rechtzeitigkeit der
Zahklung kommt es niht auf die Absendung, sondern auf den Eingang des
Geldes an, es sei dann, den Mieter trifft am verspateten Geldeingang
kein Verschulden.
Bei verspateter Zahlung ist der Vermieter berechtigt, neben
Verzugszunsen auch Mahnkosten in Hohe von DM ________ je Mahnung
zu erheben.
2. Die vereinbarten Betriebskisten sind bei Anfall vom Mieter auch dann zu
entrichten, wenn die Gegenleistung (etwa wegen vorzeitigen Auszuges)
nicht in Anspruch genommen wird.
SECTION 5
MIETPREISSTEIGERUNGEN
Bezuglich des Meitpreises zu Section 3 wird folgendes vereinbart
(z.B.Wertsichernungsklausel, nur gultig, wenn von der Landesdzentralbank
genehmigt):
WERTSICHERNUNGSKLAUSEL - SIEHE ANLAGE 7
<PAGE>
SECTION 6
AUBERORDENTLICHE KUNDIGUNG
Der Vermieter kann das Mietverhaltnis ohne Einhaltung einer Knudigungsfrist mit
sofortiger Wirkung in folgenden Fallen kundigren:
1. ween der Mieter uneachtet einer Abmahnubg des Vermierters, einen
vertragswidrigen Gebrauch der Mietraume forsetzt, der die Rechte des
Vermieters in erheblichem MaBe verletzt, insbesondere wenn der Meiter
den Gebrauch der Mietraume unbefugt einem Dritten uberlaBt oder die
Mietraume oder das Gebaude durth vertragswidrigen Gebrauch oder
Vernachlassigung der ihm obliegenden Sorgfalt erheblich gerahrdet.
2. Wenn der Mieter
a) fur zwei anfeinanderfolgende Termine mit der Entrichtung des
Mietzinses oder eines nicht unerheblichen Teils des Meitzinses
im Verzug ist, oder
b) in einem Zeitraum, der sich uber mehr als zwei Jahre
erstreckt, mit der Entrichtung des Mietzinses in Hoho eines
Betrages in Verzug gekommen in solchem MaBe verletzt, baB dem
anered Teil die fortetzung des Mietverhaltnisses nicht
zugemutet werden kann.
3. wenn der Mieter seine Verpflichtungen schuldhaft in solchem MaBe
Verletzt, daB dem andered Teil die Fortsetzung des Mietverhaltnisses
nicht zugemutet werden kann.
4. wenn uher das Vermogen des Mieters das Konkurs-oder Vergleichsverfahren
eroffnet wird.,
5. ABWEICHEND VON NR. 2 VEREINBAREN DIE PARTEIEN FUT DIE FRISTOLSE
KUNDIGUNG WEGEN ZAHLUNGSVERZUG:
Die ubrigen fristlosen Kundogungsgrunde bleiben hiervon uberuhrt.
SECTION 7
ZUSTAND DER MIETRAUME
1. Die angemieteten Raumlichkeiten einschlieBlich der Zufahrtswege,
AuBenanlagen, Gemeinschaftsanlagen, sowie das Inventar sind mangelfrei,
mit Ausnahme folgender Mangel:
DIE UBERGABE ERFOLGT BESENREIN UND SAUBET. FUR VERANDERUNGEN UND
AUSBAUTEN SIEHE ANLAGE 8.
Der Vermieter verpflichtet sich, vor dem Einzug des Mieters oder, falls
dies nicht moglich ist, bis spatestens zum ____folgende Arbeiten in den
Mietraumen vornehmen zu lassen:
SIEHE ANLAGE 8.
Der mieter verpflichtet sich, vor seinem Einzug oder, falls dies nicht
moglich ist, bis spatestens zum ____folgende Arbeiten in den Mietraumen
vornehmen zu lassen:
SIEHE ANLAGE 8.
2. (Offentlich-rechtliche Auflagen zur Nutzung der Mietsache,
insbesobndere nach oder gewerbepolizeilichen Vorschriften, hat - gleich
an wen sie ergehen - der Mieter aud eigene Kosten zu erfullen, soweit
die Auflagen in der Person oder in der Art des Mieers begrundt sind.
SECTION 8
BENUTZUNG DER MIETRAUME, UNTERVERRNIETUNG
<PAGE>
1. Der Mieter darf die Mietraume zu andren, als den in Section1 bestimmten
Zwecken nur mit Erlaubnis des Vermieters benutzen.
2. Der Mieter ist ohne ausdruckliche Erlaubnis des vermieters weder zu
einer Untervermietung der Mietraume noch zu einer sonstigen
Gebrauchsuberlassung an Dritte, ausgenommen besuchsweise sich
aufhaltende Personen, berechtigt. Die Erlaubnis gilt nur fur den
einzelnen Fall und kann bei wichtigem Grund widerrufen werden. Der
Vermieter ist berechtit, einen angemessenen Untermietzuschlag zu
erheben.
3. Tiere jeglicher Art durfon NUR MIT ERLAUBNIS DES VERMIETERS gehalten
werden. Die Erblaubnis kann widerrufen werdon, wenn Unzutraglichkeiten
eintreten. Der Mieter haftet fur alle durch die Tierhaltung
wntstandenen Schanden. Das Futtern von Tauben ist verboten.
SECTION 9
VERKAUFSRAUME
Fur den Fall, daB ein Verkaufsraum Gegenstand des Vertrages ist, darf der Mieter
nicht wahrend der Mietzeit den Geschaftsbetrieb in dem vermieteten Raum ganz
oder teilweise einstellen oder den Geschaftszweig wechslen.
Bei Zuwiderhandlung ist der Vermieter berechtigt
Zu fordern.
Die zusatzlichen Rechte des Vermieters demaB Section 6 diesee Vertrages bleiben
davon underuht.
SECTION 10
ANBRINGUNG VON SCHILDERN USW.
1. Die Wandflachen an oder im Haus auBerhalb der Mietrauem sinc nicht
mitvermietet.
2 Das Anbringen von Schildern, Aufschriften, Markisen und Vorrichtungen
zu Reklamezwecken sowie das Aufstellen von Schaukasten und
Warenautomaten ist nur in ortsublicher und angemessener Wiese und nut
fur eigene Zwecke des Mieters nach vorheriger Erlaubnis des gestattet.
Erforderliche behordliche Erlaubnisse sind vom Mieter einzuholen.
3. Der Mieter haftet fur alle Schaden, die Zusammenhang mit Anlagen dieser
Art entstehen. Er ist verpflichtet, bei Beendogung des
Mietverhaltnisses den fruheren Zustand wieder herzustellen.
SECTION 11
BENUTZUNG DER GARAGEN UND STELLPLATZE
1. Det Mieter darf Kraftfahrzeuge, Kraftrader, Motorroller sowie Fahrrader
mit Hilfsmotor (Mopeds u.a.) nur auf den hierzu bestimmten und von ihm
angemieteten Stellplaztzen oder Garagen abstellen. Die Bebutzung des
nichtvermieteten Hofraums, oder von ein- und Durchfahrten neirzu ist
nicht zulassig.
2. Die Bebutzung der Garagen und Stellpletze als Lagerplatz ist untersagt.
3. Der Mieter verpflichtet sich, die einschlagigen behordlichen
Bestimmungen betreffend der "Garagen- und Einstellplatze" zu beachten
sowie eine Vernreinigung der Boden durch Ol und Benzin zu vermeiden.
4. Der Mieter haftet fur alle Schaden, die bei der Benutzung der Garage -
des Stellplatzes oder infolge Nichtbeachtung vorstehender oder
behordlicher Vorschriften durch ihn selbst, siene Angestellten oder
Beauftragten oder durch sonstige Persones, denen er die Benutzung
seiner Kraftahrzeuge gestattet hat, verursacht werden.
SECTION 12
LNSTANDHALTUNG DER MIETRAUME
<PAGE>
1. Der Mieter hat in den Mietraumen fur gehorige Reinigung, Luftung und
Heizung zu sorgen und die Raume sowie die darin befindlichen Anlagen
und Einrichtungen pfleglich zu behandeln; er hat auch die in den
Mietraumen vorhandenen Wasserzu- und AbfluBleitungen in Winter vor den
Einfrieren zu schutzren. Die Mietraume sind von Ungeziefer
freizuholten.
2. Der Mieter ist verpflichtet, Veranderungen und schaden an und in den
Mietraumen an und im Gebaude sowie auf den Grundstuck zu beseitigen,
wenn sie von ihm, den zu seinem Hausstand gehorenden Personen,
Untermieter(n), Besucher(n), Lieferanten oder Handwerker(n) schuldhaft
verursacht wurden. Der Vermieter ist beweispflichtig fur den Eintritt
der Veranderung oder des Schadens gegenuber dem Zustand bei
Vertragsbeginn. Der Mieter hat zu beweisen, daB die Veranderung oder
der Schaden von ihm nicht zu vertreten oder auf einen vertragsgemaBen
Gebrauch zuruckzufuhren ist.
3. Der Mieter ist verpflichtet, auf seine Kosten die Schonheitsreparaturen
(das Tapezieren, Anstreichen oder Kalken der Wande und Decken, das
Streichen der FuBoden, Heizkorper einschlieBlich Heizrohre, der
Innenturen sowie der Fenster und AuBenturen von innen) in den
Mietraumen in angemessenen Zeitabstanden auszufuhren. (Als angemessene
Zeitabstande gelten fur NaBraume 3 Jahre, fur sonstige Raume 6 Jahre,
fur Nebenraume (Keller, Garagen, Lager n.a.) 8 Jahre)
4. Der Mieter ist verpflichtet - ohne Rucksicht auf ein etwaiges
Verschulden - die Kosten der Instandhaltung von Rolladen, Licht- und
Klingelanlagen, Warmemesser, Heizkorperventile, Schlosser, Wasserhahne,
Siphons, Klosetts, Wasch- und AbtluBbecken, Ofen, Herde, Gas- und
Elektrogerate, Badeeinrichtungen nod Warmwasserbereitungsanlagen sowie
zerbrochene Glasscheiben zu tragen bis zu einem Instandsetzungsaufwand
von 300,-- DM je sachich abgegrenzten Schaden und einen Aufwandsbetrag
von 1500,-- DM in ienem Kalenderjahr.
5. Jeden in den Mietraumen entstehenden Schaden hat der Mieter, soweit er
nicht selbst zu dessen Beseitigung verpflichtet ist, unverzuglich dem
Vermieter anzuzeigen. Fur einen durch nicht rechtzeitige Anzeige
verursachten Schaden ist der Mieter ersatzpflichtig.
SECTION 13
VERANDERUNGON AN UND IN DEN MIETRAUMEN DURCH DEN MIETER
1. Veranderungen an und in den Mietraumen, insbesondere Um- und Einbauten,
Installatiin und dergl., durfen nur mit ausdrucklicher Erlaubnis des
Vermieters vorgenommen werden. Die Erlaubnis kann davon abhangig
genacht werden, daB der Mieter sich zur volligen oder teliweisen
Wiederhrrstellung des fruheren Zustandes im Falle seines Auszuges
verpflichtet.
2. Will der Mieter Einrichtungen, mit denen er die Meitraume versehen hat,
bei der Beendigung des Mietverhaltnisses wegnehmem, hat er sie zunachst
dem Vermieter zur Ubernahme anzubieyen. Wenn der Vermieter die
Einrichtungen ubernehmen will, hat er dem Mieter die Herstellungskosten
abzuglich eines angemessenen Betrages fur die Abnutzung zu erstatten.
Machtt der Vermieter von diesem Recht keinen Gebrauch und nimmt der
Mieter die Einrictungen weg, so ist der Mieter zur Wiederherstellung
des ursprunglicheri Zustandes verpflichtet.
3. Der Mieter bringt folgende Gas- nod Elektrogerate in die Raume ein:
Weiter Gerate durfen nur mit Erlaubnis des Vermieters angeschlossen
werden. Die Erlaubnis kann versagt werden, wenn das vorhandene
Leitungsnetz eine zusatzliche Belastrung nicht aushalt und der Mieterrw
es ablehnt, die Kosten fur eine entspreshende Anderung des Netzes zu
tragen. Erweist sich infolge einer erhohten Inanspruchnahme des
leitungsnetzes fur Gas oder elektrischen Strom im Hause eine Vertarkung
der vorhandenen Zn oder- Steigleitungen notwendig, so verpflichtet sich
der Mieter, einen Mietaufschlag von jahrlich 11% der vom Vermieter
aufgewendeten Bau- und Einrichtungskosten in monatlichen Teilbetragen
zu zahlen.
<PAGE>
SECTION 14
BAULICHE VERANDERUNGEN UND AUSBESSERUNGEN DURCH DEN VERMIETER
1. Der Vermitere darf Ausbesserungen und bauliche Veraanderungen, die zur
Erhaltung der Mietraume oder zur Abwendung drohender Gefahren oder zur
Beseitigung von Schaden notwendig werden, auch ohne Zustimmung des
Mieters vornehmen. Dies gilt auch fur Arbeiten oder bauliche MaBnahmen,
die zwar nicht notwendig, aber zwecmaBig sind, insbesnodere der
Modernisierung des Wohngebaudes oder der Einsparung von Heizenergie
dienen. Der Mieter hat die in Betracht kommenden Ranme zuganglich zu
halten und darf die Ausfuhrung der Arbeiten nicht hehindern.
2. Soweit her Mieter die Arbeiten dulden muB, kann er weder den Mietzins
mindern, noch Schadenersatzverlangen. Diese Rechte stehen ibm nur zu,
wenn durch diese MaBnahmen der Gebrauch der Mietraume ganz oder
uberwiegend unmoglich gemacht wird.
SECTION 15
SCHADENSERSATZ AUFRECHNUNG GEGEN DEN MIETPREIS, ZURUCKBEHALTUNG DES MIETPREISES
1. Die verschuldensunabhangige Haftung des Vermieters fur bei
VertragsabschluB vorhandene Sachmangel ist ausgeschlonssen, Section 538
Abs. 1 BGB findet insoweit keine Anwendung.
2. Der Vermieter haftet nicht fur Schaden, die dem Mieter an den ihm
gehorenden Waren und Einrichtungsgegenstanden durch
Feuchtigkeiteinwirkung entstehen, gleichgultig welcher Art, Herkunft,
Dauer und welchen Umfanges die Feuchtigkeiteinwirkung ist, es sei denn,
daB der Vermieter den Schaden vorsatzlich oder grob fahrlassig
herbeigefuhrt hat.
3. Der Vermieter bezieht Trinkwasser aus einemoffentlichen Versorgungsnetz
zyu den Allgemeinen Bedingungen fur die Versorgung mit Wasser
(AVBWasserV) und leitet dieses Trinkwasser dem Meiter weiter. Das
Wasserversorgungsunternehmen haftet bei Unterbrechungen der
Wasserversorgung und bei UnregelnmaBigkeiten in der Belieferung dem
Mieter gegenuber in gleicher Weise wie dem Vermieter. Eine faruber
hinausgehende Haftung unernimmt das Wasserversorgungsunternehmen weder
dem Kunden noch Dritten gegenuber. Der Mieter wird aus unerlauber
Handlung keine weitrergehenden Schadensersatzanspruche gegenuber dem
Wasserversorgungs-Unternehmen geltend machen, als in den Absatzen 1 bis
3 der Haftungsregelung Section 6 ABVwasserV vorgesehn ist. Einen
entstandenen Schaden hat der Geschadigte unverzuglich dem
ersatzpflichtigen Versorgungsunternehmen mitzuteilen.
4. Eine Aufrechnung gegun die Miete mit einer Gegenforderung, die nicht
aus dem Mietverhaltnis begrundet ist, wird ausgeschlossen, soweit die
Gegenforderung nicht unbestritten, bereits rechtskraftig festgestellt
oder in einem gerichlichen Verfahren entscheidungsreif ist.
5. Die Ausubung des Zuruckbehaltungsrechts des Mieters ist auf Forderungen
aus dem Mietverhaltnis beschrankt.
SECTION 16
VERMIETERPFANDRECHT
Der Mieter erklart, daB die bei seinem Einzug in die Meitraume eingebrachten
Sachen sein freies Eigentum und nicht gepfandet oder verpfandet sind, mit
Ausnahme folgender Gegenstande:
SECTION 17
BETRETEN DER MIETRAUME
1. Dem Vermieter oder seinem Beauftragten oder beiden steht in
angemessenen Abstanden oder aus besonderem AnlaB die Besichtigung der
Mietraume zu verkehrsublicher Tageszeit an Werktagen frei. In Fallen
dringendcr Gafahr ist ihm das Betreten der
<PAGE>
Mietraume zu jeder Zeit zu gestatten.
2. Der Mieter hat die Besichtigung der Mietraume im Falle der Beendigung
des Mietverhaltnisses zwecks anderweitiger Vermietung oder bei
beabsichtigtem Verkauf des Grundstuckes zu verkehrsublicher Tageszeit
nach vorheriger rechtzeitiger Ankundigung an Werktagern zu gestatten.
3. Der Mieter muB dafu sorgen, daB die Meitraume auch in seiner
Abwesenheit betreten werden konnen.
SECTION 18
HAUSORDNUNG
1. Die Hausordnung auf Seite 8 dieses Mietvertrages ist Bestandteildiese
Vertrages.
2. Dem Vermeiter ist es gestattet, zusatzliche oder abweichende Regelungen
fur die Benutzung gemeinschaftlicher einrichtungen, die Reinigung, die
Aufrechterhaltung von Ruhe und Ordnung im Hause usw. Zu treffen, wenn
dadruch nicht die uruspruchglich eingeraumten Gebruachsrechte
wesentliche Einschrankungen erfahren.
3. Der Mieter ise verpflichtet, die offenlichen StraBen, Gehsteigflachen
und FuBwege am und zum Haus sowie die Zugangswege, Durchgange und
Treppen nach den ortspolizeilichen Vorschriften im vom Vermieter
festgelegten Turnus zu reinigen.
4. Der Mieter ist verpflichtet, das Sandstrunen bei winterflatte, sowie
die Schnee- und Eisbeseitigung nach den gesetzlichen Bestimmungen und
ortspolizeilichen Vorschriften auf den offentlichen Gehsteigflachen und
FuBwegen am Hause und zum Haus sowie auf den Augangswegen, Durchgangen
und Treppen im vom Vermieter festgelegten Turnus durchzufhren.
SECTION 19
BEENDIGUNG DES MIETVERHALTNISSES
1. Bei Mietende hat der mieter dam Vermieter samtliche Schlusel
auszuhandigen und die Meitraume sowie das Inventar im vertragsgemaBen,
gebruachsfahigen Zustand (vgl. Section 12) zuruckzugeben.
2. Insbesondere hat der Mieter bei seinem Auszug die Raume zu reinigen,
von ihm verlegte oder surch Vereinbarung ubernommene Bodenbelage sowie
Tepeten an den Wanden und Decken zu entfernen und Beschadigungen an
Unterboden und Wand-oder Dekenputz und am Inventar zu beheben.
3. Endet das Meitverhaltnis vor Eintritt der Verpflichtung zur
Durchfuhrung de Schonheitsreparaturen gem. Section 12 Ziff. 3, so ist
der Mieter verplichtet, die anteiligen Kosten fur die
Schonheitsreparaturen aud Grund eines Kostenvoranschlages eines vom
Vermieter auszuwahlenden Maler-Fachbetreibes an den Vermeiter nach der
folgenden MaBgabe zu zahlen:
Leigen die Schonheitsreparaturen der Wnade und Decken fur die NaBraume
(Kuche, Bad und WC) wahrend der Mietzeit langer als 1 Jahr zuruck, so
zahalt der Mieter 33%, liegen sie langer als 2 Jahre zuruck, 66%.
Liegen die letzten Schonheitsreparaturen fur die sonstigen Raume
wahrend der Mietzeit langer als 1 Jahr zuruck, so zahlt der Mieter 20%
der Kosten auf Grund dieses Kostenvoranshalges an den Vermieter, liegen
sie langer als 2 Jahre zuruck, 40%, langer als 3 Jahre 60%, langer als
4 Jahre 80%. Die anteiligen Kosten fur die Schonheitsreparaturen der
Fenster, Turen und Heizkorper betragen bei einer Mietzeit von langer
als einem Jahr 16% der Gesamtkosten, bei einer Mietzeit von langer als
2 Jahren 33%, bei einer Mietzeit von langer als 3 Jahren 50%, von
langer als 4 Jahren 66%, von langer als 5 Jahren 83%.
Die Fristen des Section 12 Ziff. 3 beginnen, unabhangig davon, ob die
Raume renoviert oder unrenoviert ubergeben wurden, ab Beginn des
Mietverhaltnisses zu laufen.
<PAGE>
DER MIETER IST BERECHTIGT, DIE ZAHLUNGEN DER ABNUTZUNGSENTSCHADIGUNG
DURCH FACHGERECHTE VORNAHME DER ARBEITEN ABZUWENDEN.
4. Der Meiter hat die enforderlichen Arbeiten bis zur Beendigung des
Mietverhaltnisses durchzufuhren. Great er mit diesen in Verzug, so ist
der Vermieter berechtigt, nach Setzen einer angemessenen Nachfrist mit
Ablehnungsandrohung die Arbeiten auf Kosten des Mieters ausfuhren zu
lassen.
SECTION 20
VORZEITIGE BEENDIGUNG DES MEITVERHALTNISSES
Endet das Mietverhaltnis durch fristlose Kundigung des Vermieters, so haftet der
Mieter bis zum Ablauf der vereinbarten Mietzeit fur den Mietausfall, der durch
das Leerstehen der Mietraume oder dadurch entsteht, daB im Falle der
Neuvermietung nicht der bisherige Mietzins erzielt werden kann.
SECTION 21
SICHERSTELLUNG DER VERPFLICHTUNGEN
Zur Sicherstellung aller Verpflichtungen aus dem Mietverhaltnis stellt der
Mieter eine Kaution von DM 30.000,00 als Bankburgschaft an den Vermieter. Nach
Beendigung des Meitverhaltnisses erhalt der Mieter nach Erfulling aller
vertraglichen Vereinbarungen diese Kaution zuruckerstattet.
SECTION 22
PERSONENMEHRHEIT AUF DER MIETERSEITE
1. Mehere Persones als Mieter haften fur alle Verbindlichkeiten aus dem
Meitvertrag als Gesametchuldner.
2. Soweit Willenserklarungen gegenuber allen Mietern gelten sollen, mussen
se von oder gegenuber allen Mietern abgegeben werden. Die Mieter
bevollmachtigen sich jedoch gegenseitg jederzeit frei widerruflich zur
Entgegennahme von Erklarungen des Vermieters. Die Vollmacht erstreckt
sich auf die Entgegennahme von Kundigungen, nicht jedoch auf die
Erklarung einer Kundigung oder auf eine Aufhebung des Mietvertrages.
SECTION 23
ANDERUNG DES VERTRAGES
Nebenabreden, Andderungen und Erganzungen des Vertrages bedurfen der
Schriftform.
SECTION 24
ERFULLUNGSORT
Erfullungsort fur alle sich aus siesem Vertrag ergebenden Verpflichtungen ist
der Ort der Mietsache nach Section 1.
SECTION 25
SONSTIGE VEREINBARUNGEN
(Erlaubnis zur Untervermietung, Anbringung von auBenreklame, Veranderungen in
und an den
<PAGE>
Mietraumen, Vereinbarungen uber Baukostenzuschusse, die Kosten des Strom- und
Gasverbrauches bei gemeinschaftlichem Zahler usw.)
Zu Diesem Mietvertrag gehoren folgende Anlagen:
<TABLE>
<CAPTION>
Zu Section Anlage Nr. Thema
<S> <C> <C>
1.1 1 Mietflachenberechnung
1.1/1.2 2 Grundrisse
1.1/1.2 3 Betriebsbeschreibung
1.4 4 Stellplatzplan
2 5 Mietzeit/Option
3, 1A 6 Anglage 3 Zu Section 27, II. BV
Aufstellung von Betriebskosten A 185
5 7 Wertsicherunhsklausel
7 8 Zustand u. Absbau der Mietraume/
Baubeschreibung
8 9 Untervermietung
10 Konkurrenzschutz
11 Einzugsermachtigung
</TABLE>
SECTION 26
WERKSAMKEIT DER VERTRAGSBESTIMMUNGEN
Durch etwige Ungultigkeit einer oder mehrerer Bestimmungen dieses Vertrages wird
die Gultgkeit der ubrigen Bestimmungen nicht breuhrt.
Nurnberg, den 24 February 1999
- -------------------------- --------------------------
als Vermieter Mieter
*ZUTREFFENDES BITTE UNTERSTREICHEN BZW. AUSFULLEN
<PAGE>
EXHIBIT 10.70
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Rudolf Geray, Zettachring 6, 70567 Stuttgart, Germany,
for property located at Business Park Stuttgart, Zettachring 10, 70567
Stuttgart, Germany. The lease term is for a minimum of 10 years beginning on
February 1, 1999 and ending on February 1, 2009. STAR GmbH incurs rental charges
of approximately 24,633 DM per month and approximately 3,105 DM per month in
additional expenses. The leased property is approximately 3,396 square feet.
<PAGE>
MIETVERTRAG
UBER BURORAUME
ZWISCHEN RUDOLF GERAY
Zettachring 6
70567 Stuttgart
(als Vermieter)
UND STAR TELECOMMUNICATIONS DEUTSCHLAND GMBH
Voltasr. 1 A
60486 Frankfurt am Main
(als Mieter)
wird folgender Mietvetrag geschlossen:
SECTION 1 GEGENSTAND DES MIETVERTRAGES SIND DIE IM ANWESEN
BUSINESSPARK STUTTGART, Zettachring -70567 Stuttgart
gelegenen gewerblichen Raume im (siehe Grundrissplan, ANLAGE 3),
bestehend aus folgenden Nutzflachen:
1.) Technikflache 5. 0G: 791 qm
2.) Buroflache 4. 0G: 244 qm
3.) Tiefgaragenstellplatze 10 Stck. Nr. 5, 6, 19 - 22, 25-28,
4.) Die endgultige Mieflachengrosse wird nach Abschluss der Werkplanung
im Massstab 1: 50 durch den Vermieter ermittelt und dem Mieter zur
Prufung ubergeben
Mietvertrag zwischen Rudolf Geray / Star Telecommunicationsa GmbH
5.) Ausstattung:
- eigener FuBoden mit Star Telecom Logo, Mehrkosten sind Sache
des Mieters
- Wande und Decken tapeziert
- Abgehangtes Lichtsystem nach Arbeitspaltzeinteilung
- Isplierglasfenster
<PAGE>
- Elektro-Installation, Unterflur Stromversorgung mit Leerrohr
fur Telefonkabel
- FuBbodenheizung
- Raumaufteilluna mit flexiblen Trennwanden
6.) Konferenzraume stehen zur gemeinschaftlichen Nutzung nach Absprache
mit der Verwaltung, ohne zusatzliche Kosten, fur den Mieter zur
Verfugung.
SECTION 2 MIETZEIT
1.) Das Mietverhaltnis beginnt mit Unterzeichnung des Mietvertrages durch
beide Parteien. Die Ubergabe der Mietraume erfolgt gemass Section 5.
2.) Es ist zeitlich befristet und endet 10 Jahre nach Ubergabe an don
Mieter.
3.) Dem Mieter wird eine Option -zu Verlangerung des Mietvertages - auf
weitere 5 Jahre eingeraumt. Soll die Option vom Mieter nicht in
Anspruch genommen werden, muss spatetens 12 Monate vor Ablauf der
fest vereinbarten Mietzeit dem Vermieter schriftlich mitgeteilt
weden, dass die Weiterfuhrung des Vertages am Ende der fest
vereinbarten Mietzeit nicht gewunscht wird. Ansonsten verlangert
sich des Mietverhaltnis um weitere 5 Jahre.
4.) Wird dice Option auf Verlangerung des Mietverhaltnisses ausgeubt,
muss der Mieter 12 Monate vor Ablauf der verlangerten Mietzeit
kundigen, sonst verlangert sich das Mietverhaltnis jeweils um weitere
12 Monate.
SECTION 3 UNTERVERMIETUNG
Untervermietung ist grundsatzlich gestattet; sie bedarf jedoch der
Zustimmug des Vermeiters, der diese nur aus wichtigem Grund verweigern
darf.
SECTION 4 MEITZINS
1.) Der Meitzins betragt ab Ubergabe der Mietraume:
Technik- +Buroflache DM 23,80
TG-Stellplatze DM 120,00
Jeweils zuzuglich der gesetzlichen Mehrwertsteuer und ist monalich im
voraus zahibar, spatestens am 5. Werktag eines Monats (siehe
Bankverbindungen im Anhang).
2.) Die Meite bleibt in den ersten 12 Monaten unverandert.
3.) Es wird eine Mietkaution in Hoho von 2 Monatsmieten vereinbart. Diese
ist mit der ersten Miete zu bezahlen. Eine Verzinsung erfolgt in Hoho
der ublichen)
Sparbuchzinsen, die fir Einlagen auf Sparbuchern mit gesetzlicher
Kundigungs Frist bezahlt werden.
DisKaution kann auch uber eine Burgschaft einer deutschen Bank
geleistet werden.
<PAGE>
SECTION 5 UBERGABE DER MIETRAUME
1.) Die Ubergabe der Mietraume erfolgt zum 01.02.1999. An diesem Tag wird
das Mietobjekt dem Meiter zur Nutzung ubergeben. Die Parteien
erstellen ein Ubergabeprotokoll, in dem eventuelle Mangel
festgesttellt und ausstehende Erganzungs- und Verbesserungsarbeiten
(Restarbeiten) erafsst werden. Diese sind vom Vermieter unverzuglich
abzustellen bzw. Durchzufuhren. Ander als im Ubergabeprotokoll
festgehaltene Mangel werden nicht anerkannt.
2.) Bei Uhergabe vorhandene geringfugige Mangel und Restarbeiten, die den
Betriebsablauf des Mieters nichit beeintrachtigen und auch ohno
Beeintrachtigung des Betriebsablaufes des Mieters behoben werden
konnon, vorzogern die Ubergabe nicht. Sie sind jedoch dann
unverzuglich zu beheben.
Die vorstehende Regelung gilt entsprechend fur den Fall, dass einzelne
Arbeiten noch nicht abgeschlossen sind, die auf
genehmigungspflichtigen Umbau-, Ausbau- oder Anderungswunschen des
Mieters beruhen.
3.) Dem Mieter ist bekannt, dass die Beseitigung von Restmangeln auch nach
Bezug ohne nc Mietminderung durch den Vermieter durchgefuhrt werden
konnen.
SECTION 6 WERTSICHERUNGSKLAUSEL
1.) Die Miete ist fur die Dauer von 12 Monaten (siehe Section 4) fest
vereinbart. Die Miete kann erstmals nach Ablauf von 12 Monaten unter
Berucksichtigung der Entwicklung des Lebenshaltungsindexes angepasst
werden.
2.) Als Indexierung gilt der Preisindex fur die Lebenshaltung eines 4
Personenhaushaltes mit mittlerem Einkommen. Die Indexierung wird
Jeweils nach 12 Monaten entsprechend der Veranderung der Indexzahl
angepasst.
3.) Andert sich der vom Stat. Landesamt Baden-Wurttemberg festgestellte
Preisindex fur die Lebenshaltung eines
Vier-Personen-Arbeitnehmerhaushaltes mit mittlerem Einkommen des
alleinverdienenden Haushaltsvorstandes gegenuber dem Stand des
Vertragsabschlusses (1991 = 100 %), so andert sich der Mietzins in
dem selben Verhaltnis, wie sich der Lebenshaltungskostenindex
verandert hat. Die Mietpreisanpassung erfolgt jahrlich, erstmals zum.
01.03.2000.
4.) Wenn aufgrund der vorstehenden Klausel eine Anpassung des Mietzinses
durchgefuhrt worden ist, wird die Regelung gem. Abs. (1) erneut
anwendbar. Im Falle der Erhohung des Mietzinses hat der Vermieter, im
Fall der ErmaBigung des Mietzinses der Mieter, dem anderen
Vertragsteil diese Anderung unter Vorlage einer Abrechnung
mitzuteilen. Fur den Eintritt des Verzuges bedarf es einer
entsprechenden konkreten Zahlungsaufforderung des anderen
Vertragsteils.
5.) Werden wegen einer Umstellung des Indexes auf eine neue Basis
bereits veroffentlichte Indexzahlen nachtraglich geandert, so bleiben
Anpassungen, die nach der alten Reihe bereits unter Vorlage einer
Abrechnung mitgeteilt waren, von dieser Anderung unberuhrt. Mit der
ersten amtlichen Veroffentlichung der neuen Reihe gilt jedoch der
Mietzins, der
<PAGE>
sich aufgrund der neuen lndexreihe, umbasiert auf die
Basis 1991 = 100, ergibt, wobeil die Indexzahlen ab dem Zeitpunkt der
letzten Anpassung (nach alter Berechnung) gelten.
6.) Die Vertragssicherungsklausel des Abe. (1) bedarf gemiss Section 3
des Wahrungsgesetzes der Genehmigung der Landeszentralbank in
Baden-Wurttemberg. Die Vermieterin wird diese Genehmigung einholen.
SECTION 7 NEBENKOSTEN - PAUSCHALE
1.) Der Mieter Zahlt eine Nebenkostenpausohale von DM 3,00 pro qm
zuzuglich der gesetzlichen Mehrwertsteuer bis zum 5. Werktag eines
jeden Monats an die Hausverwaltung (siehe Bankverbindung im Anhang)
fur folgende Betriebskosten:
- laufende offentliche Lasten des Grundstucks
(insbesondere Grundsteuer)
- Kosten der Wasserversorgung und Entwasserung
- Kosten fur Personen und Lastenaufzuge - Kosten der
Strassenreinigung und Mullabfuhr
- Kosten der Hausreinigung und Gartenpflege
- Kosten der Hausbeleuchtung und der Beleuchtung der
Gemeinschaftsraume
- Kosten der Sach- und Haftpftichtversicherunq
(Gebaude-Brand- und Haftplfichtversochrung)
- Kosten fur Hausmeisterbetreuung
- Kosten der Gemeinschatfsantennenanlage sowie des
Breitband-Kabelnetz
- Kosten fur Bewachung des Objektes
- Koston Her Hausverwaltung
2.) Der Mieter rechnet die Kosten fur Strom und fur die selbst ru
betreibende Heizung (Elektrofussbodenheizung) direct mit dem
Versorgungsunternehmen ah
3.) Der Mieter hat eine Glasversicherung abzuschliessen. Ausserdem
obliegt es dem Mieter eine Betriebshaftpflichtversicherung, eine
Wasserascaenversicherung, eine betriebliche Feuerversicherung und eine
Einbruchversichreung abzuschliessen.
SECTION 8 BENUTZUNG DER MIETRAUME, UM- UND EINBAUTEN
1.) Die qemieteten Raume sind als Buro- und Nebenflachen
(z.B.Lagerflachen) zu benutzen. Sie durfen ohne vorherige
schriftliche Zustimmung des Vermieters weder ganz noch teilweise zu
einem anderen Zweck genutzt werden. Die Einholung erforderlicher
offent!ich-rechtlicher Genehmigungen fur besondere Nutzungen der
Raume durch den Mieter ist in jedem Falle Sache des Mieters.
2.) Der Mieter ist bei Beendigung des Mietverhaltnisses verpflichtet, bei
einer Wegnahme von ihm eingebauter Einrichtungen bzw. Einbauten einen
ordnungsgemassen baulichen Zustand herzustellen, der es ermoglight,
das Objekt weiterzuvermieten.
3.) Vom Mieter auf seine Kosten beabsichtigte Um-, An- oder Einbauten
bedurfen der
<PAGE>
schriftlichen Einwilligung des Vermieters, der diese nur
aus wichtigen Grunden verweigern darf. Etwa erforderliche behordliche
Genehmigungen hat der Mieter zu beschaffen, wobei der Vermieter seine
Unterstutzung zusagt. Samtliche mit der Durchfuhrung der vorgenannten
Massnahmen verbundenen Kosten und Gefahren tragt der Mieter. Er hat
ebenfalls alle Reinigungsmassnahmen sowie alle Schutz- und
Sicherungsmassnahmen zur Sicherung des Geschaftsbetriebes der ubrigen
Mieter zu treffen. Der Mieter haftet fur alie Schaden, die im
Zusammenhang mit den von ihm vorgenommenen Baumassnahmen entstehen.
4.) Bei Beendigung des Mietverhaltnisses hat der Mieter die von ihm
vorgenommenen Veranderungen des Mietgegenstandes auf seine Kosten zu
beseitigen, sofern der Vermieter die - ihm vorher anzubietende-
Uberahme etwa vom Mieter veranlasster Veranderungen bzw. im Mietobjekt
angebrachter Einrichtungen ablehnt, es sei denn, dass der Vermieter
auf Ruckbau verzichtet oder diese baulichen Anderunen im Rahmen eines
Nachfolgemietverhaltnisses genutzt werden. Soweit aus einem Umbau des
Mieters zwei- und/oder dreiachsige Raume entstehen, ist ein Ruckbau
der Wande nicht erforderlich.
Ist der Vermieter an der Ubernahme interssiert, wird eine Verhandlung
uber den Zeitwert gefuhrt. Ubernahmen durch Nachmieter werden direkt
zwischen den Mieter und dem Nachmieter veitraglich vereinbart.
5.) Dern Vermmieter ist bekannt, dass der Mieter beabsichtigt,
Telekommunikationsgerate in das Mietobjekt einzubringen. Beide
Parteien werden nach Abstimmung dafur sorge tragen, dass diese
Einrichtungen orgnungsgemass verwendt und geschutst werden konnen. Aus
dieser Verpflichtung entstehen dem Vermieter keine Kosten.
SECTION 9 INSTANDHALTUNG DER MIETRAUME
1.) Dem Vermieter obliegt auf eigene Kosten die Instandhaltung des Daches,
der konstruktiven Teile desGebaudes sowie Aussenmauern, tragende
Innenwande, Stutsen und Fundamente sowie der Fassade und technischen
Einrichtungen, die den Meitbereich umschliessen.
2.) Minderung der Miete und Schadenersatzanspruche des Mieters wegen vom
Vermieter nicht zu vertretender Immissionen oder Strungen der Zugange
des Gebaudes oder wegen Baumassnahmen Dritter ausserhalb des Gebaudes,
sind ausgeschlossen.
3.) Der Mietgegenstand ist vom Mieter pfleglich azu behandeen, zu reinigen
und von Ungeziefer freizuhalten.
4.) AIle Schonheitsreparaturen innerhalb der ausschliesslich vom Mieter
genutzten Raume sind von ihm in einem Turnus fachgerecht aauszufuhren,
der den Mietgegenstand in einem angemessenen Zustand erhalt.
Desweiteren sind vom Mieter die laufenden lnstandhaltungs- und
Wartungsarbeiten innerhalb der Mietraume, die der Gebrauch der
Mietsache mit sich bringt, zu ubernehmen. Fur die haustechnisichen
Einrichtungen (Installationen, Heizung, Luftung, Sanitar, Elektro,
Adssenlamellen) gilt dies, soweit sie direkt vom Mieter bedient
werden.
<PAGE>
Daruber hinaus hat der Mieter die laufenden Instandhaltungs- und
Wartungsarbeiten fur die Zu- und Ableitungen von/bis zu den
Hauptstrangen sowie die vom Mietgegenstand abschilessenden Turen zu
ubernehmen.
Kommt der Mieter esner der vorstehenden Verpflichtungen trotz Verlangen
des Vermieters nicht binnen einer angemessenen Frist nach, ist der
Vermieter berechtigt, die erforderlichen Reparaturen bzw. Arbeiten auf
Kosten des Mieters ausfuhren zu lassen. Bei Gefahr in Verzuge bedarf er
einer Fristsetzg nicht.
5.) Notwendige. Lnstandsetzungsarbeiten fur Einbauten und Gegenstande, die
im Rahmen der Gebaudeerstellung vom Vermieter durch entsprechende
Firmen durchgefuhrt und fur die eine Gewahrleistungsfrist vereinbart
wurde, sind dem Vermieter oder einem von ihm genannten Dritten
lediglich unverzuglich anzuzeigen. Die Kosten sind in dieser Zeit nicht
vom Mieter zu tragen. Dies gilt nur, soweit es sich um
Gewahrleistungsmangel handelt.
6.) Der Mieter haftet dem Vermieter fur Schaden, die durch ihn, seine
Angestellten sowie die von ihm beauftragten Handwerker, Lieferanten,
Besucher, Kunden und andere zu ihm in Beziehung stehende Personen am
Mietgegenstand oder durch Anlieferung und Abholung von Waren mit
eigenen odor fremden Fahrzeugen an Gebauden, Toren, Parkflachen und
Wegen verursacht werden. Insbesondere haftet er fur Schanden, die durch
unsachgemasses Umgehen mit dar Wasser-, Licht- odor Versorgungsleitung
an der WC-, Sanitsr- und Heizungsanlage, durch offen stehen lassen von
Turen und Fensterm odor Versaumnis einer ubernommenen sonsstigen
Pflicht (Beleuchtung,usw.)entstehen.
7.) Soweit der Vermieter zur Behebung von Schaden in den Mietraumen
verpflichtet ist, sind ihm solche Schaden unverzuglich anzuzeigen. Fur
Schaden, die durch eine verspatete Benachtichtigung enstanden sind,
haftet der Mieter.
8.) Verstopfungen von Abflussleitungen hat derjenige Mieter zu beseitigen,
der sie verursacht hat. Der Verursacher haftet auch fur etwaige
Folgeschaden. Lasst sich bei einer Verstopfung nicht festellen, wer der
Verursacher ist, so lasst der Vermieter den Schanden beseitigen. Kosten
und Folgeschanden tragen in diesem Fall alle Mieter anteileg, die an
die betreffende Abflussleitung angeschlossen sind.
9.) Beschadigte Fensterscheiben und Beschlagteile an den ausschliesslich
der Nutsung des Mieters dienenden Raumen ersetzt der Vermieter auf
Kosten des Mieters, wenn die Schanden durch den Gebrauch der Sache
vom Mieter zu vertreten sind.
10.) Die Parteien sind vorpflichtet, die ihnen obliegenden Instandhaltungs
und In standsetzungsarbeiten in einer angemessenen Frist ausfuhren zu
lassen. Kommt eine Partei einer ihr obliegenden Instandhaltungs- odor
Instandsetzungpflicht trotz Mahnunq und nach Ftistsetzung nicht nach,
ist die jeweils andere Partei berechtigt, dringend notwendige Arbeiten
auf Kosten der saumigen Partei ausfuhren zu lassen.
Bei Gefahr in Verzug ist jede Partei verpflichtet, fur die Gefahr
beseitigende MoBnahmen zu veranlassen.
11.) Dert Vermieter darf Ausbesserungen, Verbesserungen und bauliche
Veranderungen, die zur Erhaltung odor Unterhaltunq odor zut Abwendung
drohender Gefahren oder zu
<PAGE>
Beseitigung von Schaden notwendig oder zweckmassig sind, ohne
Zustimmung des Mieters vornebmen.
Der Mieter hat die in Betracht kommenden Raume zuganglich zu halten und
darf die Ausfuhrung der Arbeuten nicht behindern oder vetzpgern.
Der Vermieter ist berechtigt, jederzeit am und im Gebaude in Abstimmung
mit~ dem Mietet Modernisierungsmassnahmen durchzufuhren.
Mietminderungsanspruche stehen dem Mieter wegen solcher Arbeiten nur
zu, wenn diese langer als 1 Woche abhalten und zu erheblichen
Beeintrachtigungen des Betreibes des Mieters fuhren. Entstehen durch
die Modernisierungsmassnahmen Kosten, die nicht entstanden waren, wenn
der Mieter die Raume buroublich nutzen wurde, qehen diese zu Lasten des
Mieters.
12.) Fur vom Vermieter nachzuweisende Klieireparaturen ausserhalb der
Mietfalche has der Mieter im Einzelfall bis zu 0,2% der Jahresmiete
p.a.zuzuglich Mehrwertsteuer, maximal jedoch 1% der Jahresmiete
p.a.zuzuglich Mehrwertsteuer zu tragen. Die Reparaturen an Dach und
Fach sowie Grossreparaturen an Anlagen ausserhalb der Mietflache (z.B.
Aufzuq, Heizunqs-/Klimaalage), soweit sie nicht vom Mieter zun
vertreten sind, tragt der Vermieter.
Grossreparaturen ausserhalb der Mietflache sind
Instandsetzungsarbeiten, die unter Berucksichtigung normaler Abnutzung
und sachgerechter Wartung und Instandhaltung ublicherweise periodisch
anfallen und zu einer wesenlichen Verlangerung ger Nutzungsdauer der
Anlaqe fuhren.
SECTION 10 RUCKGABE DES MIETGEGENSTANDES
1) Der Mieter verpfllichter sich, rechtzeitig vor Vertragsende sur
Feststellung des Zustandes der Mietraume mit dem Vermieter eine
gemeinsame Besichtigung durchzufuhren.
2.) Die Raume werden bei Beendigung der Mietzeit von dem Vermieter oder
dessen Beauftragten abgenommen. Uber die Abnahme wird von den
Vertragsparteien ein Protokoll angefertigt, in das samtliche bei der
Abnahmne festgestellten Mangel aufzunehmen sind. Hierbei werden
eventuell noch zuruckliegende Mangel, die bei Mietbeginn in einem
Ubernahmeprotokoll fixiert wurden und zwischen Vermieter und Mieter in
gegenseitigem Einvernehmen nicht beseitigt wurden, entsprechend
berucksichtigt. Die in das Protokoll aufgenommenen Mangel gelten mit
Unterreichnung als vom Mieter anerkannt. Mangel, die nicht in das
Protokoll aufgenommen sind, konnen vom Vermieter nur geltend gemacht
werden, wenn sie bei der Abnahme, selbst bei sorgfaltiger
Besichtigung, nicht erkennbar waren. Erscheint der Mieter nicht zu
dem von ihm genannten Abnahmetermin, so gelten die festgestellten
Mangel als anerkannt.
3.) Erfolgt eine vertragsggemasse Raumug und Ruckgabe verspatet, so hat
der Vermieter Anspruch auf Nutzungsentschadigung und Schadenersatz.
4.) Bei Beendigung des Mietverhaltnisses mussen die Mietraume vollstandig
qeraumt und
<PAGE>
gereinigt (einschliesslich Fensterreinigung) in ordnungsgemassem
Zustand ubergeben werden. Des weiteren hat der Meiter alle
erforderkichen Schonheitsreparaturen sach- und fachgerecht
auszufuhren. Die Schonheitsreparaturen umfassen u.a. das Streichen
der Decken, Wande und Turen, sowie die Durchfuhrung von sonstigen
Malerarbeiten, falls dies von der Art der Mietsache angezeigt ist.
5.) Dubellocher sind zu verschliessien, beschadigte Fliesenfelder zu
ersetzen. Die Sanitar- und alle ubrigen technischen Einrichtunngen
mussen voll funktionsfahig und qereinigt sein. Der vom Vermieter
gestellte Teppichboden ist zu reingen. Solte der Auszug des Mieters
innerhalb einer Frist von weniger ala 6 Jahren nach Ubergabe dsr
Mistsache erfolgen, so hat der Mieter dem Vermieter als Ersatz fur
die Beseitigung und Entsorgung des alten sowie die Anschaffunq und
Verlegung eines neuen Teppichbodens einen Betrag von DM 50,00 je qm
zu verguten. Dieser Betrag andert sich in dem gleichen Masss, wie
sich der monatliche Mietzins Section 6 verandert.
6.) Alle Schlussel, auch vom Mieter selbst beschaffte, sind iem Vermieter
zuruckzugeben.
7) Bei Beendigung des Mietverhaltnissess hat der Mieter von ihm
vorgenommene Veranderungen des Mietgegenstandes auf seine Kosten zu
beiseitigen, es wei denn, dass der Vermieter auf einen Ruuckbau
verzichtet oder diese baulichen Veranderungen im Rahmen eines
Nachfolgemietvertrages genutzt werden.
8.) Ist der Vermieter an der Ubernahme interessiertt, werden
Verhandlungen uber den Zeiwert (Verkehrswert bei Anschlussvermietung)
gefuhrt.
9.) Der Mieter muss bei einer Anschlussvermietung die Ubernahme der von
ihm durchgefuhrten Einbauten odoe sonstigen Gegenstanden durch den
Anschlussmieter direkt mit diesem - ohne Einschaltung des Vermieters-
regeln.
SECTION 11 BESICHTIGUNG DER MIETRAUME
Der Vermieter darf nach Anzige wahrend der ublichen Geschaftszeiten
die vermieteten Raume selbst oder durch Beauftragte, Kauf- odor
Mietinteressenten besichtigen.
SECTION 12 RUCKSTANDIGER MIETZINS, AUFRECHNUNG, ZURUCKBEHALTUNGS RECHT,
INSOLVENZVERFAHREN DES MIETERS
1.) Ist der Mister trotz schriftlicher Mahnung mit zwei Monatsmieten
langer als 4 Wochen im Ruckstand, kann der Vermieter das
Mietverhaltnis fribtlos kundigen. Der Mieter ist verpfiichtet, dem
Vermieter alle Schaden zu ersetzen, die aus der vorzeitigen
Beendigung des Mietverhaltnisses entstehen.
2.) Eine Aufrechnung qegen den Anspruche aus diesem Vetrag ist nur mit
unbestrittenen oder rechtskraftig festgestellten Gegenanspruchen des
Mieters aus diesem Mietverhaltnis zulassig. Das Recht des Mieters zum
Einbehalt eines angemessenen Teils der Miete fur den Fall, dass der
Vermieter seiner Instandshaltungspflicht nicht nachkommt, bleibt
hiervon unberuhrt.
<PAGE>
3) Wird uber das Vermogen des Mieters die Eroffnung des Konkrus- oder
Vergleichsverfahren beantragt, ist der Vermieter zur fristlosen
Kundigung des Mietverhaltnisses berechtigt.
SECTION 13 VERWENDUNG DUR GEMIETETEN RAUME ZU GESCHAFTS- ZWECKEN/VERANDERUNG
DER RAUME
1.) Gibt der Mieter sien Geschaft auf, ohne das Mietvehaltnis beendigt
zu haben, hat der Mieter fur den Rest der Mietzeit Sicherheit zu
leisten. Diese Verpflichtung entrallt, wann der Vermieter die Raume
entewder selbst oder anderweitig Vermietet.
2.) Versteigernugen oder Ausverkaufe in den gemieteten Raumen bedurfen
der schriftlichen Austimmung des Vermieiters.
<PAGE>
SECTION 14 FIRMENBESCHILDERUNG IM EINGANGSBEREICH
Der Mieter wird im Einvernehmen mit dem Vermieter entsprechend dsr
hiefur vorgesehenen einheitlichen Gestaltung auf seine Kosten ein
Firmenschild im Eingansbereich des Gebuades anbringen.
SECTION 15 ABSCHLIESSENDE BESTIMMUNGEN
1.) Mundliche Nebenabreden sind nicht getroffen. Nachtragliche
Anderungen oder Erganzungen dieses Vertrages einschliesslich dieser
Regelung bedurfen der Schriftform.
2.) Sollte eine Besttimmung dieses Vertrages unwirksam sein oder werden,
bleiben die anderen Besttimmung unberhrt. Die Vertragepartner weeden
in diesem Fall anstelle der unwirksamen Regelung sine Vereinbarung
treffen, die dem Willen der Vertragsparteien bei Abschluss dieses
Vertrages am nauchsten kommt.
3.) Zur Wirksamkeit von Rechtsgeschaften, Rechtschandlungen oder
Rechtsfblgen genugt es, wenn diese gegenuber einem oder von einem
Beteiligten vorgenommen werden.
4.) Erfullungsort fur alle sich aus dem Vertrag ergebenden
Verpflichtungen und Gerichtsstand fur beide Vertragsparteien, soweit
eins Vereinbarung daruber gesetzlich zluassig ist, ist stuttgarrt.
Stuttgart, den
- ------- --------------- ----------------------
(Vermieter) (Meiter)
<PAGE>
EXHIBIT 10.71
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Erbengemeinschaft Fiszman, 60489 Frankfurt/Main, Germany,
for property located at Solmsstrasse 2-26, 60486 Frankfurt/Main, Germany. The
lease term is for a minimum of 10 years beginning on August 1, 1999 and ending
on August 1, 2009. STAR GmbH incurs rental charges of approximately 27,911 DM
per month and approximately 5,724 DM per month in additional expenses. The
leased property is approximately 4,173 square feet.
1
<PAGE>
SECTION 1
MIETOBJEKT
1. Der Vermieter vermietet an den Mieter Haleni/Technik- und Buroflacke
und 4 aussenliegende Parkplatze (nachstehend Mietobjekt genannt).
Lage, Grosse und Ausstattung des Mietobjektes ergeben sick aus den
anliegenden
- Planen (Anlagen 1 u 2) und der
- Baubeschreibung (Anlage 5),
die Bestandteil dieses Vertrages sind. Die vermietete Gebaudeflache ist
in den Planungsunterlagen orange umrandet.
Die Lage und Anzahl der Pkw-Abstellplatze ist in Anlage 2 durch grune
Schraffur gekennzeichnet.
2. Der Mieter ubergibt dem Vermieter bis spatestens zum 09.04.1999
verbindliche, unterzeichnete Raumaufteillungsplane und eine
Ausstattungsbeschreibung, die alle Merkmale enthalt und beschreibt, die
erforderlich sind damit der Vermieter die Mietflache termingerecht nach
dem vem Vermeiter vorgegebenen Standard errichten kann (Anlage 5 des
Vertrages).
3. Die Mietflachenberechnung erfolgt auf der Grundlage der DIN 277.
4. Der Vermieter wird dern Mieter - spatestens unverzuglich nach Beginn
des Mietverhaltnisses das Aufmass eines Architekten zuteiten. Alle
Buro- und Lagerflacken werden sodann exakt berechnet Der Mieter ist
verpflichtet, nach einem Prufungszeitraum von einem Monat sein
Einverstandnis mit dieser Mietflachenberechnung zu erteilen bzw. seine
Einwendungen schriftlich darzulegen. Im letzteren Falle werden die
Vertragsparteien bei unterschiedlichen Flachenberechnungen Einvernehmen
erzielen.
Die zwischen Vermieter und Mieter verbindlich festgestellten Flachen
gelten insbesondere im Rahmen des Section 5, Ziffer 1 (Mietzins und
Nebenkosten).
Die dann geltende Mietflache wird in einem Nachtrag zum Mietvertrag
rechtsverbindlich fur beide Vertragsparteien festgesetzt.
Ergibt sich nach einem Aufmass eine Abweichung von der berechneten
Mietflache um mehr als +/- 1,5% so wird der Mieztins angepasst.
2
<PAGE>
5. Nach dem verbindlic in Section 1 Ziff 2 festgelegten Abgabetermin
geausserte Anderungswunsche des Mieters bezuglich des Ausbaus und
der Gestaltung des Mietebjektes wird der Vermieter nach Moglichkeit
berucksichtigen, sofern dies im Hinblick auf die Statik und den
Charakter des Mietobjektes moglich ist.
Ein Anspruch auf Berucksichtigung solchor Anderungswunsche besteht
nicht.
In jedem Fall ist uber solche nachtraglichen Anderungswunsche des
Mieters eine schriftliche Nachtragsvereinbarung zu diesem Mietvertrag
zwischen den Ventragsparteien zu treffen. Darin sind mindestens zu
regein;
- etwaige Anderungen der Planungsunterlagen
- welche Vertragspartei die eventuellen Mehrkosten der Anderungswunsche
einschliesslich eventuell zusatzlich anfallender Planungs-,
Genehmigungs- oder Ingenieurkosten tragt und
- im Falle einer Verzogerung des Ubergabetermines an den Mieter die
Dauer der Verzogerung und der neue Ubergabetermin
Auf Section 5 Ziff 2, Abs 2 wird verwiesen.
6. Der Vermieter wird das Mietobjekt dem Mieter bis zum .01.08.1999
bezugsfertig zur Verfugung stellen. Bei bauverzogernden
Anderungswunschen des Mieters (vgl. Section 1 Ziff. 5) gilt der in der
Nachtragsvereinbarung festgestellte neue Termin der
Bezugsfertigstellung.
Das Mietverhaltnis verlangert sich um die Dauer der Bauverzogerung.
3
<PAGE>
SECTION 2
MIETZWECK
1 Der Mieter ist berechtigt, das Mietobjekt zu Burozwecken (Geb B/C)
sowie zum Betreib und zur Aufstellung von Telekommunikationsanglen
(Hallen-Technikflache Geb. D) zu nutzen.
Der konkrete Nutzungzweck ergibt sich aus der als Anlage 4 diesem
Vertrag beiegfugten Betriebsbeschreibung, die Bestandteil dieses
Vertrages ist. Die Aussenflachen durfen nicht zu Lager-,
Reparatur-, Wartungszwecken o. a. genutzt werden.
Fahrzeuge des Mieters, seiner Besucher und Arbeitnehmer durfen nur auf
den ausgewiesenen Platzen abgestellt werden.
2 Der Vermieter ist daur verantwortlich, dass das Mietobjekt general
zu dem Ziffer 1 genannten Mietzweck nutbar ist. Erggehen nachtraglich
behordlich Anordnungen oder Auflagen oder andern sich die einschlagig
offentlich-rechtlichen, so ist fur deren Erfullung der Vermeiter
verantwortlich.
Der Meiterist ist dafur verantwortlich, dass er spatestens bei
Ubergabe im Besitz der erforderlichen behordlichen Genehmigungen fur
die von ihm konkret ausgeube Nutzung des Mietobjecktes nach Ziffer 1
und gemass der Betriebsbeschreibung (Anlage 4) ist und dass
diese Nutzung auch sonst im Einklang mit den anwendbaren
offerntlich-rechtlichen Vorschriften steht. Meiter ist dem Vermeiter
schadenersatzpflichtig, wenn diese Voraussentzungen nicht erfullt sind
und daraus dem Vermeiter ein Schaden entsteht.
Ergehen kunftige behordliche Anordnungen in Bezug auf die konkrete
Nutzung des Mietobjekt durch den Mieter, oder andern such sonst die
insoweit anwendbaren offerntlich-rechtlichen Vorschriften, so hat der
Mieter die daraus such ergebenden Anforderungen auf seine Kosten zu
erfullen.
3. Der Mieter kann die gemaB Section 2 Ziff. 1vereinbarte Nutzung nur
nach vorheriger, schriftlicher Zustimmung des Vermieters andern. Der
Vermieter kann diese Zustimmung nur aus wichtigem Grund verweigern.
Sollte durch die beabsichtigte Nutzungsanderung ein (bau-)behordliches
oder sonstiges Genehmigungserfordernis oder eine Anzeigepflicht zu
erfullen sein, so hat der Mieter dies auf eigene Kosten und auf eigenes
Risiko zu erfullen. Soweit die Erfullung solcher
Genehmigungserfordernisse bzw. Anzeigepflichten die Mitwirkung des
Vermiters erfordlich mach, hat der Mieter alle notwendigen Plane und
Unterlagen auf seine Kosten zu beschaffen und dem Vermieter zur
Unterzeichnung vorzulegen. Eine Haftung fur die Genehmigungsfahigkeit
der beabsichtigten Nutzungsanderung ubernimmt der Vermieter nicht. Auch
bei Nutzungsanderungen gilt Section 2, Ziff. 2, Abs. 2 entsprechend.
4. Jeglicher Konkurrenz- und Sortimentsschutz wird ausgeschlossen.
4
<PAGE>
5. Noch nicht fertiggestellte Aussenanlagen bzw. noch durckzufuhrende
Arbeiten an den Allgemeinflachen im Gebaude berechtigen den Mieter
nicht, die Ubernahme die Mietobjektes zu verweigern.
6. Ausser den Tatigkeiten die in Section 2, Ziff. 1 angesprocken sind
sowie den damit zusammenhangenden Geraten durfen keine Produkte
gelagert oder weiterverarbeitet werden oder Tatigkeiten ausgeubt werden
die in irgendeiner Weise fur das Objekt eine Erhohung des
Versicherungsrisikos mit sich bringen oder behordlichen Bestimmungen
widersprechen.
Kosten, die auf die besenderen Tatigkeiten oder Produkte des Mieters
(z. B. leicht entflammbare Produkte Servicebetriebe und
Ausstellungsbereich Schulungsbereich, Klimatisierung) bzw auf daraus
resultierende behordliche, berufsgenossenschaftliche oder
versicherungsbedingte Auflagen zuruckzufuhren sind tragt der Mieter.
7 Sollten bauliche oder zwingend erforderliche Massnahmen die
Zuweisung anderer Pkw-Abstellplatze wahrend der Laufzeit des
Mietvertrages erfordern, so hat der Vermieter in Absprache mit dem
Mieter das Recht, vorubergehend andere Platze anzuweisen.
SECTION 3
UNTERVERMIETUNG
1 Dem Mieter ist eine Untervermietung oder eine Gebrauchsuberlassung an
Dritte nur nach vorheriger schriftlicher Zustimmung des Vermieters
gestattet. Die Zustimmung kann dor Vermieter nur versagen wenn ein
wichtiger Grund vorliegt.
Fur den Fall, dass der Mieter im Rahmen des Untermietverhaltnisses
einen hoheren Mietzins vereinbart, als er selbst nach diesem Vertag
schuldet, ist der Vermieter berechtigt, seine Zustimmung zur
Untervermietung davon abhangig zu machen, dass im
Hauptmietverhaltnis eim Zuschlag von 50% des Differenzbetrages zur
erzielten Miete des Untermietverhaltnisses vereinbart wird.
Der Mieter haftet fur alle Handlungen oder Unterlassungen des
Untermieters oder desjenigen, dem er den Gebrauch der Mietraume
uberlassen hat, im gleichen Umfang wie fur eigenes Handeln.
2 Im Falles des Verstosses gegen das Verbot der Untervermietung kann
der Vermieter das Mietverhaltnis nach fruchtloser Abmahnung und
angemessener Fristsetzung ausserordenlich kundigen.
3 Fur den Fall der Untervermietung tritt der Mieter dem Vermieter schon
jetzt die ihm gegen den Untermieter zustehenden Forderungen nebst
Pfandrechten bis zur Hohe der Forderungen des Vermieters
sicherheitshalber ab.
5
<PAGE>
SECTION 4
MIETZEIT
1. Das Mietverhaltnis beginnt am 01.08.1999 und lauft bis zum 31.07.2009.
Es verlangert sich um 5 Jahre, wenn es nicht spatestens 12 Monate vor
Ablauf der Mietzeit schriftlich per Einschreiben gekundigt wird. Die
Kundigung muss bis zum 3. Werktag des ersten Monats der
Kundigungsfrist zugestellt sein.
2. Bezugsfertigkeit ist gegeben, wenn das Mietobjekt entsprechend den
Planungsunterlagen (Section 1, Ziff. 2) fertiggestellt ist, so dass
der Bezug und die Nutzung zu dem vertraglich vereinbarten Mietzweck dem
Mieter moglich sind.
Am Tag der Bezugsfertigkeit wird das Mietobjekt dem Mieter zur Nutzung
ubergeben. Die Parteien erstellen ein Ubergabeprotokoll, in dem
eventuelle Mangel des Mietobjektes verbindlich festgestellt und noch
ausstehende Restarbeiten bzw. zu beseitigende Mangel erfasst
werden. Bei Bezugsfertigstellung vorhandene geringfugge Mingel bzw.
noch ausstehende Rest arbeiten, die den Betriebsablauf des Mieters
nicht wesentlich beeintrachtigen, verzogern die Bezugsfertigstellung
des Mietobjektes nicht.
Die im Ubergabeprotokoll festgehaltenen etwaigen Mangel bzw. noch
ausstehenden Resterbeiten sind von dem Vermieter nach einem
festzulegenden Zeitplan zu beheben bzw. durchzufuhren
3. Der Vermieter ist berechtigt die Ubergabe des Mietobjektes von der
vorherigen Leistung der Sicherheit abhangig zu machen.
6
<PAGE>
SECTION 5
MIETZINS UND NEBENKOSTEN
I
1 Der monatliche Mietzins setzt sich wie folgt zusummen:
<TABLE>
<S> <C> <C> <C>
Grosse ca. Art der angemieteten Flachen DM/m(2) DM insgesamt
1.272 m(2) Nutzflache bestehend aus:
1.047 m(2) Hallen-/Technikflache 21,50 22.510,50
225 m(2) Buroflache 24,00 5.400,00
4 Stck. Pkw-Stellplatze im Freien 100,00 400,00
Gesamt-Monatsmiete netto
- -ohne Betriebskostenvorauszahlung 28.310,50
Betreibskostenvorauszahlung
gemass Section 5, Ziff. 6:
1.272 m(2) Heizkosten
1.272 m(2)sontige Betriebskosten 4,50 5.724,00
Gesamt -Monatsmiete netto 34.034,50
- -inclusive Betreibskostenvorauszahlung
Zzgl.gesetzl. MwSt. (derzeit 16%) 5.445.52
Gesamt -Monatsmiete brutto
- -inclusive Betreibskostenvorauszahlung 39.480,02
</TABLE>
7
<PAGE>
2. Mietzins, Betreibs- und Heizkostenvorauszahlung und Mehrwertsteuer sind
monatlich ab Bezugsfertig stellung im Sinne des Section 4 Ziff. 2 und 3
dieses Vertrages zu zahlen.
lm Falle einer Verzogerung der Bezugsfertigstellung durch nachtragliche
Anderungswunsche des Mieter (vgl. Section 1, Ziff. 5) hat der Mieter
dem Vermieter den verzogerungsbedingten Mietausfall zu ersetzen;
massgebend ist der fur diesen Fall in der Nachtragsvereinbarung
gemass Section1 Ziff. 6 festgelegte Verzogerungszeitraum.
3. Mietzins, Betriebskostenvorauszahlung und Mehrwertsteuer sind monatlich
im voraus - spatestens bis zum 3. Werktag eines jeden Monats eingehend
- auf folgende Bankverbindung
BLZ 501 204 00 bei der Berliner Bank AG Frankfurt/Main
Konto-Nr. 8 516 199 300
Porto- und spesenfrei zu uberweisen. Fur die Rechtzeitigkeit der
Zahlumg kommt es auf die Guttschriff des Bertrages an.
4. Bei verspateter Zahlung ist der Vermieter berechtigt, pauschalierte
Mahnkosten je Mahnung in Hohe von DM 10,00, inclusive Mehrwertsteur
zuzuglich Verzugszinsen in Hohe des entstandenen Schadens zu berechnen.
5. Befindet sich der Mieter mit Zahlungen im Ruckstand ,so sind Zahiungen
zunachst auf Anspruche, deren Verjahrung droht, dann auf Kosten, Zinsen
und ubrige Schluden anzurechnen. Bei Zahlungsverzug sind Verzugszinsen
in Hohe von 7 % zu entrichten.
6. Folgende Nebenlosten sind im dem vereinbarten Mietzins nicht enthalten
und deshalb gesondert zu zahlen:
<TABLE>
<CAPTION>
KOSTENART VERTEILUNGSSCHLUSSEL
--------- --------------------
<S> <C>
01. Wasser nach Verbrauch (Messgerate)
02. Kanal/Siel (Entwasserung) nach Verbrauch cbm-Wasser
03. Beleuchtung, Allgemeinstrom nach qm-Mietflache z.B. fur Treppenhaus
Hof,Parkplatz,Gemeinschaftsflachen,Aufzu
ge Heizung
04. Mullabfuhr nach qm-Mietflache (gem.Rechnungen der
Stadtwerke bzw. Contianerdienste)
05. Grundsteuer nach qm-Mietflache
06. Strassen- und Burgersteigreinigung
Schnee und Eisbeseitigung,
Pflege und Reinigung samtlicher
Aussenanlagen wie Grunflachen, Gehwege,
Aussenparkplatze, Anfahrtswege usw. nach qm-Mietflache
07. Schornsteinfeger nach qm-Mietflache
8
<PAGE>
<CAPTION>
KOSTENART VERTEILUNGSSCHLUSSEL
--------- --------------------
<S> <C>
08. Sach- und Haftpflichtversicherunqen nach qm-Mietflache (dazu gehoren z.B. Feuer-Ltg.-
wasser-, Sturm-Vers., Grundbesitzerhaftpflicht-,
Glasbruch-, Elementarvers.) nach qm-Mietflache.
09. Hausmeister nach qm-Mietflache
10. Hausverwaltung 4 % der Netto-Miete (Raum-u. Parkpl.-Miete)
11. Personen-/Lasten-Aufzuge nach qm-Mietflache (z.B. fur Vollwartung, Prufgeb.,
Prufgewichte etc.)
12. Antennen-/Kabelanschluss nach qm-Mietflache
13. Hausreinigung und Ungezieferbekampfung nach qm-Mietflache (z.B. Treppenhau
ser, Gemeinschaftsflachen Aufzuge)
14. Heizung nach Verbrauch gem. Messeinrichtunqen im Verhaltnis
70 (Verbrauch) 30 (Grundkosten)
15. Warruwasser nach Verbrauch gem.
Messeinrichtunqen im Verhaltnis 70
(Verbrauch) 30 (Grundkosten)
16. die Kosten der Unterhaltung und Wartung von Tocen,
Zugangsturen, Entwasserungshebeanlagen, Rauchwarn
und Notstromanlagen, Tauchpumpen, Blitzschutzanlagen,
Sicherheitsbeleuchtung, Feureloschern, Tank und
Lecksicherungsanlagen, Transformatoren,
Brandmeldeanlagen, Hydranten. nach qm-Mietflache
17. die Kosten der Bewachung und sonstigen
Verkehrssicherung
18. die Kosten der Betriebes der Klima sowie der
Be- und Entluftungsanlage
19. Gebaudebewachtung nach qm-Mietflache
</TABLE>
Schlussel fur die Kostenaufteilung nach qm-Mietflache ist der prozentuale
Anteil des Mieters an der Summe der Gebaudemietflache brw. an der Mietflache
des Gesamtobjektes, wenn dieses aus mehreren Gebauden besteht.
Kostenarten werden nur berechnet, soweit die vorerwahnten Einrichtungen
tatsachlich im Mietobjekt vorhanden und den Mietern zur Nuzung zur Verfugung
stehen.
7. Zu den Kosten des Betriebs der zentralen Heizungsanlage und der
zentralen Warmwasserversorgung gehoren die Kosten der verbrauchten
Brennstoffe und ihrer Lieferung, die Kosten des Betriebsstromes die
Kosten der Bedienung, Uberwachung, und Pflege der Anlage, der
regelmassigen Prufung ihrer Betriebsbereitschaft und
Betriebissicherheit einschliesslich der Reingung des Hauses nach
Anlieferung von Brennstoffen, die Kosten der Messungen nach dem
Bundesemissionsschutzgesetz sowie die Schornsteinfegergebuhren, soweit
diese nicht anderweitig umgelegt werden, und die Kosten die Anmietung
oder anderer Arten der Gebrauchsuberlassung einer Ausstattung zur
Verbrauchserfassung sowie die Kosten der Verwendung einer Ausstattung
zur Verbrauchserfassung einschliesslich der Kosten der Berechnung
und Aufteilung.
9
<PAGE>
Zu den Kosten der Lieferung von Fernwarme gehoren die Kosten der
Warmelieferung (Grund-, Arbeits- und Verrec hnungspreis) und die Kosten
des Betriebes der zugehorigen Hausanlangen wie oben.
Macht eine Mietpartei von der Heizungsanlage keinen Gebrauch, befreit
dies nicht von der Verpflichtung zur Beteiligung an der Heizungskosten.
Die Kosten einer notwendig werdenden Zwischenablesung tragt der Mieter.
Die vermieteten Raume sind an Werktagen wahrend der Heizperiode (1.
Oktober bis 30 April) in der Betriebszeit angemessen zu beheizen,
soweit nicht betriebsbedingte andere Heizzreiten notwendig sind.
Ausserhalb der Heiper iode kann die Beheizung nur verlangt werden,
wenn die Aussentemperatur an drei aufeinderfolgenden Tagen um 21.00
Uhr unter 12 Grad Celsius sinkt.
8. Der Vermieter bestimmt die Hohe der Vorauszahlungen auf die Kosten der
Heiz- und Warmwasserversorgung sowie auf die ubrigen Nebenkosten unter
Berucksichtigung der letzen Abrechnung einerseits und der zu
erwartenden Kostenanderung andererseits nach billigem Ermessen. Die
Abrechnung erfolgt einmal jahrlich fur das vorangegangene Kalenderjahr
zum Stichtag 40. 6. Hierbei erfolgt auch die Aubrechnung folgenden
nachsten Mietzahlungstermin zu leisten. Uberschusse werden innerhalb
von zwei Wochen erstattet. Die Belege zur jeweiligen Betriebs und
Nebenkostenabrechnung konnen durch den Mieter eingesehen werden.
Auch wenn das Mieterverhaltnis innerhalb eines Abrechnungszeitraumes
endet, erfolgt die Abrechnung gegenuber dem Mieter und die
zeitanteilige Kostenverteilung erst mit der nachsten
Nebenkostenabrechnung.
Der Vermieter behalt sich das Recht vor, die monatlichen
Vorauszahlungen auf Betriebs und Nebenkosten alle drei Monate zu
uberprufen und gegebenenfalls aufgrund enstandener Kostensteigerung, zu
andern sowie einzeine Vorauszahlungen fur grossere
Nebenkostenbetrage zu verlangen, die ebenfalls zum nachstmoglichen
Mietzahlungstermin zu zahlen sind.
Werden nach Mietbeginn Gebuhren oder sonstige Nebenkosten neu erhoben,
die mit der Bewirtschaftung des Gebaudes zusammenhangen, ist der
Vermieter berechtigt, die entsprechenden Betrage vom Zietpunkt ihrer
Entstehung von dem Mieter erstattet zu verlangen.
9. Der Mieter tragt unmittelbar die Gebuhren und Kosten fur seinen
Stromverbrauch in dem Mietobjekt einschliesslich Zahlergebuhren und
Installationskosten und zahlt diese direkt an das
Versorgungsunternehmen.
10 Der Reinigung der inneren und ausseren Glas- und Jalousienflachen
(Rolladenflachen) beauftragt der Mieter auf seine Kosten mindestens
viermal pro Jahr unmittelbar an ein Fachunternehman und tragt die dafur
anfallenden Kosten.
10
<PAGE>
11. Der Vermieter behalt sich vor, den Zeitpunkt einseitig zu bestimmen, ab
dem alle sich aus dem Vertragsverhaltnis ergebenden
Zahlungsverpflichtungen nur noch in EURO zu erfullen sind.
Die Umrechnung von DM in EURO erfolgt auf der Grundlage des durch den
Rat der Europaischen Union am 31.12 1998 festgelegten
Umrechnungskurses. Die Parteien sind sich ferner daruber einig,
dass die Umstellung von DM auf EURO keinen Kundigungs-, Rucktritts-
oder Anfechtungsgrund darstellt und keinen Anspruch auf eine
Vertragsanderung oder Nachvernhandlung des Vertrages oder einzelner
seiner Bestimmungen begrundet.
SECTION 6
SICHERHEITSLEISTUNG
1. Zur Sicherung aller Anspruche des Vermieters gegen den Mieter aus den
Mietverhaltnis ubergibt der Mieter dem Vermieter als Hauptpflicht aus
diesem Vertrag eine schriftliche, unbefristete, unwiderrufliche,
selbstschuldnerische Burgschaft einer inlandischen Grossbank,
wobeider Burge sich zu verpflichten hat, auf erstes Anfordern zu
zahlen, und die Burgschaft eine Befugnis des Burgen zur Hinterlegung
nicht enthalten darf. Diese Burgschaft wird ausgestellt in der Form
gemass Anlage 3 zu diesem Mietvertrag in Hohe von drei
Bruttomonatsmieten (Raum-/Freiflachenmiete, Parkplaztmiete, Betreibs-
und Nebenkosten, Mehrwertsteuer), also DM 118.440,06.
Die Uberlassung der Sicherheitsleistung hat rechtzeitig vor Ubergabe
der Mietraume zu erfolgen.
Sofern sich die vorgenannten monatlichen Zahlungsverpflichtungen des
Mieters erhohen, kann der Vermieter eine entsprechende Auffullung der
Sicherheitsleistung verlangen.
Die Burgschaft ist vom Vermieter nach Beendigung des Mietverhaltnisses
und Auszug des Mieters Zuruckzugeben, sofern samtliche Verpflichtungen
des Mieters aus dem Mietverhaltnis erfullt worden sind.
Die Buegschuft wird angemessen reduziert, soweit der Vermieter noch
Nebenkosten nach
Beendigung des Mietverihaltnisses abrechnen wird und Nachzahlungen zu
erwarten sind.
11
<PAGE>
SECTION 7
ANDERUNG DES MIETZINSES
1. Steigt oder fallt der monatliche Preisindex fur die
Lebenshaltungskosten eines Vier-Personen-Arbeitnehmer-Haushaltes mit
mittlerem Einkommen im Bundesgebiet, wie er vom Statistischen
Bundesamt in Wiesbaden festgestellt wird, um mindestens 5 Punkte, so
steigt oder fallt der Meitzens gemass Section 5, Ziff. 1 entsprechend.
Als Bezugsgrosse vereinbaren die Parteien den Lebenshaltungskostenindex
im Monat des Vertragsabschlusses auf der Basis 1991 = 100.
Die Anderung der Miete wird wirksam zum 1. des Monats, der dem Monat
folgt in dem die Voraussetzungen fur eine Anderung des Mietzinses
gegeben waren. Die Anpassung des jeweils geschuldeten Mietzinses
erfolgt automatisch, so dass der der Anderung des Index
angepasste Mietzins per 1. des Folgermonats nach Eintritt der
Mietzinsanderung geschuldet wird.
Der Vermieter ist verpflichtet, dem Mieter eine Anderung des Preisindex
bzw. des Mietzinses anzuzeigen.
2. Wenn aufgrund der vorstehenden Wertsicherungsklausel eine Anpassung des
Mietzinses durchgefuhrt worden ist, so wird die Klausel gemass den
Bestimmungen des vorangehenden Absatzes erneut anwendbar und ist der
Mietzins demgemass erneut anzupassen, sobaid sich der Index erneut
gegenuber seinem Stand zum Zeitpunkt der vorangegangenen Anpassung um
mindestens 5 Punkte nach oben oder unten verandert hat.
3. Sollte der Lebenshaltungskostenindex 1991 = 100 nicht mehr ermitteit
werden, so soil eine Uberleitung durch Umrechnung auf die Basis des
nachsten denn jeweils veroffentlichten Lebenshaltungkostenindex
erfulgen, im ubrigen aber wie vorstehend verfahren werden. Das gilt bei
allen spateren Umstellungen de Lebenshaltungkostenindex auf ein anderes
Basisjahr.
4. Sollten sich die fur doe Ermittlung des Lebenshaltungkostenindex
zustandigen Behorden andern, so treten deise an die Stelle des derzeit
zustandigen Bundesamtes fur Wirtschaft. Dies gilt insbesondere, wenn zu
einem sparteren Zeitpunkt innerhalb der EU eine andere Behorde
zustandis sein sollte.
12
<PAGE>
SECTION 8
OPTION DES VERMIETERS
1. Der Vermieter weist darauf hin, dass er zur Umsatzsteuer optiert
hat. Der Mieter sichert zu, dass er die Mietsache
ausschlie(beta)lich fur Umsatze verwenden wird, die den Vorsteuerabzug
nicht ausschliessen. Der Mieter wird bis spatestens zum 10. Januar
eines jeden Jahres dem Vermieter bestatigen, dass er die Mietsache
auch in Zukunft nur fur die Erzielung von Umsatzen verwenden wird, die
den Vorsteuerabzug nicht ausschliessen. Auf Verlangen des
Vermieters ist der Mieter verpflichtet, geeignete Unterlagen dem
Vermieter zur Prufung zur Verfugung zu stellen.
2. Der Vermieter wird ausserdem einerc Untervermietung oder einer
Uberlassung des Mietgebrauchs an einen sonstigen Dritten dann nicht
zustimmen, wenn der Dritte sich nicht verplichtet hat, die Mietsache,
die Gegenstand seines Vertrages mit dem Mieter ist, nur fur Umsatze zu
verwenden, die Vorsteuerabzug nicht ausschliessen.
13
<PAGE>
SECTION 9
VERSICHERUNGEN
1. Die ublichen Gebaueversicherungen (z. B. Feuer, Sturm, Leitungswasser
und Gebaude-Haftpflicht) sowie erganzende Versicherungen werden von dem
Vermieter abgeschlossen. Die entstehenden Kosten tragt der Mieter im
Rahmen der Betreibskosten.
Sollte nach Mietbeginn der Mieter bauliche Veranderungen am Mietobjekt
vornehmen, so ist es Sache des Mieters, sich daruber zu informieren, ob
diese baulichen Veranderungen von den bestehenden Gebaudeversicherungen
abgedeckt sind. Wird eine zusatzliche Versicherung erforderlich so hat
der Mieter die Kosten der Hoherversicherung bzw. der zusaztlichen
Versicherung zu tragen. Sofern es der Mieter versaumt, den Vermieter
auf das Erfordenis einer Hoherversicherung hinuweisen, hat der
Vermieter einen Anspruch gegen den Mieter auf Ersatz all desjenigen
Schadens, der ihm aus einer fehlenden Versicherungsdeckung entstanden
ist bzw. Fur den der Vermieter gegenuber Dritten aus diesem Grunde
einzustehen hat. EtwaigeAnspruche des mieters gegen den Vermieter, die
sich aus dem fehlenden Versicherungsschutz begrunden, sind
ausgeschlossen.
2 Wahrehn der Dauer des Mietverhaltnisses ist der Mieter verpflichtet,
eine Versicherung zur Abdeckung folgender Risiken im Zusammenhang mit
dem Mietobjekt abzuschliessen und aufrechtzuerhalten.
a) Eine Haftpflichtversicherung gegen personen-und Sachschaden Dritter
im Zusammenhang mit der Nutzung und dem Innehaben der Mietraume durch
den Mieter. Die Mindestdeckungssumme hat DM 2 Mio. je Schadensereignis
zu betragen. Daneben hat der Versicherungvertrag ausdrucklich folgende
Risiken abzudecken; Beschadigung der Mietraume durch Brand, Explosion,
Leitungs- und Abwasserleitungsbruch; Beschadigung der Mietraume durch
sonstige Ursachen sowie Abdeckung des durch abhandengekommene Schlussel
entstehenden Risikos. Die Versicherung muss das Interesse des
Vermieters fur den Fall abdecken, dass Anspruche gegen diesen
erhoebn werden.
b) Der Mieter hat eine Sachversicherung fur samtliche Einrichtungen in
bzw. an den Mietraumen, die nicht wesentlicher Gebaudebestandteil sind,
in angemessener Hohe abzuschliessen.
c) Der Mieter ist weiterhin verpflichtet, eine
Betriebsunterbrechungsversicherung auf eigene Kosten
abzuschliessen. Die Police ist dem Vermieter unaufgefordert
vorzulegen.
14
<PAGE>
SECTION 10
AUHICHNUNG, ZUNICLIBEHALTUNG
1. Der Mieter kann gegenuber Mietforderungen nur aufrechnen oder ein
Zuruckbehaltungrecht ausuben, wenn er seine Absicht mindestens einen
Monat vor der Falligkeit der Miete schriftlich angezeigt.
2. Fur nicht in Anspruch genommene Ausstattungen bzw.
Mietbereichsausbauten (siehe Section 1 des Mietvertrages) hat der
Mieter keinen Anspruch auf Vergutung bzw. Verrechnung.
SECTION 11
BAULICHE GESTALTUNG UND VERANDERUNGEN
1. Veranderungen an und in der Mietsache, insbesondere Um- und Einbauten
sowie alle Elektro und Sanitarinstallationen usw. durfen nur mit
Einwilligung des Vermieters vorgenommen werden. Vor Durchfuhrung von
Veranderfungen ist unter Volrage von unterschrieben Planen und einer
Baubeschreibung die schriftliche Genehmigung des Vermieters einzuholen.
Der Vermieter kann die Einwilligung aus berechtigtem Interesse
verweigern.
Der Mieter tragt alle fur die Baumassnahme anfallenden Kosten fur
Instandhaltung und Reparatur dieser Massnahmen.
2. Werbeanlagen fur Namens und Firmenschilder an den Gebauden sowie
Hinweisschilder im Aussenbereich werden vom Vermieter einheitlich
gestaltet und angebracht. Das Bestimmungsrecht liegt bei dem Vermieter,
der, soweit eine einheitliche Gestaltung dies zulasst, Wunsche des
Mieters berucksichtigen wird. Zusatzliche Hinweisschilder sowie jede
sonstige Art von Werbeanlagen im Gesamtobjekt oder an dem Gebaude sind
unzulassig. Die Kosten der Beschriftung von Namens-, Firmen- und
Hinweisschildern und deren Anbringung auf den Werbeanlagen tragt der
Mieter.
3. Der Vermieter darf Ausbesserungen und bauliche Veranderungen, die zur
Erhaltung oder zur besseren wirtschaftlichen Verwertung des Gebaudes
oder des Mietobjekt, zur Abwendung drohender Gefahren oder zur
Beseitigung von Schaden oder fur eventuelle Ubbau- und
Renovierungsmassnahmen im Zuge der Neu- und Weitervermietung von
anderen Mietflachen im Gebaude oder dem Objekt notwendig werden, auch
ohne Zustimmung des Mieters vornehmen. Dies gilt auch fur Arbeiten, die
zwar nicht notwendig, aber zweckmass sind (z. B. Modernisierung des
Gebaudes oder des Mietobjektes). Der Mieter hat die in Betracht
kommenden Raume zuganglich zu halten und darf die Ausfuhrung der
Arbeiten nicht hindern oder verzogern; andernfalls hat er die dadurch
entstehenden Schaden zu ersetzen. Auf die betrieblichen Belange des
Mieter ist Rucksicht zu nehmen insbesondere dadurch, dassdir
Vermieter verpflichtet ist, die Storung moglichst gering zu halten und
den Mieteruber anstenhende Arbeiten in aller Regel rechzeitig vorab zu
informieren.
Die Einbringung rind Verlegung von Daten und Kommunikationsleitungen
sowie Einrichtungen und Anlagen und deren Instandhaltung Reparatur oder
Erneuerung sind Sache des Mieters,ebenso erforderliche
Drehstromanschlusse.
15
<PAGE>
SECTION 12
INSTANDHALTUNG DES MIETOBJEKTES, HAFTUNG
1 Der Mieter ist verpflichtet, das Mietobjekt schonend und pfleglich zu
behandein.
Schaden an dem Mietgegenstand sind von dem Mieter, sobald sie bemerkt
werden, schriftlich dem Vermieter anzuzeigen.
2 Dem Mieter obliegt die Instandhaltungspflicht bezogan auf die
Mietsache. Er hat deshalb alle Massnamen vorzunehmen, die
erforderlich sind, um die Mietsache in einem vertragsgemassen
Zustand zu erhalten. Schaden sind vorbeugend abzuwehren.
Daruber hinaus ist dar Mieter auch rur Instandsetzung der Mietsache
verpflichtet. Der Mieter hat insoweit alle auftretenden Schaden an der
Mietsache zu beseitigen, die durch den Mietgebrauch
(incl.Verschleiss) enstehen. Insoweit treffen den Mieter auch die
teilweise oder vollstandige Erneuerung einzelner Teile der Mietsache.
Die Instandsetzung und Instandhaltung umfassen u.a. auch die Reparatur
und Erneuerung von Elektro- und Sanitarinstallationen, Fenster und
Turverschlussen sowie technischen Einrichtungen und Anlagen.
Jalousien und Rolladen werden ebenfalls erfasst.
Der Mieter ist nicht verpflichtet, wahrend der Mietzeit
Schonheitsreparaturen auszufuhren.
3 Dem Mieter obliegen die Sauberhaltung des Mietobjektes sowie die
erforderlichen Verkehrssi cherungspflichten fur das Mietobjekt
gemass den gesetzlichen Bestimmungen. Unter
Verkehrssicherungspflichten fallen z.B. die Pflicht zur Streuung bei
Glatteis und zur Schneeraumung. Hinsichtlich des Winterdienstes konnen
Absprachen zwischen Vermieter und Mieter dahingehend getroffen werden,
dass ein von dem Vermieter beauftragtes Unternehmen den dem Mieter
obliegenden Winterdienst auf Kosten des Mieters miterledigen kann.
Fur den Fall, dass eine Sonderabsprache getroffen wird, wird
hierdurch eine eventuelle Haftung aus Verletzung der
Verkehrssicherungspflichten des Mieters nicht beruhrt.
4 Der Mieter hat sich sorgfaltig und regelmassig zu vergewissern,
dass die gemass Baubeschreibung zulassige Belastung der
Stockwerksdecken und die vereinbarte Stromentnahme nicht uberschritten
werden. Bei Zuwiderhandlung hat er jeden dem Vermieter oder Dritten
dadurch entstehenden Schaden zu ersetzen.
16
<PAGE>
SECTION 13
BETRETEN DES MIETOBJEKTES DURCH DEN VERMIETER
1. Der Vermieter oder ein von ihm Beauftragter kann wahrend der
Geschaftszeit, nach vorheriger Benachrichtigung des Mieters, das
Mietobjekt betreten, um das Mietobjekt auf seinen ver tragsgemassen
Zustand uberprufen zu konnen, die Notwendigkeit eventueller
Ausbesserungen festzulegen, um Messeinrichtungen abzulesen etc. Der
Mieter hat das Recht, fur diese Besich tigung eine Begleitperson an den
Terminen teilnehmen zu lassen.
2. Will der Vermieter den Grundbesitz verkaufen so kann er nach vorheriger
Absprache mit dem Mieter das Mietobjekt wabrend der Geschaftszeit
betreten. An Sonn- und Feiertagen bedart dies jedoch einer
ausdrucklichen Genehmigung des Mieters.
Das gleiche gilt in einem Zeitraum von zwolf Monaten vor Ablauf des
Mietverhaltnisses fur das Betreten des Mietobjektes durch den Vermieter
und/oder einen neuen Mietinteressenten.
3. Der Mieter duldet, dassdie Mietmume jederzeit vom Vermieter bei
Gefahr betreten werden konnen.
17
<PAGE>
SECTION 14
BEENDIGUNG DES MIETVERHALTNISSES
1. Zwischen den Vertragsparteien besteht das Einvernehmen, dass der
Mieter grundsatzlich bei Beendigung des Mietverhaltnisses die
Durchfuhrung von Schonheitsreparaturen schuldet. Der Mieter ist
verpflichtet, bei Beendigung des Mietvertrages das Mietobjekt mit
samtlilchen Schlusseln zuruckzugeben.
2. Der Mieter tragt die Kosten der Renovierung des Mietobjektes bei
Beendigung des Mietverhaltnisses. Die Renovierungskosten umfassen u.a.
das Tapeziere, das Streichen oder die sonstige Neubehandlung von
Wanden und Decken, Heizkorpern und Verkleidungen, Fenastern,
Einbauschranken, Innen- und Aussenturen, ferner den Ersatz
verbrauchter Teppichboden bzw. sonstiger Bodenbelage sowie die
Grundreinigung des PVC-Bodens.
3 Den Umfang der erforderlichen Renovierungsarbeiten sowie die dafur
aufzuwendenden Kosten stellt ein von beiden Seiten zu beauftragender
Architekt oder ein von der Handwerkskammer zu benennender
Sachverstandiger fest. Dabei ist davon auszugehen, dass das
Mietobjekt bei Beendigung des Mietverhaltnisses fachgerecht in der Art
und Weise und mit den Materialien oder gleichwertigen Ersatzprodukten
renoviert wird, wie sic vom Vermieter bei Herstellung verwandt worden
sind. Die Feststellungen des Architekten oder sonstigen Fachmannes
sind fur beide Vertragsparteien massgebend und verbindlich.
Der Mieter zahlt die danach festgestellen Renovierungskosten an den
Vermieter langstens innerhalb eines Monats ab Feststellung der Hohe und
Mitteilung an den Mieter. Der Mieter ist verpflichtet, dem Architekten
oder sonstigen Fachmann und den zur Angebotsabgabe aufgeforderten
Firmen rechtzeitig vor Ruckgabe des Mietobjektes spatestens aber neun
Monate vor Ablauf des Vertragsverhaltnisses, das Betreten zum Zwecke
der Feststellung der Renovierungsbedurftigkeit zu gestatten.
4. Einrichtungen mit denen der Mieter das Mietobjekt vor oder wahrend der
Dauer der Mietzeitversehen hat, hat der Mieter unter Wiederherstellung
des ursprunglichen Zustandes zu beseitigen, es sei denn, da(beta) der
Vermieter sich damit einverstanden erlart, dass alle bzw. einzeine
Einrichtungen in dem Mietobjekt bleiben.
5. Der Mieter hat ferner bei von ihm vorgenommenen baulichen Veranderungen
die Kosten der Wiederherstellung des fruheren Zustandes zu tragen,
falls der Vermieter die Wiederherstellung des fruheren Zustandes
verlangt. Des Verfahren und die Feststellung dieser Kosten regelt sich
entsprechend Section14, Ziff. 3 entsprechend.
18
<PAGE>
SECTION 15
AUSSERORDENTLICHE KUNDIGUNG
1. Der Vermieter kann das Mietverhaltnis aus wichtigem Grund mit
sofortiger Wirkung insbesondere dann kundigen, wenn
a) der Mieter mit der Zahlung des Mietzises oder mit sonstigen
Zahlungspflichen in Hohe von zwei Monatsmieten im Ruckstand ist,
b) der Mieter seiner Verpflichtung zur Leistung der Sicherheit
gemass Section 6 des Vertrages trotz Mahnung und Fristsetzung nicht
nachkommt.
c) Jede Partei kann das Mietverhaltnis aus wichtigem Grund mit
sofortiger Wirkung dann kundigen, wenn ein Antrag auf Eroffnung des
Insolvenzverfahrens uber das Vermogen der anderen Partei gestellt und
nicht binnen 4 Wochen zuruckgenomnen wird, die andere Partei die
eidesstattliche Versicherung gemass Section 807 ZPO abgegehen hat
oder ein Haftbefehl hierzu ergangen ist oder ein
aussergerichtliches, der Schuldenregulierung dienendes Verfahren
durch die andere Partei eingeleitet wird.
2. Bei einer vom Mieter zu vertretenden vorzeitgen Beendigung des
Mietverhaltnisses haftet der Mieter fur den Ausfall an Miete,
Nebenkosten und sonstigen Leistungen langstens fur die Zeit, fur die
das Mietverhaltnis abgeschlossen war sowie fur alle weiteren Schaden,
die dem Vermieter durch die vorzeitige Beendigung des Mietverhaltnisses
entstehen.
3 Setzt der Mieter nach Ablauf der Mietzeit den Gebrauch der Mietsache
fort, gilt das Mietverhaltnis nicht als verlangert Section 568 BGB
findet demgemass keine Anwendung. Dies gilt auch fur den Fall,
dass das Mietver haltnis aufgrund einer vertraglichen Vereinbarung
bzw. nach erfolgter Kundigung auslauft.
4 Im Falle der vollstandingen Zerstirung des uberwiegenden Teils de
Mietobjektes durch ein vom Vermieter nicht zu vertretendes Ereignis
(z.B. Feuer), ist der Vermeiter zur Wiederherstellung de Mietobjektes
nicht verpflichtet. Beide Vertragsparteien konnen mit Wirkung fur den
Zeitpunkt der Zerstorung der Mietsache das Mietverhaltnis fur beendet
erklaren unabhangig davon, ob das Mietobjekt zu einem spateren
Zeitpunkt neu errichtet wird der Vermeiter dem Mieter vor Vermeitung an
Dritte rechtzeitig Gelegenheit zur Stellungnahme bezuglich eines neu
abzuschliessenden Mieterverhaltnissess geben.
19
<PAGE>
SECTION 16
ANDERUNGEN IN DER PERSON DES MIETERS
1. Andert sich die Rechtsform des Unternehmens des Mieters, treten
Anderungen bei der Gewerbeerlaubnis oder in anderen, fbr dieses
Mietverhaltnis bedeutsamen Zusammenhangen ein, ist der Mieter
verpflichtet, dies dem Vermieter unverzuglich schriftlich mitzuteilen.
Dies gilt insbesondere fur das Ausscheiden von personlich haftenden
Gesellschaftern aus einem Gesellschaftsverhaltnis. Wird durch solche
Anderungen die bei Abschluss dieses Vertrages bestehende Bonitat
des Mieters mehr als nur unwesentlich beeintrachtigt, so kann der
Vermieter den Vertrag unter Einhaltung einer Frist von sechs Monaten
kundigen, ausser wenn der Mieter eine entsprechende zusatzliche
Sicherheit in Hohe von drei Brutto-Monatsmieten leistet.
2. Will der Mieter alle Rechten und Pflichten aus diesem Mietvertrag auf
einen Dritten ubertragen, so ist dies nur moglich, wenn der Vermieter
ausschliesslich schrifltich zustimmt. Der Mieter hat keinen
Anspruch auf diese Zustimmung. Etwas anderes gilt dann, wenn der Mieter
neben dem Nachmieter mitverpflichtet bleibt.
20
<PAGE>
SECTION 17
SCHLUSSBESTIMMUNGEN
1. Der vorliegende Vetrag enthalt zusammen mit den Planungsunterlagen, der
Mietflachenberechnung, der Baubeschreibung und der Betriebsbeschreibung
samtliche getroffenen Vereinbarungen. Anderungen und Erganzungen dieses
Vertages bedurfen der Schriftform. Mundliche Nebenabreden bestehen
nicht.
2. Sollten eine oder mehrere Bestimmungen dieses Vetrages unwirksam bzw.
nichtig sein oder werden, so bleiben die ubrigen Bestimmungen heirvon
unberuhrt. Die Vertragsparteien verpflichten sich, diese unwirksame
bzw. nichtige Bestimmung durch eine solche wirksame zu ersetzen, die
dem wirtschaftlich gewollten Zweck der unwirksamen Bestimmung am
nachsten kommt. Gleiches gilt fur eine Lucke im Vertrag.
3 Dieser Vetrag unterliegt der gesetzlichen Schriftform des Section 566
BGB.
Sollte sich nach Abschluss diesos Vertrages ein Mangel in der
gesetzlichen Schriftform ergeben, so hat jede Vertragspartei gegen die
andere Vertragspartei einen Anspruch auf Nachholung der Schriftform.
4 Gerichtsstand und Erfullungsort ist Sitz des Vermieters soweit dies
gesetzlich zulassig ist. Auf diese Vereinbarung findet
ausschliesslich das deutsche Recht Anwendung.
Ort / Datum Ort / Datum
/FRANKFURT M, 1.4.99/ /FRANKFURT / M 31.03.99/
- ------------------------ -------------------------
Unterschrift Vermieter Unterschrift Vermieter
ERBENGEMEINSCHAFT FISZMAN STAR Telecommunications
Eschborner Landstrasse 42-50 Deutschland GmbH
60489 Frankfurt Voltastrasse 1 a
60486 Franfurt am Main
- ------------------------- -------------------------
21
<PAGE>
EXHIBIT 10.72
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Kallco Projekt Projektges GmbH, 1050 Vienna, for property
located at Duckegasse 15, 1220 Vienna, Austria. The lease term begins on
February 1, 1999. The lease may be canceled upon three months' notice by either
party. STAR GmbH incurs rental charges of approximately 168,000 ATS per month
and approximately 32,580 ATS per month in additional expenses. The leased
property is approximately 6,467 square feet.
<PAGE>
MIETVERTRAG
Abgeschlossen zwischen
KALLCO PROJEKT Donaufelderhof Projektentwicklungsges.m.b.H.
1050 Wien, Schlobgasse 13
(im folgenden kurz, Vermieter" genannt) einerseits und
STAR Telecommunications GmbH
1010 Wien, Parkring 10/5
(im folgenden kurz "Mieter" genannt) andererseits wie folgt:
PRAAMBEL
Die KALLCO PROJEKT "Donaufelderhof" Projektentwicklungsges.m.b.H. ist
Eigentumerin der Liegenschft Wien 22,
Duckegasse/Prandaugasse/TokiostraBe/ArakawastraBe, EZ 3723, KG 01660 Kagran, auf
der sie eine Wohnhausanlage samt Geschaftsraumen (Buro-sowle Gewerbeeinheiten,
Geschaftslokale, Lager) und Gemeinschaftseinrichtungen (insbesondere Tiefgarage)
errichtet. Die Wohnungen sowle einzelne Geschaftsraume werden aus offentlichen
Mitteln gefordert. Festehalten wird, daB der Mietgegenstand, uber den der
Vorliegende Vertrag geschlossen wird, aufgrund elner Baubewilligung vom 11.
Oktober 1996 neu errichtet wird. Die Vertragsparteien stellen einvernehmlich
fest daB fur den gegenstandlichen Mietvertrag - unbeschadet der Geltung
zwingender Rechtsnormen des MRG - ausschlieBlich die Bestimmungen dieses
Vertrages und subsidiar die Bestimmungen des ABGB rechtswirksam sind.
1. MIETGEGENSTAND
1.l Gegenstand dieses Mietvertrages sind:
Top Nr. II.0.01, EG, Stiege II sowie
Top Nr. II.2.01 und Top Nr.II.2.02, 2.OG, Stiege I in oben genannter
Wohnhausanlage.
Als Mietgegenstand gilt lediglich der Innenraum der genannten Tops.
1.2 Der beiliegende Plan sowie die beiliegende Bau- und
Ausstattungsbeschreibung bilden integrierende Bestandteile dieses
Vertrages. Die Nutzflache des Mietgegenstandes betragt im EG ca. 1.440
m2 (Top Nr.II.0.01) sowie im 2.OG ca. 461 m2 (Top Nr.II.2.01) bzw. ca.
70 m2 (Top Nr.II.2.02) und ist Grundlage fur Die vereinbarte Miete.
Abwelchungen bis zu +/- 3 %gegenuber dem tatsachlichen AusmaB
(NaturmaB) nach Fertigstellung gelten als unwesentlich und werden
beiderseits tolerlert. Vom beiliegenden Plan abweichende Zwischenwande
oder Einbauten innerhalb des Mietgegenstandes haben keinen EinfluB
aufdie vereinbarte Mietflache, gleichgultig ob sie auf Kosten des
Mieters oder des Vermleters hergestellt wurden.
1.3 Der Mietgegenstand dient zum Betrieb von Vermittlungsrechnem fur die
Festnetz-Telekommunikation im EG bzw. zur Nutzung als Buro im 2.OG eine
Anderung des Mietzweckes bedarf der schriftlichen Zustimmung des
Vermieters. Der Vermieter haftet fur keine uber den beiliegenden Plan
sowie die beiliegende Bau- und Ausstattungsbeschreibung hinausgehende
Eignung des Mietgegenstandes. Der Mieter hat samtliche zum Betrieb
seiner Tatigkeit spezifisch erforderlichen behordlichen Bewilligungen
selbst und auf eigene Kosten einzuholen.
1.4 Die KFZ-Einstellplatze in der Tiefgarage sind nicht Gegenstand dieses
Vertrages. Ober sie wird eine Gesonderte Vereinbarung getroffen.
<PAGE>
2. VERTRAGSDAUER
2.1 Das Mietverhaltnis beginnt mit Obergabe und wird auf unbefristeteDauer
abgeschlossen. Das Mietverhaltnis kann von beiden Vertragspartnem unter
Einhaltung einer dreimonatigen Kundigungsfrist zum Ende eines jeden
Quartals aufgekundigt werden. Von selten des Vermieters kann neben den
Kundigungsgrunden des MRG eine fristlose Kundigung gemaB $ 1118 ABGB
ausgesprochen werden. Der Mieter verzichtet fur die ersten zehn Jahre
auf die Ausubung seines Kundigungsrechtes. Eine Teilkundigung ist nicht
zulassig.
2.2 Der Vermieter ist zur Obergabe des Mietgegenstandes innerhalb von vier
Wochen ab seine nacriweislichen Kenntnls von der
Veftragsunterzeichnung~ verpflichtet. Der Mieter verpflichtet. sich,
den im Zustand It. big. Plan bzw. laut Bau- und
Ausstattungsbeschreibung fertiggestelltel Mietgegenstand zu dem vom
Vermieter zumindest zwel Wochen irn Voraus bekanntzugebendell Tennin zu
ubernehmen. Ab dem auf die Obemahme folgenden Monatsersten ist auch das
Mietentgelt falIlig. Verweigert der Mieter die Obernahme, ohne daB
Mangel festqesteilt wurden die die weltere Adaptierung bzw. die
Benutzung wesentlich behindern~ verzogert dies nicht den Eintritt der
Falligkeit des Mietentgeltes. Aus Verzogerungen in der Fertigstellung
andere Mietgegenstande bzw. der AuBenanlagen erwachsen dem Mieter keine
Anspruche. Auch eine berechtigte Verweigerung der Obernabme begrundet
eine Schadenersatzpflicht des Vermieters nur bei Vorliegen von grobem
Verschulden.
3. MIETENTGELT
3.1 Das Mietentgelt besteht aus dem Hauptmietzins, den auf den
Mietgegenstand entfallender Betriebskosten einschlieblich elnem
Pflegebeitrag sowie der Umsatzsteuer.
3.2 Der monatliche Hauptmietzins betragt zum Zeitpunkt des
Vertragsabschlusses ATS 188.OOO,- exklusive Umsatzsteuer. Der
Hauptmietzins ist wertgesichert. Die Wertanpassung erfolgt jahrlich
analog derr Verbraucherprelsindex 1996 oder einem gleichwertigen, an
dessen Stelle tretenden Index. Der jeweils fur Juni verlautbarte Index
wird dabei dem letzten vor Vertragsunterzeicbnung verlautbarten
Juni-index gegenubergestellt. Aufgrund der Wertanpassung erhont sich
die Miete jeweils mit 1. Janner des folgenden Jahres, wobel aufgrund
der Finanzierungsbedingungen elne jahrliche Mindeststeigerung von 2 %
vereinbart wird.
3.3 Die Betriebskosten umfassen samtliche Aufwendungen und offentlichen
Abgaben, die fur einen ordnungsgernaBen Gebrauch der Liegenschaft
nutzlich oder notwendig sind. Nahere Regelungen hlezu werden im
beiliegenden Vertragsbestnndteil "Kostenverteilung" vereinbart. Der
Mieter tragt die Betriebskosten mit dem auf das Mietobjeki
entftallenden Anteil laut Nutzwert festsetzung. Fur samtliche Objekte
in der Wohnbausanlage gilt, daB Umbauten innerhalb der einzeinen
Mietgegenstande - gleichigultig ob sie vor oder nach der Obergabe
durchgefuhrt werden - keine Anderungen des Nutawertes nach sich ziehen,
sofern sie keinen EinfluB auf die ubrigen Mietgegenstande haben und auf
alleinige Kosten des jeweiligen Nutzers erfolgen. Die Betriebskosten
werden jahrlich kalkuliert und in gleichbleibenden monatlichen
Teilbetragen vorschuBweise gegen jahrliche Verrechnung bis zum 30. Juni
des folgenden Jahres eingehoben. Sollten sich durch unvorhergesehene
Erhohungen, aber auch Einsparungen, wahrend des Jahres wesentliche
Anderungen der Kalkulationsgrundlage ergeben, ist eine Anderung der
Akonti auch im laufenden Jahr moglich.
Kosten fur Heizung sowie Warmwasser- und Kaitwasserversorgung sind in
den Betriebskosten nicht enthalten und werden getrennt verrechnet. Der
Mieter verpflichtet sich zum AbschluB eines Einzellieferungsvertrages
zu marktublichen Konditionen mit dem Betreiber dur durch die Fernwarme
Wien gespeisten zentralen Versorgungsanlage.
3.4 Gemeinsam mIt den Betriebskosten wird ein Pflegebeitrag in Hohe von 3%
des gemaB Pkt. 3.2 zur Vorschreibung gelangenden Hauptmietzinses
eingehoben, der zur laufenden Pflege und schonheitlichen Erhaltung des
Gebaudes dient. Die Instandhaltungsverpftichtung des Vermieters gemaB
Pkt. 6.2 bleibt dadurch unberuhrt.
3.5 Die Umsatzsteuer wird in der jeweiligen gesetzlichen Hone
vorgeschrieben. Der Hauptmietzins beruht auf der Geschaftsgrundlage,
daB der Vermieter gemaB Section 6 Abs.2 UStG 1994 die Option
<PAGE>
zur Regelbesteuerung wahmehmen kann. Solite aufgrund gesetzlicher
Regelungen oder Anderung der Verwaltungsubung diese Regelbesteuerung
nicbt mehr moglich sein, die unechte Steuerbefreiunq in Wirksamkeit
treten und der Vermieter nicht mehr die Moglichkeit besitzen, Vorsteuem
geltend zu machen bzw, verpflichtet werden, berelts zuerkannte
Vorsteuern ruckzuerstatten werden die Vertragspartner einen gemeinsamen
Ausgleich treffen.
3.6 Das Mietentgelt ist im voraus bis zum Ersten eines jeden Monats auf das
vom Vermieter bekanntgegebene Konto zu Oberweisen, wobel fur die
Rechtzeitigkeit der Zablung des Einlangen maBgebend ist. Der Mieter
haftet dem Vermieter fur alle durcb verspatete Entgeitzahlung verur-
sacbten Kosten. Fur den Fall des Zahlungsverzuges verpflichtet sich der
Mieter zur Bezahlung von Verzugszinsen in Hohe der bankublichen Zinsen
fur kurzfristige Ausleihungen fur den jeweils aushaftenden Betrag ab
Falligkeit.
4. KAUTION
4.1 Der Mieter ubergibt dom Vermieter bei Mietvertragsabscb1uB eine
Bankgarantie in Hohe von vier Btuttomonantsmietentgoelten
(Hauptmiezins, vorlaufiges Betriebskostenakonto inkl. Pflegabietrag
sowie Ust.) das sind zum Zeitpunkt des Vertragsabsclusses ATS
962,780,.--.
4.2 Die Kaution dient zur Sicherstellung des Mietentgeltes, der
prdnungsgemaBen Instandhaltung des Mietobjektas einschIieBlich der
Beseitigung wertmindernder baulicher Veranderungen durch den Mieter.
Derr Vermieter ist berechitgt, trotz Falligkiet nicht belichene
Forderungen gegen den Mieter aus oben genannter Kaution zu decken. Dar
Mieter ist verpflichtet, im Falle der berechtigten Inanspruchnahme der
Kaution die Erhohng auf die verienbarte ursprungliche Hohe zuzuglich
Wertsicherung analog dem Hauptmietzins zu veranlasse.n
Der Mieter darf diese Kaution keiner zahlungsverpflicbtung,
insbesondere auch nicht zur Rerablung von Bezahlung von
Mietsinsruckstannden widmen.
4.3 Die Ruckstellung der Bankgarantie erfolgt innerhalb einer Woche nach
ordnungsgemaBer Ruckgabe des Mietgegenstandes an den Vermieter gemaB
Pkt. 6.5 und Pkt. 7.3.
5. UNTERVERMIETUNG UND WEITERGABE
5.1 Der Mieter darf ohne schriftliche Zustimmung des Vermieters, die dieser
nur bei Vorliegen wichtiger Grunde verweigern kann, das Mietobjekt
weder entgeltlich noch unentgeltich, weder ganz noch teilweise dritten
Personen uberlassan, auch nicht im Wege eines allfalligen
Gesellschaftsverhaltnisses, Pachtvrtrages, etc. In keinem Falle ist es
dem Mieter gastattet, Rechte aus diesem Vertrag zur Ganze oder
tellweise dritten Personen abzutreten oder an solche - in welcher
Rechtsform auch immer - zu ubetragen.
Eine Ausnabme von diesen Grundsatzen wird hinsichtlich von
Konzemuntemehmen ISd Section 15 AktG vereinbart, sofern diese den
Meitgegenstand fur den gleichan Gescbatfszweck (vgl. Pkt. 1.3) nutzen.
5.2 Eine allfallige Uberlassung der Mietrechte ist gegenuber dem Vermieter
jedendalls erst ab jenem Zeitpunky wirksam, in dem diese Uberlassung
dem Vermieter nachweislich mittels eingeschriebenem Brief zur Kenntnis
gebracht wird.
6. INSTANDHALTUNG, BAULICHE VERANDERUNGEN
6.1 Der Vermeiter ubrgibt den Mietgegenstand It. Blg. Bau- und
Ausstattungs-beschreiltung In neusm Zustand. Liegen sichtbare Mangel
vor, so sind diese im Zuge der Obemahme in ceinem Protokoll
festzuhalten. Der Vermieter wird daraufhin die Mangelbehebung innerhalb
angemessener Frist veranlassen. Werden in dem Protokoll keine Mangel
vermerkt, so wird durch dieses Protokoll beiderseits bestatigt,baB
keine sichtbaren Mangel vorliegen.
Der Mieter hat nach der Ubergabe und wahrend der gesamten Dauer des
Mietverhaltnisses auftretende Mangel sowie Schaden am Mietgegenstand -
soweit er zu deren Behebung nicht
<PAGE>
selbst verpflichtet ist - dem Vermieter unverzuglich anzuzeigen.
Erfolgt die Anzeige verspatet oder uberhaupt nicht, sodaB der Vermieter
nictht rechtzeitig MaBnahmen zur Schadensbehebung veranlassen kann, ist
der Mieter schadenersatzpflichtig. Behebt der Vermieter die
angezeigtenieigten Schanden bzw. Mangel binnen angemessener Frist, ist
der Mieter nicht berechtigt, weitere Anspuche zu stellen oder
Rechtsfolgen abzuleiten.
Der Mieter ist verpflichtet, den Mietgegenstand pfleglich zu behandeln
und haftet gemaB Section 1111 ABGB fur jeden Schaden, der dem Vermieter
aus einer unsachgemaBen Behandlung des Mietgegenstandes durch ihn sowie
Besucher oder sonstige Benutzer entsteht.
6.2 Der Vermieter ist verpflichtet, das Gebaude, in dem sich die Mietraume
befonden, wahrend der Bestandsdauer gegen Brandschaen ausreichend
versichern zu lassen, es auf seine Kosten in baulich gut benutzbarem
Zustand zu halten und alle notwendig werdenden Instandhaltungsarbeiten,
die der Behebung von emsten Schaden der allgemeinen Teils des Hauses
dienen, auf seine Kosten vornohmen zu lassen.
Notwendige Erhaltungs- und Verbesserungsarbeiten am Haus konnen auch
ohne Zustimmung des Mieters vorgenommon werden. Solche Arbeiten sind -
gegebenenfalls auch innerhalb des Mietgegenstandes - vom Mieter zu
duldon. Die betroffenen Raume sind wahrend der ublichen Geschaftzieiten
zuganglich zu machen, wobei eine Vorankundigung zu erfolgen hat
(ausgenommen Gefahr im Verzug). Bei Verzogerung oder Verhinderung
solchor Arbeiten durch den Mieter ist der dadurch entstehende Schaden
vom Mieter zu tragen. Aus der Duldung derartiger Arbeiten ist - sofern
der Schaden nicht auf grobes Verschulden des Vermieters zurckzufuhren
ist - kein Anspruch auf Scrhadeneratz, Minderung oder Ruckhaltung der
Miete ableitbar.
6.3 Der Meiter verpflichtet sich hingegen alle Reparaturen und
Wartungsarbeiten, sowie die laufenden Instandhaltungsarbeiten im
Innrren des Mietgegenstandes, wie z. B. das Ausmalen der Mietraurme,
Instandhaltung der Bodenbeiage, Reparaturen der Gerate, Turen und
Fenster an der Innenseite von hiezu befugten Gewerbsleuten ohne
Verzogerung sowie auf eigenen Veranlassung und Rechnung durchfuhren zu
lassen, und verzichtet auf das Recht, die Instandhaltung im Inneren des
Mietgegenstandes vom Vermieter zu fordem.
6.4 Bauliche Veranderungen des Mietgegenstandes, das sind insbesondere
Anderungen der GrundriBgestaltung und des auBereb Erscheinungsbildes,
durfen nur mit Bewilligung des Vermieters erfolgen. Diese setzt die
Vorlage einer planlichen Darstellung der MaBnahme voraus. Der Mieter
hat jede von ihm beabsichtige bauliche Veranderung des Mietgegenstandes
der Vermieter anzuzeigen.
Fur den Fall von mieterseitigen baulichen MaBnahmen vetpflichtt sich
der Mieter, der Vermieter samtliche zur Erstellung von Bestandsplanen
erforderliche Informationen un Unterlagen uber die endgulitge
Ausfuhrung zu ubergeben (insbesondere entsprechende Plane auf Diskette
in dxf-files).
Bei beendigung des Mietverhaltnisses hat der Vermeiter das Wahlrecht,
entweder auf die Wiederherstellung de ursprunglichen Zustandes zu
bestehen, wenn der Vermietet sich dieses Recht bei Genehmigung der
Veranderung vorbehalton hat, oder die investition des Mieters in den
Mietgegenstand analog Section 10 MRG zu ersetzen.
6.5 Samtliche Raume de Mietgegenstandes sind bei Ruckstellung von den
eingebtachten Fah nissen zu raumen, der Wandanstrich zu erneuern und
ansonsten unter Berucksichtigung einer normalen Abnutzung in
neuwertigem und saubberem Zustand besenreln zu ubergeben. Uber diese
Ubergabo ist nach gemeinsamer Begehung ein Protokoll zu erstellen.
Im Falle der Ruckstellung des Mietgegenstandes ohne Erfullung dieser
Verpflichtungen werden die erforderlichen MaBnahmen auf Veranlassung
des Vermieters innerthalb angemessener Zeit zulasten des Mieters
durchgefurt, Bls zur wiederherstellung des ordnungsgemaBen Zusstandes
ist das laufende Mietentgelt vom Mieter weiter zu entrichten.
Fahrnisse, die der Mieter bei Ruckstellung im Mietobjekt bbelaBt und im
Ubergabeprotokoll enthalten sind, gehen in das Eigentum des Vermeiters
uber, der die zuruckgelassenen Gegen stande auf Kosten des Mieters
ueiner Verwertung zufuhren kann.
7. BENUTZUNG, WERBEMITTEL
<PAGE>
7.1 Bei der Benuzung des Mietobjektes sowie der Anlieferung und Entsorgung
ist eine Storung der anderen Mieter durch Larm tunlichst zu vermeiden.
Liefertatigkeiten sind auf Werktage im Zeitraum zwischen 08.00 bis
18.00 Uhr (sa 09.00 bis 12.00) zu beschranken.
Das Abstellen von Gegenstanden auBerhalb des Mietobjektes ist
unzulassig. Motorfahrzeuge jeglicher Art durfen ohne gesonderte
Vereinbarung wedee im Gebaude, noch im Mietgegenstand noch sonstwo auf
der Liegenschaft abgestellt werden.
7.2 Im Hinblick auf ein geordnetes Erscheinungsbild der gesamten
Wohnhausanlage behalt sich der Vetmieter die vorherige Genehmigung
samtllicher Beschriftungen, Beschilderungen, Anbringung von Reklame
jeglicher Art (im folgenden kurz "Wetbemitte") ausdrucklich vor. Der
Mieter verpflichtet sich, die beabsichtigten derartigen MaBnahmen
rechtzeitig vor deren Umsetzung dem Vermieter in genauer planlicher
Darstellung und Beschreibung zur Abstimmung mit dem vom Vermieter
beauftragten Architekten sowie zur Genehmigung vorzulegen. Der
Vermieter kann diese Genehmigung nur dann verweigern, wenn die
MaBnahmen von der ublichen Beschaffenheit oder dem ublichen AusmaB
abweichen, die Werbeerfordernisse anderer Mieter nicht ausreichend
berucksichtigt sind bzw. das Erscheinungsbild der Ladenzeile oder der
gesamten Wohnhausanlage dadurch gestort wird. Das Verkleben von
Fenstern ist untersagt.
Der Mieter hat fur die Montage, Wartung, Erhaltung und Erneuerung
der Werbemittel, die Einholung der erforderlichen behordlichen
Bewilligungen sowie die Begleichung allfalliger Gebrauchsabgaben
Sorge zu tragen.
Der Mieter ermachtigh den Vermeiter, Werbemittel, die ohne diese
Genehmigung angebracht werden, nach vorheriger Aufforderung des
Mieters zur Entferung unter Setzung einer angemessenen Frist auf
Kosten des Mieters zu entfemen und zu entsorgen.
Bei Beendigung des Mietverhaltnisses sind die Werbemittel vom Mieter
auf seine Kosten zu entfernen und auf seine Kosten eine allfallige
Beschadigung der Befestigungsstelle zu beheben. Bei VerstoB gegen
diese Regelung hat der Vermieter nach Setzung einer angemessenen
Nachfrist das Recht, die Entfemung und Entsorgung der Werbemittel ohne
weitere Ankunndigun auf Kosten des Mieters zu veernlassen.
7.3 Fur die Mietdauer werden dem Mieter die eforderllichen Achlussel
ausgehandigt. Die Ubergabe hat in einer Schlusselaufstellung bestatigh
zu wreden.
Der Meiter ist verpflichtet, bei Ruck stellung des Mietobjektes ale
Schlussel, auch zusatzlich angefertigte, dem Vermieter kostelos u
ubergeben. Fehlen Schlussel, so sind diese - auf Verlangen des
vermieters auch das ganze SchloBayatem - vom Mieter auf dessen Kosten
zu ersetzen. Wird das SchloB ernerert, so sind drei Schlussel und die
fur die anderen Mieter anorderliche Anzahl von Schlussel zu ersetzen.
8. RECHT DES VERMIETERS, DEN MIETGEGENSTAND ZU BETRETEN
8.1 Der Vermieter oder ein von Ihm schriftlich Bevollmachtigter ist bei
Vorligen eines wichtigen Grundes innerhalb der ublichen Geschaftszeiten
jederzeituit gegen vorherige Anmeldung berechtight, den Mietgegenstand
in Beisein des Mieters zu betreten. Ist In Fallen von Gefar in Verzug
der MIctgegenst~nd Meitgegenstand unbeaufsichtigt, und kann der Mieter
nicht innerhalb des enforderlichen Zeitraumes verstandigt werden,
durfen Organe des Sicherheitsdienstes (Polize,Feuerwehr) auf Kosten des
Mieters beigezogen werden. Die Feuewehr bzw. der Brandschutzbeauftragte
sind in diesen Fallen berecgtigt, den Zutritt mittels
Generalhauptschlussel zu ermoglichen.
8.2 Der Mieterverpflichtet sich, innerhaulb der letzten drei Monate vor
Auflosung des Meitverhaltnisses die Besichtigung des Mietobjektes an
Werktagen zwischen 09:00 und 16:00 Uhr gegen Vornmeldung im
HochstausmaB von Zwei Studen pro Tag zuzulasssen.
9. AUFTECHNUNGSVETBOT
9.1 Der Mieter ist nicht berechtigt, allfalligel Gegenfortderungen - aus
welchem Titel immer - mit dem Meitentgelt zu kompensieren oder aus
diesem Grund den Mietzins ganz oder teilweise
<PAGE>
zuruckzuhalten. Vom Aufrechnungsverbot ausgenommen sind gerichtlich
festgestellte oder ausdrucklich anerkannte Forderungen.
10. KOSTEN UND GEBUHREN
10.1 Die mit der Errichtung und Vergebuhring dieses Mietvertrages
verbundenen staatlichen Gebuhren ttagtt der Mieter. Die Kosten einer
allfalliden rechtsfreutndlichen Beratung und Vertretung tragt jeder
Vertragsteil fur sich.
10.2 Fur Zwecke der Gebuhrenbemessun witd festgestellt, daB der auf den
Mietgegenstand entfallende Gesamtmietzins einschlieBlich Nebenkosten
pro Jahr voraussichtlich ATS 2,888,350.--inkl. Ust. Betragen wird.
11. ALLGEMEINE BESTIMMUNGEN
11.1 Der Bestand dises vertrages wird durch die Unwirksamkeit einzelner
Best;mmungen desselben nicht beruhrt. Eine unwirksame Bestimmund ist
von den Vertragsparteien surch eine andere gultige und zulassige
Bestimmung zu ersetzen, die sem Sinn und Zweck der weggefallenen
Bestimmung entspricht.
11.2 Anderungen der Anschrift der Vertragspartner sind dem anderen Teil
schriftlich bekanntzugeben, widrigenfalls Postsendungen an die zuletzt
bekanntgegebene Anschrift als ordnungsgemaB zugestellt gelten.
11.3 Allfallige, vor AbschluB dieses Vertrages schriftlich oder mundlich
getroffene Verinbarinbarungen verlieren bei VertragssabschluB ihre
Gultigkeit; eine Anderung dieses Vertrages bedarf der Schriftfirm. Das
Abegehen vom Erfordemis der Schriftlichkeit kann ebendalls nur
schriftlich vereinbart werden.
11.4 Dieser Meirvertrg wird in drei Ausfertigungen errichtet, von denen
jeder Vertragsteil je eine Ausfertigung erhalt. Eine Ausfertigung ist
fur das Finanzamt fur Gebuhren und Verkehrssteuem bestimmt, dem
damtliche Ausfertigungen im Original anzuzeigen sind.
11.5 Fur den des Vermeirerwechsels verpflichtet sich der Vertieter, auch
seine rechtsnachfolger an diesen Vertrag zu binden
11.6 Enivernehmlich ird der Vertrag ausschlieBlich in osterreichischer
Wahrung ausgefertigt. Der Vermeiter hat die im Vertrag bekanntgegebenen
Betrage vor dem 01.01.2002 zusatzlich such ir Euro shcriftlich
bakanntzugeben.
Wein am _____________________ Wein am _____________________
KALLCO PROJEKT "Doneufelderhof" STAR Telecommunicaitons, GmbH
<PAGE>
EXHIBIT 10.73
SUMMARY
Office and Switch Lease between STAR Telecommunications Deutschland
GmbH ("STAR GmbH") and Comptoir Genevois Immobilier, 1211 Geneva, Switzerland,
for property located at 10 Chemin du Chateau-Bloch, 1219 Le Lignon, Geneva,
Switzerland. The lease term begins on June 1, 1999 and ends on May 30, 2004.
STAR GmbH incurs rental charges of approximately 22,463 CHF per month and
approximately 865 CHF per month in additional expenses. The leased property is
approximately 5,578 square feet.
<PAGE>
LOCAUX COMMERCIAUX
BAIL A LOYER
CONVENU ENTRE
Bailleu: MONSIEUR LUC PERRET, P.A. ROUTE DU BOIS-DE-BAY 38, 1242 SATIGNY
propiertarie de I'mmeuble CHEMIN DU CHATEAU-BLOCH 10, 1219 LE LIGNON
represente par: LE COMPTOIR GENEVOIS IMMOBILIER, COURS DO RIVE 7, A GENEVE
Locataire: STAR TELECOM S.A.R.L.
actuellement domiciliee RUE DU RHONE 14, 1204 GENEVE
Objet de la location: LOCAUX DO 1700 M2 ENVIRON, SELON PLAN NO 068 DU
24.02.1999 annexe, ua 1ER ETAGE DE L'IMMEUBLE SIS
CHEMIN DU CHATEAU-BLOCH 10,1219 LE LIGNON
Les mentiones de surface n'ont qu'un caractere indicatif, les eventuelles
differences constatees n'entrainerorr aucune modification du loyer.
Destination des locaux: ACTIVITES LIEES AUX TELECOMMUNICATIONS.
Dependances: AUCUNE.
Duree du ball: CINQ ANS
Debut: 1ER JUIN 1999 Fin: 30 MAI 2004
LE LOYER EST INDEXE A L'INDICE SUISSE DES PRIX A LA CONSOMMATION (DUREE
MINIMALE: 5 ANS)
Le loyer annuel de Fr. 269'556.-- est repute adapte a l'indice officiel
suisse des prix a la consommation au jour de la signature du bail,
soit: 144.50 points (base decembre 1982 = 100)
Sans pouvoir etre inferieur, le loyer peut en cours de bail et sans
denonciation preable de ce dernier, etre modifie proportionnellerment a
la variation de l'indice officiel suisse des prix a la consommation,
moyennant un preavis ecrit d'un mois au moins. II ne peut
<PAGE>
toutefois etre procede a l'adaptation du loyer qu'une fois par periode
do 12 mais
Le loyer ne peut etre indexe que si la reference est `iindice suisse
des prix a la consommation et si la duree du bail ou celle de son
renouvellement en cours est egale ou superieure a 5 ans.
RENOUVELLEMENT ET RESILIATION
SIX MOIS (six mois au minimum) au moins avant la fin du bail, les
parties diovent s'avertir pr ecrit de leurs intentions au sujet de sa
resiliatian ou de son renouvellement; lour silence a cet egard sert
d'acquiescement a sa continuation pour une duree do cinq annees
(minimum 4 mois), toutes les conditions du bail restant en vigueur, et
ainsi de suite annee(s) (biffez les mentions qui ne conviennent pas).
CHAUFFAGE / EAU CHAUDE / CLIMATISATION
En cauverture des frais de chauffage, eau chade et climatisation, le
locataire s'engage a verser une somme annuelle divisible et payable aux
memes termes et conditions que le loyer a titre: - d'acompte
provisionnel, soit Frs. 10'380.--
GARANTIE DU LOYER
Pour garantir l'execution des obligations qu'il contracte en verti du
present bail et de ses renouvellements, le locataire fournit au
bailleuir a la signature du contrat une garantie bancaire de FR.
67389.-, conformement a l'article 2 des conditions generales pour
locaux commerciaux. Cette derniere devra etre ecclusivement fournie par
un etablissement bancaire de la place.
DISPOSITIONS PARTICULIERES
LES clauses DU CONTRAT PRINCIPAL ET DES CONDITIONS GENERALES POUR
locaux COMMERCIAUX QUI SERAIENT EVENTUELLEMENT CONTRAIRES AUX
DISPOSITIONS PARTICULIERES CI-DESSOUS SONT SANS OBJET.
ART. 1 TRAVAUX A CHRGE DU LOCATAIRE:
Le locataire prendra a charge l'ensemble des travaux figurant
d'une part, sur la document intitule "offre forfaitaire de la
zone technique", etabli par la bureau Daniel BOTTGE en date du
8 mars 1999 (annexe 3), chiffre a un montant TTC de Fr.
1'243'000.--, ainsi que ceux figurant sur le document intitule
"offre forfaitaire de la zone bureaux" du bureau Daniel BOTTGE
en date du 8 mars 1999 (annexe 4) pour un montant TTC de Fr.
307'000.-- soit un montant total do travaux estime a Fr.
1;550;000.-- TTC (un million cinq cent cinquante mille francs).
ART. 2 GARANTIE TRAVAUX:
Le locataire faurnira au baileur avant le debut des travuax
une garantie bancaire dort le montant sera egal au cout total
des travaux, soit Fr. 1'550'000.-- (un million cinq cent
cinquante mille francs). Cette garantie bancaire emise par une
banque de premier ordre, garantira au bailleur le paiement par
ladite bangue, de tous les frais mentionnes ci-dessus. Elle
s'eteindra lorsque les travaux auront ete termines, leur
reception definitive effectuee par le bureau Daniel BOTTGE et
l'ensemble des factures integralement payees. II est egalement
canvenu qu'en derogation de l'article 20, alinea 4 des
Conditions
<PAGE>
generales pour locaux commerciaux, tous les travaux realises
par le locataire sort reputes etre amortis sur la duree
initiuale du bail et ne donneront par consequent drot a
aucune indemnite ou participation du bailfeur, ceci quelle
que soit la date a laquelle les locaux seront restitues. La
locataire garantit par ailleurs le bailleur qu'aucune
hypothegue legale ne sera revendiquee pour les travaux qu'il
aura effextues et s'engage le cas echeant, a les faire
radier immediatement, a ses frais et sans reserve en cas
d'inscription.
ART. 3 EXPLOTATION DES LOCAUS::
Le locataire est rendu expressement attentif au fact que
l'obtention de tottes les autorisations necessaries quant a
l'affection envisagee dans les locaux objet du present
contrat, octroyees par les autorites campetentes en la
maitere, de meme que la conclusion des assurances
indispensables a ladite exploitation, sont de san ressort
exclusif, afin de demeurer en taut temps en parfait accord
avec la legislation en vigeur.
ART. 4 ASSURANCE BRIS DE GLACE:
En complement de l'article 25, alinea c) des Conditions
generales pour locaux commerciaux, il est precise que le
locataire devra egalement s'assurer contre le bris de glace.
ART. 5 ACCES AUX LOCAUX:
Le locataire conservera au bailleur un libre acces aux locaux,
en particulier aux gaines techniques, ceci pour permettre la
realisation des travaux d'amenagement des surfaces restant a
louer dans l'immeuble.
ART. 6 OPTION:
Le locataire est mis au benefice d'une option jusqu'au 31
decembre 1999 surr la surface actuellement vacante de 593 m2
au 2(eme) etage de l'immeuble. Le locataire beneficiera d'un
mois pour exercer cette option des qu'il aura conaissance d'un
tiers interesse a la location de la surface en question.
Fait a Geneve en 2 exemplaires, le 8 mars 1999.
Le locataire: Le bailleur:
STAR TELECOM S.A.R.L. COMPTOIR GENEVOIS IMMOBILE
<PAGE>
AVENANT
AU CONTRAT DE BAIL A LOYER DU 8 MARS 1999
1/2
CONVENU ENTRE
MONSIEUR LUC PERRET, proprietaire de I'immeuble sis chemin du Chateau-Bloch 10,
1219 Le Lignon, represente par le COMPTOIR GENEVOIS IMMOBILE,
d'une part,
St
STAR TELECOM S.A.R.L., actuellement domiciliee rue du Rhone 14. 1204 Geneve,
d'autre part,
ART. 1 TRAVAUX A CHARGE DU LOCATAIRE:
Compte tenu des recentes discussions intervenues entre le locataire et
le bureau d'Architecte Daniel BOTTGE. Il est precise que le locataire
prendra a charge l'ensemble des travaux, figurant sur les deux
nouvelles offres forfaitaire, datees du 19 mars 1999 (en lieux et place
du 8 mars 1999), respectivernent "l'offre forfaitaire de la zone
technique" (annexe 3) pour un montant TTC de Fr. 95O'837.5O, ansi que
"l'offre forfaitaire de la zone bureaux" (annexe 4) POUR tin montant
TTC de Fr. 374'162.50, soit un montant total de travaux estime a Fr.
1'325'000.--(un million trois cent vingt cinq mille francs).
ART. 2 D'entente entre les parties, l'article 1 b) des dispositions
particulieres du bail a loyor du 8 mars 1 999 est supprime.
ART. 3 GARANTIE TRAVAUX:
Comme convenu, le locataire fournira au bailleur avant le debut des
travaux, une garantie bancaire dont le montant sera egal au cout total
des travaux, laquelle estt donc, compte tenu de ce qui precede, fixee a
Fr. 1'325'000.-- (un million trois cent vingt cinq mille francs).
ART. 4 RESTITUTION DES LOCAUX:
II est d'ores et deja convenu qu'en cas de restitution des locaux, le
locataire n'aura pas a les remettre dans leur etat initial, exception
faite bien entendu des equipements techniques qui lui sont propres et
qui devront etre evacuees.
ART. 5 Toutes les autres clauses et conditions du contrat de bail du 8
ars 1999 demeurent sans chanqemnt.
Fait et signe en deux exemplaries, a Geneve le 13 avril 1999.
Le locataire: Le bailleur:
STAR TELECOM S.A.R.L. COMPTOIR GENEVOIS IMMOBILE
<PAGE>
- --------------------------------------------------------------------------------
OFFICE LEASE
"NEW WORLD TOWER" - 100 N. BISCAYNE BOULEVARD
LANDLORD:
NWT PARTNERS, LTD.
TENANT:
PT-1 COMMUNICATIONS, INC.
PREMISES:
SUITE 1900
- --------------------------------------------------------------------------------
<PAGE>
BASIC TERM SHEET
OFFICE LEASE
"NEW WORLD TOWER" - 100 N. BISCAYNE BOULEVARD
The following provisions and terms are incorporated as Sections 1.2 and 1.3
in the Lease between Landlord and Tenant.
1.2.1 - LANDLORD: NWT Partners, Ltd.
1.2.2 - TENANT: PT-1 COMMUNICATIONS, INC.
1.2.3 - BUILDING: 100 N. Biscayne Blvd.
Miami, Florida 33132
which is currently known as New
World Tower and which includes
the adjacent parking garage.
1.2.4 - PREMISES: Suite 1900, having a gross
leasable area which Landlord
and Tenant designate for
purposes of this Lease to be
10,353 square feet.
1.2.5 - USE OF PREMISES: For the operation of
telecommunications equipment and its related
facilities and for general office use.
1.2.6 - TENANT'S TRADE NAME: n/a
1.2.7 - LEASE TERM: ten (10) year(s), and four (4)
months unless otherwise extended or shortened.
1.2.8 - LEASE COMMENCEMENT DATE (SECTION 1.6) ): November 1,
1997
LEASE EXPIRATION DATE (SECTION 1.6): Ten years from
Rent Commencement Date
1.2.9 - RENT COMMENCEMENT DATE (SECTION 1.7): March 1, 1998
1.2.10 - FIXED MINIMUM RENT (SECTION 2.1): $2,299,535.70
payable the first of each month as follows, plus all
applicable taxes:
<TABLE>
<CAPTION>
Lease Year Annual Rent Monthly Rent
<S> <C> <C>
1 $191,530.50 $15,960.88
2 199,191.72 16,599.31
3 207,159.39 17,263.28
4 215,455.76 17,953.81
5 224,063.60 18,671.97
6 233,026.14 19,418.84
7 242,347.18 20,195.60
8 252,041.07 21,003.42
9 262,122.71 21,843.56
10 272,607.62 22,717.30
</TABLE>
1.2.11 - Fixed Minimum Rent Increase(s)- n/a Section 2.2 is
deleted
Adjustment Dates (Section 2.2):n/a
Basic Standard (Base Month):n/a
1.2.12 - Construction Plans Submission Date:Prior to
commencement of construction pursuant to article
_______________/ JK
LANDLORD TENANT
<PAGE>
V.
1.2.13 - Landlord's Contribution: $103,530.00 which shall be
credited against the amount of Fixed Minimum rent
due and payable from the Rent Commencement Date
until the amount of the Landlord's contribution
shall have been credited to Tenant in full (the
"Abatement Months"), provided, however, that any
material default under this lease by Tenant shall
terminate Landlord's obligation to give any credit
hereunder, and the entire Rent otherwise due and
payable for the Abatement Months shall become
immediately due and payable by Tenant to Landlord,
unless the default has been cured by Tenant within
the time period provided therefor in this Lease.
1.2.14 - Security Deposit (Section 10.1): $ $31,921.76 plus
the first month's rent together with sales tax, in
the amount of $16,998.34
1.2.15 - Tenant's Participation In Operating Expenses and
Taxes (Section 4.1):
Proportionate Share: 3.521% determined in accordance
with BOMA Standard Z65.1 - 1996
Base Operating Year: 1998; Base Tax Year: 1998
First Operating Expense Adjustment Payment Date:
January 1, 1999.
First Tax Adjustment Payment Date: January 1, 1999.
1.2.16 - Addresses for Notices (Section 12.1)
Tenant: PT-1 Communications, Inc.
30-50 Whitestone Expressway
Flushing, New York 11354
Attention: Mr. Jeffrey A. Hecht
after the Lease Commencement Date, the Premises
Landlord: NWT Partners, Ltd., a _____________
Limited Partnership
1111 Lincoln Road Mall,Suite 800
Miami Beach, Florida 33139
Attn: David Garfinkle
With a copy to:
Building Manager
New World Tower
100 N. Biscayne Blvd., Suite 605
Miami, FL 33132
1.2.17 - Guarantors: N/A
1.2.18 - Additional Terms:
1.2.19 PARKING: Tenant shall have the right (but no
obligation to use) ten (10) parking spaces in the
Building parking facilities, at the then standard
rate for parking in such facilities. The rate at the
time of execution of this instrument is $85.00 per
space per month, plus applicable taxes. Tenant may
elect, by notice duly given to Landlord, to reduce
the number of spaces which it is allocated but, if
it does so, Landlord shall not be
_______________/ JK
LANDLORD TENANT
<PAGE>
obligated to increase the number of spaces in the
future.
Tenant Improvements: Tenant shall perform all Tenant
Initial Improvements at its cost subject to the
terms of Article V as to Tenant's obligations
thereunder and as set forth in the
Telecommunications Rider.
1.3 - Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Rules and Regulations
TELECOMMUNICATIONS RIDER
CO-LOCATION RIDER
_______________/ JK
LANDLORD TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I
LANDLORD COVENANTS; PRIMARY LEASE PROVISIONS;
EXHIBITS; PREMISES; USE OF PREMISES; TERM
Section 1.1 COVENANTS OF LANDLORD'S AUTHORITY AND QUIET ENJOYMENT................................1
Section 1.2 PRIMARY LEASE PROVISIONS.............................................................1
Section 1.3 EXHIBITS.............................................................................1
Section 1.4 PREMISES LEASED BY TENANT............................................................1
Section 1.5 USE OF PREMISES......................................................................2
Section 1.6 LEASE TERM...........................................................................2
Section 1.7 RENT COMMENCEMENT DATE...............................................................2
Section 1.8 LEASE YEAR...........................................................................2
Section 1.9 ACCEPTANCE OF PREMISES...............................................................2
ARTICLE II
RENT
Section 2.1 FIXED MINIMUM RENT...................................................................2
Section 2.2 FIXED MINIMUM RENT INCREASE..........................................................3
Section 2.3 LATE PAYMENT ADMINISTRATIVE FEE......................................................4
Section 2.4 ADDITIONAL RENT - DEFINITION.........................................................4
Section 2.5 SALES TAX............................................................................5
ARTICLE III
SERVICES
Section 3.1 SERVICES OF LANDLORD.................................................................5
Section 3.2 SERVICES OF TENANT...................................................................6
Section 3.3 NO EVICTION..........................................................................6
Section 3.4 SECURITY.............................................................................7
Section 3.5 PARKING..............................................................................7
ARTICLE IV
OPERATING EXPENSES AND TAXES
Section 4.1 TENANT'S PARTICIPATION IN OPERATING EXPENSES AND TAXES...............................7
Section 4.2 DEFINITION OF OPERATING EXPENSES.....................................................8
Section 4.3 TENANT'S TAXES.......................................................................8
Section 4.4 TAXES INCLUDED.......................................................................8
Section 4.5 RECEIPT OF NOTICES...................................................................9
ARTICLE V
TENANT'S INITIAL IMPROVEMENTS
Section 5.1 CONSTRUCTION PLANS...................................................................9
Section 5.2 PLANS REVIEW........................................................................10
Section 5.3 PAYMENT.............................................................................11
Section 5.4 TENANT DELAY........................................................................11
Section 5.5 SUBSTANTIAL COMPLETION..............................................................12
Section 5.6 EARLY OCCUPANCY.....................................................................13
Section 5.7 REVISIONS...........................................................................13
Section 5.8 COMPLETION DUE DILIGENCE............................................................13
_______________/ JK
LANDLORD TENANT
<PAGE>
ARTICLE VI
ADDITIONS, ALTERATIONS, REPLACEMENTS, AND TRADE FIXTURES
Section 6.1 BY LANDLORD.........................................................................14
Section 6.2 BY TENANT...........................................................................15
Section 6.3 CONSTRUCTION INSURANCE AND INDEMNITY................................................15
Section 6.4 MECHANIC'S LIENS AND ADDITIONAL CONSTRUCTION........................................16
Section 6.5 TRADE FIXTURES......................................................................17
Section 6.6 RIGHT OF ENTRY......................................................................18
ARTICLE VII
INSURANCE AND INDEMNITY
Section 7.1 TENANT'S INSURANCE..................................................................18
Section 7.2 EXTRA HAZARD INSURANCE PREMIUMS.....................................................19
Section 7.3 INDEMNITY...........................................................................20
ARTICLE VIII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 8.1 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY.....................................20
Section 8.2 CONDEMNATION........................................................................21
ARTICLE IX
DEFAULT, REMEDIES
Section 9.1 DEFAULT.............................................................................22
Section 9.2 REMEDIES............................................................................23
Section 9.3 TERMINATION.........................................................................23
Section 9.4 NO REINSTATEMENT AFTER TERMINATION..................................................24
Section 9.5 RETENTION OF SUMS AFTER TERMINATION.................................................24
Section 9.6 RE-ENTRY............................................................................24
Section 9.7 SUMS COLLECTED UPON RELETTING.......................................................25
Section 9.8 NO EFFECT ON SUIT...................................................................25
Section 9.9 WAIVER OF RIGHTS OF REDEMPTION......................................................26
Section 9.10 USE OF WORD "RE-ENTRY"..............................................................26
Section 9.11 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS..........................................26
Section 9.12 LANDLORD'S EXPENSES.................................................................26
ARTICLE X
SECURITY
Section 10.1 SECURITY DEPOSIT....................................................................27
Section 10.2 PERSONAL PROPERTY...................................................................28
ARTICLE XI
ADDITIONAL TENANT AGREEMENTS
Section 11.1 MORTGAGE FINANCING AND SUBORDINATION................................................28
Section 11.2 ASSIGNMENT OR SUBLETTING............................................................29
Section 11.3 TENANT'S NOTICE TO LANDLORD OF DEFAULT..............................................30
Section 11.4 SHORT FORM LEASE....................................................................30
Section 11.5 SURRENDER OF PREMISES AND HOLDING OVER..............................................30
Section 11.6 ESTOPPEL CERTIFICATE................................................................31
Section 11.7 DELAY OF POSSESSION.................................................................31
_______________/ JK
LANDLORD TENANT
<PAGE>
Section 11.8 COMPLIANCE WITH LAW.................................................................31
Section 11.9 RULES AND REGULATIONS...............................................................33
Section 11.10 ABANDONMENT.........................................................................33
Section 11.11 LANDLORD'S LIEN.....................................................................33
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 NOTICES.............................................................................34
Section 12.2 ENTIRE AND BINDING AGREEMENT........................................................35
Section 12.3 PROVISIONS SEVERABLE................................................................35
Section 12.4 CAPTIONS............................................................................35
Section 12.5 RELATIONSHIP OF THE PARTIES.........................................................35
Section 12.6 ACCORD AND SATISFACTION.............................................................35
Section 12.7 BROKER'S COMMISSION.................................................................35
Section 12.8 CORPORATE AND PARTNERSHIP STATUS....................................................36
Section 12.9 MISCELLANEOUS.......................................................................36
Section 12.10 FINANCIAL STATEMENTS................................................................37
Section 12.11 RELOCATION..........................................................................38
Section 12.12 NON-WAIVER PROVISIONS...............................................................38
Section 12.13 RADON GAS...........................................................................38
</TABLE>
_______________/ JK
LANDLORD TENANT
<PAGE>
OFFICE LEASE
"NEW WORLD TOWER" - 100 N. BISCAYNE BOULEVARD
THIS LEASE ("Lease") is made and entered into as of this ___________
day of _______________________________, 19__ by and between Landlord and Tenant.
Landlord demises and rents to Tenant, and Tenant leases from
Landlord, the Premises now existing in Landlord's Building, upon the terms,
covenants and conditions contained herein.
ARTICLE I
LANDLORD COVENANTS; PRIMARY LEASE PROVISIONS;
EXHIBITS; PREMISES; USE OF PREMISES; TERM
Section 1.1 COVENANTS OF LANDLORD'S AUTHORITY AND QUIET ENJOYMENT.
Landlord represents and covenants that (a) prior to commencement of
the Lease Term, it will have either good title to or a valid leasehold
interest in the land and Building of which the Premises form a part, and (b)
upon performing all of its obligations under this Lease, Tenant shall
peacefully and quietly have, hold and enjoy the Premises for the Lease Term.
Section 1.2 PRIMARY LEASE PROVISIONS.
The provisions and terms of Sections 1.2.1 through 1.2.18 of the
Basic Term Sheet are incorporated in this Lease as a part of this Section
1.2, and are subject to the additional provisions of this Lease.
Section 1.3 EXHIBITS.
The exhibits, riders and attachments described on the Basic Term
Sheet are incorporated in and made part of this Lease as part of this Section
1.3.
Section 1.4 PREMISES LEASED BY TENANT.
1.4.1 The Premises are leased by Tenant from Landlord. The
approximate boundaries and location of the Premises are outlined on the Site
Plan diagram of the Building (Exhibit "B"), which sets forth the general
layout of the Building but which shall not be deemed to be a warranty,
representation, or agreement upon the part of the Landlord that the Building
and layout will be exactly as indicated on said diagram.
1.4.2 The Premises, for the purpose of this Lease, shall
extend to the exterior faces of all walls or to the building line where there
is no wall, or to the center line of those walls separating the Premises from
other premises in the Building, together with the appurtenances specifically
granted in this Lease, but reserving and excepting to Landlord the use of the
exterior walls and the roof and the right to install, maintain, use, repair
and replace pipes, ducts, conduits, and wires leading through the Premises in
locations which will not materially interfere with Tenant's use thereof, or
which serve other parts of the Building.
_______________/ JK
LANDLORD TENANT
<PAGE>
Section 1.5 USE OF PREMISES.
The Premises shall be used and occupied only for the Use specified
in the Basic Term Sheet, under Tenant's Trade Name specified in the Basic
Term Sheet, and for no other purpose or purposes without Landlord's prior
written consent. Tenant shall, at its own risk and expense, obtain all
governmental licenses and permits necessary for such use.
Section 1.6 LEASE TERM.
The Lease Commencement Date, the Lease Term and the Lease
Termination Date shall be for the period specified in the Basic Term Sheet,
unless sooner terminated or extended as provided in this Lease.
Section 1.7 RENT COMMENCEMENT DATE.
Tenant shall commence payment of Rent ON THE Rent Commencement Date.
If the Rent Commencement Date falls on a day other than the first day of a
calendar month, the Fixed Minimum Rent for such month shall be prorated on a
per diem basis, calculated on the basis of a thirty (30) day month.
Section 1.8 LEASE YEAR.
For purpose of this Lease, the term "Lease Year" is defined to mean
a calendar year (beginning January 1 and extending through December 31 of any
given year). Any portion of a year which is less than a Lease Year, that is,
from the Lease Commencement Date through the next December 31, and from the
last January 1 falling within the Lease Term through the last day of the
Lease Term, shall be defined as a Partial Lease Year.
Section 1.9 ACCEPTANCE OF PREMISES.
Tenant acknowledges that it has fully inspected and accepts the
Premises in their present condition and "as is", except as indicated in
Article V and in the Basic Term Sheet if applicable, and that the same are
suitable for the use specified in the Basic Term Sheet.
ARTICLE II
RENT
Section 2.1 FIXED MINIMUM RENT.
2.1.1 The total Fixed Minimum Rent for the Lease Term as
specified in the Basic Term Sheet shall be payable by Tenant as specified in
the Basic Term Sheet.
2.1.2 The phrase "Fixed Minimum Rent" shall be the Fixed
Minimum Rent specified above, payable monthly in advance on the first day of
each month, without prior demand therefore and without any deduction or
setoff whatsoever. In addition, Tenant covenants and agrees to pay Landlord
all applicable sales or other taxes which may be imposed on the above
specified rents or payments hereinafter provided for to be received by
Landlord when each such payment is made.
_______________/ JK
LANDLORD TENANT
<PAGE>
Section 2.2 INTENTIONALLY DELETED
Section 2.3 LATE PAYMENT ADMINISTRATIVE FEE.
If a Rent payment is not received within five (5) days after its due
date, administrative fees and late charges of $50.00, plus an ongoing charge
of 18% (annual rate, which shall accrue on the unpaid Rent including
Additional Rent) shall become immediately due and payable from Tenant to
Landlord, without notice or demand. This provision for administrative fees
and late charges is not, and shall not be deemed, a grace period. In the
event any check, bank draft or negotiable instrument given for any payment
under this Lease shall be dishonored at any time for any reason whatsoever
not attributable to Landlord, Landlord shall be entitled, in addition to any
other remedy that may be available, to an administrative charge of Two
Hundred Dollars ($200.00). Such administrative fees and late charges are
neither penalties nor interest charges, but liquidated damages to defray
administrative, collection, and related expenses due to Tenant's invalid
payment or to Tenant's failure to make such Rent payment when due. An
additional administrative fee and late charge shall become immediately due
and payable on the first day of each month for which all or a portion of a
Rent payment (together with any administrative fee and late charge) remains
unpaid. Landlord, at its option, may deduct any such charge from any Security
Deposit held by Landlord and, in such event, Tenant shall immediately deposit
a like amount with Landlord in accordance with the terms of Section 10.1. All
sums which Tenant shall be obligated to pay to Landlord from time to time
pursuant to this Lease shall be deemed part of the Rent. In the event of the
nonpayment by Tenant of such sums, Landlord shall have the same rights and
remedies by reason of such nonpayment as if Tenant had failed to pay any Rent.
Section 2.4 ADDITIONAL RENT - DEFINITION.
In addition to the foregoing Fixed Minimum Rent and Fixed Minimum
Rent Increase, all payments to be made under this Lease by Tenant to Landlord
shall be deemed to be and shall become Additional Rent hereunder and,
together with Fixed Minimum Rent, shall be included in the term "Rent"
whenever such term is used in this Lease. Unless another time is expressly
provided for the payment thereof, any Additional Rent shall be due and
payable on demand or together with the next succeeding installment of Fixed
Minimum Rent, whichever shall first occur, together with all applicable State
taxes and interest thereon at the then prevailing legal rate, and Landlord
shall have the same remedies for failure to pay the same as for non-payment
of Fixed Minimum Rent. Landlord, at its election, shall have the right to pay
or do any act which requires the expenditure of any sums of money by reason
of the failure or neglect of Tenant to perform any of the provisions of this
Lease, and in the event Landlord elects to pay such sums or do such acts
requiring the expenditure of monies, all such sums so paid by Landlord,
together with interest thereon, shall be deemed to be Additional Rent and
payable as such by Tenant to Landlord upon demand.
Section 2.5 SALES TAX.
Together with each payment of Rent or other sum on which such tax may
be due, Tenant shall pay to Landlord a sum equal to
_______________/ JK
LANDLORD TENANT
<PAGE>
any applicable sales tax, tax on rents, and any other charges, taxes, and/or
impositions now in existence or subsequently imposed based upon the privilege
of renting the Premises or upon the amount of rent collected. Tenant's
liability for such taxes and/or impositions shall be payable whether assessed
at the time the Rent payment is made or retroactively, and shall survive the
termination or expiration of this Lease.
ARTICLE III
SERVICES
Section 3.1 SERVICES OF LANDLORD.
3.1.1 Landlord shall maintain the public and common areas
of the Building, including lobbies, stairs, elevators, corridors and
restrooms, the windows in the Building, the mechanical, plumbing and
electrical equipment serving the Building, and the structure itself in
reasonably good order and condition except for damage occasioned by the act
of Tenant, which damage shall be repaired by Landlord at Tenant's expense.
3.1.2 Landlord shall furnish the Premises with (a)
electricity for lighting and the operation of standard office machines, (b)
elevator service, if applicable (c) lighting replacement (for building
standard lights), (d) standard restroom supplies, and (e) window washing with
reasonable frequency, during the times and in the manner that such services
are customarily furnished in comparable office buildings in the area.
Landlord shall not be in default hereunder or be liable for any damages
directly or indirectly resulting from, nor shall the rental herein reserved
be abated by reason of (i) the installation, use or interruption of use of
any equipment in connection with the furnishing of any of the foregoing
services, (ii) failure to furnish or delay in furnishing any such services
when such failure or delay is caused by accident or any condition beyond the
reasonable control of Landlord or by the making of necessary repairs or
improvements to the Premises or to the Building, or other cause other than
Landlord's willful malfeasance, or (iii) the limitation, curtailment,
rationing or restrictions on use of water, electricity, gas or any other form
of energy serving the Premises or the Building. Landlord shall use reasonable
efforts diligently to remedy any interruption in the furnishing of such
services. Notwithstanding anything herein contained to the contrary, Landlord
agrees to give no less than twenty four (24) hours advance notice to Tenant
of any planned interruption of services, except in the case of an emergency
interruption, as to which Landlord shall have no such obligation.
3.1.3 Whenever heat generating equipment or lighting other
than Building standard lights are used in the Premises by Tenant which affect
the temperature otherwise maintained by the air conditioning system, Landlord
shall have the right, after notice to Tenant, to install supplementary air
conditioning facilities in the Premises or otherwise modify the ventilating
and air conditioning systems serving the Premises, and the cost of such
facilities and modifications shall be borne by Tenant. Tenant shall also pay,
as Additional Rent, the cost of providing all cooling and heat energy to the
Premises in excess of that required for normal office use or during hours
requested by Tenant when air conditioning or heat is not
_______________/ JK
LANDLORD TENANT
<PAGE>
otherwise furnished by Landlord. If Tenant installs lighting requiring power
in excess of that required for normal office use in the Building, or if
Tenant installs equipment requiring power in excess of that required for
normal desk-top office equipment or normal copying equipment, Tenant shall
pay for the cost of such excess power as Additional Rent, together with the
cost of installing any additional risers or other facilities that may be
necessary to furnish such excess power to the Premises.
Section 3.2 SERVICES OF TENANT.
Tenant shall, at Tenant's own expense, keep the Premises in good
repair and tenantable condition during the Term, except only for reasonable
wear and tear. Tenant shall, at Tenant's expense but under the direction of
Landlord, promptly repair (and make replacements where necessary) any injury
or damage to the Building and the property of which it is a part
("Property"), including, but not limited to, any and all broken glass, caused
by Tenant or Tenant's officers, personnel, agents, employees, servants,
licensees, invitees, guests, patrons, or customers. Tenant shall shampoo and
replace carpeting, wash walls and ceilings, and otherwise maintain the
appearance of the Premises and contents thereof at Tenant's expense. Tenant
shall install, operate and maintain at Tenant's sole cost and expense its own
Air Conditioning system and shall pay for the installation of an electrical
submeter so that the cost of all electricity to the premise is paid for by
Tenant.
Section 3.3 NO EVICTION.
The services described in this Article III shall be provided as long
as this Lease is in full force and effect, no Event of Default by Tenant
exists, and no event has occurred which but for notice and/or the passage of
time would constitute an Event of Default by Tenant, subject to interruption
caused by unavoidable delay, force majeure or acts of God, and conditions and
causes beyond the control of Landlord. Furthermore, Landlord reserves the
right to stop the service of the air-cooling, elevator, electrical, plumbing
or other mechanical systems or facilities in the Building when necessary, by
reason of accident or emergency, or for repairs, additions, alterations,
replacements, decorations or improvements desirable or necessary to be made
in the judgment of Landlord, until such repairs, alterations, replacements or
improvements shall have been completed. Landlord shall undertake to
diligently commence and work toward completion of all necessary repairs. All
discretionary repairs shall be done in a manner and at times, whenever
reasonably appropriate, so as not to unnecessarily interfere with Tenant's
Use (although Landlord need not pay additional costs in order to make such
arrangements). Landlord shall have no responsibility or liability for
interruption, curtailment or failure to supply cooled or outside air, heat,
elevator, plumbing or electricity when prevented by exercising its right to
stop service or by Unavoidable Delay or by any cause whatsoever beyond
Landlord's control or by human occupancy factors, or by failure of
independent contractors to perform, or by Legal Requirements, or by mandatory
energy conservation, or if Landlord elects voluntarily to cooperate in energy
conservation at the request of any Legal Authority. The exercise of such
right or such failure by Landlord shall not constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any
_______________/ JK
LANDLORD TENANT
<PAGE>
compensation or to any abatement or diminution of Base Rent or Additional
Rent, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reason of inconvenience
or annoyance to Tenant, or injury to or interruption of Tenant's business, or
otherwise.
Section 3.4 SECURITY.
Tenant acknowledges that Landlord shall not and does not have any
responsibility for the security of Tenant's officers, personnel, agents,
employees, servants, licensees, invitees, guests, patrons, customers, and all
others who come on or about the Property related to Tenant or Tenant's Use.
Section 3.5 PARKING.
If any parking is made available to Tenant by Landlord (but Landlord
does not represent that such parking shall ever be made available), Landlord
shall not be liable for any damage of any nature whatsoever to, or any theft
of, automobiles or other vehicles or the contents of them, while in or about
such parking areas.
ARTICLE IV
OPERATING EXPENSES AND TAXES
Section 4.1 TENANT'S PARTICIPATION IN OPERATING EXPENSES AND
TAXES.
4.1.1 Commencing on the First Adjustment Payment Date,
Tenant shall, on the first day of each month in advance pay to Landlord pro
rata monthly installments on account of the amount reasonably projected by
Landlord for Tenant's Share of increases in Operating Expenses and for
Tenant's Share of increases in Taxes over the Base Operating Year and over
the Base Tax Year, respectively, based upon the most recent data available to
Landlord, from time to time, for Operating Expenses and for Taxes. Landlord
shall submit to Tenant statement(s) showing the actual amounts which should
have been paid by Tenant with respect to increases in Operating Expenses and
with respect to increases in Taxes for the past calendar year, the amount of
those expenses actually paid during that year by Tenant and the amount of the
resulting balance due on either or both of those expenses, or overpayment of
either of both of them, as the case may be. Tenant may object to such
statements if, and only if, Tenant, within thirty (30) days of receipt by
Tenant of such statement, sends a written notice to Landlord objecting to
such statement and specifying the respects in which such statement is claimed
to be incorrect. If such notice is sent, the parties recognize, as to the
Operating Expenses, the unavailability of Landlord's books and records
because of the confidential nature thereof and hence agree that either party
may refer the decision of the issues raised to a reputable independent firm
of certified public accountants selected by Landlord and reasonably
acceptable to Tenant, and the decision of such accountants shall be
conclusively binding upon the parties. The fees and expenses involved in such
decision shall be borne by Tenant unless Landlord's charges are found to be
in error by more than five percent (5%). Notwithstanding anything to the
contrary in this paragraph, if the amount in dispute is less than $1000 for a
calendar year, no third parties shall be utilized, by Landlord or
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Tenant, whose cost shall be subject to reimbursement by the other party. Any
balance shown to be due pursuant to said statement shall be paid by Tenant to
Landlord within thirty (30) days following Tenant's receipt of the statement
and any overpayment shall be immediately credited against Tenant's obligation
to pay expected Additional Rent in connection with anticipated increases in
Operating Expenses or anticipated increases in Taxes or, if by reason of any
termination of this Lease no such future obligations exist, shall be refunded
to Tenant. Anything in this Lease to the contrary notwithstanding, Tenant
shall not delay or withhold payment of any balance shown to be due pursuant
to a statement rendered by Landlord to Tenant, pursuant to the terms of this
Lease, because of any objection which Tenant may raise with respect to the
statement. If at the time of the resolution of said objection the Term has
expired, Landlord shall immediately refund to Tenant any overpayment found to
be owing to Tenant.
4.1.2 If this Lease expires during a Partial Lease Year,
Tenant shall be responsible for its estimated pro rata share of Operating
Expenses and of Taxes for the Partial Lease Year. Tenant shall remit full
payment to Landlord within seven (7) days of such bill. If Tenant fails to
remit such full payment to Landlord, Landlord in its sole discretion may
deduct the amount due from Tenant's Security Deposit and be entitled to all
other rights and remedies under this Lease for Tenant's default.
Section 4.2 DEFINITION OF OPERATING EXPENSES.
The term "Operating Expenses" shall mean (a) all costs of
management, operation and maintenance of the Building, including, without
limitation, wages, salaries and payroll burden of employees, janitorial,
maintenance, guard and other services, Building management office rent or
rental value, power, fuel, water, waste disposal, landscaping care, premiums
for liability, fire, hazard and other property related insurance, parking
area care and management, advertising and promotion, fees for energy saving
programs, administrative costs, including management fee, and (b) the cost
(amortized over such reasonable period as landlord shall determine) of any
capital improvements made to the Building by Landlord after the date of this
Lease that are intended to reduce the Operating Expenses or that are required
under any governmental law or regulation; provided, however, that Operating
Expenses shall not include real property taxes or assessments (which are
included in "Taxes"), depreciation on the Building, costs of tenant
improvements, real estate brokers' commissions, interest and capital items
other than those referred to in clause (b) above.
Section 4.3 TENANT'S TAXES.
Tenant covenants and agrees to pay promptly when due all taxes
imposed upon its business operations and its personal property situated in
the Premises.
Section 4.4 TAXES INCLUDED.
Should any governmental taxing authority, acting under any present or
future law, ordinance, or regulation, levy, assess or impose a tax, excise
and/or assessment (other than income or franchise tax) upon or against or in any
way related to the land
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and buildings comprising the Building, either by way of substitution or in
addition to any existing tax on land and building otherwise, Tenant shall be
responsible for and shall pay to Landlord its Proportionate Share as set
forth above of such tax, excise and/or assessment.
Section 4.5 RECEIPT OF NOTICES.
Failure of Landlord to furnish in a timely manner a statement of
actual increases in Operating Expenses or Taxes or to give notice of an
adjustment to rent under this Article IV shall not prejudice or act as a
waiver of Landlord's right to furnish such statement or to give such notice
at a subsequent time or to collect any adjustment to or recalculation of the
Additional Rent for any preceding period. Tenant recognizes that Landlord's
statements showing the estimate of increases in Operating Expenses and Taxes
for any calendar year may be rendered at the end of the previous calendar
year or the beginning of such calendar year, or later. If Landlord's statement
is rendered subsequent to the beginning of a calendar year, Tenant shall
continue to pay the increase in the Operating Expenses and in the Taxes for
the prior calendar year and, should a deficiency result by virtue of an
increase in Landlord's estimate of the Operating Expenses or Taxes for the
current year, Tenant shall pay the amount of such deficiency, if any, in
full, in addition to the next monthly rent payment.
ARTICLE V
TENANT'S INITIAL IMPROVEMENTS
Section 4.6 CONSTRUCTION PLANS.
Tenant shall complete or cause the completion of Tenant's Initial
Improvements as shown on the Final Plans and as more fully described in this
Section. At Tenant's sole cost and expense, Tenant shall submit to Landlord
its complete and detailed architectural, structural, mechanical and
engineering plans and specifications prepared by an architect or engineer,
showing Tenant's Initial Improvements ("Construction Plans") no later than
the Construction Plans Submission Date (thirty (30) days after the execution
of this lease). If applicable, Tenant's Construction Plans shall include all
information necessary to reflect Tenant's requirements for the installation
of any supplemental air conditioning system and ductwork, heating,
electrical, plumbing and other mechanical systems and all work necessary to
connect any special or non-standard facilities to the Building's base
mechanical, electrical and structural systems. Tenant's submission shall
include not less than one (1) set of sepias and five (5) sets of black and
white prints. Tenant's Construction Plans shall include, but not be limited
to, indication or identification of the following:
4.6.1 locations and structural design of all floor
area requiring live load capacities in excess of 75 pounds per square foot;
4.6.2 the density of occupancy in large work areas;
4.6.3 the location of any food service areas or
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vending equipment rooms;
4.6.4 areas requiring 24-hour air conditioning;
4.6.5 any partitions that are to extend from floor to
underside of structural slab above;
4.6.6 location of rooms for telephone equipment;
4.6.7 locations and types of plumbing, if any,
required for toilets (other than core facilities), sinks, drinking fountains,
etc.;
4.6.8 light switching of offices, conference rooms, etc.;
4.6.9 layouts for specially installed equipment,
including computers, size and capacity of mechanical and electrical services
required and heat projection of equipment;
4.6.10 dimensioned location of: (a) electrical
receptacles (120 volts), including receptacles for wall clocks, and telephone
outlets and their respective locations (wall or floor), (b) electrical
receptacles for use in the operation of Tenant's business equipment which
requires 208 volts or separate electrical circuits, (c) electronic
calculating and CRT systems, etc., (d) special audiovisual requirements, and
(e) other special electrical requirements;
4.6.11 special fire protection equipment and raised
flooring;
4.6.12 reflected ceiling plan;
4.6.13 information concerning air conditioning loads,
including, but not limited to, air volume amounts at all supply vents;
4.6.14 materials, colors and designs of wall coverings
and finishes;
4.6.15 painting and decorative treatment required to
complete all construction;
4.6.16 swing of each door, and schedule for doors
(including dimensions for undercutting to clean carpeting) and frames and
hardware;
4.6.17 modifications of the front door and surrounding
area, if any, as may be required for handicapped use; and
4.6.18 all other information reasonably necessary to
make the work complete and in all respects ready for operation.
Section 4.7 PLANS REVIEW
Landlord or Landlord's consultant shall respond to Tenant's request
for approval of Tenant's Construction Plans within ten
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(10) business days of their submission, prepared in accordance with the terms
of this Lease. In the event Landlord or Landlord's Consultant shall
disapprove of all or a portion of Tenant's Construction Plans, it shall set
forth its reasons therefor in reasonable detail, in which event Tenant shall
revise its Construction Plans and resubmit same to Landlord within five (5)
business days thereafter, time being of the essence. Upon Landlord's written
final approval (notice of such approval, or of disapproval, shall be given by
Landlord within five (5) business days of receipt of the Construction Plans),
Tenant may proceed with Tenant's Initial Improvements, which shall be
performed in accordance with the provisions of this Article V. Change orders
by Tenant shall be similarly subject to Landlord's review and approval or
disapproval, and notice of either shall be given Tenant within five (5)
business days of Landlord's receipt of them. Neither the recommendation or
designation of an architect, any general contractor, any subcontractor or any
materialman as provided for is Section 5.3 nor the approval of the
Construction Plans by Landlord shall be deemed to create any liability on the
part of Landlord with respect to the design, functionality and/or
specifications set forth in the Final Plans.
Section 4.8 PAYMENT
Tenant shall pay for the Construction Plans, Final Plans, and all
work depicted on them. Landlord's Contribution shall only be in the form set
forth in Section 1.2.13 above and Landlord shall not pay for any work done
directly. Tenant shall be responsible for and pay all other costs. Promptly
following Landlord's approval of the Final Plans, Landlord shall cause the
Final Plans to be submitted for bid. Landlord may assist Tenant in obtaining
bids by giving Tenant a list of general contractors, subcontractors,
architects and materialmen, for Tenant to use in soliciting bids, which list
need not be used by Tenant. Promptly following Tenant's receipt of the bids,
Tenant shall submit to Landlord the estimate of the cost of Tenant's Initial
Improvements which exceeds Landlord's Contribution ("Tenant's Extra Cost").
Tenant shall either approve or disapprove the estimate of Tenant's Extra Cost
within three (3) business days after submission by Landlord. If Tenant shall
disapprove all or a portion of the estimate of the Tenant's Extra Cost,
Tenant shall revise the Construction Plans to the extent required and
resubmit same to Landlord for approval. Landlord shall within three (3)
business days resubmit the revised Construction Plans to the applicable
subcontractors for revised bids. This process shall continue until Tenant
approves Tenant's Extra Cost estimate. Tenant's approval of Tenant's Extra
Cost shall be evidenced by the execution by Tenant of written contracts with
the architect and general contractor, or if there is no general contractor,
with each contractor, subcontractor and materialman, within ten (10) days
thereafter. Tenant agrees to pay the charges rendered by its architect,
general contractor, subcontractors and materialmen stricly in the manner set
forth in each such contract entered into between Tenant and each such party
and as provided by law.
Section 4.9 TENANT DELAY
Landlord shall not be responsible or liable for Tenant Delay. Tenant
Delay includes without limitation any of the
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following:
4.9.1 Tenant's failure to furnish plans, drawings, and
specifications in accordance with and at the times required pursuant to this
Article V; or
4.9.2 any delays resulting from the disapproval by
Landlord or Landlord's consultant of all or a portion of Tenant's revised
plans and specifications as resubmitted after initial submission; or
4.9.3 any delays resulting from Tenant's disapproval
of the cost of Tenant's Extra Cost, which delay shall be deemed to commence
upon the date of Tenant's disapproval of the cost of Tenant's Extra Cost and
end on the date of Tenant's final approval of such cost; or
4.9.4 Tenant's request for materials, finishes or
installations which are not readily available at the time Landlord is ready
to install same; or
4.9.5 Tenant's changes in drawings, plans,
specifications, or construction submitted to Landlord including at any time
subsequent to Landlord's approval of the Final Plans, including any Revisions
which Tenant submits to Landlord; or
4.9.6 the performance of work by a person, firm or
corporation employed by Tenant and delays in the completion of the said work
by said person, firm or corporation; or
4.9.7 Tenant's failure to pay timely for the Tenant's
Extra Cost.
Section 4.10 SUBSTANTIAL COMPLETION.
If the anticipated Substantial Completion Date, as more particularly
described in this Article V, shall be delayed by reason of Tenant Delay, the
Premises shall be deemed substantially completed for the purposes of the Rent
Commencement Date as of the date that the Premises would have been
substantially completed but for any such Tenant Delay as determined by
Landlord in its reasonable discretion. Tenant shall pay for any additional
costs in completing Tenant's Initial Improvements resulting from Tenant
Delay. Any such sums shall be in addition to any sums payable pursuant to
Section 5.3 and shall be paid to Landlord within ten (10) days after Tenant's
architect, general contractor, subcontractors or materialmen submits an
invoice to Tenant therefor. If such costs, or any of the costs of Tenant
Improvements to be paid by Tenant under thi8s Article V are not paid by
Tenant when due, Landlord shall have the right, but not the obligation, to
pay all or part of such costs, and in that event, such costs shall be
collectible from Tenant in the same manner as Additional Rent whether or not
the Term shall have commenced, and if Tenant defaults in the payment of such
costs, such default shall be deemed a default under Article IX of this Lease
and Landlord shall have all of the remedies therefore set forth in the Lease.
Section 4.11 EARLY OCCUPANCY
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Except for the purposes of administering and managing the build out
of Tenant's Initial Improvements, neither Tenant nor its agents, employees,
invitees or independent contractors shall enter the Premises during the
performance of Tenant's Initial Improvements. Tenant and its agents,
employees and independent contractors shall have unimpeded access to the
Premises for the purposes of administering and managing the build out of
Tenant's Initial improvements. Upon the granting of consent by Landlord,
which shall not be unreasonably withheld, Tenant or its agents may enter the
Premises prior to the completion of Tenant's Initial Improvements to perform
such decorative or other Tenant finishing work as it may desire provided that
such work in no way interferes with the performance of Tenant's Initial
Improvements and such entry shall be deemed under all terms covenants and
conditions of this Lease, except the covenant to pay Base Rent. Tenant shall
indemnify and save Landlord harmless from and against any and all loss,
liability, damage, cost and expense, including without limitation, reasonable
attorneys' fees and disbursements, claimed or actually arising from, growing
out of or related to (a) any act, neglect or failure to act of Tenant or
anyone entering the Premises or Building with Tenant's permission, (b) the
performance of such Tenant's finish work, or (c) any other reason whatsoever
arising out of said entry upon the Premises or Building. The provisions of
this Section 5.6 shall survive the termination of this Lease.
Section 4.12 REVISIONS
Tenant shall have the right to make revisions to the Final Plans
("Revisions"). All Revisions shall be subject to Landlord's prior written
approval, which shall not be unreasonably withheld provided the Revisions are
non-structural in nature. Landlord shall either approve or disapprove the
Revisions within five (5) business days after submission thereof by Tenant.
Without limiting the generality of the foregoing, no Revision will be
approved unless (a) all changes to and modifications from Tenant's Final
Plans are circled or highlighted as per standard industry practices and (b)
said Revisions conform with the requirements of Article V. Tenant shall
notify Landlord in writing of the cost of the Revisions, and any Tenant Delay
that the performance of the same may entail. If Landlord agrees with such
revisions, Landlord shall acknowledge Landlord's approval in writing within
five (5) business days after Tenant's notice thereof. If Landlord fails to
approve of such revisions within five (5) business days, Tenant shall not
make such Revisions. The cost of any Revisions shall be borne solely by
Tenant.
Section 4.13 COMPLETION DUE DILIGENCE
Landlord shall, subject to Tenant Delays and any other cause beyond
Landlord's reasonable control, use due diligence to complete Tenant's Initial
Improvements as soon as may be practicable. Tenant shall notify Landlord of
the date of the substantial completion of Tenant's' Initial Improvements
("Substantial Completion Date") at least five (5) days prior thereto. The
phrase "substantial completion" shall mean that, Tenant's Initial
Improvements shall have been completed in accordance with the Final Plans and
all mechanical systems
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serving or affecting the Premises shall then be in working order, and Tenant
shall have delivered to Landlord a copy of the applicable Certificate of
Occupancy or Completion, as the case may be. Tenant shall have no right to
enter the Premises for the purpose of conducting its business therefrom until
Tenant has complied with the above requirements.
ARTICLE V
ADDITIONS, ALTERATIONS, REPLACEMENTS, AND TRADE FIXTURES
Section 5.1 BY LANDLORD.
Landlord reserves the right at any time to make alterations or
additions to the Building in which the Premises are contained and to build
additional stories thereon. Landlord also reserves the right to construct
other buildings or improvements in the Building or Common Areas from time to
time and to make alterations thereof or additions thereto and to build
additional office space on any such building or buildings so constructed.
Section 5.2 BY TENANT.
5.2.1 Upon receipt of Landlord's prior written approval,
Tenant may from time to time, at its own expense, alter, renovate or improve
the interior of the Premises provided the same be performed in a good and
workmanlike manner, in accordance with accepted building practices and so as
not to weaken or impair the strength or lessen the value of the Building in
which the Premises are located. No changes, alterations or improvements
affecting the exterior of the Premises or the Building or the Building
systems shall be made by Tenant without the prior written approval of
Landlord, which may be unreasonably withheld. Any work done by Tenant under
the provisions of this Section shall not interfere with the use by the other
tenants of their premises in the Building. Tenant also agrees to pay 100% of
any increase in the Real Estate Taxes or Landlord's Personal Property Taxes
resulting from such improvements by or for Tenant.
5.2.2 All alterations, decorations, additions and
improvements made by Tenant, or made by Landlord on Tenant's behalf as
provided in this Lease, shall remain the property of Tenant for the Lease
Term or any extension or renewal thereof, but they shall not be removed from
the Premises without the prior written consent of Landlord.
5.2.3 Upon obtaining the prior written consent of Landlord,
Tenant shall remove such alterations, decorations, additions and improvements
and restore the Premises as provided in Section 6.5, and if Tenant fails to
do so and moves from the Premises, all such alterations, decorations,
additions and improvements shall become the property of Landlord, who may
charge Tenant for storing or disposing of any or all of such property.
Section 5.3 CONSTRUCTION INSURANCE AND INDEMNITY.
5.3.1 Tenant shall indemnify and hold Landlord harmless
from any and all claims for loss or damages or otherwise based upon or in any
manner growing out of any alterations or
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construction undertaken by Tenant under the Lease Term, including all costs,
damages, expenses, court costs and attorneys' fees incurred in or resulting
from claims made by any person or persons, by other tenants of premises in
the Building, their subtenants, agents, employees, customers and invitees.
5.3.2 Before undertaking any alterations or construction,
Tenant shall obtain and pay for a public liability policy insuring Landlord
and Tenant against any liability which may arise on account of such proposed
alterations and construction work in limits of not less than $1,000,000.00
for any one person, $1,000,000.00 for more than one person in any one
accident and $200,000.00 for property damage; and a copy of such pre paid
policy or a certificate from the insurer of such insurance on Form ACORD 27,
shall be delivered to Landlord prior to the commencement of such proposed
work. Tenant shall also maintain at all times fire insurance with extended
coverage in the name of Landlord and Tenant as their interests may appear in
an amount adequate to cover the cost of replacement of all alterations,
decorations, additions or improvements in and to the Premises and all trade
fixtures therein, in the event of fire or extended coverage loss. Tenant
shall deliver to Landlord copies of such pre paid fire insurance policies or
a certificate from the insurer of such insurance on Form ACORD 27, which
shall contain a clause requiring the insurer to give Landlord ten (10) days'
notice of cancellation of such policies.
Section 5.4 MECHANIC'S LIENS AND ADDITIONAL CONSTRUCTION.
5.4.1 If by reason of any alteration, repair, labor
performed or materials furnished to the Premises for or on behalf of Tenant
any mechanic's or other lien shall be filed, claimed, perfected or otherwise
established or as provided by law against the Premises, Tenant shall
discharge or remove the lien by bonding or otherwise, within fifteen (15)
days after Tenant receives notice of the filing of same. Notwithstanding any
provision of this Lease seemingly to the contrary, Tenant shall never, under
any circumstances, have the power to subject the interest of Landlord in the
Premises or the Building to any mechanics' or materialmen's liens or liens of
any kind, nor shall any provision contained in this Lease ever be construed
as empowering Tenant to encumber or cause Landlord to encumber the title or
interest of Landlord in the Premises.
5.4.2 Tenant hereby expressly acknowledges and agrees that,
except as indicated under Article V, no alterations, additions, repairs or
improvements to the Premises of any kind are required or contemplated to be
performed as a prerequisite to the execution of this Lease and the
effectiveness thereof according to its terms or in order to place the
Premises in a condition necessary for use of the Premises for the purposes as
set forth in this Lease, that the Premises are presently complete and usable
for the purposes as set forth in this Lease and that this Lease is in no way
conditioned on Tenant making or being able to make alterations, additions,
repairs or improvements to the Premises, unless otherwise specified in this
Lease, notwithstanding the fact that alterations, repairs, additions or
improvements may be made by Tenant, for Tenant's convenience or for Tenant's
purposes, subject to Landlord's prior written consent, at Tenant's sole cost
and expense.
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5.4.3 Landlord and Tenant expressly acknowledge and agree
that neither Tenant nor any one claiming by, through or under Tenant,
including without limitation contractors, sub-contractors, materialmen,
mechanics and laborers, shall have any right to file or place any mechanics'
or materialmen's liens of any kind whatsoever upon the Premises nor upon any
building or improvement thereon; on the contrary, any such liens are
specifically prohibited. All parties with whom Tenant may deal are hereby put
on notice that Tenant has no power to subject Landlord's interest in the
Premises to any claim or lien of any kind or character and any persons
dealing with Tenant must look solely to the credit of Tenant for payment and
not to Landlord's interest in the Premises or otherwise. All contracts of
Tenant, including those for extras and change orders, for the consideration
of any alteration, addition, decoration, or improvement, including, but not
limited to, the contracts of subcontractors and materialmen, shall contain
the agreement of the contractor, subcontractor or materialman agreeing to
look solely to Tenant for payment and waiving any right to a lien on
Landlord's interest in the Building or the Premises. Such contracts shall
also require the contractor, subcontractor or materialman to provide in
recordable form, a waiver and release of lien progress payment during the
construction thereof. Landlord shall be advised by Tenant, in writing, at
least ten (10) days prior to the date that work, by or for the Tenant, is to
commence or the date of anticipated commencement in order to allow Landlord
to post notices of non-responsibility on the Premises. Tenant agrees to allow
such notices to remain posted in the premises throughout the construction
period and to notify Landlord if such notices are damaged or removed. The
construction work shall be scheduled in such a manner so as to create the
minimum disturbance to other tenants in the Building. Any construction
causing or resulting in unreasonable noise, dust or other disturbance of
other tenants shall be scheduled to be performed between the hours of 6:00 PM
and 7:00 AM. No building materials, construction tools and equipment shall be
stored in the common areas of the Building. All trash and construction debris
shall be promptly removed and deposited by Tenant lawfully off the Property,
or, if a dumpster has been approved for the deposit of trash and construction
debris, then such trash and construction debris shall be deposited into the
approved dumpster. No dumpster shall be brought onto the property unless the
size and location thereof has been approved by Landlord in writing.
5.4.4 Any lien filed against the Premises in violation of
this Section 6.4 shall be null and void and of no force or effect. In
addition, Tenant shall cause any lien filed against the Premises in violation
of this paragraph to be canceled, released, discharged and extinguished
within fifteen (15) days after Tenant receives notice of filing of the same
and shall indemnify and hold Landlord harmless from and against any such lien
and any costs, damages, charges and expenses, including but not limited to,
attorney's fees, incurred in connection with or with respect to any such lien.
Section 5.5 TRADE FIXTURES.
5.5.1 All trade fixtures and equipment installed by Tenant
in the Premises shall be new or completely reconditioned and shall remain the
property of Tenant.
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5.5.2 Provided Tenant is not in default under this Lease,
Tenant shall have the right, at the termination of this Lease, to remove any
and all trade fixtures, equipment and other items of personal property not
constituting a part of the Building which it may have stored or installed in
the Premises including, but not limited to, counters, shelving, showcases,
chairs, and movable machinery purchased or provided by Tenant and which are
susceptible of being moved without damage to the Building and the Premises,
provided this right is exercised before the Lease is terminated or during the
five (5) day period immediately following such termination and provided that
Tenant, at its own cost and expense, shall repair any damage to the Premises
or Building caused thereby. The right granted Tenant in this Section 6.5
shall not include the right to remove any plumbing or electrical fixtures or
equipment, heating or air conditioning equipment, floor coverings (including
wall-to-wall carpeting) glued or fastened to the floors or any paneling, tile
or other materials fastened or attached to the walls or ceilings, all of
which shall be deemed to constitute a part of the Building, and, as a matter
of course, shall not include the right to remove any fixtures or machinery
that were furnished or paid for by Landlord. The Premises and the immediate
areas in front, behind and adjacent to it shall be left in a broom-clean
condition. Should Tenant fail to comply with this provision, Landlord may
deduct the cost of clean-up from Tenant's Security Deposit. If Tenant shall
fail to remove its trade fixtures or other property at the termination of
this Lease or within five (5) days thereafter, or upon cessation of Tenant's
business in the Premises or upon termination of Tenant's rights to possession
of the Premises, such fixtures and other property not removed by Tenant shall
be deemed abandoned by Tenant, and, at the option of Landlord, shall become
the property of Landlord; Landlord may store, sell, or otherwise dispose of
such property at Landlord's sole discretion but at Tenant's expense. Any such
removal shall be performed in a good and workmanlike manner, in accordance
with accepted building codes and the ADA, with Tenant procuring at its sole
cost and expense all permits required for such work.
5.5.3 All of the foregoing Section 6.5 is subject to
Section 6.3.1 of this Lease.
Section 5.6 RIGHT OF ENTRY.
Landlord or its representatives shall have the right, without
liability, to enter the Premises at reasonable hours during the Lease Term to
(a) show the Premises to prospective purchasers, lenders and tenants, or (b)
ascertain if the Premises are in proper repair and condition, and make
repairs, additions or alterations thereto or to the Building in which the
same are located, including the right to take the required materials
therefore into and upon the Premises without the same constituting an
eviction of Tenant in whole or part, and the Rent shall not abate while such
repairs, alterations, replacements or improvements are being made by reason
of loss or interruption of Tenant's business due to the performance of any
such work. If Tenant shall not be personally present to permit an entry into
the Premises when for any reason an entry therein shall be permissible,
Landlord may enter the Premises by a master key or by the use of force
without rendering Landlord liable therefore and without in any manner
affecting Tenant's obligations under this Lease.
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ARTICLE VI
INSURANCE AND INDEMNITY
Section 6.1 TENANT'S INSURANCE.
Tenant shall maintain, at its own cost and expense, in responsible
companies approved by Landlord, combined single limit public liability
insurance, insuring Landlord and Landlord's agents and Tenant, as their
interests may appear, against all claims, demands or actions for bodily
injury, personal injury or death of any one person in an amount of not less
than $1,000,000.00; and for bodily injury, personal injury or death of more
than one person in any one accident in an amount of not less than
$1,000,000.00; and for damage to property in an amount of not less than
$1,000,000.00. Landlord shall have the right to direct Tenant to increase
such amounts whenever it considers them inadequate. Such liability insurance
shall also cover and include all exterior signs maintained by Tenant. The
policy of insurance may be in the form of a general coverage or floater
policy covering these and other premises, provided that Landlord and
Landlord's agents are specifically insured therein. Tenant shall carry like
coverage against loss or damage by boiler or compressor or internal explosion
of boilers or compressors, if there is a boiler or compressor in the
Premises. Tenant shall maintain insurance covering all glass forming a part
of the Premises including plate glass in the Premises and fire insurance
against loss or damage by fire or windstorms, with such endorsements for
extended coverage, vandalism, malicious mischief and special extended
coverage as Landlord may require, covering 100% of the replacement costs of
any items of value, including but not limited to signs, stock, inventory,
fixtures, improvements, floor coverings and equipment. All of said insurance
shall be in form and in responsible companies licensed in the state of
Florida satisfactory to Landlord, and shall provide that it will not be
subject to cancellation, termination or change except after at least thirty
(30) days' prior written notice to Landlord. Any insurance procured by Tenant
as herein required shall contain an express waiver of any right of
subrogation by the insurance company against Landlord. The policies or a
certificate from the insurer on Form ACORD 27, together with satisfactory
evidence of the payment of the premiums thereon, shall be deposited with
Landlord on the day Tenant begins operations. Thereafter, Tenant shall
provide Landlord with a certificate from the insurer on Form ACORD 27 and
evidence of proof of payment upon renewal of such policy, not less than
thirty (30) days prior to expiration of the term of such coverage. In the
event Tenant fails to timely obtain or maintain the insurance required
hereunder, Landlord may obtain same and any costs incurred by Landlord in
connection therewith shall be payable by Tenant upon demand. Landlord shall
carry public liability insurance covering the common areas of the Building,
including but not limited to the sidewalks, malls and parking lot.
Section 6.2 EXTRA HAZARD INSURANCE PREMIUMS.
Tenant shall not keep, use, sell or offer for sale in or upon the
Premises any article or permit any activity which may be prohibited by the
standard form of fire or public liability insurance policy. Tenant shall not
knowingly use or occupy the
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Premises or any part thereof, or suffer or permit the same to be used or
occupied for any business or purpose deemed extra hazardous on account of
fire or otherwise. In the event Tenant's use and/or occupancy causes any
increase of any insurance premium above the rate for the least hazardous type
of occupancy legally permitted in the Premises, Tenant shall pay such
additional premium on any policy, including but not limited to fire, extended
coverage, public liability or any insurance that may be carried by Landlord
for its protection against rent loss through fire. Bills for such additional
premiums shall be rendered by Landlord to Tenant at such times as Landlord
may elect, and shall be due from and payable by Tenant when rendered in
writing, but such increases in the rate of insurance shall not be deemed a
breach of this covenant by Tenant. Failure to pay amounts due hereunder shall
be a breach of the Lease. In determining whether increased premiums are the
result of Tenant's use of the Premises, a schedule, issued by the
organization making the insurance rate on the Premises, showing various
components of such rate, shall be conclusive evidence of the several items
and charges which make up the fire and public liability insurance rate on the
Premises.
Section 6.3 INDEMNITY.
Tenant shall indemnify and save harmless Landlord and its agents
from and against any and all claims and demands whether for injuries to
persons or loss of life, or damage to property, occurring within the Premises
and immediately adjoining the Premises and arising out of the use and
occupancy of the Premises or Building by Tenant, or occasioned wholly or in
part by any act or omission of Tenant, its subtenants, agents, contractors,
employees, servants, licensees or concessionaires, excepting however such
claims and demands, whether for injuries to persons or loss of life, or
damage to property, caused solely by the gross negligence or willful
malfeasance of Landlord. If, however, any liability arises in the Common
Areas because of the negligence of Tenant, Tenant's subtenants, agents,
employees, contractors, invitees, customers or visitors, then in such event
Tenant shall hold Landlord and its agents harmless. In case Landlord or its
agents shall, without fault on its part, be made a party to any litigation
commenced by or against Tenant, then Tenant shall protect and hold Landlord
and its agents harmless and shall pay all costs, expenses and reasonable
attorneys' fees incurred or paid by Landlord or its agents in connection with
such litigation. Tenant shall also pay all costs, expenses and reasonable
attorneys' fees that may be incurred or paid by Landlord or its agents in
enforcing the covenants and agreements of this Lease.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY.
7.1.1 Tenant shall give prompt notice to Landlord in case
of fire or other damage to the Premises or the Building. In the event the
Premises are damaged by fire, explosion, flood, tornado or by the elements,
or through any casualty, or otherwise, after the commencement of the Lease
Term, the Lease shall continue in full force and effect. If the extent of the
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damage is less than fifty percent (50%) of the cost of replacement of the
Premises, the damage shall promptly be repaired by Landlord at Landlord's
expense, provided that Landlord shall not be obligated to so repair if such
fire, explosion or other casualty is caused directly by the negligence or
malfeasance of Tenant, or any other tenant, their subtenants, permitted
concessionaires, or their agents, servants or employees, and provided further
that Landlord shall not be obligated to expend for such repair an amount in
excess of the insurance proceeds recovered as a result of such damage, and
that in no event shall Landlord be required to replace Tenant's stock in
trade, fixtures, furniture, furnishings, floor coverings and equipment. In
the event of any such damage and (a) Landlord is not required to repair as
hereinabove provided, or (b) the Premises shall be damaged to the extent of
fifty percent (50%) or more of the cost of replacement, or (c) the Building
of which the Premises are a part is damaged to the extent of twenty-five
percent (25%) or more of the cost of replacement, Landlord may elect either
to repair or rebuild the Premises, or the Building, or to terminate this
Lease upon giving notice of such election to Tenant within ninety (90) days
after the occurrence of the event causing the damage.
7.1.2 If the casualty, repairing, or rebuilding shall
render the Premises untenantable, in whole or in part, and the damage shall
not have been due to the default or neglect of Tenant, a proportionate
abatement of the Fixed Minimum Rent shall be allowed from the date when the
damage occurred until the date Landlord completes the repairing or
rebuilding, said proportion to be computed on the basis of the relation which
the gross square foot area of the space rendered untenantable bears to the
floor area of the Premises. If Landlord is required or elects to repair the
Premises as herein provided, Tenant shall repair or replace its stock in
trade, fixtures, furniture, furnishings, floor coverings and equipment, and
if Tenant has closed for business, Tenant shall promptly reopen for business
upon the completion of such repairs.
7.1.3 In the event the Premises or the Building shall be
damaged in whole or in substantial part within the last twenty-four (24)
months of the original term, or within the last twenty-four (24) months of
the last renewal term, if renewals are provided for in this Lease, Landlord
shall have the option, exercisable within Ninety (90) days following such
damage, of terminating this Lease, effective as of the date of Tenant's
receipt of notice from Landlord. If any such termination occurs during the
initial Lease Term, any options for renewal shall automatically be of no
further force or effect.
7.1.4 No damage or destruction of the Premises or the
Building shall allow Tenant to surrender possession of the Premises nor
affect Tenant's liability for the payment of Rent or any other covenant
contained herein, except as may be specifically provided in this Lease.
Notwithstanding any of the provisions herein to the contrary, Landlord shall
have no obligation to rebuild the Premises or the Building and may at its own
option cancel this Lease unless the damage or destruction is a result of a
casualty covered by Landlord's insurance policy.
Section 7.2 CONDEMNATION.
In the event the entire Premises shall be appropriated or
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taken under the power of eminent domain by any public or quasi-public
authority, this Lease shall terminate and expire as of the date of title
vesting in such proceeding, and Landlord and Tenant shall thereupon be
released from any further liability hereunder. If any part of the Premises
shall be taken as aforesaid, and such partial taking shall render that
portion not so taken unsuitable for the business of Tenant, as determined by
Landlord, then this Lease and the Lease Term herein shall cease and terminate
as aforesaid. If such partial taking is not extensive enough to render the
Premises unsuitable for the business of Tenant, then this Lease shall
continue in effect, except that the Fixed Minimum Rent shall be reduced in
the same proportion that the floor area of the Premises taken bears to the
original floor area leased and Landlord shall, upon receipt of the award in
condemnation, make all necessary repairs or alterations to the Building in
which the Premises are located so as to constitute the portion of the
Building not taken as a complete architectural unit, but such work shall not
exceed the scope of the work to be done by Landlord in originally
constructing said Building, nor shall Landlord, in any event, be required to
spend for such work an amount in excess of the amount received by Landlord as
damages for the part of the Premises so taken. "Amount received by Landlord"
shall mean that part of the award in condemnation which is free and clear to
Landlord of any collection by mortgagee for the value of the diminished fee.
If more than twenty percent (20%) of the floor area of the Building in which
the Premises are located shall be taken as aforesaid, Landlord may, by
written notice to Tenant, terminate this Lease, such termination to be
effective as aforesaid. If this Lease is terminated as provided in this
paragraph, the Rent shall be paid up to the date that possession is so taken
by public authority and Landlord shall make an equitable refund of any Rent
paid by Tenant in advance. Tenant shall not be entitled to and expressly
waives all claim to any condemnation award for any taking, whether whole or
partial, and whether for diminution in value of the leasehold or to the fee
although Tenant shall have the right, to the extent that the same shall not
reduce Landlord's award, to claim from the condemnor, but not from Landlord,
such compensation as may be recoverable by Tenant in its own right for damage
to Tenant's business, fixtures and improvements installed by Tenant at its
expense.
ARTICLE VIII
SECURITY
Section 8.3 SECURITY DEPOSIT.
8.3.1 Tenant has deposited with Landlord the sum specified
in the Basic Term Sheet to be retained by Landlord without liability for
interest, as security for the payment of all Rent and other sums of money
which shall or may be payable for the full stated term of this Lease, and any
extension or renewal thereof, and for the faithful performance of all the
terms of this Lease to be observed and performed by Tenant.
8.3.2 The Security Deposit shall not be mortgaged,
assigned, transferred or encumbered by Tenant without the prior written
consent of Landlord and any such act on the part of Tenant shall be without
force or effect and shall not be binding upon Landlord. If any of the Rent
herein reserved or any other
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sum payable by Tenant to Landlord shall be overdue and unpaid or should
Landlord make payments on behalf of Tenant, or if Tenant shall fail to
perform any of the terms of this Lease, then Landlord may, at its option and
without prejudice to any other remedy which Landlord may have on account
thereof, appropriate and apply said entire deposit or so much thereof as may
be necessary to compensate Landlord toward the payment of Rent or Additional
Rent or loss or damage sustained by Landlord due to breach on the part of
Tenant; and Tenant shall promptly upon demand restore said security to the
original sum deposited. If Tenant should be overdue in the payment of monthly
Rent or other sums payable to Landlord on at least two or more occasions
during a year, Landlord, at its option, may require Tenant to increase the
amount of Security Deposit now held by Landlord by an amount sufficient to
cover at least two months' Rent or greater amount to be determined at the
sole discretion of Landlord. In this event, upon receipt of the additional
security sum, Landlord and Tenant shall evidence such receipt by a letter
signed and acknowledged by both Landlord and Tenant to be incorporated as
part of this Lease amending the Basic Term Sheet, stating the "New Total
Amount" so held without liability for any interest. Within sixty (60) days
after the expiration of the tenancy hereby created, whether by lapse of time
or otherwise, provided Tenant shall not be in default hereunder and shall
have complied with all the terms, covenants and conditions of this Lease,
including the yielding up of immediate possession to Landlord, Landlord
shall, upon being furnished with affidavits and other satisfactory evidence
by Tenant that Tenant has paid all bills incurred by it in connection with
its performance of the terms, covenants and conditions of this Lease, return
to Tenant said sum on deposit or such portion thereof then remaining on
deposit with Landlord as set forth herein. In the event Tenant has not
complied with all the obligations provided for hereunder, Landlord may
appropriate a part or all of the Security Deposit as liquidated damages to
satisfy Tenant's obligations.
Section 8.4 PERSONAL PROPERTY.
As additional security for the performance of Tenant's obligations
hereunder, Tenant hereby pledges and assigns to Landlord all the furniture,
fixtures, goods, inventory, stock and chattels, and all other personal
property of Tenant which are now or may hereafter be brought or put in the
Premises, and further grants to Landlord a security interest therein under
the Uniform Commercial Code. Upon default of the payment of Rent,
assessments, charges, penalties and damages herein covenanted to be paid by
Tenant, and for the purpose of securing the performance of all other
obligations of Tenant hereunder, and at the request of Landlord, Tenant
hereby agrees to execute and deliver to Landlord all financing statements,
amendments thereto or other similar statements which Landlord may reasonably
request. Nothing herein contained shall be deemed to be a waiver by Landlord
of its statutory lien to Rent and remedies, rights and privileges of Landlord
in the case of default of Tenant as set forth above and shall not be
exclusive and, in addition thereto, Landlord may also exercise and enforce
all its rights at law or in equity which it may otherwise have as a result of
Tenant's default hereunder. Landlord is herein specifically granted all of
the rights of a secured creditor under the Uniform Commercial Code with
respect to the property in which Landlord
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has been granted a security interest by Tenant, including, but not limited
to, the right to take possession of the above mentioned property and dispose
of it by sale in a commercially reasonable manner.
ARTICLE IX
DEFAULT, REMEDIES
Section 9.5 DEFAULT.
The occurrence of any of the following during the Term shall
constitute an Event of Default by Tenant:
9.5.1 Tenant shall fail to pay when due all or any portion
of any Rent and shall not have remedied such failure within 5 days after the
due date
9.5.2 Tenant shall fail to pay when due any other sums,
fees, charges, costs, or expenses which are payable under this Lease;
9.5.3 Tenant shall, other than in the manner permitted
under this Lease, make or permit or suffer to occur any assignment (including
any transfer of interest in Tenant which is deemed to be an assignment under
this Lease), sublease or occupancy arrangement, conveyance, transfer,
conditional or collateral assignment, pledge, hypothecation, or other
encumbrance, whether by operation of law or otherwise, of this Lease or any
interest in this Lease;
9.5.4 Tenant shall fail in any other way in the performance
or observance of any of the terms and conditions of this Lease and within ten
(10) days shall not have cured such default or, if impossible of cure within
such time but possible of cure within sixty (60) days, begun and diligently
pursued such cure to completion;
9.5.5 there shall be filed by or against Tenant or any
guarantor of this Lease in any court or other tribunal a petition in
bankruptcy or insolvency proceedings or for reorganization or for the
appointment of a receiver or trustee of all or substantially all of Tenant's
or any such guarantor's property, unless such petition shall be filed against
Tenant or any guarantor of this Lease and Tenant or any guarantor of this
Lease shall in good faith promptly thereafter commence and diligently
prosecute any and all proceedings appropriate to secure the dismissal of such
petition and shall secure such dismissal within thirty (30) days of its
filing;
9.5.6 Tenant or any guarantor of this Lease shall be
adjudicated a bankrupt or an insolvent or take the benefit of any federal
reorganization or composition proceeding, make an assignment for the benefit
of creditors, or take the benefit of an insolvency law;
9.5.7 a trustee in bankruptcy or a receiver shall be
appointed or elected or had for Tenant or any guarantor of this Lease,
whether under federal or state laws;
9.5.8 Tenant's interest under this Lease shall be
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sold under any execution or process of law;
9.5.9 the Premises shall be abandoned or deserted or Tenant
shall fail to make continuous use of the Premises for twenty (20) business
days for the Use or Tenant shall have failed to complete the Initial Tenant
Improvements and open for business within four (4) months after the execution
of this Lease by both parties to it; or
9.5.10 Tenant shall fail to maintain current, duly issued
occupational licenses, or any other permit or license required by an
applicable Legal Authority for its operations at the Premises, or Tenant
shall fail to meet the insurance requirements of this Lease and provide
certificates of insurance (and binders and policies, if required) evidencing
such compliance.
Section 9.6 REMEDIES.
In the event of the occurrence of an Event of Default by Tenant,
Landlord, at Landlord's option, may elect to do one or more of the following:
9.6.1 accelerate all of the remaining Rent for the Lease
Term, in which event all Rent shall become immediately due and payable;
9.6.2 terminate this Lease as provided by this section and
re-enter the Premises and remove all persons and property from the Premises,
either by summary proceedings or by any other suitable action or proceeding
at law, or otherwise; or
9.6.3 without terminating this Lease, re-enter the Premises
and remove all persons and property from the Premises, either by summary
proceedings or by any other suitable action or proceeding at law, or
otherwise, and relet all or any part of the Premises.
Section 9.7 TERMINATION.
If Landlord elects to terminate this Lease:
9.7.1 Landlord shall give notice of such termination, which
shall take effect ten (10) days after such notice is given, or such greater
number of days as is set forth in such notice, fully and completely as if the
effective date of such termination were the date originally set forth in this
Lease for the expiration of the Lease Term;
9.7.2 Tenant shall quit and peacefully surrender the
Premises to Landlord, without any payment by Landlord for doing so, on or
before the effective date of termination; and
9.7.3 All Rent, including accelerated Rent, shall become
due and shall be paid up to the effective date of termination, together with
such expenses, including attorneys' fees, as Landlord shall incur in
connection with such termination.
Section 9.8 NO REINSTATEMENT AFTER TERMINATION.
No receipts of monies by Landlord from Tenant after
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termination of this Lease shall reinstate, continue, or extend the Term,
affect any Notice previously given by Landlord to Tenant, or operate as a
waiver of the right of Landlord to enforce the payment of Rent.
Section 9.9 RETENTION OF SUMS AFTER TERMINATION.
If Landlord shall terminate this Lease, Landlord shall be entitled
to retain, free of trust, all sums then held by Landlord pursuant to any of
the provisions of this Lease. In the interim following such termination until
the retention of such sums by Landlord free of trust, such sums shall be
available to Landlord, but not to Tenant, pursuant to and for the purposes
provided by the terms and conditions of this Lease.
Section 9.10 RE-ENTRY.
In the event of any re-entry and/or dispossession by summary
proceedings or otherwise without termination of this Lease:
9.10.1 all Rent shall become due and shall be paid up to
the time of such re-entry and/or dispossession, together with such expenses,
including attorneys' fees, as Landlord shall incur in connection with such
re-entry and/or dispossession by summary proceedings or otherwise; and
9.10.2 all Rent for the remainder of the Lease Term may be
accelerated and due in full, the collection of such sums being subject to the
provisions of Section 9.6.3.3; and
9.10.3 Landlord may relet all or any part of the Premises,
either in the name of Landlord or otherwise, for a term or terms which may,
at Landlord's option, be equal to, less than, or greater than the period
which would otherwise have constituted the balance of the Term. In connection
with such reletting:
9.10.3.1 Tenant or Tenant's representative shall pay, as
Additional Rent, to Landlord, as they are incurred by Landlord, such
reasonable expenses as Landlord may incur in connection with reletting,
including, without limitation, legal expenses, attorneys' fees, brokerage
commissions, and expenses incurred in altering, repairing, and putting the
Premises in good order and condition and in preparing the Premises for
reletting;
9.10.3.2 Tenant or Tenant's representative shall pay to
Landlord, in monthly installments on the due dates for Rent payments for each
month of the balance of the Term, the amount by which any Rent payment
exceeds the net amount, if any, of the rents for such period collected on
account of the reletting of the Premises; any suit brought to collect such
amount for any month or months shall not prejudice in any way the rights of
Landlord to collect the deficiency for any subsequent month or months by a
similar action or proceeding;
9.10.3.3 at Landlord's option exercised at any time,
Landlord shall be entitled to recover immediately from Tenant, in addition to
any other proper claims, but in lieu of and not in addition to any amount
which would thereafter become payable under the preceding subsection, a sum
equal to the amount by which the sum of the Rent for the balance of the Lease
Term, compound discounted at a reasonable rate selected by Landlord to its
then-present worth, exceeds the net rental value of the
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Premises, compound discounted at the same annual rate to its then-present
worth, for the balance of the Lease Term. In determining such net rental
value of the Premises, the rent realized by any reletting of the Premises, if
such reletting is upon terms (other than rental amounts) generally comparable
to the terms of this Lease, shall be deemed to be such net rental value; and
9.10.3.4 at Landlord's option, Landlord may make such
alterations and/or decorations in or upon the Premises as Landlord, in
Landlord's sole judgment, considers advisable and necessary for the purpose
of reletting the Premises; the making of such alterations and/or decorations
shall not operate or be construed to release Tenant from liability under this
Section; the cost of all such alterations and/or decorations shall be paid by
Tenant to Landlord as Additional Rent.
Section 9.11 SUMS COLLECTED UPON RELETTING.
Landlord shall have, receive, and enjoy as Landlord's sole and
absolute property, any and all sums collected by Landlord as rent or
otherwise upon reletting the Premises after Landlord shall resume possession
of the Premises as provided by this Lease, including, without limitation, any
amounts by which the sum or sums so collected shall exceed the continuing
liability of Tenant under this Lease. If Landlord shall have accelerated Rent
payments and collected same from Tenant, and subsequently shall have relet
the Premises, then Landlord, after deducting all costs related to reletting,
including, but not limited to, those described or anticipated in this Section
9.7 and in Section 9.11, and any other sums due from Tenant to Landlord,
shall pay to Tenant the amount remaining which is collected as Rent for each
month, to the extent Landlord shall have previously received the Rent for
such month from Tenant (but Landlord may retain any such amount, for
application to future amounts not yet paid but which may become due).
Section 9.12 NO EFFECT ON SUIT.
Landlord and Tenant agree that after the commencement of suit for
possession of the Premises or after final order or judgment for the
possession of the Premises, Landlord may demand, receive, and collect any
monies due or coming due without in any manner affecting such suit, order, or
judgment. All such monies collected shall be deemed to be payments on account
of the use and occupation of the Premises, or, at the election of Landlord,
on account of Tenant's liability under this Lease.
Section 9.13 WAIVER OF RIGHTS OF REDEMPTION.
Tenant waives all rights of redemption which may otherwise be
provided by any Legal Requirement in the event that Landlord shall, because
of the occurrence of an Event of Default by Tenant, obtain possession of the
Premises under legal proceedings, or pursuant to present or future law or to
the terms and conditions of this Lease.
Section 9.14 USE OF WORD "RE-ENTRY".
The words "re-enter" and "re-entry", as used in this Section, are
not and shall not be restricted to their technical
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legal meaning, but are used in the broadest sense.
Section 9.15 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS.
Whenever and as often as Tenant shall fail or neglect to comply with
the terms and conditions of this Lease, Landlord, at Landlord's option and
upon ten (10) days' Notice to Tenant (or upon shorter Notice, or with no
Notice at all, if reasonable to meet an emergency or a time limitation
imposed by Legal Authorities), may, in addition to all other remedies
available to Landlord, perform, or cause to be performed, such work, labor,
services, acts, or things, and take such other steps, including, but not
limited to, entry onto the Premises, as Landlord may deem advisable, to
comply with and perform any such term or condition. Tenant shall reimburse
Landlord upon demand, and from time to time, for all costs and expenses
suffered or incurred by Landlord in so complying with or performing such term
or condition. The commencement of any work or the taking of any other steps
or performance of any other act by Landlord pursuant to this Section shall
not be deemed to obligate Landlord to complete the curing of any term or
condition which is in default.
Section 9.16 LANDLORD'S EXPENSES.
Tenant shall reimburse Landlord upon demand for all reasonable
expenses, including attorneys' fees and costs for negotiation, trial, or
appellate work (including fees for the services of paralegals and similar
persons) incurred by Landlord in connection with (a) any litigation or
dispute in which Landlord becomes a party or otherwise becomes involved
related to the Premises or Landlord's rights or obligations under this Lease
(except to the extent Landlord is found to be at fault); (b) all costs of
reletting the Premises in the event of Tenant's default, including brokers'
charges, and the proportionate share of the original broker's fees, if any,
for which Tenant has not paid all Rent, (c) the enforcement or collection of
any judgments, settlements or court awards, and (d) if the leasehold interest
of Tenant under this Lease shall be held by more than one person or entity,
and if litigation shall arise by reason of a dispute among such persons or
entities, then Landlord's reasonable expenses incurred if Landlord is made a
party to, or incurred otherwise in connection with, such litigation.
ARTICLE VIII
ADDITIONAL TENANT AGREEMENTS
Section 8.1 MORTGAGE FINANCING AND SUBORDINATION.
This Lease and all of Tenant's rights hereunder are and shall be
subordinate to the present and any future mortgage upon the Building, as well
as to any existing ground lease, however, Tenant shall, upon request of
either Landlord, the holder of any mortgage or Deed of Trust now or hereafter
placed upon the Landlord's interest in the Premises or future additions
thereto, and to any ground lease now or hereafter affecting the Premises,
execute and deliver upon demand, and such further instruments subordinating
this Lease to the lien of any such mortgage or mortgages, and such ground
lease, provided such subordination shall be upon the express condition that
this Lease shall be recognized by the mortgagees and ground lessors and that
the
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rights of Tenant shall remain in full force and effect during the Lease Term
and any extension thereof, notwithstanding any default by the mortgagors with
respect to the mortgages or any foreclosure thereof, or any default by the
ground lessee, so long as Tenant shall perform all of the covenants and
conditions of this Lease. Tenant agrees to execute all agreements required by
Landlord's mortgagee or ground lessor or any purchaser at a foreclosure or
sale in lieu of foreclosure by which agreements Tenant will attorn to the
mortgagee or purchaser or successor or ground lessor. Landlord agrees to
obtain a non-disturbance agreement from any mortgagee or Ground lessor. Any
such non-disturbance agreement shall be substantially in the form attached
hereto as Exhibit D "Subordingation, Nondisturbance and Attornment Agreement."
Section 8.2 ASSIGNMENT OR SUBLETTING.
8.2.1 All assignments of this Lease or sublease or
subleases of the Premises by Tenant or occupancy of all or part of the
Premises by anyone other than Tenant shall be subject to and in accordance
with all of the provisions of this Section.
8.2.2 Tenant may not assign this Lease or sublet the
Premises, in whole or in part, to a party other than a wholly-owned
corporation or controlled subsidiary of Tenant without first having obtained
the written consent of Landlord, such consent not to be unreasonably withheld.
8.2.3 Any assignment or sublease by Tenant shall be only
for the permitted Use, and for no other purpose, and in no event shall any
assignment or sublease of the Premises release or relieve Tenant from any
obligations of this Lease.
8.2.4 In the event that Tenant shall seek Landlord's
permission to assign this Lease or sublet the Premises or allow additional
occupants, Tenant shall provide to Landlord the name, address, financial
statement and business experience resume for the immediately preceding ten
(10) years of the proposed assignee or subtenant or occupant and such other
information concerning such proposed assignee or subtenant or occupant as
Landlord may require. This information shall be in writing and shall be
received by Landlord no less than thirty (30) days prior to the effective
date of the proposed assignment or sublease or occupancy. It shall be a
condition to any consent by Landlord to an assignment or sublease or
occupancy that Tenant shall pay to Landlord a processing fee in the amount of
$125.00 or one percent (1%) of the annual current value of this Lease,
whichever is greater, as reimbursement to Landlord for any and all
legally-related expenses in connection with the review and preparation of
assignment or sublease or occupancy-related documents which may be incurred
by Landlord in connection therewith. Payment of such fee shall be submitted
along with Tenant's request for Landlord's consent. Any consent by Landlord
to any assignment or sublease or occupancy, or to the operation of a
concessionaire or licensee, shall not constitute a waiver or the necessity
for such consent to any subsequent assignment or sublease or occupancy, or
operation by a concessionaire or licensee.
8.2.5 If Tenant is a corporation or partnership and any
transfer, sale, pledge or other disposition of more than
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LANDLORD TENANT
<PAGE>
fifty percent (50%) of the common stock or partnership interests shall occur,
or voting control or power to vote the majority of the outstanding capital
stock or partnership interests be changed, such action shall be deemed an
assignment under the terms of this Lease and shall be subject to all the
terms and conditions thereof provided , however, that a public offering of
capital stock of Tenant shall not be deemed an assignment for the purposes of
this section. Any breach of the assignment clause by Tenant will constitute a
default under the terms of this Lease and Landlord shall have all rights and
remedies available to it as set forth herein.
In the event Tenant shall sublease the Premises for rentals in
excess proportionately of those rentals payable hereunder, Tenant shall pay
to Landlord, as Additional Rent hereunder, all such excess rentals. Any
consideration for any assignment of this Lease shall be paid to Landlord.
Any proposed assignee or subtenant of Tenant shall assume Tenant's
obligations hereunder and deliver to Landlord an assumption agreement in form
satisfactory to Landlord no less than ten (10) days prior to the effective
date of the proposed assignment or sublease.
Notwithstanding any of the foregoing provisions, if Tenant is or has
been at any time in default under any of the terms of this Lease, Tenant may
not assign or sublet the Premises in whole or in part.
Section 8.3 TENANT'S NOTICE TO LANDLORD OF DEFAULT.
Should Landlord be in default under any of the terms of this Lease,
Tenant shall give Landlord prompt written notice thereof in the manner
specified in Section 12.1, and Tenant shall allow Landlord a reasonable
length of time in which to cure such default, which time shall not in any
event be less than thirty (30) days from the date of receipt of such notice.
Section 8.4 SHORT FORM LEASE.
Tenant agrees not to record this Lease without the express written
consent of Landlord.
Section 8.5 SURRENDER OF PREMISES AND HOLDING OVER.
At the expiration of the tenancy, Tenant shall surrender the
Premises in good condition, reasonable wear and tear excepted, and damage by
unavoidable casualty (except to the extent that the same is covered by
Landlord's fire insurance policy with extended coverage endorsement), and
Tenant shall surrender all keys for the Premises to Landlord at the place
then fixed for the payment of Rent and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises. Tenant
shall remove all its trade fixtures and any alterations or improvements,
subject to the provisions of Section 6.5, before surrendering the Premises,
and shall repair, at its own expense, any damage to the Premises caused
thereby. Tenant's obligations to observe or perform this covenant shall
survive the expiration or other termination of the Lease Term. In the event
Tenant remains in possession of the Premises after the expiration of the
tenancy
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LANDLORD TENANT
<PAGE>
created hereunder, whether or not with the consent or acquiescence of
Landlord, and without the execution of a new lease, Tenant, at the option of
Landlord, shall be deemed to be occupying the Premises as a tenant at will on
a week-to-week tenancy and in no event on a month-to-month or on a
year-to-year tenancy. The rent during this week-to-week tenancy shall be
payable weekly at twice the Fixed Minimum Rent, and twice all other charges
due hereunder, and it shall be subject to all the other terms, conditions,
covenants, provisions and obligations of this Lease, and no extension or
renewal of this Lease shall be deemed to have occurred by such holding over.
Tenant's obligations to observe or perform this covenant shall survive the
expiration or other termination of the Lease Term.
Section 8.6 ESTOPPEL CERTIFICATE.
Tenant shall provide at any time, within ten (10) days of Landlord's
written request, a statement certifying that this Lease is unmodified and in
full force and effect or, if there have been modifications, that same are in
full force and effect as modified and stating the modifications, and the
dates to which the Fixed Minimum Rent and other charges have been paid in
advance, if any. It is intended that any such statement delivered pursuant to
this paragraph may be relied upon by any prospective purchaser or mortgagee
of the Premises.
Section 8.7 DELAY OF POSSESSION.
If Landlord is unable to give possession of the Premises on the
Commencement Date by reason of the holding over of any prior tenant or
tenants or for any other reason, an abatement or diminution of the Rent to be
paid hereunder shall be allowed Tenant under such circumstances, but nothing
herein shall operate to extend the Lease Term beyond the agreed Lease
Expiration Date. Said abatement of rent shall be the full extent of
Landlord's liability to Tenant for any loss or damage to Tenant on account of
said delay in obtaining possession of the Premises.
Section 8.8 COMPLIANCE WITH LAW.
8.8.1 At all times during the Lease Term, Tenant shall, at
Tenant's own cost and expense, fully perform and comply with any law,
statute, code, rule, regulation, ordinance, order, judgment, decree, writ,
injunction, franchise, permit, certificate, license (including any beer, wine
or liquor license), authorization, registration, or other direction or
requirement of any domestic or foreign federal, state, county, municipal, or
other government or governmental or quasi-governmental department,
commission, board, bureau, court, agency, or instrumentality having
jurisdiction or authority over Landlord, Tenant, and/or all or any part of
the Premises ("Legal Authority"), which is now or in the future applicable to
the Premises, including those not within the present contemplation of the
parties ("Legal Requirements"), and applicable insurance underwriters' rules,
regulations, decrees or requirements, whether or not they shall necessitate
ordinary or extraordinary structural changes, improvements, replacements, or
repairs to the Premises, or cause any interference with the Use. Tenant
acknowledges that the Building is not newly constructed, and Tenant shall
cooperate with Landlord in asbestos removal or any other matter which may be
necessary or advisable in connection
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LANDLORD TENANT
<PAGE>
with Legal Requirements.
8.8.2 At all times during the Term, Tenant shall not do,
permit, or suffer to be done any act, or cause, permit, or suffer to exist
any condition upon the Premises, which may (a) be dangerous, unless
safeguarded as provided for by Legal Requirements; (b) constitute a public or
private nuisance; (c) make any Insurance void or voidable or cause any
increase in Insurance premiums; or (d) involve invasive medical procedures
including but not limited to the use of syringes. Landlord may enforce this
provision in different ways from time to time, and the permitting by Landlord
of certain activities on one or more occasions shall not alter Landlord's
rights to prohibit or modify such activities at other times. Tenant
acknowledges and agrees that Landlord shall have the right to provide for the
comfort of others in the Building and that such right is a significant
consideration and inducement to Landlord to enter into this Lease.
8.8.3 Tenant shall:
8.8.3.1 neither cause nor permit the Premises
to be used to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce, or process Hazardous Materials, except in
compliance with all Legal Requirements;
8.8.3.2 neither cause nor permit a release
or threatened release of Hazardous Materials onto the Premises or any other
property as a result of any intentional or unintentional act or omission on
the part of Tenant;
8.8.3.3 comply with all applicable Legal
Requirements related to Hazardous Materials;
8.8.3.4 conduct and complete all investigations,
studies, sampling, and testing, and all remedial, removal, and other actions
on, from, or affecting the Premises in accordance with such applicable Legal
Requirements and to the satisfaction of Landlord;
8.8.3.5 allow access to the Premises by Landlord
and applicable regulatory authorities so that they may assure compliance with
this Section 11.8;
8.8.3.6 upon the expiration or termination of
this Lease, deliver the Premises to Landlord free of all Hazardous Materials;
and
8.8.3.7 defend, indemnify, and hold harmless
Landlord and Landlord's employees and other agents from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs,
or expenses of any kind or nature, known or unknown, contingent or otherwise
(including, without limitation, accountants' and attorneys' fees (including
fees for the services of paralegals and similar persons), consultant fees,
investigation and laboratory fees, court costs, and litigation expenses at
the trial and all appellate levels), arising out of, or in any way related to
(a) the presence, disposal, release, or threatened release, by or caused by
Tenant or its agents, of any Hazardous Materials which are on, from, or
affecting the soil, water, vegetation, buildings, personal property, persons,
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LANDLORD TENANT
<PAGE>
animals, or otherwise; (b) any personal injury, including wrongful death, or
damage to property, real or personal, arising out of or related to such
Hazardous Materials; (c) any lawsuit brought, threatened, or settled by Legal
Authorities or other parties, or order by Legal Authorities, related to such
Hazardous Materials; and/or (d) any violation of Legal Requirements related
in any way to such Hazardous Materials. For the purposes of this Lease
"Hazardous Materials" means any flammable explosives, radioactive materials,
oil or petroleum products and their by products, asbestos,
polychlorobiphenyls, hazardous materials, hazardous wastes, hazardous or
toxic substances, or related materials as defined under or regulated by any
Legal Requirements, including, without limitation, the following statutes and
the regulations promulgated under their authority: (a) the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Sections 9601 et seq.); (b) the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801 et seq.); and (c) the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C. Sections 6901 et
seq.). The provisions of this Section 11.8 shall survive the expiration or
termination of this Lease.
Section 8.9 RULES AND REGULATIONS.
Tenant's use of the Premises shall be subject, at all times during
the Lease Term, to Landlord's right to adopt in writing, from time to time,
modify and/or rescind reasonable Rules and Regulations not in conflict with
any of the express provisions hereof governing the use of the parking areas,
walks, driveways, passageways, signs, exterior of Building, lighting and
other matters affecting other tenants in and the general management and
appearance of the Building of which the Premises are a part, but no such rule
or regulation shall discriminate against Tenant. The current Rules and
Regulations are attached as Exhibit "C".
Section 8.10 ABANDONMENT.
Tenant shall not vacate or abandon the Premises at any time during
the Lease Term, nor permit the Premises to remain unoccupied for a period
longer than ten (10) consecutive days during the Lease Term. If Tenant shall
abandon, vacate or surrender the Premises, or be dispossessed by process of
law or otherwise, any personal property belonging to Tenant left on the
Premises shall, at the option of the Landlord, be deemed abandoned, and
Landlord may sell, store, or dispose of it at Tenant's expense.
Section 8.11 INTENTIONALLY LEFT BLANK
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 NOTICES.
Whenever notice shall or may be given to either of the parties by
the other, each such notice shall be either delivered in person or sent by
nationally recognized overnight delivery service, with return receipt
requested. Notices to Landlord shall be sent to the address specified in the
Basic Term Sheet.
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LANDLORD TENANT
<PAGE>
Notices to Tenant shall be sent to the address specified in the Basic Term
Sheet. Any notice under this Lease shall be deemed to have been given at the
time it is received or refused by the addressee.
Section 9.2 ENTIRE AND BINDING AGREEMENT.
This Lease contains all of the agreements between the parties
hereto, and it may not be modified in any manner other than by agreement in
writing signed by all parties hereto or their successors in interest. Tenant
shall pay Landlord for any and all legally-related expenses which may be
incurred by Landlord in connection with the review or preparation of all
lease-related documents including, without limitation, consents, amendments,
modifications and assignments therewith. The terms, covenants and conditions
contained herein shall inure to the benefit of and be binding upon Landlord
and Tenant and their respective heirs, successors and assigns, except as may
be otherwise expressly provided in this Lease.
Section 9.3 PROVISIONS SEVERABLE.
If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be illegal, invalid or
unenforceable, the remainder of this Lease, or the application of such term
or provision to persons or circumstances other than those to which it is held
illegal, invalid or unenforceable shall not be affected hereby and each term
and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
Section 9.4 CAPTIONS.
The captions contained herein are for convenience and reference only
and shall not be deemed as part of this Lease or construed as in any manner
limiting or amplifying the terms and provisions of this Lease to which they
relate.
Section 9.5 RELATIONSHIP OF THE PARTIES.
Nothing herein contained shall be deemed or construed as creating
the relationship of principal and agent or of partnership or joint venture
between the parties hereto; it being understood and agreed that neither the
method of computing rent nor any other provision contained herein nor any
acts of the parties hereto shall be deemed to create any relationship between
the parties other than that of Landlord and Tenant.
Section 9.6 ACCORD AND SATISFACTION.
No payment by Tenant or receipt by Landlord of a lesser amount than
the Rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated Rent nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as Rent be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue
any other remedy provided for in this Lease or available at law or in equity.
Section 9.7 BROKER'S COMMISSION.
Tenant warrants that it has not engaged any Real Estate
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LANDLORD TENANT
<PAGE>
Broker or Realtor, except for Abood & Associates, Inc. (which represents
Landlord) in connection with its execution of this Lease and agrees to
indemnify and save Landlord harmless from any liability that may arise from
such claim, including reasonable attorneys' fees by any other broker, realtor
or finder, claiming to have represented Tenant.
Section 9.8 CORPORATE AND PARTNERSHIP STATUS.
9.8.1 If Tenant is a corporation or partnership, tenant's
corporate or partnership status shall continuously be in good standing and
active and current with the state of its incorporation and the state in which
the Building is located at the time of execution of the Lease and at all
times thereafter. Tenant shall keep its corporate status active and current
throughout the Lease Term or any extensions or renewals. Tenant shall
annually file with Landlord a current copy of the Certificate of Good
Standing under Seal. Failure of Tenant to keep its corporate or partnership
status active and current shall constitute a default under the terms of the
Lease. In the event this Lease is signed on behalf of Tenant by a person in a
representative capacity, each of the person or persons signing in such
capacity represents and warrants to the Landlord and its successors and
assigns that:
9.8.1.1 Their execution and delivery of this lease
has been duly and validly authorized and all requisite actions have been
taken to make it valid and binding on the entity they represent.
9.8.1.2 The entity they represent will, on the
date of the commencement of and at all times during the term of this Lease,
be duly organized, validly existing and in good standing in the state of its
organization and entitled to conduct its business in the state where the
Premises is located.
9.8.2 The person or persons signing this Lease on behalf of
the Tenant shall be personally responsible for the Tenant's obligations under
this Lease.
Section 9.9 MISCELLANEOUS.
9.9.1 Landlord shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling materials,
steam, gas, electricity, water, rain or leaks from any part of the Premises
or from the pipes, appliances or plumbing works or from the roof, street or
subsurface or from any other place or by dampness or by any other cause of
whatsoever nature. All property of Tenant, including merchandise and
furnishings, kept or stored on the Premises shall be so kept or stored at the
risk of Tenant only and Tenant shall hold Landlord harmless from any and all
claims arising out of damage to same. If Landlord is required to make repairs
by reason of any act, omission or negligence of Tenant, any permitted
subtenants, concessionaires or their respective employees, agents, invitees,
licensees or contractors, the cost of such repairs shall be borne by Tenant
and shall be due and payable immediately upon receipt of Landlord's
notification of the amount due.
9.9.2 At Tenant's request, if Landlord provides any
miscellaneous services and/or supplies to Tenant or Tenant's Premises
(including by way of example, but not limited to: keys,
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LANDLORD TENANT
<PAGE>
directory strips, carpet cleaning, non-standard light bulbs, repairs, locks,
parking, overtime electricity usage) all charges for these services imposed
by Landlord shall be billed to Tenant and payable by Tenant as Additional
Rent. Landlord shall have the same remedies for failure to pay the same as
for non-payment of Fixed Minimum Rent. Tenant covenants and agrees to pay
Landlord all applicable sales tax or other taxes which may be imposed on the
above Additional Rent.
9.9.3 It is specifically understood and agreed that there
shall be no personal liability on Landlord in respect to any of the
covenants, conditions or provisions of this Lease; in the event of a breach
or default by Landlord of any of its obligations under this Lease, Tenant
shall look solely to the equity of Landlord in the Premises for the
satisfaction of Tenant's remedies. In the event of a sale or transfer of the
Building or any portion thereof which includes the Premises, or in the event
of the making of the lease of the Building or of any portion, or in the event
of a sale or transfer of the leasehold estate under any such underlying
lease, the grantor, transferor or Landlord, as the case may be, shall
thereafter be entirely relieved of all terms, covenants and obligations
thereafter to be performed by Landlord under this Lease to the extent of the
interest or portion so sold, transferred or leased, and it shall be deemed
and construed, without further agreement between the parties and the
purchaser, transferee or Tenant, as the case may be, has assumed and agreed
to carry out any and all covenants of Landlord hereunder.
9.9.4 The parties hereby waive trial by jury in any action,
proceeding or counter claim brought by either of the parties hereto against
the other or any matters whatsoever arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises, and/or claim of injury or damage.
9.9.5 In the event of a breach by Tenant of any of the
covenants or provision hereof, Landlord shall have, in addition to any other
remedies which it may have, the right to invoke any remedy allowed at law or
in equity, including injunctive relief, to enforce Landlord's rights or any
of them, as if re-entry and other remedies were not herein provided for.
9.9.6 In the event of any litigation arising out of
enforcement of this Lease, the prevailing party in such litigation shall be
entitled to recovery of all costs, including reasonable attorneys' fees.
9.9.7 Notwithstanding anything in this Lease to the
contrary, Landlord reserves all rights which any state or local laws, rules,
regulations or ordinances confer upon a Landlord against a Tenant in default.
This article shall apply to any renewals or extensions of this Lease.
9.9.8 This agreement shall be deemed to have been made in
Dade County, Florida and shall be interpreted, and the rights and liabilities
of the parties here determined, in accordance with the laws of the State of
Florida.
Section 9.10 FINANCIAL STATEMENTS.
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LANDLORD TENANT
<PAGE>
Tenant shall furnish Landlord, within five (5) business days after
Landlord's request therefor, an updated, current financial statement of
Tenant, Tenant's shareholders, and any guarantors of this Lease. Unless
Landlord has reason to believe there has been a material reduction in the
financial worth of any of such parties, such financial statement(s) shall not
be required to be furnished more than twice each calendar year as to Tenant,
its shareholders or partners, and each guarantor.
Section 9.11 RELOCATION.
Landlord may, at its expense, relocate Tenant to another location
in the Building, decorated by Landlord, without releasing Tenant of any
obligation under this Lease for the full Term. If Landlord remodels a
substantial portion of the Building and deems the Premises to be needed for
other purposes than this Lease, Landlord may relocate Tenant in the Building
or terminate this Lease.
Section 9.12 NON-WAIVER PROVISIONS.
9.12.1 The failure of Landlord to insist upon a strict
performance of any of the terms, conditions and covenants herein shall not be
deemed to be a waiver of any rights or remedies that Landlord may have and
shall not be deemed a waiver of any subsequent breach or default in the
terms, conditions and covenants herein contained except as may be expressly
waived in writing.
9.12.2 The maintenance of any action or proceeding to
recover possession of the Premises or any installment or installments of rent
or any other monies that may be due or become due from Tenant to Landlord
shall not preclude Landlord from thereafter instituting and maintaining
subsequent actions or proceedings for the recovery or possession of the
Premises or of any other monies that may be due or become due from Tenant
including all expenses, court costs and attorneys' fees and disbursements
incurred by Landlord in recovering possession of the Premises and all costs
and charges for the care of the Premises while vacant. Any entry or re-entry
by Landlord shall not be deemed to absolve or discharge Tenant from liability
hereunder.
9.12.3 If Landlord is delayed or prevented from performing
any of its obligations under this Lease by reason of strike, labor disputes,
or any cause whatsoever beyond Landlord's reasonable control, the period of
such delay or such prevention shall be deemed added to the time herein
provided for the performance of any obligation by Landlord.
Section 9.13 RADON GAS.
Pursuant to F.S. 404.056(8), Tenant is hereby notified that radon is
a naturally occurring radioactive gas that, when it has accumulated in a
building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public
health
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LANDLORD TENANT
<PAGE>
unit. In no event shall Landlord be liable for direct or indirect,
consequential or incidental damages arising from the existence or discovery
of radon in the Premises.
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LANDLORD TENANT
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant above duly executed
this Lease as of the day and year first above written, each
acknowledging receipt of an executed copy hereof.
WITNESSES: LANDLORD:
NWT PARTNERS, LTD., a _______
limited partnership
BY:_________________, Inc., a
_________________corporation,
General Partner
Name:
By:
________________________
Name: Vice President
[Corporate Seal]
TENANT:
PT-1 COMMUNICATIONS, INC.
Name:
By: /JOHN KLUSARITZ/
Name/Title: GENERAL COUNSEL
Name:
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LANDLORD TENANT
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
PARCEL I: Lots 1, 2 and 3 of Smith Subdivision of Lots 4, 5 and 6 in
Block 102 North, City of Miami, according to the plat thereof recorded in
Plat Book 3, page 5, Public Records of Dade County, Florida.
PARCEL II: Non-exclusive right-of-way and easement for a term of years
for ingress and egress from Parcel I to Northeast Third Avenue on and over
Lot 6, less North 28 ft. thereof, of Smith Subdivision of Lots 4,5 and 6, of
Block 102 North, City of Miami, according to the plat thereof in Plat Book 3
at page 5, Public Records of Dade County, Florida, as created by Right-of-Way
and Easement Agreement dated September 27, 1979, filed September 28, 1979
under CF 79R275271 and recorded in O.R. Book 10527 at pages 1401-1405, and as
assigned by assignment in O.R. Book 10527, page 1394, and as assigned by
assignment in O.R. Book 10971, page 1866, and as conveyed by Warranty Deed in
O.R. Book 12001, page 960, Public Records of Dade County, Florida.
PARCEL III: The South 24.00 feet of Lot 2 and all of Lot 3, in Block
102 North, City of Miami, A.L. Knowiton Map of Miami, according to the Plat
thereof recorded in Plat Book B, at page 41, of the Public Records of Dade
County, Florida.
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LANDLORD TENANT
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
1. At all times during the terms of this Lease, the Landlord
shall have the right by themselves, their agents, and employees, to enter
into and upon the Premises during reasonable business hours for the purpose
of examining and inspecting the same and determining whether the Tenant shall
have complied with his obligation under the Lease and the rules and
regulations contained herein, in respect to the care and maintenance of the
Premises and the repair or rebuilding of the improvements thereon, when
necessary.
2. Tenant shall not use the name of the Building for any
purpose other than Tenant's business address and shall never use a picture or
likeness of the Building or Premises in any advertisement, notice or
correspondence without Landlord's advance written consent hereto.
3. Tenant shall not make or permit any noise or odor that is
objectionable to the public, to other occupants of the Building, or to
Landlord to emanate from the premises and shall not create or maintain a
nuisance thereon and shall not disturb, solicit or canvass any occupant and
shall not do any act tending to injure the reputation of the Building or
Premises.
4. Tenant shall not place or permit any radio antenna, loud
speakers, sound amplifiers, or similar devices on the roof or outside of the
Building, or within the core area.
5. The sidewalks, entrances, passages, elevators, vestibules,
stairways, corridors and halls must not be obstructed or encumbered or used
for any purpose other than ingress and egress to and from the Premises.
6. With the exception of initially moving into or completely
moving out of the Tenant's Premises, supplies, goods, materials, packages,
furniture and all such items of every kind are to be delivered at the
entrance point provided therefore, through service elevators or dumbwaiters
to the Tenant, or in such manner as the Landlord may provide and the Landlord
is not responsible for the loss or the damage of any such property.
7. The Landlord may retain a pass key to the Premises. The
Tenant shall not alter any lock or install anew lock or a knocker on any door
of the Premises without written consent of the Landlord or the Landlord's
agent, provided, in case such consent is given, the Tenant shall make
provisions that the lock is compatible with the Landlord keying system
pursuant to the Landlord's right of access to the Premises.
8. Tenant shall, upon termination of the Lease or of Tenant's
possession, surrender all keys of the Premises to landlord at the Building
office and shall make known to Landlord the explanation of all combination
locks on safes, cabinets, and vaults in the Premises.
9. Tenant shall not install any concession or vending machines
in the Premises, and shall not sell from the Premises the following items:
cigars, cigarettes, tobacco, pipes, candies,
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LANDLORD TENANT
<PAGE>
newspapers, magazines, or greeting cards.
10. Landlord reserves the right to: (1) change the street
address of the Building; (2) install and maintain a sign or signs on the
exterior or interior of the Building; (3) designate all sources furnishing
sign painting and lettering and, and (4) take all measures as may be
necessary or desirable for the safety, protection or preservation of the
Premises of the Building.
11. All persons entering or leaving the Building after normal
Building operating hours, 7:00 A.M. - 7:00 P.M.; Monday through Friday, or at
any time during Saturdays, Sundays and holidays, may be required to do so
under such regulations as Landlord may impose.
12. Draperies and other window coverings installed by Tenant
will be of either non-combustible material such as fiberglass, metal mesh,
etc. or in lieu thereof have fabric treated with a flame retardant material.
13. Drapery traverse mechanisms shall be so arranged as to
permit the full opening of draperies and to provide sufficient over-travel
that the stacked draperies in the full open position shall have at least a
clearance of either window jam.
14. The Tenant shall not penetrate the exterior walls for ANY
REASON. All penetrations of interior walls for book shelves, pictures, or any
other reason must have the prior written consent of the Landlord.
15. The Landlord at all times shall have the right to
reasonably amend, modify or waive any of the foregoing rules and regulations
and to make such other and further rules and regulations as the landlord may
adopt.
16. No furniture, freight or equipment of any kind or nature
shall be brought into or removed from the Building or any demised premises
without the prior written consent of Landlord. All moving of the same by
tenant into, within or out of the Building, shall be done at such times and
in such manner as Landlord shall designate. Landlord shall have the right to
prescribe the weight, size and position of all safes and other heavy property
brought into the Building. As security for any damage done to the Building or
the Premises, by tenant or tenant's movers, contractors, vendors, lessors, or
employees, in connection with any move into, within or out of the Building;,
tenant shall deposit with Landlord a moving security deposit in the amount of
$0.00, which shall be deposited with Landlord (i) at the time of execution of
the lease for a new lease, (ii) at least ten (10) days prior to moving out of
the Building any furniture, freight or equipment of tenant (by tenant or any
lessor to tenant) at the termination of the lease term, or (iii) at least ten
(10) days prior to any move within the Building or moving in or out of the
Building during the term of the lease any furniture, freight or equipment (by
tenant or any lessor to tenant). Any claims by Landlord against such deposit
shall be made by Landlord within ten (10) days after the particular move
into, within or out of the Building to which such deposit applies. The terms
and conditions of Section 10.1 of the Lease regarding the Security Deposit
shall apply to this deposit, provided, however, if no claim has been made by
Landlord to
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LANDLORD TENANT
<PAGE>
tenant within the aforesaid ten (10) day period of time, or if a claim has
been made by Landlord for less than all of such deposit, the balance of such
deposit shall be delivered to tenant within fifteen (15)days after the
respective move has taken place. If such moving security deposit is not given
to Landlord by such tenant within the appropriate time period, Landlord may
at its sole, but reasonable discretion prevent any move by tenant of any
furniture, freight or equipment into, within or out of the Building. All
damage done to the Building by such moving or maintaining any safe or heavy
property shall be repaired at the expense of the tenant. In the event a
tenant engages the services of a moving company, such tenant shall provide
Landlord with a certificate on Form ACORD 27 from such tenant's and such
mover's respective insurance carrier (which carrier(s) shall be reasonably
satisfactory to Landlord) naming Landlord as an additional insured and
stating that such insurance coverage shall not be terminated without at least
fifteen (15) days prior written notice having been given to Landlord at
Landlord's address for notice in the lease. The exercise of any of Landlord's
rights under the moving security deposit shall not diminish or be in lieu of
Landlord's other rights against tenant or others under this lease or at law
or at equity.
The failure of the Landlord to seek redress for violation of, or
insist upon the strict performance of, any covenant or conditions of this
Lease or any of the rules and regulations set forth above or hereafter
adopted by Landlord, shall not prevent a subsequent act, which would have
originally constituted a violation. The receipt by Landlord of Rent with
knowledge of the breach of any covenant of this Lease or breach of these
rules and regulations shall not be deemed a waiver of such breach. The
failure of Landlord to enforce any of these rules and regulations as set
forth above or hereafter adopted against the Tenant and/or any other tenant
in the Building shall not be deemed a waiver of any such rules and
regulations.
Landlord shall not be liable to Tenant for violations of any said
rules and regulations or the breach of any covenant or condition in any Lease
by any other tenant in the Building.
No act or thing done or omitted to be done by Landlord or Landlord's
agents during the term of the Lease which is necessary to enforce these rules
and regulations shall constitute an eviction by Landlord. No employee of
Landlord or Landlord's agent shall have any power to accept the keys of said
Premises prior to the termination of the Lease. The delivery of keys to any
employee of Landlord or Landlord's agents shall not operate as a termination
of the Lease or a surrender of the Premises.
The rules and regulations shall be binding upon heirs, successors,
representatives and assigns of the Tenant.
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LANDLORD TENANT
<PAGE>
TELECOMMUNICATIONS RIDER
TO OFFICE LEASE FOR NEW WORLD TOWER
NWT PARTNERS, LTD. LANDLORD
PT-1 COMMUNICATION, INC., TENANT
R.1. OPTION TO RENEW.
1.01 So long as this Lease is in full force and effect and
Tenant is not in default under any of the Lease provisions, and no condition
exists which with notice or passage of time would constitute a default by
Tenant under this Lease, Landlord grants to Tenant an option to renew the
Lease ("Option to Renew") for one Option Period of five (5) years each,
subject to the following provisions.
(a) Tenant shall provide written notice to Landlord of
Tenant's intent to renew the Lease not less than twelve (12) months and not
more than twenty-four (24) months prior to the expiration date of the
then-current Lease Term.
(b) The Option to Renew shall be void if at any time during
the last twenty four (24) months of the then current Lease Term (including,
but not limited to, the period of time between the date of the exercise of
the Option and the date upon which the current Lease Term would normally
expire) the Landlord, in order to enforce its rights under the Lease has in
good faith and with reasonable basis under this Lease and applicable law (i)
brought an action to collect Rent from Tenant, or (ii) brought an action to
recover possession of the Premises from Tenant; or (iii) brought an action to
dispossess Tenant.
(c) All other terms and conditions of the Lease shall remain
unchanged with the exceptions that (i) there shall be no further option to
renew; and ii) there shall be no Tenant's Initial Improvements or other
matters specific to the initial leasing of the Premises, and (iii) Fixed
Minimum Rent shall subject to increase during the first year and each
subsequent year of the Option Period at the rate of four (4%) percent per
annum over the Fixed Minimum Rent in effect at the end of the preceding lease
year.
R.2. CONSTRUCTION OF TENANT IMPROVEMENTS.
2.01 As set forth in Section I.2.13 on the
BASIC TERM SHEET, Tenant shall receive a total construction allowance in the
amount of $103,530.00 (the "Allowance"), which shall be applied towards
leasehold improvements over the base Building. For purposes of this
paragraph, leasehold improvements may specifically include, but not be
limited to, construction of Tenant improvements, the cost of Tenant's
architectural design services, plans, engineering costs, Tenant's purchase
and installation of equipment including telephone and computer equipment and
cabling, (provided that none of such equipment and cabling used by Tenant for
the purpose of providing its telecommunications business to its customers
shall be eligible for such allowance), and costs of Tenant's construction
coordinator, and any other applicable internal and/or external costs incurred
by Tenant. Tenant may hire its own interior
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LANDLORD TENANT
<PAGE>
designer/architect to be compensated out of the Allowance. In addition, the
cost of any electrical, mechanical, and structural engineering, including all
plans, permits, licenses, and fees that are related to the development of the
Premises may be paid by Tenant out of the Allowance. To the extent that any
portion of the Allowance to be contributed by Landlord under this paragraph
by abatement of Rent does not apply to the initial construction of Tenant's
Improvements to the Premises, the remaining amount of the abatement of Rent
shall be terminated. All such monthly abatements of Rent shall be subject to
receipt by Landlord of appropriate waivers of liens by all contractors,
subcontractors and materialmen on progress payments and final payment.
R.3. COMPLETE STATEMENT OF LANDLORD WORK.
3.01 Except as set forth in this section, Tenant
is taking the Premises in its "as-is" condition, existing as of the execution
of this Lease, which Tenant acknowledges that Tenant has inspected. Other
than as to that the electrical and mechanical systems are in good working
order to the mechanical room on the 3rd floor of the Building, as to which
Landlord warrants and represents that such systems are as represented,
Landlord specifically disclaims all warranties or representations as to the
condition of the Premises, including the warranties of merchantability and
fitness for a particular purpose, which disclaimer is acknowledged by Tenant
as a material inducement to entry into this Lease on the part of Landlord.
R.4. SUBMETERING.
4.01 Since Tenant's use of electricity and air conditioning shall be above
building standard, Tenant shall obtain and pay for at its own expense
Tenant's entire supply of electric current by submeter arrangement whereby
Tenant's monthly kilowatt hour usage shall be paid by Tenant. Tenant shall
pay for the installation of such submeter. Landlord shall read the submeter
at the end of each calendar month and forward to Tenant an invoice detailing
the amount of money necessary to reimburse Landlord for the cost of
electricity used by Tenant for each such month, which amount shall be deemed
Additional Rent. Tenant shall pay Landlord this amount within ten (10) days
of receipt of such invoice. Tenant may use a portion of the mechanical room
on the 19th floor for its air conditioner condenser unit.
R.5. ALTERATIONS.
5.01 The following provisions supplement but do not replace the provisions of
this Lease related to alterations and repairs of the Premises by Tenant;
where these provisions conflict with the other provisions of the Lease,
however, the following provisions shall control.
(a) Landlord shall have the right to approve
the general contractor, construction manager, subcontractor, architect and
engineer which Tenant may select; for electrical work connecting to
Landlord's core electrical systems, however, Tenant shall utilize Landlord's
contractor(s), provided their pricing is reasonably competitive with other
bids, such decision to be made by Tenant within ten (10) days after
submission of
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LANDLORD TENANT
<PAGE>
Tenant's receipt of bids. If Landlord's contractors' prices are not
reasonably competitive with other bids, then Tenant shall have the right to
solicit independent bids from electrical contractors reasonably satisfactory
to Landlord.
(b) Prior to commencing any alterations, Tenant shall
submit plans and specifications to Landlord , which shall be approved or
disapproved within thirty (30) business days after submission to Landlord.
Landlord hereby notifies Tenant, and Tenant hereby agrees to be bound by such
notification, that all fixtures and equipment built or installed by Tenant in
the Premises and on the Roof shall be required to be removed by Tenant at the
end of the Lease Term, at Tenant's sole cost and expense, in a manner that
shall comply with all applicable terms and conditions for the original
installation thereof as are in effect at the time of such removal leaving the
said Premises and Roof in the same condition as they were at the commencement
of this Lease ordinary wear and tear excepted.
R.6. EQUIPMENT AND OPERATING RIGHTS; LICENSE FOR ACCESS.
6.01 So long as this Lease is in full force and effect and Tenant is not in
default under any of its provisions, Tenant shall, subject to the provisions
of this Lease and License and to Landlord's reasonable rules and regulations
therefor as promulgated from time to time, have a nonexclusive license (the
"License") (a) to install, operate, maintain, repair and replace cable within
vertical and horizontal shafts of the Building; (b) have the nonexclusive use
of the Building risers at such locations as may be required for Tenant's
business needs and as reasonably approved by Landlord from time to time; (c)
have the right to install at Tenant's sole cost and expense up to two (2)
four-inch conduit risers in the mechanical closets area of the Building, to
run the height of the Building to the 19th Floor for the purpose of
installing the cable described in (a); (d) install an emergency generator on
the third floor of the Building in a location reasonably satisfactory to
Landlord; (e) install connections to Landlord's fuel tank and to Landlord's
emergency generator in locations reasonably satisfactory to Landlord;(f)
install up to __ tons of HVAC equipment as set forth on Exhibit A; (g)
install electrical system as set forth on Exhibit A; (h) install certain life
safety systems as set forth on Exhibit A; all of (a) through (h) being for
the purpose of Tenant providing telecommunications services to its customers.
All of the shafts, risers and other areas designated by Landlord for such
License use are referred to in this Section R6 as the "License Area" and are
subject to and shall be installed, operated, maintained, repaired, replaced
and removed in accordance with the terms and conditions of Exhibit A,
Equipment and Operating Rider, annexed hereto.
6.02 Subject to Tenant's receipt of all applicable governmental permits and
licenses required by law, prior to installation, and at Tenant's sole cost,
following notice to and approval by Landlord, Tenant shall have a right to
construct in the License Area, where necessary for such purposes, conduit
facilities for the provision of telecommunications services in the Building.
Such conduits shall be limited in size and location so as not to interfere
with the Building systems and to allow other uses
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LANDLORD TENANT
<PAGE>
deemed reasonable or necessary by Landlord in the vertical shafts and all
other areas of the Building.
6.03 The license granted in this Rider is not exclusive. Landlord reserves
the right to grant, renew or extend similar licenses, and unrelated licenses
and agreements for use, to others. Nothing contained in this Rider shall be
construed as granting to Tenant any property or ownership rights in the
Building or to create a partnership or joint venture between Landlord or
Tenant. Tenant's rights as to all areas of the Building other than the
Premises are granted as a license only, and Tenant (notwithstanding the fact
that the term "Tenant" is used in reference to it) is a licensee only with no
additional rights as might accrue to a tenant under landlord/tenant or any
other law.
6.04 Tenant shall use the License Area and Tenant's facilities within it only
for the provision of telecommunications services and for no other purpose. If
any electrical panels or meters for such facilities are required, they shall
be installed only with Landlord's prior consent, which shall not be
unreasonably withheld, delayed or conditioned, in accordance with all terms
and provisions of this Lease and License, and at Tenant's sole cost and
expense, for initial installation, maintenance, ongoing costs, and (unless
Landlord requires that such facilities not be removed) removal.
6.05 Prior to the commencement of any work in the License Area, Tenant shall,
at its sole cost and expense, prepare and deliver to Landlord working
drawings, plans and specifications (the "Plans"), detailing the location,
size and type of any facilities and improvements to be constructed or
installed in the License Area. Landlord shall approve all such Plans in
writing, and no construction or installation shall occur without such
approval. All construction and installation shall be done in a safe manner
consistent with the highest generally accepted construction standards; shall
be done in a manner which will prevent interference with the operation of the
Building; shall not begin until all applicable federal, state, and local
permits, licenses and approvals have been obtained and all applicable
insurance coverage has been obtained and paid for; and shall be in accord
with all provisions and terms of the Lease.
6.06 Tenant shall promptly and satisfactorily repair all damage to the
Building and its contents caused by or related to or growing out of Tenant's
use of this License. Tenant shall comply with all federal, state, and local
laws, orders, rules and regulations applicable to the facilities and the
License Area and Tenant's use of them. Tenant shall not disrupt, adversely
affect, or interfere with other providers of services in the Building or with
any of the Building's occupants' use and enjoyment of its premises or of the
common areas of the Building. Notwithstanding that the License Area is
subject to Tenant's use under a license agreement, Tenant's use thereof is
subject to all provisions of the Lease as anticipated or described for the
Premises and, accordingly, all references in the Lease to the Premises
(except for the provisions which provide that the Premises are leased to
Tenant) shall be deemed to include the License Area to the extent that Tenant
utilizes such area in any way. By way of illustration but not of limitation,
all insurance
_______________/ JK
LANDLORD TENANT
<PAGE>
required of Tenant as to the Premises shall also include the License Area.
6.07 In the event of a default under the Lease, including this Rider,
Landlord may, but shall not be obligated to, exercise any or any combination
of rights which it has, as to the License Area, the Premises, or both, as
licensor and/or as landlord, in law, in equity and/or under this Lease.
6.08 The License granted in this Section is granted for the additional
consideration of $1,200.00 per month, plus applicable taxes (subject to a 4%
annual increase after the first year of the Lease Term and in any extension
terms beyond the initial lease term in the manner set forth in Section 1.2.11
of the Lease). In the event Tenant does not use its own emergency generator,
but uses only Landlord's emergency generator, in accordance with Section 3 of
Exhibit A, the monthly license fee shall be reduced to $900.00.
6.09 All of the above equipment installed by Tenant shall, if not removed by
Tenant in accordance with Section 5.01 c of this Rider, become the property
of Landlord and be surrendered with the Premises upon the termination of this
License or Tenant's right to possession under it. Notwithstanding anything to
the contrary in this Lease, a termination of the Lease shall be a termination
of this License, and a termination of Tenant's right of possession under the
Lease shall be a termination of Tenant's right of possession under this
License.
_______________/ JK
LANDLORD TENANT
<PAGE>
EXHIBIT "A"
EQUIPMENT AND OPERATING RIGHTS
The following are the specifications and conditions for use in the
installation and operation of equipment on the Premises and the obligations
of the Landlord and Tenant with respect thereto.
1. CONDUIT/RISER
a. Tenant shall have the right to install two four inch conduits ("Main
Conduits") in the existing riser space within the mechanical closets in the
Building, which shall run the entire height of the Building to connect
Tenant's telecommunications facility to its Premises and to other tenants
in the Building. Tenant shall also have the right to run feeder conduit,
the location of which shall be reasonably designated by Landlord stemming
from the Main Conduit to connect to each telecommunications tenant on each
floor. There shall be no additional compensation payable by Tenant for such
right to use and place conduit and cable except for a monthly charge as set
forth and as increased during the term of this License in the manner set
forth in Section 6.08 of the Rider which charge shall be deemed Additional
Rent, for access to the generator and fuel storage space and all conduit.
All such conduits and cable shall be installed by Tenant in accordance with
the terms of the Lease, including, but not limited to, Articles V and VI
thereof, and shall generally be installed pursuant to local zoning,
building and fire safety codes, shall comply with all applicable Federal
Communications Commission ("FCC") rules and regulations, and shall comply
with all Fire Underwriters' and Insurance Underwriters' requirements. In
the event any planned breach in the Chases would compromise the fire safety
of the Building, in the opinion of the Legal Authorities or the Fire
Underwriters or Insurance Underwriters, Tenant, at its sole cost and
expense, shall promptly take those reasonable steps necessary to cure any
such problems provided that such cure is effected to the satisfaction of
the Legal Authorities, the Fire Underwriters and the Insurance
Underwriters; is commenced within ten (10) business days after receipt by
Tenant of the notice referred to above; and is completed by Tenant within
thirty (30) days thereafter. If such conditions are not complied with by
Tenant, Landlord may, in its sole discretion, determine whether to permit
the installation of any feeder conduit, and if any feeder conduit is
permitted by Landlord, what restrictions must be placed upon such
installation, maintenance and operation thereof. No such approval,
determination or restrictions set by Landlord shall operate to render
Landlord liable for any injury or damage done by any such feeder conduit or
opening in the Chases; and Tenant shall remain fully liable for the
installation, maintenance and operation of such feeder conduit and openings
in the Chases.
b. Subject to providing reasonable prior written notice thereof to Landlord at
least two (2) business days in advance of any such entry, Tenant is granted
the limited right to enter onto Landlord's property for the purpose of
carrying out all of Tenant's rights hereunder, subject to the terms of the
Lease and generally to be effected without any danger or inconvenience to
the Landlord, any other tenants in the Building, or any property in or of
the Building, nor to adversely affect the use or value
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LANDLORD TENANT
<PAGE>
of any conduit and cable currently installed in the Building by any
other tenant.
c. In the event any of the conduit and cable and all the other equipment
referred to in this Rider installed by Tenant has not been removed by
Tenant upon the termination of this Lease as provided for in the Lease,
Landlord may at its option (i) remove the same at the cost and expense of
Tenant or (ii) the same shall become the property of Landlord and shall be
surrendered with the Premises upon expiration or termination of the Lease
as provided in the Lease.
2. HVAC SYSTEMS
a. Tenant shall have the right to install up to 80 tons of HVAC equipment for
the Premises. Tenant shall be allocated the space in the mechanical room on
the 19th Floor, of the Building in which to place all of the condenser
units for the HVAC equipment.
b. Tenant shall have the right to remove or cap any HVAC system currently in
the Premises for the term of the Lease, subject to the terms of Section 6 a
of this Exhibit A.
c. Tenant shall have the right to install drains for its HVAC equipment either
within the mechanical room on the 19th floor or, if not feasible there, to
be tied in to the Building's waste sewer system.
d. Landlord's approval of this or any other specification or material to be
used in the construction of Tenant Improvements under this Rider and the
Lease shall not be deemed as a guaranty of the fitness for use or a
particular purpose or as a warranty of any of such specifications or
material by Landlord. All work done under this Rider shall be done in
compliance with all applicable local building, safety and zoning Codes, all
applicable Fire Underwriters' and Insurance Underwriters' requirements and
all rules and regulations of OSHA and the Americans with Disabilities Act.
3. ELECTRICAL SYSTEMS
a. Landlord shall provide access at the main power vault of the Building to
7,000 amps, 277/480 volts, three phase alternating current of electric
capacity to Tenant. Tenant shall be given access for installation of two
additional four inch conduits to run Tenant's electrical power from the
electrical vault to the Premises. Tenant's use of such access shall be
subject to the terms of the Lease and generally shall be effected without
any danger or inconvenience to the Landlord or to any other tenants in the
Building, and shall not adversely affect the use or value of any conduit
and cable currently installed in the Building by the Landlord or by any
other tenant.
b. Tenant shall be provided reasonably adequate space on the third floor of
the Building to install at Tenant's sole cost and expense one diesel
generator NOT TO EXCEED 500 KW where indicated on the attached Exhibit A-1.
c. Tenant shall be provided reasonably adequate access to install at Tenant's
expense connections to Landlord's 1500 KW volt diesel Emergency Generator
which Landlord is currently installing. The terms and conditions of use of
the Emergency Generator are as follows: (1) Tenant is granted the right to
use up to ____ kilowatts of emergency power from such Emergency Generator
commencing on the date such Emergency Generator is fully operational (such
date to be determined by Landlord in its sole discretion) in the event of
an interruption of normal electrical
_______________/ JK
LANDLORD TENANT
<PAGE>
service to the Premises during the Lease Term, provided that: (a) Tenant
notifies Landlord in writing within thirty (30) days following the Lease
Commencement Date of the number of kilowatts (not to exceed ___ kilowatts)
of emergency power which Tenant reserves the right to use; (b) Tenant pays
Landlord, at the time of notification in (a) above, a one time fee in an
amount equal to $500.00 per kilowatt of emergency power so reserved; and
(c) Tenant pays Landlord as Additional Rent under the Lease a monthly sum
in an amount reasonably determined by Landlord in good faith based upon the
amount of emergency power reserved by Tenant, and Landlord's costs of
operation, use, maintenance, fuel, oil, governmental permits, licenses and
fees, insurance, Landlord's profit and administration and other expenses
relating to the Emergency Generator. The monthly amount of the Additional
Rent described in item (c) initially shall be $1.20 per kilowatt reserved
per month. Tenant shall also pay the costs to connect Tenant's Premises to
the Emergency Generator as described in Section 4 of this paragraph below.
(2) Each such payment described in subparagraph 1 (c)above shall be due on
the first day of each month with Tenant's other Rent payments, with the
first such payment due on the Rent Commencement Date. Such monthly amount
may be adjusted annually, in Landlord's discretion, during the term of the
Lease and any extensions thereof. (3) Tenant's use of such emergency power
shall be in accordance with such reasonable rules and regulations as may be
established by Landlord from time to time. (4) Landlord shall repair and
maintain the Emergency Generator, provided that Tenant shall reimburse
Landlord upon demand, as Additional Rent hereunder, for the cost of any
repairs or extraordinary maintenance for the Emergency Generator
necessitated by acts of Tenant or Tenant's employees, contractors, agents,
licensees, invitees, assignees or sublessees. In addition, any installation
of equipment, wiring or cabling in the Premises or the Building for the
purpose of enabling Tenant to access the Emergency Generator shall be
performed by Landlord in accordance with plans and specifications approved
by the parties in writing in advance, and Tenant shall reimburse Landlord
for the costs of such installation, including, but not limited to, design
fees and costs of demolition, plus Landlord's administrative fee of 10% of
the installation and connection costs. (5) The provision of Emergency
Generator service by Landlord to Tenant shall be subject to the provisions
of Article III of the Lease. (6) If Tenant elects to use the Emergency
Generator as described in Subparagraph c 1 above, but the Emergency
Generator referred to in Subparagraph c 1 is not fully operational by the
Rent Commencement Date, as determined by Landlord in its sole discretion,
Tenant shall have the right to connect Tenant's Premises temporarily to one
of the other currently existing emergency generators in the Building,
including that installed by Tenant, as designated by Landlord, provided
that: (a) all of the terms and conditions set forth in this Rider shall
apply to Tenant's right to use power from such other emergency generator in
the same fashion as if Tenant had exercised its right to use power from the
new Emergency Generator being installed; (b) if such other emergency
generator belongs to a party other than Landlord, Landlord has been able to
procure consent of such third party to Tenant's connection to such other
emergency generator and Tenant shall pay the entire cost of such connection
and any other charges levied by such third party; (c) within thirty (30)
days following Tenant's receipt of notice from Landlord that the new
Emergency Generator is fully operational, Tenant must
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LANDLORD TENANT
<PAGE>
disconnect, at its own expense, Tenant's Premises from such other existing
emergency generator and connect, at its expense, Tenant's Premises to such
new Emergency Generator, as described in more detail in subparagraph 4
above; and (d) once connected to the new Emergency Generator, Tenant's
right to use emergency power from such new Emergency Generator remains
subject to the terms and conditions set forth in this Rider.
d. Tenant shall have the right to install a connection to Landlord's
electrical ground to be accessible on the __ floor, in accordance with
equipment specifications and requirements reasonably satisfactory to
Landlord, and all applicable laws.
4. STRUCTURAL
Landlord makes no warranties or representations regarding the load bearing
capacity of the floors in the Premises and the Building generally or the
suitability of the Premises for Tenant's use. Tenant has inspected the
Premises and accepts it "As-Is" "Where-Is".
a. Tenant's floor load bearing capacity needs are as follows:
Equipment: 86 lbs./usable sq. ft.
Batteries: 480 lbs./usable sq. ft.
Office: 60 lbs./usable sq. ft.
5. LIFE SAFETY
a. Tenant shall have the right to install a water based fire suppression
system independent of the Building's systems. Such system shall be
connected to the Building's life safety system, if compatible. Such system
shall not use Halon or any similar chemical that may have a materially
adverse health affect on human beings. Any such installation and the
operation of such system shall be done in compliance with all local
building, zoning and safety codes, all applicable Fire Underwriters' and
Insurance Underwriters" requirements and all rules and regulations of OSHA
and the Americans with Disabilities Act and all Legal Requirements.
b. If applicable, Tenant shall have the right to modify the Building's fire
sprinkler system serving the Premises to a dry pipe system, if permitted by
and in compliance with all applicable local building, zoning and fire
safety codes, fire underwriters and insurance underwriters' requirements.
6. OTHER
a. Tenant shall have the right if it is then not in default under the Lease to
remove any or all of its equipment, including generators, HVAC, batteries,
UPS systems, and the like, from the Premises at any time during the term of
the Lease. At the expiration or termination of the Lease, Tenant shall
either (i) leave the Premises in the same condition as it was on the date
prior to any Tenant Improvements being commenced in the Premises or (ii)
leave the Premises with all of the alterations and additions and equipment
installed therein. Tenant shall notify Landlord of its decision under the
preceding sentence in writing no later than six (6) months prior to the
date upon which Tenant intends to quit the Premises.
_______________/ JK
LANDLORD TENANT
<PAGE>
CO-LOCATION RIDER
Landlord acknowledges that Tenant's business to be conducted on the
Premises requires the installation of certain communications equipment owned
by telecommunication customers and co-locators of Tenant ("Permitted
Licensees") in the Premises for the Permitted Licensees to interconnect with
Tenant's terminal facilities. Accordingly, Landlord agrees not to
unreasonably withhold, delay or condition its consent to Tenant's right to
license co-location agreements (collectively, "Permitted Agreements") with,
the Permitted Licensees, but the Permitted Agreements shall be subject to the
provisions of the following paragraph.
Lessee shall provide Lessor with copies of such proposed Permitted
Agreements with a request for Landlord's approval thereof, at least fifteen
(15) business days prior to the proposed effective date of such Permitted
Agreements, and Landlord shall respond to such request within ten (10)
business days. Tenant acknowledges that the Permitted Agreements shall be
subject and subordinate to this Lease and to any mortgages, deeds of trust,
or land sale contracts (collectively, "Encumbrances") now or in the future
encumbering the Premises. All Permitted Agreements shall contain provisions
(a) unconditionally acknowledging and agreeing to such subordination; (b)
requiring the parties thereto to execute such documents as may reasonably be
requested by the Landlord or the holder of the Encumbrance to evidence the
subordination; (c) disclaiming any right or interest in the Premises or the
Lease; (d) affirming that the rights to locate switches and other items in
the Premises shall terminate as and when the Lease expires or is sooner
terminated; and (e) requiring, notwithstanding any provision of the Permitted
Agreement, that the parties thereto comply with all obligations imposed on
Tenant under this lease to the extent relating to the portion of the Premises
in question, including without limitation, the rules and regulations from
time to time in effect under the Lease and the insurance requirements
thereof. Tenant shall be liable to Landlord for any violation by its
Permitted Licenses of any provisions of this Lease.
_______________/ JK
LANDLORD TENANT
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
CEO Telecommunications, Inc. California
CEO California Telecommunications, Inc. California
Helvey Com, L.L.C. Delaware
AS Telecommunications, Inc. Arizona
Lucius Enterprises, Inc. California
Grupo Bunden, S.A. de C.V. Mexico
Grupo Palafox-Toledo, S.A. de C.V. Mexico
Servicios Sumosierra S.A. de C.V. Mexico
Grupo Industrial Arvilla S.A. de C.V. Mexico
PT-1 Communications, Inc. New York
Phonetime Technologies, Inc. Delaware
PT-1 Long Distance, Inc. Delaware
PT-1 Phonecard, L.P. Texas
PT-1 Holdings I, Inc. Delaware
PT-1 Holdings II, Inc. Delaware
Nationwide Distributors, Inc. Delaware
Platform Services, L.P. Delaware
Investment Services, Inc. Delaware
Bayonne, S.A. de C.V. Mexico
Morningside, S.A. de C.V. Mexico
Milhouse, S.A. de C.V. Mexico
PT-1 Communications Canada, Inc. Canada
PT-1 Communications Puerto Rico, Inc. Delaware
STAR Telecommunications, S.a.r.l. Switzerland
STAR Telecommunications (France) Holding, Eurl. France
STAR Telecommunications France France
STAR Telecommunications Holding, GmbH Germany
STAR Telecommunications Deutschland, GmbH Germany
STAR Europe Ltd. United Kingdom
Romborg Holding, B.V. Netherlands
STAR Telecommunications Australia Pty., Ltd. Australia
Asian Datanet, Inc. Japan (50%)
STAR Telecommunications Japan, Inc. Japan (51%)
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated April 14, 2000 included in this Form 10-K into
the Company's previously filed Registration Statements File No. 333-29681 and
333-32083 pertaining to STAR Telecommunications, Inc. 1997 Omnibus Stock
Incentive Plan, 1996 Stock Incentive Plan, 1996 Outside Director Non Statutory
Stock Option and Employment/Consulting Agreements.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS,
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND CONSOLIDATED STATEMENTS OF
CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 25,561
<SECURITIES> 1,482
<RECEIVABLES> 214,110
<ALLOWANCES> 46,707
<INVENTORY> 1,088
<CURRENT-ASSETS> 235,086
<PP&E> 414,748
<DEPRECIATION> (51,659)
<TOTAL-ASSETS> 807,754
<CURRENT-LIABILITIES> 433,007
<BONDS> 67,852
0
0
<COMMON> 58
<OTHER-SE> 277,996
<TOTAL-LIABILITY-AND-EQUITY> 807,754
<SALES> 0
<TOTAL-REVENUES> 1,061,774
<CGS> 0
<TOTAL-COSTS> 1,131,387
<OTHER-EXPENSES> 1,373
<LOSS-PROVISION> 25,003
<INTEREST-EXPENSE> 9,895
<INCOME-PRETAX> (75,943)
<INCOME-TAX> (12,096)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,847)
<EPS-BASIC> (1.12)
<EPS-DILUTED> (1.12)
</TABLE>
