<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RSL COMMUNICATIONS PLC
(Exact Name of Registrant as Specified in its Charter)
RSL COMMUNICATIONS, LTD.
(Exact Name of Registrant with respect to the Guarantee)
<TABLE>
<S> <C> <C>
UNITED KINGDOM 4813 N/A
BERMUDA 4813 N/A
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S.Employer
Incorporation) Classification Code Number) Identification Number)
</TABLE>
CLARENDON HOUSE
CHURCH STREET
HAMILTON HM CX BERMUDA
(441) 295-2832
(Address, including zip code, and telephone number, including area code, of each
Registrant's principal executive offices)
ITZHAK FISHER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RSL COMMUNICATIONS, N. AMERICA, INC.
767 FIFTH AVENUE, SUITE 4300
NEW YORK, NY 10153
(212) 317-1800
(Name, address, including zip code, and telephone number, including area
code, of agent for service for each Registrant)
------------------------------
COPY TO:
ROBERT L. KOHL, ESQ.
ROSENMAN & COLIN LLP
575 MADISON AVENUE
NEW YORK, NY 10022
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE (1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
$300,000,000
12 1/4% Senior Notes due 2006............... Principal Amount 100% $100,000,000 $30,304(2)
Guarantee of 12 1/4% Senior Notes due 2006
by RSL Communications, Ltd................ -- -- -- (3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
(2) Based on one-third of the principal amount of the notes offered pursuant to
Rule 457(f)(2) under the Securities Act of 1933.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no registration
fee is payable with respect to the Guarantee.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET TO FORM S-4
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages;
Prospectus Summary; Business
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Prospectus Summary; Risk Factors; Selected
Consolidated Financial Data;
4. Terms of the Transaction............................ Prospectus Summary; The Exchange Offer; Description
of the Exchange Notes; Certain United Kingdom Tax
Considerations for U.S. Holders of Notes; Certain
U.S. Federal Income Tax Consequences
5. PRO FORMA Financial Information..................... (1)
6. Material Contracts with the Company Being
Acquired............................................ (1)
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... (1)
8. Interests of Named Experts and Counsel.............. Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... (1)
10. Information With Respect to S-3 Registrants......... (1)
11. Incorporation of Certain Information by Reference... (1)
12. Information With Respect to S-2 or S-3
Registrants......................................... (1)
13. Incorporation of Certain Information by Reference... (1)
14. Information With Respect to Registrants Other Than
S-2 or S-3 Registrants..............................
(a) Description of Business......................... Prospectus Summary; Business
(b) Description of Property......................... Prospectus Summary; Business--Properties
(c) Legal Proceedings............................... Business--Certain Legal Proceedings
(d) Dividends and Related Stockholders Matters...... (1)
(e) Financial Statements............................ Selected Consolidated Financial Data
(f) Selected Financial Data......................... Prospectus Summary; Selected Consolidated Financial
Data
(g) Supplementary Financial Information............. (1)
(h) Management's Discussion and Analysis of
Financial Condition and Results of Operations... Management's Discussion and Analysis of Financial
Condition and Results of Operations
(i) Disagreements with Accountants.................. (1)
15. Information With Respect to S-3 Companies........... (1)
16. Information With Respect to S-2 or S-3 Companies.... (1)
17. Information With Respect to Companies Other than S-2
or S-3 Companies.................................... (1)
18. Information if Proxies, Consents or Authorizations
Are to be Solicited................................. (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
19. Information if Proxies, Consents or Authorizations
Are Not to be Solicited, or in an Exchange Offer.... (1)
(a) Statement that Proxies are not to be
Solicited....................................... (1)
(b) Date, Time and Place of the Meeting of Security
Holders......................................... (1)
(c) Dissenters' Rights of Appraisal................. (1)
(d) Material Interests or Affiliates in the Company
Being Acquired.................................. (1)
(e) Voting Securities and Principal Holders
Thereof......................................... Prospectus Summary; Management; Certain
Relationships and Related Transactions; Principal
Shareholders
(f) Vote Required for Approval...................... (1)
(g) Directors and Executive Officers................ Management
(h) Executive Compensation.......................... Management
(i) Certain Relationships and Related
Transactions.................................... Management; Certain Relationships and Related
Transactions; Principal Shareholders
</TABLE>
- ------------------------
(1) Omitted from Prospectus because the item is inapplicable or the answer is in
the negative.
<PAGE>
[LOGO]
PROSPECTUS
EXCHANGE OFFER FOR
$300,000,000
12 1/4% SENIOR NOTES DUE 2006
GUARANTEED BY
RSL COMMUNICATIONS, LTD.
TERMS OF EXCHANGE OFFER
- Expires 5:00 p.m., New York City time, May 22, 1997, unless extended
- Not subject to any condition other than that the Exchange Offer not
violate applicable law or any applicable interpretation of the Staff of
the Securities and Exchange Commission
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged
- Tenders of outstanding notes may be withdrawn any time prior to the
expiration of the Exchange Offer
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes
- We will not receive any proceeds from the Exchange Offer
- The terms of the notes to be issued are substantially identical to the
outstanding notes, except for certain transfer restrictions and
registration rights relating to the outstanding notes
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR
HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
APRIL 24, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY.................................................................... 3
RISK FACTORS.......................................................................... 20
THE EXCHANGE OFFER.................................................................... 31
USE OF PROCEEDS....................................................................... 39
CAPITALIZATION........................................................................ 40
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS....................................... 41
SELECTED CONSOLIDATED FINANCIAL DATA.................................................. 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 45
BUSINESS.............................................................................. 58
MANAGEMENT............................................................................ 93
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................ 100
PRINCIPAL SHAREHOLDERS................................................................ 101
DESCRIPTION OF THE EXCHANGE NOTES..................................................... 103
DESCRIPTION OF CAPITAL STOCK.......................................................... 138
DESCRIPTION OF CERTAIN INDEBTEDNESS................................................... 144
CERTAIN UNITED KINGDOM TAX CONSIDERATIONS FOR U.S. HOLDERS OF NOTES................... 145
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS........................................ 145
PLAN OF DISTRIBUTION.................................................................. 145
LEGAL MATTERS......................................................................... 146
EXPERTS............................................................................... 146
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This
Prospectus includes specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this Prospectus in its entirety.
THE EXCHANGE OFFER
RSL Communications, Ltd. and RSL Communications PLC completed on October 3,
1996, the private offering of 300,000 units, each unit consisting of one 12 1/4%
Senior Note due 2006 of RSL Communications PLC and one warrant to purchase 1.815
Class A common shares of RSL Communications, Ltd. The units were sold for an
aggregate purchase price of $300 million. The notes are guaranteed by RSL
Communications, Ltd.
These two companies entered into a Notes Registration Rights Agreement with
the placement agents in the private offering in which we agreed, among other
things, to deliver to you this Prospectus and to complete the Exchange Offer on
or prior to June 1, 1997. You are entitled to exchange in the Exchange Offer
your notes for registered notes with substantially identical terms. If the
Exchange Offer is not completed on or prior to June 1, 1997, the interest rate
on the notes will be increased to 12 3/4% per year. You should read the
discussion under the heading "Summary of Terms of the Exchange Notes" and
"Description of the Exchange Notes" for further information regarding the
registered notes.
We believe that the notes issued in the Exchange Offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, subject to certain conditions. You should read the
discussion under the headings "Summary of the Exchange Offer" and "The Exchange
Offer" for further information regarding the Exchange Offer and resale of notes.
THE COMPANY
OVERVIEW
WHO WE ARE
Our company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services,
including long distance calling to over 200 countries, calling card, private
line and value-added services. The business is operated through subsidiaries of
RSL Communications, Ltd.
The following chart shows the organization of RSL Communications, Ltd. and
its major subsidiaries, their respective jurisdictions of incorporation, the
percentage ownership of each subsidiary by its direct parent and the
indebtedness of each of these companies (excluding inter-company indebtedness)
as of December 31, 1996. Your notes and the notes to be issued in the Exchange
Offer are effectively subordinated to the existing and future indebtedness of
our subsidiaries. You should read the discussion under the heading "Risk
Factors--Risks Relating to Holding Company Structure; Effective Subordination of
Exchange Notes to Liabilities of Subsidiaries" for further information regarding
such effective subordination.
3
<PAGE>
[Chart showing organization of RSL Communications, Ltd. and its major
subsidiaries, their respective jurisdictions of incorporation, the percentage
ownership of each subsidiary by its direct parent and the indebtedness of each
of these companies (excluding inter-company indebtedness) as of December 31,
1996.]
CONTROLLING SHAREHOLDERS
Ronald S. Lauder, Chairman of the Board of our company, may be deemed to own
beneficially approximately 72.3% of our outstanding capital stock (63.6% on a
fully diluted basis). However, our Company's shareholders have entered into an
agreement providing that an Executive Committee, consisting of Itzhak Fisher,
Andrew Gaspar and Ronald S. Lauder, must approve unanimously substantially all
major corporate actions.
WHAT WE DO
We focus on providing international long distance voice services to small
and medium-sized businesses in strategic markets. We currently have operations
in the United States, the United Kingdom, France, Germany, Sweden, Finland, the
Netherlands, Denmark and Australia. In 1995, approximately 53% of all
international long distance telecommunications minutes originated in these
markets. We are also expanding our operations and network into additional
strategic markets which account for a significant portion of the remaining
international traffic.
4
<PAGE>
HOW WE HAVE DONE
Our consolidated pro forma revenues for 1996 were $124.2 million. Our
consolidated pro forma revenues give retroactive effect to the October 1996
private offering of $300 million of notes and the acquisitions of our US,
French, German and Dutch operations in 1996, as if all these transactions
occurred on January 1, 1996. Our actual revenues for 1996 were $113.2 million
and we incurred an actual loss in that year of $38.2 million.
PRO FORMA INFORMATION. Pro forma information is not indicative of actual
results and may not be indicative of future results. We have presented pro forma
information throughout this Prospectus, however, because we believe that the
rapid changes to our business during 1996 make the pro forma information more
meaningful to you.
OUR PURPOSE
We were founded by Ronald S. Lauder in 1994 to capitalize on the
opportunities created by the worldwide growth and profitability of the
international long distance market. We have grown through acquisitions, as well
as through the start-up of our own operations in strategic markets. We began our
operations in the United States in order to establish a presence in the largest
and one of the most deregulated telecommunications markets in the world. We have
since expanded our presence into Europe in anticipation of continued
telecommunications deregulation in the European Union. We intend to continue to
expand by establishing or acquiring operations in additional strategic countries
as they deregulate.
THE INDUSTRY
OUR PRIMARY MARKET
The international long distance public switched voice telecommunications
market, consisting of telephone calls between countries, generated an estimated
$55 billion in revenue and 60 billion minutes of use in 1995 and is one of the
fastest growing and most profitable segments of the long distance industry. We
currently have significantly less than a 1% share of this market.
International long distance minutes are projected to grow between
approximately 11% and approximately 17% each year through the year 2000. Growth
in the international long distance market is spurred by the following:
- - the deregulation of telecommunications markets throughout the world;
- - the privatization of government-owned post, telegraph and telephone monopolies
("PTTs");
- - increased capacity, improved quality and lower operating costs attributable to
technological improvements;
- - the expansion of telecommunications infrastructure; and
- - the globalization of the world's economies and free trade.
CURRENT MARKET CONDITIONS
Increased competition has caused international settlement rates (i.e., the
rates paid to other carriers to terminate an international call) and costs for
leased capacity to decline over the past five years. Settlement rates and costs
for leased capacity are expected to continue to decline based on the efforts of
the U.S. Federal Communications Commission and the World Trade Organization to
set cost-based pricing on a global basis and to open markets to competition.
Despite declining costs, PTTs and other dominant carriers have maintained
high end-user rates for international long distance services. For example, in
the United States, from 1989 to 1995, average settlement rates declined
approximately 33%, from $0.70 to $0.47 per minute, while average international
long distance revenues per U.S.-originated minute decreased approximately 14%,
from $1.02 to $0.88. PTTs and other dominant carriers have historically
maintained these high international rates to end-users as a result of their
dominant market share which allows them to subsidize their domestic services.
5
<PAGE>
We believe that the continuation of this trend (costs decreasing more
rapidly than prices charged to the end-user) will allow us to achieve and
maintain attractive levels of gross profit per minute.
INDUSTRY DATA
Industry data used throughout this Prospectus was obtained from industry
publications and we have not independently verified such information.
COMPANY OPERATIONS
HISTORY OF OUR OPERATIONS
Our operations in each country are in different stages of development. The
following shows our principal operations and the date of our acquisition or
start-up of such operations in each country in which we operate, as well as the
date each such operation began servicing customers (which may, in certain
circumstances, have been prior to our acquisition):
- - UNITED STATES (International Telecommunications Group, Ltd.)
Date of Acquisition: March 1995
Commencement of Operations: May 1990
- - UNITED KINGDOM (RSL COM UK, Ltd.)
Date of Start-Up: March 1995
Commencement of Operations: May 1996
- - FRANCE (RSL COM France S.A.)
Date of Acquisition: May 1996
Commencement of Operations: January 1994
- - GERMANY (RSL COM Deutschland GmbH)
Date of Acquisition: May 1996
Commencement of Operations: November 1993
- - SWEDEN (RSL COM Sweden AB)
Date of Acquisition: November 1995
Commencement of Operations: May 1996
- - FINLAND (RSL COM Finland OY)
Date of Acquisition: November 1995
Commencement of Operations: May 1996
- - THE NETHERLANDS (Belnet Nederland B.V.)
Date of Acquisition: October 1996
Commencement of Operations: October 1995
- - DENMARK (Belnet Nederland B.V.)
Date of Start-Up: December 1996
Commencement of Operations: April 1997
- - AUSTRALIA (RSL COM Australia Pty. Ltd)
Date of Start-Up: October 1996
Commencement of Operations: April 1997
OUR EXPANSION PLANS
We plan to expand our operations into other countries in Europe, Asia and
the Pacific Rim and are negotiating with a strategic partner to initiate
operations in Latin America. We expect to add operations and begin offering
services in 11 additional countries over the next few years which, together with
the markets in which we currently operate, accounted for the origination of
approximately 70% of the 1995 worldwide international long distance
telecommunications minutes of use.
OUR MANAGEMENT
To develop and implement our global strategy, we have assembled a team of
industry executives experienced in managing international communications
businesses. Most of our senior executives have substantial levels of experience
in the telecommunications industry and many of them have been involved with
other telecommunications businesses which were early competitors in deregulating
markets.
THE NETWORK
WHAT IT IS
The core of our operations is "RSL-NET." RSL-NET is our integrated digital
telecommunications network that we are continuing to develop to connect our
switches in the various countries in which we operate and to employ least cost
routing techniques. Least cost routing involves our programming of our switches
to transport international calls over the route which is most likely to produce
the lowest cost without compromising on quality.
By linking our switches on portions of both the originating and terminating
segments of a call, RSL-NET allows us to avoid the high
6
<PAGE>
costs incurred by our competitors that transport the international portion of
their calls through a third party carrier. RSL-NET will enable us to offer high
quality, competitively priced services on a cost efficient basis.
The three components of RSL-NET include:
- - OWNED FACILITIES.Our "owned facilities" include switches and interests in
international fiber optic cable systems.
- - OPERATING AGREEMENTS.We have operating agreements with foreign carriers. Our
operating agreements give us the ability to exchange traffic directly with
carriers in other countries over jointly-owned facilities. We avoid the
generally higher cost of leasing capacity from other carriers or satellite
providers by entering into operating agreements with foreign carriers in
countries where we do not have our own facilities and where we transport high
levels of calling traffic.
- - LEASED CAPACITY.For all routes where we do not own facilities or use operating
agreements, we use transmission capacity leased from other carriers and
satellite providers and we enter into agreements with other carriers for the
resale of their capacity. We arrange with local carriers in each country in
which we provide services to transmit domestic calls from our customer to our
switch. We do not own or intend to own intra-national transmission facilities
due to the general availability of such facilities for lease and the high cost
associated with the development and operation of a transmission line
infrastructure.
COMPANY STRATEGY
Our strategic objective is to become a significant provider of high quality
international voice services to small and medium-sized businesses in strategic
markets while developing a competitive cost structure. The key elements of our
strategy are as follows:
FOCUS ON PROVIDING INTERNATIONAL LONG DISTANCE SERVICES
The international long distance public switched voice telecommunications
market is one of the fastest growing and most profitable segments of the long
distance industry. We provide a broad array of international and domestic
services, but we focus on providing services to customers which generate
significant calling traffic between countries. Our strategy allows us to
capitalize on the continued growth of international traffic and the margin
opportunity created by the high end-user rates currently maintained by PTTs and
other dominant carriers.
ESTABLISH OPERATIONS IN STRATEGIC MARKETS
We establish operations in markets that originate or terminate significant
levels of international traffic and are, or are in the process of being,
deregulated. We have structured our operations in each country to be managed
independently and expect our local operations to be separately profitable, while
benefiting from our centralized strategic and network support.
ENTER MARKETS EARLY
We try to enter new markets ahead of full deregulation. We believe this
provides us with advantages over carriers which attempt to enter a market after
deregulation is complete. These advantages include:
- - the establishment of a customer base prior to widespread competition;
- - the early acquisition of scarce technical and marketing personnel and
distribution channels; and
- - the achievement of name recognition as one of the early competitors to the
incumbent higher-priced PTTs.
DEVELOP A COST COMPETITIVE GLOBAL NETWORK
All of our local operations, with the exception of those in Australia and
Denmark, have network switching facilities, known as points of presence
("POPs"), to provide
7
<PAGE>
international long distance voice services in their markets. As we integrate our
POPs into RSL-NET, we will be able to originate, transport and terminate traffic
between countries in which we have POPs solely by utilizing our own network.
This will allow us to avoid the high costs associated with transporting the
international portion of a call through a third party carrier. We expect this to
enable us to significantly reduce our cost structure for calls that originate
and terminate in markets in which we have local operations and our overall cost
structure.
GROW THROUGH ACQUISITIONS AND STRATEGIC ALLIANCES
We intend to enter additional markets and expand our operations through
acquisitions, strategic alliances and the establishment of new operations. We
are continuously reviewing acquisition and strategic alliance opportunities, and
seek to acquire control of businesses with an established customer base,
compatible operations, licenses to operate as an international carrier and/or
experienced management. We believe that our senior management team's extensive
operational, technical, financial and regulatory expertise enables us to
identify and rapidly complete acquisitions and strategic alliances.
MANAGE NETWORK GROWTH
We transmit traffic on capacity leased on a variable cost per minute basis
until we believe that an investment in owned facilities or fixed cost lease
arrangements between countries or on a particular route is warranted.
TARGET SMALL AND MEDIUM-SIZED BUSINESSES
We intend to focus on offering high quality services to small and
medium-sized businesses that originate in excess of $500 in international
telephone calls per month. We believe that this segment offers significant
market opportunities because it has traditionally been underserved by the major
global telecommunications carriers and the PTTs, which offer their lowest rates
and best services primarily to higher volume multinational business customers.
We believe that in most markets, small and medium-sized businesses account for a
significant percentage of international calling traffic and will continue to
provide ample opportunity for us to compete profitably in the future.
8
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SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of our
company. Our financial statements are prepared in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP").
The information as of and for the year ended December 31, 1994 was prepared
using the consolidated financial statements of our predecessor entity,
International Telecommunications Group, Ltd. The information for subsequent
dates and years was prepared using the consolidated financial statements of RSL
Communications, Ltd. The consolidated financial statements of RSL
Communications, Ltd. for the years ended December 31, 1995 and 1996 have been
audited by Deloitte & Touche LLP, independent auditors.
It is important that you read the summary consolidated financial data
presented below along with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Pro Forma Consolidated Statements of
Operations and the Consolidated Financial Statements of our company and the
related notes included elsewhere in this Prospectus.
The pro forma data as of and for the year ended December 31, 1996 is
intended to give you a better picture of what our business might have looked
like if the following transactions had each occurred on January 1, 1996:
- - our $300 million private offering of the notes in October 1996;
- - our acquisition of Sprint Corporation's voice businesses in France and Germany
in May 1996;
- - our acquisition of an interest in Belnet Nederland B.V. in November 1996; and
- - our acquisition of interests in International Telecommunications Group, Ltd.
in 1996.
The pro forma data are unaudited.
9
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<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
YEARS ENDED
DECEMBER 31, PRO FORMA
------------------------------------ -----------------
PREDECESSOR YEAR ENDED
1994 1995(1) 1996 DECEMBER 31, 1996
----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT LOSS PER SHARE)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $ 4,702 $ 18,617 $ 113,257 $ 124,236
Cost of services...................................... (4,923) (17,510) (98,461) (106,157)
----------- ---------- ----------- -----------------
Gross profit (loss)................................... (221) 1,107 14,796 18,079
Selling, general and administrative expense........... (2,395) (9,639) (38,893) (41,700)
Depreciation and amortization......................... (240) (849) (6,655) (10,066)(2)
----------- ---------- ----------- -----------------
Loss from operations.................................. (2,856) (9,381) (30,752) (33,687)
Interest income....................................... -- 173 3,976 3,976
Interest expense...................................... (225) (194) (11,359) (38,305)(3)
Other Expense......................................... -- -- (288) (288)
Foreign currency transaction gain..................... -- -- 758 758
Minority interest..................................... -- -- (180) (389)
Income taxes.......................................... -- -- (395) (395)
----------- ---------- ----------- -----------------
Net loss.............................................. $ (3,081) $ (9,402) $ (38,240) $ (68,330)
----------- ---------- ----------- -----------------
----------- ---------- ----------- -----------------
Loss per share (4).................................... $ (15.41) $ (3.65) $ (11.24) $ (20.09)
Weighted average number of shares of Common Stock
outstanding......................................... 200 2,576 3,401 3,401
OTHER FINANCIAL DATA:
EBITDA (5)............................................ $ (2,616) $ (8,532) $ (23,807) $ (23,540)
Capital expenditures (6).............................. 1,126 6,074 24,097 26,162
Ratio of earnings to fixed charges (7)................ -- -- -- --
Cash (used in) provided by operating activities....... (1,987) 3,554 (10,475) --
Cash used in investing activities..................... (478) (16,537) (225,000) --
Cash provided by financing activities................. 2,888 18,143 335,031 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 452 $ 5,163 $ 104,068
Restricted marketable securities.............................................. -- -- 104,370
Total assets.................................................................. 3,682 53,072 427,969
Short-term debt and current portion of capital lease debt..................... 2,645 5,506 6,974
Long-term debt and capital lease obligations.................................. 1,404 6,648 314,425
Shareholders' equity (deficiency)............................................. (3,651) 5,705 20,843
</TABLE>
10
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- ------------------------
(1) Effective with the acquisition of a majority equity interest in
International Telecommunications Group, Ltd. in September 1995, our company
began to consolidate International Telecommunications Group, Ltd.'s
operations. From March 1995 (the date of our initial investment) to
September 1995, we accounted for our investment in International
Telecommunications Group, Ltd. using the equity method of accounting.
(2) Pro forma depreciation and amortization expense reflect approximately $2.1
million of additional amortization of goodwill recognized in connection with
the Companys' acquired subsidiaries and the amortization of the $11.0
million of costs and other fees relating to the 1996 private offering of the
notes using an amortization period of 10 years.
(3) Pro forma interest expense reflects (i) approximately $36.8 million of
interest on the outstanding notes for the year ended December 31, 1996 and
(ii) the elimination of $1.4 million of interest expense for the year ended
December 31, 1996 with respect to indebtedness that was retired. Interest
income has not been adjusted to reflect interest earned on additional
available cash.
(4) Loss per common share is calculated by dividing the loss attributable to
common shares by the weighted average number of shares outstanding.
Outstanding stock options and warrants are not included in the loss per
share calculation as their effect is anti-dilutive. Shares of Class B common
stock of RSL Communications, Ltd. are the only outstanding shares of its
common stock.
(5) EBITDA consists of loss before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the telecommunications industry. It is presented to enhance an understanding
of our operating results and is not intended to represent cash flow or
results of operations in accordance with U.S. GAAP for the periods
indicated. Our use of EBITDA may not be comparable to similarly titled
measures used by other companies due to the use by other companies of
different financial statement components in calculating EBITDA.
(6) Capital expenditures include assets acquired through capital lease financing
and other debt.
(7) The ratio of earnings to fixed charges is computed by dividing the loss from
operations before fixed charges by fixed charges. Fixed charges consist of
interest charges and amortization of debt issuance costs, whether expensed
or capitalized and that portion of rental expense we believe to be
representative of interest. For the years 1994, 1995 and 1996, earnings were
insufficient to cover fixed charges by approximately $3.1 million, $9.4
million and $37.7 million, respectively. Our earnings would have been
insufficient to cover fixed charges by $67.5 million for 1996 on a pro forma
basis.
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SUMMARY OF THE EXCHANGE OFFER
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Registration Rights Agreement..... You are entitled to exchange your notes for registered
notes with substantially identical terms. The Exchange
Offer is intended to satisfy these rights. After the
Exchange Offer is complete, you will no longer be
entitled to any exchange or registration rights with
respect to your notes.
The Exchange Offer................ We are offering to exchange $1,000 principal amount of
12 1/4% Senior Notes due 2006 of RSL Communications PLC
which have been registered under the Securities Act of
1933 for each $1,000 principal amount of its outstanding
12 1/4% Senior Notes due 2006 which were issued in
October 1996 in a private offering. In order to be
exchanged, an outstanding note must be properly tendered
and accepted. All outstanding notes that are validly
tendered and not validly withdrawn will be exchanged.
As of this date there are $300 million principal amount
of notes outstanding.
We will issue registered notes on or promptly after the
expiration of the Exchange Offer. Each of your notes was
originally issued as part of a unit consisting of one
note and a warrant to purchase 1.815 shares of Class A
common stock of RSL Communications, Ltd. These warrants
have been separately tradeable since April 1, 1997 and
we are not offering to exchange them.
Resales........................... We believe that the notes issued in the Exchange Offer
may be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions of the
Securities Act of 1933 provided that:
-the notes issued in the Exchange Offer are being
acquired in the ordinary course of your business;
-you are not participating, do not intend to
participate, and have no arrangement or understanding
with any person to participate, in the distribution of
the notes issued to you in the Exchange Offer; and
- you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any note
issued to you in the Exchange Offer without delivering a
prospectus meeting the requirements of the Securities
Act of 1933 or without an exemption from registration of
your notes from such requirements, you may incur
liability under the Securities Act of 1933. We do not
assume or indemnify you against such liability.
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Each broker-dealer that is issued notes in the Exchange
Offer for its own account in exchange for notes which
were acquired by such broker-dealer as a result of
market-making or other trading activities, must
acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act of 1933, as
amended, in connection with any resale of the notes
issued in the Exchange Offer. A broker-dealer may use
this Prospectus for an offer to resell, resale or other
retransfer of the notes issued to it in the Exchange
Offer.
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time, May 22, 1997, unless we decide to extend the
expiration date.
Conditions to the Exchange
Offer........................... The Exchange Offer is not subject to any condition other
than that the Exchange Offer not violate applicable law
or any applicable interpretation of the Staff of the
Securities and Exchange Commission.
Procedures for Tendering
Outstanding Notes held in the
Form of Book-Entry Interests.... The outstanding notes were issued as global securities
in bearer form without interest coupons. The outstanding
notes were deposited with The Chase Manhattan Bank, as
book-entry depositary, when they were issued. The Chase
Manhattan Bank issued a certificateless depositary
interest in each note, which represents a 100% interest
in the note, to The Depositary Trust Company ("DTC").
Beneficial interests in the notes, which are held by
direct or indirect participants in DTC through the
certificateless depositary interests (the "Book-Entry
Interests"), are shown on, and transfers of the notes
can be made only through, records maintained in
book-entry form by DTC (with respect to its
participants) and its participants.
If you are a holder of a note held in the form of a
Book-Entry Interest and you wish to tender your
Book-Entry Interest for exchange pursuant to the
Exchange Offer, you must transmit to The Chase Manhattan
Bank, as exchange agent, on or prior to the Expiration
Date:
either
- a properly completed and duly executed Letter of
Transmittal, which accompanies this Prospectus, or a
facsimile of the Letter of Transmittal, including all
other documents required by the Letter of Transmittal,
to the Exchange Agent at the address set forth on the
cover page of the Letter of Transmittal; or
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- a computer-generated message transmitted by means of
DTC's Automated Tender Offer Program system and
received by the Exchange Agent and forming a part of a
confirmation of book entry transfer in which you
acknowledge and agree to be bound by the terms of the
Letter of Transmittal;
and, either
- a timely confirmation of book-entry transfer of your
outstanding notes into the Exchange Agent's account at
DTC, pursuant to the procedure for book-entry
transfers described in this Prospectus under the
heading "The Exchange Offer -- Book-Entry Transfer,"
must be received by the Exchange Agent on or prior to
the Expiration Date; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
Procedures for Tendering
Definitive Registered Notes..... Subject to certain conditions, if you are a holder of
Book-Entry Interests in the outstanding notes, you are
entitled to receive, in exchange for your Book-Entry
Interests, registered notes which are in equal principal
amounts to your Book-Entry Interests. However, as of
this date, no registered notes were issued and
outstanding. If you acquire registered notes prior to
the Expiration Date, you must tender your registered
notes in accordance with the procedures described in
this Prospectus under the heading "The Exchange Offer --
Procedures for Tendering Definitive Registered Notes."
Special Procedures for Beneficial
Owners.......................... If you are the beneficial owner of Book-Entry Interests
and your name does not appear on a security position
listing of DTC as the holder of such Book-Entry
Interests or if you are a beneficial owner of registered
notes that are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee
and you wish to tender such Book-Entry Interests or
registered notes in the Exchange Offer, you should
contact such person in whose name your Book-Entry
Interests or registered notes are registered promptly
and instruct such person to tender on your behalf.
Guaranteed Delivery Procedures.... If you wish to tender your notes and time will not
permit your required documents to reach the Exchange
Agent by the Expiration Date, or the procedure for
book-entry transfer cannot be completed on time or
certificates for registered notes cannot be delivered on
time, you may tender your notes pursuant to the
procedures described in this Prospectus under the
heading "The Exchange Offer --Guaranteed Delivery
Procedures."
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Withdrawal Rights................. You may withdraw the tender of your notes at any time
prior to 5:00 p.m. New York City time on May 22, 1997.
Certain U.S. Federal Income Tax
Consequences.................... The exchange of notes will not be a taxable exchange for
United States federal income tax purposes. You will not
recognize any taxable gain or loss or any interest
income as a result of such exchange.
Certain U.K. Related Regulatory
Issues.......................... If you are a U.K. person, you are eligible to receive
the notes to be issued in the Exchange Offer only if
your ordinary activities involve you in acquiring,
holding, managing or disposing of investments (as
principal or agent) for the purposes of your businesses
or if the Exchange Offer does not constitute an offer to
the public in the U.K. for purposes of the Public Offers
of Securities Regulations 1995.
If you are a U.K. person, this Prospectus is being
distributed to you on the basis that we reasonably
believe that you are a person falling within an
exemption to section 57 of the Financial Services Act
1986, as amended, as set out in the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Orders
1996 or the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) (No. 2) Order 1995. By
accepting delivery of this Prospectus or accepting the
Exchange Offer, you warrant and acknowledge that you are
a person falling within any such exemption.
We also reasonably believe that you are a person falling
within an exemption to section 56 of the Financial
Services Act 1986 (as amended) as set out in the Common
Unsolicited Calls Regulations (SIB--Release 101). By
accepting delivery of the Prospectus or accepting the
Exchange Offer, you warrant and acknowledge that you are
a person falling within any such exemption.
If you are a U.K. person, this Prospectus must not be
passed on or shown to any person in the United Kingdom
unless that person falls within the class of persons
described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom such document may otherwise
lawfully be shown or passed on. In addition, by
accepting this Prospectus you warrant that this
Prospectus will not be used in a manner contrary to the
provisions of the Financial Services Act 1986 or the
Public Offers of Securities Regulations 1995.
Use of Proceeds................... We will not receive any proceeds from the issuance of
notes pursuant to the Exchange Offer. We will pay all
expenses incident to the Exchange Offer.
Exchange Agent.................... The Chase Manhattan Bank is serving as exchange agent in
connection with the Exchange Offer.
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SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the notes to be issued in the Exchange Offer are the
same as the form and terms of outstanding notes except that the notes to be
issued in the Exchange Offer will be registered under the Securities Act of 1933
and, therefore, will not bear legends restricting their transfer and will not be
entitled to registration under the Securities Act of 1933. The notes issued in
the Exchange Offer will evidence the same debt as the outstanding notes and both
the outstanding notes and the notes to be issued are governed by the same
indenture.
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Aggregate Amount.... $300 million principal amount of 12 1/4% Senior Notes due
2006 of RSL Communications PLC.
Maturity............ November 15, 2006.
Yield and
Interest.......... Interest on the notes will be payable in cash at a rate of
12.25% per year, semi-annually in arrears on each May 15 and
November 15, beginning on the last date on which interest
was paid on the outstanding notes.
Security............ We have invested approximately $102.8 million of the net
proceeds from the issuance of the outstanding notes in a
portfolio of securities consisting of U.S. government
securities. This portfolio of securities has been pledged as
security for the payment of the first six scheduled interest
payments due on the notes and as security for the repayment
of the aggregate principal amount of the notes. This
portfolio of securities is being held by The Chase Manhattan
Bank under a pledge agreement with RSL Communications PLC
pending disbursement.
Guarantee........... The notes are guaranteed on an unsubordinated basis by RSL
Communications, Ltd. You should refer to the organization
chart on page 4 of this Prospectus and the disclosure in
this Prospectus under the heading "Risk Factors--Risks
Related to Holding Company Structure; Effective
Subordination of Notes to Liabilities of Subsidiaries" for
information concerning the effective subordination of the
guarantee to the debt incurred by the operating subsidiaries
of RSL Communications, Ltd.
Optional
Redemption........ On or after November 15, 2001, the notes will be redeemable,
at our option, in whole or in part, at any time or from time
to time, at the redemption prices described in this
Prospectus under the heading "Description of the Exchange
Notes," plus accrued and unpaid interest, if any, to the
date of redemption. In addition, prior to November 15, 1999,
notes having a principal amount of up to $90.0 million may
be redeemed with the proceeds of certain public offerings of
equity in our company.
Ranking............. The notes and the guarantee:
- are unsubordinated indebtedness of RSL Communications PLC
and RSL Communications, Ltd., respectively;
- rank equal in right of payment with all existing and
future unsubordinated indebtedness of each of them;
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- are senior in right of payment to all of their existing
and future subordinated indebtedness;
- are effectively subordinated to certain secured
indebtedness of RSL Communications PLC to the extent of
such security interests; and
- are junior to all existing and future liabilities
(including trade payables) of our subsidiaries (other than
RSL Communications PLC).
Additional Amounts;
Tax
Redemption........ Any payments made by RSL Communications PLC or RSL
Communications, Ltd. under the notes or the guarantee
generally will be made without withholding or deduction for
taxes unless required by changes to current law or its
interpretation or administration. If changes to current law
require us to withhold or deduct taxes from payments due
under the notes or the guarantee, then, subject to certain
exceptions, at our option, either:
- RSL Communications PLC or RSL Communications, Ltd. will
pay all additional amounts (if any) as are necessary so
that the net amount received by you after such withholding
or deduction will not be less than the amount that you
would have received in the absence of such withholding or
deduction; or
- the notes will be redeemable, in whole but not in part, at
their aggregate principal amount plus accrued interest, if
any.
Certain Covenants... The indenture under which the outstanding notes have been
and the new notes are being issued contains certain
covenants for your benefit which, among other things and
subject to certain exceptions, restrict our ability to:
- incur indebtedness;
- make certain payments;
- issue capital stock of certain of our subsidiaries;
- issue guarantees;
- enter into transactions with stockholders and affiliates;
- create liens;
- engage in sale-leaseback transactions;
- sell assets;
- amend a loan facility available from one of our
shareholders; and
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- with respect to each of RSL Communications PLC and RSL
Communications, Ltd., consolidate, merge or sell all or
substantially all of their assets.
Change of Control... Upon a change of control of RSL Communications, Ltd., we are
required to make an offer to purchase the notes from you at
a purchase price equal to 101% of their aggregate principal
amount on the date of purchase, plus accrued interest, if
any.
Form of Exchange
Notes............. The notes issued in the Exchange Offer will be represented
by one or more permanent global securities in bearer form
deposited with The Chase Manhattan Bank, as book entry
depositary, for the benefit of DTC. You will not receive
notes in registered form unless one of the events set forth
under the heading "Description of the Exchange
Notes-Book-Entry; Delivery and Form-Definitive Registered
Exchange Notes" occurs. Instead, beneficial interests in the
notes issued in the Exchange Offer will be shown on, and
transfers of these will be effected only through, records
maintained in book-entry form by DTC with respect to its
participants.
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FORWARD-LOOKING STATEMENTS
Certain of the information contained in this Prospectus, including
information with respect to our plans and strategy for our business and its
financing, are forward-looking statements. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, see "Risk Factors."
RISK FACTORS
See "Risk Factors" immediately following this summary, for a discussion of
certain factors that you should consider in connection with your investment in
the notes to be issued in the Exchange Offer.
OUR HISTORY
RSL Communications PLC was incorporated under the laws of the United Kingdom
in July 1996. RSL Communications, Ltd. was incorporated under the laws of
Bermuda in March 1996. RSL Communications, Ltd. is the successor in interest to
RSL Communications Inc., a British Virgin Islands corporation ("RSL BVI"), which
was amalgamated into RSL Communications, Ltd. in July 1996. RSL BVI is the
successor in interest to RSL Communications, Inc., a Delaware corporation ("RSL
Delaware"), which was merged into RSL BVI in April 1995. RSL Delaware and RSL
BVI were incorporated in July 1994 and April 1995, respectively.
PRINCIPAL EXECUTIVE OFFICE
Our headquarters are located at Clarendon House, Church Street, Hamilton HM
CX Bermuda (telephone number 441-295-2832). We also maintain executive offices
with respect to some of our operations at 767 Fifth Avenue, Suite 4300, New
York, New York 10153 (telephone number 212-317-1800).
WHERE YOU CAN FIND MORE INFORMATION
RSL Communications PLC and RSL Communications, Ltd. have filed with the
Securities and Exchange Commission (the "SEC") a Registration Statement on Form
S-4 under the Securities Act of 1933, as amended, covering the notes to be
issued in the Exchange Offer. This Prospectus does not contain all of the
information included in the Registration Statement. Any statement made in this
Prospectus concerning the contents of any contract, agreement or other document
is not necessarily complete. If we have filed any such contract, agreement or
other document as an exhibit to the Registration Statement, you should read the
exhibit for a more complete
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understanding of the document or matter involved. Each statement regarding a
contract, agreement or other document is qualified in its entirety by reference
to the actual document.
Following the Exchange Offer, we will be required to file periodic reports
and other information with the SEC under the Securities Exchange Act of 1934, as
amended. Our obligation to file periodic reports with the SEC will be suspended
if the notes issued in the Exchange Offer are held of record by fewer than 300
holders as of the beginning of any year. However, the indenture governing the
notes nevertheless requires us to file with the SEC financial and other
information for public availability. In addition, the indenture governing the
notes requires us to deliver to you, or to The Chase Manhattan Bank for
forwarding to you, copies of all reports that we file with the SEC without any
cost to you. We will also furnish such other reports as we may determine or as
the law requires.
You may read and copy the Registration Statement, including the attached
exhibits, and any reports, statements or other information that we file at the
SEC's public reference room in Washington, D.C. You can request copies of these
documents, upon payment of a duplicating fee, by writing the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings will also be available to the public on the SEC
Internet site (http://www.sec.gov).
You should rely only on the information provided in this Prospectus. No
person has been authorized to provide you with different information.
We are not making an offer to exchange notes in any jurisdiction where the
offer is not permitted.
The information in this Prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this Prospectus
is accurate as of any other date.
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RISK FACTORS
An investment in the registered notes to be issued pursuant to this
Prospectus (the "Exchange Notes") is subject to a number of risks. You should
carefully consider the following factors, as well as the more detailed
descriptions cross-referenced to the body of the Prospectus and the other
matters described in this Prospectus, in evaluating RSL Communications, Ltd.
(the "Guarantor"), RSL Communications PLC (the "Issuer" and, together with the
Guarantor and their direct and indirect subsidiaries, the "Company"), the
Company's business and the telecommunications industry. The term "Note" or
"Notes" includes the outstanding notes (the "Original Notes") and the Exchange
Notes.
SHORT OPERATING HISTORY; ENTRANCE INTO NEWLY OPENING MARKETS
The Company acquired its principal operations in the United States in 1995
and in France, Germany and the Netherlands in 1996, commenced operations in the
United Kingdom, Sweden, Finland, Denmark and Australia in 1996 and has limited
experience in operating its business. The businesses which now constitute the
Company's principal operations in the U.S., France, Germany and the Netherlands
commenced operations in 1990, 1994, 1993 and 1995, respectively, and, therefore,
have limited operating histories. In addition, the Company plans to acquire or
start-up operations in markets where it currently does not have operations.
Furthermore, in many of its existing and future markets, the Company plans to
offer services that have been provided in the past only by PTTs. Accordingly,
the Company may face difficulties hiring personnel that have experience in
providing such telecommunications services in such markets. The Company's
prospects must, therefore, be considered in light of the risks, expenses,
problems and delays inherent in establishing a new business in an evolving
industry.
HISTORICAL AND FUTURE NET AND OPERATING LOSSES AND NEGATIVE EBITDA; NEED FOR
ADDITIONAL CAPITAL; SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS
The Company will need to continue to enhance and expand its operations and
meet the increasing demands for service quality, availability of value added
services and competitive pricing in order to establish and maintain a
competitive position in its existing markets and the additional markets it
enters. The Company has incurred, and during the next several years expects to
continue to incur, significant and increasing operating and net losses, negative
EBITDA and negative cash flow from operating activities due to the start-up
nature of the Company's business and the Company's need to expand its
operations, develop RSL-NET and build its customer base and marketing
operations. The Company will need to raise substantial additional capital in the
future to fund its acquisitions, strategic alliances, start-up operations,
capital expenditures and anticipated substantial operating losses. The net
proceeds from the 1996 private offering of the Original Notes (the "Private
Offering"), together with borrowings under the Company's $15 million revolving
credit facility with The Chase Manhattan Bank (the "Revolving Credit Facility"),
its $35 million Standby Shareholder Facility (as hereinafter defined) from the
Company's principal shareholder and vendor financing, are expected to fund the
Company's planned expansion of its existing operations and operating losses for
18 to 24 months; however, this is a forward-looking statement and there can be
no assurance in this regard. If the Company's plans or assumptions change or
prove to be inaccurate, if the Company consummates acquisitions in addition to
those currently contemplated, if the Company experiences unanticipated costs or
competitive pressures or if the net proceeds from the Private Offering together
with the proceeds of the Revolving Credit Facility and such vendor financing
otherwise prove to be insufficient, the Company may be required to seek
additional capital sooner than currently anticipated. The Company may seek to
raise such additional capital from public or private equity or debt sources.
There can be no assurance that the Company will be able to raise such capital on
satisfactory terms or at all. If the Company decides to raise additional funds
through the incurrence of debt, the Company may become subject to additional or
more restrictive financial covenants. If the Company is unable to obtain such
additional capital or is unable to obtain such additional capital on acceptable
terms, the Company may be required to reduce the scope of its presently
anticipated expansion, which could materially
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adversely affect the Company's business, results of operations and financial
condition and its ability to compete.
The Company has a significant level of indebtedness. As of December 31,
1996, the Company had consolidated indebtedness of $325.4 million and
shareholders' equity of $20.8 million. The indenture governing the notes (the
"Indenture") limits, but does not prohibit, the incurrence of additional
indebtedness by the Company. The Company expects to incur substantial amounts of
additional indebtedness in the future. On a pro forma basis giving effect to the
Company's acquisition of Sprint Corporation's international voice operations in
France and Germany in May 1996 (the "Sprint Acquisitions"), the Company's
acquisition of interests in International Telecommunications Group, Ltd. ("ITG")
in 1996 (the "ITG 1996 Acquisition"), the Company's acquisition of 75% of Belnet
Nederland B.V. ("Belnet") in October 1996 (the "Belnet Acquisition") and the
issuance of the Notes in the Private Offering for a full year, the Company would
have had interest expense, negative EBITDA, operating losses and net losses of
approximately $38.3 million, $23.5 million, $33.6 million and $68.3 million,
respectively, for the year ended December 31, 1996. The Company expects to incur
substantial and increasing interest expense, negative EBITDA, negative cash flow
from operations, deficiencies of earnings to fixed charges, operating losses and
net losses for future periods.
After giving effect to the Sprint Acquisitions, the ITG 1996 Acquisition and
the Belnet Acquisition, the Company made capital expenditures of approximately
$26.2 million during 1996. The Company has also experienced a consistently
increasing working capital deficit. The Company's interest expense may exceed
its EBITDA and cash flow from operations and the Company will experience a
deficiency of earnings to fixed charges for at least the next few years. If the
Company does not achieve and sustain profitability and positive EBITDA, the
Company will not be able to pay interest or principal on the Notes when
required. If the Company's EBITDA is insufficient to meet its future debt
service obligations and fund its operating losses, the Company will face
substantial liquidity problems. If the Company is unable to generate sufficient
EBITDA or cash flow from operations, or otherwise obtain funds necessary to make
required payments, or if the Company otherwise fails to comply with the material
terms of its indebtedness, it would be in default thereunder, which would permit
the holders of such indebtedness to accelerate the maturity thereof and could
cause defaults under other indebtedness of the Company. Such defaults could
result in a default on the Notes and could delay or preclude payment of
principal of, or interest on, the Notes. The ability of the Guarantor and the
Issuer to meet their obligations is dependent upon future performance of the
Company, which is subject to prevailing economic conditions (in each market,
country and region in which the Company operates, as well as globally) and to
financial, business and other factors, including factors beyond the Company's
control.
The Company's indebtedness could have important consequences to holders of
the Notes, including the following: (i) the debt service requirements of any
additional indebtedness could make it more difficult for the Issuer to make
payments on the Notes; (ii) the Company's level of indebtedness could limit the
ability of the Company to obtain any necessary financing in the future for
working capital, capital expenditures, debt service requirements or other
purposes; (iii) a substantial portion of the Company's future cash flow from
operations, if any, will be dedicated to the payment of principal and interest
on its indebtedness and other obligations and will not be available for the
Company's business; (iv) the Company's level of indebtedness could limit its
flexibility in planning for, or reacting to changes in, its business; (v) the
Company is more highly leveraged than certain of its competitors, which may
place it at a competitive disadvantage; and (vi) the Company's high degree of
indebtedness could make it more vulnerable in the event of a downturn in its
business. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISKS ASSOCIATED WITH ANTICIPATED GROWTH AND ACQUISITIONS
The Company has experienced rapid growth and intends to continue to grow
through further expansion of its existing operations, through acquisitions and
joint ventures and through the establishment
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of new operations. The Company constantly evaluates acquisition opportunities.
The Company's ability to manage its anticipated future growth will depend on its
ability to evaluate new markets and investment vehicles, monitor operations,
control costs, maintain effective quality controls, obtain satisfactory and
cost-
effective lease rights from, and interconnection agreements with, competitors
that own transmission lines (in many cases intra-national transmission lines may
be available from only one dominant competitor) and significantly expand the
Company's internal management, technical and accounting systems. The Company's
rapid growth has placed, and its planned future growth will continue to place, a
significant and increasing strain on the Company's financial, management and
operational resources, including the identification of acquisition targets and
joint venture partners, the negotiation of acquisition and joint venture
agreements and the maintenance of satisfactory relations, including, when
necessary, the resolution of disputes with its joint venture partners and
minority investors in acquired entities. In addition, acquisitions and the
establishment of new operations will entail considerable expenses in advance of
anticipated revenues and may cause substantial fluctuations in the Company's
operating results.
The Company's planned new businesses will need to be integrated with its
existing operations. For acquired businesses, this will entail, among other
things, integration of switching, transmission, technical, sales, marketing,
billing, accounting, quality control, management, personnel, payroll, regulatory
compliance and other systems and operating hardware and software, some or all of
which may be incompatible. Furthermore, employees and customers of acquired
businesses generally experience turnover at higher rates during and after the
acquisition. In countries where the Company expands by establishing a new
business, it must, among other things, recruit, hire and train personnel,
establish offices, obtain regulatory authorization, lease transmission lines
from, and obtain interconnection agreements with, competitors that own
intra-national transmission lines, and install hardware and software. In
addition, since the Company operates businesses in several countries and intends
to expand into additional countries and regions, including Europe, Asia, the
Pacific Rim and Latin America, the Company must manage the problems associated
with integrating a culturally and linguistically diverse workforce. The Company
has limited experience dealing with these problems.
RISKS ASSOCIATED WITH RAPIDLY CHANGING INDUSTRY
The international telecommunications industry is changing rapidly due to,
among other things, deregulation, privatization of PTTs, technological
improvements, expansion of telecommunications infrastructure and the
globalization of the world's economies and free trade. There can be no assurance
that one or more of these factors will not vary unpredictably, which could have
a material adverse effect on the Company. There can also be no assurance, even
if these factors turn out as anticipated, that the Company will be able to
implement its strategy or that its strategy will be successful in this rapidly
evolving market. Furthermore, there can be no assurance that the Company will be
able to compete effectively or adjust its contemplated plan of development to
meet changing market conditions.
Much of the Company's planned growth is predicated upon the deregulation of
telecommunications markets. There can be no assurance that such deregulation
will occur when or as anticipated, if at all, or that the Company will be able
to grow in the manner or at the rates currently contemplated.
The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of new product and service offerings and
increased satellite and fiber optic cable transmission capacity for services
similar to those provided by the Company, including utilization of the Internet
for international voice and data communications. The Company cannot predict
which of the many possible future product and service offerings will be
important to establish and maintain a competitive position or what expenditures
will be required to develop and provide such products and services. The
Company's profitability will depend, in part, on its ability to anticipate and
adapt to rapid technological changes occurring in the telecommunications
industry and on its ability to offer, on a timely basis, services that meet
evolving industry standards and customer preferences. There can be no assurance
that the Company
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will be able to adapt to such technological changes or offer such services on a
timely basis or establish or maintain a competitive position.
The Company's ownership interest in international fiber optic cable systems
consists of minimum investment units ("MIUs") and indefeasible rights of use
("IRUs"). As a result of existing excess international transmission capacity,
the marginal cost of carrying an additional international call is often very low
for carriers that own MIUs or IRUs. Industry observers have predicted that these
low marginal costs may result in significant pricing pressures and that, within
a few years after the end of this century, there may be no charges based on the
distance a call is carried. Certain of the Company's competitors have introduced
calling plans that provide for flat rates on calls within the U.S. and Canada,
regardless of time of day or distance of the call. If this type of pricing were
to become prevalent, it would have a material adverse effect on the Company's
prospects and its ability to make payments on the Notes.
LOW GROSS MARGINS
As a new entrant in its markets, the Company may need to grant substantial
discounts in order to attract a significant customer base. The Company has and
will continue to provide services to carrier customers at discounted prices,
resulting in lower gross margins than margins related to sales to other
customers. In addition, the Company's operations in each country (the "Local
Operators") may incur significant costs developing their network infrastructures
(including MIUs, IRUs, switches and leased capacity) as their business grows.
The fixed costs and expenses incurred under these circumstances may result in
low or negative operating margins. Furthermore, the Company may enter into
long-term agreements for leased capacity in anticipation of traffic volumes
which do not reach expected levels and, therefore, be obligated to pay for
transmission capacity without adequate corresponding revenues. Conversely, the
Company may underestimate its need for leased capacity and, therefore, be
required to obtain transmission capacity through more expensive means.
Cyberlink, Inc. ("Cyberlink") and ITG, each of which is a majority owned
subsidiary of the Company, have, in the past, both overestimated and
underestimated their need for leased capacity and, therefore, have been forced
to obtain capacity for overflow traffic at a higher cost and have also leased
capacity which was underutilized. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." If the Company is unable to
accurately project its needs for leased capacity in the future, such inability
will have a material adverse effect on the Company's business and profitability
and ability to make payments on the Notes.
DEPENDENCE ON FACILITIES-BASED CARRIERS
Currently, the Company does not own any intra-national telecommunications
lines for any country in which it provides services and does not intend to
construct or acquire any of its own intra-national transmission facilities. All
of the telephone calls made by the Company's customers are and will continue to
be connected, at least in part, through transmission lines that the Company
leases. In many jurisdictions in which the Company conducts business (including
France, Germany, Sweden, Finland and the Netherlands) or plans to conduct
business, the only current provider of significant intra-national transmission
facilities is the PTT. Accordingly, prior to full deregulation, there may be
only one source of intra-national transmission lines in these countries and the
Company may be required to lease transmission capacity at artificially high
rates from a provider that occupies a monopoly or near monopoly position. Such
rates may be too high to allow the Company to generate gross profit on
intra-national calls or international calls routed to a Company switch by means
of such intra-national lines. In addition, PTTs will not necessarily be required
by law to allow the Company to lease transmission lines. To the extent that
applicable law requires PTTs to lease transmission lines to the Company, delays
may nevertheless be encountered with respect to the commencement of operations
and extensive delays can be expected with respect to the negotiation of leases
and interconnection agreements. See "--Government Regulatory Restrictions." In
addition, ongoing disputes can be expected with respect to pricing terms and
billing.
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Many of the international telephone calls made by the Company's customers
are and will continue to be transported through transmission lines that the
Company leases. The lessors of such facilities are competitors of the Company,
including American Telephone & Telegraph, Inc. ("AT&T"), MCI Communications
Corporation ("MCI"), Teleglobe Canada, Inc. ("Teleglobe"), British
Telecommunications PLC ("British Telecom"), France Telecom S.A. ("France
Telecom"), Deutsche Telekom AG ("Deutsche Telekom") and Mercury Communications
PLC ("Mercury"). The Company's lines are leased on a per-minute basis (some with
minimum volume commitments) and, where the Company anticipates higher volumes of
traffic, it leases capacity for point-to-point circuits on a monthly or
longer-term fixed cost basis. The negotiation of lease agreements involves
estimates regarding future supply and demand for transmission capacity as well
as estimates of the calling patterns and traffic levels of the Company's
existing and future customers. When there has been excess transmission capacity,
as was the case for many years in the United States, lease rates have declined
and short term leases have been advantageous. Recently, capacity has been
somewhat constrained in the United States and the decline in lease rates has
slowed. As a result, longer term leases may become more attractive. Should the
Company fail to meet its minimum volume commitments pursuant to long-term
leases, it will be obligated to pay "under-utilization" charges. See "-- Low
Gross Margins." For these reasons, the Company would suffer competitive
disadvantages if it entered into leases with inappropriate durations or leases
based on per-minute charges for high volume routes (or leases with fixed monthly
rates for low volume routes), or if it failed to meet its minimum volume
requirements. The Company is also vulnerable to service interruptions and poor
transmission quality from leased lines. The deterioration or termination of the
Company's relationships with one or more of its carrier vendors could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS
Sophisticated information systems are vital to the Company's growth and its
ability to monitor costs, bill and receive payments from customers, reduce
credit exposure, effect least cost routing and achieve operating efficiencies.
The Company currently operates separate management information systems for
Cyberlink and certain of its European operations and relies on third parties for
billing and other information services for ITG and its French and German
operations. The Company is in the process of integrating its U.S. operations
under a single information system and is integrating its European operations
under a separate information system. The Company intends to integrate and
operate the information services for all of its Local Operators from a central
location. A failure of any of the Company's current systems (including
third-party systems), the failure of the Company to implement or integrate new
systems without difficulty or at all, the failure of any new systems or the
failure to upgrade systems as necessary could have a material adverse effect on
the Company, its financial condition and the results of operations.
RISKS RELATED TO HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION OF EXCHANGE
NOTES TO LIABILITIES OF SUBSIDIARIES
The Issuer and the Guarantor are holding companies and their only material
assets, other than the remaining portion of the net proceeds received by the
Issuer from the Private Offering, consist of the stock of their subsidiaries.
The Issuer has loaned a portion of, and intends to loan or contribute a
substantial majority of, the net proceeds of the Private Offering to its
subsidiaries and other affiliates (i.e., the Guarantor and those direct and
indirect subsidiaries of the Guarantor which are not also direct or indirect
subsidiaries of the Issuer). The cash flow and the consequent ability of the
Issuer and the Guarantor to service their debt obligations, including the Notes,
are dependent upon the ability of the Issuer and the Guarantor to receive cash
from their affiliates. These affiliates, however, are legally distinct from the
Issuer and the Guarantor and may have no obligation, contingent or otherwise, to
pay amounts due pursuant to the Notes or to make funds available for such
payment. These affiliates do not guarantee the Exchange Notes. Accordingly, the
Notes and the guarantee of the Notes by the Guarantor (the "Note Guarantee") are
effectively subordinated to the liabilities, including trade payables, of these
affiliates. The
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ability of these affiliates to make such payments to the Issuer and the
Guarantor are subject to, among other things, the availability of funds and the
terms of such affiliates' indebtedness. In addition, the repayment of loans and
advances by such affiliates may be subject to statutory restrictions and to
taxation, are contingent upon the earnings of those affiliates and are subject
to various business considerations. Dividends and other payments to the Issuer
and the Guarantor from their subsidiaries, in certain jurisdictions, may have
adverse tax consequences to them, and the subsidiaries' ability to declare and
pay dividends and/or their ability to make any payment or transfer of property
or assets to the Issuer and the Guarantor are, in certain circumstances, subject
to local statutory restrictions and restrictions contained in their respective
Articles of Association, other organizational documents or loan agreements.
As shareholders of each of their subsidiaries, claims of the Issuer and the
Guarantor as such rank junior to all other creditors of such subsidiaries. In
the event of such a subsidiary's liquidation, there may not be assets sufficient
for the Issuer and/or the Guarantor to recoup their investments therein. In
addition, as a result of the ITG 1996 Acquisition, Charles M. Piluso and Richard
Rebetti have security interests in shares of ITG owned by the Issuer (currently
representing an approximately 28% interest therein) to secure payment by the
Issuer of the purchase price therefor. Accordingly, Mr. Piluso's and Mr.
Rebetti's security interests in such ITG shares have priority over the interest
of the holders of the Notes in such ITG shares. Although the Guarantor
guarantees the Notes, it has received only a portion of the net proceeds
therefrom. At December 31, 1996, the Guarantor's subsidiaries (excluding the
Issuer) had approximately $111.1 million of liabilities (excluding intercompany
payables to the Guarantor, the Issuer and the Guarantor's other subsidiaries),
including $9.3 million of indebtedness. See "Description of Certain
Indebtedness."
REFINANCING RISK
The Company may not be able to repay the Notes with cash from operations.
Accordingly, the Company may need to seek capital from outside sources in order
to repay principal on the Notes. The Company's ability to do so will depend on,
among other things, its financial condition at the time, market conditions and
other factors, including factors beyond the Company's control. If the Company is
unable to effect such refinancings or obtain additional funds, the value of the
Notes would be adversely affected.
COMPETITION
The provision of telecommunications services is and will continue to be
extremely competitive. Prices for long distance calls have decreased
substantially over the last few years in most of the markets in which the
Company does business and prices are expected to decline substantially over the
next several years in all of the markets where the Company does business or
expects to do business. In addition, all of the Company's markets and expected
future markets are in the process of deregulating telephone services. As a
result, customers in most of these markets are not familiar with obtaining
services from competitors to the PTTs and may be reluctant to use new providers,
such as the Company. In particular, the Company's target customers, small and
medium-sized businesses, may be reluctant to entrust their telecommunications
needs to new and unproven operators. The Company has experienced high levels of
customer attrition in the United States and expects to continue to experience
high levels of customer attrition as a result of the highly competitive nature
of most of its markets.
The Company's success will depend upon the Company's ability to compete with
a variety of other telecommunications providers in each of its markets,
including (i) the PTTs, (ii) alliances such as AT&T's alliance with Unisource
(itself an alliance currently among Telecom Netherlands, Telia AB, Swiss Telecom
PTT and Telefonica de Espana, S.A.) known as "Uniworld" and the corresponding
alliance with WorldPartners, MCI's alliance (and proposed consolidation) with
British Telecom, known as "Concert," and Sprint Corporation's ("Sprint")
alliance with Deutsche Telekom and France Telecom, known as "Global One," (iii)
companies offering resold international telecommunications services, (iv)
companies such as WorldCom, Inc. ("WorldCom") offering local exchange service in
conjunction with domestic long
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distance and international long distance services and (v) other companies with
business plans similar to the Company's. The Company expects that competition
will increase in the future as the deregulation of telecommunications markets
worldwide accelerates. Many of the Company's competitors have significantly
greater financial, management and operational resources and more experience than
the Company. If any of the Company's competitors were to devote additional
resources to the provision of international long distance voice
telecommunication services to the Company's target customer base of small and
medium-sized businesses, there could be an adverse effect on the Company's
business. In addition, certain of the Company's competitors may target discounts
in one market to gain an advantage in another market or with a particular
customer. The Company may be unable to compete with such discounts on an
economically feasible basis.
Each of the Company's Local Operators are expected to separately compete
within their respective countries. There can be no assurance that any of the
Local Operators will be able to do so effectively and the success of the
Company's strategy in any one market is not necessarily indicative of its
ability to succeed in any other market.
Competition for customers is primarily on the basis of price and, to a
lesser extent, on the type and quality of services offered and customer service.
The Company attempts to price its services at a discount to the prices charged
by the PTT or major carriers in each of its markets. The Company has no control
over the prices set by its competitors and some of the Company's larger
competitors may be able to use their substantial financial resources to cause
severe price competition in the countries in which the Company operates.
Although the Company does not believe that there is a sufficiently strong
economic incentive for the major carriers to pursue such a pricing strategy or
that such competitors are likely to engage in such a course of action, there can
be no assurance that severe price competition will not occur. Any price
competition could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, certain of the
Company's competitors will provide potential customers with a broader range of
services than the Company currently offers or can offer due to regulatory
restrictions. See "Business--Industry Overview" and "--European Operations."
In addition to these competitive factors, recent and pending deregulation in
each of the Company's markets may encourage new entrants. For example, as a
result of both legislation recently enacted in the United States and regulatory
initiatives taken by the U.S. Federal Communications Commission (the "FCC"),
regional Bell operating companies ("RBOCs") may provide international
telecommunications services, are allowed to offer domestic long distance service
through an affiliate outside their service areas as "non-dominant" carriers and
are allowed to provide long distance service within their service areas. AT&T,
MCI and other long distance carriers are allowed to enter the local telephone
services market, and any entity, including cable television companies and
utilities, may enter the United States domestic long distance telecommunications
market. In addition, the FCC had, on several occasions since 1984, approved or
required price reductions by AT&T because it was a "dominant" carrier. However,
the FCC reclassified AT&T as a "non- dominant" carrier for domestic purposes in
October 1995 and for international purposes in May 1996. These FCC actions
substantially reduced the regulatory constraints on AT&T. As the Company expands
its geographic coverage, it will encounter additional regional competitors and
increased competition. Moreover, the Company believes that competition in
non-U.S. markets will increase and begin to resemble the competitive landscape
in the U.S.
The PTTs generally have certain competitive advantages that the Company and
its other competitors do not have due to their control over the intra-national
transmission lines and connection to it, their ability to delay access to lines
and the reluctance of some regulators to adopt policies and grant regulatory
approvals that will result in increased competition for the local PTT. If the
PTT in any jurisdiction uses its competitive advantages to their fullest extent,
the Local Operator in such jurisdiction would be adversely affected.
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GOVERNMENT REGULATORY RESTRICTIONS
National and local laws and regulations differ significantly among the
countries in which the Company currently operates and plans to operate. The
interpretation and enforcement of such laws and regulations vary and could limit
the Company's ability to provide certain telecommunications services.
Furthermore, there can be no assurance that changes in current or future laws or
regulations or future judicial intervention would not have a material adverse
effect on the Company. In addition, the Company's strategy is based in large
part upon the expected deregulation of the European Union (the "EU") markets
based on European Commission directives. Such deregulation of the EU markets has
already experienced delays. Accordingly, there can be no assurance that the EU
will proceed with the expected deregulation in accordance with its current
schedule, if at all, or that the trend towards deregulation will not be stopped
or reversed. In addition, even if the EU does act to deregulate its
telecommunications markets on the current schedule, the national governments of
EU member states must pass legislation to deregulate the markets within their
countries. The national governments may not necessarily pass such legislation in
the form required, if at all, or may pass such legislation only after a
significant delay. Even if a national legislature enacts appropriate regulations
within the time frame established by the EU, there may be significant resistance
to the implementation of such legislation from PTTs, regulators, trade unions
and other sources. For example, in the United Kingdom, Mercury took legal action
against the Post Office Engineering Union because the union refused to connect
Mercury's customers. In France, the telecommunications union has stated its
objection to the current move towards deregulation. These and other potential
obstacles to deregulation would have a material adverse effect on the Company's
operations by preventing the Company from expanding its operations as currently
anticipated.
In addition, the telecommunications services provided by the Company in the
United Kingdom are subject to and affected by regulations introduced by the
Office of Telecommunications ("Oftel"). Oftel has imposed mandatory rate
reductions on British Telecom in the past and is expected to continue to do so
for the foreseeable future. This will have the effect of reducing the prices the
Company can charge its U.K. customers.
The Company is currently authorized or otherwise allowed to originate
traffic in only 16 states in the United States and relies on third party
carriers to originate traffic in all other states, although the Company is
applying for authority to originate traffic in most other states. The Company
believes its use of a third party carrier in such other states is permissible,
but any adverse action taken against the Company by a state authority due to
such activity could have a material adverse effect on the Company, its financial
condition and its results of operations.
RISK OF LOSS, OR DIMINUTION OF VALUE, OF OPERATING AGREEMENTS
Although the Company's U.S. operation has operating agreements with 14
foreign carriers, the Company presently only utilizes five operating agreements
with carriers in the Dominican Republic, the United Kingdom, Bolivia, Denmark
and Norway. In order to utilize the remaining operating agreements, the Company
would have to make an investment in transmission facilities to each of these
countries, which the Company is unlikely to do unless and until it originates
sufficient calling volume to a country to justify an investment. The Company's
failure to utilize these operating agreements may result in these foreign
carriers terminating such agreements in order to secure more profitable
agreements with carriers other than the Company and may limit the Company's
ability to secure operating agreements with additional foreign carriers. The
loss of the Company's operating agreements could have a material adverse effect
on its business, and the failure to enter into additional operating agreements
or other favorable arrangements in the future could limit the Company's ability
to increase its revenues on a positive gross margin basis. There can be no
assurance that the Company will be able to enter into additional operating
agreements or other favorable arrangements in the future.
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In addition, the Company's operating agreements may become less valuable to
the Company. As increasing numbers of international carriers emerge, operating
agreements may become more available. Moreover, as telecommunications markets
deregulate, particularly in Europe, an increasing proportion of international
traffic is being carried outside of the traditional operating
agreement/settlement rate system.
DEPENDENCE ON CARRIER CUSTOMERS
The Company provides telecommunication services to carrier customers
principally in the United States. Revenues derived from the provision of such
services accounted for 57% of the Company's actual U.S. revenues for the year
ended December 31, 1996, respectively. Accordingly, the loss of revenue from
carrier customers could have a material adverse effect upon the Company's
business. Carrier customers are extremely price sensitive, generate very low
margin business and frequently choose to move their business based solely on
small price changes. In addition, certain of the Company's carrier customers are
unprofitable or are only marginally profitable, resulting in a higher risk of
delinquency or non-payment than in the case of more creditworthy customers. In
February 1996, the Company terminated service to a carrier customer that
accounted for 11% of ITG's total 1995 U.S. revenues for failure to pay for past
services. As a result, although the Company is attempting to recover the amounts
owed by such customer, the Company booked a $4.9 million write-off for bad debt
on its 1995 financial statements. While the Company has recently instituted
credit criteria to enable the Company to reduce its exposure to the higher risks
associated with carrier customers, no assurance can be given that such criteria
and methods will afford adequate protection against such risks.
DEPENDENCE UPON KEY PERSONNEL
The success of the Company is dependent, in part, upon its key management.
In particular, the Company is highly dependent upon certain of its officers,
including Ronald S. Lauder, Chairman of the Board of each of the Issuer and the
Guarantor, and Itzhak Fisher, the President and Chief Executive Officer of each
of the Issuer and the Guarantor. The loss of services of Mr. Lauder, Mr. Fisher
or any of the other members of the Company's senior management team could have a
materially adverse effect on the Company. The degree of Mr. Lauder's involvement
in the activities of the Company varies from time to time based on the then
current needs of the Company. Mr. Lauder's involvement with the Company, in
addition to his activities as a member of the Guarantor's and the Issuer's
Boards of Directors and the Guarantor's Executive Committee, includes
identifying potential local strategic partners, marketing the Company and
recruiting management. However, he is not an employee of the Company and he
spends a majority of his business time on other matters. While Mr. Fisher has an
employment agreement with the Company, the Company does not have employment
agreements with most of the other members of its senior management team. The
Company also maintains a $5.0 million key man life insurance policy on the life
of Mr. Fisher, as well as a key man policy on one other member of the Company's
senior management team. See "Management--Key Man Life Insurance."
The Company believes its future success will depend in large part upon its
ability to attract, retain and motivate highly skilled employees. Such employees
are in great demand and are often subject to offers for competitive employment.
There can be no assurance that the Company can retain its key managerial
employees or that it can attract, assimilate or retain such employees in the
future.
DEPENDENCE ON EQUIPMENT SUPPLIER
The Company purchases most of its switches from a vendor that has granted
the Company volume discounts and also provides lease financing for, and
maintenance of, this equipment. Although switches of comparable quality may be
obtained from several alternative suppliers, the failure of the Company to
acquire switches that are compatible from an alternative source, or the failure
to acquire additional switches (regardless of the vendor) on a timely basis or
on a similar price basis, could result in delays,
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operational problems or increased expenses, which could have a material adverse
effect on the Company's business, results of operations and financial condition.
CONTROLLING SHAREHOLDERS; ANTI-TAKEOVER PROVISIONS
Approximately 72.3% of the capital stock of the Guarantor (63.6% on a fully
diluted basis) may be deemed to be beneficially owned by Ronald S. Lauder,
Chairman of the Guarantor and the Issuer. However, pursuant to a shareholders'
agreement and resolutions of the Guarantor's Board of Directors, Mr. Lauder,
Andrew Gaspar and Itzhak Fisher, as the members of the Executive Committee of
the Guarantor's Board, control the decision regarding the undertaking of major
corporate actions. The exercise of these powers may present conflicts of
interest between these individuals and the other owners of the Guarantor's
capital stock and the holders of the Notes. For example, if the Company
encounters financial difficulties, or is unable to pay its debts as they mature,
the Company's equity investors may have an interest in pursuing acquisitions,
divestitures, financings or other transactions that, in their judgment, could
enhance their equity investment, even though such transactions might involve
risk to the holders of the Notes. See "The Company--Controlling Shareholders"
and "Principal Shareholders."
The concentration of ownership in the Guarantor and Mr. Lauder's intention
to maintain a controlling interest in the Guarantor, as well as the ability of
the Guarantor's Executive Committee to control major corporate actions, may have
the effect of delaying, deferring or preventing a change of control of the
Guarantor, a transaction which might otherwise be beneficial to shareholders. In
addition, the Guarantor's Memorandum of Association and bye-laws contain
provisions that could delay, defer or prevent a change in control without the
approval of the incumbent Board of Directors. Such a provision could impede the
ability of the shareholders to replace management even if factors warrant such a
change. See "Principal Shareholders" and "Description of Capital Stock."
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
If the Issuer is liquidated under the laws of the United Kingdom after the
issuance of the Notes, the claim of a holder of the Notes with respect to
amounts owing in respect thereof may be limited to an amount equal to the sum of
(i) the issue price of the Notes and (ii) interest accrued in respect of the
period before the Issuer goes into liquidation. Any original issue discount that
was not accreted as of the date on which the Issuer goes into liquidation, and
any cash interest accruing under the Notes in respect of any period after the
Issuer goes into liquidation, would not be claimable by holders of the Notes in
the liquidation of the Issuer (although U.K. insolvency law provides that any
surplus amounts remaining after payment of all other debts in connection with
the liquidation of the Issuer shall be available to pay interest accrued on
debts in respect of any period after the commencement of the liquidation).
BERMUDA CORPORATE LAW
The Guarantor is a Bermuda company and, accordingly, is governed by The
Companies Act 1981 of Bermuda. The Companies Act 1981 of Bermuda differs in
certain aspects from laws generally applicable to United States corporations and
shareholders, including with respect to the provisions relating to interested
directors, mergers and similar arrangements, takeovers, shareholders suits,
indemnification of directors and inspection of corporate records.
UNITED KINGDOM CORPORATE LAW
The Issuer is a United Kingdom corporation and, accordingly, is governed by
the Companies Act 1985 of the United Kingdom. This act differs materially from
laws generally applicable to United States corporations and their shareholders,
including regulations relating to interested directors, mergers, indemnification
of directors and inspection of corporate records. United Kingdom company law
does include
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requirements for the protection of investors who suffer abuse and legal
requirements relating to the disclosure of information.
DEVALUATION AND CURRENCY RISKS
An increasing portion of the Company's revenues and expenses will be
denominated in non-U.S. currencies, although a disproportionate portion of the
Company's expenses, including interest and principal on the Notes, will be
denominated in U.S. dollars. In addition, the Company, in the future, may
acquire interests in entities that operate in countries where the expatriation
or conversion of currency is restricted. The Company currently does not hedge
against foreign currency exchange translation risks but may in the future
commence such hedging against specific foreign currency transaction risks.
Because of the number of currencies involved, the Company's constantly changing
currency exposure and the fact that all foreign currencies do not fluctuate in
the same manner against the United States dollar, the Company cannot quantify
the effect of exchange rate fluctuations on its future financial condition or
results of operations.
CONSEQUENCES OF FAILURE TO EXCHANGE
The issuance of the Exchange Notes in exchange for the Original Notes
pursuant to the Exchange Offer will be made only after a timely receipt by the
Company of such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Original
Notes desiring to tender such Original Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to the
tenders of Original Notes for exchange. Original Notes that are not tendered
following the consummation of the Exchange Offer will continue to be subject to
the existing restrictions upon transfer thereof and the Company will have no
further obligation to provide for the registration under the Securities Act of
1933, as amended (the "Securities Act"), of such Original Notes. In addition,
any holder of Original Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent that Original Notes are
tendered in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Original Notes could be adversely affected. See "The Exchange
Offer." Each broker or dealer that receives Exchange Notes for its own account
in exchange for Original Notes where such Exchange Notes were acquired by such
broker or dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
LACK OF PUBLIC MARKET
The Exchange Notes are a new issue of securities for which there is
currently no active trading market. If any Exchange Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and the
financial condition, performance of, and prospects for the Company.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were initially issued and sold by the Issuer on October
3, 1996 (the "Closing Date"), to Morgan Stanley & Co. Incorporated, Bear,
Stearns Co. Inc. and Dillon Read & Co. Inc., as placement agents (the "Placement
Agents"), pursuant to a Placement Agreement, dated September 30, 1996 (the
"Placement Agreement"). The Placement Agents subsequently sold the Original
Notes to qualified institutional buyers in reliance on Rule 144A under the
Securities Act and to institutional accredited investors in reliance on other
exemptions from the registration requirements under the Securities Act. Pursuant
to the Placement Agreement, the Issuer and the Placement Agents entered into a
Notes Registration Rights Agreement on October 3, 1996 (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Issuer agreed to
use its best efforts to consummate the Exchange Offer on or prior to June 1,
1997. A copy of the Registration Rights Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part and the
description of the terms of the Registration Rights Agreement is qualified in
their entirety by reference thereto. The Registration Statement of which this
Prospectus is a part is intended to satisfy the Issuer's and the Guarantor's
obligations with respect to the registration of Original Notes in accordance
with the terms of the Registration Rights Agreement and the Indenture.
Following the consummation of the Exchange Offer, holders of Original Notes
not tendered in the Exchange Offer and holders of Exchange Notes will not have
any further registration rights. In addition, holders of Original Notes will
continue to be subject to certain restrictions on transfer. See "--Termination
of Certain Rights." Accordingly, the liquidity of the market for Original Notes
could be adversely affected. See "Risk Factors--Consequences of Failure to
Exchange."
The Original Notes were issued in units together with warrants (the
"Warrants") to purchase Class A common shares of the Guarantor (the "Class A
Common Stock"). Since April 1, 1997, the Warrants have been separately tradeable
from the Original Notes and are not part of the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
The Issuer intends the following terms to provide for the conduct of the
Exchange Offer in accordance with the provisions of the Registration Rights
Agreement, the Indenture, the applicable requirements of the Securities Act and
the rules and regulations of the SEC thereunder. Upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (the "Letter of Transmittal"), the Issuer will accept any and all
Original Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time on May 22, 1997, or such later time and date to which the Exchange
Offer is extended by the Issuer in its sole discretion (the "Expiration Date").
The Issuer will issue $1,000 principal amount (or fraction thereof) of Exchange
Notes in exchange for each $1,000 principal amount (or fraction thereof) of
Original Notes accepted in the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act and (ii) the Exchange
Notes will not be subject to any covenant regarding registration under the
Securities Act, including any such rights under the Registration Rights
Agreement or the Indenture, which rights, in any event, will terminate with
respect to the Original Notes upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace) and will be issued under, and be entitled to the benefits of, the
Indenture, which also authorized the issuance of the Original Notes, such that
both the Exchange Notes and the Original Notes will be treated as a single class
of debt securities under the Indenture.
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As of the date of this Prospectus, $300 million principal amount of Original
Notes was outstanding. There will be no fixed record date for determining
holders of the Original Notes entitled to participate in the Exchange Offer.
The Issuer shall be deemed to have accepted validly tendered Original Notes
when, as and if the Issuer has given oral or written notice thereof (oral notice
being promptly confirmed in writing) to The Chase Manhattan Bank, as Exchange
Agent (the "Exchange Agent"). The Exchange Agent will act as agent for the
tendering holders of the Original Notes for the purposes of receiving the
Exchange Notes from the Issuer.
Holders of Notes (each, a "Holder") who tender Original Notes in the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Notes pursuant to the Exchange Offer. The
Issuer will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the Exchange Offer. See "--Fees and
Expense."
EXTENSION; AMENDMENTS
In order to extend the Exchange Offer, the Issuer will notify the Exchange
Agent of any extension by oral or written notice (oral notice being promptly
confirmed in writing) and will make public announcement thereof, each prior to
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Issuer reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Expiration Date, (iii) if any
of the conditions set forth below under "--Conditions of the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer or (iv) to amend
the terms of the Exchange Offer in any manner, by giving oral or written notice
(oral notice being promptly confirmed in writing) of such delay, extension,
termination or amendment to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by a public announcement thereof. If the Exchange Offer is amended in a manner
determined by the Issuer to constitute a material change, the Issuer will
promptly disclose such amendments by means of a prospectus supplement that will
be distributed to The Depositary Trust Company ("DTC") and the Issuer will
extend the Exchange Offer for a period of five to 10 business days, depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
five to 10 business day period.
Without limiting the manner in which the Issuer may choose to make a public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Issuer shall not have an obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
PROCEDURES FOR TENDERING BOOK-ENTRY INTERESTS
The Original Notes (which for purposes of the Exchange Offer include
Book-Entry Interests (as defined) therein and Original Notes in registered form
("Definitive Registered Notes")) were issued as global securities in bearer form
without interest coupons (each, a "Global Note"). Concurrently with the issuance
thereof, the Global Notes were deposited with The Chase Manhattan Bank, as
Book-Entry Depositary (the "Book-Entry Depositary"), which issued a
certificateless depositary interest (each, a "Depositary Interest") in each
Global Note representing a 100% interest therein to DTC. Beneficial interests in
the Global Notes, held by direct or indirect participants in DTC through the
Depositary Interests (the "Book-Entry Interests"), are shown on, and transfers
thereof are effected only through, records maintained in book-entry form by DTC
(with respect to its participants) and its participants.
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Each Holder (which for purposes of the Exchange Offer, includes any
participant in DTC whose name appears on a security position listing as a holder
of Book-Entry Interests) of Original Notes held in the form of Book-Entry
Interests who wishes to tender such Book-Entry Interests for exchange pursuant
to the Exchange Offer must transmit to the Exchange Agent on or prior to the
Expiration Date either (i) a properly completed and duly executed Letter of
Transmittal or a facsimile thereof, including all other documents required by
such Letter of Transmittal, to the Exchange Agent at the address set forth on
the cover page of the Letter of Transmittal or (ii) a computer-generated message
(an "Agent's Message"), transmitted by means of DTC's Automated Tender Offer
Program ("ATOP") system and received by the Exchange Agent and forming a part of
a book-entry transfer (a "Book-Entry Confirmation"), in which such Holder
acknowledges and agrees to be bound by the terms of the Letter of Transmittal.
In addition, in order to deliver Original Notes held in the form of Book Entry
Interests (i) a timely Book-Entry Confirmation of book-entry transfer of such
Original Notes into the Exchange Agent's account at DTC pursuant to the
procedure for book-entry transfers described below under "--Book-Entry Transfer"
must be received by the Exchange Agent prior to the Expiration Date or (ii) the
Holder must comply with the guaranteed delivery procedures described below.
The tender of an Original Note by a Holder that is not withdrawn prior to
the Expiration Date will constitute an agreement between such holder and the
Issuer in accordance with the terms and subject to the conditions set forth
hereunder and in the Letter of Transmittal.
DELIVERY OF BOOK-ENTRY INTERESTS MUST BE EFFECTED BY BOOK-ENTRY TRANSFER AS
DESCRIBED UNDER "--BOOK-ENTRY TRANSFER." THE METHOD OF DELIVERY OF THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL SHOULD BE SENT TO THE
ISSUER.
PROCEDURES FOR TENDERING DEFINITIVE REGISTERED NOTES
Only registered holders of Definitive Registered Notes may tender such
Original Notes in the Exchange Offer. Each Holder of Definitive Registered Notes
who wishes to tender such Definitive Registered Notes for exchange pursuant to
the Exchange Offer must transmit to the Exchange Agent on or prior to the
Expiration Date a properly completed and duly executed Letter of Transmittal or
a facsimile thereof, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at the address set forth below under
"--Exchange Agent." In addition, in order to deliver Definitive Registered Notes
(i) the certificates representing such Definitive Registered Notes must be
received by the Exchange Agent prior to the Expiration Date or (ii) the Holder
must comply with the guaranteed delivery procedures described below.
The tender by a Holder (not withdrawn prior to Expiration Date) will
constitute an agreement between such holder and the Issuer in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF THE DEFINITIVE REGISTERED NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR CERTIFICATES FOR DEFINITIVE
REGISTERED NOTES
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SHOULD BE SENT TO THE ISSUER. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTION FOR SUCH HOLDERS.
PROCEDURES APPLICABLE TO ALL HOLDERS
Any beneficial owner of Book-Entry Interests whose name does not appear on a
security position listing of DTC as a holder of such Book-Entry Interests and
any beneficial owner of Definitive Registered Notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender such Book-Entry Interests or Definitive Registered Notes in
the Exchange Offer should contact such person in whose name such Book-Entry
Interests or Definitive Registered Notes are registered promptly and instruct
such Holder to tender on such beneficial owner's behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Original Notes surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Original Notes who has not
completed the box entitled "Special Issuance Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined). In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantees must be by a
firm which is a member of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions").
If the Letter of Transmittal or powers of attorney are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by the Issuer, proper
evidence satisfactory to the Issuer of its authority to so act must be
submitted.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes the Issuer's
acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of the Original Notes must be cured within such time as
the Issuer shall determine. Although the Issuer intends to notify holders of
defects or irregularities with respect to tenders of the Original Notes, none of
the Issuer, the Exchange Agent or any other person shall incur any liability for
failure to give such notification. Tenders of the Original Notes will not be
deemed to have been made until any and all such defects or irregularities have
been cured or waived.
While the Issuer has no present plan to acquire any Original Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Original Notes that are not tendered in the Exchange Offer, the
Issuer reserves the right in its sole discretion to purchase or make offers for
any Original Notes that remain outstanding subsequent to the Expiration Date or,
as set forth below under "--Conditions of the Exchange Offer," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Original
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By transmitting an Agent's Message or executing a Letter of Transmittal,
each Holder will represent to the Issuer and agree that, among other things, (i)
the Exchange Notes or interests therein to be acquired by such Holder and any
beneficial owners thereof (the "Beneficial Owner(s)") in the Exchange Offer are
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being acquired by such Holder and any Beneficial Owner(s) in the ordinary course
of business of the Holder and any such Beneficial Owner(s), (ii) the Holder and
each Beneficial Owner are not participating, do not intend to participate, and
have no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) the Holder and each Beneficial Owner
acknowledge and agree that any person who is a broker-dealer registered under
the Exchange Act or is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Notes and any interest therein acquired by
such person and cannot rely on the position of the staff of the SEC set forth in
certain no-action letters (see "--Resales of the Exchange Notes"), (iv) the
Holder and each Beneficial Owner understands that a secondary resale transaction
described in clause (iii) above and any resales of the Exchange Notes and any
interest therein obtained by such Holder in exchange for the Original Notes
originally acquired by such Holder directly from the Issuer should be covered by
an effective registration statement containing the selling security holder
information required by Items 507 and 508, as applicable, of Regulation S-K of
the SEC and (v) neither the Holder nor any Beneficial Owner(s) is an
"affiliate," as defined in Rule 405 promulgated under the Securities Act, of the
Issuer. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes must represent that the Original Notes tendered in
the Exchange Offer were acquired by such broker-dealer as a result of
market-making activities or other trading activities and must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act of
1933 in connection with any resale of such Exchange Notes. By so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resales of Exchange Notes received in
exchange for Original Notes where Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Issuer has indicated its intention to make this Prospectus (as
it may be amended or supplemented) available to any broker-dealer for use in
connection with any such resale for a period of 180 days after the Expiration
Date. See "Plan of Distribution."
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuer will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Original Notes. See "--Conditions of the Exchange Offer." For purposes of
the Exchange Offer, the Issuer shall be deemed to have accepted properly
tendered Original Notes for exchange when, as and if the Issuer has given oral
or written notice thereof (oral notice being promptly confirmed in writing) to
the Exchange Agent.
RETURN OF ORIGINAL NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the Holders
thereof desire to exchange, then such unaccepted, withdrawn or non-exchanged
Original Notes will be returned without expense to the tendering Holder thereof.
Under such circumstances, Book-Entry Interests in Original Notes will be
credited to an account maintained with DTC as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Book-Entry
Interests at DTC for purposes of the Exchange Offer promptly after the date of
this Prospectus. All deliveries of Book-Entry Interests must be made by
book-entry transfer to the account maintained by the Exchange Agent at DTC. Any
financial institution that is a participant in DTC's systems may make book-entry
delivery of Book-
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Entry Interests by causing DTC to transfer such Book-Entry Interests into the
Exchange Agent's account in accordance with DTC's ATOP procedures for transfer.
Holders of Book-Entry Interests who are unable to deliver a Book-Entry
Confirmation of the tender of their Book-Entry Interests into the Exchange
Agent's account at DTC or all other documents required by the Letter of
Transmittal to the Exchange Agent on or prior to the Expiration Date, must
tender their Book-Entry Interests according to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a Holder of Original Notes desires to tender such Original Notes and time
will not permit such Holder's required documents to reach the Exchange Agent, or
the procedure for book-entry transfer cannot be completed or the certificates
relating to Definitive Registered Notes cannot be delivered, in each case, on or
prior to the Expiration Date, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution (a) either a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) or a
properly transmitted Agent's Message and (b) a Notice of Guaranteed Delivery,
substantially in the form provided by the Issuer (by facsimile transmission,
mail or hand delivery), setting forth the name and address of such Holder of
Original Notes and the amount of Original Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation or the certificates relating to
the Definitive Registered Notes and all other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) a Book-Entry Confirmation or the certificates relating to the
Definitive Registered Notes and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
A tender of Original Notes may be withdrawn any time prior to the Expiration
Date.
For a withdrawal to be effective, (i) a written notice must be received by
the Exchange Agent at the address set forth below under "--Exchange Agent" or
(ii) the appropriate procedures of DTC's ATOP system must be complied with. Any
such notice of withdrawal with respect to Book-Entry Interests must (a) specify
the name of the person having tendered the Original Notes to be withdrawn and
identify the Original Notes to be withdrawn (including the principal amount of
such Original Notes) and (b) specify the name and number of the account at DTC
to be credited with the withdrawn Original Notes and otherwise comply with the
procedures of DTC. Any such notice of withdrawal with respect to Definitive
Registered Notes must (x) specify the name of the person having tendered the
Definitive Registered Notes to be withdrawn and (y) identify the Definitive
Registered Notes to be withdrawn (including the certificate number and principal
amount of Original Notes). Any such written withdrawal must be signed by the
Holder in the same manner as the original signature on the Letter of Transmittal
by which such Original Notes were tendered (including required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuer, in its sole
discretion and whose determination shall be final and binding on all parties.
Any Original Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Properly withdrawn Original
Notes may be retendered by following one of the procedures described above at
any time on or prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Issuer shall not
be required to accept for exchange, or exchange Exchange Notes for, any Original
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Original Notes:
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(a) if, in the sole judgment of the Issuer, the Exchange Offer would
violate any law, statute, rule or regulation or an interpretation thereof of
the SEC staff; or
(b) with respect to all Book-Entry Interests tendered, if on the
Expiration Date, the Book-Entry Depositary does not present the Global Notes
to The Chase Manhattan Bank, as trustee (the "Trustee").
If the Issuer determines in its sole discretion that any of the conditions
are not satisfied, the Issuer may (i) refuse to accept any Original Notes and
return all tendered Original Notes to the tendering Holders, (ii) extend the
Exchange Offer and retain all Original Notes tendered prior to the Expiration
Date, subject, however, to the rights of Holders to withdraw such Original Notes
(see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all validly tendered Original Notes
which have not been withdrawn. If such waiver constitutes a material change to
the Exchange Offer, the Issuer will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders and the
Issuer will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to 10 business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Original Notes will terminate upon consummation of the
Exchange Offer except with respect to the Issuer's continuing obligations (i) to
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities (including liabilities under the
Securities Act), (ii) to provide, upon the request of any holder of a
transfer-restricted Original Note, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Original Notes
pursuant to Rule 144A, (iii) to use its reasonable best efforts to keep the
Registration Statement effective to the extent necessary to ensure that it is
available for resales of transfer-restricted Exchange Notes by broker-dealers
for a period of 180 days from the date on which the Registration Statement is
declared effective and (iv) to provide copies of the latest version of this
Prospectus to broker-dealers upon their request for a period of 180 days from
the date on which the Registration Statement is declared effective.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests or
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
BY REGISTERED OR CERTIFIED MAIL, BY OVERNIGHT COURIER OR BY HAND:
The Chase Manhattan Bank
15th Floor
450 W. 33rd Street
New York, New York 10001-2697
Attention: James D. Heaney
or
BY FACSIMILE:
The Chase Manhattan Bank
Attention: James D. Heaney
Facsimile Number: (212) 946-8161/8162
In addition, Letters of Transmittal and any other required documentation
should be sent to the Exchange Agent at the address set forth above, except
where facsimile transmission is specifically
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authorized (E.G., withdrawals and Notices of Guaranteed Delivery). DELIVERY OF
THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuer. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Issuer and its affiliates.
The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
its reasonable out-of-pocket expenses in connection therewith.
The Issuer will pay all transfer taxes ,if any, applicable to the exchange
of the Original Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of the Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Original Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule 144
of the Securities Act. Accordingly, such Original Notes may be resold only (i)
to the Issuer or any subsidiary thereof, (ii) so long as the Original Notes are
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act, purchasing for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or other transfer is being made in reliance on Rule 144A, (iii)
outside the United States to non-U.S. persons in an offshore transaction in
compliance with Rule 904 under the Securities Act, (iv) pursuant to an exemption
from registration in accordance with Rule 144 (if available), (v) to an
institutional "accredited investor" that, prior to such transfer, furnishes to
the Trustee a signed letter containing certain representations and agreements
relating to the registration of transfer of the Original Notes and, if such
transfer is in respect of a principal amount of Original Notes as the time of
transfer of less than $250,000, an opinion of counsel acceptable to the Issuer
that such transfer is in compliance with the Securities Act and (vi) pursuant to
an effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United States
and subject to certain requirements of the Trustee being met. The liquidity of
the Original Notes could be adversely affected by the Exchange Offer. See "Risk
Factors--Consequences of Failure to Exchange." Following the consummation of the
Exchange Offer, holders of the Original Notes will have no further registration
rights under the Registration Rights Agreement except as described herein under
"--Termination of Certain Rights."
RESALES OF THE EXCHANGE NOTES
Based on an interpretation by the staff of the SEC set forth in certain
no-action letters issued to third parties, the Issuer believes that the Exchange
Notes or interests therein issued pursuant to the Exchange Offer in exchange for
Original Notes or interests therein may be offered for resale, resold and
otherwise transferred by a Holder thereof (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Issuer to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an "affiliate" of the Issuer within the meaning of Rule 405 under
the
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Securities Act), without compliance with the registration and prospectus
delivery requirements of the Securities Act, PROVIDED that the Holder is
acquiring the Exchange Notes in the ordinary course of its business and not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of Exchange Notes. Each broker-dealer that
receives the Exchange Notes for its own account in exchange for the Original
Notes must represent that the Original Notes tendered in the Exchange Offer were
acquired by such broker-dealer as a result of market-making activities or other
trading activities and must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time or time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Original Notes where
such Original Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Issuer has indicated its
intention to make this Prospectus (as it may be amended or supplemented)
available to any broker-dealer for use in connection with any such resale for a
period of 180 days after the Expiration Date. See "Plan of Distribution."
USE OF PROCEEDS
The Exchange Offer is being effected to satisfy the Company's obligations
under the Original Notes, the Indenture and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the Exchange Offer. In
consideration of issuing the Exchange Notes in the Exchange Offer, the Issuer
will receive an equal principal amount of Original Notes. Original Notes that
are properly tendered in the Exchange Offer and not validly withdrawn will be
accepted, cancelled and retired and cannot be reissued.
The net proceeds to the Company from the Private Offering were approximately
$289.0 million, after deducting commissions and other expenses paid by the
Company.
The Company has used the proceeds as follows: (i) approximately $102.8
million in connection with the purchase of the Pledged Securities, which will be
used to make the first six scheduled interest payments on the Notes and as
security for the repayment of the principle amount of the Notes, (ii)
approximately $10.5 million in connection with the ITG 1996 Acquisition and the
purchase of all remaining minority interests in Cyberlink and Cyberlink
Communications Europe, Ltd. ("Cyberlink Europe"), (iii) approximately $10.5
million to purchase the Company's 75% ownership interest in Belnet, (iv)
approximately $1.5 million in settlement of legal claims, (v) approximately $2.0
million in connection with the purchase of a customer base for the Company's
Australian operations, (vi) to fund operating losses and capital expenditures of
its existing Local Operators, and (vii) to fund the start-up operating losses
and capital expenditures of new operations, which include start-up operations in
Denmark and Australia. The Company believes it will use the remaining proceeds
to fund other potential acquisitions, strategic alliances or start-up of its own
operations in additional countries and for working capital and general corporate
purposes. The Company has invested such remaining proceeds in short-term,
interest-bearing, investment grade securities. See "Business-Targeted
Operations."
The net proceeds from the Private Offering, together with borrowings under
the Revolving Credit Facility and vendor financing, are expected to fund the
Company's planned expansion of its existing operations and operating losses for
18 to 24 months; however, this is a forward-looking statement and there can be
no assurance in this regard. If the Company's plans or assumptions change, if
its assumptions prove to be inaccurate, if the Company consummates acquisitions
in addition to those currently contemplated, if the Company experiences
unanticipated costs or competitive pressures or if the net proceeds for the
Private Offering together with the proceeds of the Revolving Credit Facility and
such vendor financing otherwise prove to be insufficient, the Company may be
required to seek additional capital sooner than currently anticipated.
39
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and capitalization of
the Guarantor as of December 31, 1996. The table should be read in conjunction
with the Company's Consolidated Financial Statements, and the related notes
thereto, and the other information included elsewhere in this Prospectus. See
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Pro Forma Consolidated Statements of
Operations."
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996
----------------------
<S> <C>
Cash and cash equivalents............................................. $ 104,068
--------
--------
Restricted marketable securities...................................... $ 104,370
--------
--------
Short-term debt and current portion of long-term debt and current
portion of capital lease obligations................................ $ 6,974
Long-term debt and capital lease obligation:
Capital leases...................................................... 12,393
12 1/4% Senior Notes due 2006 (net of unamortized discount of $4.0
million).......................................................... 296,000
Other long-term debt................................................ 6,032
--------
Total long-term debt and capital lease obligations................ $ 321,399
--------
--------
Shareholders' equity:
Common shares, $.01 par value; 20,000,000 shares authorized;
4,807,711 shares Class B shares outstanding....................... $ 48
Preferred stock, $.01 par value; 20,000,000 shares authorized;
9,243,866 shares outstanding...................................... 93
Warrants-Common Stock............................................... 5,544
Additional paid-in capital.......................................... 65,064
Accumulated deficit................................................. (47,740)
Foreign currency translation adjustment............................. (622)
Deferred financing costs............................................ (1,544)
--------
Total shareholders' equity........................................ 20,843
--------
Total capitalization............................................ $ 342,242
--------
--------
</TABLE>
40
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited Pro Forma Consolidated Statements of Operations
present the Company's consolidated results of operations for the year ended
December 31, 1996, after giving effect to the ITG 1996 Acquisition, the Sprint
Acquisitions and the Belnet Acquisition and the financing thereof, and the other
adjustments referred to herein, in each case as if these transactions had
occurred on January 1, 1996. The pro forma data for the year ended December 31,
1996 does not give effect to the Private Offering and the application of a
portion of the net proceeds thereof to repay certain indebtedness. Accordingly,
the data set forth herein differs from the pro forma data set forth in the
Summary Financial Data contained herein. The pro forma data are not necessarily
indicative of the results that would have been achieved, nor are they indicative
of the Company's future results.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1996
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, ACQUIRED DECEMBER 31,
1996 ENTITIES PRO FORMA 1996
HISTORICAL (1) ADJUSTMENTS (2) PRO FORMA
------------ ----------- --------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT LOSS PER SHARE)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 113,257 $ 10,979 $ -- $ 124,236
Cost of services....................................... (98,461) (7,696) -- (106,157)
------------ ----------- ------- ------------
Gross profit........................................... 14,796 3,283 -- 18,079
Selling, general and administrative expense............ (38,893) (2,807) -- (41,700)
Depreciation and amortization.......................... (6,655) (443) (2,128) (9,226)
------------ ----------- ------- ------------
Loss from operations................................... (30,752) 33 (2,128) (32,847)
Interest income........................................ 3,976 -- -- 3,976
Interest expense....................................... (11,359) (1) (732) (12,092)
Other expense.......................................... (288) (209) -- (288)
Foreign currency transaction gain...................... 758 -- -- 758
Minority Interest...................................... (180) -- -- (389)
Provision for Income taxes............................. (395) -- -- (395)
------------ ----------- ------- ------------
Net loss attributable to Class B Common Stock.......... $ (38,240) $ (177) $ (2,860) $ (41,277)
Loss per share of Class B Common Stock (3)............. $ (11.24) $ (12.14)
Weighted average number of shares of Class B Common
Stock outstanding.................................... 3,401 3,401
OTHER FINANCIAL DATA:
EBITDA (4)........................................... $ (23,807) $ 267 $ -- $ (23,540)
Capital expenditures (5)............................. 24,097 2,065 -- 26,162
Ratio of earnings to fixed charges (6)............... -- -- -- --
Cash used in operating activities.................... (10,475) -- -- --
Cash used in investing activities.................... (225,000) -- -- --
Cash provided by financing activities................ 335,031 -- -- --
</TABLE>
FOOTNOTES APPEAR ON FOLLOWING PAGE
41
<PAGE>
REVENUES BY MARKET
The following table describes the breakdown of the Company's unaudited pro
forma revenues in each of its markets for the year ended December 31, 1996.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
----------------------------
($ IN
THOUSANDS) % OF
AMOUNT TOTAL
--------------- -----
<S> <C> <C>
United States......................................................... $ 85,843 69%
France................................................................ 11,078 9
Germany............................................................... 11,705 10
Netherlands........................................................... 7,857 6
United Kingdom........................................................ 6,260 5
Others................................................................ 1,493 1
--------------- ---
$ 124,236 100%
--------------- ---
--------------- ---
</TABLE>
- ------------------------
(1) The pro forma data for the year ended December 31, 1996 includes the results
of operations for (i) Sprint France and Sprint Germany from January 1, 1996
to April 30, 1996 and (ii) Belnet from January 1, 1996 to September 30,
1996, each of which is prior to the Company's acquisition of such entities.
(2) Pro forma depreciation and amortization expense reflects approximately $2.1
million of amortization expense on the goodwill recognized in connection
with the acquired entities (see note(1)) had such acquisitions occurred on
January 1, 1996. Goodwill is amortized over a period of 15 years.
Pro forma interest expense reflects $732,000 of interest for the year ended
December 31, 1996 for interest expense that would have been recognized for
indebtedness incurred with respect to the Company's acquisition of the
acquired entities as if all such acquisitions had occurred on January 1,
1996.
(3) Loss per common share is calculated by dividing the loss attributable to
common shares by the weighted average number of shares outstanding.
Outstanding stock options and warrants are not included in the loss per
share calculation as their effect is anti-dilutive. Class B common shares,
par value $.01 per share (the "Class B Common Stock"), of the Guarantor are
the only outstanding shares of common stock of the Guarantor.
(4) EBITDA consists of loss before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the telecommunications industry. It is presented to enhance an understanding
of the Company's operating results and is not intended to represent cash
flow or results of operations in accordance with U.S. GAAP for the periods
indicated. The Company's use of EBITDA may not be comparable to similarly
titled measures used by other companies due to the use by other companies of
different financial statement components in calculating EBITDA.
(5) Capital expenditures include assets acquired through capital lease financing
and other debt.
(6) The ratio of earnings to fixed charges is computed by dividing the loss from
operations before fixed charges by fixed charges. Fixed charges consist of
interest charges and amortization of debt issuance costs, whether expensed
or capitalized and that portion of rental expense the Company believes to be
representative of interest. For the year ended December 31, 1996, earnings
were insufficient to cover fixed charges by approximately $37.7 million. On
a pro forma basis, earnings would have been insufficient to cover fixed
charges by $40.5 million for 1996.
42
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below with respect to the
years ended December 31, 1996 and 1995 has been derived from the Company's
Consolidated Financial Statements. The information as of and for the year ended
December 31, 1994 has been derived from the financial statements of the
predecessor entity, International Telecommunications Group, Ltd. The information
set forth below is qualified by reference to and should be read in conjunction
with the Consolidated Financial Statements and the notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------
<S> <C> <C> <C>
PREDECESSOR
1996 1995 1994
---------- ---------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT LOSS PER
SHARE)
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues................................................................... $ 113,257 $ 18,617 $ 4,702
Cost of services........................................................... (98,461) (17,510) (4,923)
---------- ---------- -----------
Gross profit (loss)........................................................ 14,796 1,107 (221)
Selling, general and administrative expense................................ (38,893) (9,639) (2,395)
Depreciation and amortization.............................................. (6,655) (849) (240)
---------- ---------- -----------
Loss from operations....................................................... (30,752) (9,381) (2,856)
Interest income............................................................ 3,976 173 --
Interest expense........................................................... (11,359) (194) (225)
Other expense.............................................................. (288) -- --
Foreign currency transaction gain.......................................... 758 -- --
Minority interest.......................................................... (180) -- --
Income taxes............................................................... (395) -- --
---------- ---------- -----------
Net loss................................................................... $ (38,240) $ (9,402) $ (3,081)
---------- ---------- -----------
---------- ---------- -----------
Loss per share(1)............................................................ $ (11.24) $ (3.65) $ (15.41)
Weighted average number of shares of Common Stock outstanding................ 3,401 2,576 200
OTHER FINANCIAL DATA:
EBITDA(2).................................................................. $ (23,807) $ (8,532) $ (2,616)
Capital expenditures (3)................................................... 24,097 6,074 1,126
Ratio of earnings to fixed charges (4)..................................... -- -- --
Cash (used in) provided by operating activities............................ (10,475) 3,554 (1,987)
Cash used in investing activities.......................................... (225,000) (16,537) (478)
Cash provided by financing activities...................................... 335,031 18,143 2,888
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 104,068 $ 5,163 $ 452
Restricted marketable securities........................................... 104,370 -- --
Total assets............................................................... 427,969 53,072 3,682
Short-term debt and current portion of capital lease obligations........... 6,974 5,506 2,645
Long-term debt and capital lease obligation................................ 314,425 6,648 1,404
Shareholders' equity (deficiency).......................................... 20,843 5,705 (3,651)
</TABLE>
- ------------------------
(1) Loss per share is calculated by dividing the loss attributable to common
shares by the weighted average number of shares outstanding. Outstanding
options and warrants are not included in the loss per common share
calculation as their effect is anti-dilutive.
43
<PAGE>
(2) EBITDA consists of loss before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the telecommunications industry. It is presented to enhance an understanding
of the Company's operating results and is not intended to represent cash
flow or results of operations in accordance with U.S. GAAP for the periods
indicated. The Company's use of EBITDA may not be comparable to similarly
titled measures used by other companies due to use by other companies of
different financial statement components in calculating EBITDA.
(3) Capital expenditures include assets acquired through capital lease financing
and other debt.
(4) The ratio of earnings to fixed charges is computed by dividing the loss from
operations before fixed charges by fixed charges. Fixed charges consist of
interest charges and amortization of debt issuance costs, whether expensed
or capitalized and that portion of rental expense the Company believes to be
representative of interest. For the years 1996, 1995 and 1994, earnings were
insufficient to cover fixed charges by approximately $37.7 million, $9.4
million and $3.1 million, respectively.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS. FOR A
DISCUSSION OF IMPORTANT FACTORS, INCLUDING, BUT NOT LIMITED TO, CONTINUED
DEVELOPMENT OF THE COMPANY'S BUSINESS, ACTIONS OF REGULATORY AUTHORITIES AND
COMPETITORS AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS, SEE "RISK FACTORS."
OVERVIEW
GENERAL
The Company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services,
including long distance calling to over 200 countries, calling card, private
line and value-added services. The Company focuses on providing international
long distance voice service to small and medium-sized businesses in strategic
markets. The Company currently has operations in the United States, the United
Kingdom, France, Germany, Sweden, Finland, the Netherlands, Denmark and
Australia. In 1995, approximately 53.0% of all international long distance
telecommunications minutes originated in these markets. The Company is expanding
its operations and network into additional strategic markets which account for a
significant portion of the remaining international traffic. The Company's
consolidated pro forma revenues for the year ended December 31, 1996 were $124.2
million.
The Company's initial operations were established in the United States in
1995 through the acquisition of interests in Cyberlink and Cyberlink Europe in
September and November 1995 (the "Cyberlink Acquisitions") and the acquisition
of interests in ITG in 1995 (the "ITG 1995 Acquisition"). ITG and Cyberlink had
growing businesses in New York and California, respectively, each with an
established customer base and sales channels, but both had operational problems
which prevented these entities from realizing their profit potential. These
problems included costly capacity arrangements, vendor disputes and inadequate
credit and pricing policies. Each of ITG and Cyberlink was also unable to obtain
funding for working capital which limited their ability to purchase capacity on
a cost-efficient basis which, coupled with the foregoing problems, limited their
operating performance.
Following the Company's acquisition of interests in ITG in 1996 (the "ITG
1996 Acquisition"), which brought the Company's ownership in ITG to 87% the
Company obtained full operational control and took further steps to streamline
and improve operations, including finance, network provisioning, pricing and
selling functions.
Following the Company's consummation of the Cyberlink Acquisition and the
ITG 1995 Acquisition, the Company implemented solutions designed to improve
ITG's and Cyberlink's operations, including adding key members of management.
The Company has negotiated and continues to negotiate rate reductions and more
appropriate capacity arrangements based on the Company's current and anticipated
capacity requirements. The Company improved vendor relations by paying bills on
a more timely basis and has implemented stricter financial controls, including
ongoing customer credit reviews and managerial procedures to reduce credit
exposure. The Company has also settled certain disputes and claims with certain
of its vendors.
As a result of the Company's efforts to improve the operational deficiencies
of ITG and Cyberlink, the Company's pro forma gross margins increased 5.3% to
14.6% for the year ended December 31, 1996. The Company expects that its gross
margin will continue to improve as a result of the operational efficiencies to
be derived from continued growth, the continued development of RSL-NET and the
resulting economies of scale. However, the foregoing is a forward-looking
statement and there can be no assurance that the Company will be able to
continue to improve its gross margins. Factors which could affect such statement
include (i) changes to or the Company's inability to effect its growth strategy,
(ii) regulatory actions or
45
<PAGE>
inactions which adversely affect the Company's existing operations or ability to
expand outside of the U.S. and (iii) changes in the competitive and economic
environments in each of the Company's existing and new markets. See "Risk
Factors--Low Gross Margins."
SCHEDULE OF ACQUISITIONS AND PURCHASE PRICE ALLOCATION
The following table provides a chronology of all of the material
acquisitions, purchase price allocations and the total purchase price of the
Company's acquisitions.
<TABLE>
<CAPTION>
COMPONENT COST AND TOTAL RECORDED
ACQUISITION DATES ACQUIRED PURCHASE PRICE ALLOCATION(1) PURCHASE PRICE(2)
- ------------------------------ --------------------------- --------------------------------------- -----------------
<S> <C> <C> <C>
($ IN MILLIONS) ($ IN MILLIONS)
ITG (Predecessor) (3)......... March 1995--September 1996 Assets acquired: $ 26.8
Cash and cash equivalents of $7.4
Accounts receivable of $6.7
Telecommunications equipment of
$1.9
Deposits and others of $1.3
Intangible assets--Goodwill of
$26.8
Liabilities assumed:
Accounts payable of $42.0
Long term debt of $2.1
Cyberlink..................... September 1995--March 1997 Assets acquired: 30.6
Accounts receivable of $2.2
Telecommunications equipment of
$2.6
Deposits and others of $0.7
Intangible assets--Goodwill of
$30.6
Liabilities assumed:
Accounts payable of $33.5
Long term debt of $2.6
Cyberlink Europe.............. November 1995--March 1997 Assets acquired: 5.2
Accounts receivable of $0.2
Intangible assets--Goodwill of $2.9
Liabilities assumed:
Accounts payable of $3.1
Belnet(1)..................... October 1996 Assets acquired: 10.5
Cash of $2.3
Accounts receivable of $0.6
Telecommunications equipment of
$1.2
Deposits and others of $0.3
Intangible assets--Goodwill of $8.5
Liabilities assumed:
Accounts payable of $2.4
Other Acquisitions............ May--August 1996 Assets acquired: 13.8
Telecommunications equipment of $1.0
Intangible assets--Goodwill of
$11.7
Liabilities assumed:
Lease commitment of $2.4
</TABLE>
- ------------------------------
(1) Purchase Price Allocation represents the results of the Company's fair value
analysis and resulting valuation attributable to the assets purchased,
liabilities assumed and goodwill allocated with respect to each of the
Company's acquisitions.
(2) Total recorded purchase price consists of cash paid in connection with each
respective acquisition and assumed net liabilities recorded as accrued
expenses and other liabilities--non current in the Company's December 31,
1996 consolidated balance sheet.
(3) In connection with certain stock purchase agreements that the Company has
with the former majority shareholders of both ITG and Belnet, the Company
has provided such shareholders with the right to sell their respective
remaining shareholdings in such
46
<PAGE>
subsidiary to the Company at such time, if any, that the Company consummates
an initial public offering. The Company will account for the effects of
these transactions in the period, if ever, in which these transactions
occur. Furthermore, the Company does not have any contingent payment
liabilities, options or any other commitments, other than that which exists
under such certain stock purchase agreements, as noted above, to any selling
stockholders of acquired entities.
ACQUISITION ACCOUNTING
Since its formation in 1994, the Company has expanded its revenues, customer
base and network through internal growth and acquisitions. All of its
acquisitions were negotiated on an arm's length basis with unaffiliated third
parties. The Company accounted for all of its acquisitions of controlling
interests using the purchase method of accounting and, accordingly, the
respective purchase prices have been allocated to the assets acquired and
liabilities assumed based on their estimated fair values at their dates of
acquisition. The excess of the purchase price over the estimated fair values of
the net assets acquired has been recorded as goodwill, which is being amortized
over a 15-year period. For periods prior to April 1, 1996, the Company had
included 100% of the losses of its loss generating subsidiaries in its results
of operations because the book value of the minority interests in these
subsidiaries has been reduced to below zero. Effective April 1, 1997, the
Company owns 100% of its loss generating subsidiaries. The Company does however
record minority interest for another entity's ownership interest in Belnet. The
Company's non-U.S. subsidiaries denominate revenues, costs, assets and
liabilities for the most part in local currencies. All of the subsidiaries,
however, report their financial results in U.S. dollars pursuant to U.S. GAAP.
See "--Currency."
The following table sets forth the Company's recorded acquisition value for
material acquisitions completed by the Company:
<TABLE>
<CAPTION>
CUMULATIVE
ACQUISITION DATE ACQUISITION VALUE (1) OWNERSHIP %
- --------------------------------------------------- ---------------------- ----------------------- ---------------
<S> <C> <C> <C>
($ IN MILLIONS)
ITG Acquisitions:
Initial Investment(2)............................ March 1995 4.8 25
First Step-up.................................... April 1995 2.4 35
Second Step-up................................... September 1995 (3) 8.1 50
Third Step-up.................................... September 1996 11.5 87(4)
Cyberlink Acquisitions: (5)
Cyberlink........................................ September 1995 15.6 51
August 1996 2.0 63
December 1996 12.2 94
March 1997 .8 100
Cyberlink Europe................................. November 1995 2.2 51
August 1996 (6) 1.0 74
December 1996 1.1 91
March 1997 .9 100
Sprint Acquisitions:
Sprint France.................................... May 1996 (7) 100
Sprint Germany................................... May 1996 (7) 100
Incom Acquisition................................ August 1996(8) 3.8 100
Belnet Acquisition............................... October 1996(9) 10.5 75
</TABLE>
- ------------------------
(1) Acquisition value represents the Company's recorded values under U.S. GAAP
and includes cash paid plus the assumption of net liabilities.
47
<PAGE>
(2) The Company's initial investment in ITG was $4.75 million, $3.0 million of
which was paid in 1995 and $1.75 million of which was paid in 1996.
(3) The Company began to consolidate ITG's operations effective with its
acquisition of a majority equity interest in ITG on September 30, 1995. From
March 1995 to September 30, 1995, the Company accounted for its investment
in ITG using the equity method of accounting.
(4) The Company acquired 38% of ITG's shares in the third step-up and caused ITG
to issue additional shares in connection with the Incom Acquisition (as
defined herein), thereby diluting the Company's interest in ITG to 87%.
(5) In connection with the acquisitions of Cyberlink and Cyberlink Europe, the
Company paid approximately $1.5 million and approximately $2.2 million
(approximately $900,000 in 1995 and $1.3 million in 1996), respectively, and
assumed net liabilities of approximately $14.1 million and $1.0 million,
respectively. In early 1996, the Company paid an additional approximately
$2.1 million for Cyberlink. Such additional amount resulted from certain
contingent 1995 events. In August 1996, the Company purchased approximately
12% and 9% of Cyberlink and Cyberlink Europe, respectively, from the former
president of such companies. The Company purchased approximately 37% and 26%
of Cyberlink and Cyberlink Europe, respectively, from several minority
shareholders during the period from August 1996 through March 1997.
(6) Cyberlink Europe issued additional shares pursuant to capital calls in May
and August 1996. The Company's subscription to these capital calls increased
the Company's ownership in Cyberlink Europe by approximately 14% (in
addition to the approximately 9% of Cyberlink Europe purchased from the
President of Cyberlink). See Footnote 5.
(7) Pursuant to the applicable asset purchase agreements, the Company cannot
disclose the acquisition values.
(8) In August 1996, the Company acquired the assets and assumed certain limited
liabilities of Incom (UK) Limited ("Incom"), a United Kingdom reseller, for
$500,000 plus 3,954 non-voting shares of ITG (the "Purchased Shares"). In
addition, 3,333 voting shares of ITG currently held by Incom were exchanged
for an equal number of non-voting shares. The Company has also entered into
a consulting agreement with an affiliate of Incom calling for payments of
$10,000 per month for seven years and has paid such affiliate $280,000 for
its agreement not to compete for a period of seven years and has agreed to
make a $660,000, seven-year loan to such affiliate, bearing interest at a
rate of 7% per annum. In connection with this acquisition, the Company
recorded approximately $2,400,000 of goodwill.
(9) In October 1996, the Company acquired 38,710 shares of Belnet, representing
75% of Belnet's outstanding capital stock, for $10.5 million. In connection
with the Belnet Acquisition, the Company recorded approximately $8.5 million
of goodwill.
REVENUES
The Company provides both domestic and international long distance services
and derives its revenues principally from the provision of international long
distance voice telecommunication services. Revenues are derived from the number
of minutes of use (or fractions thereof) billed by the Company ("revenue
minutes") and are recorded upon completion of calls. In addition, the Company
derives revenues from prepaid calling cards. These revenues are recognized at
the time of usage or upon expiration of the card. The Company maintains local
market pricing structures for its services and generally prices its services at
a discount to the prices charged by the local PTTs and major carriers. The
relatively high prices charged by these PTTs and major carriers enable the
Company to offer attractive pricing to its customers. The Company has
experienced, and expects to continue to experience, declining revenue per minute
in all of its markets as a result of increasing competition in
telecommunications, which
48
<PAGE>
it expects will be offset by increased minute volumes and decreased operating
costs per minute. See "Risk Factors--Risks Associated With Rapidly Changing
Industry" and "Risk Factors--Competition."
To date, the Company's revenues have been primarily derived from its
operations within the United States and have resulted primarily from the sale of
long distance voice services on a wholesale basis to other carriers. The Company
has, and expects to experience further significant month to month changes in
revenues generated by its carrier customers. The Company believes such carrier
customers will, on occasion, react to temporary price fluctuations and spot
market availability that will impact the Company's carrier revenues. The Company
has shifted its marketing focus in the United States to small and medium-sized
businesses and has restructured its pricing of wholesale services to other
carriers. In connection with this shift in marketing focus, the Company
determined in December 1995 that certain carrier customers provided the Company
with margins below its targeted levels for margin contribution. Accordingly, the
Company established new pricing structures and terminated service to the low or
zero margin customers which did not agree to the new pricing structures. In
addition, the Company terminated service in February 1996 to its largest
wholesale customer because of such customer's inability to pay for past
services. This customer represented approximately 11% of ITG's revenues in 1995.
The Company has commenced legal proceedings to recover amounts owed to the
Company by such customer. The Company has also instituted stricter credit
criteria to reduce its bad debt exposure.
To compensate for the loss of such revenues, the Company accelerated its
U.S. sales efforts to small and medium-sized businesses during 1996, resulting
in increased sales to this segment.
An increasing portion of the Company's revenues are derived from the
provision of services to residential customers. As a result of intense
competition for U.S. residential customers, the Company experiences significant
churn (customer attrition) in this segment. For example, the Company believes
that in excess of 75% of residential customers brought on through past
telemarketing efforts did not remain customers of the Company beyond one year.
Because of such churn rates, sustained growth in this segment may be more
difficult to achieve. Significant changes in the Company's selling strategies
have been implemented, including the termination of its telemarketing efforts in
favor of agent and prepaid phone card sales, in order to decrease such
historical churn rates.
The Company has recently commenced European operations with the introduction
of operations in the United Kingdom, Finland and Sweden in the second quarter of
1996. In addition, the Company acquired operations in France and Germany during
that quarter and acquired operations in the Netherlands in the fourth quarter of
1996. Each of the countries in which the Company operates has experienced
different levels of deregulation and, as a result, the level of competition in
each country varies. Therefore, the Company believes that as it pursues its
strategic growth strategy it will continue to encounter various degrees of
start-up time. Accordingly, the Company does not expect comparable start-up
revenues and believes it may experience greater costs for most of its new
operations.
Substantially all revenues from the Company's European operations are
derived from commercial sales to end-users, achieving a higher gross profit than
wholesale sales to carriers. Sales are targeted at small and medium-sized
corporate customers in addition to niche ethnic customers and certain other
individuals. To reduce its credit risk, the Company targets its niche ethnic
customers with prepaid products. As revenues from European operations grow in
proportion to the Company's overall revenue, the Company anticipates higher
margins in the future. The foregoing is a forward-looking statement and there
can be no assurance in this regard. Factors which could affect such statement
include (i) changes to or the Company's inability to effect its growth strategy,
(ii) regulatory actions or inactions which adversely affect the Company's
existing operations or ability to expand outside of the U.S. and (iii) changes
in the competitive and economic environments in each of the Company's existing
and new markets.
49
<PAGE>
COST OF SERVICES
The Company's cost of services is comprised of costs associated with gaining
local access and the transport and termination of calls over RSL-NET. A majority
of the Company's cost of services is variable, including local access charges
and capacity leased on a per-minute basis. The Company expects that an
increasing amount of its total operating costs will be fixed in the future, as
the volume of the Company's calls carried over its IRUs, MIUs and point-to-point
fixed cost leases increases. The depreciation expense with respect to the
Company's MIUs and IRUs is not accounted for in cost of services. In addition,
the Company intends to lower its variable cost of termination as a percentage of
revenues by carrying traffic pursuant to more of its existing operating
agreements and by negotiating additional operating agreements on strategic
routes. The Company has directly linked its Local Operators in Europe and the
United States utilizing lines leased on a fixed cost point to point basis and
MIUs and IRUs. To the extent traffic can be transported between two Local
Operators over MIUs or IRUs, there is almost no marginal cost to the Company
with respect to the international portion of a call other than the fixed lease
payment on the up front cost of acquiring the MIUs or IRUs. The Company's cost
of transport and termination will decrease to the extent that it is able to
bypass the settlement rates associated with the transport of international
traffic. By integrating its operations in this manner, the Company expects to
continue to improve its gross margins. For a discussion of important factors
that adversely affect the Company's gross margins see "Risk Factors--Low Gross
Margins" and "Business--Network Strategy." However, the Company does not intend
to purchase or construct its own intra-national transmission facilities in any
of its markets. Accordingly, variable costs will continue to be a majority of
the Company's cost of services for the foreseeable future.
The Company's cost of services is affected by the volume of traffic relative
to its owned facilities and facilities leased on a point-to-point fixed cost
basis and capacity leased on a per minute basis with volume discounts. To the
extent that volume exceeds capacity on leased facilities that have been arranged
for in advance, the Company is forced to acquire capacity from alternative
carriers on a spot rate per-minute ("overflow") basis at a higher cost.
Acquiring capacity on an overflow basis has a negative impact on margins, but
enables the Company to maintain uninterrupted service to its customers. See
"Risk Factors-- Low Gross Margins."
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's selling, general and administrative expenses consist of costs
incurred to support the continued expansion of RSL-NET, the introduction of new
services and the provision of ongoing customer service. These costs are
principally comprised of costs associated with employee compensation, occupancy,
insurance, professional fees, sales and marketing (including sales commissions)
and bad debt expenses. In addition, as the Company commences operations in
different countries, it incurs significant start up costs, particularly for
hiring, training and retention of personnel, leasing of office space and
advertising. In addition, the Company's selling, general and administrative
expense includes the settlement of various claims and disputes relating to
pre-acquisition periods.
The Company has grown and intends to continue to grow by establishing
operations in countries that are in the process of being deregulated and that
originate and terminate large volumes of international traffic or offer other
strategic benefits. Each of the Company's operations is in a different stage of
development. The early stages of development of a new operation involve
substantial start-up costs in advance of revenues. Upon the commencement of such
operations, the Company generally incurs additional fixed costs to facilitate
growth. The Company expects that during periods of significant expansion,
selling, general and administrative expenses will increase materially.
Accordingly, the Company's consolidated results of operations will vary
depending on the timing of the Company's expansion strategy and, during a period
of rapid expansion, will not necessarily reflect the performance of the more
established Local Operators.
50
<PAGE>
FOREIGN EXCHANGE
The Company is exposed to fluctuations in foreign currencies relative to the
U.S. dollar, as its revenues, costs, assets and liabilities are, for the most
part, denominated in local currencies. The results of operations of the
Company's subsidiaries, as reported in U.S. dollars, may be significantly
affected by fluctuations in the value of the local currencies in which the
Company transacts business.
The Company incurs settlement costs when it exchanges traffic via operating
agreements with foreign correspondents. These costs currently represent a small
portion of total costs; however, as the Company's international operations
increase, it expects that these costs will become a more significant portion of
its cost of services. Such costs are settled by utilizing a net settlement
process with the Company's foreign correspondents comprised of special drawing
rights ("SDRs"). SDRs are the established method of settlement among
international telecommunications carriers. The SDRs are valued based upon a
basket of foreign currencies and the Company believes that this mitigates, to
some extent, its foreign currency exposure. As the Company establishes
operations in countries the currencies of which are not represented in SDRs, the
Company will consider the implementation of hedging policies, as appropriate.
Since payments of principal and interest on the Notes will be made in U.S.
dollars and a substantial portion of the cash flow used to service these
payments will be denominated in local currencies, the Notes will increase the
Company's exposure to exchange rate fluctuations. The Company has monitored and
will continue to monitor its currency exposure. See "Risk Factors--Devaluation
and Currency Risks."
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(UNAUDITED; IN THOUSANDS, EXCEPT LOSS PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues....................................................................................... $ 124,236
Cost of services............................................................................... (106,157)
-----------------
Gross profit................................................................................... 18,079
Selling, general and administrative expense.................................................... (41,700)
Depreciation and amortization.................................................................. (9,226)
-----------------
Loss from operations........................................................................... (32,847)
Interest income................................................................................ 3,976
Interest expense............................................................................... (12,092)
Other expense.................................................................................. (288)
Foreign currency transaction gain.............................................................. 758
Minority interest.............................................................................. (389)
Income taxes................................................................................... (395)
-----------------
Net loss attributable to Class B Common Stock.................................................. $ (41,277)
-----------------
-----------------
Loss per share of Class B Common Stock (2)..................................................... $ (12.14)
Weighted average number of shares of Class B Common Stock outstanding.......................... 3,401
OTHER FINANCIAL DATA:
EBITDA (3)..................................................................................... $ (23,540)
Capital expenditures (4)....................................................................... 26,162
Ratio of earnings to fixed charges (5)......................................................... --
</TABLE>
- ------------------------
(1) See the Pro Forma Consolidated Statements of Operations and the notes
thereto included elsewhere in this Prospectus.
51
<PAGE>
(2) Loss per share is calculated by dividing the loss attributable to common
shares by the weighted average number of shares outstanding. Outstanding
options and warrants are not included in the loss per common share
calculation as their effect is anti-dilutive. Shares of Class B Common Stock
are the only outstanding shares of the Guarantor's common stock.
(3) EBITDA consists of loss before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the telecommunications industry. It is presented to enhance an understanding
of the Company's operating results and is not intended to represent cash
flow or results of operations in accordance with U.S. GAAP for the periods
indicated. The Company's use of EBITDA may not be comparable to similarly
titled measures used by other companies due to use by other companies of
different financial statement components in calculating EBITDA.
(4) Capital expenditures include assets acquired through capital lease financing
and other debt.
(5) The ratio of earnings to fixed charges is computed by dividing the loss from
operations before fixed charges by fixed charges. Fixed charges consist of
interest charges and amortization of debt issuance costs, whether expensed
or capitalized and that portion of rental expense the Company believes to be
representative of interest. For the year ended December 31, 1996, earnings
were insufficient to cover fixed charges by approximately $37.7 million. On
a pro forma basis, earnings would have been insufficient to cover fixed
charges by $40.5 million for 1996.
52
<PAGE>
RESULTS OF OPERATIONS
The Company had no operations in 1994 other than insignificant salary
expense. The Company's predecessor, ITG, had less than $2.8 million of revenue
and a net loss of $250,000 for the year ended December 31, 1993. In 1995, the
Company had virtually no operations other than its initial investments in its
U.S. operations and an investment in Cyberlink Europe, which had no material
operations. The majority of these investments (in terms of acquisition value)
were made at the end of the third quarter of 1996. Therefore, a comparison of
historical results for 1995 compared to 1994 would not be meaningful.
Accordingly, the discussion set forth below focuses on the historical
information for the years ended December 31, 1995 and 1996.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
REVENUES. Revenues increased to $113.3 million for the year ended December
31, 1996 from $18.6 million for the year ended December 31, 1995, an increase of
509%. This increase is due primarily to the full year of U.S. operations that is
consolidated in the 1996 results of operations compared to only three months of
the Company's U.S. operations consolidated in the historical statement of
operations for 1995. The Company experienced an increase in commercial customers
at each of the Company's operations. The Company's Swedish, Finnish and U.K.
operations began generating revenues in May 1996 and contributed approximately
$7.8 million to 1996 revenues. The Company purchased Sprint France and Sprint
Germany in May 1996. These operations contributed approximately $13.1 million to
1996 revenues. The Company's European operations did not generate any revenues
in 1995. For the year ended December 31, 1996, approximately 24% of the
Company's revenues were generated from the Company's European operations. The
Company expects European operations to increase as a percentage of its total
consolidated revenues as the Company proceeds with its expansion of its
operations in geographic areas outside the U.S. The Company anticipates that
U.S. revenues will continue to decline as a percentage of its total consolidated
revenues. The foregoing is a forward-looking statement and there can be no
assurance in this regard. Factors which could affect such statement include (i)
changes to or the Company's inability to effect its growth strategy, (ii)
regulatory actions or inactions which adversely affect the Company's existing
operations or ability to expand outside of the U.S. and (iii) changes in the
competitive and economic environments in each of the Company's existing and new
markets.
COST OF SERVICES. Cost of services increased to $98.5 million for the year
ended December 31, 1996 from $17.5 million for the year ended December 31, 1995,
an increase of 463%. This increase is due primarily to the full year of U.S.
operations that is consolidated in the 1996 results of operations compared to
only three months of the Company's U.S. operations consolidated in the
historical statement of operations for 1995. As a percentage of revenues, cost
of services decreased to 86.9% for the year ended December 31, 1996 from 94% for
the year ended December 31, 1995. The decrease in cost of services as a
percentage of revenues is primarily attributable to the Company's growing
European revenues which generate greater gross margins (21.3% in 1996) than the
Company's U.S. operations (10.4% in 1996) and, to a lesser extent, to a decrease
in overflow traffic and increased utilization of the Company's operating
agreements. The Company is currently seeking to purchase additional capacity on
routes on which it has experienced, or anticipates experiencing, overflow
traffic. In addition, the Company's prices to customers utilizing these routes
are often adjusted to take into account an increased expectation of overflow
traffic.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the year ended December 31, 1996 increased to $38.9
million from $9.6 million for the year ended December 31, 1995. This increase is
primarily attributable to the reasons previously provided for revenues and cost
of services above. Costs for start-up and expansion of the Company's U.K.,
Dutch, Finnish and Swedish Local Operators represented 30% and 6.3% of the
Company's total selling, general and administrative expense for the years ended
December 31, 1996 and 1995, respectively, although they only accounted for 24.2%
and
53
<PAGE>
1% of the Company's total revenues for the same periods. Selling, general and
administrative expense as a percentage of revenues will vary from period to
period as a result of new Local Operators' start-up costs. For existing Local
Operators however, such costs are not expected to increase in proportion to
revenues.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased 689% to $6.7 million for the year ended December 31, 1996 from
$849,000 for the year ended December 31, 1995, an increase of $5.9 million. This
increase is primarily attributable to the increased amortization of goodwill
recorded as a result of acquisitions. Depreciation and amortization expense is
expected to increase in the future as the Company acquires additional businesses
and assets. The Company depreciates its switches over a five- to seven-year
life, office equipment is depreciated over their estimated useful lives which
range from three to seven years and its investments in MIUs and IRUs are
depreciated over a 15-year life. Goodwill is amortized over 15 years.
INTEREST INCOME. Interest income increased to $4.0 million for the year
ended December 31, 1996 from $173,000 for the year ended December 31, 1995,
primarily as a result of interest earned on the net proceeds from the Private
Offering.
INTEREST EXPENSE. Interest expense increased to $11.4 million for the year
ended December 31, 1996 from $194,000 for the year ended December 31, 1995, an
increase of approximately $11.2 million, as a result of interest related to the
Notes ($9.2 million) and borrowings under the Revolving Credit Facility
($748,000) and the remaining amounts due to interest related to capital leases.
Interest expense will increase substantially in future periods due to the
interest payments on the Notes.
NET LOSS. Net loss increased to $38.2 million for the year ended December
31, 1996 from $9.4 million for the year ended December 31, 1995 due to increased
costs and expenses, as described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred significant operating and net losses, due in large
part to the start-up and development of the Company's operations and RSL-NET.
The Company expects that such losses will increase as the Company implements its
growth strategy. Historically, the Company has funded its operating losses and
capital expenditures through capital contributions, borrowings and a portion of
the net proceeds of the Private Offering. Cash provided by operating activities
for 1995 and cash used in operating activities for the year ended December 31,
1996 equaled $3.6 million and $10.5 million, respectively. Capital expenditures
for 1995 and the year ended December 31, 1996 were $6.1 million and $24.1
million, respectively. Funds expended for acquisitions during 1995 and the year
ended December 31, 1996 were $15.4 million and $38.6 million, respectively.
During 1995, the Company funded such operating losses, capital expenditures and
acquisitions with short-term borrowings of $3.0 million, capital contributions
of $15.2 million, the assumption of a capital lease obligation of $5.0 million
and increases in accounts payable, accrued expenses and other liabilities, of
$12.2 million. During 1996, the Company funded such operating losses, capital
expenditures and acquisitions with borrowings of $44.5 million and a portion of
the net proceeds of the Private Offering. At December 31, 1996, the Company had
$125.0 million of working capital as compared to a working capital deficiency of
$19.6 million at December 31, 1995.
Capital expenditures for 1996 were $24.1 million. These capital expenditures
are principally for switches and related telecommunications equipment. The
Company is contractually committed to the purchase of three international
gateway and two domestic switches. This commitment amounts to approximately $8.0
million, all of which is being financed under the Company's existing $50.0
million facility provided by one of the Company's primary equipment vendors.
During the period from July 1996 to March 1997, the Company made payments
totalling $7.5 million to a carrier vendor to repay payables which were accrued
in association with services rendered to ITG's then largest customer. This
customer defaulted on its obligation to ITG and was subsequently terminated.
54
<PAGE>
Prior to the Cyberlink Acquisition, Cyberlink entered into a contract with a
carrier vendor that requires Cyberlink to lease capacity on a per minute basis
with minimum dollar commitments. The contract provides that Cyberlink must pay
for capacity in an amount equal to $2.3 million per month in July, August and
September 1996, $2.5 million per month for October 1996 through February 1997
and $3.0 million per month thereafter through August 1997. Cyberlink is required
to pay these amounts even if it does not use the leased capacity. Cyberlink has
not utilized this much capacity from this carrier vendor to date due primarily
to quality and service problems encountered throughout 1995 and 1996. The
Company is still utilizing this carrier and negotiations to either modify or
terminate the existing contract are ongoing. The Company has accrued
approximately $8.0 million, which, when combined with payments made on account
to this carrier vendor, represents 100% of the Company's contractual 1996
liabilities with respect to such currently contested vendor liabilities. This
carrier vendor has not required full payment of contested amounts to date and
the Company expects that it will be able to come to a comprehensive settlement
with respect to these matters. The Company does not believe it will incur any
losses to be recognized in any future periods with respect to the amendment or
subsequent termination of these leases. However, there can be no assurance that
an acceptable settlement will be reached.
The Company is continuously reviewing and considering acquisition
opportunities. The Company intends to pursue acquisitions which it believes will
expand or enhance its current operations. Accordingly, such acquisitions and
investments, if consummated, could use a material portion of the Company's
financial resources and may accelerate the need for raising additional capital
in the future.
On October 3, 1996, the Issuer issued 300,000 units, each unit consisting of
one Original Note and one Warrant to purchase 1.815 shares of Class A Common
Stock which expires 10 years after the Closing Date.
The Notes, which are guaranteed by the Guarantor, are redeemable, at the
Issuer's option, subsequent to November 15, 2001, initially at 106.1250% of
their principal amount, declining to 103.0625% of their principal amount for the
calendar year subsequent to November 15, 2002, and at 100% of the principal
amount subsequent to November 15, 2003.
The Indenture contains certain restrictive covenants which impose
limitations on the Guarantor and certain of its subsidiaries ability to, among
other things: (i) incur additional indebtedness, (ii) pay dividends or make
certain other distributions, (iii) issue capital stock of certain subsidiaries,
(iv) guarantee debt, (v) enter into transactions with shareholders and
affiliates, (vi) create liens, (vii) enter into sale-leaseback transactions, and
(viii) sell assets.
Pursuant to the Registration Rights Agreement, if the Exchange Offer is not
completed on or prior to June 1, 1997, the interest rate on the Notes will
increase to 12 3/4%.
The Company has a $15.0 million Revolving Credit Facility and a $35.0
million subordinated Shareholder Standby Facility. The Company was not utilizing
either of these facilities at December 31, 1996 and as of the date of this
Prospectus, the full amount of each of these facilities was available. In
October 1996, the Company paid $44.0 million to repay cumulative borrowings
under the Revolving Credit Facility, which at the time had a $50.0 million
commitment. Simultaneously with such repayment, the commitment was reduced to
$15.0 million. The Revolving Credit Facility is payable on April 1, 1998 and
accrues interest, at the Company's option, at (i) the lender's prime rate per
annum or (ii) LIBOR plus 1% per annum. The Company's Chairman has provided a
guarantee in connection with the Company's borrowings under the Revolving Credit
Facility. In September 1996, the Company borrowed the $35.0 million Subordinated
Shareholder Loan from Ronald S. Lauder. In connection with the subsequent
prepayment of the Subordinated Shareholder Loan, Mr. Lauder has agreed to
provide (or arrange for a bank to provide) the Guarantor with up to $35.0
million of subordinated debt (the "Shareholder Standby Facility"). See
"Management--Compensation Committee Interlocks and Insider Participation" and
"Description of Certain Indebtedness."
55
<PAGE>
Cyberlink has a $5.0 million line of credit to finance its accounts
receivable, as well as an additional $2.0 million line of credit from the same
lender to finance its capital expenditures. At December 31, 1996, $4.3 million
and $1.4 million, respectively, of such lines of credit were available. The
interest rate applicable to such commitments is 2.25% and 2.5% over the prime
rate, respectively. The Company's borrowings from this lender are payable on
August 31, 1998 and are collateralized by a security interest in substantially
all of the assets of Cyberlink. See "Description of Certain Indebtedness."
One of the Company's primary equipment vendors has also provided to the
Company $50 million in vendor financing to fund the purchase of additional
switching and related telecommunications capital equipment. At December 31,
1996, approximately $39 million was available under this facility. Borrowings
from this equipment vendor accrue interest at a rate of LIBOR plus either 5.25%
or 4.5% depending on the equipment purchased. See "Description of Certain
Indebtedness."
The Company's planned network facilities expansion is comprised primarily of
both international gateway and domestic switches projected to require
approximately $25 million of the currently available $39 million under the
Company's vendor financing facility. The Company is contractually committed to
the purchase of three international gateway and two domestic switches. This
commitment amounts to approximately $8.0 million, all of which is being financed
under the Company's vendor financing facility. The Company has no commitment to
purchase IRU's or MIU's. The Company will consider whether to purchase or lease
such international facilities when traffic volume increases. The Company
believes that such costs, if incurred, will not be material to the liquidity and
capital resources of the Company.
The Company anticipates that it will enter 11 new markets over the next few
years. The costs related to commencing operations in these 11 markets are
projected to range from $500,000 to $1.5 million per market exclusive of costs
related to switching and network equipment that are expected to be vendor
financed; however, this is a forward looking statement and there can be no
assurance in this regard.
The Company reinvested a portion of the net proceeds of the Private Offering
in short-term, interest-bearing investment-grade securities until such funds are
applied to the capital investments and operating needs of the Company's business
and to fund operating losses.
The Company is currently investigating the extent to which its customers
will require "value added services." It is the Company's belief, however, that
when such value added services are offered, amounts invested to enable the
Company to provide such services will not be material since significantly all of
the material costs would have been previously incurred and financed with the
purchase of basic switching facilities.
In connection with the issuance of the Notes, the Company is required to
maintain restricted marketable securities in order to make the first six
scheduled interest payments on the Notes. Such restricted marketable securities
amounted to $104,370,011 at December 31, 1996.
In connection with the September 1996 purchase of additional shares of ITG's
common stock, the Company issued secured notes totaling approximately
$9,328,000. Such notes and interest are secured by the common stock acquired,
are payable in three semiannual installments, and bear interest at the rate of
6%.
The remaining net proceeds of the Private Offering, together with borrowings
under the Revolving Credit Facility and vendor financing, are expected to fund
the Company's planned expansion of its existing operations and operating losses
for 18 to 24 months; however, this is a forward-looking statement and there can
be no assurance in this regard. If the Company's plans or assumptions change, if
its assumptions prove to be inaccurate, if the Company consummates acquisitions
in addition to those currently contemplated, if the Company experiences
unanticipated costs or competitive pressures or if the net proceeds from the
Private Offering together with the proceeds of the Revolving Credit Facility and
such vendor financing otherwise prove to be insufficient, the Company may be
required to seek additional capital sooner than currently anticipated. See "Risk
Factors--Refinancing Risk."
56
<PAGE>
INFLATION
The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations.
SEASONALITY
The Company's European operations experience seasonality during July and
August, December and January, and, to a lesser extent, March, as these months
are traditional holiday months in most European countries and many European
businesses, which are the Company's principal European customers, are closed
during portions of these months.
CURRENCY
In this Prospectus, references to "dollars" and "$" are to United States
dollars.
The revenues and expenses of the Company's foreign operations are
denominated in numerous foreign currencies. Therefore, results of operations as
stated in local currencies, and the Company's business practices and plans with
respect to a particular country are not significantly affected by exchange rate
fluctuations. However, such results of operations as reported in U.S. dollars
may be significantly affected by fluctuations in the value of the local
currencies in which the Company transacts business in relation to the U.S.
dollars. Amounts shown herein are denominated in U.S. dollars. Conversions of
foreign currencies to U.S. dollars in the pro forma and historical financial
information included herein have been calculated, for purposes of the statements
of operations, on the basis of average exchange rates over the periods
presented. For purposes of the balance sheet data included in this Prospectus,
conversions of foreign currencies to U.S. dollars have been calculated on the
basis of exchange rates in effect on the balance sheet dates. Exchange rates per
United States dollar as of certain dates for certain currencies are set forth
below.
<TABLE>
<CAPTION>
RATE AS OF RATE AS OF RATE AS OF
CURRENCY DECEMBER 31,1995 DECEMBER 31, 1996 MARCH 19,1997
- ------------------------------------------------------------ ------------------- --------------------- -----------------
<S> <C> <C> <C>
Australian Dollar........................................... (1) 1.26 1.27
British Pound............................................... .65 .58 .63
Dutch Guilders.............................................. (1) 1.74 1.89
Finnish Markka.............................................. 4.37 4.60 5.06
French Franc................................................ 4.95 5.19 5.67
German Mark................................................. 1.44 1.54 1.68
Swedish Krona............................................... 6.64 6.89 7.68
</TABLE>
- ------------------------
(1) The Company had no business activity in these countries during the period
indicated.
57
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services,
including long distance calling to over 200 countries, calling card, private
line and value-added services. The Company focuses on providing international
long distance voice services to small and medium-sized businesses in strategic
markets. The Company currently has operations in the United States, the United
Kingdom, France, Germany, Sweden, Finland, the Netherlands, Denmark and
Australia. In 1995, approximately 53.0% of all international long distance
telecommunications minutes originated in these markets. The Company is expanding
its operations and network into additional strategic markets which account for a
significant portion of the remaining international traffic.
The core of the Company's operations is RSL-NET, its integrated digital
telecommunications network. RSL-NET is comprised of (i) the Company's owned
facilities, which consist of MIUs, IRUs and international and domestic switches,
(ii) operating agreements between the Company and foreign telecommunications
carriers in other countries to exchange traffic between countries and (iii)
transmission capacity leased from other carriers and satellite providers.
RSL-NET is being developed to employ least cost routing techniques, leveraging
the cost structure of its operations in each country. By linking points of
presence on portions of both the originating and terminating segments of a call,
RSL-NET allows the Company to avoid the high costs associated with transporting
the international portion of a call through a third party carrier.
INDUSTRY OVERVIEW
International telecommunications involves the transmission of voice and data
information from the domestic telephone network of one country to that of
another. According to industry sources, international long distance switched
telecommunications traffic worldwide increased from 28 billion minutes in 1989
to 60 billion minutes in 1995 and is projected to reach between 99 and 151
billion minutes by the year 2000. The market for these services is highly
concentrated in more developed countries, with Europe and the United States
accounting for approximately 43.1% and 25.9%, respectively, of the industry's
1995 total worldwide minutes of use.
International telecommunications is one of the fastest growing and most
profitable segments of the long distance industry, having experienced a
compounded growth in total minutes of 13.4% per annum from 1989 to 1995. The
industry has been undergoing rapid change due to deregulation, the construction
of additional infrastructure and the introduction of new technologies, which has
resulted in increased competition and demand for telecommunications services
worldwide. Forecasts by the International Telecommunications Union (the "ITU"),
a worldwide telecommunications organization under the auspices of the United
Nations, and Analysys Ltd., a telecommunications industry consulting group,
project this trend to continue with an annual growth rate of approximately 11%
and approximately 17%, respectively, through the year 2000.
58
<PAGE>
The size of each market in which the Company currently operates is set forth
below.
<TABLE>
<CAPTION>
COUNTRY'S
1995 MARKET COUNTRY'S %
COUNTRY OF SIZE IN OF 1995 GLOBAL
OPERATION MINUTES (1) INTERNATIONAL TRAFFIC
- ----------------------------------------------------------- ------------- ---------------------
<S> <C> <C>
USA........................................................ 15,623 25.9
Germany.................................................... 5,244 8.7
UK......................................................... 4,016 6.7
France..................................................... 2,805 4.7
Netherlands................................................ 1,459 2.4
Australia.................................................. 1,024 1.7
Sweden..................................................... 900 1.5
Denmark.................................................... 533 .9
Finland.................................................... 315 .5
------ ---
31,919 53.0%
</TABLE>
- ------------------------
(1) Represents total public switched minutes originated in the country, in
millions. Source: Federal Communications Commission and Telegeography, Inc.
The increasing pace of deregulation in telecommunications is evidenced by
the recent World Trade Organization's Group on Basic Telecommunications
Agreement (the "GBT Agreement"). The GBT Agreement, signed by 69 countries,
calls for relaxed restrictions on foreign ownership and a commitment to
deregulate telecommunications and allow competition. Of the 69 signatories to
the GBT Agreement, 65 have agreed to adopt certain regulatory principles which
call for deregulation of telecommunications markets and the initiation of
competition based on the following actions: (i) pro-competitive regulation; (ii)
creation of favorable interconnect terms, (iii) standard licensing criteria,
(iv) establishment of an independent regulator, and (v) non-discriminatory
allocation of scarce resources (I.E., rights of way, frequencies, telephone
numbers). Each signatory nation has accepted these principles to varying degrees
and has set a different timetable for the enactment of such principles although
there can be no assurance of such enactment.
Deregulation has coincided with technological innovation in the telephone
industry. New technologies include fiber optic cable and improvements in
computer software, digital compression and processing technology. Fiber optic
cable, which has widely replaced traditional wire lines, has dramatically
increased the capacity, speed and flexibility of telephone lines. Such
technological innovation has resulted in lack of capacity being a less
significant barrier to entry for new international telephone companies. In part
as a result of these technological innovations, the transmission costs per
minute of an international call have decreased substantially.
Deregulation and privatization of telecommunications services and the onset
of competition have also resulted in (i) the broadening of service offerings,
including advanced and enhanced services (such as global voicemail, faxmail and
electronic mail, itemized and multicurrency billing and the ability to allow
customers to pay for long distance calls made from any telephone using a single
account (E.G., calling cards)) and (ii) lower end-user prices. These factors
have contributed to an increase in the volume of both inbound and outbound call
traffic. Despite falling prices, the overall market for international long
distance traffic has been growing and the decline in prices generally has been
more than offset by an increase in telecommunications usage.
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[Bar graph showing projected growth of international long distance voice traffic
for Europe, USA & Canada, Asia/Pacific Rim and all other regions of the world
for the years 1995 to 2000.]
Source: Analysys Ltd.
* Prices have declined and are expected to continue to decline. Accordingly,
growth in revenues will be substantially less than growth in minutes. The
data presented above constitutes a forward-looking statement. Important
factors that could cause actual minutes of use to differ materially from the
forward-looking data above are noted below.
UNITED STATES INTERNATIONAL LONG DISTANCE MARKET
The United States international long distance market accounted for
approximately 26% of global international long distance call originations in
1995 based on minutes of use. The industry is large and growing, with revenues
for U.S.-originated international long distance telephone services rising from
approximately $6.9 billion (6.8 billion minutes) in 1989 to approximately $14.2
billion (16.1 billion minutes) in 1995. The growth of the U.S.-originated
international long distance market was initially attributable to deregulation
and the decrease in prices which accompanied the onset of competition.
Deregulation and the resulting competition also led to improvement in service
offerings and customer service. More recently, the growth of the U.S.-originated
international long distance market has been attributable to (i) the deregulation
of other telecommunications markets throughout the world, (ii) the privatization
of PTTs, (iii) increased capacity, improved quality and lower operating costs
attributable to technological improvements, (iv) the expansion of
telecommunications infrastructure and (v) the globalization of the world's
economies and expansion of free trade.
The profitability of the U.S.-originated international long distance market
is principally driven by the difference between settlement rates (I.E., the
rates paid to other carriers to terminate an international call) and billed
revenues. Increased competition arising from deregulation and privatization and
pressure arising from increased global trade have brought about reductions in
settlement rates and end-user prices, reducing termination costs for United
States based carriers. Based on FCC data for the period 1989 through 1995, per
minute settlement payments by United States based carriers to foreign PTTs fell
33%, from $.70 per minute to $.47 per minute. However, over this same period,
per minute international billed revenues fell only 14%, from $1.02 in 1989 to
$.88 in 1995. As a result, gross profit per outbound international minute
(before local access charges) grew from $.32 in 1989 to $.41 in 1995, a 25%
increase. The FCC has issued benchmark levels in an effort to reduce the
settlement rates charged and paid by U.S. carriers. Such benchmark rates are
substantially lower than the current settlement rates. The Company believes that
as settlement rates and costs for leased capacity continue to decline,
international long distance will continue to provide high revenue and gross
profit per minute, although there can be no assurance in this regard.
Although the Company focuses on the international telecommunications market,
it also provides domestic long distance services to many of its customers.
According to the FCC, the U.S. domestic long distance market grew in total
minutes at an annual compound rate of approximately 8.1% from 1989 to 1995 while
the U.S.-originated international long distance market grew in total minutes at
an annual compound rate of approximately 15.4% during the same period. Although
the domestic market is much larger, the profit per minute of use for
international traffic has generally been higher than for domestic traffic. See
"--U.S. Operations."
EUROPEAN INTERNATIONAL LONG DISTANCE MARKET
The European international long distance market is the largest in the world,
accounting for approximately 26 billion minutes or 43% of worldwide minute
originations in 1995 based on minutes. Of the total minutes, 72.4% were
generated from calls between European nations and 7.2% were terminated in the
United States.
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The European PTTs have historically had monopolies on providing telephone
services, making the cost of international telephone calls from Europe much
higher than similar calls from the United States. In addition, the Company
believes that many PTTs have used profits from international traffic to
subsidize domestic calling. Customers in many European markets are not able to
obtain a number of value-added features taken for granted in the United States,
such as itemized billing, touch tone dialing, voice mail and other enhanced
services. Deregulation, together with significant advances in technology that
have decreased the cost of providing services and allowed the provision of more
sophisticated value-added features, have made it possible for other telephone
companies to compete with the PTTs in providing international voice
telecommunications services.
A 1990 EC directive (the "Directive") required each EU member state to
liberalize by 1991 all telephony services offered over its local public switched
telecommunications network ("PSTN"), with the exception of basic "voice
telephony." The effect of the Directive was that value-added services and the
delivery of voice telephony to closed user groups (I.E., to a specified group of
people) were liberalized to the extent that they do not come within the
Directive's definition of basic "voice telephony." Different interpretations as
to whether a service should be regarded as a value-added service or as a basic
"voice telephony" service, and as to what constitutes a closed user group, have
led to variations among the EU member states as to what services may be
delivered and the manner in which they can be provided. In addition, certain EU
member states have delayed the enactment of legislation implementing the
Directive, which has created further regulatory uncertainty. The Company
believes that political agreement has been reached in the Council of the EU,
which is made up of ministers from the national governments of the member
states, that all voice telephony services should be deregulated by January 1,
1998 in most of the EU member states. As a condition to the FCC granting
approval for the Global One joint venture, the regulatory authorities of France
and Germany agreed to implement legislation to deregulate their respective
markets by January 1998. However, there can be no assurance regarding the timing
or extent of deregulation in any particular country or the EU in general. See
"--European Operations" for a more detailed discussion of the Directive and
related regulatory matters.
In response to these European regulatory changes, a number of different
competitors, including the Company, are emerging to compete with the European
PTTs. At one end of the scale, the large U.S. telecommunications service
providers and European PTTs have begun to form "mega-carrier" alliances to
compete in offering value-added services and the resale of calling services
across Europe. At the other end of the scale, a number of competitors have
emerged that primarily provide long distance telephone service with call back
access. Other companies are developing networks in Europe to service specific
markets.
The Company believes, along with many industry observers, that the
deregulation currently underway in many countries in continental Europe will
lead to market developments similar to those that occurred in the United States
and the United Kingdom upon deregulation of long distance telecommunications
services. Such deregulation in the United States and the United Kingdom has
resulted in an increase in call traffic and the emergence of multiple new
telecommunications services providers of varying sizes. In addition, significant
reductions in prices, particularly for domestic long distance calls, as well as
improvement in both the services offered and the level of overall responsiveness
to customers, have occurred. Although pricing has become competitive in both
countries, pricing levels continue to permit services to be profitably provided.
There can be no assurance, however, that this will continue to be the case.
OTHER MARKETS
Deregulation is spreading throughout many of the major markets in Asia, the
Pacific Rim and Latin America. A significant number of countries in these
regions are signatories of the GBT Agreement and have committed to open their
markets to competition. The Philippines and New Zealand have already opened
their markets to full competition and Hong Kong, Indonesia, Japan, South Korea
and Malaysia have legalized the provision of value added services. Hong Kong has
also recently licensed three new carriers to provide local service. Japan is
expected to legalize resale of international facilities by the end of
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1997. Australia is in the process of deregulating its market and currently
allows licensed carriers to resell international minutes. In addition, licenses
for the provision of facilities-based international services in Australia are
expected to be granted in mid-1997. In Latin America, several countries have
competitive local and/or long distance sectors, most notably Chile, which has
competitive operators in all sectors. Colombia is scheduled to license two
international service providers in addition to its PTT soon. In addition,
several Latin American countries have completely or partially privatized their
national carriers, including Venezuela and Argentina. Venezuela has also
legalized value-added services and has targeted January 1, 2000 as the date for
full deregulation. Brazil has adopted a constitutional amendment requiring the
privatization of its PTT, the establishment of an independent regulator and the
opening of the telecommunications market to competition. In Mexico, the former
PTT has been privatized and its exclusive long distance concession expired in
August 1996. It has also been obligated to interconnect with the networks of
competitors since January 1997. Competition in Mexico has been initiated and an
independent regulator has been established.
Despite the growth and deregulatory trends in the global telecommunications
market, the pace of change and emergence of competition in many countries,
particularly in parts of Africa, remains slow, with domestic and international
traffic still dominated by the government-controlled PTTs. The Company believes
that international carriers, such as itself, which have already established, or
are in negotiations to establish, operating agreements with the PTTs in many
such countries will be well-positioned to capture the benefits of increasing
traffic flows as the telecommunications infrastructure in these countries is
expanded.
The Company believes that the trend towards deregulation creates numerous
opportunities for international carriers such as itself to increase their access
to developing telecommunications markets and to increase their market share for
calls both into and out of these emerging markets. The Company believes that
many of the emerging carriers in developing countries, as well as certain
recently privatized PTTs, are likely to seek alliances, partnerships or joint
ventures with other international carriers to expand their global networks and
that the size of many of the markets may lead them to seek alliances with
carriers like the Company as opposed to the mega-carriers, such as Uniworld,
Concert and Global One. Although there is a general trend towards deregulation
worldwide, there can be no assurance regarding the timing or the nature of
deregulation, whether any deregulation will occur at all or whether any trend
towards deregulation will not be reversed in any particular country.
INTERNATIONAL LONG DISTANCE MECHANICS
A long distance telephone call generally consists of three
segments--origination, transport and termination.
[Graphic depicting the three segments (origination, transport and termination)
of a long distance telephone call.]
A typical international long distance call originates on a local exchange
network or private line and is carried to the international gateway switch of a
long distance carrier. The call is then transported along a fiber optic cable or
a satellite connection to an international gateway switch in the terminating
country and finally to another local exchange network or private line where the
call is terminated. A domestic long distance call is similar to an international
long distance call, but typically involves only one long distance carrier, which
transports the call on fiber, microwave radio or via a satellite connection
within the country of origination and termination. Generally, only a small
number of carriers are licensed by a foreign country for international long
distance and, in many countries, only the PTT is licensed to provide
international long distance service. The Company is licensed or otherwise
permitted (or not prohibited) to operate as an international long distance
carrier in all nine of its current markets. Any carrier that desires to
transport switched calls to or from a particular country must, in addition to
obtaining a license or other permission
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(if required), enter into operating agreements or other arrangements with the
PTT or another international carrier in that country or lease capacity from a
carrier that already has such arrangements.
ORIGINATION
The Company can originate calls in all countries where it currently operates
and route them to its local switch through a dedicated telephone line between
the customer and the Company's switch (commonly known as "direct access"). In
addition, depending on local regulations, the Company can originate calls by
using the PSTN. In the United States, all licensed long distance carriers are
provided with "equal access" which allows such carriers to directly interconnect
with the PSTN on the same basis. As a result of equal access, all long distance
calls from a customer are routed directly to the Company's local switch without
requiring the customer to dial any special access numbers. This is accomplished
by the local telephone company in the customer's territory programming its
network to direct all of the Company's customers' long distance calls to the
selected switch. Outside the United States, certain restrictions require the
Company to utilize either direct access or one of the following methods to
originate a call via the PSTN.
PREFIX DIALING. Prefix dialing allows a customer to access the Company's
switch via the PSTN by dialing a three to five digit access code (the "prefix")
assigned to the Company prior to dialing the destination telephone number.
Prefix dialing requires direct interconnection with the operator of the PSTN,
typically the PTT or other major carrier, in order to allow the PSTN to
recognize the prefix and direct the call to the Company's switch. In order to
make the use of prefix dialing service transparent to the customer, the Company
can either program the customer's telephone system or install an auto-dialer
device to automatically dial the prefix on behalf of the customer when
appropriate. The auto-dialer device is purchased, installed and maintained by
the Company.
In Europe, prefix dialing is currently provided only by the Company's
operations in the United Kingdom, Sweden and Finland because prefix dialing
service requires interconnection with the PSTN, which is not currently permitted
in France, Germany or the Netherlands. Prefix dialing is expected to be provided
in the remainder of the EU in January 1998, when deregulation is scheduled to be
complete. See "Risk Factors--Government Regulatory Restrictions." Prefix dialing
requires the Company to incur a substantial up-front fixed fee that is payable
to the PTT or other operator of the PSTN for interconnection. The Company is
then charged a variable local access charge to route each call to the Company's
switch. Despite such fees, for customers generating relatively low volumes of
calls or in remote locations, prefix dialing is a more cost-effective form of
call origination than through a direct access line.
DIRECT ACCESS. Direct access allows a customer to connect its phone system
directly to the Company's switch utilizing a dedicated phone line. Dedicated
phone lines are leased on a monthly or longer-term fixed cost basis from the PTT
or other local exchange carrier. This method of origination is only
cost-effective for those customers which generate substantial volumes of
international traffic, given the fixed cost of leasing a dedicated line.
DIAL-IN. In countries where interconnection with the PTT or other operator
of the PSTN is currently not available, the Company can provide dial-in services
to closed user groups by allowing the customer to directly call the Company's
switch via the PSTN by dialing a pre-assigned telephone number (local or toll-
free), followed by a pin-code (which allows the switch to recognize the
customer) and the destination telephone number. The mechanics of this service
are substantially similar to calling card services currently provided by the
Company and other carriers in the United States. What constitutes a closed user
group has been the subject of a fair degree of interpretation among EU member
states, but is generally interpreted as meaning that the customer can only call
a limited predetermined group of destinations. As with prefix dialing, the
Company can make this service more transparent to the customer by programming
the customer's telephone system or installing an auto-dialer, subject to local
regulation. Given the greater number of digits required to be dialed by the
customer, however, a slight delay in placing a call cannot be
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avoided by this service. Dial-in service involves a variable local access charge
to route the call to the Company's switch.
TRANSPORT
The transport of telephone calls is accomplished via land-based cables or
undersea cables, which are usually fiber optic, or by microwave radios or
satellites. A carrier can obtain half circuits on cable systems through MIUs,
IRUs or leases. In instances where a carrier has not purchased interests in a
cable prior to the time when the cable was placed in service, the carrier is
only permitted to acquire capacity on the cable through the purchase, by way of
a lump sum payment, of an IRU. The fundamental difference between an IRU holder
and an owner of MIUs is that the IRU holder is not entitled to participate in
management decisions relating to the cable system. Between two countries, a
carrier from each country owns a "half-circuit" of a cable, essentially dividing
the ownership of the cable into two equal components. In the event that the
Company commences utilizing its remaining operating agreements, it will have to
either invest in additional IRUs or MIUs, or acquire satellite capacity, to
enable it to connect to a carrier in such countries. Additionally, any carrier
may generally lease circuits on a cable from another carrier with an MIU or IRU.
Satellite circuits are also obtained on a leased basis.
Traditionally, international long distance traffic is exchanged under
bilateral operating agreements between international carriers which own MIUs or
IRUs on the same fiber optic cable system in two countries or through leased
satellite capacity. Operating agreements provide for the termination of traffic
in, and return of traffic to, the carriers' respective countries at negotiated
accounting rates. Operating agreements typically provide that carriers will
return to their correspondents a percentage of the minutes received from such
correspondents ("return traffic"). In the United States this percentage is set
by the FCC to be the relative ratio of U.S. inbound traffic to U.S. outbound
traffic to each country. In addition, operating agreements provide for network
coordination and accounting and settlement procedures between the carriers.
Accounting rates are reciprocal between each party to an operating
agreement. For example, if a foreign carrier charges a U.S. carrier $0.30 per
minute to terminate a call in the foreign country, the U.S. carrier would charge
the foreign carrier the same $0.30 per minute to terminate a call in the United
States. All U.S. carriers face the same accounting rates for each country.
The term "settlement" rates arises because carriers pay each other for
traffic exchanged utilizing the accounting rate structure on a net basis
determined by the difference between inbound and outbound traffic between them.
Settlement rates differ between countries. For example, a U.S. carrier may have
a settlement rate of $.30 to terminate a call in one country and $.35 in another
country while a U.K. carrier may have settlement rates of $.45 and $.40 to
terminate calls in the same countries. By linking its Local Operators over owned
and leased facilities, the Company bypasses this traditional settlement process
and lowers its cost of transporting its international traffic.
The FCC has established a policy that effectively prohibits foreign carriers
from discriminating among U.S. carriers (the "International Settlements
Policy"). The International Settlements Policy requires: (1) the equal division
of accounting rates; (2) non-discriminatory treatment of U.S. carriers; and (3)
proportionate return of inbound traffic. In December 1996, the FCC modified its
rules to allow alternative payment arrangements that deviate from the
International Settlements Policy between any U.S. carrier and any foreign
correspondent in a country that satisfies the FCC's effective competitive
opportunities test. The FCC also stated that it would allow alternative
settlement arrangements between a U.S. carrier and a foreign correspondent in a
country that does not satisfy the effective competitive opportunities test, if
the U.S. carrier can demonstrate that deviation from the International
Settlements Policy will promote market-oriented pricing and competition while
precluding abuse of market power by the foreign correspondent.
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A carrier which does not have an operating agreement with a carrier in a
particular country is able to provide international service to that country by
leasing capacity from a carrier which does. Until recently, in many foreign
countries there was only one operating agreement in place between that country's
PTT and a foreign based international carrier as a result of monopolies held by
such PTTs. For example, in the United States, before the deregulation of
telecommunications services, AT&T was the only carrier that had operating
agreements with foreign carriers. However, after deregulation, MCI and Sprint,
over a period of years, each negotiated its own operating agreements with
foreign carriers. Since then, a limited number of other U.S.-based companies,
including the Company, have been able to secure operating agreements with
foreign carriers. Operating agreements are expected to become increasingly
available as international markets deregulate and new carriers that are seeking
business partners emerge in countries previously subject to a PTT monopoly or
other limited competition market. See "Risk Factors--Risks Associated with
Rapidly Changing Industry" and "Risk Factors--Risk of Loss, or Diminution of
Value of, Operating Agreements."
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For an international long distance company without operating agreements or
its own international network, the profitability of originating international
traffic is a function of, among other things, the difference between its billing
rates and the rates it must pay another carrier to transport and terminate such
traffic.
For a company with operating agreements that provide for return traffic, the
profitability of originating international traffic will be a function of, among
other things, the volume of its originating traffic and its billing rates, as
well as the relative volume of its originating and return traffic minutes. Under
the settlement process, a carrier which originates more traffic than it
receives, will, on a net basis, make payments to the corresponding carrier,
while a carrier which receives more traffic than it originates will receive
payments from the corresponding carrier. If the incoming and outgoing flows of
traffic are equal in the number of minutes transmitted, there is no net
settlement payment to either carrier. Therefore, in addition to all of the other
factors that can influence the profitability of a long distance carrier, the
profitability of an international carrier is dependent on its relative flows of
incoming and outgoing traffic.
Return traffic can be more profitable than outgoing traffic when there is a
significant disparity in the cost of terminating traffic between the two
countries that are party to an operating agreement. This is particularly true
for a U.S. carrier because the actual cost for a U.S. carrier to terminate a
call in the United States generally is less expensive than the settlement cost
under an operating agreement with any foreign carrier and return traffic does
not involve any origination costs. The receipt of more profitable return traffic
reduces the aggregate cost to a carrier to transport traffic pursuant to an
operating agreement, and carriers with significant levels of return traffic can
price their international transport and termination services at a discount to
the settlement cost and recover the discount on the return traffic.
TERMINATION
The termination of an international call occurs after the call has been
transported to an international carrier in the destination country. The
international carrier then transports the call to a local exchange network where
it is then terminated. In many countries, only the PTT is licensed to provide
international long distance service and local exchange services.
COMPANY STRATEGY
The Company's strategic objective is to become a significant provider of
high quality international voice services to small and medium-sized businesses
in strategic markets while developing a competitive cost structure. The key
elements of the Company's strategy to achieve this objective are as follows.
FOCUS ON PROVIDING INTERNATIONAL LONG DISTANCE SERVICE
The international long distance telecommunications market generated an
estimated $55 billion in revenue and 60 billion minutes in 1995 with minutes of
use projected to grow at a rate of between approximately 11% and approximately
17% per annum through the year 2000. Although prices are expected to decline,
resulting in substantially slower growth in revenues, the international long
distance switched telecommunications market is one of the fastest growing and
most profitable segments of the long distance industry. The Company provides a
broad array of international and domestic services but focuses on end users
which generate significant calling traffic between countries to capitalize on
(i) the continued growth of international traffic and (ii) the margin
opportunity created by the high end-user rates currently maintained by PTTs and
other dominant carriers. If any of the factors contributing to the growth of
traffic or the pricing scheme by the PTTs and other major carriers should cease
to apply, growth and profitability in the international market and the Company's
prospects would be negatively impacted. The United States market, one of the
most deregulated and competitive market in the world, illustrates the greater
profitability of international traffic versus domestic traffic. Based on FCC
statistics and other available information, the Company estimates that
industry-wide gross profit (before access charges) in 1995 for
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U.S.-originated traffic averaged $.41 per minute of international use, compared
to $.08 per minute of domestic use, although the actual gross profit per minute
of use may vary significantly depending on the destination, route and time of
day of a particular call. From 1989 to 1995, per minute settlement payments by
United States based carriers to foreign PTTs fell approximately 33% from $.70 to
$.47. However, over this same period, per minute international billed revenues
fell only about 14%, from $1.02 in 1989 to $.88 in 1995. Therefore, gross profit
per international minute (before local access charges) grew from $.32 in 1989 to
$.41 in 1994, a 25% increase. Despite declining costs, dominant carriers and
PTTs have maintained high end-user rates for international long distance
services, allowing them to provide domestic services at lower rates. The Company
believes that as settlement rates and costs for leased capacity continue to
decline, international long distance will continue to provide high revenue and
gross profit per minute. See "--Industry Overview."
ESTABLISH OPERATIONS IN STRATEGIC MARKETS
The Company establishes operations in strategic markets that (i) originate
or terminate significant levels of international traffic and (ii) are, or are in
the process of being, deregulated. The Company has structured its operations in
each country to be managed independently and to be separately profitable, while
benefiting from centralized strategic and network support provided by the
Company. The Local Operators are each developed to be stand-alone operations
shaped by local market conditions and preferences. The Company currently
provides each Local Operator with centralized business development, financial,
and marketing support and has commenced a plan of operation to provide billing
and network management. See "--Headquarter Operations." The Company currently
operates in nine markets that, in the aggregate, account for 53% of the
international telecommunications market. By expanding its operations into
additional strategic markets, in which significant volumes of international
traffic are originated and terminate and which are in the process of
deregulation, the Company seeks to rapidly establish a broad market coverage.
The Company currently plans to initiate operations in an additional 11 countries
which, together with the markets in which the Company currently operates,
accounted for 70% of the 1995 worldwide international long distance minutes of
use.
The Company enters additional countries primarily by acquiring a controlling
interest in existing companies that are either operating in or are in the
process of establishing operations in the international telecommunications
industry in that country or by means of a start-up operation which the Company
funds and manages on its own or together with a local strategic partner. In the
case of an acquisition, the Company seeks to acquire an international carrier
which matches the criteria set forth below. In the case of the establishment of
new operations, the Company identifies an experienced and professional
management team to develop the new operation. In the formation of a joint
venture, the Company identifies a local strategic partner with a good reputation
and knowledge of the local marketplace.
ENTER MARKETS EARLY
The Company seeks to enter new markets ahead of full deregulation to provide
it with advantages over carriers which attempt to enter a market after
deregulation is complete. These advantages include (i) the establishment of a
customer base prior to widespread competition, (ii) the early acquisition of
scarce technical and marketing personnel and distribution channels and (iii) the
achievement of name recognition as one of the early competitors to the incumbent
higher priced PTTs.
The Company further believes that its early entry into deregulating markets
will provide it with an advantage in obtaining licenses as they become available
over carriers which attempt to enter the market after deregulation is complete.
The securing of necessary licenses, which is limited in some circumstances to a
small number of entrants into the deregulating market, is essential to the
Company's strategy and the Company will endeavor to enter into arrangements with
a licensee to gain access to such market if the Company cannot secure
successfully the license.
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In countries that are in the process of deregulating, competition is often
restricted to a limited number of specific services. The Company takes advantage
of current market conditions and, within the context of its established strategy
and service offerings, provides the fullest range of services permissible under
local regulation. The Company thereby gains an early toehold in the market,
affording it the opportunity to become a recognized international carrier and to
begin to build its own marketing channels and customer base prior to the opening
of markets to full competition. As deregulation permits, the Company expands its
service offerings thereby giving the Company the opportunity to increase the
amount of business it does with its existing customers and to increase its
market penetration by building on its name recognition, marketing channels and
expanded service offerings to attract additional customers.
DEVELOP A COST COMPETITIVE GLOBAL NETWORK
All of the Local Operators, with the exception of those in Australia and
Denmark, have network switching facilities to establish POPs to provide
international voice services in their markets. The Company presently has an
international gateway or domestic switch located in each of New York, Los
Angeles, London, Paris, Frankfurt, Rotterdam, Amsterdam, Stockholm and Helsinki.
The Company has entered into an agreement to purchase an international gateway
switch for installation in Sidney and domestic switches in Melbourne and
Brisbane. Installation is expected by June 1997. POPs will be linked together
via owned international facilities or leased capacity to form a meshed network
for international telecommunications. By integrating its current and future POPs
into RSL-NET, the Company believes that it will be able to originate, transport
and terminate traffic utilizing its network, thereby bypassing the high costs
associated with traditional international settlement policies. This is expected
to enable the Company to significantly reduce its cost structure for calls
originating and terminating in markets in which the Company has Local Operators.
See "--Network" and "--Network Strategy."
GROW THROUGH ACQUISITIONS AND STRATEGIC ALLIANCES
The Company intends to enter new markets and expand its operations through
acquisitions, strategic alliances and the establishment of new operations. The
Company is continuously reviewing acquisition and strategic alliance
opportunities and seeks to acquire control of businesses with an established
customer base, compatible operations, licenses to operate as an international
carrier and/or experienced management. The Company intends to pursue
acquisitions which it believes will expand or enhance its current operations by
providing the Company with the opportunity to enter additional strategic markets
or to strengthen its operations in an existing market. The Company believes that
its senior management team's extensive operational, technical, financial and
regulatory expertise enables the Company to identify and rapidly complete
acquisitions and strategic alliances. No specific acquisition is currently
contemplated except as described in this section under the sub-heading
"--Targeted Operations."
The Company believes that many of the emerging carriers in developing
countries as well as certain recently privatized PTTs are likely to seek
alliances, partnerships or joint ventures to compete more effectively in their
local markets and abroad. The Company actively seeks out opportunities for
alliances with such carriers to expand the scope of its network and improve its
competitive abilities. The Company believes that it is uniquely positioned as an
attractive alternative strategic partner for such carriers as opposed to the
mega-carriers such as Uniworld, Concert and Global One.
MANAGE NETWORK GROWTH
The Company pursues a flexible, incremental capital expenditure program. The
Company transmits traffic on capacity leased on a variable cost per minute basis
until it believes that an investment in owned facilities or fixed cost lease
arrangements between countries or on a particular route is warranted and that
the Company's financial resources should be utilized for that purpose.
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TARGET SMALL AND MEDIUM-SIZED BUSINESSES
The Company intends to focus on offering high quality products and services
to small and medium-sized businesses that originate in excess of $500 in
international telephone calls per month. The Company believes that this segment
offers significant market opportunities because it traditionally has been
underserved by the major global telecommunications carriers and the PTTs, which
offer their lowest rates and best services primarily to higher volume
multinational business customers. The Company believes that in most markets
small and medium-sized businesses account for a significant percentage of
international calling traffic. The Company believes that this market segment
will continue to provide ample opportunity for the Company to compete profitably
in the future.
Small and medium-sized businesses account for the vast majority of all
businesses. For example, the EU estimates that there are 15 million small and
medium-sized businesses in the EU and that the businesses that employ fewer than
100 workers in the aggregate account for more than one half of all EU
employment, almost half of all business revenue. In addition, these businesses
are estimated to produce total telecommunications revenue of about $30 billion
per year. For the year ended December 31, 1996, approximately 44% of the
Company's revenues on a pro forma basis were derived from sales to other
carriers.
NETWORK
RSL-NET is an integrated digital telecommunications network that is being
developed to employ least cost routing techniques, leveraging the cost structure
of its operations in each country.
OWNED FACILITIES
The Company's owned facilities include switches and interests in
international fiber optic cable systems. The Company's five international
gateway switches are located in New York, Los Angeles, London, Stockholm and
Helsinki. In addition, the Company operates domestic switches in Rotterdam,
Amsterdam, Paris, Frankfurt, New York and London. The Company's switches in
Paris and Frankfurt are currently in the process of being upgraded to
international gateway switches which are expected to be completed by the third
quarter of 1997. The Company has entered into an agreement to purchase an
international gateway switch for installation in Sidney and domestic switches
for installation in Melbourne and Brisbane which will be directly linked to each
other. Installation is expected by May 1997. The Company's existing
international gateway switches conform to international signaling and
transmission standards provided for in International Telegraph and Telephone
Consultative Committee ("CCITT") recommendations and allow the Company to
interconnect its network to existing PTT and carrier networks around the world
while maintaining quality and dependable services. The Company's equipment
purchases have been financed by one of its vendors and the Company believes it
has developed a favorable working relationship with this vendor which will
enable the Company to benefit from financing for future purchases, although
there can be no assurance that this will be the case. See "Risk
Factors--Dependence on Equipment Supplier. " The Company's switching facilities
are easily expandable to accommodate growth.
The Company also owns capacity on certain international digital fiber optic
cable systems. The Company's United States operations currently own IRUs on
three undersea fiber optic cable systems, which are CANUS-1, CANTAT-3 and PTAT-1
and owns MIUs on four undersea fiber optic cable systems, which are Antillas I
(which is under construction), Odin, Rioja and the TAT-12/TAT-13 systems (TAT-13
is under construction). The Company also plans to purchase IRUs for its United
States operations on the Columbus II, TPC-5, America's One, T-C and Eurafrica
Systems and on APCN, Pacrim East, Tasman 2, Ariadne-2 and Aphrodite undersea
fiber optic cable systems. The Company's Swedish operation owns IRUs on the
CANTAT-3 and MIUs on the KATTEGAT-1 transoceanic cables. The Company's United
Kingdom operation owns IRUs on the UK-NL 14 undersea fiber optic cable system.
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OPERATING AGREEMENTS
The Company's operating agreements provide the Company with the ability to
transmit traffic directly to foreign carriers over jointly-owned facilities
rather than utilizing leased capacity. The Company's U.S. operations currently
hold 14 operating agreements, which provide potential direct access to
Australia, Bolivia, Chile, Denmark, the Dominican Republic, Finland, Japan,
Jordan, New Zealand, Norway, Russia, Sweden, Suriname and the United Kingdom.
The Company currently transmits and terminates traffic pursuant to the
agreements in Bolivia, the Dominican Republic, the United Kingdom, Denmark and
Norway. The Company believes that these agreements constitute significant assets
and that the Company is one of only a limited number of carriers within the
United States that has been able to secure a significant number of operating
agreements with non-U.S. carriers. The Company's Swedish operation currently
utilizes two operating agreements which enable it to exchange traffic with
Denmark and Norway. Operating agreements lower the cost of transmitting traffic
by allowing the Company to utilize its MIUs and IRUs to correspond directly with
its foreign carriers, thereby eliminating the cost of transmitting a call
through leased capacity. In addition, if the Company can develop sufficient
traffic into another country, it can potentially develop an additional source of
revenue through return traffic or other settlement arrangements with the PTT or
other carriers in that country.
LEASED CAPACITY
For all routes where the Company does not own facilities or utilize
operating agreements, the Company utilizes leased capacity. In addition, the
Company has arrangements with local carriers in each country in which it
originates traffic to transmit domestic calls from its end-users to its switch.
The Company does not own or intend to own intra-national transmission facilities
networks due to the general availability of such facilities for lease and the
high cost associated with the development and operation of a transmission line
infrastructure. Leased capacity is typically obtained on a per minute basis or a
point-to-point fixed cost basis. The Company utilizes leased satellite
facilities for traffic to and from those countries where digital undersea fiber
optic cables are not available or cost-effective. Leased satellite facilities
are also used for redundancy when digital undersea cable service is temporarily
interrupted.
NETWORK MANAGEMENT SYSTEMS
The Company generally utilizes redundant, highly automated state-of-the-art
telecommunications equipment in its network and can, in cases of component or
facility failure, use the network management facilities to redirect calls to
another carrier's facilities. Back-up power systems and automatic traffic re-
routing enable the Company to provide a high level of reliability to its
customers. Computerized automatic network monitoring equipment allows fast and
accurate analysis and resolution of service problems. The Company maintains
separate network management facilities for its U.S. and European operations
which maintain separate least cost routing systems. U.S. network management is
operated from the Company's facilities in New York and Los Angeles. European
network management for the United Kingdom, Sweden and Finland is operated
centrally from the Company's switching center in London. The Company expects
that France and Germany will be monitored from this facility by the third
quarter of 1997.
NETWORK STRATEGY
The Company has switches in each of the countries in which it operates with
the exception of Australia and Denmark. The Company has connected its current
switches and expects to connect its future switches by investing in IRUs and
MIUs or fixed point to point leases, subject to local regulatory conditions. In
each market it enters the Company seeks to install its own switching facilities
which are then integrated into RSL-NET to improve the Company's overall cost
structure. The Company transmits traffic from its Local Operators on capacity
leased on a variable cost per minute basis until it believes an investment in
owned facilities or fixed cost lease arrangements between countries or on a
particular route is warranted. To the extent traffic can be transported between
two Local Operators over MIUs and IRUs
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or lines leased on a fixed cost point-to-point basis, there is almost no
marginal cost to the Company. In such cases, the Company will be able to bypass
the traditional settlement process for the transport and termination of
international traffic. The settlement rates for international correspondence are
based on negotiated rates which often are substantially higher than the actual
cost. The Company expects that it will realize significant cost savings by
routing an increasing portion of its international traffic over its owned and
leased facilities as opposed to corresponding via operating agreements. In
addition, each of the Local Operators maintains an independent cost structure
for all other traffic. By directly linking its operations the Company will be
able to implement a least cost routing system which utilizes the lowest cost
available to the Company as a whole. See "--International Long Distance
Mechanics."
For calls to countries where the Company does not have a Local Operator, the
Company seeks to establish and utilize an operating agreement with a local
carrier. While this method generates higher costs than transporting calls
between the Local Operators, it has the potential to generate higher margin
return minutes. The Company has not generated significant return minutes to
date. In addition, by strategically establishing its Local Operators and
obtaining operating agreements, the Company will seek to arbitrage the
differential in settlement rates between countries.
Origination and termination of traffic is accomplished through transmission
capacity leased on a per minute basis, except where the Company provides private
line service. As the Company's operations in a given country grow, the Company
will install additional switches or nodes and lease transmission capacity (on a
point-to-point fixed cost basis) to connect the new switch or node to its
international gateway switch. This will enable the Company to reduce its
dependence on relatively high cost-per-minute leases by reducing the distance
calls will travel over capacity leased on that basis.
PRODUCTS AND SERVICES
The Company offers a variety of long distance products and services to its
customers, as well as certain value-added services. Although the Company focuses
on providing international service, it also provides domestic long distance
services to accommodate customer demands.
The Company provides the services described below to the extent permitted by
local regulation in each of its markets. See "Risk Factors--Government
Regulatory Restrictions," "--Industry Overview," "--International Long Distance
Mechanics," "--U.S. Operations" and "--European Operations."
LONG DISTANCE SERVICES
The Company provides domestic and international long distance service to its
customers. Currently, the Company provides domestic services in the United
States, the United Kingdom, Sweden and Finland. In the United States, the
Company is certified and tariffed or otherwise authorized to originate calls
from 16 states and can terminate calls throughout the United States.
PRIVATE LINE SERVICE
The Company provides dedicated point-to-point connections to businesses
requiring dedicated private telephone lines for high volumes of voice and data
between the customer's offices.
CALLING CARDS
The Company's calling cards are either prepaid cards or cards for which
calls are billed in arrears. The Company's calling cards provide international
call access to or between all countries that have direct dial service with the
United States. Prepaid calling cards are similar products to other calling
cards, but differ in marketing focus as well as the method of payment. A
customer purchases a prepaid card that entitles the customer to make phone calls
on the card up to some limit. The Company also offers prepaid calling cards that
are rechargeable. In all cases, the card number is proprietary to the customer
and is secured by means
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of a personal identification number. The Company currently offers these products
only in the United States, the United Kingdom and the Netherlands but plans to
offer these products in the rest of its European operations in 1997, to the
extent permitted under the laws and regulations of each market.
VALUE-ADDED SERVICES
The Company currently offers facsimile services in all of its operations,
toll-free dialing in the United States, the United Kingdom and Sweden and
Internet access in Sweden and expects to offer these services in all markets
where it is allowed to do so. The Company intends to introduce the following
services: (i) voice mail, (ii) video- teleconferencing and (iii) international
directory assistance.
INTERNATIONAL TERMINATION AND TRANSIT
International termination on a wholesale basis involves the sale of long
distance services to another long distance company that resells the services to
its customers. Reselling to other carriers generates traffic sufficient to allow
the Company to obtain volume discounts when it leases capacity on a per-minute
basis and allows it to generate revenues from otherwise unused capacity on its
MIUs, IRUs and point-to-point leases. See "Risk Factors--Dependence On Carrier
Customers." Transit traffic originates and terminates outside a particular
country, but is transported through that country on a carrier's network to take
advantage of lower costs.
MARKETING AND SALES
The Company markets its services on a retail basis to commercial customers
and residential customers and on a wholesale basis to other carriers and
resellers. The Company targets small to medium-sized businesses with significant
international telephone usage. The Company markets its products and services
utilizing its direct sales forces, networks of independent agents, networks of
distributors and direct and independent telemarketing force. The Company's
services are currently marketed independently by the Local Operators without
significant coordination. The Company is in the process of developing a
universal brand name for each product and service which it offers to provide
uniformity of image and brand and to create worldwide name recognition for the
Company.
CUSTOMERS
SMALL AND MEDIUM-SIZED BUSINESSES. The Company's target customers are small
and medium-sized businesses. The Company has focused on industries which
traditionally have significant volumes of international traffic. The Company
believes that this segment of the telecommunications market has been underserved
by the major global telecommunications carriers and the PTTs, which have focused
on offering their lowest rates and best services primarily to higher volume
multinational business customers. The Company offers these companies
significantly discounted international calling rates as compared to the standard
rates charged by the major carriers and PTTs.
Small and medium-sized businesses account for the vast majority of all
businesses and the Company believes that in most markets they account for a
significant percentage of the international long distance traffic originated in
those markets. For example, the EU estimates that in 1996 there were 15 million
small and medium-sized businesses in the EU and that businesses that employ
fewer than 100 workers account for more than one half of all EU employment in
1996, almost half of all business revenue and about $30 billion per year in
total telecommunications revenue. Consistent with that, it is estimated that in
the United Kingdom, companies employing fewer than 250 people spend about $6
billion to $7 billion per year on telecommunications services as compared to
about $8 billion to $9 billion per year for businesses employing in excess of
250 people and only $3 billion to $4 billion per year for the multinationals.
LARGE CORPORATIONS. The Company services a number of large corporations
through its French and German operations and the Company intends to continue to
target large corporations on those routes
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where the Company's cost structure allows it to compete. These customers were
acquired as part of the Sprint Acquisitions.
RESIDENTIAL CUSTOMERS. The Company targets customers with high
international calling patterns. The Company intends to capitalize on global
immigration patterns to target immigrant ethnic communities. This segment has
grown rapidly as shown by international calling patterns. The Company primarily
targets this market for its prepaid calling cards and phone shops.
CARRIERS. The Company offers international termination and transit traffic
services to other carriers, including resellers, on a wholesale basis, as a
"carriers' carrier."
SALES CHANNELS
The Company markets its services through a variety of channels, including
direct sales by the Company's own sales force, indirect sales through
independent agents, sales through distributors and telemarketing sales by
Company personnel, and outside agents, depending on local business practices and
business environment. Residential customers are targeted in neighborhoods with
large immigrant populations, utilizing resource materials and third party market
research companies, among other things, as resources for this information.
Carriers typically approach the Company directly to inquire about the Company's
transit and termination rates.
DIRECT SALES. Each Local Operator maintains its own direct sales force.
Each sales representative is compensated on a commission basis. The Company
intends to expand its direct sales force as it expands existing operations and
commences additional operations.
INDEPENDENT AGENTS. The Company also markets its services through an
indirect sales force comprised of independent agents. These agents include,
among others, companies which have a sales force or individuals marketing
related services such as telephone systems, copiers, fax machines or other
office machines to the Company's targeted customer segments. The Company's
indirect sales forces will be an important contributor in providing the Company
with access to and information regarding the local market.
DISTRIBUTORS. The Company has relationships with a small number of
distributors in the United States as well as the Netherlands for the sale of
prepaid cards and will seek such arrangements in its other markets.
TELEMARKETING SALES. The Company maintains or plans to maintain
telemarketing sales forces in each of its markets. Telemarketing sales are
targeted to cover small to medium-sized business and niche residential
customers. Commercial customers are offered long distance services while
residential customers are offered long distance services and a blend of prepaid
and similar products.
CUSTOMER MANAGEMENT
The Company strives to provide competitive pricing, high quality services
and superior customer service and believes that these factors are important to
its ability to compete effectively. The Company works closely with its customers
to develop competitively priced telecommunications and value-added services
(such as customized billing) that are tailored to their needs. In addition, each
of the Local Operators has customer service and engineering personnel available
to address service and technical problems as they arise.
HEADQUARTER OPERATIONS
The Guarantor directs the Company's operations, including managing the
growth of current operations, expansion of operations into new markets, forming
potential joint ventures and strategic alliances
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and executing acquisitions. The Guarantor also identifies strategic markets,
determining the vehicles through which, as well as the manner in which, the
Company will enter such markets and overseeing the implementation of these
plans. The Company is continuously reviewing and considering investment and
acquisition opportunities. The Company intends to pursue acquisitions which it
believes will expand or enhance its current operations. All such acquisitions
will be identified, negotiated and consummated through the Guarantor. In
addition, the Guarantor seeks out alliances with carriers to expand the scope of
the Company's network and improve its competitive abilities.
The Guarantor currently provides centralized financial services for all of
the Local Operators including financial planning and analysis, cost control and
network management. The Guarantor attempts to coordinate the acquisition of
additional transmission capacity (either leased or purchased) with the growth of
traffic volumes of each Local Operator. The Guarantor assists in securing
financing and discounts for these expenditures as well as other capital
expenditures through its arrangements with particular vendors. The Guarantor
also maintains global treasury functions including managing cash flows between
the Local Operators for the transmission of traffic between them as well as the
allocation of working capital.
The Guarantor will assume global responsibility for the Company's billing.
All of the Company's switching facilities will be linked to a central billing
system administered by the Guarantor. The Guarantor will provide the billing
information to Local Operators which will then invoice the customers directly.
The invoice will be branded with the Guarantor's name and will be payable to a
Guarantor account in the Local Operator's country.
The Guarantor manages the expansion of RSL-NET, including the acquisition of
additional capacity for existing operations and the integration of developing
and new Local Operators into RSL-NET. The Guarantor will coordinate the routing
of traffic on RSL-NET to effect routing on a least cost basis. To facilitate the
implementation of least cost routing on RSL-NET, the Guarantor will maintain an
international tariff database which will serve to advise Local Operators as to
the least expensive routes for calls.
The Guarantor is in the process of coordinating the marketing activities of
the Local Operators and defining its own unique approach to branding and
marketing its services on a global basis. In addition, the Guarantor will direct
the service offerings of the Local Operators to enable the Company to provide
services to a single customer in more than one country. The Guarantor would then
provide the customer with a single bill and designate a primary customer service
representative to address the customer's overall needs.
U.S. OPERATIONS
In this Prospectus, the terms "United States" and "U.S." mean the United
States of America, its states, its territories, its possessions and all areas
subject to its jurisdiction.
OVERVIEW
The United States is the largest market in terms of international long
distance call terminations and originations. The top seven destinations for
U.S.-originated calls in 1995 were: Canada, Mexico, the United Kingdom, Germany,
Japan, France and the Dominican Republic. The Company initiated its U.S.
operations in March 1995, with its investment in ITG and has grown the business
significantly since then. The Company operates in the United States as a full
service international long distance carrier with multiple "214" licenses issued
under the Communications Act, which permit it to provide international
telecommunications services. The Company currently has offices located in New
York, Los Angeles and the Miami/ Fort Lauderdale metropolitan region.
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The Company operates in the United States through ITG, an international
carrier which operates through its 98% owned subsidiary, RSL COM U.S.A., Inc.
(formerly known as International Telecommunications Corporation) ("RSL USA"),
and its 95% owned subsidiary, RSL COM PrimeCall, Inc. (formerly known as
Intelco, Global Information Services, Ltd.). The Company acquired a 25% equity
interest in ITG in March 1995. The Company increased its ownership in ITG from
25% to 35% in April 1995. In September 1995, corresponding to ITG's investment
in Cyberlink, the Company increased its ownership in ITG from 35% to just in
excess of 50%. In September 1996, the Company raised its interest in ITG to
approximately 87% by purchasing additional interests from ITG's other
shareholders. The Company also has the right to acquire from one of the other
ITG shareholders, upon the occurrence of certain events, an additional 5%
interest in ITG.
In September 1995, the Company acquired a 51% interest on a fully diluted
basis in Cyberlink, through an investment made by ITG. From August 1996, the
Company purchased approximately 12.2% of the outstanding capital stock of
Cyberlink from its former President and, during the period September 1996
through March 1997, the Company purchased the remaining 36.8% of Cyberlink's
outstanding capital stock from certain minority shareholders. In March 1997,
ITG's equity ownership interest in Cyberlink was 100%.
The Company's operations in the United States have shown considerable
growth. Revenues for ITG and Cyberlink on a consolidated basis were
approximately $18.5 million for the year ended December 31, 1995 and $85.9
million for the year ended December 31, 1996. International traffic carried by
ITG has experienced substantial growth from 3.6 million minutes in December 1995
to 14.6 million minutes in December 1996. The Company's U.S. operations have
grown from a total of 24 employees in December 1994 to 148 employees in February
1997.
During 1996, the Company initiated a program focused on enhancing
profitability, revenues and the quality of services to its customers. The
Company shifted the marketing focus of its U.S. operations from wholesale
"carrier's carrier" business to higher margin services targeted at end-user
customers in an effort to increase operating margins. In connection with this
effort, the Company determined that the rates offered to certain customers
provided the Company with inadequate margins. Accordingly, the Company increased
rates to these customers and, as a result, these customers either accepted the
rate increases or terminated their arrangements with the Company, thus reducing
the Company's exposure to low or negative margin business. In the fourth quarter
of 1996, the Company restructured its U.S. operations and recorded a charge of
$750,000 in connection with such restructuring. Operational, managerial and
technical functions were consolidated under a single organization. Under the
Company's direction, ITG has hired experienced management, implemented new
managerial and financial controls, and introduced a new marketing focus and
plan. These activities, in conjunction with ITG's investment in MIUs, IRUs and
switches, obtaining of multiple international operating agreements and focus on
customer service, have resulted in rapid growth of the business.
SERVICES AND CUSTOMERS
The Company offers its customers in the United States international and
domestic long distance, private line, calling card and value added services.
Since the first quarter of 1996, the Company has been refocusing its U.S.
operations from providing international long distance services to other carriers
to providing international and domestic long distance services to small and
medium-sized businesses as well as certain residential markets. As of December
31, 1996, the Company had 29 carrier customers, approximately 7,200 commercial
customers and approximately 11,100 residential customers.
In addition, through RSL COM PrimeCall, Inc. the Company specializes in the
provision of prepaid calling cards for niche ethnic and immigrant markets and
for promotional use by large corporate subscribers in entertainment, retail,
banking and other industries.
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MARKETING AND SALES
The Company markets its services and products in the United States through a
variety of channels, including direct sales, indirect sales through independent
agents and sales by distributors. As of December 31, 1996, the Company's U.S.
operations employed 28 sales and marketing employees and had relationships with
approximately 350 master agents with an underlying network in excess of 2,200
independent agents and six distributors. In addition, the Company employs two
sales professionals dedicated to the sale of promotional prepaid card products
to major corporate accounts. The Company intends to expand its direct sales
force as a part of its growth strategy by adding sales representatives to its
New York City, Los Angeles and Fort Lauderdale sales offices and opening an
additional sales office in Miami. The Company believes that, due to the
existence of a competitive marketplace in the United States for over a decade,
it can hire capable, experienced sales representatives and managers and that use
of a direct sales force is the most efficient means for it to grow its business.
U.S. NETWORK ARCHITECTURE
The Company operates two international gateway switches in the United
States, an Ericsson AXE-10 located in New York and a Northern Telecom DMS
250/300 located in Los Angeles. The Company's New York international gateway
switch and Los Angeles international gateway switch are connected to each other
via leased lines on a fixed cost, point-to-point basis. The Company also
operates a domestic switch and a prepaid card switch in New York. The Company
utilized this domestic switch until the Ericsson international gateway switch
was installed in the second quarter of 1996, enabling the Company to use its
operating agreements in certain countries where there had been an
incompatibility problem with the domestic switch. The Company experienced delays
in installing the New York Ericsson international gateway switch because
significant improvements had to be made to the floor housing the switch to
provide adequate support and cooling systems for the switch. The international
gateway switches conform to CCITT recommendations and are directly connected to
each other by leased fiber optic cable. The Company is developing a plan for
installation of switches in strategic sites throughout the United States, which
may include a third international gateway switch in Florida. Traffic to Asia and
the Pacific Rim is generally routed via the Company's Los Angeles international
gateway switch and traffic to Europe, Africa and Latin America is generally
routed via the Company's New York international gateway switch.
The Company currently has investments in IRUs in three undersea fiber optic
cable systems which are CANUS-1, CANTAT-3, and PTAT-1 and owns MIUs on four
undersea fiber optic cable systems, which are Antillas I (which is under
construction) Odin, Rioja and the TAT-12/TAT-13 systems (TAT-13 is under
construction). The Company also plans to purchase IRUs for its United States
operations on the Columbus II, TPC-5, America's One, T-C and Eurafrica systems
and on the APCN, Pacrim East, Tasman 2, Ariadne-2 and Aphrodite undersea fiber
optic cable systems.
The Company currently is a party to 14 operating agreements, which provide
potential direct access to Australia, Bolivia, Chile, Denmark, the Dominican
Republic, Finland, Japan, Jordan, New Zealand, Norway, Russia, Sweden, Suriname
and the United Kingdom. The Company believes that it is one of only a limited
number of carriers within the United States that has been able to secure a
significant number of operating agreements with carriers outside the United
States. The Company currently only transmits and terminates traffic pursuant to
the agreements in Bolivia, the Dominican Republic, the United Kingdom, Denmark
and Norway. The Company transmits call traffic bound for all other destinations
through leased capacity. Some of the operating agreements have been inactive
because of the delays caused by the incompatibility of the New York domestic
switch with the corresponding carrier's equipment and the subsequent delay in
installing the New York international gateway switch. These agreements are
expected to become active in the near future. The remaining operating agreements
are inactive because the Company has not yet invested in international
transmission capacity for those routes, in certain cases because call volume on
such routes does not warrant such an investment. By activating these operating
agreements as well as any additional agreements it may obtain, the Company will
be able to significantly
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lower its costs of terminating international traffic. The Company's failure to
begin transmitting traffic pursuant to any such operating agreement could lead
to the termination of the agreement. See "Risk Factors--Risk of Loss, or
Diminution of Value, of Operating Agreements."
The Company's New York switch site also includes the network management
facilities from which the Company administers and monitors the Company's New
York facilities and provides customer service, 24-hour network monitoring,
trouble reporting and response procedures, service implementation and billing
assistance. The Company designates a specific customer service representative
for each commercial customer to oversee the installation and maintenance of the
phone equipment, the start-up of service and problem resolution.
INFORMATION SYSTEMS AND BILLING
ITG currently outsources its billing services to a third party provider and
is in the process of integrating its billing into Cyberlink's system. Cyberlink
operates an Electronic Data Systems ("EDS") IXPlus System. The Company expects
that the EDS system will be utilized to: (i) provide sophisticated billing
information that can be tailored to meet a specific customer's requirements,
(ii) provide high quality customer service, (iii) detect and reduce fraud and
(iv) integrate additions to its customer base. The Company's information systems
are important to its operations as they allow the Company to assess and
determine quickly customer billing and collection problems, production by and
compensation or commissions owed to agents, sales representatives and
distributors, proper pricing for the Company's services and other matters which
are important to the operation of the Company. The IXPlus System is operated and
maintained by EDS pursuant to the five year agreement with EDS that commenced at
Cyberlink in January 1995 (the "EDS Agreement"). Under the EDS Agreement, EDS
supplies, operates and maintains this hardware system, and is responsible for
providing back-up facilities and implementing a contingency plan upon the
occurrence of certain events, including natural disasters. In 1995, one of the
carrier customers of the Company's U.S. operation failed to route properly its
international traffic to the Company's Los Angeles switch and to provide the
Company with proper billing information. See "Risk Factors--Dependence on
Effective Information Systems."
COMPETITION
The Company competes with AT&T, MCI, Sprint, WorldCom and other United
States-based and foreign carriers, many of which have considerably greater
financial and other resources than the Company. Certain of the larger United
States based carriers have entered into joint ventures with foreign carriers to
provide international services. In addition, certain foreign carriers have
entered into joint ventures with other foreign carriers to provide international
services and have begun to compete or invest in the United States market,
creating greater competitive pressures on the Company. The Company believes that
its services are competitive in terms of price and quality with the service
offerings of its U.S. competitors.
REGULATORY ENVIRONMENT
The Company's United States operations are subject to extensive federal and
state regulation. Federal laws and FCC regulations apply to interstate
telecommunications (including international telecommunications that originate or
terminate in the United States), while particular state regulatory authorities
have jurisdiction over telecommunications originating and terminating within the
state. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company, that
domestic or international regulators or third parties will not raise material
issues with regard to the Company's compliance or noncompliance with applicable
regulations or that regulatory activities will not have a material adverse
effect on the Company.
FEDERAL. The FCC currently regulates the Company as a non-dominant carrier
with respect to both its domestic and international long distance services.
Generally, the FCC has chosen not to exercise its
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statutory power to closely regulate the charges, practices or classifications of
non-dominant carriers. Nevertheless, the FCC acts upon complaints against such
carriers for failure to comply with statutory obligations or with the FCC's
rules, regulations and policies. The FCC also has the power to impose more
stringent regulation requirements on the Company and to change its regulatory
classification. In the current regulatory atmosphere, the Company believes that
the FCC is unlikely to do so with respect to the Company's domestic service
offerings. With respect to the Company's international services, however, it is
possible that the FCC could classify the Company as dominant for the provision
of services on specific international routes on the basis of the Company's
foreign ownership or a determination that the Company had the ability to
discriminate against U.S. competitors. Recently, for example, the FCC classified
Sprint as a dominant carrier for the provision of U.S. international services on
the U.S.-France and U.S.-Germany routes in connection with investments in Sprint
by France Telecom and Deutsche Telekom.
Among domestic carriers, local exchange carriers ("LECs") are currently
classified as dominant carriers with respect to the local exchange services they
provide, and no interstate, interexchange carriers, including RBOCs which are
permitted to offer long distance service outside their service areas, are
classified as dominant. Until recently, AT&T was classified as a dominant
carrier, but AT&T successfully petitioned the FCC for non-dominant status in the
domestic interstate, interexchange and international markets. Therefore, certain
pricing restrictions that once applied to AT&T have been eliminated, likely
making AT&T's prices more competitive than the Company's. Nonetheless, the FCC
placed certain conditions on AT&T's reclassification to promote the development
of vigorous competition in the international services marketplace.
The Company has the authority to provide domestic, interstate
telecommunications services. The Company has also been granted authority by the
FCC to provide switched international telecommunications services through the
resale of switched services of United States facilities based carriers, to
generally resell international private lines not connected to the PSTN or which
are connected to the PSTN in Canada, Sweden or the United Kingdom, and to
provide international telecommunication services by acquiring circuits on
various undersea cables or leasing satellite facilities. The FCC reserves the
right to condition, modify or revoke such domestic and international authority
for violations of the Communications Act or the FCC's regulations, rules or
policies promulgated thereunder. Although the Company believes the probability
to be remote, a rescission by the FCC of the Company's domestic or international
authority or a refusal by the FCC to grant additional international authority
would have a material adverse effect on the Company.
Both domestic and international non-dominant carriers must maintain tariffs
on file with the FCC. The Company must file tariffs containing detailed actual
rate schedules. In reliance on the FCC's past relaxed tariff filing requirements
for non-dominant domestic carriers, the Company and most of its competitors did
not maintain detailed rate schedules for domestic offerings in their tariffs, as
the FCC's rules currently require. Until the two year statute of limitations
expires, the Company could be held liable for damages for its past failure to
file tariffs containing actual rate schedules. The Company believes that such an
outcome is remote and would not have a material adverse effect on its financial
condition or results of operations. The Company has always been required to
include detailed rate schedules in its international tariffs.
In February 1996, the Telecommunications Act of 1996 was signed into law.
Under the Telecommunications Act the RBOCs will be permitted to provide long
distance services in competition with the Company. The law includes safeguards
against anti-competitive conduct which could result from a RBOC having access to
all customers on its existing network as well as its ability to cross-subsidize
its services and discriminate in its favor against its competitors.
Except with respect to transit agreements, authorizations held under Section
214 of the Communications Act (such as those held by the Company) for
international services are limited to providing services or using facilities
between the United States and countries specified in the authorizations. The
Company
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holds all necessary Section 214 authorizations for conducting its present
business but may need additional authority in the future. Additionally, carriers
may not lease private lines between the United States and an international point
for the purpose of offering switched services unless the FCC has first
determined that the foreign country affords resale opportunities to United
States carriers equivalent to those available under United States law. The FCC
has made such a determination with respect to New Zealand, Canada, Sweden and
the United Kingdom and the Company is authorized to resell international private
lines to these points for the provision of basic services interconnected to the
PSTN.
The FCC has promulgated certain rules governing the offering of
international switched telecommunications. Such calls typically involve a
bilateral, correspondent relationship between a carrier in the United States and
a carrier in the foreign country. Until recently, the United States was one of a
few countries to allow multiple carriers to handle international calls; almost
all foreign countries authorized only a single carrier, often a state-owned
monopoly, to provide telecommunication services. In light of the disparate
bargaining positions of the United States carriers, the FCC imposed certain
requirements to try to minimize the opportunities that dominant foreign
telecommunications providers would have to favor one United States carrier over
another. These policies include provisions of the International Settlement
Policy, which requires that return minutes from a foreign carrier must be
proportional to the traffic that the United States carrier terminates to a
foreign carrier. In December 1996, the FCC modified its rules to allow payment
arrangements that deviate from the International Settlements Policy between any
U.S. carrier and any foreign correspondent in a country that satisfies the FCC's
effective competitive opportunities test. The FCC also stated that it would
allow alternative settlement arrangements between a U.S. carrier and a foreign
correspondent in a country that does not satisfy the effective opportunities
test if the U.S. carrier can demonstrate that deviation from the International
Settlement Policy will promote market-oriented pricing and competition, while
precluding abuse of market power by the foreign correspondent. The Company has
numerous agreements with foreign carriers providing for the handling of switched
calls.
Additionally, the FCC enforces certain requirements which derive from the
regulations of the ITU. These regulations may further circumscribe the
correspondent relationships described above. In addition to settlement rates,
these regulations govern certain aspects of transit arrangements, wherein the
originating carrier may contract with an interim carrier in a second country to
terminate service in a third country. The Company has transit agreements with
foreign carriers. Such agreements may allow the Company to pay less than the
full accounting rate it would have to pay if it had a direct operating agreement
with the terminating country. However, the Company is unaware of any instance in
which a terminating country has objected with respect to any of the Company's
traffic. If a terminating country objects in the future to such transit
arrangements, the Company may be required to secure alternative arrangements.
STATE. The intrastate, long distance telecommunications operations of the
Company are also subject to various state laws, regulations, rules and policies.
Currently, the Company is certified and tariffed or otherwise authorized to
provide service in 16 states and uses a third party carrier to originate calls
in states where it needs, but does not have, authorization to provide services.
Additionally, the Company provides service in states where it requires but does
not have certification or registration of any form. Ultimately, the Company
intends to apply for authorization in substantially all of the states that
require certification or registration. See "Risk Factors--Government Regulatory
Restrictions."
The vast majority of states require carriers to apply for certification to
provide telecommunications services before commencing intrastate service and to
file and maintain detailed tariffs listing the rates for intrastate service.
Many states also impose various reporting requirements and require prior
approval for all transfers of control of certified carriers, assignments of
carrier assets, carrier stock offerings and the incurrence by carriers of
certain debt obligations. In some states, regulatory approval may be required
for acquisitions of telecommunications operations. In the past, the Company has
sought and successfully obtained such approval for its acquisitions.
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EUROPEAN OPERATIONS
OVERVIEW
RSL COM Europe, Ltd. ("RSL Europe") is a United Kingdom limited liability
company and a wholly-owned subsidiary of the Issuer. RSL Europe was formed in
March 1995 to implement the Company's pan-European strategy. In November 1995,
RSL Europe acquired a 51% interest of Cyberlink Europe, an affiliate of
Cyberlink. Cyberlink Europe has three wholly owned international
telecommunications subsidiaries: (i) RSL COM Sweden AB (formerly known as
Cyberlink Sweden AB), a Swedish corporation ("RSL Sweden"); (ii) RSL COM Finland
OY, a Finnish corporation (formerly known as Cyberlink Finland Oy) ("RSL
Finland"); and (iii) Cyberlink International Telesystem GmbH, a German
corporation ("Cyberlink Germany"). In May 1996, RSL Europe increased its
ownership percentage of Cyberlink Europe by approximately 14% when it was issued
additional shares pursuant to capital calls, and in August 1996, RSL Europe
purchased an additional 9.3% of Cyberlink Europe stock from its former
President. These transactions resulted in RSL Europe owning 74% of the
outstanding shares of Cyberlink Europe. During the period beginning September
1996 through March 1997, the Company purchased the remaining 26% of the
outstanding shares of Cyberlink Europe.
In March 1996, the Company was the successful bidder to acquire the
international long distance voice businesses of Sprint in France and Germany
through its wholly owned subsidiaries RSL COM France S.A., a French corporation
("RSL France"), and RSL COM Deutschland GmbH, a German limited liability company
("RSL Germany"). These transactions were consummated in May 1996. The Company
did not enter into any non-compete agreements with Sprint or any of Sprint's
affiliates in connection with the Sprint Acquisitions. RSL COM UK, Ltd., a
United Kingdom limited liability company and a wholly owned subsidiary of RSL
Europe ("RSL UK"), was formed to serve as the Company's Local Operator in the
United Kingdom, and began generating revenues in May 1996, although its
predecessors had been active in the United Kingdom since August 1995.
In August 1996, the Company acquired (the "Incom Acquisition") the assets
and assumed certain limited liabilities of Incom for $500,000 plus 3,954
non-voting shares of ITG (the "Purchased Shares"). The delivery of the Purchased
Shares is contingent upon the exchange of 3,333 voting shares of ITG currently
held by Incom for an equal number of non-voting shares. In addition, the Company
also contributed its 50% interest in International Telecommunications Europe,
Inc. (while assuming its past liabilities) to Incom in exchange for Incom's
release of the Company's assignment to Incom of the Company's rights to an IRU
on PTAT and an operating agreement between RSL USA and Mercury. The Company has
also entered into a consulting agreement with an affiliate of Incom calling for
payments of $10,000 per month for seven years, has paid such affiliate $280,000
for its agreement not to compete and has agreed to make a $660,000, seven-year
loan to such affiliate, bearing interest at a rate of 7% per annum.
In October 1996, RSL Europe acquired a 75% interest in the operations of
Belnet, an international reseller which had been operating in the Netherlands
since October 1995. Belnet commenced operations in Denmark in March 1997.
In connection with the Belnet Acquisition, RSL COM Europe entered into a
shareholders' agreement (the "Belnet Shareholders' Agreement") with Belnet and
Gerard A. van Leest, the founder, general manager and minority shareholder of
Belnet. Under the Belnet Shareholders' Agreement, in the event of an
underwritten public offering of the Guarantor pursuant to an effective
registration statement covering the public offering of common stock of the
Guarantor (a "Guarantor Equity Offering"), Mr. van Leest was granted the right
to exchange 12,903 shares of Belnet owned by him with shares of common stock of
the Guarantor of equivalent value. The value of the shares of Mr. van Leest in
Belnet would be determined by the managing underwriter of the offering.
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In April 1997, RSL Europe and its subsidiaries entered into an agreement
(the "PrimeCall Europe Agreement") with Mr. van Leest and The First Worldwide
Network Management & Consultant N.V. ("FWN"), a corporation wholly-owned by Mr.
van Leest, pursuant to which RSL Europe and its subsidiaries will jointly
develop, market and distribute a prepaid calling card product targeted at select
customers throughout Europe. The Company will organize local companies located
in select markets throughout Europe (the "PrimeCall Local Operators") to conduct
such business. The PrimeCall Local Operators will be 87.75% owned by the
Company's Local Operator within such market and 12.25% owned by FWN. All
technical services and facilities will be provided to the PrimeCall Local
Operators by a wholly-owned subsidiary of Belnet.
Under the PrimeCall Europe Agreement, in the event of a Guarantor Equity
Offering, FWN was granted the right to exchange its shares in each of the
PrimeCall Local Operators with shares of common stock of the Guarantor of
equivalent value. The value of the shares of FWN would be determined by the
managing underwriter of the Guarantor Equity Offering.
As of March 31, 1997, the Company had 158 employees in Europe.
INFORMATION SERVICES, SYSTEMS AND BILLING
RSL Europe has developed its own proprietary information and billing system
employing a Hewlett Packard 9000 UNIX server and a Sybase, Inc. ("Sybase")
developed customized software package (collectively, the "System"). The System
provides for billing, customer service, management information, financial
reporting and related functions. The Company has invested significant resources
into the development of the System and the Company's management worked closely
with Sybase to develop software which reflects the experiences of the Company's
management in the telecommunications industry. The System has been designed to
be easily integrated into the operations of each of its current, planned and
future European Local Operators and may ultimately be used as the centralized
information system for the Company. The System currently provides centralized
billing, customer service, and information systems to the Company's United
Kingdom, Sweden and Finland operations, with France and Germany expected to be
brought online by the end of 1997. The Company believes that the System is a key
asset of the Company and an important advantage in the management of its growth.
The System provides for sophisticated, automatic, itemized billing that can
be tailored to meet each customer's specific requirements, including customized
tariffs and discount schemes. The Company expects that the System will also
facilitate integration and central oversight of its European operations through
automated data entry by its Local Operators and through easily generated
financial status, sales information, performance and sales commission reports.
REGULATORY ENVIRONMENT
Most EU member states are in the initial stages of deregulation.
Deregulation in these countries may occur either because the member state
decides to open up its own market (e.g., the United Kingdom, Sweden and Finland)
or because it is directed to do so by the European Commission ("EC") through one
or more directives issued thereby. In the latter case, such an EC directive
would be addressed to the national legislative body of each member state,
calling for such legislative body to implement such directive through the
passage of national legislation.
Since most European countries currently restrict competition to a limited
number of specific services, the Company has developed a two stage market
penetration strategy to capitalize on the current and future opportunities in
Europe. The first step is to take advantage of current market conditions and,
within the parameters of the Company's established service offerings, to provide
the fullest range of services permissible under local regulation. The Company
thereby seeks to become a recognized international carrier in the targeted
countries as its operations grow. The second step, as deregulation permits, is
to build on its name recognition, marketing channels and existing customer base
in the market to expand its
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service offerings to both existing and new customers. By the time that the
telecommunications markets throughout Europe are open to full competition, the
Company intends to have established Local Operators in all major European
telecommunications markets.
The EC is currently expected to issue in 1997 an Interconnect Directive
which was originally expected to be issued in 1996. The Interconnect Directive
is expected to be implemented in 1998 and is expected to require the incumbent
PTTs to interconnect to other carriers using CCITT C-7 signaling standards. Such
connection will provide "Calling Line Identity" ("CLI"), also known as ANI or
PIC, which will allow the Company's customers to access more easily the
Company's local switch (E.G., through prefix dialing instead of dial-in access)
and will remove the local access fee levied in addition to the Company's charge
for the call. After interconnection, rates charged by the PTT for the PSTN
portion of the call are expected to be incurred by carriers at wholesale rates
and it is expected that carriers will be allowed to compete against the PTT in
the domestic long distance market, as well as the international market. However,
the implementation of this or any EC directive by member states is subject to
substantial delay. See "Risk Factors--Government Regulatory Restrictions."
Member states have the flexibility to interpret EC directives. If a member
state determines that a member state's legislation implementing an EC directive
does not adequately do so, the EC tests such interpretation through legal
proceedings in a court of law. This process is time consuming. Accordingly,
while a date has been set for the liberalization of voice telephony services
within the EU, the actual date on which liberalization actually occurs could be
months or years later. See "Risk Factors--Government Regulatory Restrictions."
There also may be practical considerations in implementing a directive which
could result in a delay of its implementation, as there are considerable doubts
as to the preparedness of many EC countries for a wide-ranging change. For
example, the negotiation of interconnection agreements can take a significant
amount of time. Even after such agreements are negotiated and implemented,
substantial ongoing disputes with the incumbent PTTs regarding prices and
billing are to be expected.
In an attempt to speed up the market entry of new operators despite the
obstacles referred to above, the EC issued a directive allowing alternative
entities to the PTTs (typically utility and cable television companies) to
supply infrastructure, beginning July 1, 1996. This permits the Company to
purchase cable capacity from companies other than the local PTTs as such
companies build transmission facilities. To date, however, there has not been
substantial construction of such facilities by competitors to the PTTs in EU
countries, although several member states have enacted national legislation to
adopt the foregoing directive.
Although it is not expected that interconnect will be available and
implemented in most countries of interest by January 1, 1998, the current
regulatory scheme in Europe nevertheless provides an opportunity for the Company
to provide a range of services immediately in many countries, while putting in
place adequate infrastructure to capitalize on final deregulation when it occurs
on or after January 1, 1998. The Company can provide value-added services before
1998 and, beginning in 1998 but prior to interconnection, the Company can
provide dial-in access, coupled, when possible, with autodialers or the
programming of customers' phone systems to dial access codes, to route traffic
over the PSTN to the Company's switches. See "--International Long Distance
Mechanics."
U.K. OPERATIONS
OVERVIEW
The United Kingdom originated 4 billion minutes of international traffic in
1995. From August 1995 through March 1996, the Company applied for and obtained
the necessary licenses, installed an Ericsson AXE-10 international gateway
switch and necessary software, installed a customer service and billing system,
entered into interconnect agreements and hired most members of senior
management. The
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Company's UK operations began generating revenues in May 1996 and generated $6.3
million in revenues for the year ended December 31, 1996, its first year of
operations.
SERVICES AND CUSTOMERS
The Company offers its customers in the United Kingdom international and
domestic long distance services. Customers access these services by direct
access, prefix dialing and dial-in. Direct access services are provided by
connecting customers to the Company's London switches by means of lines leased
from British Telecom or Mercury. Prefix dialing services are provided by means
of access to the Company's London switches by way of the PSTN using the
Company's access codes. As of December 31, 1996, the Company's customer base in
the United Kingdom consisted of nine carriers and in excess of 1,500 commercial
customers. The Company's current commercial customers include multinationals,
large national companies, as well as small and medium-sized businesses. In
addition, the Company, through a joint venture, operates approximately 100 phone
shops, most of which were opened in June through August 1996 in neighborhoods
with a high immigrant population.
MARKETING AND SALES
The Company markets its services in the United Kingdom through a variety of
channels, including direct sales, indirect sales through independent agents and
telemarketing sales. The Company has two sales professionals dedicated to
marketing and to maintaining the Company's relationships with its carrier
customers in addition to participating in and advertising at key industry trade
shows. As of December 31, 1996, RSL UK employed eight other marketing employees
in the United Kingdom dedicated to commercial and residential customers. RSL UK
intends to expand its direct sales force as a part of its growth strategy by
adding sales representatives to its London office as well as establishing
additional sales offices in the United Kingdom. The Company relies heavily on
its network of approximately 36 independent sales agents to sell its long
distance calling services in the United Kingdom. The Company believes that many
of the agents have existing relationships with businesses in the Company's
target market which better position them to identify and sell services to
prospective customers.
U.K. NETWORK ARCHITECTURE
RSL UK operates two AXE-10 switches, one an international gateway switch,
the other a domestic switch, located in London. Prior to December 1996, the
Company was prohibited from owning interests in fiber optic cable coming in or
out of the United Kingdom. As a result, the Company had been transmitting call
traffic bound for all other international destinations through leased capacity
provided by British Telecom and Mercury. The Company has since purchased IRUs on
the UK-NL14 undersea fiber optic cable and continues to utilize leased capacity
for all other international destinations. The Company expects to purchase
additional IRUs from the United Kingdom as warranted.
COMPETITION
The Company's principal competitors in the United Kingdom are British
Telecom, the dominant supplier of telecommunications services in the United
Kingdom and Mercury. The Company also faces competition from emerging licensed
public telephone operators (who are constructing their own facilities-based
networks) such as Energis, and from resellers including ACC Corporation,
WorldCom, Esprit and Global One. The Company believes its services are
competitive, in terms of price and quality, with the service offerings of its UK
competitors.
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REGULATORY ENVIRONMENT
The Company was awarded an International Facilities Based Telecommunications
License (an "IFBTL") in the United Kingdom in December 1996. An IFBTL entitles
the Company to acquire IRUs and MIUs on international satellite and cable
systems, resell international private lines, as well as interconnect with, and
lease capacity at, wholesale rates from British Telecom and Mercury. In
addition, the Company holds an International Simple Resale ("ISR") license in
the United Kingdom. An ISR license allows the Company to resell international
private lines, as well as interconnect with, and lease capacity at wholesale
rates from, British Telecom and Mercury.
FRENCH OPERATIONS
OVERVIEW
France originated 2.8 billion minutes of international traffic in 1995. RSL
France was formed in April 1996 for the purpose of acquiring Sprint's
international voice business in France. Sprint was required to divest itself of
its French and German international voice businesses under the terms of the
Global One joint venture agreement.
Sprint commenced its international voice business in France in 1994.
Revenues for such operation for the years ended December 31, 1996 and 1995 were
$11.1 million and $8.0 million, respectively.
SERVICES AND CUSTOMERS
The Company offers its customers in France international long distance
services utilizing direct access over leased lines and restricted dial-in for
customers in closed-user groups. Direct access is provided via a leased line
connection between the customer's phone system and the RSL switch in Paris.
Following deregulation, the Company plans to offer long distance services,
restricted until January 1998 to closed user groups, with prefix dialing and
value-added services. As of December 31, 1996, the Company's French customer
base consisted of one carrier customer and 55 commercial customers. The
Company's customers in France include multinationals, large and smaller
businesses, as well as a government agency with heavy international calling
patterns.
MARKETING AND SALES
The Company markets its services through a variety of channels, including
direct sales and indirect sales through independent agents. As of February 1997,
the Company's French operations employed 19 sales representatives and had
relationships with six independent agents. The Company intends to expand its
direct sales force and agent network as a part of its growth strategy.
FRENCH NETWORK ARCHITECTURE
RSL France operates a Northern Telecom Meridian domestic switch in its
offices in Paris. An upgrade to an international gateway switch is currently
underway and a new Ericson AXE-10 international gateway switch will be installed
by the third quarter of 1997. RSL France intends to install POPs in major
business centers outside Paris to lower its cost of providing services in these
areas. French regulations currently do not allow the Company to purchase its own
international transmission facilities and it is uncertain when or if the law
will be changed. As a result, international transmission facilities are leased
from France Telecom. In connection with the Company's acquisition of this
business, the Company entered into various transition services agreements with
Sprint, Global One and certain of their affiliates pursuant to which such
entities provided the Company with termination, billing and certain other
services until the end of March 1997. The Company has integrated these services
into its own systems and made other arrangements to ensure that these services
are provided to the Company beginning April 1997. The Company connected its
French operations to RSL-NET in December 1996.
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COMPETITION
The Company's principal competitor in France is France Telecom, the dominant
supplier of telecommunications services in France, and its International Colisee
program which offers discount long distance services to the largest commercial
customers. The Company also faces competition from emerging licensed public
telephone operators (who are constructing fiber networks in major metropolitan
areas) such as CGE/Siris and WorldCom and from resellers including Esprit and
Viatel, Inc. ("Viatel"). Upon deregulation in 1998, alternative networks
currently under construction will become available to route and terminate
traffic domestically. The Company believes its services are competitive, in
terms of price and quality, with the service offerings of its French market
competitors.
REGULATORY ENVIRONMENT
The services currently provided by the Company in France do not require a
license. The telecommunications market in France is scheduled to be liberalized
on January 1, 1998 along with the markets of most other EU member states. Under
the currently proposed law, new operators would be able to interconnect with
France Telecom's PSTN starting on January 1, 1998. In accordance with the
Telecommunications Laws passed in July 1996, the liberalization process is
regulated by a new government authority, the French Authority for Registration
of Telecommunications, which was established in January 1997. The Company has
applied for a license which will permit it to provide international long
distance services utilizing direct access or dial-in access. By the summer of
1997, the interconnection price with France Telecom is expected to be known. See
"Risk Factors--Government Regulatory Restrictions."
GERMAN OPERATIONS
OVERVIEW
Germany originated 5.2 billion minutes of international traffic in 1995. RSL
Germany was formed in April 1996 for the purpose of acquiring Sprint's
international voice business in Germany. Sprint was required to divest itself of
its German and French international voice businesses pursuant to the terms of
the Global One joint venture agreement.
Sprint commenced its German voice business in 1993. Revenues for such
operation for the years ended December 31, 1996 and 1995 were $8.6 million and
$6.4 million, respectively. The Company's German operations generated pro forma
revenues of $11.7 million for the year ended December 31, 1996.
SERVICES AND CUSTOMERS
The Company offers its customers in Germany national and international long
distance services utilizing direct access over leased lines and restricted
dial-in for customers in closed-user groups. As of March 1997 the Company's
customer base in Germany consisted of one reseller in Austria that provides
international traffic from Austria to Germany and other countries, one German
reseller and the largest German mobile phone service provider and 240 commercial
customers. The Company's current customer base primarily consists of large
national or multinational corporations due to the high cost of installing and
leasing lines. See "--Products and Services." The Company intends to switch its
marketing focus to small and medium-sized businesses.
MARKETING AND SALES
The Company currently has a limited sales force in Germany as a result of
attrition attributable to Sprint's decision to sell its operations and the
acquisition thereof by the Company. As of March 1997, the Company employed nine
sales and marketing employees in Germany. RSL Germany is expanding its direct
sales force as a part of its growth strategy by adding sales representatives.
The Company is developing a network of independent sales agents to sell its
international long distance services in Germany.
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GERMAN NETWORK ARCHITECTURE
RSL Germany operates a Wyatts MRX-2000 domestic switch in its offices in
Frankfurt. An upgrade to an Ericsson AXE-10 international gateway switch will be
installed by the third quarter of 1997. The Company also plans to install POPs
in additional German cities to lower its cost of providing services in these
cities. International transmission facilities are leased from Deutsche Telekom.
In connection with the acquisition of this business by the Company, the Company
entered into various transition services agreements with Sprint, Global One and
certain of their affiliates pursuant to which such entities were to provide the
Company with termination and certain other services until the end of March 1997.
The Company has integrated these services into its own systems and made such
other arrangements to ensure these services are provided to the Company
beginning April 1997. The Company has connected its German operations to
RSL-NET.
COMPETITION
In Germany, the Company competes with facilities-based carriers and
resellers. The Company's principal competitor in Germany is Deutsche Telekom,
the dominant supplier of telecommunications services in Germany. The Company
also faces competition from emerging public telephone operators (who are
constructing their own facilities-based networks) such as WorldCom, ARCOR, the
new alliance of Mannesmann and DBKom, and Otelo, the new alliance of RWE and
VEBACOM, from resellers including BT/VIAG Interkom and Viatel and call-back
providers such as Tele Passport and Kallback. Upon deregulation in 1998,
alternative networks currently under construction will become available to route
and terminate voice traffic. The Company believes its services are competitive,
in terms of price and quality, with the service offerings of its German
competitors.
REGULATORY ENVIRONMENT
Currently, "voice telephony" may only be provided by Deutsche Telekom and
the relevant German supervisory authorities regard the international direct
dialing service currently offered by the Company as a service that does not fall
within Deutsche Telekom's voice telephony monopoly. The German parliament has
passed the German Telecommunications Act 1996, which became effective August 1,
1996, in order to liberalize the German telecommunications market. Under this
new law, licenses for the offering of voice telephony services will be issued to
an applicant for such licenses unless (i) such applicant fails to meet certain
good standing requirements, (ii) such applicant lacks the competence to run a
telecommunications business or (iii) the offering of telecommunications services
by such applicant would be regarded as a danger to public safety. Under the
German Telecommunications Act 1996, Deutsche Telekom is required to permit
competitors to be interconnected to its network.
SWEDISH OPERATIONS
OVERVIEW
Sweden originated 900 million minutes of international traffic in 1995. The
Company operates in Sweden through RSL Sweden, in which the Company acquired a
majority interest in November 1995. RSL Sweden is licensed as an international
carrier in Sweden, which permits it to transmit long distance services
nationally and internationally. The Company's Swedish operations began operating
and generating revenues in May 1996 and generated approximately $895,000 for the
year ended December 31, 1996, its first full year of operations.
SERVICES AND CUSTOMERS
The Company offers long distance and value added services to its customers
in Sweden. Customers access the Company's switch utilizing prefix dialing and
direct access. As of December 31, 1996, the Company's customer base in Sweden
consisted of 800 commercial customers and 1,700 residential
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customers as well as an agreement to terminate international traffic for a
mobile service provider in Sweden.
MARKETING AND SALES
The Company's Swedish operation markets its services through a variety of
channels, including direct sales, indirect sales through independent agents and
telemarketing sales. As of December 31, 1996, the Company employed five
full-time sales and marketing employees in Sweden, although the Company intends
to expand its direct sales force as a part of its growth strategy. The Company
primarily relies on its network of approximately 25 independent sales agents to
sell its long distance calling services in Sweden. In addition, the Company
sells its services through a chain of 62 independent telecommunications stores
with locations throughout Sweden, as well as through a large association
comprised of individuals and businesses. The Company believes that many of its
agents have existing relationships with businesses in the Company's target
market which better position them to identify, and sell services to, prospective
customers.
SWEDISH NETWORK ARCHITECTURE
In Sweden, the Company operates an Ericsson AXE-10 international gateway
switch from its offices outside of Stockholm. RSL Sweden is connected to RSL-NET
by leased facilities. RSL Sweden utilizes its IRUs on the CANTAT-3 transoceanic
cable and resells services from WorldCom and Telia (the former monopoly PTT in
Sweden). RSL Sweden currently has operating agreements with carriers in Denmark
and Norway, as well as direct connections to the Company's operations in the
United Kingdom, United States and Finland.
COMPETITION
The Company's principal competitor in Sweden is Telia, the dominant supplier
of telecommunications services in Sweden. The Company also faces competition
from emerging licensed public telephone operators (which are constructing their
own fiber networks) such as Tele2 and WorldCom, and from resellers including
Telenordia, Telecom Finland and Tele 8. Upon the completion of the construction
of the new fiber networks, the Company will have alternative means of routing
and terminating calls. The Company believes its services are competitive, in
terms of price and quality, with the service offerings of its Swedish
competitors.
REGULATORY ENVIRONMENT
All types of telecommunication services were liberalized in Sweden in 1993.
Through RSL Sweden, the Company holds an unrestricted license to provide
national and international telephony in the Swedish market. As a licensed
carrier, the Company may buy IRUs or lease fixed capacity from other providers,
or utilize the former PTT network to originate and terminate its traffic. The
Company's services are accessed primarily by prefix dialing. It is generally
believed that the Swedish Parliament will amend the Swedish Telecom Act to
facilitate equal access for all carriers after 1998.
FINNISH OPERATIONS
OVERVIEW
Finland originated 315 million minutes of international traffic in 1995 and
is an important market because it serves as a gateway to Russia. The Company
operates in Finland through RSL Finland, in which the Company acquired a
majority interest in November 1995. RSL Finland is a fully licensed
international long distance carrier in Finland. The Company's Finnish operations
began operating and generating revenues in May 1996 and generated approximately
$598,000 in revenues for the year ended December 31, 1996, its first full year
of operations.
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SERVICES AND CUSTOMERS
The Company offers its customers in Finland international and domestic long
distance services utilizing direct access, prefix dialing and dial-in access. As
of February 28, 1997, the Company's customer base in Finland consisted of
approximately 1300 commercial customers and 700 residential customers.
MARKETING AND SALES
The Company markets its services in Finland through a variety of channels,
including direct sales and indirect sales through independent agents. As of
February 1997, the Company employed seven sales and marketing employees in
Finland. The Company relies heavily on its network of approximately 30
independent sales agents to sell its long distance calling services in Finland.
The Company believes that many of the agents have existing relationships with
businesses in the Company's target market which better position them to identify
and sell services to prospective customers.
FINNISH NETWORK ARCHITECTURE
In Finland, the Company operates an Ericsson AXE-10 international gateway
switch in its offices in Helsinki. RSL Finland primarily utilizes RSL Europe's
network for international termination. International termination is also
achieved by RSL Finland through the resale of Telefinland's and other carriers'
international circuits.
COMPETITION
The Company's principal competitor in Finland is TeleFinland, the dominant
supplier of telecommunications services in Finland. The Company also faces
competition from emerging licensed public telephone operators (who are
constructing their own facilities-based networks) such as Global One, Finnet and
Telivo, and from resellers including Telel. The Company believes its services
are competitive, in terms of price and quality, with the service offerings of
its Finnish competitors.
REGULATORY ENVIRONMENT
There are two classes of operators in Finland, (i) network operators, which
have their own network of domestic transmission lines, and (ii) service
operators, which cannot own domestic transmission lines or IRUs, but can have
their own switching facilities. As a service operator, the Company offers
international and domestic long distance services without restrictions. RSL
Finland was granted a license to provide services as a network operator in March
1997. Finnish law requires that network operators connect service operators into
the network operators' transmission network.
The Finnish telecom law was amended in August 1996 to remove restrictions
applicable to telecommunications. As a result of these amendments, companies
will not need to hold a license in order to provide services as a service
operator.
NETHERLANDS OPERATIONS
OVERVIEW
The Netherlands originated 1.5 billion minutes of international traffic in
1995. The Company operates in the Netherlands through Belnet, in which the
Company acquired a 75% interest in October 1996. Belnet is an international
carrier with switches installed in Rotterdam and Amsterdam.
Belnet initiated operations in October 1995 and generated approximately $7.9
million in revenues for the year ended December 31, 1996, its first full year of
operations, a gross margin of approximately 47%, and a pretax profit of
approximately $2.0 million.
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SERVICES AND CUSTOMERS
The Company offers its customers in the Netherlands international long
distance services utilizing direct access, prefix dialing and dial-in access,
and prepaid calling cards. As of December 31, 1996, the Company's customer base
in the Netherlands consisted of approximately 1,200 commercial customers.
MARKETING AND SALES
The Company markets its services in the Netherlands through a variety of
channels, including indirect sales through independent agents and an external
telemarketing company. The Company relies primarily on a network of
approximately 20 independent sales agents to sell its long distance calling
services in the Netherlands. The Company believes that many of the agents have
existing relationships with businesses in the Company's target market which
better position them to identify and sell services to prospective customers. The
Company sells its prepaid calling card through seven independent distributors.
NETHERLANDS NETWORK ARCHITECTURE
In the Netherlands, the Company operates two Nortel Meridian switches,
directly linked by leased capacity, from its offices in Rotterdam and Amsterdam.
Belnet is linked directly to the Company's London gateway by leased facilities
and resells the services of British Telecom and Global One on all routes where
it is economical to do so.
COMPETITION
The Company's principal competitor in the Netherlands is PTT Telecom
Netherlands, the dominant supplier of telecommunications services in the
Netherlands. The Company also faces competition from emerging licensed public
telephone operators (who are constructing their own facilities-based networks)
such as WorldCom, and from mega-carriers including Concert and Global One. The
Company believes its services are competitive, in terms of price and quality,
with the service offerings of its competitors in the Netherlands.
REGULATORY ENVIRONMENT
Currently, "voice telephony" may only be provided in the Netherlands by the
Dutch PTT. The Company believes that the current services offered by Belnet do
not conflict with the monopoly of the Dutch PTT.
Two licenses to operate a telecommunications network over the existing cable
infrastructure have been granted in the Netherlands, one to Telfort, a joint
venture between British Telecom and Dutch Railways, and one to Enertel a
consortium of Dutch Gas Companies and a large television cable company. In
reliance on the Dutch government's past relaxed regulation of the
telecommunications market, the Company and most of its competitors currently
provide services in the Netherlands without a license. The Dutch government is
expected to enact regulations that will liberalize the Netherlands'
telecommunications market in 1997 and full liberalization is expected in the
beginning of 1998 along with the liberalization of the telecommunications
markets of most other EU member states. Until such liberalization takes place,
the Company may be required to apply for a license in the Netherlands. The
Company believes that such an outcome will not occur and would not have a
material adverse effect on its financial condition or results of operations.
The Netherlands has already initiated the process of deregulation and
pending legislation is expected to liberalize telecommunications by June 1997.
However, the legislative process may be lengthy.
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DENMARK OFFICE
In February 1997, Belnet opened an office in Copenhagen to commence the
provision of international telecommunications services in Denmark through RSL
COM Denmark N.V. The Company currently offers international long distance
services in Denmark utilizing prefix dialing. The Company sells such services
through three direct sales personnel. The Company expects to begin generating
revenues in Denmark in May 1997, however, this is a forward-looking statement
and, accordingly, there can be no assurance in this regard.
All calls from customers in Denmark will be routed through the Company's
facilities in the Netherlands by facilities leased from TeleDanmark. Calls will
then be switched to their ultimate destination utilizing the Netherlands network
architecture.
AUSTRALIA OPERATIONS
OVERVIEW
Australia originated 1.0 billion minutes of international traffic in 1995.
The Company operates in Australia through RSL COM Australia Pty Ltd. ("RSL
Australia"), a wholly-owned subsidiary of RSL COM Asia Ltd. The Company began
generating revenues in Australia in April 1997.
SERVICES AND CUSTOMERS
In April 1997, the Company entered into an agreement with Pacific Star
Communications Limited ("Pac Star"), an Australian based switchless reseller,
pursuant to which the Company acquired substantially all of the commercial
customer contracts of Pac Star. As a result of such transaction, the Company's
customer base in Australia currently consists of approximately 1,700 commercial
customers. The Company offers these customers local services and domestic and
international long distance services.
MARKETING AND SALES
The Company plans to market its services in Australia through a variety of
channels, including direct sales and indirect sales through independent agents.
AUSTRALIAN PROPOSED NETWORK STRUCTURE
The Company has entered into an agreement to purchase an international
gateway switch for installation in Sidney and domestic switches for installation
in Melbourne and Brisbane which will be directly linked to each other.
Installation is expected during May 1997. The Company expects to have other
critical network facilities in place by the end of the second quarter of 1997.
Currently, the Company provides services to its customers by reselling the
services of the PTT and other major carriers in Australia.
COMPETITION
The Company's principal competitors in Australia are the two licensed
general carriers Telstra Corporation Limited (the former PTT) and Optus
Communications Pty. Limited. Each of these competitors provide a bundle of
services including mobile, local, and domestic and international long distance.
In addition the Company faces competition from switch-based and switchless
resellers such as Spectrum Network Systems Limited, Axicorp Pty. Limited, Call
Australia Pty. Limited, and AAPT Pty. Limited.
REGULATORY ENVIRONMENT
RSL Australia is enrolled with the Australian Telecommunications Authority
("Austel") under the provisions of the International Service Providers Class
License as a provider of services with double-ended interconnection. The
Telecommunications Act 1991 allows enrollment as a provider of services with
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double-ended interconnection, provided that Austel is satisfied that the
services to be offered are in the public interest. Double-ended interconnection
allows the Company to interconnect with the Australian PSTN, to resell general
carrier services, and to transmit international calls over owned international
transmission facilities. Customers are able to access the Company's network from
the PSTN utilizing a four digit prefix code issued by Austel. International long
distance services may be provided by the use of satellite based facilities or
international cable capacity. Full deregulation of the Australian
telecommunications market is scheduled to occur in July 1997, at which time full
carrier status will be available to the Company, although there can be assurance
in this regard.
TARGETED OPERATIONS
The Company has identified 11 markets in which it plans to initiate
operations over the next several years. Five are in Europe, three are in Latin
America, and two are in the Pacific Rim. The Company is seeking potential joint
venture partners and acquisition targets and has developed specific business
plans for its entrance into, and operations in each of these markets. See "Risk
Factors--Risks Associated with Anticipated Growth and Acquisitions."
ASIA AND PACIFIC RIM
RSL COM Asia, Ltd. ("RSL Asia") is a wholly-owned subsidiary of the
Guarantor, based in Hong Kong. RSL Asia was formed to expand the Company's
operations into the Asian/Pacific Rim market and, in March 1997, the Company
incorporated RSL COM Japan K.K. to initiate the Company's operations in Japan.
RSL Asia intends to capitalize on the trend toward deregulation within the
region to establish operations in key countries. The Company is currently
seeking a Regional Manager to oversee and develop RSL Asia's operations. RSL
Asia has applied for a Private Non-Exclusive Telecommunications Services License
to provide value added services in Hong Kong.
LATIN AMERICA
The Company is in the process of negotiating a joint venture with a
strategic partner in order to expand the Company's operations into Latin
America. The Company will incorporate RSL COM Latin America ("RSL Latin
America") to initiate the Company's operations in Latin America. The Company
intends to capitalize on the trend toward deregulation within the region to
establish operations in key countries. The Company is currently seeking a
Regional Manager to oversee and develop RSL Latin America's operations.
EMPLOYEES
At December 31, 1996, the Company employed 326 people, including officers,
administrative and selling personnel. The Company considers its relationship
with its employees to be good.
PROPERTIES
The Company maintains executive and administrative offices at 767 Fifth
Avenue, New York, New York, where the Company occupies 2,670 square feet under a
lease which expires on December 31, 1997. The lease provides for annual lease
payments of $180,225.
The Company maintains additional offices at 767 Fifth Avenue, New York, New
York, where the Company occupies 2,589 square feet under a lease which expires
on January 31, 2002, although the Company has the option to terminate such lease
beginning in February 1998. The lease provides for annual lease payments of
$110,032.
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The Company maintains a 3,040 square foot office at 60 Hudson Street, New
York, New York which houses the Company's international gateway and domestic
switches located in New York. The lease extends until September 30, 1997 and
provides for annual lease payments of $261,804.
The Company maintains an office at Churchill House, 142-146 Old Street,
London, England which is used as the location for the London international
gateway switch and the London domestic switch. The lease extends until October
1, 2005 and provides for annual lease payments of $83,138 until March 1998 and
may be increased thereafter.
The Company, through its direct and indirect subsidiaries, also leases
additional office spaces for its operations.
LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company is not presently a party
to any such litigation that the Company believes could reasonably be expected to
have a material adverse effect on its business or results of operations.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
The Issuer is a United Kingdom corporation and the Guarantor is a Bermuda
corporation. Certain of their directors and officers, and certain of the experts
named herein, are not residents of the United States. All or a substantial
portion of the assets of such persons are or may be located outside the United
States. As a result, it may not be possible for investors to effect service of
process within the United States upon such persons or to enforce against them
judgements obtained in the United States courts. The Guarantor has been advised
by its legal counsel in Bermuda, Conyers, Dill & Pearman, that there is doubt as
to the enforcement in Bermuda, in original actions or in actions for enforcement
of judgments of United States courts, of liabilities predicated upon U.S.
Federal securities laws, although Bermuda courts will enforce foreign judgments
for liquidated amounts in civil matters, subject to certain conditions and
exceptions. The Issuer has been advised by its legal counsel in the United
Kingdom, Levinson Gray, that it is doubtful whether an English court would
accept jurisdiction and impose civil liability if proceedings are commenced in
England predicated upon U.S. Federal securities laws. However, subject to a
number of factors and conditions, a final judgment for payment given by any
federal or state court in the United States, and based on civil liability, may
be enforceable in England in proceedings initiated by way of a common law
action.
The Guarantor and the Issuer have each expressly submitted to the
jurisdiction of the U.S. federal and New York state courts sitting in the City
of New York for the purpose of any suit, action or proceeding arising out of the
offering of the notes and other securities sold at the time of the Private
Offering and
have each appointed RSL Communications, N. America, Inc., 767 Fifth Avenue,
Suite 4300, New York, New York 10153, to accept service of process in any such
action.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Certain information concerning directors and executive officers of the
Guarantor and certain of the subsidiaries of the Guarantor is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Ronald S. Lauder....................... 53 Director and Chairman of the Board
Itzhak Fisher.......................... 41 Director, President and Chief Executive Officer
Andrew Gaspar.......................... 49 Director and Vice Chairman of the Board
Jacob Z. Schuster...................... 48 Director, Chief Financial Officer, Assistant Secretary and
Treasurer
Richard E. Williams.................... 45 President and Chief Executive Officer of RSL Europe
Karen van de Vrande.................... 46 Vice President of Marketing
Nir Tarlovsky.......................... 30 Director and Vice President of Business Development
Nesim N. Bildirici..................... 30 Director and Vice President of Mergers and Acquisitions
Mark J. Hirschhorn..................... 32 Global Controller, Assistant Secretary
Paul G. Black.......................... 40 President and Chief Operating Officer of RSL USA
Gustavo A. Cisneros.................... 51 Director
Leonard A. Lauder...................... 64 Director
Eugene Sekulow......................... 55 Director
Nicolas G. Trollope.................... 49 Director
Tucker Hall............................ 41 Secretary
</TABLE>
The directors listed above, other than Messrs. L. Lauder, Cisneros and
Trollope, are also directors of the Issuer. Each of the executive officers of
the Guarantor listed above are executive officers of, and hold the same offices
with, the Issuer except that Jacob Z. Schuster is Secretary of the Issuer and
Tucker Hall is not an officer of the Issuer. All directors hold office, subject
to death, removal or resignation, until the next annual meeting of shareholders
and thereafter until their successors have been elected and qualified. Officers
of the Guarantor and the Issuer serve at the pleasure of their respective Boards
of Directors, subject to any written arrangements with the Company. See
"--Employment Arrangements." Set forth below is certain information with respect
to the directors, executive officers and other senior management of the Company.
RONALD S. LAUDER has been Chairman of the Board of Directors of the
Guarantor since 1994 and of the Issuer since August 1996. Mr. Lauder is a
principal shareholder of Estee Lauder Companies, Inc. and has served as Chairman
of Estee Lauder International since 1992 and Chairman of Clinique, an Estee
Lauder division, since 1992. Mr. Lauder has also served as Chairman of the Board
of Central European Media Enterprises Ltd. ("CME"), an owner and operator of
Central and Eastern European television stations since June 1994, and as
Chairman of Central European Development Corporation ("CEDC"), an investment and
development company operating in Central Europe since 1990. From 1986 until
1987, Mr. Lauder served as U.S. Ambassador to Austria, having previously served
as Deputy Assistant Secretary of Defense for European and NATO Policy. Mr.
Lauder currently serves as a director of Estee Lauder, Inc. and The
International Society for Yad Vashem and is the Chairman of The Museum of Modern
Art in New York City. Mr. Lauder is also the President of the Jewish National
Fund.
ITZHAK FISHER has been a director, President and Chief Executive Officer of
the Guarantor since its inception in 1994 and of the Issuer since August 1996.
Mr. Fisher is also the President and Vice Chairman of ITG, the Vice Chairman of
RSL USA and the Chairman of RSL COM Europe, Ltd. From 1992 to 1994, Mr. Fisher
served as General Manager of Clalcom, the telecommunications subsidiary of Clal
(Israel), Ltd., Israel's largest investment corporation ("Clal"). Prior to
joining Clalcom, Mr. Fisher served as a Special Consultant to the President of
Bezeq, Israel's national telecommunications company, from 1993 to
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1994. In 1993, he founded Aurec Goldnet, a company that provides on-line data
and electronic mail services in Israel. In 1991, Mr. Fisher founded Medic Media,
a company engaged in the business of renting telephone and television systems in
hospitals throughout Israel. Prior to 1991, Mr. Fisher served in various
management capacities at Mobil Oil and at IBM.
ANDREW GASPAR has served as a director and Vice Chairman of the Board of the
Guarantor since its inception in 1994 and of the Issuer since August 1996. Mr.
Gaspar has been (through a limited liability company) the managing member of
Lauder Gaspar Venture LLC ("LGV") since its inception in September 1996. Mr.
Gaspar has been President of the corporate general partner of R.S. Lauder,
Gaspar & Co., L.P. ("RSLAG"), a venture capital company which Mr. Gaspar formed
with Mr. Lauder, since 1991. RSLAG is the largest shareholder of the Company.
Mr. Gaspar has also been Secretary and a director of CME since June 1994 and
Vice Chairman of CEDC since 1991. From 1982 until 1991, Mr. Gaspar was a partner
of Warburg, Pincus & Co., a venture capital firm, in which Mr. Gaspar
specialized in start-up ventures in the telecommunications industry. From 1973
until 1981, Mr. Gaspar served in various executive capacities at RCA Global
Communications, Inc. and its affiliates. Mr. Gaspar is Chairman of Auto Info
Inc., a financial services company. The degree of Mr. Gaspar's involvement in
the activities of the Company varies from time to time based on the then current
needs of the Company but, generally, Mr. Gaspar devotes a majority of his
business time on matters unrelated to the business and affairs of the Company.
JACOB Z. SCHUSTER has been a director, Secretary or Assistant Secretary and
Treasurer of the Guarantor since 1994 and of the Issuer since August 1996 and
has been the Chief Financial Officer of both the Guarantor and the Issuer since
February 1997. From 1986 to 1992, Mr. Schuster was a General Partner and the
Treasurer of Goldman, Sachs & Co. Mr. Schuster has been Executive Vice President
of RSL Investments Corporation since March 1994. Mr. Schuster joined Goldman,
Sachs & Co. in 1980, served as Treasurer of the firm from 1985 until his
retirement from the firm in 1992 and was made a General Partner in 1986. In
1993, Mr. Schuster served as a consultant to Goldman, Sachs.
RICHARD E. WILLIAMS has served as President and Chief Executive Officer of
RSL Europe since August 1995 and as a director of the Issuer since August 1996.
From 1992 through 1994, Mr. Williams served as a director of IDB WorldCom, with
responsibility for sales and marketing. From 1990 to 1992, Mr. Williams served
as Managing Director and Vice President of Operations (Europe, Africa and Middle
East) of WICAT Systems, a computer systems company. From 1968 to 1990, Mr.
Williams served in various technical, research, sales, and management capacities
at British Telecom, most recently serving as a General Manager from 1988 to
1990.
KAREN VAN DE VRANDE has been Vice President of Marketing of the Guarantor
since March 1996 and of the Issuer since August 1996. From March 1993 to
February 1996, Ms. van de Vrande served as Managing Director of AT&T's Consumer
Communications Services for Europe, the Middle East and Africa. From 1990 to
1993, Ms. van de Vrande served as Managing Director of AT&T's Israeli
operations. She served in various marketing and sales capacities at AT&T from
1981 to 1990.
NIR TARLOVSKY has been a director and Vice President of Business Development
of the Guarantor since April 1995 and of the Issuer since August 1996. Mr.
Tarlovsky is also Vice President of ITG. From 1992 to March 1995, Mr. Tarlovsky
served as Senior Economist of Clal, Ltd., where he was responsible for oversight
of the operations and budgets of 150 of Clal subsidiaries. While at Clal, he was
also responsible for the development of new international telecommunications
ventures. Prior to 1992, Mr. Tarlovsky served as an officer in the Israeli Army,
where he was responsible for management and financial oversight of international
research and development projects.
NESIM N. BILDIRICI has been a director of the Guarantor since 1994 and Vice
President of Mergers and Acquisitions of the Guarantor since 1995. Mr. Bildirici
has also been a director and Vice President of Mergers and Acquisitions of the
Issuer since August 1996. Mr. Bildirici is also Managing Director of RSLAG where
he has been employed since 1993. Prior to joining RSLAG, Mr. Bildirici was an
investment
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banker at Morgan Stanley & Co. Incorporated from 1989 to 1991. From 1991 to
1993, Mr. Bildirici was a graduate student at Harvard Business School, where he
received his MBA.
MARK J. HIRSCHHORN has been Global Controller of the Guarantor since January
1996 and of the Issuer since August 1996. Mr. Hirschhorn has also served as the
Assistant Secretary of both the Guarantor and the Issuer since September 1996.
From October 1987 to December 1995, Mr. Hirschhorn was employed at Deloitte &
Touche LLP, most recently as a Senior Manager specializing in emerging business
and multinational consumer product companies.
PAUL G. BLACK has been the President and Chief Operating Officer of RSL USA
since March 1997. Mr. Black joined the Company as President and Chief Executive
Officer of Cyberlink in November 1996. From 1995 to 1996, Mr. Black served as
Vice President, International Business Development of Pacific Gateway Exchange,
Inc. From 1993 through 1995, Mr. Black was President of SERSA/GEOCOMM, a
provider of dedicated international communications services. From 1990 to 1993,
Mr. Black was Manager, Western Region for GTE Spacenet (now known as GTE
Telecom).
GUSTAVO A. CISNEROS has been a director of the Guarantor since March 1997.
Mr. Cisneros, together with other members of his family, owns a controlling
interest in Venevision as well as interests in a wide variety of other business
enterprises. For more than five years, Mr. Cisneros has been a direct or
indirect beneficial owner of interests in and a director of certain of the
companies that own or are engaged in a number of diverse commercial enterprises
principally in Venezuela, the United States, Brazil, Chile and Mexico. Mr.
Cisneros, together with other members of his family, indirectly beneficially
owns Venevision. Mr. Cisneros is the Chairman of the Board of Directors of
Pueblo Xtra International, Inc. and a Director of Univision Communications Inc.
LEONARD A. LAUDER has been a director of the Guarantor since March 1997. Mr.
Lauder has served as Chief Executive Officer of the Estee Lauder Companies, Inc.
("Estee Lauder") since 1982 and as President of Estee Lauder from 1972 until
1995. He became Chairman of the Board of Directors of Estee Lauder in 1995. He
has been a director of Estee Lauder since 1958. Mr. Lauder formally joined Estee
Lauder in 1958 after serving as an officer in the United States Navy. He is
Chairman of the Board of Trustees of the Whitney Museum of American Art, a
Charter Trustee of the University of Pennsylvania and a Trustee of The Aspen
Institute. He also served as a member of the White House Advisory Committee on
Trade Policy and Negotiations under President Reagan.
EUGENE SEKULOW has been a director of the Guarantor since September 1995 and
of the Issuer since August 1996. From December 1991 until his retirement in
December 1993, Mr. Sekulow served as Executive Vice President-International of
NYNEX Corporation, having served as President of NYNEX International Company
from 1986 to 1991. Prior to joining NYNEX International Company, Mr. Sekulow had
served as President of RCA International, Ltd. since 1973. Mr. Sekulow
previously served as a member of the United States State Department Advisory
Committee on International Communications and Information Policy and on the
State Department Task Force on Telecommunications in Eastern Europe.
NICOLAS G. TROLLOPE, a director of the Guarantor since July 1996, has been a
partner with the law firm of Conyers, Dill & Pearman, Hamilton, Bermuda, since
1991.
TUCKER HALL, Secretary of the Guarantor since March 1997, has been a manager
of Codan Services Limited, Hamilton, Bermuda, since 1989.
Other than Ronald S. Lauder and Leonard A. Lauder, who are brothers, no
family relationship exists between any director or executive officer of the
Guarantor and/or the Issuer.
COMMITTEES OF THE BOARD
The Guarantor's Board of Directors has an Executive Committee (the
"Executive Committee") and a Compensation Committee (the "Compensation
Committee").
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The Executive Committee is composed of Ronald S. Lauder, Andrew Gaspar and
Itzhak Fisher. The Executive Committee must unanimously approve any of the
following items before the Guarantor's full Board of Directors may consider any
such matter: (i) all investments and borrowing commitments in excess of $100,000
and the entering into of any agreement requiring payment by the Guarantor of an
amount in excess of $100,000 or that is otherwise material to the business and
operations of the Guarantor; (ii) all potential acquisitions and mergers of the
Guarantor or acquisitions or dispositions of material assets; (iii) budget
approval; (iv) nomination and election of all officers; (v) all amendments to
the Guarantor's Memorandum of Association and Bye-laws (which also require
shareholder approval); (vi) all major strategic decisions (such as entering
additional markets and providing new services, etc.); and (vii) all decisions of
the Guarantor with respect to raising additional capital from the Guarantor's
stockholders generally and, in connection therewith, the valuation of the
Guarantor at such time.
The Compensation Committee is composed of Ronald S. Lauder, Andrew Gaspar
and Itzhak Fisher. The Compensation Committee is responsible for determining
executive compensation policies and guidelines and for administering the 1995
Stock Option Plan, including granting options and setting the terms thereof
pursuant to such plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes all plan and non-plan compensation awarded
to, earned by, or paid to the Guarantor's Chief Executive Officer and its four
most highly compensated executive officers, other than the Chief Executive
Officer, whose total annual salary and bonus exceed $100,000 and who were
serving as executive officers at the end of the Guarantor's last fiscal year
(together, the "Named Executive Officers"), for services rendered in all
capacities to the Company for the year ended December 31, 1996. The Issuer does
not separately pay any salaries to its officers nor does it have any employees.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- -------------
SALARY BONUS OPTIONS
NAME AND PRINCIPAL POSITION YEAR $ $ #
- --------------------------------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Itzhak Fisher
President and Chief Executive Officer.............................. 1996 350,000 150,000 0
Nir Tarlovsky
Vice President of Business Development............................. 1996 178,000 75,000 0
Richard E. Williams (2)
President and Chief Executive Officer of
RSL Europe......................................................... 1996 172,000 50,000 0
Charles M. Piluso
Chairman of ITG.................................................... 1996 230,000 0 0
Mark Hirschhorn
Global Controller.................................................. 1996 140,000 50,000 42,600
Karen van de Vrande
Vice President of Marketing........................................ 1996 120,000 50,000 0
</TABLE>
- ------------------------
(1) Mr. Tarlovsky's options to acquire Class A Common Stock vest such that he
will not be able to exercise options to acquire more than 2% of the
outstanding capital stock as of the date on which his current employment
agreement expires.
(2) Mr. Williams' salary has been converted to U.S. dollars for the purposes of
this table based upon the average exchange rate of British Pounds to U.S.
Dollars for the periods covered.
(3) Mr. Piluso, the former President of ITG and RSL USA, has not, since November
1996, served as an executive officer of the Company.
96
<PAGE>
No other annual compensation, restricted stock awards, stock appreciation
rights or long-term incentive plan payouts or other compensation (all as defined
in the proxy regulations of the SEC) were awarded to, earned by, or paid to the
Named Executive Officers during 1996.
STOCK OPTION PLAN
In April 1995, the Board of Directors of the Guarantor authorized, and the
shareholders of the Guarantor approved, the 1995 Stock Option Plan. Under the
1995 Stock Option Plan, the Guarantor's Compensation Committee is authorized to
grant options for up to 1,000,000 shares of the Guarantor's Class A Common
Stock. As of December 31, 1996, the Guarantor had granted options to purchase
779,600 shares of the Guarantor's Class A Common Stock under the 1995 Stock
Option Plan. In general, options granted under the 1995 Stock Option Plan
terminate on the tenth anniversary of the date of grant. The 1995 Stock Option
Plan was developed to provide incentives to employees of the Company and to
attract new employees and non-employee directors.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to purchase shares of Class A Common Stock pursuant to the Guarantor's
1995 Stock Option Plan granted to the Named Executive Officers during the year
ended December 31, 1996. No stock appreciation rights have been granted by the
Guarantor. The Issuer does not have a stock option plan nor has it granted any
stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------------
PERCENT OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE GRANT DATE
GRANTED TO EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME # FISCAL YEAR $/SH DATE $
- ------------------------------------------------ ----------- ----------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Itzhak Fisher................................... 0 -- -- -- --
Nir Tarlovsky................................... 0 -- -- -- --
Richard E. Williams............................. 0 -- -- -- --
Charles M. Piluso............................... 0 -- -- -- --
Mark Hirschhorn................................. 42,600 33.6% $ 3.50 1/01/06 $ 25,000
Karen van de Vrande............................. 60,000 46.3% $ 3.50 4/01/06 $ 35,000
</TABLE>
97
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the value at
December 31, 1996 of unexercised stock options held by the Named Executive
Officers. No stock appreciation rights have been granted by the Company and no
stock options were exercised during the fiscal year ended December 31, 1996 by
the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL OPTIONS IN-THE-MONEY AT
YEAR-END FISCAL YEAR-END(1)
------------------------ -----------------------
<S> <C> <C>
EXERCISABLE/
EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
NAME # $
- ------------------------------------------ ------------------------ -----------------------
Itzhak Fisher............................. 0/0 0/0
Nir Tarlovsky(2).......................... 40,571/359,429 1,078,742/9,556,858
Richard E. Williams....................... 0/0 0/0
Charles M. Piluso......................... 0/0 0/0
Mark Hirschhorn........................... 0/42,600 0/983,634
Karen van de Vrande....................... 0/60,000 0/1,385,900
</TABLE>
- ------------------------
(1) Fair market value of securities underlying the options at fiscal year-end
minus the exercise price of the options.
(2) Mr. Tarlovsky's options to acquire Class A Common Stock vest such that he
will not be able to exercise options to acquire more than 2% of the
outstanding capital stock as of the date on which his current employment
agreement expires.
COMPENSATION OF DIRECTORS
Neither the Guarantor nor the Issuer compensates directors who are not their
employees for their services as directors.
KEY MAN LIFE INSURANCE
The Company maintains $5.0 million key man life insurance policies on the
lives of each of Itzhak Fisher and Richard E. Williams. The Company is the sole
beneficiary of such policies.
EMPLOYMENT ARRANGEMENTS
The Guarantor and ITG have entered into Employment Agreements, dated as of
September 15, 1995, with Itzhak Fisher, the President and Chief Executive
Officer of the Guarantor and the President and Vice Chairman of ITG, the initial
terms of which expire on December 31, 1998. The term of the agreements will be
automatically extended for successive one-year periods unless they are
terminated (i) by either party by September 30, 1998 or September 30 of any
subsequent year, (ii) for cause pursuant to a majority vote of the Guarantor's
and ITG's Board of Directors, respectively, or (iii) or by Mr. Fisher for good
reason upon 30 days' notice. The employment agreements provide that Mr. Fisher's
aggregate initial base salary shall be $350,000 per annum, which amount may be
increased at the sole discretion of the respective Board of Directors of each of
the Guarantor and ITG. The agreements contain non-compete covenants having a
term of one year following the termination of the agreements and a
confidentiality covenant. The agreement with the Guarantor relates to services
to be provided by Mr. Fisher solely outside of the United States, while the
agreement with ITG relates to services to be provided by Mr. Fisher solely
within the United States.
The Guarantor and ITG have also entered into Employment Agreements, dated as
of April 1, 1995, with Nir Tarlovsky, the Vice President of Business Development
of the Guarantor and a Vice President of
98
<PAGE>
ITG, the terms of which expire on March 31, 1998. Mr. Tarlovsky's employment
agreements provide that his aggregate initial base salary will be $150,000 per
annum, which amount may be increased at the sole discretion of the respective
Board of Directors. Pursuant to the agreement with the Guarantor, the Guarantor
granted to Mr. Tarlovsky options under its 1995 Stock Option Plan to acquire up
to 400,000 shares of the Class A Common Stock. Mr. Tarlovsky's options to
acquire shares of Class A Common Stock vest in an amount no greater than 2% of
the outstanding shares of capital stock as of the date on which his current
employment agreement expires. The agreements contain non-compete covenants
having a term of one year following the termination of the agreements and a
confidentiality covenant. The agreement with the Guarantor relates to services
to be provided by Mr. Tarlovsky solely outside of the United States, while the
agreement with ITG relates to services to be provided by Mr. Tarlovsky solely
within the United States.
RSL Europe has entered into an employment agreement with Richard E.
Williams, the Chief Executive Officer of RSL Europe, the term of which expires
in August 1998. The employment agreement provides that Mr. Williams' base salary
shall be L100,000 (approximately $160,000) per annum, which amount may be
increased at the sole discretion of RSL Europe's Board of Directors. Pursuant to
the agreement RSL Europe granted to Mr. Williams the option to purchase shares
of capital stock of RSL Europe equal to up to 2% of the outstanding capital
stock of RSL Europe. Such option vests as follows: 1/3% on each of the first and
second anniversaries of the grant and 1 1/3% on the third anniversary of the
grant. In addition, Mr. Williams is, under circumstances more fully described in
the agreement, entitled to receive certain annual bonus payments. The agreement
contains a non-compete covenant having a term of nine months following the
termination of the agreement and a confidentiality covenant.
The Company has also entered into, or is in the process of entering into,
employment agreements with the country managers of its Local Operators in the
United States, the United Kingdom, France, Germany, Sweden, Finland, Australia
and the Netherlands.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for the fiscal year ended December
31, 1995 were Ronald S. Lauder, Andrew Gaspar and Itzhak Fisher. Since 1994, Mr.
Fisher has served as the President and Chief Executive Officer of the Guarantor.
RSL Management Corporation ("RSL Management"), which is wholly owned by
Ronald S. Lauder, the Chairman of the Board of each of the Guarantor and the
Issuer and the principal shareholder of the Guarantor, leases an aggregate of
2,670 square feet of office space to the Company at an annual rent of $180,000
per annum. In addition, RSL Management provides payroll and benefits services to
the Company for an annual fee of $6,000.
In September 1996, the Guarantor borrowed $35.0 million from Ronald S.
Lauder, the Chairman of the Board of each of the Issuer and the Guarantor and
the principal shareholder of the Guarantor, bearing interest at the rate of 11%
per annum (the "Subordinated Shareholder Loan"). The Company repaid the
Subordinated Shareholder Loan with the proceeds of the Shareholder Equity
Investment (described below).
The Company used the proceeds of the Subordinated Shareholder Loan to repay
$35.0 million of the amounts outstanding under the Revolving Credit Facility and
reduced the outstanding commitment amount under the Revolving Credit Facility to
$15.0 million. The Revolving Credit Facility is personally guaranteed by Ronald
S. Lauder, the Chairman of the Board of each of the Issuer and the Guarantor and
the principal shareholder of the Guarantor.
Prior to the closing of the Private Offering, Ronald S. Lauder, the Chairman
of the Board of both the Issuer and the Guarantor and the principal shareholder
of the Guarantor, Leonard A. Lauder, a director of the Guarantor and Ronald S.
Lauder's brother, and LGV, an investment vehicle the principal investors of
which are Ronald S. Lauder and Leonard A. Lauder and the managing member
(through a wholly
99
<PAGE>
owned company) of which is Andrew Gaspar, a director of each of the Guarantor
and the Issuer, purchased an aggregate of 1,880,147 shares of Class B Common
Stock (approximately 11.6% of the outstanding common shares of the Guarantor on
a fully diluted basis) for $50.0 million (the "Shareholder Equity Investment").
LGV purchased one-half of such shares and Ronald S. Lauder and Leonard A. Lauder
each purchased one-quarter of such shares. The Guarantor has applied the
proceeds of the Shareholder Equity Investment to the repayment in full of the
Subordinated Shareholder Loan, together with accrued interest.
In addition, Ronald S. Lauder will, upon the request of the Guarantor,
provide (or arrange for a bank to provide) the Guarantor with the Shareholder
Standby Facility. If this facility is provided by a bank, Mr. Lauder will
personally guarantee the Guarantor's obligations under the facility up to $35.0
million. Under the terms of the Indenture, the Guarantor may borrow, repay, and
reborrow any amounts under the Shareholder Standby Facility at any time or from
time to time. However, the lender will be obligated to make loans thereunder at
the request of the Guarantor up to $35.0 million, without conditions and
regardless of any default thereunder, until such time as the Guarantor has
received $35.0 million of net cash proceeds from the issuance of common shares
of the Guarantor (the "Common Stock"). The Shareholder Standby Facility will
expire on the earlier of December 15, 2006 or the receipt of $35.0 million of
net cash proceeds from the issuance of Common Stock and will provide that
interest may not be paid in cash until December 15, 2001. Mr. Lauder's
obligations under the Shareholder Standby Facility may, under applicable law,
terminate upon his demise. As of the date of this Prospectus, the Shareholder
Standby Facility has not been utilized.
As consideration for the Shareholders Standby Facility and Mr. Lauder's
continuing guarantee of the Revolving Credit Facility, Mr. Lauder received, in
the aggregate, warrants to purchase 210,000 shares of Class B Common Stock, of
the Guarantor. The exercise price, exercise period and other terms of the
warrants issued to Mr. Lauder are substantially the same as the terms of the
Warrants other than with respect to the class of stock which will be issued upon
their exercise.
Nesim N. Bildirici, a director and the Vice President of Mergers and
Acquisitions of the Guarantor and the Issuer, is an employee of both the
Guarantor and RSLAG, a venture capital company owned and controlled by Ronald S.
Lauder and Andrew Gaspar. Mr. Bildirici's salary is paid by RSLAG and the
Company reimburses RSLAG each year for the services Mr. Bildirici provides to
the Company. In 1996, the Company reimbursed RSLAG approximately $130,000 for
Mr. Bildirici's services. Mr. Bildirici currently dedicates substantially all of
his business time to the business of the Company and is expected to continue to
do so for the foreseeable future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Guarantor entered into a consulting agreement as of September 1, 1995
with Eugene Sekulow, a director of the Guarantor and the Issuer, the current
term of which expires August 31, 1997 and which renews automatically for
successive one-year periods. The consulting agreement provides that Mr. Sekulow
is to receive a $24,000 annual fee, as well as an annual grant of options to
purchase 10,000 shares of the Guarantor's Class A Common Stock, for services
rendered as a consultant to the Company.
The law firm of Conyers, Dill & Pearman, of which Nicolas Trollope is a
partner, was engaged as the Company's counsel in Bermuda for the fiscal year
ended December 31, 1996 and will continue to be so engaged for the fiscal year
ending December 31, 1997.
For additional disclosure with respect to certain transactions between the
Company and certain of its directors, see "Management--Compensation Committee
Interlocks and Insider Participation."
100
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of preferred shares of the Guarantor (the "Preferred
Stock"), Class A Common Stock and Class B Common Stock as of December 31, 1996
by (i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of either the Preferred Stock, Class A Common Stock or Class
B Common Stock, (ii) each director of the Issuer and the Guarantor and each
Named Executive Officer who owns shares of any class of the Guarantor's capital
stock and (iii) the directors and executive officers as a group. Except as
otherwise noted below, each of the shareholders identified in the table has sole
voting and investment power over the shares beneficially owned by such person.
The Guarantor also is authorized to issue Class C common shares (the "Class C
Common Stock"). As of December 31, 1996, there were no shares of Class C Common
Stock issued or outstanding.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF BENEFICIAL OWNERSHIP
CLASS A OF CLASS B
COMMON STOCK+ COMMON STOCK+ PREFERRED STOCK (1)
------------------------- ----------------------- -----------------------
NAME AND ADDRESS NUMBER NUMBER NUMBER
OF BENEFICIAL OWNER OF SHARES PERCENT OF SHARES PERCENT OF SHARES PERCENT
- ----------------------------------------------- ------------ ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ronald S. Lauder(2)(3)(4)(5)................... -- -- 1,891,547 39.3% 8,268,278 89.4%
Andrew Gaspar (2)(3)(4)(6)..................... -- -- 1,362,204 28.3 7,170,442 77.6
R.S. Lauder, Gaspar & Co., L.P. (2)(4)......... -- -- 422,130 8.8 7,170,442 77.6
Itzhak Fisher (2).............................. -- -- 2,013,179 41.9 243,964 2.3
Leonard A. Lauder (2)(3)(4)(7)................. -- -- 1,410,110 29.3 -- --
Lauder Gaspar Ventures LLC (2)(3).............. -- -- 940,073 19.6 -- --
Jacob Z. Schuster (2)(8)....................... -- -- 419,770 8.7 365,946 4.0
Nir Tarlovsky (2)(9)........................... 40,571 38.5% 13,179 * 243,964 2.6
Nesim N. Bildirici (2)(10)..................... 40,571 38.5 -- -- 121,714 1.3
Mark J. Hirschhorn (2)(11)..................... 14,200 13.5 -- -- -- --
Eugene Sekulow (12)(13)........................ 10,000 9.5 -- -- -- --
All directors and executive officers as a group
(13 persons)................................. 105,342(14) 100.0% 4,807,711 100.0% 9,243,866 100.0%
</TABLE>
- ------------------------
+ Does not include shares of Class A Common Stock issuable upon conversion of
shares of Class B Common Stock. Shares of Class B Common Stock are
convertible at any time into shares of Class A Common Stock on a
share-for-share basis.
+ Does not include shares of Class B Common Stock issuable upon conversion of
shares of Preferred Stock.
* Less than 1%.
(1) Shares of Preferred Stock are convertible at any time into shares of Class B
Common Stock and are mandatorily convertible into such shares immediately
upon the closing of a firm commitment underwriting of the Guarantor's equity
in an initial public offering with proceeds of not less than $25 million.
(2) The business address of each of the indicated holders of the Company's
securities is 767 Fifth Avenue, New York, New York 10153.
(3) Andrew Gaspar (through a limited liability company) is the managing member
of LGV, Ronald S. Lauder and Leonard A. Lauder are both members with
substantial ownership interests in LGV, and as such each may be deemed to
beneficially own all of the shares of Class B Common Stock owned by LGV.
Ronald S. Lauder, Leonard A. Lauder and Andrew Gaspar each disclaim
beneficial ownership of some of such shares.
101
<PAGE>
(4) Andrew Gaspar is president of the corporate General Partner of RSLAG, and
Ronald S. Lauder is directly and indirectly the owner of a majority of the
limited partnership interests in RSLAG, and as such each may be deemed to
beneficially own all of the shares of Class B Common Stock and Preferred
Stock owned by RSLAG. In addition, Leonard A. Lauder owns limited
partnership interests in RSLAG. Ronald S. Lauder, Leonard A. Lauder and
Andrew Gaspar each disclaim beneficial ownership of some of such shares.
(5) Includes 1,362,204 shares of Class B Common Stock owned by RSLAG and LGV
(see notes 3 and 4), 529,343 shares of Class B Common Stock owned directly
by Ronald S. Lauder, 7,170,442 shares of Preferred Stock owned by RSLAG (see
note 4) and 1,097,836 shares of Preferred Stock owned directly by Ronald S.
Lauder.
(6) Includes 7,170,442 shares of Preferred Stock owned by RSLAG (see note 4) and
an aggregate of 1,362,204 shares of Class B Common Stock owned by RSLAG and
LGV (see notes 3 and 4).
(7) Includes 1,362,204 shares of Class B Common Stock owned by RSLAG and LGV
(see notes 3 and 4), 47,907 shares of Class B Common Stock owned directly by
Leonard A. Lauder and 7,170,442 shares of Preferred Stock owned by RSLAG
(see note 4).
(8) Such shares are owned by Schuster Family Partners I, L.P., a New York
limited partnership, of which Jacob Z. Schuster is the sole general partner
and the limited partners of which are certain of Mr. Schuster's children.
Mr. Schuster disclaims beneficial ownership of such shares.
(9) Consists of 40,571 shares of Class A Common Stock issuable upon exercise of
an equal number of presently exercisable options granted to Mr. Tarlovsky
under the Company's 1995 Stock Option Plan.
(10) Consists of 40,571 shares of Class A Common Stock issuable upon exercise of
an equal number of presently exercisable options granted to Mr. Bildirici
under the Company's 1995 Stock Option Plan.
(11) Consists of 14,200 shares of Class A Common Stock issuable upon exercise of
an equal number of presently exercisable options granted to Mr. Hirschhorn
under the Company's 1995 Stock Option Plan.
(12) The business address of Mr. Sekulow is Westchester Financial Center, 50
Main Street, 10th Floor, White Plains, New York 10606.
(13) Consists of 10,000 shares of Class A Common Stock issuable upon the
exercise of an equal number of presently exercisable options granted to Mr.
Sekulow.
(14) Consists solely of shares of Class A Common Stock issuable upon the
exercise of an equal number of presently exercisable options.
102
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under the Indenture. The Exchange Notes
are subject to all of the terms of the Indenture and the Trust Indenture Act of
1939, as amended. A copy of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following summary
of certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Indenture, including the definitions of certain terms therein and those
terms made a part thereof by reference to the Trust Indenture Act of 1939, as
amended. Whenever particular defined terms of the Indenture not otherwise
defined herein are referred to, such defined terms are incorporated herein by
reference. The term "Note" or "Notes" includes the Original Notes and the
Exchange Notes. For definitions of certain capitalized terms used in the
following summary, see "--Certain Definitions."
GENERAL
The Notes are unsubordinated obligations of the Issuer, limited to $300.0
million aggregate principal amount, and will mature on November 15, 2006.
Interest on the Notes accrues at the rate of 12 1/4% per annum from the most
recent interest payment date on which interest has been paid or provided for or,
if no interest has been paid or provided for, from the Closing Date, payable
semiannually (to Holders of record at the close of business on the May 1 or
November 1 immediately preceding the interest payment date) on May 15 and
November 15 of each year, commencing May 15, 1997. Holders whose Original Notes
are accepted in the Exchange Offer will be deemed to have waived their right to
receive accrued interest on the Original Notes.
The principal of, premium on, if any, and interest on the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or agency
of the Issuer in the Borough of Manhattan, the City of New York (which agency
initially will be the corporate trust office of the Trustee at 450 West 33rd
Street 15th Floor, New York, New York 10001).
The Exchange Notes will be initially represented by three or more global
securities in bearer form. See "--Book-Entry; Delivery and Form."
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Issuer's option, in whole or in part,
at any time or from time to time, on or after November 15, 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing
November 15, of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------- -----------
<S> <C>
2001................................................................... 106.1250%
2002................................................................... 103.0625%
2003 and thereafter.................................................... 100.0000%
</TABLE>
In addition, at any time and from time to time prior to November 15, 1999,
the Issuer may redeem Notes having a principal amount of up to $90.0 million
with the Net Cash Proceeds that are (A) actually received by the Issuer
(including such proceeds received by the Guarantor and contributed to the
Issuer) from one or more Public Equity Offerings following which a Public Market
occurs and (B) not used to repay Indebtedness of the Guarantor under the
Shareholder Standby Facility, at any time as a whole or from time to time in
part, at a Redemption Price (expressed as a percentage of principal amount) of
103
<PAGE>
112.25%, plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date); provided that (1) at least $210.0 million aggregate
principal amount of Notes remains outstanding after each such redemption and (2)
each such redemption occurs within 180 days of the related Public Equity
Offering.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a PRO RATA basis, by
lot or by such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate; provided that no Note of $1,000 in principal amount or
less shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note.
In the event that (i) the Guarantor or the Issuer has become or would become
obligated to pay, on the next date on which any amount would be payable under or
with respect to the Notes, any Additional Amounts (as defined herein) as a
result of certain changes affecting withholding tax laws and (ii) the Guarantor
and the Issuer cannot reasonably arrange for another obligor to make such
payment so as to avoid the requirement to pay such Additional Amounts, then the
Issuer may redeem all, but not less than all of the Exchange Notes at any time
at 100% of the principal amount thereof on the redemption date, together with
accrued interest thereon, if any, to the redemption date. See "--Additional
Amounts."
SECURITY
In accordance with the Indenture, the Issuer has purchased and pledged to
the Trustee for the benefit of the Holders of the Notes the Pledged Securities.
The Pledged Securities have been pledged by the Issuer to the Trustee for the
benefit of the Holders of the Notes pursuant to the Pledge Agreement and are
being held by the Trustee in the Pledge Account. Pursuant to the Pledge
Agreement, immediately prior to an Interest Payment Date on the Notes, the
Issuer may either deposit with the Trustee from funds otherwise available to the
Issuer cash sufficient to pay the interest scheduled to be paid on such date or
the Issuer may direct the Trustee to release from the Pledge Account proceeds
sufficient to pay interest then due on the Notes. In the event that the Issuer
exercises the former option, the Issuer may thereafter direct the Trustee to
release to the Issuer proceeds or Pledged Securities from the Pledge Account in
like amount. A failure by the Issuer to pay interest on the Notes in a timely
manner through the first six scheduled interest payment dates will constitute an
immediate Event of Default under the Indenture, with no grace or cure period.
Interest earned on the Pledged Securities is added to the Pledge Account. In
the event that the funds or Pledged Securities held in the Pledge Account exceed
the amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants selected by the Issuer, to provide for payment in
full of the first six scheduled interest payments due on the Notes (or, in the
event an interest payment or payments have been made, an amount sufficient to
provide for payment in full of any interest payments remaining, up to and
including the sixth scheduled interest payment), the Trustee will be permitted
to release to the Issuer at the Issuer's request any such excess amount. The
Notes are secured by a first priority security interest in the Pledged
Securities and in the Pledge Account and, accordingly, the Pledged Securities
and the Pledge Account also secure repayment of the principal amount of the
Notes to the extent of such security.
Under the Pledge Agreement, assuming that the Issuer makes the first six
scheduled interest payments on the Notes in a timely manner, all of the Pledged
Securities will be released from the Pledge Account and thereafter the Notes
will be secured only by the Note Guarantee.
104
<PAGE>
REGISTRATION RIGHTS
There will be no registration rights with respect to the Exchange Notes.
Certain brokers or dealers registered under the Exchange Act who may be deemed
to be "underwriters" with respect to the Exchange Notes may be entitled to
continuing registration rights which the Issuer granted with respect to the
Original Notes. See "Plan of Distribution."
RANKING
The Notes and the Note Guarantee are unsubordinated Indebtedness of the
Issuer and the Guarantor, respectively, and will rank PARI PASSU in right of
payment with all existing and future unsubordinated indebtedness of the Issuer
and the Guarantor and senior in right of payment to all existing and future
subordinated indebtedness of the Issuer and the Guarantor, respectively. As of
December 31, 1996, on an unconsolidated basis, there was indebtedness (other
than the Notes and the Note Guarantee) outstanding consisting of $9.3 million of
secured indebtedness of the Issuer and no Indebtedness of the Guarantor. The
Notes are effectively subordinated to such security interests to the extent of
such security interests. In addition, all existing and future liabilities
(including trade payables) of the subsidiaries of the Guarantor will be
effectively senior to the Notes and at December 31, 1996 such subsidiaries had
$111.1 million of liabilities (excluding inter-company payables to the
Guarantor, the Issuer or other Restricted Subsidiaries).
GUARANTEE
The Issuer's obligations under the Notes are fully and unconditionally
guaranteed on an unsubordinated basis by the Guarantor; provided that the Note
Guarantee shall not be enforceable against the Guarantor in an amount in excess
of the net worth of the Guarantor at the time that determination of such net
worth is, under applicable law, relevant to the enforceability of such Note
Guarantee. Such net worth shall include any claim of the Guarantor against the
Issuer for reimbursement.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided. For purposes of these
definitions, the term "Notes" shall mean the Original Notes and the Exchange
Notes.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Guarantor and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person (other than the
Guarantor or any of its Restricted Subsidiaries) has a joint interest and the
net income of any Unrestricted Subsidiary, except to the extent of the amount of
dividends or other distributions actually paid to the Guarantor or any of its
Restricted Subsidiaries by such other Person or such Unrestricted Subsidiary
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described below
(and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Guarantor or any of its
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Restricted Subsidiaries or all or substantially all of the property and assets
of such Person are acquired by the Guarantor or any of its Restricted
Subsidiaries; (iii) the net income of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described below,
any amount paid or accrued as dividends on Preferred Stock of the Guarantor or
any Restricted Subsidiary owned by Persons other than the Guarantor and any of
its Restricted Subsidiaries; and (vi) all extraordinary gains and extraordinary
losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of the Guarantor and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of the Guarantor and its Restricted Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly or annual consolidated balance sheet of the
Guarantor and its Restricted Subsidiaries, prepared in conformity with GAAP and
filed with the Commission pursuant to the "Commission Reports and Reports to
Holders" covenant.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Guarantor or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Guarantor or any of its Restricted Subsidiaries; PROVIDED that such Person's
primary business is related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Guarantor or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Guarantor or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Guarantor or
any of its Restricted Subsidiaries (other than to the Guarantor or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary of the Guarantor or (ii) all or substantially all of
the assets that constitute a division or line of business of the Guarantor or
any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by the Guarantor or any of its Restricted
Subsidiaries to any Person other than the Guarantor or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Guarantor or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Guarantor or any of
its Restricted Subsidiaries outside the ordinary course of business of the
Guarantor or such Restricted Subsidiary and, in each case, that is not governed
by the provisions of the Indenture applicable to mergers, consolidations and
sales of assets of the Guarantor; PROVIDED that "Asset Sale" shall not include
(a) sales or other dispositions of inventory, receivables and other current
assets or obsolete or outdated equipment; provided that each such sale or other
disposition
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or series of such sales or other dispositions shall not involve assets that are
material to the business of the Guarantor and its Restricted Subsidiaries, taken
as a whole, (b) transfers of up to 25% of the Common Stock of RSLC Prepaid, Inc.
to Marvin Josephson and transfers of up to 15% of the Common Stock of RSL COM
PrimeCall, Inc. (formerly known as Intelco, Global Information Systems, Ltd.),
in each case provided that the consideration received has a value equal to the
fair market value of the Common Stock so transferred, (c) a transfer of assets
to the extent the consideration received (A) is equal to the fair market value
of the assets transferred and (B) takes the form of Investments described in
clause (iv) of the definition of Permitted Investment or (d) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, provided that the consideration received
consists of assets used or useful in the telecommunications business and would
satisfy clause (B) of the "Limitation on Asset Sales" covenant.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligations" means the discounted present value of the rental obligations
under such lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or group " (within the meaning of Section 13(d) or
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the
Guarantor, on a fully diluted basis, than is held by the Existing Stockholders
and their Affiliates on such date and (b) after the occurrence of a Public
Market, a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 35% of the total voting power of the
Voting Stock of the Guarantor on a fully diluted basis and such ownership is
greater than the amount of voting power of the Voting Stock of the Guarantor, on
a fully diluted basis, held by the Existing Stockholders and their Affiliates on
such date; (ii) individuals who on the Closing Date constitute the Board of
Directors (together with any new directors whose election by the Board of
Directors or whose nomination for election by the Guarantor's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office; or (iii) all of the Common Stock of the
Issuer is not beneficially owned by the Guarantor.
"Closing Date" means October 3, 1996, the date on which the Original Notes
were initially issued under the Indenture.
"Consolidated EBITDA" means, for any period, the sum of the amounts for such
period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest
Expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets),
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(iv) depreciation expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, (v) amortization expense, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, and (vi)
all other non-cash items reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is, or
is required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Guarantor and its Restricted Subsidiaries in conformity with GAAP; provided
that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the quotient of (1) the number of shares of outstanding Common Stock of such
Restricted Subsidiary not owned on the last day of such period by the Guarantor
or any of its Restricted Subsidiaries divided by (2) the total number of shares
of outstanding Common Stock of such Restricted Subsidiary on the last day of
such period.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Guarantor or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Guarantor and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Guarantor and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Guarantor have been filed
with the Commission pursuant to the "Commission Reports and Reports to Holders"
covenant described below (such four fiscal quarter period being the "Four
Quarter Period"); provided that (A) PRO FORMA effect shall be given to (x) any
Indebtedness Incurred from the beginning of the Four Quarter Period through the
Transaction Date (the "Reference Period"), to the extent such Indebtedness is
outstanding on the Transaction Date and (y) any Indebtedness that was
outstanding during such Reference Period but that is not outstanding or is to be
repaid on the Transaction Date; (B) PRO FORMA effect shall be given to Asset
Dispositions and Asset Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur during such
Reference Period, as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; and (C) PRO FORMA effect shall be given
to asset dispositions and asset acquisitions (including giving pro forma effect
to the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted Subsidiary or has been merged with or
into the Guarantor or any Restricted Subsidiary during such Reference Period and
that would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary as if such
asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that PRO
FORMA effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired
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or disposed of for which financial information is, in the good faith opinion of
the Board of Directors of the Guarantor, available.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Guarantor and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Guarantor or any of its Restricted Subsidiaries, each item
to be determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; PROVIDED that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes Upon a Change of Control" covenants described below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Issuer's
repurchase of such Notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes Upon a Change of Control"
covenants described below.
"Existing Stockholders" means (A) R.S. Lauder, Gaspar & Co., L.P., ("LGC"),
(B) partners in LGC and Lauder Gaspar Ventures LLC and their Affiliates, in each
case as of the Closing Date, (C) Itzhak Fisher, Ronald S. Lauder, Leonard
Lauder, Jacob Z. Schuster, Nir Tarlovsky, Nesim N. Bildirici, Andrew Gaspar and
Eugene Sekulow, (D) family members of any of the foregoing, (E) trusts, the only
beneficiaries of which are persons or entities described in clauses (A) through
(D) above and (F) partnerships which are controlled by the persons or entities
described in clauses (A) through (D) above.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes and (ii) except
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as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16.
"Government Securities" means direct obligations of, obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged and which are not callable or redeemable at the option of the
issuer thereof.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor" means RSL Communications, Ltd. and its successors and assigns.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary of the Guarantor; provided that neither the accrual of
interest nor the accretion of original issue discount shall be considered an
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; PROVIDED that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
PROVIDED (A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the original issue price of such Indebtedness,
(B) that "Indebtedness" shall not include any amount of money borrowed, at the
time of the Incurrence of the related Indebtedness, for the purpose of
pre-funding any interest payable on such related Indebtedness and (C) that
Indebtedness shall not include any liability for federal, state, local or other
taxes.
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"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Guarantor or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the
Guarantor or any of its Restricted Subsidiaries, of (or in) any Person that has
ceased to be a Restricted Subsidiary, including without limitation, by reason of
any transaction permitted by clause (iii) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities (other than liabilities to the
Guarantor or any of its Subsidiaries)) of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii)
the fair market value of the assets (net of liabilities (other than liabilities
to the Guarantor or any of its Subsidiaries)) of any Unrestricted Subsidiary at
the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
shall be considered a reduction in outstanding Investments and (iii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer. Notwithstanding the
foregoing an acquisition of assets (including, without limitation, Capital Stock
or rights to acquire Capital Stock) by the Guarantor or any of its Restricted
Subsidiaries shall be deemed not to be an Investment to the extent that the
consideration therefor consists of Common Stock of the Guarantor.
"ITG" means International Telecommunications Group, Ltd., a Delaware
corporation and its successors.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Guarantor or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Guarantor and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Guarantor or any Restricted Subsidiary of the Guarantor as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Guarantor or any Restricted Subsidiary of the
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Guarantor) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Note Guarantee" means the Guarantee of the Notes by the Guarantor as
provided for in the Indenture.
"Offer to Purchase" means an offer to purchase Notes by the Issuer from the
Holders commenced by mailing a notice to the Trustee and each Holder stating:
(i) the covenant pursuant to which the offer is being made and that all Notes
validly tendered will be accepted for payment on a PRO RATA basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Issuer defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; PROVIDED
that each Note purchased and each new Note issued shall be in a principal amount
at maturity of $1,000 or integral multiples thereof. On the Payment Date, the
Issuer shall (i) accept for payment on a pro rata basis Notes or portions
thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee
all Notes or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Issuer. The
Paying Agent shall promptly mail to the Holders of Notes so accepted payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; PROVIDED that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Issuer will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The Trustee
shall act as the Paying Agent for an Offer to Purchase. The Issuer will comply
with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable,
in the event that the Issuer is required to repurchase Notes pursuant to an
Offer to Purchase.
"Permitted Investment" means (i) an Investment in the Guarantor or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Guarantor
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) notes and other evidences of Indebtedness, not to
exceed $2 million at any one time outstanding; and (v) stock, obligations or
securities received in satisfaction of judgments.
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"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Guarantor or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
or any other asset acquired after the Closing Date; provided that (a) such Lien
is created solely for the purpose of securing Indebtedness Incurred, in
accordance with the "Limitation on Indebtedness" covenant described below, (1)
to finance the cost (including the cost of improvement or construction) of the
item of property or assets subject thereto and such Lien is created prior to, at
the time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property, (2) to refinance any Indebtedness so secured, or (3) as Interest Rate
Agreements and Currency Agreements relating solely to the Indebtedness described
in clauses (1) or (2) above, (b) the principal amount of the Indebtedness
secured by such Lien as of the time of the Incurrence thereof does not exceed
100% of such cost and (c) any such Lien does not extend to or cover any property
or assets other than such item of property or assets and any improvements on
such item; (vii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Guarantor and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or
assets under construction arising from progress or partial payments by a
customer of the Guarantor or its Restricted Subsidiaries relating to such
property or assets; (ix) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xi) Liens
on property of, or on shares of Capital Stock or Indebtedness of, any Person
existing at the time such Person becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens do not extend to or cover any property or
assets of the Guarantor or any Restricted Subsidiary other than the property or
assets acquired; (xii) Liens in favor of the Guarantor or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or order
against the Guarantor or any Restricted Subsidiary of the Guarantor that does
not give rise to an Event of Default; (xiv) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (xvi) Liens encumbering customary initial deposits and
margin deposits, and other Liens that are within the general parameters
customary in the industry and incurred in the ordinary course of business, in
each case, securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, future contracts, futures options or
similar agreements or arrangements designed solely to protect the Guarantor or
any of its Restricted Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (xvii) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of goods
entered into by the Guarantor or any of its Restricted Subsidiaries in the
ordinary course of business in accordance with the past practices of the
Guarantor and its Restricted Subsidiaries prior to the Closing Date; and (xviii)
Liens on or sales of receivables.
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"Pledge Account" means the account established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the Pledged Securities
purchased by the Issuer with a portion of the proceeds from the sale of the
Original Notes.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated
as of October 3, 1996, made by the Issuer in favor of the Trustee, governing the
disbursement of funds from the Pledge Account, as such Agreement may be amended,
restated, supplemented or otherwise modified from time to time.
"Pledged Securities" means the securities originally purchased by the Issuer
with a portion of the proceeds from the sale of the Original Notes, which
consists of Government Securities, deposited in the Pledge Account, all in
accordance with the terms of the Pledge Agreement.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Issuer or the Guarantor pursuant to an effective
registration statement under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the Issuer or the Guarantor has been distributed by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Guarantor, accounted for more than 10% of the consolidated revenues
of the Guarantor and its Restricted Subsidiaries or (ii) as of the end of such
fiscal year, was the owner of more than 10% of the consolidated assets of the
Guarantor and its Restricted Subsidiaries, all as set forth on the most recently
available consolidated financial statements of the Guarantor for such fiscal
year.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Guarantor) organized and
in existence under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America with a rating
at the time as
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of which any investment therein is made of P-1 (or higher) according to Moody's
or A-1 (or higher) according to S&P, (v) securities with maturities of six
months or less from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or Moody's and (vi) time deposits, certificates of deposit,
bank promissory notes and bankers' acceptances maturing not more than 180 days
after the acquisition thereof and guaranteed or issued by any of the ten largest
banks (based on assets as of the immediately preceding December 31) organized
under the laws of any jurisdiction in which one of the Restricted Subsidiaries
does business and which are not under intervention, bankruptcy or similar
proceeding, not to exceed $10 million outstanding at any one time.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Guarantor or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Guarantor) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Guarantor or
any Restricted Subsidiary; provided that (A) any Guarantee by the Guarantor or
any Restricted Subsidiary of any Indebtedness of the Subsidiary being so
designated shall be deemed an "Incurrence" of such Indebtedness and an
"Investment" by the Guarantor or such Restricted Subsidiary (or both, if
applicable) at the time of such designation; (B) either (i) the Subsidiary to be
so designated has total assets of $1,000 or less or (ii) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
"Limitation on Restricted Payments" covenant described below and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under the "Limitation on
Indebtedness" and "Limitation on Restricted Payments" covenants described below.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that immediately after giving effect to such
designation (x) the Guarantor could Incur $1.00 of additional Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant described below
and (y) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Warrants" means the warrants to purchase Class A Common Stock of the
Guarantor issued as part of a unit with the Notes.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
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COVENANTS
The Indenture contains, among others, the following covenants.
LIMITATION ON INDEBTEDNESS
(a) The Guarantor will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes, the Note
Guarantee and Indebtedness existing on the Closing Date); provided that the
Guarantor and any Restricted Subsidiary may Incur Indebtedness (including
Acquired Indebtedness), if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the pro
forma Consolidated Leverage Ratio would be greater than zero and less than 5 to
1; provided that no more than 50% of the Indebtedness Incurred under this clause
may be incurred by Restricted Subsidiaries other than the Issuer.
Notwithstanding the foregoing, the Guarantor and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed the greater of (A) $225 million and (B) Consolidated EBITDA for the
preceding four quarters for which reports have been filed pursuant to the
"Commission Reports and Reports to Holders" covenant, in each case less any
amount of Indebtedness permanently repaid as provided under the "Limitation on
Asset Sales" covenant described below, provided that the aggregate amount of
Indebtedness of Restricted Subsidiaries (other than the Issuer) outstanding at
any one time under this clause (i) shall not exceed one-half of the greater of
the amounts referred to in clause (A) and clause (B) above; (ii) Indebtedness
(A) to the Guarantor evidenced by an unsubordinated promissory note or (B) to
any of its Restricted Subsidiaries; provided that any event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Issuer or another
Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness issued in exchange for, or the net proceeds of which are used to
refinance or refund, then outstanding Indebtedness (including, without
limitation, the Notes and the Note Guarantee), other than Indebtedness Incurred
under clause (i), (ii), (iv), (vi), (viii), (ix) or (x) of this paragraph (which
clauses provide for the refinancing of Indebtedness Incurred thereunder), and
any refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the Notes or
Indebtedness that is PARI PASSU with, or subordinated in right of payment to,
the Notes or the Note Guarantee shall only be permitted under this clause (iii)
if (A) in case the Notes are refinanced in part or the Indebtedness to be
refinanced is PARI PASSU with the Notes or the Note Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made PARI
PASSU with, or subordinate in right of payment to, the remaining Notes or Note
Guarantee, as the case may be, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Notes or the Note Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
subordinate in right of payment to the Notes or the Note Guarantee, as the case
may be, at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes or the Note Guarantee, as the case may be, and (C)
such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded (assuming such Indebtedness had a final Stated Maturity
three months later than its actual final stated maturity); and provided further
that in no event may Indebtedness of the Guarantor or the Issuer be refinanced
by means of any Indebtedness of any Restricted Subsidiary (other than the
Issuer) pursuant to this clause (iii); (iv) Indebtedness (A) in respect of
performance, surety or appeal bonds provided in the ordinary course of business,
(B) under Currency Agreements and Interest Rate Agreements; provided that such
agreements (a) are designed solely to protect the Guarantor or its Subsidiaries
against fluctuations in
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foreign currency exchange rates or interest rates and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder; and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Issuer or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of the Issuer (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted Subsidiary
of the Issuer for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Issuer or any
Restricted Subsidiary in connection with such disposition; (v) Indebtedness of
the Guarantor or the Issuer, to the extent the net proceeds thereof are promptly
(A) used to purchase Notes tendered in an Offer to Purchase made as a result of
a Change in Control or (B) deposited to defease the Notes as described below
under "Defeasance"; (vi) Guarantees of the Notes or Guarantees of Indebtedness
of the Guarantor or the Issuer by any Restricted Subsidiary provided the
Guarantee of such Indebtedness is permitted by and made in accordance with the
"Limitation on Issuance of Guarantees by Restricted Subsidiaries" covenant
described below; (vii) secured Indebtedness Incurred to finance the cost
(including the cost of design, development, construction, installation or
integration) of equipment, inventory or ownership rights with respect to
indefeasible rights of use or minimum investment units (or similar ownership
interests) in transnational fiber optic cable or other transmission facilities,
in each case acquired by the Guarantor or a Restricted Subsidiary after the
Closing Date; (viii) Indebtedness of the Guarantor or the Issuer not to exceed,
at any one time outstanding, two times the Net Cash Proceeds (less the amount of
such proceeds applied as provided in clause (ii) or (iii) of the second
paragraph of the "Limitation on Restricted Payments" covenant or applied to
repay Indebtedness of the Guarantor or the Issuer under the Shareholder Standby
Facility) received by the Guarantor or the Issuer (or any other Restricted
Subsidiary that Guarantees the Notes in accordance with the "Limitation on
Issuances of Guarantees by Restricted Subsidiaries" covenant; provided that the
Company delivers to the Trustee an Opinion of Counsel to the effect (subject to
customary caveats) that such Guarantee is enforceable and provided further that
such Capital Stock is not subsequently repurchased by the Guarantor or any
Restricted Subsidiary) after the Closing Date from the issuance and sale of its
Capital Stock (other than Disqualified Stock), to a Person that is not a
Subsidiary of the Guarantor; provided that such Indebtedness matures after the
Stated Maturity of the Notes and has an Average Life longer than the Notes; (ix)
Indebtedness of the Guarantor, the Issuer and each other Restricted Subsidiary,
not to exceed in aggregate at any one time outstanding, 60% of the accounts
receivable (net of accounts more than 60 days past due, reserves and allowances
for doubtful accounts, determined in accordance with GAAP) of the Guarantor and
its Restricted Subsidiaries on a consolidated basis as set forth on the balance
sheet of the Guarantor most recently filed with the Commission pursuant to the
"Commission Reports and Reports to Holders" covenant; provided that any such
Indebtedness of any Restricted Subsidiary (other than the Issuer) is not
Guaranteed by the Guarantor or the Issuer; and (x) Indebtedness of any
Restricted Subsidiary, not to exceed at any one time outstanding, the amount of
the commitment to lend to such Restricted Subsidiary by any Person not an
Affiliate thereof on the Closing Date (and refinancings of such Indebtedness).
(b) Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, the maximum amount of Indebtedness that the Guarantor or a Restricted
Subsidiary may Incur pursuant to this "Limitation on Indebtedness" covenant
shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness, due solely to the result of fluctuations in interest rates or the
exchange rates of currencies. (c) For purposes of determining any particular
amount of Indebtedness under this "Limitation on Indebtedness" covenant, (1)
Guarantees, Liens or obligations with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such particular amount
shall not be included and (2) any Liens granted pursuant to the equal and
ratable provisions referred to in the "Limitation on Liens" covenant described
below shall not be treated as Indebtedness. For purposes of determining
compliance with this "Limitation on Indebtedness" covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, the Issuer,
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in its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses.
LIMITATION ON RESTRICTED PAYMENTS
The Guarantor will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to (i) declare or pay any dividend or make any
distribution on or with respect to its Capital Stock (other than (x) dividends
or distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) PRO RATA dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro rata
share of such Restricted Subsidiaries' net income from the first day of the
fiscal quarter beginning immediately following the Closing Date) held by Persons
other than the Guarantor or any of its Restricted Subsidiaries, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of (A)
the Guarantor or the Issuer, any Person that has sold Capital Stock which allows
the Company or the Guarantor or such Person to Incur Indebtedness under clause
(viii) of the second paragraph of the "Limitation on Indebtedness" covenant or
an Unrestricted Subsidiary (including options, warrants or other rights to
acquire such shares of Capital Stock) held by any Person or (B) a Restricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Affiliate of the Guarantor (other than a Wholly
Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of
5% or more of the Capital Stock of the Guarantor, (iii) make any voluntary or
optional principal payment, or voluntary or optional redemption, repurchase,
defeasance, or other acquisition or retirement for value, prior to the scheduled
maturity, of Indebtedness of the Guarantor or the Issuer that is subordinated in
right of payment to the Notes or the Note Guarantee (other than the purchase,
repurchase or the acquisition of Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in any case
due within one year of the date of acquisition) or (iv) make any Investment,
other than a Permitted Investment, in any Person (such payments or any other
actions described in clauses (i) through (iv) being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and be
continuing, (B) except with respect to Investments, the Guarantor could not
Incur at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant or (C) the aggregate amount of all
Restricted Payments (the amount, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) made after the Closing Date shall exceed the
sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income
(or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount
of such loss) (determined by excluding income resulting from transfers of assets
by the Guarantor or a Restricted Subsidiary to an Unrestricted Subsidiary)
accrued on a cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter immediately following the
Closing Date and ending on the last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed pursuant to the "Commission
Reports and Reports to Holders" covenant plus (2) the aggregate Net Cash
Proceeds received by the Guarantor or the Issuer after the Closing Date from the
issuance and sale permitted by the Indenture of Capital Stock of the Guarantor
or the Issuer (other than Disqualified Stock), to a Person who is not a
Subsidiary of the Guarantor or from the issuance to a Person who is not a
Subsidiary of the Guarantor of any options, warrants or other rights to acquire
Capital Stock of the Issuer or the Guarantor (in each case, exclusive of any
Disqualified Stock or any options, warrants or other rights that are redeemable
at the option of the holder, or are required to be redeemed, prior to the Stated
Maturity of the Notes) plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Guarantor
or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any
such Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted Consolidated Net Income),
or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not to
exceed, in each case, the amount of Investments previously made by the Guarantor
or any Restricted Subsidiary in such Person or Unrestricted Subsidiary.
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The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
or the Note Guarantee, including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange for, Indebtedness Incurred under
clause (iii) of the second paragraph of part (a) of the "Limitation on
Indebtedness" covenant; (iii) the repurchase, redemption or other acquisition of
Capital Stock of the Guarantor or the Issuer (or options, warrants or other
rights to acquire such Capital Stock) in exchange for, or out of the proceeds of
a substantially concurrent offering of, shares of Capital Stock (other than
Disqualified Stock) of the Guarantor or the Issuer; (iv) the making of any
principal payment or the repurchase, redemption, retirement, defeasance or other
acquisition for value of Indebtedness of the Guarantor or the Issuer which is
subordinated in right of payment to the Notes or the Note Guarantee, as the case
may be, in exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of the Capital Stock of the Guarantor or the Issuer (other
than Disqualified Stock); (v) the declaration or payment of dividends on the
Common Stock of the Guarantor or the Issuer following a Public Equity Offering
of such Common Stock, of up to 6% per annum of the Net Cash Proceeds received by
the Guarantor or the Issuer, as the case may be, in such Public Equity Offering;
(vi) payments or distributions, to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the Indenture applicable
to mergers, consolidations and transfers of all or substantially all of the
property and assets of the Guarantor; (vii) any Investments described in clause
(A), (B) or (C) below, provided that the sum of such Investments does not exceed
$25 million at any one time outstanding: (A) Investments that the Board of
Directors of the Guarantor has determined in good faith will enable the
Guarantor or any of its Restricted Subsidiaries to obtain additional business
that it might not be able to obtain without making such Investment; (B) any
Investments; and (C) Investments in entities the principal function of which is
to perform research and development with respect to products and services that
may be used or useful in the telecommunications business; provided that the
Guarantor or one of its Restricted Subsidiaries will obtain rights to such
products or services as a result of such Investment; (viii) acquisitions of a
minority equity interest in entities engaged in the telecommunications business;
provided that (A) the acquisition of a majority equity interest in such entities
is not then permitted or practicable under applicable law without regulatory
consent, (B) the Board of Directors of the Guarantor determines in good faith
that there is a substantial probability that such approval will be obtained, (C)
the Guarantor or one of its Restricted Subsidiaries has the right to acquire
Capital Stock representing a majority of the voting power of the Voting Stock of
such entity upon receipt of regulatory consent and does acquire such Voting
Stock reasonably promptly upon receipt of such consent and (D) in the event that
such consent has not been obtained within 18 months of funding such Investment,
the Guarantor or one of its Restricted Subsidiaries has the right to sell such
minority equity interest to the Person from whom it acquired such interest, for
consideration consisting of the consideration originally paid by the Guarantor
and its Restricted Subsidiaries for such minority equity interest; (ix)
purchases or other acquisitions of Capital Stock of ITG in compliance with the
terms of written agreements in effect on the Closing Date, as amended; (x) cash
payments in lieu of the issuance of fractional shares upon the exercise of the
Warrants; provided that the Board of Directors determines that each such
amendment is not adverse to the interests of any Holder; or (xi) repayment of
Indebtedness Incurred under the Shareholder Standby Facility, as long as the
commitment of Ronald S. Lauder thereunder remains in effect; provided that,
except in the case of clauses (i) and (iii), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein. Any Restricted Payments made other than in cash
shall be valued at fair market value. The amount of any Investment "outstanding"
at any time shall be deemed to be equal to the amount of such Investment on the
date made, less the return of capital to the Guarantor and its Restricted
Subsidiaries with respect to such Investment (up to the amount of such
Investment on the date made).
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Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof and an exchange
of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii)
or (iv) thereof, the Net Cash Proceeds from any issuance of Capital Stock
referred to in clauses (iii) and (iv) and the amount of any payment pursuant to
clause (xi) thereof), shall be included in calculating whether the conditions of
clause (C) of the first paragraph of this "Limitation on Restricted Payments"
covenant have been met with respect to any subsequent Restricted Payments. In
the event the proceeds of an issuance of Capital Stock of the Guarantor are used
for the redemption, repurchase or other acquisition of the Notes, or
Indebtedness that is PARI PASSU with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Guarantor will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary (other than the Issuer) to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Guarantor or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Guarantor or any other Restricted
Subsidiary, (iii) make loans or advances to the Guarantor or any other
Restricted Subsidiary or (iv) transfer any of its property or assets to the
Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those encumbrances
or restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law, rule or
regulation or, to the extent not material to the Guarantor, at the behest of
regulatory authorities; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Guarantor or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Guarantor or
any Restricted Subsidiary not otherwise prohibited by the Indenture or (C)
arising or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Guarantor or any Restricted Subsidiary in
any manner material to the Guarantor or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary; (vi)
with respect to Restricted Subsidiaries in which, on and subsequent to the
Closing Date, the Guarantor and its Restricted Subsidiaries only make
Investments that are evidenced by unsubordinated promissory notes that bear a
reasonable rate of interest and are payable prior to the Stated Maturity of the
Notes; provided that such encumbrances and restrictions expressly allow the
payment of interest and principal on such promissory notes; or (vii)
encumbrances or restrictions solely of the type referred to in clause (iii) or
(iv) of the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant that are contained in
any stockholders' agreement, joint venture agreement or similar agreement among
owners of Common Stock of a
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Restricted Subsidiary; provided that such restrictions consist solely of
requirements that transactions between such Restricted Subsidiaries and
affiliates thereof (including the Guarantor and its Restricted Subsidiaries) be
on fair and reasonable terms no less favorable to such Restricted Subsidiary
than could be obtained in a comparable arm's-length transaction with a Person
that is not such an affiliate. Nothing contained in this "Limitation on Dividend
and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall
prevent the Guarantor or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in the "Limitation
on Liens" covenant or (2) restricting the sale or other disposition of property
or assets of the Guarantor or any of its Restricted Subsidiaries that secure
Indebtedness of the Guarantor or any of its Restricted Subsidiaries.
LIMITATION ON THE ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Guarantor will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Guarantor or a Wholly Owned
Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales
to non-U.S. nationals of shares of Capital Stock of non-U.S. Restricted
Subsidiaries, to the extent required by applicable law; (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary, provided any Investment in such
Person remaining after giving effect to such issuance or sale would have been
permitted to be made under the "Limitation on Restricted Payments" covenant, if
made on the date of such issuance or sale; (iv) issuances or sales of Common
Stock, the Net Cash Proceeds of which are promptly applied pursuant to clause A)
or (B) of the "Limitation on Asset Sales" covenant; (v) issuances and sales of
up to 6% of the Common Stock of each Restricted Subsidiary in connection with
employee benefit plans or arrangements and (vi) the issuance of 3,954 non-voting
shares of common stock of ITG (and subsequent anti-dilution issuances with
respect thereto) to Incom (U.K.) Limited.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Guarantor will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Guarantor or the Issuer which
is PARI PASSU with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Guarantor, the Issuer
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) PARI PASSU with the Notes or
the Note Guarantee, then the Guarantee of such Guaranteed Indebtedness shall be
PARI PASSU with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes or the Note Guarantee, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes or the Note Guarantee, as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Guarantor, of all of the Guarantor's and
each Restricted Subsidiary's Capital Stock in, or all or substantially all the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the
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Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
The Guarantor will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Guarantor or with any
Affiliate of the Guarantor or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Guarantor or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Guarantor or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm (or a subsidiary or affiliate thereof) in the United States stating
that the transaction is fair to the Guarantor or such Restricted Subsidiary from
a financial point of view; (ii) any transaction solely between the Guarantor and
any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and customary regular
fees to directors of the Guarantor or the Issuer who are not employees of the
Guarantor or the Issuer; (iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Guarantor and any other Person with which the
Guarantor files a consolidated tax return or with which the Guarantor is part of
a consolidated group for tax purposes; (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant; or (vi) the
Shareholder Standby Facility, as in effect on the Closing Date. Notwithstanding
the foregoing, any transaction covered by the first paragraph of this
"Limitation on Transactions with Shareholders and Affiliates" covenant and not
covered by clauses (ii) through (v) of this paragraph, the aggregate amount of
which exceeds $1 million in value, must be approved or determined to be fair in
the manner provided for in clause (i)(A) or (B) above.
LIMITATION ON LIENS
The Guarantor will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Notes or the Note
Guarantee, prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the Closing
Date; (ii) Liens granted after the Closing Date on any assets or Capital Stock
of the Issuer or its Restricted Subsidiaries created in favor of the Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary granted by
such Restricted Subsidiary to the Guarantor or a Wholly Owned Restricted
Subsidiary to secure Indebtedness owing to the Guarantor or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of the "Limitation on Indebtedness" covenant;
provided that such Liens do not extend to or cover any property or assets of the
Guarantor or any Restricted Subsidiary other than the property or assets
securing the Indebtedness being refinanced; (v) Permitted Liens; (vi) (A) Liens
securing obligations not in excess of $2 million and (B) Liens on assets having
a fair market value not in excess of $2 million at the time of incurrence of
such Liens; or (vii) Liens on stock of ITG acquired from Charles Piluso or
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Richard Rebetti prior to the Closing Date or pursuant to written agreements, as
in effect on the Closing Date.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
The Guarantor will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into any sale-leaseback transaction involving any
of its assets or properties whether now owned or hereafter acquired, whereby the
Guarantor or a Restricted Subsidiary sells or transfers such assets or
properties and then or thereafter leases such assets or properties or any part
thereof or any other assets or properties which the Guarantor or such Restricted
Subsidiary, as the case may be, intends to use for substantially the same
purpose or purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Guarantor
and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned
Restricted Subsidiaries; or (iv) the Guarantor or such Restricted Subsidiary,
within twelve months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the net proceeds received from such
sale in accordance with clause (A) or (B) of the first paragraph of the
"Limitation on Asset Sales" covenant described below.
LIMITATION ON ASSET SALES
The Guarantor will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the
Guarantor or such Restricted Subsidiary is at least equal to the fair market
value of the assets sold or disposed of and (ii) at least 85% of the
consideration received consists of cash or Temporary Cash Investments. In the
event and to the extent that the Net Cash Proceeds received by the Guarantor or
any of its Restricted Subsidiaries from one or more Asset Sales occurring on or
after the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date closest to
the commencement of such 12-month period for which a consolidated balance sheet
of the Guarantor and its subsidiaries have been filed pursuant to the
"Commission Reports and Reports to Holders" covenant), then the Guarantor or the
Issuer shall or shall cause the relevant Restricted Subsidiary to (i) within
twelve months after the date Net Cash Proceeds so received exceed 10% of
Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such
excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the
Guarantor or any Restricted Subsidiary providing a Subsidiary Guarantee pursuant
to the "Limitation on Issuances of Guarantees by Restricted Subsidiaries"
covenant described above or Indebtedness of any other Restricted Subsidiary, in
each case owing to a Person other than the Guarantor or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing to so
invest within twelve months after the date of such agreement), in property or
assets (other than current assets) of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Guarantor and its Restricted Subsidiaries
existing on the date of such investment and (ii) apply (no later than the end of
the twelve-month period referred to in clause (i)) such excess Net Cash Proceeds
(to the extent not applied pursuant to clause (i)) as provided in the following
paragraph of this "Limitation on Asset Sales" covenant. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such twelve-month period as set forth in clause (i) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
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If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $10 million, the Issuer
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes on the relevant Payment Date equal to the
Excess Proceeds on such date, at a purchase price equal
to 101% of the principal amount of the Notes, plus, in each case, accrued
interest (if any) to the Payment Date.
LIMITATION ON THE SHAREHOLDER STANDBY FACILITY
The Guarantor will not, and will not permit any Subsidiary to, (i) pay
interest in cash on the Shareholder Standby Facility prior to December 15, 2001,
(ii) amend the terms of the Shareholder Standby Facility in any manner that, in
the good faith opinion of the Board of Directors, would be materially adverse to
the interests of holders of the Notes, (iii) make any payment with respect to
the Shareholder Standby Facility at any time when a Default exists under the
Indenture or (iv) allow the commitment of Ronald S. Lauder under the Shareholder
Standby Facility to expire prior to December 15, 2006 unless amounts outstanding
under such facility were prepaid with the proceeds of an equity offering having
net proceeds to the Guarantor of at least $35 million. In addition, the
Guarantor agrees that it will not merge or enter into any similar transaction
with the Issuer unless the lenders, if any, with respect to the Shareholder
Standby Facility agree that the Shareholder Standby Facility will be
subordinated to the Notes to the same extent that it is subordinated to the Note
Guarantee.
As used herein, "Shareholder Standby Facility" means the contractual
obligation of Ronald S. Lauder, pursuant to a written agreement dated as of the
Closing Date, to lend $35 million to the Guarantor or cause a bank to lend $35
million to the Guarantor and to personally guarantee such bank loan and also
means such loan.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Issuer must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date. The Issuer will comply with any
applicable tender offer rules or other applicable securities laws in connection
with any such repurchase.
There can be no assurance that the Issuer will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Issuer which might be outstanding at
the time). The above covenant requiring the Issuer to repurchase the Notes will,
unless consents are obtained, require the Issuer to repay all indebtedness then
outstanding which by its terms would prohibit such Note repurchase, either prior
to or concurrently with such Note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
At all times from and after the commencement of the Exchange Offer, the
Guarantor and the Issuer shall file with the Commission all such reports and
other information as they would be required to file with the Commission by
Sections 13(a) or 15(d) under the Exchange Act if they were subject thereto, it
being understood that separate reports and other information for the Issuer are
not required by this covenant unless they would be required by the Commission if
the Guarantor and the Issuer were subject to Sections 13(a) or 15(d) under the
Exchange Act. The Issuer shall supply the Trustee and each Holder or shall
supply
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to the Trustee for forwarding to each such Holder, without cost to such Holder,
copies of such reports and other information.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
provided that a failure to make any of the first six scheduled interest payments
on the Notes in a timely manner will constitute an Event of Default with no
grace or cure period; (c) defaults in the performance or breach of the
provisions of the Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the assets of the Guarantor and the Issuer or the
failure to make or consummate an Offer to Purchase in accordance with the
"Limitation on Asset Sales" or "Repurchase of Notes upon a Change of Control"
covenant; (d) the Guarantor or the Issuer defaults in the performance of or
breaches any other covenant or agreement of the Guarantor or the Issuer, as the
case may be, in the Indenture or under the Notes (other than a default specified
in clause (a), (b) or (c) above) and such default or breach continues for a
period of 30 consecutive days after written notice by the Trustee or the Holders
of 25% or more in aggregate principal amount at maturity of the Notes; (e) there
occurs with respect to any issue or issues of Indebtedness of the Guarantor, the
Issuer or any Significant Subsidiary having an outstanding principal amount of
$10 million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, (i) an event
of default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration and/or (ii) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 30 days of such
payment default; (f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Guarantor, the Issuer or any Significant Subsidiary and shall not be paid or
discharged, and there shall be any period of 30 consecutive days following entry
of the final judgment or order that causes the aggregate amount for all such
final judgments or orders outstanding and not paid or discharged against all
such Persons to exceed $10 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; (g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Guarantor, the Issuer or any Significant
Subsidiary 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
the Guarantor, the Issuer or any Significant Subsidiary or for all or
substantially all of the property and assets of the Guarantor, the Issuer or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Guarantor, the Issuer or any Significant Subsidiary and, in each case, such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (h) the Guarantor, the Issuer or any Significant Subsidiary
(A) 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, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Guarantor, the
Issuer or any Significant Subsidiary or for all or substantially all of the
property and assets of the Guarantor, the Issuer or any Significant Subsidiary
or (C) effects any general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Guarantor or the Issuer) occurs
and is continuing under the Indenture, the Trustee or
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the Holders of at least 25% in aggregate principal amount at maturity of the
Notes, then outstanding, by written notice to the Issuer (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal amount of, premium, if any, and
accrued interest on the Notes to be immediately due and payable. Upon a
declaration of acceleration, such principal amount of, premium, if any, and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Guarantor, the Issuer or the relevant Significant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause
(g) or (h) above occurs with respect to the Guarantor or the Issuer, the
principal amount of, premium, if any, and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of at least a majority in principal amount at maturity of the
outstanding Notes by written notice to the Issuer and to the Trustee, may waive
all past defaults and rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the nonpayment of
the principal of, premium, if any, and interest on the Notes that have become
due solely by such declaration of acceleration, have been cured or waived and
(ii) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. For information as to the waiver of defaults, see
"--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount at maturity
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at maturity of
outstanding Notes make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity satisfactory to the
Trustee against any costs, liability or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the Holders of a majority
in aggregate principal amount at maturity of the outstanding Notes do not give
the Trustee a direction that is inconsistent with the request. However, such
limitations do not apply to the right of any Holder of a Note to receive payment
of the principal of, premium, if any, or interest on, such Note or to bring suit
for the enforcement of any such payment, on or after the due date expressed in
the Notes, which right shall not be impaired or affected without the consent of
the Holder.
The Indenture requires certain officers of the Guarantor and the Issuer to
certify, on or before a date not more than 90 days after the end of each fiscal
year of the Guarantor, that a review has been conducted of the activities of the
Guarantor or the Issuer, as the case may be, and its Restricted Subsidiaries and
the Guarantor's or the Issuer's and its Restricted Subsidiaries' performance
under the Indenture and that the Guarantor and the Issuer has fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof. The Guarantor and the Issuer are also obligated to notify the Trustee
of any default or defaults in the performance of any covenants or agreements
under the Indenture.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither the Guarantor nor the Issuer will consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially an
entirety in one transaction or a series of related transactions) to, any Person
or permit any Person to merge with or into the Issuer or the Guarantor unless:
(i) the Guarantor or the Issuer shall be the continuing Person, or the Person
(if other than the Guarantor or the Issuer) formed by such consolidation or into
which the Guarantor or the Issuer is merged or that acquired or leased such
property and assets of the Guarantor or the Issuer shall be a corporation
organized and validly existing under the laws of the jurisdiction of
incorporation of the Guarantor or the Issuer immediately prior to such
transaction, the United States of America, the British Virgin Islands, the
Cayman Islands, the Netherlands, the Netherlands Antilles, Ireland or Jersey or
any jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the obligations of the
Guarantor or the Issuer, as the case may be, on all of the Notes and under the
Indenture; provided that, with respect to any such transaction immediately
subsequent to which the continuing Person is incorporated in a jurisdiction
other than the United States or the jurisdiction in which such Person was
incorporated immediately prior to such transaction, (A) the Issuer delivers to
the Trustee an Opinion of Counsel stating that the obligations of the continuing
Person under the Indenture are enforceable under the laws of the new
jurisdiction of its incorporation to the same extent as the obligations of the
Issuer or the Guarantor, as the case may be, under the Indenture immediately
prior to such transaction; (B) the continuing Person agrees in writing to submit
to jurisdiction and appoints an agent for the service of process, each under
terms substantially similar to the terms contained in the Indenture with respect
to the Issuer or the Guarantor, as the case may be; (C) the continuing Person
agrees in writing to pay "additional amounts" as provided under the Indenture
with respect to the Issuer or the Guarantor, as the case may be, except that
such "additional amounts" shall relate to any withholding tax whatsoever
regardless of any change of law (subject to exceptions substantially similar to
those contained in the Indenture and described under "Additional Amounts"); (D)
the Board of Directors of the Guarantor determines in good faith that such
transaction will have no material adverse effect on any Holder and a Board
Resolution to that effect is delivered to the Trustee; and (E) the principal
purpose of such transaction is to obtain tax benefits for the Guarantor, the
Issuer, their direct and indirect stockholders or the Noteholders; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Guarantor or the Issuer, as
the case may be, or any Person becoming the successor obligor of the Notes or
the Note Guarantee, as the case may be, shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Guarantor or the
Issuer, as the case may be, immediately prior to such transaction; (iv)
immediately after giving effect to such transaction on a pro forma basis, the
Guarantor or the Issuer, as the case may be, or any Person becoming the
successor obligor of the Notes or the Note Guarantee, as the case may be, would
have a Consolidated Leverage Ratio no higher (or, if negative, no lower) than
the Consolidated Leverage Ratio of the Guarantor or the Issuer, as the case may
be, immediately prior to such transaction; provided that, in connection with any
such merger or consolidation, no consideration (other than Common Stock in the
surviving Person, the Guarantor or the Issuer) shall be issued or distributed to
the stockholders of the Guarantor or the Issuer, as the case may be; and (v) the
Issuer delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and (iv))
and Opinion of Counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with; provided, however, that clauses (iii) and (iv) above do not
apply if, in the good faith determination of the Board of Directors of the
Guarantor, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state or jurisdiction of
incorporation of the Guarantor or the Issuer; and provided further that any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
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DEFEASANCE
DEFEASANCE AND DISCHARGE
The Indenture provides that the Issuer will be deemed to have paid and will
be discharged from any and all obligations in respect of the Notes on the 123rd
day after the deposit referred to below, and the provisions of the Indenture
will no longer be in effect with respect to the Notes (except for, among other
matters, certain obligations to register the transfer or exchange of the Notes,
to replace stolen, lost or mutilated Notes, to maintain paying agencies and to
hold monies for payment in trust) if, among other things, (A) the Issuer has
irrevocably deposited or caused to be irrevocably deposited with the Trustee, in
trust, money and/or U.S. Government Obligations that through the payment of
interest, premium, if any, and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after payment of
all state and local taxes or other charges and assessments in respect thereof
payable by the Trustee, the principal of, premium, if any, and accrued interest
on the Notes on the Stated Maturity of such principal or interest or upon
earlier redemption in accordance with the terms of the Indenture and the Notes,
(B) the Issuer has delivered to the Trustee either (i) a ruling based on
relevant law and practice at the time directed to the Trustee from the Inland
Revenue or other relevant tax authority to the effect that the Holders will not
recognize income, gain or loss for U.K. income tax or other tax purposes as a
result of the Issuer's exercise, disregarding income tax on any amounts that
would have been received but for such exercise of its option under this
"Defeasance" provision and will be subject to income tax on the same amount and
in the same manner and at the same time as would have been the case if such
option had not been exercised or (ii) an Opinion of Counsel to the same effect
as the ruling described in clause (i) above; (C) the Issuer has delivered to the
Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for U.K. income tax or other tax purposes as a
result of the Issuer's exercise of its option under this "Defeasance" provision
and will be subject to income tax on the sane amount and in the same manner and
at the same time as would have been the case if such option had not been
exercised, which Opinion of Counsel must be based upon (and accompanied by a
copy of) a ruling published by the Internal Revenue Service to the same effect
unless there has been a change in applicable federal income tax law after the
Closing Date such that a ruling is no longer required or (y) a ruling directed
to the Trustee received from the Internal Revenue Service to the same effect as
the aforementioned Opinion of Counsel and (ii) an Opinion of Counsel to the
effect that the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and after the passage of 123 days following the deposit, the
trust fund will not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (D)
immediately after giving effect to such deposit on a pro forma basis, no Default
or Event of Default, or event that after the giving of notice or lapse of time
or both would become a Default or an Event of Default, shall have occurred and
be continuing on the date of such deposit or during the period ending on the
123rd day after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Issuer or any of its Subsidiaries is a party or by which
the Issuer or any of its Subsidiaries is bound, (E) if at such time the Notes
are listed on a national securities exchange, the Issuer has delivered to the
Trustee an Opinion of Counsel to the effect that the Notes will not be delisted
as a result of the Issuer's exercise of its option under this "Defeasance"
provision, and (F) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, in each case stating that all the above
conditions precedent have been complied with.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Indenture further provides that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under "Consolidation,
Merger and Sale of Assets" and all the covenants
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described herein under "Covenants," clauses (c) and (d) under "Events of
Default" with respect to such clauses (iii) and (iv) under "Consolidation,
Merger and Sale of Assets" and such covenants and clauses (e) and (f) under
"Events of Default" shall be deemed not to be Events of Default, upon, among
other things, the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Notes, the satisfaction of the provisions described in
clauses (B)(ii), (C) and (D) of the preceding paragraph and the delivery by the
Issuer to the Trustee of an Opinion of Counsel to the effect that, among other
things, the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance of certain covenants and
Events of Default and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
In the event the Issuer exercises its option to omit compliance with certain
covenants and provisions of the Indenture with respect to the Notes as described
in the immediately preceding paragraph and the Notes are declared due and
payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Notes at the time of the acceleration resulting from such Event of Default.
However, the Issuer will remain liable for such payments and the Note Guarantee
with respect to such payments will remain in effect.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Issuer, the
Guarantor and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of each Holder affected thereby, (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (ii) reduce the
principal amount of, or premium, if any, or interest on, any Note, (iii) change
the place or currency of payment of principal of, or premium, if any, or
interest on, any Note, (iv) impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any Note, (v) reduce the
above-stated percentage of outstanding Notes the consent of whose Holders is
necessary to modify or amend the Indenture, (vi) waive a default in the payment
of principal of, premium, if any, or interest on the Notes, (vii) reduce the
percentage or aggregate principal amount at maturity of outstanding Notes the
consent of whose Holders is necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults or (viii) release
the Guarantor from its Note Guarantee.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Issuer or the Guarantor in the Indenture, the
Pledge Agreement or in any of the Notes or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer, director, employee or controlling person of the Issuer or
the Guarantor or of any successor Person thereof. Each Holder, by accepting the
Notes, waives and releases all such liability.
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CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of the Issuer or the Guarantor, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest, it must eliminate such conflict or resign.
ADDITIONAL AMOUNTS
In the event of any change in the laws of England or Bermuda or of any
political subdivision or taxing authority thereof or therein or any change in
the interpretation or administration thereof, the effect of which is to require
the withholding or deduction by the Issuer or the Guarantor pursuant to the
Notes or the Note Guarantee, respectively, of any amount for taxes, the Issuer
or the Guarantor will pay, to the extent it may then lawfully do so, such
additional amounts ("Additional Amounts") as may be necessary in order that
every net payment of the principal of and interest on the Notes, after deduction
for withholding for or on account of any future tax, assessment or other
governmental charge will not be less than the amount provided for in the Notes
to be then due and payable; provided, however, that the foregoing obligation to
pay Additional Amounts shall not apply in respect of:
(a) any tax, withholding, assessment or other governmental charge which
would not have been imposed but for (i) the existence of any present or
former connection between such holder (or between a fiduciary, settler,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, trust, partnership or corporation) and
England or Bermuda or any political subdivision or taxing authority thereof
including, without limitation, such holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged in
trade or business therein or having or having had a permanent establishment
therein or (ii) the presentation of a Note or a Note Guarantee (where
presentation is required) for payment on a date more than 30 days after the
date on which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sale, transfer or personal property
tax;
(c) any tax, assessment or other governmental charge that is withheld by
reason of the failure to timely comply by the holder or the beneficial owner
of the Note or a Note Guarantee with a request in writing of the Issuer or
the Guarantor (i) to provide information concerning the nationality,
residence or identity of the holder or such beneficial owner or (ii) to make
any declaration or other similar claim or satisfy any information or
reporting requirement, which, in the case of (i) or (ii), is required or
imposed by a statute, treaty, regulation or administrative practice of the
taxing or domicile jurisdiction as a precondition to exemption from or
reduction of all or part of such tax, assessment or other governmental
charge; provided, however, that this clause (c) shall not apply to limit the
Issuer's or Guarantor's obligation to pay Additional Amounts if the
completing and filing of the information described in subclause (i) or the
declaration or other claim described in subclause (ii) would be materially
more onerous in form, in procedure or in substance of information disclosed,
in comparison to the information reporting requirements imposed under U.S.
tax law with respect to Forms 1001, W-8 and W-9; or
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(d) any combination of items (a), (b) and (c) above; nor shall
Additional Amounts be paid with respect to any payment of the principal of,
or any interest on, any Note or Note Guarantee to any holder who is not the
sole beneficial owner of such Note or Note Guarantee or is a fiduciary or
partnership, but only to the extent that a beneficial owner, a beneficiary
or a settlor with respect to a fiduciary or a member of the partnership
would not have been entitled to the payment of the Additional Amount had the
beneficial owner, beneficiary, settlor or member of such partnership
received directly its beneficial or distributive share of the payment.
In the opinion of Levinson Gray, U.K. counsel for the Issuer, under English
law and Inland Revenue practice as applied and interpreted on the date of this
Prospectus and on the basis of the United Kingdom/ United States Double Taxation
Treaty currently in force (and assuming that appropriate claims are validly made
thereunder), no taxes, levies, imposts or charges of the United Kingdom or any
political subdivision or taxing authority thereof or therein would be required
to be deducted or withheld from any payment to a resident of the United States
(who is not also a resident of the United Kingdom) made by the Issuer pursuant
to the Notes.
In the opinion of Conyers, Dill & Pearman, Bermuda counsel for the
Guarantor, under Bermuda law no withholding tax would be payable in Bermuda in
respect of any payment that may be required under the Note Guarantee.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Issuer or the Guarantor will be
obligated to pay Additional Amounts with respect to such payment, the Issuer or
the Guarantor will deliver to the Trustee an Officer's Certificate stating the
fact that such Additional Amounts will be payable and the amounts so payable and
will set forth such other information necessary to enable the Trustee to pay
such Additional Amounts to Holders on the payment date. Whenever in the
Indenture or in this Prospectus there is mentioned, in any context, the payment
of principal (and premium, if any), redemption price, interest or any other
amount payable under or with respect to any Note, such mention shall be deemed
to include mention of the payment of Additional Amounts to the extent that, in
such context, Additional Amounts are, were or would be payable in respect
thereof. See "--Optional Redemption."
CONSENT TO JURISDICTION AND SERVICE
Each of the Guarantor and the Issuer has appointed RSL Communications, N.
America, Inc. as its agent for service of process in any suit, action or
proceeding with respect to the Indenture or the Notes and the Note Guarantee and
for actions brought under federal or state securities laws brought in any
federal or state court located in the City of New York and will agree to submit
to such jurisdiction.
BOOK-ENTRY; DELIVERY AND FORM
GENERAL
The Exchange Notes will initially be represented by three or more global
securities in bearer form without interest coupons (the "Global Exchange Notes")
which will be issued in denominations equal to the outstanding principal amount
of the Notes represented thereby. The Global Notes will be deposited with the
Book-Entry Depositary pursuant to the terms of a Note Deposit Agreement, dated
as of October 3, 1996 (the "Deposit Agreement"), between the Issuer, for the
limited purposes set forth therein, and the Book-Entry Depositary.
The Book-Entry Depositary will issue a Depositary Interest for each Global
Exchange Note, representing a 100% interest in the respective underlying Global
Exchange Note, to DTC by recording such interest in the Book-Entry Depositary's
books and records in the name of Cede & Co., as a nominee of DTC. Book-Entry
Interests in the Global Exchange Notes will be shown on, and transfers thereof
will be
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effected only through, records maintained in book-entry form by DTC (with
respect to its participants) and its participants. See "--Description of
Book-Entry System."
Except in the limited circumstance described below, owners of Book-Entry
Interests in the Global Exchange Notes will not be entitled to receive physical
delivery of Definitive Registered Exchange Notes (defined below).
DEFINITIVE REGISTERED EXCHANGE NOTES
Under the terms of the Deposit Agreement and the Indenture, owners of
Book-Entry Interests in the Global Exchange Notes will receive definitive
Exchange Notes in registered form ("Definitive Registered Exchange Notes") (i)
if DTC notifies the Issuer in writing that it (or its nominee) is unwilling or
unable to continue to act as Depositary or ceases to be a clearing agency
registered under the Exchange Act and, in either case, a successor Depositary
registered as a clearing agency under the Exchange Act is not appointed by the
Issuer within 90 days, (ii) at any time after consummation of the Exchange
Offer, if an Event of Default under the Indenture occurs, upon the request
delivered in writing to DTC of the owner of a Book-Entry Interest, (iii) at any
time if the Issuer in its sole discretion determines that the Global Exchange
Notes (in whole but not in part) should be exchanged for Definitive Registered
Exchange Notes, (iv) at any time after the consummation of the Exchange Offer,
if the owner of a Book-Entry Interest requests such exchange in writing
delivered to DTC and through DTC to the Book-Entry Depositary and the Trustee or
(v) if the Book-Entry Depositary is at any time unwilling or unable to continue
as Book-Entry Depositary and a successor Book-Entry Depositary is not appointed
by the Issuer within 90 days.
In no event will definitive securities in bearer form be issued. Any
Definitive Registered Exchange Notes will be issued in fully registered form in
denominations of $1,000 principal amount and integral multiples thereof. Any
Definitive Registered Exchange Notes will be registered in such name or names as
DTC shall instruct the Trustee, through the Book-Entry Depositary. It is
expected that DTC's instructions will be based upon directions received by DTC
from its participants (including Euroclear and Cedel Bank) reflecting the
beneficial ownership of Book-Entry Interests. To the extent permitted by law,
the Issuer, the Trustee and any paying agent shall be entitled to treat the
person in whose name any Definitive Registered Exchange Note is registered as
the absolute owner thereof. While any Global Exchange Note is outstanding,
holders of Definitive Registered Exchange Notes may exchange their Definitive
Registered Exchange Notes for a corresponding Book-Entry Interest in such Global
Exchange Note by surrendering their Definitive Registered Exchange Notes to the
Book-Entry Depositary and providing the certificates and opinions required by
the Indenture. The Book-Entry Depositary will make the appropriate adjustments
to the Global Exchange Note underlying such Book-Entry Interest to reflect any
issue or surrender of Definitive Registered Exchange Notes. The Indenture
contains provisions relating to the maintenance by a registrar of a register
reflecting ownership of Definitive Registered Exchange Notes, if any, and other
provisions customary for a registered debt security. Payment of principal and
interest on each Definitive Registered Exchange Note will be made to the holder
appearing on the register at the close of business on the record date at his
address shown on the register on the record date.
U.S. HOLDERS SHOULD BE AWARE THAT, UNDER CURRENT U.K. LAW, UPON THE ISSUANCE
TO A HOLDER OF DEFINITIVE REGISTERED EXCHANGE NOTES SUCH HOLDER WILL BECOME
SUBJECT TO U.K. INCOME TAX (CURRENTLY 20%) TO BE WITHHELD ON ANY PAYMENTS OF
INTEREST ON THE DEFINITIVE REGISTERED EXCHANGE NOTES AS SET FORTH UNDER "CERTAIN
UNITED KINGDOM TAX CONSIDERATIONS FOR U.S. HOLDERS OF NOTES." A U.S. HOLDER OF
DEFINITIVE REGISTERED EXCHANGE NOTES WILL, TO THE EXTENT DESCRIBED ABOVE UNDER
"A ADDITIONAL AMOUNTS," BE ENTITLED TO RECEIVE ADDITIONAL AMOUNTS WITH RESPECT
TO SUCH DEFINITIVE REGISTERED EXCHANGE NOTES. ADDITIONAL AMOUNTS WILL NOT BE
PAYABLE IF SUCH DEFINITIVE REGISTERED EXCHANGE NOTES WERE ISSUED AT THE REQUEST
OF A HOLDER (INCLUDING FOLLOWING AN EVENT OF DEFAULT) AND IF AT THE TIME OF
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THE PAYMENT IN QUESTION DEFINITIVE REGISTERED EXCHANGE NOTES HAVE NOT BEEN
ISSUED IN EXCHANGE FOR THE ENTIRE PRINCIPAL AMOUNT OF NOTES THEN OUTSTANDING.
HOWEVER, A U.S. HOLDER OF DEFINITIVE REGISTERED EXCHANGE NOTES MAY BE ENTITLED
TO RECEIVE A REFUND OF WITHHELD AMOUNTS FROM THE INLAND REVENUE IN CERTAIN
CIRCUMSTANCES.
DESCRIPTION OF BOOK-ENTRY SYSTEM
GENERAL
Upon receipt of the Global Exchange Notes, the Book-Entry Depositary will
issue a Depositary Interest for each such Global Exchange Note, representing a
100% interest in the respective underlying Global Note, to DTC by recording such
interest in the Book-Entry Depositary's books and records in the name of Cede &
Co., as nominee of DTC. Ownership of Book-Entry Interests will be limited to
persons who have accounts with DTC, including Euroclear and Cedel Bank
("participants"), or persons who have accounts through participants ("indirect
participants"). Upon such issuance of interests in such Global Exchange Notes to
DTC, DTC will credit, on its internal book-entry registration and transfer
system, its participants' accounts with the respective interests owned by such
participants. Ownership of Book-Entry Interests will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of indirect participants).
The laws of some countries and some states in the United States may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge the Book-Entry Interests in the Global Exchange Notes.
So long as the Book-Entry Depositary, or its nominee, is the holder of the
Global Exchange Notes, the Book-Entry Depositary or such nominee, as the case
may be, will be considered the sole holder of such Global Exchange Notes for all
purposes under the Indenture and the Notes. Except as set forth above under
"--Book-Entry; Delivery and Form," participants or indirect participants will
not be entitled to have Notes or Book-Entry Interests registered in their names,
will not receive or be entitled to receive physical delivery of Notes or
Book-Entry Interests in definitive bearer or registered form and will not be
considered the owners or holders thereof under the Indenture. Accordingly, each
person owning a Book-Entry Interest must rely on the procedures of the
Book-Entry Depositary and DTC, Euroclear and Cedel Bank and, if such person is
an indirect participant in DTC, on the procedures of the participant in DTC
through which such person owns its interest, to exercise any rights and remedies
of a holder under the Indenture. See "--Action by Owners of Book-Entry
Interests." If any definitive Notes are issued to participants or indirect
participants, they will be issued in registered form, as described under
"--Book-Entry; Delivery and Form." Unless and until Book-Entry Interests are
exchanged for Definitive Registered Exchange Notes, the certificateless interest
held by DTC may not be transferred except as a whole between DTC and a nominee
of DTC, between nominees of DTC or by DTC or any such nominee to a successor of
DTC or a successor of such nominee.
PAYMENTS ON THE GLOBAL EXCHANGE NOTES
Payments of any amounts owing in respect of the Global Exchange Notes will
be made through one or more paying agents appointed under the Indenture (which
initially will include The Chase Manhattan Bank, as paying agent for the Notes)
to the Book-Entry Depositary as the holder of the Global Exchange Notes. All
such amounts will be payable in U.S. dollars. Upon receipt of any such amounts
in respect of the Global Exchange Notes, the Book-Entry Depositary will pay such
amounts to DTC in proportion to their respective interests, as shown on the
Book-Entry Depositary's records.
The Company expects that DTC or its nominee, upon receipt of any payment
made in respect of the Global Exchange Notes, will credit its participants'
accounts with such payments in amounts proportionate
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to their respective interest in the principal amount of such Global Exchange
Note as shown on the records of DTC or its nominee. The Issuer expects that
payments by participants to owners of Book-Entry Interests held through such
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the account of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants. Distribution with respect to ownership of
Book-Entry Interests held through Euroclear or Cedel Bank will be credited to
the cash accounts of Euroclear participants or Cedel Bank participants in
accordance with the relevant system's rules and procedures, to the extent
received by its depositary.
Payments of all such amounts made with respect to the Notes will be made
without deduction or withholding for or on account of any present or future
Taxes of whatever nature except as may be required by law, and if any such
deduction or withholding is required to be made by any law or regulation of the
U.K. or of any other jurisdiction in which the Guarantor and the Issuer are
engaged in business for tax purposes then, only to the extent described under
"--Additional Amounts," the Guarantor and the Issuer have agreed pursuant to the
Indenture that such Additional Amounts will be paid as may be necessary in order
that the net amounts received by any holder of a Global Exchange Note or owner
of a Book-Entry Interest after such deduction or withholding will equal the net
amounts that such holder or owner would have otherwise received in respect of
such Global Exchange Note or Book-Entry Interest, as the case may be, absent
such withholding or deduction.
None of Guarantor, the Issuer, the Book-Entry Depositary or any paying
agent, has any responsibility or liability for any aspect of the records
relating to or payments made on account of Book-Entry Interests or for
maintaining, supervising or reviewing any records relating to such Book-Entry
Interests or beneficial ownership interests.
REDEMPTION OF GLOBAL EXCHANGE NOTES
In the event any Global Exchange Note (or any portion thereof) is redeemed,
the Book-Entry Depositary will, through DTC, redeem, from the amount received by
it in respect of the redemption of such Global Exchange Note, an equal amount of
the Book-Entry Interest in such Global Exchange Note. The redemption price
payable in connection with the redemption of such Book-Entry Interest will be
equal to the amount received by the Book-Entry Depositary in connection with the
redemption of such Global Exchange Note (or any portion thereof). The Issuer
understands that under existing DTC practices, if fewer than all of the Exchange
Notes are to be redeemed at any time, DTC will credit participants' accounts on
a proportionate basis (with adjustments to prevent fractions) or by lot or on
such other basis as DTC deems fair and appropriate; provided that no beneficial
interests of less than $1,000 principal amount may be redeemed in part.
TRANSFERS
Pursuant to the Deposit Agreement, the Global Exchange Notes may be
transferred only to a successor to the Book-Entry Depositary. All transfers of
Book-Entry Interests between participants in DTC will be effected by DTC
pursuant to customary procedures established by DTC and its participants.
Transfers between participants in Euroclear and Cedel Bank will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Holders of Exchange Notes may, at their option, obtain Definitive Registered
Exchange Notes as set forth under "--Book Entry; Delivery and Form --Definitive
Registered Exchange Notes."
ACTION BY OWNERS OF BOOK-ENTRY INTERESTS
As soon as practicable after receipt by the Book-Entry Depositary of notice
of any solicitation of consents or request for a waiver or other action by the
holders of Notes, or of any offer to purchase the
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Notes with Excess Proceeds or upon a Change of Control (as defined in this
section under the subheading "--Certain Definitions"), the Book-Entry Depositary
will mail to DTC a notice containing (a) such information as is contained in the
notice received by the Book-Entry Depositary, (b) a statement that at the close
of business on a specified record date DTC will be entitled to instruct the
Book-Entry Depositary as to the consent, waiver or other action, if any,
pertaining to such Notes and (c) a statement as to the manner in which such
instructions may be given. In addition, the Book-Entry Depositary will forward
to DTC all materials pertaining to any such solicitation, request, offer or
other action. Upon the written request of DTC the Book-Entry Depositary shall
endeavor insofar as practicable to take such action regarding the requested
consent, waiver, offer or other action in respect of such Notes in accordance
with any instructions set forth in such request. DTC may grant proxies or
otherwise authorize DTC participants or indirect participants to provide such
instructions to the Book-Entry Depositary so that it may exercise any rights of
a holder or take any other actions which a holder is entitled to take under the
Indenture. Under its usual procedures, DTC would mail an omnibus proxy to the
Guarantor, the Issuer and the Book-Entry Depositary assigning Euroclear's and
Cedel Bank's consenting or voting rights to those DTC participants to whose
accounts such Book-Entry Interests are credited on a record date as soon as
possible after such record date. Euroclear or Cedel Bank, as the case may be,
will take any action permitted to be taken by a holder under the Indenture on
behalf of a Euroclear participant or Cedel Bank participant only in accordance
with its relevant rules and procedures and subject to its Depositary's ability
to effect such actions on its behalf through DTC. The Book-Entry Depositary will
not exercise any discretion in the granting of consents or waivers or the taking
of any other action relating to the Indenture.
DTC has advised the Guarantor and the Issuer that it will take any action
permitted to be taken by a holder of Notes (including the presentation of Notes
for exchange as described above) only at the direction of one or more
participants to whose account the DTC interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of Notes as to which such participant or participants has or have given such
direction.
REPORTS
The Book-Entry Depositary will immediately send to DTC a copy of any
notices, reports and other communications received relating to the Guarantor,
the Issuer, the Notes or the Book-Entry Interests.
ACTION BY BOOK-ENTRY DEPOSITARY
Upon the occurrence of a Default with respect to the Notes, or in connection
with any other right of the holder of a Global Exchange Note under the
Indenture, if requested in writing by DTC, the Book-Entry Depositary will take
any such action as shall be requested in such notice; provided that the Book-
Entry Depositary has been offered reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request by the owners of Book-Entry Interests.
RESIGNATION OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary may at any time resign as Book-Entry Depositary by
written notice to the Issuer and DTC, such resignation to become effective upon
the appointment of a successor book-entry Depositary, in which case the Global
Notes shall be delivered to that successor. If no such successor has been so
appointed by the Issuer within 90 days, the Book-Entry Depositary may request
the Issuer to issue Definitive Registered Notes as described above.
If at any time DTC is unwilling or unable to continue as a Depositary for
the Global Exchange Notes and a successor Depositary is not appointed by the
Guarantor and the Issuer within 90 days, DTC may request that the Guarantor and
the Issuer issue Definitive Registered Exchange Notes in exchange therefor.
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EXPENSES OF BOOK-ENTRY DEPOSITARY
The Issuer has agreed to indemnify the Book-Entry Depositary against certain
liabilities incurred by it and pay the charges of the Book-Entry Depositary as
agreed between the Issuer and the Book-Entry Depositary.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The Deposit Agreement may be amended by the Issuer and the Book-Entry
Depositary without notice to or consent of DTC or any owner of a Book-Entry
Interest: (a) to cure any ambiguity, defect or inconsistency, provided that such
amendment or supplement does not adversely affect the rights of DTC or any
holder of Book-Entry Interests, (b) to evidence the succession of another person
to the Issuer (when a similar amendment with respect to the Indenture is being
executed) and the assumption by any such successor of the covenants of the
Issuer herein, (c) to evidence or provide for a successor Book-Entry Depositary,
(d) to make any amendment, change or supplement that does not adversely affect
DTC or any owner of Book-Entry Interests, (e) to add to the covenants of the
Issuer or the Book-Entry Depositary, (f) to add a guarantor when a guarantor is
made a party to the Indenture pursuant to the Indenture or (g) to comply with
the United States federal and English securities laws. Except as provided in the
Deposit Agreement, no amendment that adversely affects DTC may be made to the
Deposit Agreement without the consent of DTC, and no amendment that adversely
affects the holders of Book-Entry Interests may be made without the consent of a
majority of the aggregate principal amount of Book-Entry Interests outstanding.
Upon the issuance of Definitive Registered Exchange Notes in exchange for
Book-Entry Interests constituting the entire principal amount of Notes, the
Deposit Agreement will terminate. The Deposit Agreement may be terminated upon
the resignation of the Book-Entry Depositary if no successor has been appointed
within 90 days as set forth under Resignation of Book-Entry Depositary.
INFORMATION CONCERNING DTC, EUROCLEAR AND CEDEL BANK
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities of its participants
and to facilitate the clearance and settlement of transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC participants include securities brokers and
dealers (including the Placement Agents), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to the DTC book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of an owner of a
Book-Entry Interest to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be limited by the lack of a definitive certificate for such
interest. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
Book-Entry interests to such persons may be limited. In addition, beneficial
owners of Book-Entry Interests through the DTC system will receive distributions
attributable to the Global Exchange Notes only through DTC participants.
Euroclear and Cedel Bank hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between their
respective participants through electronic book-entry changes in accounts of
such participants. Euroclear and Cedel Bank provide to their participants,
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among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Euroclear and Cedel Bank interface with domestic securities markets.
Euroclear and Cedel Bank participants are financial institutions such as
underwriters, securities brokers and dealers, banks, trust companies and certain
other organizations. Indirect access to Euroclear or Cedel Bank is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodian relationship with a Euroclear or Cedel
Bank participant, either directly or indirectly.
GLOBAL CLEARANCE AND SETTLEMENT UNDER BOOK-ENTRY SYSTEM
INITIAL SETTLEMENT. Holders of Exchange Notes electing to own their
Book-Entry Interest through DTC (other than through accounts at Euroclear or
Cedel Bank) will follow the settlement practices applicable to U.S. corporate
debt obligations. The securities custody accounts of investors will be created
with their holdings against payment in same day funds on the settlement date.
Holders of Exchange Notes electing to own their Book-Entry Interests through
Euroclear or Cedel Bank accounts will follow the settlement procedures
applicable to conventional eurobonds in registered form. Book-Entry Interests
will be credited to the securities custody accounts of Euroclear and Cedel Bank
holders on the business day following the settlement date against payment for
value on the settlement date.
SECONDARY MARKET TRADING. The Book-Entry Interests will trade in DTC's
Same-Day Funds Settlement System, and secondary market trading activity in such
Book-Entry Interests will, therefore, settle in same-day funds.
Since the purchaser determines the place of delivery, it is important to
establish at the time of trading of any Book-Entry Interests where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Guarantor is qualified
in its entirety by reference to the provisions of the Guarantor's Memorandum of
Association and Bye-Laws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
The Guarantor is authorized to issue 20,000,000 shares of Preferred Stock
and 20,000,000 common shares, which may be issued as shares of Class A Common
Stock, Class B Common Stock or Class C Common Stock. The Guarantor has in the
past used and intends in the future to use shares of its capital stock to pay
for acquisitions.
PREFERRED STOCK
As of the date of this Prospectus, there were six holders of record of
Preferred Stock and 9,243,866 shares of Preferred Stock were outstanding.
Dividends accrue on the Preferred Stock on a cumulative basis at a rate of 8% of
the liquidation preference amount per share per annum. Cumulative dividends are
not payable and are to be deemed cancelled and waived upon conversion of the
shares of preferred stock.
Each holder of Preferred Stock is entitled to the number of votes per share
equal to the number of votes to which the shares of Class B Common Stock into
which each share of Preferred Stock is convertible would be entitled. Holders of
the Preferred Stock vote together with the holders of Class A Common Stock and
Class B Common Stock as a single class on all matters subject to shareholder
approval, except that the holders of the Preferred Stock vote as a separate
class on any matter requiring class voting by the Companies Act 1981 of Bermuda.
In the event of the liquidation, dissolution or winding up of the Guarantor,
holders of Preferred Stock are entitled to receive $1,000 per share (to the
extent a share is paid up) plus an amount per share equal to the accrued and
unpaid dividends thereon. Each share of Preferred Stock is convertible into one
share of Class B Common Stock at the option of the holder, and each share of
Preferred Stock is automatically convertible into one share of Class B Common
Stock on a one-for-one basis in the event of a firm commitment underwritten
public offering of the shares of Class A Common Stock which has aggregate net
proceeds to the Guarantor of at least $25 million.
CLASS A COMMON STOCK
As of the date of this Prospectus, no shares of Class A Common Stock had
been issued. The holders of the Class A Common Stock are entitled to one vote
per share and are entitled to vote as a single class together with the holders
of the Class B Common Stock and the Preferred Stock on all matters subject to
shareholder approval, except that the holders of the Class A Common Stock will
vote as a separate class on any matter requiring class voting by The Companies
Act 1981 of Bermuda. The holders of the outstanding shares of Class A Common
Stock are entitled to receive dividends as and when declared by the Board of
Directors, PARI PASSU with the holders of the Class B Common Stock and the Class
C Common Stock, out of funds legally available therefor after the payment of any
dividends declared but unpaid on any shares of Preferred Stock then outstanding.
The holders of the Class A Common Stock have no preemptive or cumulative voting
rights and no rights to convert their shares of Class A Common Stock into any
other securities. On liquidation, dissolution or winding up of the Guarantor,
the holders of Class A Common Stock are entitled to receive, PARI PASSU with the
holders of Class B Common Stock and the Class C Common Stock, pro rata the net
assets of the Guarantor remaining after preferential distribution to holders of
Preferred Stock and the payment of all creditors and liquidation preferences, if
any.
CLASS B COMMON STOCK
As of the date of this Prospectus, there were seven holders of Class B
Common Stock and 4,807,711 shares of Class B Common Stock were issued and
outstanding. The holders of the Class B Common Stock
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are entitled to 10 votes per share and are entitled to vote as a single class
together with the holders of the Class A Common Stock and the Preferred Stock on
all matters subject to shareholder approval, except that the holders of the
Class B Common Stock vote as a separate class on any matter requiring class
voting by The Companies Act 1981 of Bermuda. The holders of the outstanding
shares of Class B Common Stock are entitled to receive dividends as and when
declared by the Board of Directors, PARI PASSU with the holders of Class A
Common Stock and the Class C Common Stock, out of funds legally available
therefor. The holders of the Class B Common Stock can convert their shares of
Class B Common Stock on a share-for-share basis into Class A Common Stock.
Shares of Class B Common Stock may be transferred only to other original holders
of Class B Common Stock or to members of the family of the original holder by
gift, devise or otherwise through laws of inheritance, descent, distribution or
to a trust established by the holder for the holder's family members, to
corporations the majority of beneficial owners of which are or will be owned by
the holders of Class B Common Stock and from corporations or partnerships which
are the holders of Class B Common Stock, to their shareholders or partners, as
the case may be (each a "Permitted Transferee"). Any other transfer of Class B
Common Stock is void, although the Class B Common Stock may be converted at any
time into Class A Common Stock on a one to one basis and then sold, subject to
the conditions and restrictions of Rule 144.
On liquidation or winding up of the Guarantor, the holders of the Class B
Common Stock are entitled to share ratably, PARI PASSU with the holders of Class
A Common Stock and the Class C Common Stock, the assets remaining after payment
of all debts and other liabilities and after distribution in full of the
preferential amounts to be distributed to the holders of Preferred Stock.
CLASS C COMMON STOCK
As of the date of this Prospectus, no shares of Class C Common Stock had
been issued. The holders of the Class C Common Stock are not entitled to any
votes in respect of such Class C Common Stock, except as may otherwise be
provided by law. The holders of the outstanding shares of Class C Common Stock
are entitled to receive dividends as and when declared by the Board of
Directors, PARI PASSU with the holders of Class A Common Stock and the Class B
Common Stock, out of funds legally available therefor. Each share of Class C
Common Stock shall be convertible into Class A Common Stock on such terms and
conditions, if any, as the Board of Directors of the Guarantor may determine. On
liquidation or winding up of the Guarantor, the holders of the Class C Common
Stock are entitled to share ratably, PARI PASSU with the holders of Class A
Common Stock and the Class B Common Stock, the assets remaining after payment of
all debts and other liabilities and after distribution in full of the
preferential amounts to be distributed to the holders of Preferred Stock.
WARRANTS
The Guarantor issued an aggregate of 300,000 Warrants to the purchasers of
the units in the Private Offering. The Warrants were issued pursuant to the
Warrant Agreement (the "Warrant Agreement"), dated the Closing Date, between the
Guarantor and The Chase Manhattan Bank, as the warrant agent (the "Warrant
Agent"). The Exchange Offer does not apply to the Warrants.
The following summary of certain provisions of the Warrant Agreement does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Warrant Agreement, including the definitions
of certain terms therein. A copy of the Warrant Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Each Warrant is evidenced by a certificate which entitles the holder thereof
to purchase 1.815 shares of Class A Common Stock from the Guarantor at a price
(the "Exercise Price") of $.01 per share, subject to adjustment as provided in
the Warrant Agreement. The Warrants may be exercised at any time beginning one
year after the Closing Date and prior to the close of business on the tenth
anniversary
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thereof. Warrants that are not exercised by such date will expire. The Warrants
became separately transferable from the Notes on April 1, 1997.
The aggregate number of shares of Class A Common Stock issuable upon
exercise of the Warrants is equal to approximately 3.35% of the outstanding
shares of Common Stock, on a fully diluted basis, as of the date of this
Prospectus.
CERTAIN TERMS
ANTI-DILUTION PROVISIONS
The Warrant Agreement contains provisions adjusting the Exercise Price and
the number of shares of Class A Common Stock or other securities issuable upon
exercise of a Warrant in the event of (i) a division, consolidation or
reclassification of the shares of Class A Common Stock, (ii) the issuance of
rights, options, warrants or convertible or exchangeable securities to all
holders of shares of Class A Common Stock entitling such holders to subscribe
for or purchase shares of Class A Common Stock at a price per share which is
lower than the then current value per share of Class A Common Stock, subject to
certain exceptions, (iii) the issuance of shares of Class A Common Stock at a
price per share that is lower than the then current value of such shares, except
for issuances in connection with an acquisition, merger or similar transaction
with a third party, (iv) certain distributions to all holders of shares of Class
A Common Stock of evidences of indebtedness or assets and (v) in the discretion
of the Guarantor's Board of Directors, in certain other circumstances. No
adjustment in the number of shares of Class A Common Stock purchasable upon
exercise of the Warrants is required, however, for grants (or exercises) of
options or other rights to purchase (or the exercise thereof) granted to
employees of the Company under the Guarantor's 1995 Stock Option Plan or
otherwise, for issuances of shares of Class A Common Stock to employees of the
Company, for grants (or exercises) of options, warrants or other agreements or
rights to purchase capital stock of the Guarantor entered into prior to the date
of the issuance of the Warrants and in certain other circumstances, or unless
such adjustment would require an increase or decrease of at least one percent in
the number of shares of Class A Common Stock purchasable upon the exercise of a
Warrant and such anti-dilution provisions will not apply to certain additional
limited exceptions.
NO RIGHTS AS SHAREHOLDERS
The holders of unexercised Warrants are not entitled, as such, to receive
dividends or other distributions, receive notice of any meeting of the
shareholders, consent to any action of the shareholders, receive notice of any
other stockholder proceedings, or to any other rights as shareholders of the
Guarantor.
MERGERS, CONSOLIDATIONS, ETC.
Except as provided below, if the Guarantor consolidates with, merges with or
into, or sells all or substantially all of its property and assets to another
person, each Warrant thereafter shall entitle the holder thereof to receive upon
exercise thereof the number of shares of capital stock or other securities or
property which the holder of Class A Common Stock is entitled to receive upon
completion of such consolidation, merger or sale of assets. If the Guarantor
merges or consolidates with, or sells all or substantially all of the property
and assets of the Guarantor to, another person and, in connection therewith,
consideration to the holders of Class A Common Stock in exchange for their
shares is payable solely in cash, or in the event of the dissolution,
liquidation or winding-up of the Guarantor, then the holders of the Warrants
will be entitled to receive distributions on an equal basis with the holders of
Class A Common Stock or other securities issuable upon exercise of the Warrants
assuming the Warrants had been exercised immediately prior to such event, less
the Exercise Price. Upon receipt of such payment, if any, the Warrants will
expire and the rights of the holders thereof will cease. In case of any such
merger, consolidation or sale of assets, the surviving or acquiring person and,
in the event of any dissolution,
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liquidation or winding-up of the Guarantor, the Guarantor must deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the holders of the
Warrants. After such funds and the surrendered Warrant Certificate are received,
the Warrant Agent must make payment by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such person or persons as it may be directed
in writing by the holders surrendering such Warrants.
ANTI-TAKEOVER PROTECTIONS
The voting provisions of the Class A Common Stock, Class B Common Stock and
the Preferred Stock could substantially impede the ability of one or more
shareholders (acting in concert) to acquire sufficient influence over the
election of directors and other matters to effect a change in control or
management of the Guarantor. As a result, such provision may be deemed to have
an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a shareholder might consider in such shareholder's best
interest, including attempts that might result in a premium over the market
price for the Class A Common Stock held by shareholders.
DIFFERENCES IN CORPORATE LAW
The Companies Act 1981 of Bermuda differs in certain respects from laws
generally applicable to United States corporations and their shareholders. Set
forth below is a summary of certain significant provisions of The Companies Act
(including any modifications adopted pursuant to the Guarantor's bye-laws)
applicable to the Guarantor, which differ in certain respects from provisions of
Delaware corporate law. The following statements are summaries, and do not
purport to deal with all aspects of Bermuda law that may be relevant to the
Guarantor and its shareholders.
INTERESTED DIRECTORS
A director who, directly or indirectly, is interested in a contract or
proposed contract or arrangement with the Guarantor must disclose the nature of
such interest as required by The Companies Act 1981 of Bermuda. Following
disclosure and unless disqualified by the chairman of the relevant Board
meeting, a director may vote in respect of any contract or arrangement in which
such director is interested and may be counted in the quorum of such meeting.
Under Delaware law no such transaction would be voidable if (i) the material
facts as to such interested director's relationship or interests are disclosed
or are known to the board of directors and the board in good faith authorizes
the transaction by the affirmative vote of a majority of the disinterested
directors, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) the
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified. Under Delaware law, such interested director could be held
liable for any transaction for which such director derived an improper personal
benefit.
MERGER AND SIMILAR ARRANGEMENTS
The Guarantor may acquire the business of another Bermuda company similarly
exempt from Bermuda taxes or a company incorporated outside Bermuda and carry on
such business when it is within the objects of its Memorandum of Association.
The Guarantor may amalgamate only with another Bermuda company or with a company
incorporated in another jurisdiction which permits such a company to amalgamate
with a Bermuda company, subject to shareholder approval. A shareholder may apply
to a Bermuda court for a proper valuation of such shareholder's shares if such
shareholder is not satisfied that fair value has been paid for such shares. The
court ordinarily would not disapprove the transaction on that ground absent
evidence of fraud or bad faith. Under Delaware law, with certain exceptions, any
merger, consolidation or sale of all or substantially all the assets of a
corporation must be approved by the board of directors and a majority of the
outstanding shares entitled to vote. Under Delaware law, a stockholder of a
corporation participating in certain major corporate transactions may, under
varying circumstances, be
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entitled to appraisal rights pursuant to which such stockholder may receive cash
in the amount of the fair market value of the shares held by such stockholder
(as determined by a court or by agreement of the corporation and the
stockholder) in lieu of the consideration such stockholder would otherwise
receive in the transaction. Delaware law does not provide stockholders of a
corporation with voting or appraisal rights when the corporation acquires
another business through the issuance of its stock or other consideration (i) in
exchange for the assets of the business to be acquired, (ii) in exchange for the
outstanding stock of the corporation to be acquired or (iii) in a merger of the
corporation to be acquired with a subsidiary of the acquiring corporation.
TAKEOVERS
Bermuda law provides that where an offer is made for shares of another
company and, within four months of the offer the holders of not less than 90% of
the shares which are the subject of the offer accept, the offeror may by notice
require the nontendering shareholders to transfer their shares on the terms of
the offer. Dissenting shareholders may apply to the court within one month of
the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its discretion to enjoin the
required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion as between the offeror and the
holders of the shares who have accepted the offer as a means of unfairly forcing
out minority shareholders. Delaware law provides that a parent corporation, by
resolution of its board of directors and without any stockholder vote, may merge
with any 90% or more owned subsidiary. Upon any such merger, dissenting
stockholders of the subsidiary would have appraisal rights.
SHAREHOLDERS' RIGHTS
The rights of shareholders under Bermuda law are not as extensive as the
rights of shareholders under legislation or judicial precedent in many United
States jurisdictions. Class actions and derivative actions are generally not
available to shareholders under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law precedent, which would
permit a shareholder to commence an action to remedy a wrong done by the
Guarantor where the act complained of is alleged to be beyond the corporate
power of the Guarantor or is illegal or would result in the violation of the
Guarantor's Memorandum of Association and Bye-laws. Furthermore, consideration
would be given by the court to acts that are alleged to constitute a fraud
against the minority shareholders or where an act requires the approval of a
greater percentage of the Guarantor's shareholders than actually approved it.
The winning party in such an action generally would be able to recover a portion
of attorneys' fees incurred in connection with such action. Class actions and
derivative actions generally are available to stockholders under Delaware law
for, among other things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover attorney fees incurred in
connection with such action.
INDEMNIFICATION OF DIRECTORS
The Guarantor may indemnify its directors or officers in their capacity as
such in respect of any loss arising or liability attaching to them by virtue of
any rule of law in respect of any negligence, default, breach of duty or breach
of trust of which a director or officer may be guilty in relation to the
Guarantor other than in respect of his own fraud or dishonesty. Under Delaware
law, a corporation may adopt a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for breaches of the
director's duty of loyalty, for acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law, for improper
payment of dividends or for any transaction from which the director derived an
improper personal benefit. Delaware law has provisions and limitations similar
to Bermuda regarding indemnification by a corporation of its directors or
officers, except that under Delaware law the statutory rights to indemnification
may not be as limited.
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INSPECTION OF CORPORATE RECORDS
Members of the general public have the right to inspect the public documents
of the Guarantor available at the office of the Registrar of Companies in
Bermuda which will include documents relating to an increase or reduction of
authorized capital. The shareholders have the additional right to inspect the
bye-laws, minutes of general meetings and audited financial statements of the
Guarantor, which must be presented to the annual general meeting of
shareholders. The register of shareholders of the Guarantor is also open to
inspection by shareholders without charge, and to members of the public for a
fee. The Guarantor is required to maintain its share register in Bermuda. The
Guarantor is required to keep at its registered office a register of its
directors and officers which is open for inspection by members of the public
without charge. Bermuda law does not, however, provide a general right for
shareholders to inspect or obtain copies of any other corporate records.
Delaware law permits any stockholder to inspect or obtain copies of a
corporation's stockholder list and its other books and records for any purpose
reasonably related to such person's interest as a stockholder.
CERTAIN PROVISIONS OF BERMUDA LAW
The Guarantor has been designated as a non-resident under the Exchange
Control Act of 1972 (the "Control Act") by the Bermuda Monetary Authority whose
permission for the issuance of shares of Class A Common Stock has been obtained.
This designation allows the Guarantor to engage in transactions in currencies
other than the Bermuda dollar.
The transfer of shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issuance of shares after the completion of
the Private Offering to or by such persons may be effected without specific
consent under the Control Act and regulations thereunder. Issues and transfers
of shares involving any person regarded as resident in Bermuda for exchange
control purposes require specific prior approval under the Control Act.
Non-Bermuda owners of shares of Class A Common Stock are not restricted in
the exercise of the rights to hold or vote their shares. Because the Guarantor
has been designated as a non-resident for Bermuda exchange control purposes
there are no restrictions on its ability to transfer funds in and out of Bermuda
or to pay dividends to United States residents who are holders of Class A Common
Stock, other than in respect of local Bermuda currency.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an applicant
acting in a special capacity (for example as a trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity the Guarantor
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such trust.
The Guarantor will take no notice of any trust applicable to any of its
shares whether or not it had notice of such trust.
As an "exempted company", the Guarantor is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company the Guarantor may not participate in certain business
transactions including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years); (2) the taking of mortgages on land in Bermuda
to secure an amount in excess of $50,000 without the consent of the Minister of
Finance of Bermuda; (3) the acquisition of securities created or issued by, or
any interest in, any local company or business, other than certain types of
Bermuda government securities of another "exempted" company, partnership or
other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Guarantor carried on outside Bermuda or with the permission of,
or under a license granted by, the Minister of Finance of Bermuda.
143
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
BANK REVOLVING CREDIT FACILITY
On October 5, 1995, The Chase Manhattan Bank, N.A. (the "Bank") extended a
$10 million revolving credit facility (the "Revolving Credit Facility") to
Ronald S. Lauder, Chairman of the Board of each of the Issuer and the Guarantor
and the principal shareholder of the Guarantor. On June 26, 1996, the Bank
replaced the original Revolving Credit Facility, which had been increased to $25
million, by extending a $40 million Revolving Credit Facility directly to the
Company which was increased to $50 million in August 1996. Pursuant to the
Subordinated Shareholder Loan, $35 million of this facility was repaid and the
Revolving Credit Facility was reduced to $15 million. The remaining outstanding
amounts under the Revolving Credit Facility were repaid with a portion of the
proceeds of the Shareholder Equity Investment. The Company intends to maintain
the Revolving Credit Facility and, accordingly, such amounts may be subsequently
reborrowed. Mr. Lauder has guaranteed the Company's obligations under the
Revolving Credit Facility. The Revolving Credit Facility accrues interest on all
amounts outstanding at the Company's option at either (i) the Bank's publicly
announced prime rate per annum or (ii) LIBOR plus 1% per annum, with such
interest rate to be determined by the Company. As of December 31, 1996, the full
amount of the Revolving Credit Facility was available to the Company. The
Revolving Credit Facility is payable on demand or is otherwise due and payable
by the Company on April 1, 1997.
CYBERLINK CREDIT LINE
Cyberlink has entered into a credit agreement pursuant to which Cyberlink
may borrow up to $5 million to finance its accounts receivable. Interest accrues
on all amounts outstanding at the rate of prime plus 2.25% per annum. Pursuant
to such credit agreement, Cyberlink may also borrow up to $2 million under a
second credit line for capital expenditures. Borrowings under this second line
of credit accrue interest at an annual rate of prime plus 2.5%. At December 31,
1996, $4.3 million and $1.4 million of such vendor financing was available,
respectively. All of the assets of Cyberlink, including Cyberlink's stock in its
subsidiaries, and of Cyberlink's subsidiaries have been pledged as collateral to
secure the borrowings under this credit agreement. Under the terms of such
agreement, Cyberlink is prohibited, without the bank's prior written consent,
from paying or declaring any dividends. The Company's borrowings from such banks
are payable prior to August 31, 1998 and are personally guaranteed by the former
President of Cyberlink, who is not an officer of the Company. The former
President of Cyberlink resigned effective as of July 15, 1996. The agreement
with this bank provides that the bank may, in its sole discretion, declare all
amounts outstanding under such credit agreement immediately due and payable in
the event that the former President of Cyberlink disavows his guarantee.
VENDOR FINANCING
One of the Company's primary equipment vendors has provided to certain of
the Company's subsidiaries an aggregate of approximately $50 million in vendor
financing commitments to fund the purchase of additional capital equipment. At
December 31, 1996, approximately $39 million was available. Borrowings from this
equipment vendor will accrue interest at a rate of LIBOR plus either 5.25% or
4.5% depending on the equipment purchased.
SHAREHOLDER STANDBY FACILITY
Ronald S. Lauder, Chairman of the Board of each of the Issuer and the
Guarantor and the principal shareholder of the Guarantor, has agreed, upon the
Guarantor's request, to provide (or arrange for a bank to provide) the Guarantor
with the $35.0 million subordinated Shareholder Standby Facility. If the
Shareholder Standby Facility is provided by a bank, Mr. Lauder will personally
guarantee the Guarantor's obligations under the facility up to $35.0 million.
Under the terms of the Indenture, the Guarantor may borrow, repay and reborrow
any amounts under the Shareholder Standby Facility at any time and from
144
<PAGE>
time to time. However, the lender will be obligated to make loans thereunder at
the request of the Guarantor up to $35.0 million, without conditions and
regardless of any default thereunder, until such time as the Guarantor has
received $35.0 million of net cash proceeds from the issuance of Common Stock.
The Shareholder Standby Facility will expire on the earlier of December 15, 2006
or the receipt of $35.0 million of net cash proceeds from the issuance of Common
Stock and will provide that interest may not be paid in cash until December 15,
2001. Mr. Lauder's obligations under the Shareholder Standby Facility may, under
applicable law, terminate upon his demise. The Shareholder Standby Facility is
in addition to Mr. Lauder's guarantee of the Revolving Credit Facility. As of
the date of this Prospectus, the Shareholder Standby Facility has not been
utilized.
CERTAIN UNITED KINGDOM TAX CONSIDERATIONS FOR U.S. HOLDERS OF NOTES
In the opinion of Levinson Gray, UK counsel to the Company, the following
reflects the material UK income tax consequences expected to result to holders
whose Original Notes are exchanged for Exchange Notes in the Exchange Offer. The
signed opinion of Levinson Gray is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Such opinion is based on
current UK law and Inland Revenue practice which may change prospectively or
retrospectively. There can be no assurance that the UK Inland Revenue would not
take a contrary view and no ruling from the UK Inland Revenue has been or will
be sought.
For UK tax purposes, the exchange of the Original Notes for the Exchange
Notes will have no UK tax consequences for a U.S. holder who is neither resident
nor ordinarily resident in the UK, nor carries on a trade, profession or
vocation in the UK through a branch or agency to which the Notes are
attributable.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Rosenman & Colin LLP, U.S. counsel to the Company, the
following summary describes the material United States federal income tax
consequences of the exchange of Original Notes for Exchange Notes as of the date
hereof. Such opinion is not binding on any taxing authority or the courts, and
no U.S. tax ruling has been or will be sought. The discussion below is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations, rulings and judicial decisions as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below. Certain
Holders (including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below.
The exchange of Original Notes for Exchange Notes pursuant to the Exchange
Offer will not be a taxable event for federal income tax purposes because the
Exchange Notes will not be considered to differ materially in kind or extent
from the Original Notes. As a result, there should be no material U.S. federal
income tax consequences to a holder exchanging Original Notes for the Exchange
Notes pursuant to the Exchange Offer.
EACH HOLDER OF ORIGINAL NOTES SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING ORIGINAL NOTES FOR EXCHANGE
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
PLAN OF DISTRIBUTION
Reference is made to "The Exchange Offer," above, for a description of the
Exchange Offer, including the purpose of the Exchange Offer, the basis upon
which the Exchange Notes are offered and expenses incurred in connection with
the Exchange Offer.
145
<PAGE>
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus with
any resale of such Original Notes. This Prospectus as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Original Notes received in exchange for Original Notes where
such Original Notes were acquired as a result of marketmaking activities or
other trading activities. The Company will, for a period of 180 days from the
date the Registration Statement is declared effective, make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
Neither the Company nor any of its affiliates has entered into any
arrangement or understanding with any broker-dealer to distribute the Exchange
Notes and will not receive any proceeds from any sale of Exchange Notes by any
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of the resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchaser of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such person may be deemed to be an underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed in the Registration Rights Agreement to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any brokers or dealers and expenses of counsel for the holders of the Exchange
Notes.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes being offered
hereby are being passed upon for the Company by Rosenman & Colin LLP, New York,
New York and Levinson Gray, London, United Kingdom. Certain legal matters with
respect to the Guarantee are being passed upon for the Company by Conyers, Dill
& Pearman, Hamilton, Bermuda.
EXPERTS
The Consolidated Financial Statements of RSL Communications, Ltd. as of and
for the years ended December 31, 1995 and December 31, 1996, and International
Telecommunications Group, Ltd. as of and for the year ended December 31, 1994
and as of and for the nine months ended September 30, 1995, included in this
Prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
The Consolidated Financial Statements of Cyberlink, Inc. as of August 31,
1995 and for the eight months then ended, included in this Prospectus, have been
audited by Brown, Leifer, Slatkin + Berns, independent auditors, as stated in
their report appearing herein.
146
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
RSL COMMUNICATIONS, LTD.
INDEPENDENT AUDITORS' REPORT......................................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1996 and 1995....................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996 and
1995............................................................................. F-4
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1996 and 1995.................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996 and
1995............................................................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
INDEPENDENT AUDITORS' REPORT......................................................... F-22
CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Consolidated Statement of Operations and Accumulated Deficit for the Nine Months
Ended September 30, 1995......................................................... F-23
Consolidated Statement of Cash Flows for the Nine Months Ended September 30,
1995............................................................................. F-24
Notes to Consolidated Financial Statements......................................... F-25
INDEPENDENT AUDITORS' REPORT......................................................... F-30
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1994
Consolidated Statement of Operations and Accumulated Deficit for the Year Ended
December 31, 1994................................................................ F-31
Consolidated Statement of Cash Flows for the Year Ended December 31, 1994.......... F-32
Notes to Consolidated Financial Statements......................................... F-33
CYBERLINK, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT......................................................... F-38
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of August 31, 1995................................... F-39
Consolidated Statement of Operations for the Eight Month Period Ended August 31,
1995............................................................................. F-40
Consolidated Statement of Cash Flows for the Eight Month Period Ended August 31,
1995............................................................................. F-41
Notes to Consolidated Financial Statements......................................... F-42
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
RSL Communications, Ltd.
We have audited the accompanying consolidated balance sheets of RSL
Communications, Ltd., a Bermuda corporation, and its subsidiaries (together, the
"Company"), as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended. Our audits also included the financial statement schedules listed in the
Index at Item 21(b). These financial statements and the financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
Deloitte & Touche LLP
New York, New York
March 7, 1997
F-2
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
-------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................................... $ 104,067,604 $ 5,163,087
Accounts receivable.......................................................................... 26,479,190 6,140,222
Marketable securities--available for sale.................................................... 67,828,360 --
Prepaid expenses and other current assets.................................................... 3,968,928 855,589
-------------- ------------
Total current assets..................................................................... 202,344,082 12,158,898
-------------- ------------
MARKETABLE SECURITIES--Held to maturity...................................................... 104,370,011 --
-------------- ------------
PROPERTY AND EQUIPMENT:
Telecommunications equipment................................................................. 29,924,892 9,844,196
Furniture, fixtures and other................................................................ 5,926,462 988,898
-------------- ------------
35,851,354 10,833,094
Less accumulated depreciation................................................................ (3,513,449) (302,022)
-------------- ------------
Property and equipment--net.................................................................. 32,337,905 10,531,072
-------------- ------------
GOODWILL--and other intangible assets net of accumulated amortization........................ 87,605,112 29,397,768
-------------- ------------
DEPOSITS AND OTHER ASSETS.................................................................... 1,311,923 984,441
-------------- ------------
TOTAL ASSETS................................................................................. $ 427,969,033 $53,072,179
-------------- ------------
-------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................................. $ 49,369,564 $20,788,142
Accrued expenses............................................................................. 12,701,543 2,276,649
Notes payable................................................................................ 6,537,853 5,235,967
Deferred revenue............................................................................. 3,569,853 744,985
Other liabilities............................................................................ 5,235,961 2,712,054
-------------- ------------
Total current liabilities................................................................ 77,414,774 31,757,797
-------------- ------------
OTHER LIABILITIES--noncurrent................................................................ 15,286,340 8,961,909
-------------- ------------
LONG-TERM DEBT--less current portion......................................................... 6,032,123 1,604,123
-------------- ------------
SENIOR NOTES, 12 % due 2006, net of unamortized discount of $4,000,000....................... 296,000,000 --
-------------- ------------
CAPITAL LEASE OBLIGATIONS--less current portion.............................................. 12,392,699 5,043,498
-------------- ------------
TOTAL LIABILITIES............................................................................ 407,125,936 47,367,327
-------------- ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, Class A--par value $.01; no shares authorized, none issued................... -- --
Common stock, Class B--par value $.01; 4,807,711 and 2,927,564 issued and outstanding at
December 31, 1996 and 1995, respectively................................................. 48,077 29,275
Common Stock Class C--par value $.01; no shares issued..................................... -- --
Preferred stock par value $.01; 20,000,000 shares authorized, 9,243,866 shares issued and
outstanding at December 31, 1996 and 1995, respectively.................................. 92,439 92,439
Warrants--Common Stock, exercise price of $.01............................................. 5,543,500 --
Additional paid-in capital................................................................. 65,064,284 15,083,086
Accumulated deficit........................................................................ (47,739,777) (9,499,948)
Foreign currency translation adjustment.................................................... (621,926) --
Deferred financing costs................................................................... (1,543,500) --
-------------- ------------
Total shareholders' equity................................................................. 20,843,097 5,704,852
-------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................................... $ 427,969,033 $53,072,179
-------------- ------------
-------------- ------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
-------------- -------------
<S> <C> <C>
REVENUES...................................................... $ 113,257,340 $ 18,616,684
COST OF SERVICES.............................................. 98,461,406 17,510,041
-------------- -------------
Gross profit................................................ 14,795,934 1,106,643
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................. 38,892,751 9,638,997
DEPRECIATION AND AMORTIZATION................................. 6,655,192 848,658
-------------- -------------
LOSS FROM OPERATIONS.......................................... (30,752,009) (9,381,012)
INTEREST INCOME............................................... 3,975,922 172,922
INTEREST EXPENSE.............................................. (11,358,796) (193,838)
OTHER EXPENSE................................................. (287,986) --
FOREIGN CURRENCY TRANSACTION GAIN............................. 757,696 --
MINORITY INTEREST............................................. (180,100) --
INCOME TAXES.................................................. (394,556) --
-------------- -------------
NET LOSS...................................................... $ (38,239,829) $ (9,401,928)
-------------- -------------
-------------- -------------
LOSS PER SHARE OF CLASS B COMMON STOCK........................ $ (11.24) $ (3.65)
WEIGHTED AVERAGE NUMBER OF SHARES OF CLASS B COMMON STOCK
OUTSTANDING................................................. 3,401,464 2,575,855
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS B
------------------
COMMON STOCK
COMMON STOCK PREFERRED STOCK WARRANTS DEFERRED
------------------ ------------------ ------------------- FINANCING
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT COSTS
--------- ------- --------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995...... -- $ -- -- $ -- -- $ -- $ --
Issuance of Preferred Stock... -- -- 9,243,866 92,439 -- -- --
Issuance of Common Stock...... 2,927,564 29,275 -- -- -- -- --
Net loss...................... -- -- -- -- -- -- --
--------- ------- --------- ------- ------- ---------- -----------
BALANCE, DECEMBER 31, 1995.... 2,927,564 29,275 9,243,866 92,439 -- -- --
Issuance of warrants in
connection with Notes
Offering.................... -- -- -- -- 300,000 4,000,000 --
Issuance of warrants in
connection with shareholder
standby facility and
revolving credit facility... -- -- -- -- 210,000 1,543,500 (1,543,500)
Issuance of Common Stock...... 1,880,147 18,802 -- -- -- -- --
Foreign Currency Translation
Adjustment.................. -- -- -- -- -- -- --
Net loss...................... -- -- -- -- -- -- --
--------- ------- --------- ------- ------- ---------- -----------
BALANCE, DECEMBER 31, 1996.... 4,807,711 $48,077 9,243,866 $92,439 510,000 $5,543,500 $(1,543,500)
--------- ------- --------- ------- ------- ---------- -----------
--------- ------- --------- ------- ------- ---------- -----------
<CAPTION>
FOREIGN
CURRENCY
ADDITIONAL ACCUMULATED TRANSLATION
PAID-IN CAPITAL DEFICIT ADJUSTMENT TOTAL
--------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995...... $ -- $ (98,020 )* $ -- $ (98,020)
Issuance of Preferred Stock... 13,261,087 -- -- 13,353,526
Issuance of Common Stock...... 1,821,999 -- -- 1,851,274
Net loss...................... -- (9,401,928 ) -- (9,401,928)
--------------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1995.... 15,083,086 (9,499,948 ) -- 5,704,852
Issuance of warrants in
connection with Notes
Offering.................... -- -- -- 4,000,000
Issuance of warrants in
connection with shareholder
standby facility and
revolving credit facility... -- -- -- --
Issuance of Common Stock...... 49,981,198 -- -- 50,000,000
Foreign Currency Translation
Adjustment.................. -- -- (621,926) (621,926)
Net loss...................... -- (38,239,829 ) -- (38,239,829)
--------------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1996.... $65,064,284 $(47,739,777) $(621,926) $ 20,843,097
--------------- ------------ ---------- ------------
--------------- ------------ ---------- ------------
</TABLE>
* Deficit at January 1, 1995 consists of pre-operating expenses.
See notes to consolidated financial statements.
F-5
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
--------------- --------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss........................................................................... $ (38,239,829) $ (9,401,928)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities, net of effects of purchase of subsidiaries Accretion of interest
receivable on restricted marketable securities................................... (1,562,359) --
Depreciation and amortization...................................................... 6,655,192 848,658
Foreign currency transaction gain.................................................. (787,696) --
Loss on disposal of fixed assets................................................... 367,658 --
Provision for losses on accounts receivable........................................ 2,829,578 148,690
Changes in assets and liabilities:
Increase in accounts receivable.............................................. (17,033,664) (2,453,396)
(Increase) decrease in deposits and other current assets..................... (3,249,197) 366,210
(Increase) decrease in prepaid expenses and other current assets............. (925,424) 296,867
Increase in accounts payable and accrued expenses............................ 44,243,136 3,510,899
Increase in deferred revenue and other current liabilities................... 4,279,292 1,501,400
(Decrease) increase in other liabilities..................................... (7,051,860) 8,736,770
--------------- --------------
Net cash provided by (used in) operating activities.......................... (10,475,173) 3,554,170
--------------- --------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of subsidiaries........................................................ (38,552,408) (15,413,080)
Purchase of marketable securities.................................................. (82,529,263) --
Proceeds from marketable securities................................................ 14,700,903 --
Purchase of restricted marketable securities....................................... (102,807,652) --
Purchase of property and equipment................................................. (15,983,227) (1,123,539)
Proceeds from sale of equipment.................................................... 171,367 --
--------------- --------------
Net cash used in investing activities........................................ (225,000,280) (16,536,619)
--------------- --------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of common and preferred stock and Warrants.................. 50,000,000 15,204,800
Proceeds from notes payable........................................................ -- 3,000,000
Payment of notes payable........................................................... (3,000,000) --
Proceeds from issuance of 12 % Senior Notes and Warrants........................... 300,000,000 --
Payments of offering costs......................................................... (10,988,423) --
Proceeds from long-term debt--net.................................................. 44,000,000 --
Payments of long-term debt......................................................... (44,598,280) --
Principal payments under capital lease obligations................................. (382,181) (61,799)
--------------- --------------
Net cash provided by financing activities.................................... 335,031,116 18,143,001
--------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS.............................................. 99,555,663 5,160,552
EFFECTS OF FOREIGN CURRENCY EXCHANGE RATES ON CASH................................. (651,146) --
CASH AND CASH EQUIVALENTS AT JANUARY 1............................................. 5,163,087 2,535
--------------- --------------
CASH AND CASH EQUIVALENTS AT DECEMBER 31........................................... $ 104,067,604 $ 5,163,087
--------------- --------------
--------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for:
Interest........................................................................... $ 1,639,351 $ 30,606
--------------- --------------
--------------- --------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES -
Assets acquired under capital lease obligations.................................... $ 7,897,041 $ 4,950,333
--------------- --------------
--------------- --------------
Issuance of notes to acquire stock................................................. $ 9,328,166 $ --
--------------- --------------
--------------- --------------
Issuance of Warrants for shareholder standby facility.............................. $ 1,543,500 $ --
--------------- --------------
--------------- --------------
</TABLE>
See notes to consolidated financial statements.
F6
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
RSL Communications, Ltd. ("RSL"), a Bermuda corporation, is the successor in
interest to RSL Communications Inc., a British Virgin Islands corporation, which
is the successor in interest to RSL Communications, Inc., a Delaware
corporation. RSL, together with its direct and indirect subsidiaries are
referred to herein as the "Company." The Company is a multinational
telecommunications company which provides an array of international and domestic
telephone services. The Company focuses on providing international long distance
voice services to small and medium-sized businesses in strategic markets. The
Company currently has operations and provides services in the United States, the
United Kingdom, France, Germany, the Netherlands, Sweden and Finland. In 1995,
approximately 52% of the world's international long distance telecommunications
minutes originated in these markets.
2. ACQUISITIONS
On March 10, 1995, the Company entered into a stock purchase agreement (the
"Agreement") with International Telecommunications Group, Ltd. ("ITG") and RSL
COM U.S.A., Inc. (formerly known as International Telecommunications
Corporation) ("RSL USA"), pursuant to which the Company initially purchased from
ITG 66,667 shares of ITG's Series A convertible preferred stock (which
represented 25% of ITG's then outstanding stock, including common and preferred
shares) for $3,000,000, subject to increase, to a maximum of $4,750,000. Such
increase was predicated upon the attainment of certain financial targets and
ratios. Based on the terms of the Agreement, the adjusted purchase price of the
shares totaled $4,750,000. The Company subsequently purchased additional shares
of ITG's common stock at various times during 1995 and 1996 for a total purchase
price of cash and secured notes aggregating $12,870,000 and $26,725,000 at
December 31, 1995 and 1996, respectively and the assumption of net liabilities
resulting in recorded goodwill of $26,780,000. At December 31, 1996, the
Company's investment in ITG was $54,204,000, which represented in excess of 87%
of the outstanding shares of ITG.
Effective September 1, 1995, ITG's subsidiary RSL USA, purchased 51% of the
capital stock of Cyberlink, Inc. ("Cyberlink"). During the period August 1996
through December 1996, RSL USA purchased 1,023,807 shares of the capital stock
of Cyberlink for approximately $7,200,000. In addition, through March 1997, the
Company acquired the remaining outstanding shares.
The total purchase price consisted of approximately $11,509,000, and
assumption of net liabilities of $21,131,000. In connection with the purchase of
Cyberlink, the Company recorded approximately $32,640,000 of goodwill.
In November 1995, the Company, through its wholly-owned subsidiary RSL COM
Europe, Ltd. ("RSL COM Europe") completed the acquisition of 51% of Cyberlink
Communications Europe Ltd. ("Cyberlink Europe"). Cyberlink Europe is a holding
company which owned 100% of the shares of RSL COM Sweden AB, Cyberlink
International Telesystems Germany GmbH and RSL COM Finland OY. During the period
August 1996 through March 1997, RSL COM Europe purchased the remaining 49% of
the Cyberlink Europe shares for approximately $2,062,000. The total cash paid
was approximately $3,805,000 at December 31, 1996. The Company recorded
approximately $2,457,000 of goodwill in connection with this purchase.
In May 1996, the Company acquired the net assets, principally
telecommunications equipment and facilities, constituting the international long
distance voice businesses of Sprint in France and Germany through its wholly
owned subsidiaries RSL COM France S.A., a French corporation ("RSL France"), and
RSL COM Deutschland GmbH, a German limited liability company ("RSL Germany").
F-7
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
Pursuant to the applicable asset purchase agreements, the Company can not
disclose the purchase price of the net assets. In connection with this
transaction, the Company recorded approximately $7,905,000 of goodwill.
In October 1996, the Company acquired 38,710 shares of Belnet Nederland B.V.
("Belnet/RSL"), representing 75% of the outstanding stock for $10,000,000. In
connection with the purchase of Belnet/ RSL, the Company recorded approximately
$8,000,000 of goodwill.
In August 1996, the Company acquired the assets and assumed certain limited
liabilities of Incom (UK) Limited ("Incom"), a United Kingdom reseller, for
$500,000 plus 3,954 non-voting shares of ITG (the "Purchased Shares"). In
addition, 3,333 voting shares of ITG currently held by Incom were exchanged for
an equal number of non-voting shares. The Company has also entered into a
consulting agreement with an affiliate of Incom calling for payments of $10,000
per month for seven years and has paid such affiliate $280,000 for its agreement
not to compete for a period of 7 years and has agreed to make a $660,000,
seven-year loan to such affiliate, bearing interest at a rate of 7% per annum.
In connection with this acquisition, the Company recorded approximately
$3,840,000 of goodwill. The Company will fully evaluate the acquired assets
prior to August 1997. The Company does not expect any material changes to its
recorded asset values as a result of such evaluation.
The acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase prices have been allocated to the
assets acquired, primarily fixed assets and accounts receivable, and liabilities
assumed based on their estimated fair values at the dates of acquisition. The
excess of the purchase price over the estimated fair values of the net assets
acquired has been recorded as goodwill, which is amortized over fifteen years.
The December 31, 1995 consolidated statements of operations, shareholders'
equity and cash flows include the results of ITG, Cyberlink and Cyberlink Europe
from their dates of acquisition, respectively, through December 31, 1995. The
December 31, 1996 consolidated statements of operations, shareholders equity and
cash flows also include the results of RSL COM France and RSL COM Germany as of
May 1996 (date of commencement of operations), Incom as of August 1996, and
Belnet/RSL from October 1996 (date of acquisition) through December 31, 1996.
The following presents the unaudited pro forma consolidated statement of
operations of the Company for the years ended December 31, 1996 and 1995 as
though the acquisitions of ITG, Cyberlink, Cyberlink Europe, RSL COM France, RSL
COM Germany and Belnet/RSL had occurred on January 1, 1995. The acquisition of
Incom is excluded as it is not significant. The consolidated statement does not
necessarily represent what the Company's results of operations would have been
had such acquisitions actually occurred on such date.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
(UNAUDITED)
Revenues............................................... $ 124,235,934 $ 72,777,643
----------------- -----------------
----------------- -----------------
Net loss............................................... $ (41,277,456) $ (38,008,282)
----------------- -----------------
----------------- -----------------
Net loss per share..................................... $ (12.14) $ (14.76)
</TABLE>
F-8
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--The consolidated
financial statements include the accounts of RSL Communications, Ltd. and its
majority-owned subsidiaries: its 87% owned subsidiary ITG and its 94% owned
subsidiary, Cyberlink, Inc. and RSL COM Europe and its 91% owned subsidiary
Cyberlink Communications Europe Ltd. and Belnet/RSL a 75% owned subsidiary of
RSL COM Europe. The Company has included 100% of its subsidiaries' operating
losses since the minority interests' investments have been reduced to zero.
Minority interest represents another entity's ownership interest in Belnet/RSL
at December 31, 1996. All material intercompany accounts and transactions have
been eliminated. All of the Company's subsidiaries' years end December 31.
MANAGEMENT ASSUMPTIONS--The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses. Such
estimates primarily relate to reserves recorded for doubtful accounts and
accruals for other claims. Actual results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION--Assets and liabilities of foreign entities
have been translated into United States dollars using the exchange rates in
effect at the balance sheet dates. Results of operations of foreign entities are
translated using the average exchange rates prevailing throughout the period.
Local currencies are considered the functional currencies of the Company's
foreign operating entities. The Company utilizes a net settlement process with
its correspondents comprised of special drawing rights ("SDRs"). SDRs are the
established method of settlements among international telecommunications
carriers. The SDRs are valued based upon the values of a basket of foreign
currencies. Translation effects are accumulated as part of the cumulative
foreign currency translation adjustment in equity which at December 31, 1995
were not significant. Gains and losses from foreign currency transactions are
included in the consolidated statements of operations for each respective
period.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
ACCOUNTS RECEIVABLE--Accounts receivable are stated net of the allowance for
doubtful accounts of $3,900,000 and $1,600,000 at December 31, 1996 and 1995,
respectively. The Company recorded bad debt expense of $2,829,578 and $148,690
for the years ended December 31, 1996 and 1995, respectively.
ACCRUED EXPENSES--Accrued expenses for the years ended December 31, 1996 and
1995 consist primarily of accrued interest. Accrued interest for the years ended
December 31, 1996 and 1995 were $9,447,000 and $92,000, respectively.
MARKETABLE SECURITIES--Marketable securities consist principally of US.
Treasury bills, commercial paper and corporate notes with a maturity date
greater than three months when purchased. Available for sale securities are
stated at market and the held to maturity securities are stated at amortized
costs. Gains and losses, both realized and unrealized, are measured using the
specific identification method. Market value is determined by the most recently
traded price of the security at the balance sheet date. Marketable securities
are defined as either available for sale or held to maturity securities under
the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", depending on the security.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION--Property and equipment are
stated at cost or fair values at the date of acquisition, and in the case of
equipment under capital leases, the present value of the
F-9
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
future minimum lease payments, less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives of the
depreciable assets, which range from five to fifteen years. Improvements are
capitalized, while repair and maintenance costs are charged to operations as
incurred.
GOODWILL--Goodwill represents the excess of cost over the fair value of the
net assets of acquired entities, and is being amortized using the straight-line
method over fifteen years. The Company periodically reviews the value of its
goodwill to determine if an impairment has occurred. The Company measures the
potential impairment of recorded goodwill by the undiscounted value of expected
future cash flows in relation to its net capital investment in the subsidiary.
Based on its review, the Company does not believe that an impairment of its
goodwill has occurred.
DEFERRED FINANCING COSTS--The deferral financing costs incurred in
connection with the Senior Notes are being amortized on a straight line basis
over ten years.
DEPOSITS--Deposits consist principally of amounts paid to the Company's
carrier vendors.
REVENUE RECOGNITION AND DEFERRED REVENUE--The Company records revenue based
on minutes (or fractions thereof) of customer usage.
The Company records payments received in advance for prepaid calling card
services and services to be supplied under contractual agreements as deferred
revenues until such related services are provided.
COSTS OF SERVICES--Costs of services is comprised primarily of transmission
costs.
SELLING EXPENSES--Selling costs such as commissions, marketing costs, and
other customer acquisition costs are treated as period costs. Such costs are
recorded in selling, general and administrative costs in the Company's statement
of operations.
INCOME TAXES--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. SFAS No. 109 establishes financial accounting and reporting
standards for the effect of income taxes that result from activities during the
current and preceding years. SFAS No. 109 requires an asset and liability
approach for financial reporting for income taxes. The Company's foreign
subsidiaries file separate income tax returns in the jurisdiction of their
operations. The Company's United States subsidiaries file stand-alone United
States income tax returns.
LOSS PER COMMON SHARE--Loss per common share is calculated by dividing the
loss attributable to common shares by the weighted average number of shares
outstanding. Outstanding common stock options and warrants are not included in
the loss per common share calculation as their effect is anti-dilutive.
NEW ACCOUNTING STANDARDS--During 1995, the Company adopted SFAS No. 121,
Impairment of Long-Lived Assets. There was no adjustment recorded as a result of
adopting this standard. The Company periodically compares the carrying value of
its long-lived assets, principally property and equipment, to undiscounted cash
flows generated by the long-lived assets. The Company's undiscounted cash flows
exceed the carrying value of its long-lived assets.
F-10
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. CONCENTRATION OF CREDIT RISK
The Company is subject to significant concentrations of credit risk which
consist principally of trade accounts receivable, cash and cash equivalents, and
marketable securities. The Company's US subsidiaries sell a significant portion
of their services to other carriers and, as a result, maintains significant
receivable balances with certain carriers. If the financial condition and
operations of these customers deteriorate below critical levels, the Company's
operating results could be adversely affected.
The Company now performs ongoing credit evaluations of its customers'
financial condition and requires collateral in the form of deposits in certain
circumstances.
The Company maintains its cash with high quality credit institutions, and
its cash equivalents and marketable securities are in high quality securities.
5. MARKETABLE SECURITIES
A summary of the Company's available for sale marketable securities at
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
AMORTIZED COST MARKET VALUE
-------------- -------------
<S> <C> <C>
Corporate notes............................................... $ 40,728,408 $ 40,677,564
Medium term notes............................................. 10,950,557 10,938,389
Commercial paper.............................................. 10,260,965 10,256,634
Federal agency notes.......................................... 5,888,430 5,884,481
-------------- -------------
$ 67,828,360 $ 67,757,068
-------------- -------------
-------------- -------------
</TABLE>
The Company has recorded its available for sale marketable securities at
amortized cost as the difference between amortized cost and market value is
immaterial to the consolidated financial statements.
The carrying value of the available for sale marketable securities by
maturity date as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Matures in one year............................................ $57,548,581
Matures after one year through three years..................... 10,279,779
----------
Total.......................................................... $67,828,360
----------
----------
</TABLE>
Proceeds from the sale of available for sale marketable securities during
1996 were $14,700,903. Gross gains of $56,302 were realized on these sales in
1996.
Securities classified as held to maturity, which are comprised of Federal
agency notes, are stated at amortized cost. Such securities are restricted in
order to make the first six scheduled interest payments on the 12 % Senior
Notes. The held to maturity securities at December 31,1996 are as follows:
<TABLE>
<CAPTION>
AMORTIZED COST MARKET VALUE
-------------- --------------
<S> <C> <C>
Matures in one year.......................................... $ 39,692,258 $ 39,738,512
Matures after one year through three years................... 64,677,753 65,001,563
-------------- --------------
Total........................................................ $ 104,370,011 $ 104,740,075
-------------- --------------
-------------- --------------
</TABLE>
F-11
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES
The Company has incurred losses since inception for both book and tax
purposes. The Company's Netherlands subsidiary recorded approximately $395,000
in income tax expense. For the years ended December 31, 1996 and 1995, the
Company had net operating loss carryforwards generated primarily in the United
States of approximately $47,000,000. The net operating loss carryforwards will
expire at various dates beginning in 2009 through 2012 if not utilized.
In accordance with SFAS No. 109, the Company has computed the components of
deferred income taxes as of December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Deferred tax assets.............................................. $ 18,800,000 $ 6,900,000
Less valuation allowance......................................... (18,800,000) (6,900,000)
------------- ------------
Net deferred tax assets.......................................... $ -- $ --
------------- ------------
------------- ------------
</TABLE>
The Company's net operating losses and legal reserves generated the deferred
tax assets. At December 31, 1996 and 1995, a valuation allowance of $18,800,000
and $6,900,000, respectively, is provided as the realization of the deferred tax
benefits are not likely.
7. NOTES PAYABLE AND LONG-TERM DEBT
On October 3, 1996, RSL Communications PLC ("RSL PLC"), a wholly owned
subsidiary of RSL, issued (the "Private Offering") 300,000 Units, each
consisting of an aggregate of one $1,000 Senior Note (collectively, the "Notes")
due 2006 bearing interest at the rate of 12 1/4% and one warrant to purchase
1.815 Class A common shares which expire in ten years (collectively, the
"Warrants"). The exercise price of such Warrants is $.01.
The value ascribed to the Warrants was $4,000,000. The unamortized discount
of $4,000,000 is recorded as a reduction against the face value of the Notes,
and is amortized over the life of the Notes.
The Notes, which are guaranteed by RSL, are redeemable, at RSL PLC's option,
subsequent to November 15, 2001, initially at 106.1250% of their principal
amount, declining to 103.0625% of their principal amount for the calendar year
subsequent to November 15, 2002, and at 100% of the principal amount subsequent
to November 15, 2003.
The indenture pursuant to which the Notes were issued contains certain
restrictive covenants which impose limitations on RSL and certain of its
subsidiaries ability to, among other things: (i) incur additional indebtedness,
(ii) pay dividends or make certain other distributions, (iii) issue capital
stock of certain subsidiaries, (iv) guarantee debt, (v) enter into transactions
with shareholders and affiliates, (vi) create liens, (vii) enter into
sale-leaseback transactions, and (viii) sell assets.
At December 31, 1996, the Company is in compliance with the above
restrictive covenants.
The Company is obligated to register the Notes with the Securities and
Exchange Commission on or prior to June 1, 1997. If the Notes are not registered
on or prior to June 1, 1997, the interest rate on the Notes will increase to
12 3/4%.
In connection with the issuance of the Notes, the Company is required to
maintain restricted marketable securities in order to make the first six
scheduled interest payments on the Notes. Such restricted marketable securities
amounted to $104,370,011 at December 31, 1996.
F-12
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
At December 31, 1996, the Company had a $35,000,000 shareholder standby
facility with the Company's Chairman and a $15,000,000 revolving credit facility
with a bank (the "Revolving Credit Facility"), guaranteed by the Company's
Chairman, all of which was available.
The shareholder standby facility bears interest at the rate of 11% per
annum. In connection with this facility and the Company's Chairman's personal
guarantee of the Revolving Credit Facility, the Company's Chairman received
warrants, which vest over one year, to purchase 210,000 Class B common shares of
the Company (the "Class B Common Stock"). The Company recorded $1,543,500 as the
value of the warrants at the time of their issuance. At December 31, 1996, the
deferred financing costs recorded will be amortized, over the vesting period,
through October 3, 1997. The revolving credit facility bears interest at the
rate of LIBOR plus 1%.
The warrants become exercisable on October 3, 1997 at an exercise price of
$.01 per share and expire in October 2006.
In connection with the September 1996 purchase of additional shares of ITG's
common stock, the Company issued secured notes totaling approximately
$9,328,000. Such notes and interest are secured by the common stock acquired,
and are payable in quarterly annual installments, and bear interest at the rate
of 6%.
During August 1996, the Company obtained a $50,000,000 revolving credit
facility with a bank, guaranteed by the Company's Chairman, and utilized this
facility to repay the bank for all amounts due under the previously outstanding
revolving loan facility provided by the bank and guaranteed by the Company's
Chairman, which was $44,000,000 at the time of repayment. Immediately prior to
the Private Offering, the Company repaid $35,000,000 of the $44,000,000 borrowed
under the Revolving Credit Facility with the proceeds of the Subordinated
Shareholder Loan (see Note 11) and reduced the outstanding commitment under the
Revolving Credit Facility to $15,000,000.
At December 31, 1996 RSL USA has a series of current notes payable to
different vendors in the amount of $213,086, which bear interest at the rates
from 8% to 14.5%. At December 31, 1995, such amount was $698,652, of which
$564,529 was current.
Cyberlink has a credit agreement which provides for up to $5,000,000 in
committed credit lines to finance its accounts receivable. Interest is payable
at 2 1/4% over the prime rate of interest (prime being 8.25% at December 31,
1996). A second credit line provides for up to $2,000,000 in capital expenditure
financing. Interest on this line is payable at 2 1/2% over the prime rate of
interest. The total amounts outstanding at December 31, 1996 from the above
credit lines were $679,784 and $605,600, respectively, and $1,566,000 and
$470,000, at December 31, 1995, respectively. The credit lines terminate on
August 31, 1998. Borrowings under both of these credit lines are collateralized
by a security interest in substantially all of Cyberlink's assets.
Cyberlink has a long-term note payable to a vendor in the amount of
$1,743,000 which bears interest at the rate of 10%, commencing January 1, 1997.
One of the Company's primary equipment vendors has provided to certain of
the Company's subsidiaries an aggregate of approximately $50 million in vendor
financing commitments to fund the purchase of additional capital equipment. At
December 31, 1996, approximately $39.0 million was available. Borrowings under
this agreement are recorded as capital lease obligations.
F-13
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
Long-term debt matures as follows:
<TABLE>
<S> <C>
1997.......................................................... $ 6,537,853
1998.......................................................... 3,099,349
1999.......................................................... 2,932,774
2000.......................................................... --
2001.......................................................... --
2002 and thereafter........................................... 300,000,000
-----------
Total......................................................... 312,569,976
Less current maturities....................................... (6,537,853)
-----------
Long Term Debt and 12 1/4% Senior Notes....................... $306,032,123
-----------
-----------
</TABLE>
RSL's notes payable had fair values that approximated their carrying
amounts.
Interest expense on the above notes was approximately $10,456,869 and
$461,000 for the years ended December 31, 1996 and 1995, respectively.
8. GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Goodwill....................................................... $ 79,731,497 $ 29,425,093
Deferred financing costs....................................... 10,988,423 --
Organization costs and others.................................. 625,820 521,086
------------- -------------
91,345,740 29,946,179
Less accumulated amortization.................................. (3,740,628) (548,411)
------------- -------------
Intangible assets-net.......................................... $ 87,605,112 $ 29,397,768
------------- -------------
------------- -------------
</TABLE>
Amortization expense for the years ended December 31, 1996 and 1995 was
$3,192,217 and $548,411, respectively.
9. SHAREHOLDERS' EQUITY
COMMON STOCK
During 1996, the Company issued 1,880,147 shares of Class B Common Stock for
cash aggregating $50,000,000. During 1995, 2,927,564 shares were issued for
$1,851,274. The Company is authorized to issue 20,000,000 shares in aggregate of
its common stock.
PREFERRED STOCK
During 1995, the Company issued 9,243,866 shares of its preferred stock to
the holders of its Class B common stock for cash of $13,353,526. The preferred
stock ranks senior to the Company's common stock as to dividends and a
liquidation preference of $1,000 per share. Each share is convertible at the
holder's option into one share of Class B Common Stock. All preferred shares
will be automatically converted into
F-14
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (CONTINUED)
the Company's Class B Common Stock in the event of the consummation of a public
offering that yields proceeds in excess of $25,000,000. Dividends, at the rate
of 8%, are cumulative. Upon conversion of the shares of the preferred stock, the
cumulative dividends are not payable and are to be deemed cancelled and waived.
The cumulative amount of such dividends is approximately $16,000.
10. CAPITAL LEASE OBLIGATIONS
Future minimum annual payments applicable to assets held under capital lease
obligations for years subsequent to December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................... $1,237,477
1998........................................................... 2,852,380
1999........................................................... 4,355,684
2000........................................................... 3,691,498
2001........................................................... 2,626,885
2002 and thereafter............................................ 3,769,417
----------
Total minimum lease obligations................................ 18,533,341
Less interest.................................................. (5,704,476)
----------
Present value of future minimum lease obligations.............. 12,828,865
Less current portion, included in other current liabilities.... (436,166)
----------
Long-term lease obligations at December 31, 1996............... $12,392,699
----------
----------
</TABLE>
The assets and liabilities under capital leases are recorded at the present
value of the minimum lease payments using effective interest rates ranging from
9% to 11% per annum.
Assets held under capital leases aggregated $13,224,507 and $5,325,771 at
December 31, 1996 and 1995, respectively. The related accumulated depreciation
was $824,933 and $82,077, respectively.
11. RELATED PARTY TRANSACTIONS
In September 1996, the Company borrowed $35,000,000 from Ronald S. Lauder,
the Chairman of the Board of the Company and the principal shareholder of the
Company, bearing interest at the rate of 11% per annum (the "Subordinated
Shareholder Loan"). The Company repaid the Subordinated Shareholder Loan with
the proceeds of the Shareholder Equity Investment (described below).
The Company used the proceeds of the Subordinated Shareholder Loan to repay
$35,000,000 of the amounts outstanding under the Revolving Credit Facility
available in August 1996 (see Note 7) and reduced the outstanding commitment
amount under the Revolving Credit Facility to $15,000,000. The Revolving Credit
Facility is personally guaranteed by the Company's Chairman.
Prior to the closing of the Private Offering, Ronald S. Lauder, the
Company's Chairman, Leonard A. Lauder, a director of the Company and Ronald S.
Lauder's brother, and Lauder Gaspar Venture LLC ("LGV"), an investment vehicle
the principal investors of which are Ronald S. Lauder and Leonard A. Lauder and
the managing member (through a wholly owned company) of which is Andrew Gaspar,
a director of the Company, purchased an aggregate of 1,880,147 shares of Class B
Common Stock (approximately 11.6% of the outstanding common shares of the
Company on a fully diluted basis) for
F-15
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RELATED PARTY TRANSACTIONS (CONTINUED)
$50,000,000 (the "Shareholder Equity Investment"). LGV purchased one-half of
such shares and Ronald S. Lauder and Leonard A. Lauder each purchased
one-quarter of such shares.
In addition, Ronald S. Lauder will, upon the request of the Company, provide
(or arrange for a bank to provide) the Company with the Shareholder Standby
Facility (see Note 7). If this facility is provided by a bank, Mr. Lauder will
personally guarantee the Company's obligations under the facility up to
$35,000,000. Under the terms of the indenture which governs the Notes, the
Company may borrow, repay, and reborrow any amounts under the Shareholder
Standby Facility at any time or from time to time. However, the lender will be
obligated to make loans thereunder at the request of the Company up to
$35,000,000, without conditions and regardless of any default thereunder, until
such time as the Company has received $35,000,000 of net cash proceeds from the
issuance of common shares of the Company (the "Common Stock"). The Shareholder
Standby Facility will expire on the earlier of December 15, 2006 or the receipt
of $35,000,000 of net cash proceeds from the issuance of Common Stock and will
provide that interest may not be paid in cash until December 15, 2001.
Nesim N. Bildirici, a director and the Vice President of Mergers and
Acquisitions of the Company, is an employee of both the Company and R.S. Lauder,
Gaspar & Co., L.P. ("RSLAG"), a venture capital company owned and controlled by
Ronald S. Lauder and Andrew Gaspar. Mr. Bildirici's salary is paid by RSLAG and
the Company reimburses RSLAG each year for the services Mr. Bildirici provides
to the Company. In 1996, the Company reimbursed RSLAG approximately $130,000 for
Mr. Bildirici's services. Mr. Bildirici currently dedicates substantially all of
his business time to the business of the Company and is expected to continue to
do so for the foreseeable future.
RSL Management Corporation (RSL Management"), which is wholly owned by
Ronald S. Lauder, the Chairman of the Board of the Company and the principal
shareholder of the Company, leases an aggregate of 2,670 square feet of office
space to the Company at an annual rent of $180,000 per annum. In addition, RSL
Management provides payroll and benefit services to the Company for an annual
fee of $6,000.
The Company has employment contracts with certain of its executive officers.
These agreements expire beginning April 1998 through May 2000 unless terminated
earlier by the executive or the Company, and provide for annual salaries and
bonuses based on the performance of the Company. Salary expense for these
officers was approximately $1,419,000 and $646,250 for the years ended December
31, 1996 and 1995, respectively. The aggregate commitment for annual future
salaries at December 31, 1996, excluding bonuses, is approximately $1,727,500,
$1,051,000, $447,875 and $66,667 for 1997, 1998, 1999 and 2000, respectively.
12. DEFINED CONTRIBUTION PLAN
In 1996, the Company instituted a defined contribution plan which provides
retirement benefits for most of its domestic employees. The Company's
contributions to the defined contribution which are based on a percentage of the
employee's annual compensation subject to certain limitations, were not
significant for 1996.
13. STOCK INCENTIVE PLAN
In April 1995, the Company established an Incentive Stock Option Plan (the
"Plan") to reward employees, nonemployee consultants and directors for service
to the Company and to provide incentives
F-16
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK INCENTIVE PLAN (CONTINUED)
for future service and enhancement of shareholder value. The Plan is
administered by the Compensation Committee of the Board of Directors of the
Company (the "Committee"). The Committee consists of three members of the Board
of Directors. The Plan provides for awards of up to 1,000,000 shares of Class B
common stock of the Company.
The options granted in 1995 vest over a period of three years commencing on
the first anniversary of the date of grant such that the option holder may not
acquire more than 2% of the outstanding capital stock as of the date upon which
the related employment agreement expires. The options granted in 1996 vest in
one-third increments on each of the first, second and third anniversaries of the
grant date.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE WEIGHTED AVERAGE
OPTIONS PRICE EXERCISE PRICE
----------- ------------- -----------------
<S> <C> <C> <C>
Outstanding at January 1, 1995
Granted............................................................. 650,000 $0.001 $0.001
Exercised........................................................... --
Rescinded/Canceled.................................................. -- --
----------- ------------- ------
Outstanding at December 31, 1995.................................... 650,000 0.001 0.001
Granted............................................................. 129,600 3.50-5.50 3.79
Exercised........................................................... --
Rescinded/Canceled.................................................. --
-----------
Outstanding at December 31, 1996.................................... 779,600 $0.001-5.50 $0.63
----------- ------------- ------
----------- ------------- ------
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RESERVED FOR EXERCISE
EXERCISABLE FUTURE GRANTS PRICE
------------- ------------- -------------
<S> <C> <C> <C>
December 31, 1996.................................................... 81,142 220,400 $ 0.001
December 31, 1995.................................................... -- 350,000 --
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. The Company has
issued its options at fair market value at the date of grant. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
SFAS Statement No. 123 "Accounting for Stock Based Compensation" ("SFAS
123") was issued by the FASB in 1995 and if fully adopted, changes the methods
for recognition of costs on plans similar to those of the Company. Adoption of
the recognition provisions of SFAS No. 123 is optional; however, pro forma
disclosures as if the Company adopted the cost recognition requirements under
SFAS No. 123 is presented below.
Under SFAS No. 123, options granted during 1996 and 1995, the fair value at
the date of grant was estimated using the Black-Scholes option pricing model.
The fair value was estimated using the minimum value method. Under this method,
the expected volatility of the Company's common stock is not estimated, as there
is no market for the Company's common stock in which to monitor stock price
volatility.
F-17
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK INCENTIVE PLAN (CONTINUED)
The following weighted average assumptions were used in calculating the fair
value of the options granted in 1996 and 1995, respectively: risk-free interest
rates of 5.85%; no dividends are expected to be declared; expected life of the
options are between 30 and 42 months and between 39 and 51 months, respectively;
and a maximum contractual life of 10 years.
For purposes of the pro forma disclosures the estimated fair value of the
options granted is amortized to compensation expense over the options' vesting
period. The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Net loss
As reported.................................................................. $ (38,239,829) $ (9,401,928)
Pro forma.................................................................... $ (38,314,829) $ (9,404,428)
Net loss per common share:
As reported.................................................................. $ (11.24) $ (3.65)
Pro forma.................................................................... $ (11.26) $ (3.65)
Weighted average fair value of options granted during the year..................... $ 0.58 $ 0.0004
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company was committed to unrelated parties for the
rental of office space under operating leases. Minimum annual lease payments
with respect to the leases is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ---------------------------------------------------------------------------------------------------
<S> <C>
1997............................................................................................... $ 2,117,442
1998............................................................................................... 1,851,834
1999............................................................................................... 1,641,577
2000............................................................................................... 1,489,268
2001............................................................................................... 1,426,569
2002 and thereafter................................................................................ 3,302,871
-------------
$ 11,829,561
-------------
-------------
</TABLE>
Rent expense for the years ended December 31, 1996 and 1995 was $2,275,721
and $209,806, respectively.
The Company is committed to pay for transmission capacity under certain
operating leases. The minimum annual lease payments with respect to these
agreements is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ---------------------------------------------------------------------------------------------------
<S> <C>
1997............................................................................................... $ 40,500,000
1998............................................................................................... 3,000,000
-------------
$ 43,500,000
-------------
-------------
</TABLE>
F-18
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The minimum lease payments for the year ended December 31, 1996 were
$21,500,000. The Company did not remit payments for this full amount. At
December 31, 1996 and 1995, the Company had accrued approximately $8,000,000 and
$5,900,000, respectively, as purchase accounting adjustments representing the
unfavorable portion of such lease commitments. Concurrent with the consummation
of the purchase of the capital stock of Cyberlink, the Company obtained
transmission capacity. At December 31, 1995, the Company recorded what
management believed to be its best estimate of the unfavorable portion related
to the operating leases. Prior to December 31, 1996, the Company recorded what
management believed to be its best estimate of the unfavorable portion related
to the operating leases and the liabilities incurred in connection with the
early termination or reconfiguration of the existing operating leases. Such
purchase accounting accruals have been recorded under the captions "Goodwill"
and "Other Liabilities--Noncurrent" in the accompanying consolidated balance
sheets. When the Company ultimately terminates, settles or reconfigures its
operating leases, the Company will recognize the difference between the
approximately $8,000,000 recorded at December 31, 1996 and the actual cost
incurred to terminate, settle or reconfigure the operating leases. Such amount
will be recorded in the Company's consolidated statement of operations. The
amount accrued, when combined with the payments remitted during the year ended
December 31, 1996, aggregated approximately $21,500,000. The Company is
currently negotiating the amendment or termination of these leases.
COMMITMENTS AND CONTINGENCIES--The Company is involved in various claims
that arose in the ordinary course of its acquired businesses prior to the
Company's acquisition of such businesses. The expected settlements from these
matters have been accrued and are recorded as "Other Liabilities." In
management's opinion, the settlement of such claims would not have a material
adverse effect on the Company's consolidated financial position or results of
its operations.
LETTERS OF CREDIT--The Company has outstanding letters of credit aggregating
$550,000 at December 31, 1996, expiring at various dates. Such letters of
credit, which were issued as deposits to vendors or security on leased premises,
are fully secured by certificates of deposit, and are classified as current
assets.
15. SIGNIFICANT CUSTOMER
For the year ended December 31, 1996 no customer accounted for more than 10%
of the Company's revenues. For the year ended December 31, 1995, one customer
accounted for 26% of the Company's revenues.
F-19
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. REVENUES BY GEOGRAPHIC AREA
The following table provides certain geographic data on the Company's
operations for the year ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUE INCOME (LOSS) ASSETS
-------------- -------------- --------------
<S> <C> <C> <C>
1996
US............................................................. $ 85,842,924 $ (12,146,118) $ 54,509,115
Germany........................................................ 8,844,479 (2,249,834) 9,776,032
France......................................................... 7,345,625 (886,119) 10,423,464
UK............................................................. 6,260,032 (7,966,674) 18,994,422
Netherlands.................................................... 3,471,165 1,087,142 8,605,557
Corporate and other............................................ 1,493,115 (8,300,796) 325,660,443
-------------- -------------- --------------
$ 113,257,340 $ (30,462,399) $ 427,969,033
-------------- -------------- --------------
-------------- -------------- --------------
1995
US............................................................. $ 18,460,486 $ (6,969,473) $ 37,759,621
Germany........................................................ -- -- --
France......................................................... -- -- --
UK............................................................. -- -- --
Netherlands.................................................... -- -- --
Corporate and other............................................ 156,198 (2,411,539) 15,312,558
-------------- -------------- --------------
$ 18,616,684 $ (9,381,012) $ 53,072,179
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Intersegment and intergeographic revenue are not significant to the revenue
of any business segment or geographic location. There is no export revenue from
the United States. Corporate and other assets consist principally of cash and
cash equivalents, and goodwill.
F-20
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. SUMMARIZED FINANCIAL INFORMATION
The following presents summarized financial information of RSL
Communications PLC* ("RSL PLC") as of December 31, 1996. RSL PLC is a 100%
wholly owned subsidiary of the Company. RSL PLC had no independent operations
other than serving solely as a foreign holding company for the Company's U.S.
and European operations. The Notes issued by RSL PLC are fully and
unconditionally guaranteed by the Company. The Company's financial statements
are, except for the Company's capitalization, corporate overhead expenses and
available credit facilities, identical to the financial statements of RSL PLC.
<TABLE>
<CAPTION>
DECEMBER 31,
1996
--------------
<S> <C>
Current Assets........................ $ 201,734,395
Non-current Assets.................... $ 225,131,081
Current Liabilities................... $ 74,949,341
Non-current Liabilities............... $ 394,555,559
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
--------------
<S> <C>
Net Revenue........................... $ 113,257,340
Gross Profit.......................... $ 14,795,934
Net Loss $ (34,309,127)
</TABLE>
- ------------------------
* Company incorporated in 1996
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
International Telecommunications Group Ltd. And Subsidiaries
We have audited the consolidated statements of operations and accumulated
deficit and of cash flows of International Telecommunications Group Ltd. and
subsidiaries for the nine months ended September 30, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements of International
Telecommunications Group Ltd. and subsidiaries present fairly, in all material
respects, the results of their operations and their cash flows for the nine
months ended September 30, 1995 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
New York, New York
March 14, 1997
F-22
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
REVENUES....................................................................... $26,351,634
COST OF SERVICES............................................................... 24,614,337
-----------
Gross Profit............................................................. 1,737,297
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................................... 6,299,188
-----------
LOSS FROM OPERATIONS........................................................... (4,561,891)
INTEREST INCOME................................................................ 56,148
INTEREST EXPENSE............................................................... (345,212)
-----------
NET LOSS....................................................................... (4,850,955)
ACCUMULATED DEFICIT, JANUARY 1, 1995........................................... (5,153,000)
-----------
ACCUMULATED DEFICIT, SEPTEMBER 30, 1995........................................ $(10,003,955)
-----------
-----------
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $(4,850,955)
Adjustments to reconcile net loss to net cash provided by operating
activities, net of effects of purchase of subsidiaries:
Depreciation and amortization............................................... 379,782
Provision for losses on accounts receivable................................. 2,881,440
Changes in operating assets and liabilities:
Increase in accounts receivables.......................................... (9,204,455)
Decrease in accounts receivables--affiliates.............................. 111,434
Increase in prepaid expenses and other current assets..................... (325,013)
Increase in deposits and other assets..................................... (398,003)
Increase in accounts payable and accrued expenses......................... 11,849,193
Increase in other current liabilities..................................... 601,084
Increase in other liabilities............................................. 1,355,703
Decrease in due to affiliates............................................. (534,941)
----------
Net cash provided by operating activities................................. 1,865,269
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiary, net of cash acquired............................... (1,500,000)
Purchase of marketable debt securities........................................ (2,200,000)
Purchase of property and equipment............................................ (446,517)
----------
Net cash used in investing activities..................................... (4,146,517)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term note payable.......................................... (1,000,000)
Proceeds from issuance of common stock........................................ 5,749,300
Proceeds from issuance of preferred stock..................................... 3,000,000
Principal payments under capital lease obligations............................ (100,166)
Repayment of long-term debt................................................... (241,080)
----------
Net cash provided by financing activities................................. 7,408,054
----------
INCREASE IN CASH................................................................ 5,126,806
CASH AT JANUARY 1, 1995......................................................... 451,865
----------
CASH AT SEPTEMBER 30, 1995...................................................... $5,578,671
----------
----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for:
Interest.................................................................... $ 185,996
----------
----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES-
Assets acquired under capital lease obligation................................ $ 443,710
----------
----------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995
1. BUSINESS DESCRIPTION
International Telecommunications Group Ltd. and its subsidiaries ("ITG")
operate a domestic and international communications network which provides
international and domestic long distance telephone services for businesses and
individuals in the United States and abroad.
2. ACQUISITION
Effective September 1, 1995, ITG's subsidiary International
Telecommunications Corporation ("RSL USA") (collectively, "ITG") consummated a
stock purchase agreement with Cyberlink, Inc. ("Cyberlink") and Cyberlink's
principal stockholder.
The agreement provided for the purchase of 51% of the capital stock of
Cyberlink. The purchase price consisted of $1,500,000 paid to Cyberlink and
assumption of net liabilities of $14,131,000. In connection with the purchase of
Cyberlink, the Company recorded approximately $15,631,000 of goodwill as of
September 30, 1995.
In connection with the acquisition of Cyberlink, the 49% minority
stockholders of Cyberlink may sell their shares to RSL USA at fair market value
if RSL USA consummates an initial public offering of its securities. RSL USA can
call the 49% minority stockholders shares at any time after December 31, 1996
for a price equal to 49% of the sum of eight times Cyberlink's average monthly
revenues of the last quarter prior to exercise date plus cash minus long-term
liabilities.
The acquisition has been accounted for by the purchase method of accounting,
and accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based on their estimated fair values at the date of
acquisition. The excess of the purchase price over the estimated fair values of
the net assets acquired has been recorded as goodwill, which will be amortized
over fifteen years.
The accompanying consolidated statements of operations and accumulated
deficit and cash flows include the results of Cyberlink from its date of
acquisition through September 30, 1995.
The following presents the unaudited pro forma consolidated statement of
operations of the Company for the nine months ended September 30, 1995, assuming
the Company had purchased Cyberlink at January 1, 1995. The consolidated
statement does not necessarily represent what the Company's results of
operations would have been had such acquisition actually occurred on such date,
or of results to be achieved in the future:
F-25
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
2. ACQUISITION (CONTINUED)
<TABLE>
<CAPTION>
PRO FORMA FOR THE
NINE
MONTHS ENDED
SEPTEMBER 30, 1995
---------------------
<S> <C>
(UNAUDITED)
Revenue................................................................ $ 40,504,172
Cost of services....................................................... 37,087,243
---------------------
Gross Profit........................................................... 3,416,929
Selling, general and administrative expenses........................... 23,555,216
---------------------
Loss from operations................................................... (20,138,287)
Interest income........................................................ 56,148
Interest expense....................................................... (738,496)
---------------------
Net loss............................................................... $ (20,820,635)
---------------------
---------------------
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--The consolidated
financial statements include the accounts of International Telecommunications
Group Ltd. and its majority-owned subsidiaries. The Company has included 100% of
its subsidiaries' operating losses since the minority interests' investment has
been reduced to zero. All material intercompany accounts and transactions have
been eliminated. All of the Company's subsidiaries' fiscal years end December
31.
MANAGEMENT ASSUMPTIONS--The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses. Such
estimates primarily relate to reserves recorded for doubtful accounts and
accruals for litigation and other claims. Actual results could differ from these
estimates.
REVENUE RECOGNITION--The Company records revenue based on minutes (or
fractions thereof) of customer usage.
The Company records payments received in advance for prepaid calling card
services and services to be supplied under contractual agreements as deferred
revenues until such related services are provided. Deferred revenue is included
in other current liabilities.
GOODWILL--Goodwill represents the excess of cost over the fair value of the
net assets of acquired entities, and is being amortized using the straight-line
method over fifteen years. The Company periodically reviews the value of its
goodwill to determine if an impairment has occurred. The Company measures the
potential impairment of recorded goodwill by the undiscounted value of expected
future cash flows in relation to its net capital investment in the subsidiary.
Based on its review, the Company does not believe that an impairment of its
goodwill has occurred.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION--Property and equipment are
stated at cost or fair values at the date of acquisition, and in the case of
equipment under capital leases, the present value of the future minimum lease
payments, less accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the depreciable assets,
which range from five to
F-26
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
fifteen years. Improvements are capitalized, while repair and maintenance costs
are charged to operations as incurred. Construction in progress represents costs
incurred in connection with the building of a switch facility center.
DEPOSITS--Deposits consist principally of amounts paid to the Company's
providers of telephone access lines.
INCOME TAXES--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR
INCOME TAXES. SFAS No. 109 establishes financial accounting and reporting
standards for the effect of income taxes that result from activities during the
current and preceding years. SFAS No. 109 requires an asset and liability
approach for financial reporting for income taxes.
NEW ACCOUNTING STANDARDS--During 1995, the Company adopted SFAS No. 121,
IMPAIRMENT OF LONG-LIVED ASSETS. There was no adjustment recorded as a result of
adopting this standard. The Company periodically compares the carrying value of
its long-lived assets, principally property and equipment, to undiscounted cash
flows generated by the long-lived assets. The Company's undiscounted cash flows
exceed the carrying value of its long-lived assets.
Amortization expense for the nine months ended September 30, 1996 was
$86,838.
4. CONCENTRATION OF CREDIT RISK
The Company is subject to significant concentrations of credit risk which
consist principally of trade accounts receivable. The Company sells a
significant portion of its services to other carriers and, as a result,
maintains significant receivable balances with certain carriers. If the
financial condition and operations of these customers deteriorate below critical
levels, the Company's operating results could be adversely affected. During
1995, one of the Company's customers, which represented approximately 18% of the
Company's sales for the nine months ended September 30, 1995, failed to meet
minimum payments schedules and, as a result, the Company terminated services to
this customer. Consequently, the customer refused to pay outstanding receivable
balances totaling approximately $4,653,000. At September 30, 1995, the Company
had written off the entire $4,653,000. The Company has commenced legal
proceedings to recover amounts owed to the Company.
The Company now performs ongoing credit evaluations of its customer's
financial condition and requires collateral in the form of deposits in certain
circumstances.
5. INCOME TAXES
No provision for income taxes has been made because the Company has
sustained cumulative losses since the commencement of its operations in 1994.
For the nine months ended September 30, 1995, the Company had net operating loss
carryforwards generated primarily in the United States of approximately
$10,000,000. The net operating loss carryforwards will expire at various dates
beginning in 2009 through 2010 if not utilized.
F-27
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
5. INCOME TAXES (CONTINUED)
In accordance with SFAS No. 109, the Company has computed the components of
deferred income taxes as follows:
<TABLE>
<S> <C>
Deferred tax assets............................................. $8,120,000
Less valuation allowance........................................ (8,120,000)
----------
Net deferred tax assets......................................... $ --
----------
----------
</TABLE>
The Company's net operating losses and legal reserves generated the deferred
tax assets. At September 30, 1995, a valuation allowance of $8,120,000 is
provided as the realization of the deferred tax benefits are not likely.
6. NOTES PAYABLE AND LONG-TERM DEBT
RSL USA has a series of notes payable to different vendors in the amount of
$1,136,712 which bear interest at the rates from 8% to 14.5%, of which $874,066
is current.
Cyberlink has a credit agreement which provides for up to $5,000,000 in
committed credit lines to finance its accounts receivable. Interest is payable
at 2 1/4% over the prime rate of interest (prime being 8.75% at September 30,
1995). A second credit line provides for up to $2,000,000 in capital expenditure
financing with interest payable at 2 1/2% over the prime rate. The total amount
outstanding at September 30, 1995 from the above credit lines are $1,713,296 and
$0, respectively. The credit lines terminate on August 31, 1998.
Cyberlink has a long-term note payable to a vendor in the amount of
$1,000,000 which bears interest at the rate of 10%, commencing January 1, 1997.
ITG's notes payable had fair values that approximated their carrying
amounts.
Interest expense on the above notes was approximately $190,603 for the nine
months ended September 30, 1995.
7. EMPLOYMENT AGREEMENTS
The Company has employment contracts with certain of its executive officers.
These agreements expire beginning April 1998 through May 2000 unless terminated
earlier by the executive or the Company, and provides for an annual base salary.
Salary expense for the officers was $253,750 for the nine months ended September
30, 1995. The aggregate commitment for annual future salaries at September 30,
1995, excluding bonuses, was approximately $453,750 for 1996, $454,500,
$300,000, $200,000 and $116,667 for 1997, 1998, 1999 and 2000, respectively.
F-28
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
8. COMMITMENTS AND CONTINGENCIES
At September 30, 1995, the Company is committed to unrelated parties for the
purchase of certain capital assets and the rental of office space under
operating leases. Minimum annual lease payments with respect to the leases and
capital commitment is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
- --------------------------------------------------------------------------------
<S> <C>
1996............................................................................ $ 849,435
1997............................................................................ 808,300
1998............................................................................ 546,760
1999............................................................................ 366,998
2000............................................................................ 305,226
2001 and thereafter............................................................. 431,612
------------
$ 3,308,331
------------
------------
</TABLE>
- ------------------------
Rent expense for the nine months ended September 30, 1995 was $173,072.
The Company is committed to the rental of transmission capacity under
certain operating leases. The minimum annual lease payments with respect to
these agreements is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
- -------------------------------------------------------------------------------
<S> <C>
1996........................................................................... $ 20,400,000
1997........................................................................... 38,000,000
1998........................................................................... 7,500,000
-------------
$ 65,900,000
-------------
-------------
</TABLE>
The Company is currently negotiating the termination of these operating
leases.
LITIGATION AND OTHER CLAIMS--The Company is involved in various litigation
and other claims that arose in the ordinary course of its acquired businesses
prior to the Company's acquisition of such businesses. The expected settlements
from these matters have been accrued and are recorded as "Other Liabilities." In
management's opinion, the settlement of such litigation and claims would not
have a material adverse effect on the Company's consolidated financial position
or results of its operations.
LETTERS OF CREDIT--The Company has outstanding letters of credit aggregating
approximately $76,000 at September 30, 1995, expiring at various dates between
June 1, 1996 and August 8, 1996. Such letters of credit, which were issued as
deposits to vendors or security on leased premises, are fully secured by
certificates of deposit and are classified as current assets.
9. SIGNIFICANT CUSTOMER
For the nine months ended September 30, 1995, one customer accounted for 18%
of the Company's revenues.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
International Telecommunications Group Ltd. And Subsidiaries
We have audited the consolidated statements of operations and accumulated
deficit and of cash flows of International Telecommunications Group Ltd. and
subsidiaries for the year ended December 31, 1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements of International
Telecommunications Group Ltd. and subsidiaries present fairly, in all material
respects, the results of their operations and their cash flows for the year
ended December 31, 1994 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
New York, New York
March 14, 1997
F-30
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
REVENUES........................................................................ $4,701,886
COST OF SERVICES................................................................ 4,922,545
----------
Gross loss................................................................ (220,659)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................................... 2,635,115
----------
LOSS FROM OPERATIONS............................................................ (2,855,774)
INTEREST EXPENSE-Net............................................................ (225,069)
----------
NET LOSS........................................................................ (3,080,843)
ACCUMULATED DEFICIT, JANUARY 1, 1994............................................ (2,072,157)
----------
ACCUMULATED DEFICIT, DECEMBER 31, 1994.......................................... $(5,153,000)
----------
----------
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $(3,080,843)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation.................................................................. 239,663
Gain on the sale of equipment................................................. (6,781)
Provision for losses on accounts receivable................................... 13,237
Changes in operating assets and liabilities:
Decrease in accounts receivables.............................................. 75,785
Increase in inventories....................................................... (426,431)
Decrease in prepaid expenses and other current assets......................... 41,271
Decrease in due from affiliates............................................... 235,804
Increase in employee loans.................................................... (209,596)
Increase in deposits.......................................................... (71,395)
Increase in accounts payable and accrued expenses............................. 1,183,149
Increase in other current liabilities......................................... 19,108
----------
Net cash used in operating activities..................................... (1,987,029)
----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.................................. 544,890
Purchase of property and equipment............................................ (1,022,783)
----------
Net cash used in investing activities..................................... (477,893)
----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from long-term debt.................................................. 1,454,094
Payments of long-term debt.................................................... (686,868)
Principal payments under capital lease obligations............................ (440,330)
Due to affiliate.............................................................. 60,913
Proceeds from issuance of common stock........................................ 1,499,700
Proceeds from short-term note payable to RSL Communications, Inc.............. 1,000,000
----------
Net cash provided by financing activities..................................... 2,887,509
----------
INCREASE IN CASH................................................................ 422,587
CASH AT JANUARY 1, 1994......................................................... 29,278
----------
CASH AT DECEMBER 31, 1994....................................................... $ 451,865
----------
----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for:
Interest.................................................................... $ 234,100
----------
----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Assets acquired under capital lease obligations............................... $ 103,230
----------
----------
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1994
1. BUSINESS DESCRIPTION
International Telecommunications Group Ltd. and its subsidiaries ("ITG")
operate a domestic and international communications network which provides
international and domestic long distance telephone services for businesses and
individuals in the United States and abroad.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--The consolidated
financial statements include the accounts of International Telecommunications
Group Ltd. and its majority-owned subsidiaries. The Company has included 100
percent of its subsidiaries' operating losses since the minority interests'
investment has been reduced to zero. All material intercompany accounts and
transactions have been eliminated. All of the Company's subsidiaries' fiscal
years end December 31.
REVENUE RECOGNITION--The Company records revenue based on minutes (or
fractions thereof) of customer usage.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION--Property and equipment are
stated at cost or in the case of equipment under capital leases, the present
value of the future minimum lease payments, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the depreciable assets, which range from five to fifteen years.
Improvements are capitalized, while repair and maintenance costs are charged to
operations as incurred.
DEPOSITS--Deposits consist principally of amounts paid to the Company's
providers of telephone access lines.
INCOME TAXES--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. SFAS No. 109 establishes financial accounting and reporting
standards for the effect of income taxes that result from activities during the
current and preceding years. SFAS No. 109 requires an asset and liability
approach for financial reporting for income taxes.
F-33
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
3. RELATED PARTY TRANSACTIONS
The Company engaged in certain transactions with certain companies in which
stockholders of the Company are significant shareholders. Such transactions are
in the normal course of business. For the year ended December 31, 1994, the
Company had receivables with respect to those related parties as follows:
<TABLE>
<CAPTION>
ACCOUNTS
AFFILIATES RECEIVABLES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Litco............................................................................ $ 1,649
Income UK........................................................................ 191,255
ITC America...................................................................... 18,285
Intelco Europe, Ltd.............................................................. 195,909
Intelco Russia................................................................... 295,270
Intelco Ukraine.................................................................. 284,486
Interactive Telephone............................................................ 4,565
-----------
Total............................................................................ 991,419
Less provision for doubtful affiliate receivables................................ (776,417)
-----------
Due from affiliates-net.......................................................... $ 215,002
-----------
-----------
</TABLE>
Due to affiliate, aggregating $60,913 at December 31, 1994, consists of a
loan from Income UK.
4. INCOME TAXES
No provision for Federal, state and local income taxes has been made because
the Company has sustained cumulative losses since commencement of its
operations. For the year ended December 31, 1994, the Company had net operating
loss carryforward of approximately $4,266,000. Such net operating loss
carryforwards begin expiring in 2006.
In accordance with SFAS No.109, the Company has computed the components of
deferred income taxes as follows:
<TABLE>
<S> <C>
Deferred tax benefit............................................ $1,500,000
Less valuation allowance........................................ (1,500,000)
---------
Net deferred tax benefit........................................ $ --
---------
---------
</TABLE>
At December 31, 1994, a valuation allowance of $1,500,000 is provided as the
realization of the deferred tax benefits are not more likely than not. The
Company's net operating losses, primarily generated the deferred tax benefits.
F-34
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
5. LONG-TERM DEBT
Notes payable at December 31, 1994 consists of the following:
<TABLE>
<S> <C>
Term note payable in monthly installments of $54,357 plus
interest at 8.0 percent per annum through the date of
maturity, January 15, 1996.................................... $ 674,728
Term note payable in monthly installments of $3,729 plus
interest at 8.25 percent per annum through the date of
maturity, July 1, 1996........................................ 82,237
Term note payable in monthly installments of $4,628 plus
interest at 8.25 percent per annum through the date of
maturity, September 15, 1996.................................. 64,795
Term note payable in monthly installments of $43,745 plus
interest at 10.0 percent per annum through the date of
maturity, June 1, 1996........................................ 1,355,703
Term note payable in monthly installments of $23,750 plus
interest at 14.5 percent per annum through date of maturity,
January 12, 1997.............................................. 517,575
Term note payable at 10.0 percent per annum due January 1, 1995 2,688
---------
Total........................................................... $2,697,726
---------
---------
</TABLE>
The scheduled repayment of long-term debt from years subsequent to December
31, 1994 is as follows:
<TABLE>
<S> <C>
1995............................................................ $1,580,457
1996............................................................ 805,522
1997............................................................ 311,747
----------
2,697,726
Less current maturities......................................... (1,500,457)
----------
$1,197,269
----------
----------
</TABLE>
6. CAPITAL LEASE OBLIGATIONS
FUTURE MINIMUM ANNUAL PAYMENTS APPLICABLE TO ASSETS HELD UNDER CAPITAL LEASE
OBLIGATIONS FOR YEARS SUBSEQUENT TO DECEMBER 31, 1994 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ---------------------------------------------------------------------------------
<S> <C>
1995............................................................................. $ 181,447
1996............................................................................. 159,359
1997............................................................................. 66,399
-----------
Total minimum lease obligations.................................................. 407,205
Less interest.................................................................... (55,930)
-----------
Present value of future minimum lease obligations................................ 351,275
Less current portion............................................................. (144,610)
-----------
Long-term lease obligations at December 31, 1994................................. $ 206,665
-----------
-----------
</TABLE>
F-35
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
6. CAPITAL LEASE OBLIGATIONS (CONTINUED)
Assets held under capital leases aggregated $276,643 (net of accumulated
depreciation of $201,679).
The assets and liabilities under capital leases are recorded at the present
value of the minimum lease payments using effective interest rates ranging from
9 percent to 11 percent per annum.
7. COMMITMENTS AND CONTINGENCIES
At December 31, 1994, the Company is committed to the rental of office space
under an operating lease. Minimum annual lease payments with respect to this
lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- -------------
<S> <C>
1995.............................................................................. $ 115,927
1996.............................................................................. 115,927
1997.............................................................................. 115,927
1998.............................................................................. 115,927
1999.............................................................................. 115,927
Thereafter........................................................................ 173,891
----------
$ 753,526
----------
----------
</TABLE>
Rent expense for the year ended December 31, 1994 was $106,049.
The Company is currently in litigation with one of its vendors.The Company
has provided for an amounts equal to the vendors original invoices, prior to the
filing of this claim and has recorded such amounts in long-term debt. The
Company has not made any payments on this debt since June 1994. ITG's subsidiary
International Telecommunications Corporation ("RSL USA") outside counsel had
advised RSL USA that at this time, the extent of RSL USA's liability, if any, is
not determinable.
The Company has outstanding letters of credit aggregating $167,772 at
December 31, 1994, expiring at various dates during 1995. Such letters of
credit, which were issued as deposits to vendors or security on leased premises,
are fully secured by certificates of deposit, such certificates of deposit are
classified as long-term assets and included in the balance sheet caption
"Deposits."
8. SUBSEQUENT EVENTS
On March 10, 1995, International Telecommunications Group Ltd., sold 66,667
shares of its convertible preferred stock to RSL Communications Inc. (RSL) for
$3,000,000 subject to increase to a maximum of $4,750,000, as provided for in
the terms of the transactions. The convertible preferred stock is convertible at
RSL's option into common stock, in a one-for-one basis. Additionally, RSL has
the option of redeeming such preferred stock, at any time, through 1998 for
$4,750,000. ITG utilized $1,000,000 of the proceeds from the transaction to
repay the short term note payable to RSL subsequent to December 31, 1994.
In conjunction with the March 10th sale of shares, ITG reorganized Intelco
Russia and Ukraine; the ITG ownership in these two entities was transferred to
the Chairman of the Company. The Company continues to do business with these two
entities. Fair market value of these two entities was nominal.
F-36
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
8. SUBSEQUENT EVENTS (CONTINUED)
On September 1, 1995, ITG issued additional shares of common stock to RSL
for $6,000,000.
In September 1995, RSL USA purchased 51% of Cyberlink, Inc., a Delaware
Corporation, for $6,000,000. Two percent of the total purchase price is held in
escrow until certain requirements are satisfied by Cyberlink.
RSL USA has begun the installation of new telecommunication switching
facilities. In conjunction with these installations, RSL USA will enter into a
long-term capital lease agreement for approximately $6,000,000.
F-37
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Cyberlink, Inc. and Subsidiaries
Woodland Hills, California
We have audited the accompanying consolidated balance sheet of Cyberlink,
Inc. and subsidiaries as of August 31, 1995, and the related consolidated
statements of operations and accumulated deficit, and cash flows for the eight
months then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cyberlink, Inc. and
Subsidiaries as of August 31, 1995, and the results of its operations and cash
flows for the eight months then ended in conformity with generally accepted
accounting principles.
Brown, Leifer, Slatkin + Berns
August 30, 1996
Studio City, California
F-38
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................................... $ 7,324
Accounts receivable, less allowance for doubtful accounts of $2,438,000........ 2,195,483
Prepaid expenses............................................................... 71,430
-----------
Total current assets....................................................... 2,274,237
-----------
Property and Equipment......................................................... 2,558,200
Other Assets................................................................... 671,302
-----------
$ 5,503,739
-----------
-----------
LIABILITIES AND NET SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Checks outstanding in excess of balance in bank................................ $ 131,012
Advances under accounts receivable financing line.............................. 1,472,889
Current maturities of long-term debt........................................... 1,226,168
Accounts payable............................................................... 7,541,228
Accrued expenses and other current liabilities................................. 9,994,564
Advances from stockholder...................................................... 200,000
-----------
Total current liabilities.................................................. 20,565,861
-----------
LONG-TERM DEBT................................................................. 2,611,526
-----------
COMMITMENTS AND CONTINGENCIES (Note 7)
Net Stockholders' Deficit:
Common stock, authorized 10,000,000 shares; issued and outstanding 1,000
shares..................................................................... 1,200
Additional paid-in capital................................................... 796,214
Accumulated deficit.......................................................... (18,471,062)
-----------
(17,673,648)
-----------
$ 5,503,739
-----------
-----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1995
<TABLE>
<S> <C>
REVENUE........................................................................ $14,152,538
COST OF REVENUE................................................................ 12,472,906
-----------
GROSS PROFIT................................................................... 1,679,632
OPERATING EXPENSES:
Selling.................................................................... 2,356,714
General and Administrative................................................. 6,117,255
-----------
8,473,969
-----------
LOSS FROM OPERATIONS........................................................... (6,794,337)
OTHER EXPENSES:
Interest................................................................... 405,875
Reserve for lawsuits and contingencies..................................... 7,810,000
-----------
8,215,875
-----------
LOSS BEFORE PROVISION FOR INCOME TAXES......................................... (15,010,212)
PROVISION FOR INCOME TAXES..................................................... 1,600
-----------
NET LOSS....................................................................... (15,011,812)
ACCUMULATED DEFICIT, BEGINNING OF PERIOD....................................... (3,459,250)
-----------
ACCUMULATED DEFICIT, END OF PERIOD............................................. $(18,471,062)
-----------
-----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................... $(15,011,812)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization............................................. 221,620
Provision for uncollectible accounts...................................... 1,528,938
Increase in accounts receivable........................................... (1,152,942)
Increase in prepaid expenses.............................................. (71,430)
Increase in accounts payable, accrued expenses, and other current
liabilities............................................................. 13,436,607
-----------
NET CASH USED BY OPERATING ACTIVITIES......................................... (1,049,019)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (1,276,888)
Deposits paid............................................................... (142,764)
Advances to affiliates...................................................... (500,000)
-----------
NET CASH USED BY INVESTING ACTIVITIES......................................... (1,919,652)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on accounts receivable financing line........................ 951,091
Loans from officer/stockholder.............................................. 1,600,000
Principal payments on long-term debt........................................ (27,225)
Other borrowings............................................................ 131,012
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES..................................... 2,654,878
-----------
NET DECREASE IN CASH.......................................................... (313,793)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................ 321,117
-----------
CASH AND CASH EQUIVALENTS, END OF PERIOD...................................... $ 7,324
-----------
-----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest.................................................................. $ 293,991
-----------
-----------
</TABLE>
During the period, the Company incurred capital lease obligations in the
amount of $131,595.
See accompanying notes to consolidated financial statements.
F-41
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995
1. NATURE OF OPERATIONS
Cyberlink, Inc. and its subsidiaries (the "Company") provide domestic common
carrier service by leasing a mix of telephone services from a variety of
underlying common carriers. In addition, the Company resells international
switched and private line telecommunications services between the United States
and various international points. The Company is also authorized to resell
private line services to provide non-interconnected private line services to
various foreign countries and to resell private line services to provide
switched services to the United Kingdom. Furthermore, the Company is authorized
to provide international data, voice and television services via satellite
systems.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of Cyberlink, Inc. and its wholly-owned
subsidiaries Cyberlink--Nevada, Inc. and Cyberlink-- California, Inc. All
material intercompany transactions and balances have been eliminated in
consolidation.
CONCENTRATIONS OF CREDIT RISK -- Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
trade accounts receivable and uninsured cash balances. Concentrations of credit
risk with respect to accounts receivable are limited due to the number of
customers comprising the Company's customer base and their geographic
dispersion. The Company requires no collateral from its customers and performs
ongoing credit evaluations.
The Company places its cash deposits with high-credit quality financial
institutions. At times, balances in the Company's cash accounts may exceed the
Federal Deposit Insurance Corporation (FDIC) limit of $100,000.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets. The estimated useful lives of the assets are as follows:
<TABLE>
<S> <C>
Leasehold improvements............................................ 4 years
Network equipment................................................. 7 years
Dialers........................................................... 4 years
Computer equipment................................................ 5 years
Office furniture and equipment.................................... 5 years
Equipment held under capital leases............................... 4-5 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred, while renewals and betterments are capitalized.
CAPITAL LEASE OBLIGATIONS -- The Company capitalizes certain equipment under
lease obligations which, by their terms, are equivalent to installment
purchases.
INCOME TAXES -- The Company has elected to be taxed as an S Corporation,
whereby the entire Federal and California taxable income or loss of the Company
is reportable by the stockholder. The Company will not be responsible for
Federal income tax, but will incur a 1.5% California surtax.
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes.
F-42
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred income taxes are provided for temporary differences with respect to
balance sheet items that result from different reporting practices for financial
statements and income tax purposes. Deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes are also recognized for operating losses that are
available to offset future taxable income and tax credits that are available to
offset future federal income taxes. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Deferred taxes are classified as current or noncurrent, depending on the
classification of the assets and liabilities to which they relate. Deferred
taxes arising from temporary differences that are not related to an asset or
liability are classified as current or noncurrent depending on the periods in
which the temporary differences are expected to reverse.
The principal source of temporary differences is the use of the cash method
of accounting for income tax purposes which results in immaterial deferred
income taxes. Consequently, the provision for income taxes consists of taxes
currently payable (minimum state franchise taxes).
3. COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS
PROPERTY AND EQUIPMENT -
<TABLE>
<S> <C>
Leasehold improvements.......................................... $ 3,818
Network equipment............................................... 1,761,277
Dialers......................................................... 564,499
Computer equipment.............................................. 171,003
Office furniture and equipment.................................. 142,956
Equipment held under capital leases............................. 267,452
---------
2,911,005
Accumulated depreciation, including $44,264 for equipment held
under capital leases.......................................... (352,805)
---------
$2,558,200
---------
---------
</TABLE>
Depreciation expense charged to operations amounted to $221,620 including
$25,768 for capital leases.
F-43
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1995
3. COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS (CONTINUED)
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES -
<TABLE>
<S> <C>
Lawsuit and contingency reserves................................ $7,550,000
Utility taxes................................................... 990,742
Commissions..................................................... 640,965
Unearned revenue................................................ 400,000
Other........................................................... 412,857
---------
$9,994,564
---------
---------
</TABLE>
OTHER ASSETS -
<TABLE>
<S> <C>
Advances to European affiliates................................. $ 500,000
Deposits........................................................ 171,302
---------
$ 671,302
---------
---------
</TABLE>
4. ADVANCES UNDER ACCOUNTS RECEIVABLE FINANCING LINE
The Company has a credit agreement with a factor for a revolving line of
credit of up to $1,200,000 for financing of its accounts receivable. Advances
are based on 60% of eligible accounts receivable and are secured by
substantially all assets of the Company and the personal guarantee of the
officer/stockholder. Interest is payable monthly at the rate of 2 3/4% per
month.
5. ADVANCES FROM STOCKHOLDER
Advances from stockholder represent a non-interest bearing advance, due on
demand.
F-44
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1995
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C>
Note payable to officer/stockholder unsecured, interest payable quarterly at $2,500,000
the rate of 8% per annum with all principal and interest due December 15,
1997. The repayment of the note may be accelerated upon the Company achieving
a total stockholder's equity of at least $7,500,000. The note is subordinated
to substantially all obligations of the Company and has been assigned as
collateral by the officer/stockholder of the Company (See Notes 7 and 9).....
Demand note payable unsecured, non-interest bearing. The note is subordinated 1,150,000
to the advances under the factoring agreement (Note 4) and is convertible
into 187,254 shares of the Company's common stock (See Note 9)...............
Capital lease obligations, due in monthly installments aggregating $8,928 187,694
including interest at rates ranging from 13% to 28.1%........................
---------
3,837,694
Current maturities, including $45,000 for capital lease obligations............ 1,226,168
---------
$2,611,526
---------
---------
</TABLE>
The following is a schedule of aggregate annual maturities of long-term
debt:
<TABLE>
<S> <C>
1996............................................................ $1,226,168
1997............................................................ 2,550,860
1998............................................................ 35,477
1999............................................................ 16,670
2000............................................................ 8,519
---------
$3,837,694
---------
---------
</TABLE>
F-45
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1995
7. COMMITMENTS AND CONTINGENCIES
LEASES -- The Company leases its facilities and equipment under
non-cancelable operating and capital leases expiring in various years through
September 30, 2004 and is committed to minimum rental payments (exclusive of
real estate taxes, maintenance, etc.) as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
------------ ----------
<S> <C> <C>
1996.................................................................................... $ 783,361 $ 96,006
1997.................................................................................... 787,579 60,477
1998.................................................................................... 551,350 36,826
1999.................................................................................... 186,120 18,176
2000.................................................................................... 89,220 6,708
Thereafter.............................................................................. 364,315 --
------------ ----------
Total minimum lease payments............................................................ $ 2,761,945 218,193
------------
------------
Less amounts representing interest...................................................... 30,499
----------
Present value of net minimum lease payments............................................. $ 187,694
----------
----------
</TABLE>
Rent expense charged to operations amounted to $371,236 for the eight months
ended August 31, 1995.
SUBORDINATED NOTE PAYABLE TO OFFICER/STOCKHOLDER -- As described in Note 6,
the Company is obligated under a note payable to the officer/stockholder of the
Company, which has been assigned to collateralize a loan secured by the
officer/stockholder. In connection with the underlying financing for the loan,
the Company was required to enter into an agreement whereby it was required to
adhere to various affirmative and negative covenants with respect to the
operations of the Company, disposition of assets, issuance of stock, payment of
dividends, conversion of debt and other actions as defined in the agreement. In
addition, the Company was required to issue stock warrants as described in Note
8.
LITIGATION -- On December 9, 1994 the Company filed suit against one of its
suppliers for breach of contract and unfair business practices, damages to be
proved at trial. A counterclaim in the approximate amount of $3,000,000 has been
filed by the defendant alleging breach of contract and unfair business
practices, among other allegations. Outside counsel for the Company have advised
that at this stage in the proceedings settlement discussions are in progress and
they cannot offer an opinion as to the probable outcome. The Company however,
has provided a reserve in the amount of $4,500,000 in the accompanying financial
statements.
In addition to the litigation noted above, the Company is, from time to
time, subject to routine litigation incidental to its business. The Company
believes that adequate reserves have been provided where appropriate.
8. COMMON STOCK WARRANTS
At August 31, 1995 Cyberlink, Inc. had outstanding warrants to purchase
33 1/3% of the outstanding shares of Cyberlink, Inc. common stock at $.10 per
share. The warrants were subsequently cancelled as discussed in Note 9 to the
financial statements.
F-46
<PAGE>
CYBERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1995
9. SUBSEQUENT EVENTS
ADDITIONAL FINANCING -- On September 8, 1995 the Company refinanced its
factoring arrangement (Note 4) and entered into a credit facility providing a
$5,000,000 revolving line of credit and a $2,000,000 equipment line. The term
loan bears interest at prime plus 2 1/2%. Advances under the revolving line bear
interest at prime plus 2 1/2%.
CONVERSION OF SUBORDINATED DEBT -- On September 1, 1995 the
officer/stockholder of the Company and the Company entered into an exchange
agreement whereby notes payable aggregating $2,500,000 were exchanged for
349,837 shares of Cyberlink, Inc. common stock. In addition, the warrants, as
described in Note 8 were cancelled.
In addition, on September 1, 1995 the note payable in the amount of
$1,150,000 was converted into 187,294 shares of Cyberlink, Inc. common stock.
ISSUANCE OF COMMON STOCK -- On September 1, 1995, Cyberlink, Inc. sold
1,213,719 shares of its common stock for $1,500,000 plus an additional capital
contribution of $2,029,397.
In addition, on September 1, 1995 the Company issued 71,396 shares in
exchange for services and cancellation of certain rights estimated at
approximately $176,000. Warrants to purchase an additional 47,597 shares at
$.001 per share were also issued for services and cancellation of certain rights
at an estimated cost of approximately $118,000.
TERMINATION OF S CORPORATION ELECTION -- Effective September 1, 1995 the
Company's status as an S corporation was terminated when it sold 1,213,719 of
its shares as described above. Consequently, the Company will be taxed as a C
corporation and any deferred income taxes will be reinstated at the corporate
level.
F-47
<PAGE>
RSL COMMUNICATIONS, LTD.
RSL COMMUNICATIONS PLC
All tendered Original Notes, executed Letters of Transmittal and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
------------------------
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS:
THE CHASE MANHATTAN BANK
- --------------------------------------------------------------------------------
BY REGISTERED OR CERTIFIED MAIL, BY OVERNIGHT COURIER OR BY HAND:
The Chase Manhattan Bank
450 W. 33rd Street
15th Floor
New York, New York 10001-2697
Attention: James D. Heaney
or
BY FACSIMILE:
The Chase Manhattan Bank
Attention: James D. Heaney
Facsimile Number: (212) 946-8161/8162
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the laws of the United Kingdom and the Issuer's Articles of
Association, except in the case of fraud or misconduct, the directors and
officers of the Issuer are indemnified out of the assets of the Issuer against
all losses or liabilities which they may sustain or incur in or about the
execution of the duties of their office or otherwise and no director or officer
of the Issuer shall be liable for any loss, damage or misfortune which may
happen to or be incurred by the Issuer in the execution of the duties of their
office or in relation thereto.
Under Bermuda law and the Guarantor's Memorandum of Association and
bye-laws, the directors, officers, liquidators and trustees (if any) of the
Guarantor and their heirs, executors and administrators are indemnified and held
harmless out of the assets of the Guarantor from and against all actions, costs,
charges, losses and expenses which they or any of them, their heirs, executors
or administrators, shall or may incur or sustain by or by reason of any act
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts, and none of them shall
be answerable for the acts, receipts, neglects or defaults of the others of them
or for joining in any receipts for the sake of conformity, or for any bankers or
other persons with whom any moneys or effects belonging to the Guarantor shall
or may be lodged or deposited for safe custody, or for insufficiency or
deficiency of any security upon which any moneys of or belonging to the
Guarantor shall be placed out on or invested, or for any other loss, misfortune
or damage which may happen in the execution of their respective offices or
trusts, or in relation thereto, provided that they are not entitled to
indemnification in respect of any fraud or dishonesty which may attach to them.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 --Certificate of Incorporation of RSL Communications PLC, issued by the Registrar of Companies for
England and Wales on July 25, 1996.
3.2 --Memorandum of Association of RSL Communications PLC, filed with the Registrar of Companies for
England and Wales on July 25, 1996.
3.3 --Articles of Association of RSL Communications PLC, filed with the Registrar of Companies for
England and Wales on July 25, 1996.
3.4 --Certificate of Incorporation of RSL Communications, Ltd., issued by the Bermuda Registrar of
Companies on March 14, 1996.
3.5 --Memorandum of Association of RSL Communications, Ltd., filed with the Bermuda Registrar of
Companies on March 14, 1996.
3.6 --Bye-Laws of RSL Communications, Ltd.
4.1 --Placement Agreement, dated as of September 30, 1996, by and among RSL Communications PLC, RSL
Communications, Ltd. and Morgan Stanley & Co. Incorporated, Bear Stearns Co. Inc. and Dillon Read &
Co. Inc.
4.2 --Indenture, dated October 3, 1996, by and among RSL Communications PLC, RSL Communications, Ltd. and
The Chase Manhattan Bank, as Trustee, containing, as exhibits, specimens of 12 % Senior Notes due
2006.
4.3 --Notes Registration Rights Agreement, dated October 3, 1996, by and among RSL Communications PLC,
RSL Communications, Ltd. and the Placement Agents.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.4 --Note Deposit Agreement, dated October 3, 1996, by and among RSL Communications PLC, RSL
Communications, Ltd. and The Chase Manhattan Bank, as Book Entry Depositary.
4.5 --Collateral Pledge and Security Agreement, dated October 3, 1996, by and among RSL Communications
PLC and Trustee.
4.6 --Form of Letter of Transmittal.
5.1 --Opinion of Levinson Gray.
5.2 --Opinion of Conyers, Dill and Pearman.
8.1 --Opinion of Rosenman & Colin LLP.
8.2 --Opinion of Levinson Gray (included in Exhibit 5.1 hereto).
10.1 --Warrant Agreement, dated October 3, 1996, between RSL Communications, Ltd., as Issuer, and The
Chase Manhattan Bank, as warrant agent.
10.2 --Warrant Registration Rights Agreement, dated October 3, 1996, between RSL Communications, Ltd., as
issuer, and The Chase Manhattan Bank, as warrant agent
10.3 --Amendment to the Revolving Credit Facility, dated August 20, 1996, from The Chase Manhattan Bank to
RSL Communications, Ltd.
10.4 --Amendment to the Revolving Credit Facility, dated September 10, 1996, from The Chase Manhattan Bank
to RSL Communications, Ltd.
10.5 --Subordinated Promissory Note, dated September 10, 1996 from RSL Communications, Ltd. to Ronald S.
Lauder.
10.6 --Warrant for 210,000 shares of Class B Common Stock of RSL Communications, Ltd. issued to Ronald S.
Lauder on September 10, 1996.
10.7 --Standby Facility Agreement, dated October 1, 1996, by and between RSL Communications, Ltd. and
Ronald S. Lauder.
10.8 --Consulting Agreement, dated September 15, 1995, between Eugene Sekulow and RSL Inc.
10.9 --Extension of Agreement, dated August 8, 1996, between Eugene Sekulow and RSL Inc.
10.10 --RSL Communications, Ltd.'s 1995 Amended and Restated Stock Option Plan.
10.11 --Employment Agreement, dated September 15, 1995, between Itzhak Fisher and International
Telecommunications Group Ltd.
10.12 --Employment Agreement, dated September 15, 1995, between Itzhak Fisher and RSL Communications Inc.
10.13 --Employment Agreement, dated April 1, 1995, between Nir Tarlovsky and International
Telecommunications Group Ltd.
10.14 --Employment Agreement, dated April 1, 1995, between Nir Tarlovsky and RSL Communications Inc.
10.15 --Employment Agreement, dated August 9, 1995, between RSL COM Europe Limited and Richard Williams.
10.16 --Memorandum of Agreement, dated July 30, 1996, between International Telecommunications Corporation
and Codetel.
10.17 --General Purchase Agreement, dated September 14, 1995, between Ericsson Inc. and International
Telecommunications Corporation.
10.18 --Lease Agreement between AB LM Ericsson and International Telecommunications Corporation.
10.19 --Lease Agreement, dated April 10, 1996, between RSL COM Europe Ltd. and AB LM Ericsson Finans.
10.20 --Lease Agreement, dated December 30, 1996, between RSL COM Europe Ltd. and AB LM Ericsson Finans.
10.21 --Loan and Security Agreement, dated September 8, 1995, between Cyberlink Inc. and CoastFed Business
Credit Corporation.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.22 --Accounts Collateral Security Agreement, dated September 8, 1995, between Cyberlink Inc. and
CoastFed Business Credit.
10.23 --Equipment Collateral Security Agreement, dated September 8, 1995, between Cyberlink Inc. and
CoastFed Business Credit.
10.24 --Security Stock Pledge Agreement, dated September 8, 1995, between CoastFed Business Credit and
Cyberlink Inc.
10.25 --Security Agreement, dated September 8, 1995, between CoastFed Business Credit and
Cyberlink-California Inc.
10.26 --Security Agreement, dated September 8, 1995, between CoastFed Business Credit and Cyberlink-Nevada
Inc.
*10.27 --Asset Purchase Agreement, dated as of May 8, 1996, by and between RSL COM France S.A. and Sprint
Telecommunications France Inc.
*10.28 --Transition Services Agreement, dated May 8, 1996, by and among Sprint Telecommunications France
Inc., Sprint International France S.A. and RSL COM France S.A.
*10.29 --Transition Services Agreement, dated May 8, 1996, by and between Sprint Communications Company L.P.
and RSL COM France S.A.
*10.30 --Amendment No. 1 to the Transition Services Agreement, effective as of May 8, 1996, among Sprint
Communications Company L.P., Sprint International France S.A. and RSL COM France S.A.
*10.31 --Transition Services Agreement, dated May 8, 1996, by and between Global One Communications World
Operations, Limited and RSL COM France S.A.
*10.32 --Asset Purchase Agreement, dated as of May 8, 1996, by and among RSL COM Deutschland GmbH, Sprint
Telecommunication Services GmbH and Sprint Fon Inc.
*10.33 --Transition Services Agreement, dated May 8, 1996, by and among Sprint Telecommunication Services
GmbH, Sprint Fon Inc. and RSL COM Deutschland GmbH.
*10.34 --Transition Services Agreement, dated May 8, 1996, by and between Sprint Communications Company L.P.
and RSL COM Deutschland GmbH.
*10.35 --Amendment No. 1 to the Transition Services Agreement, effective as of May 8, 1996, among Sprint
Communications Company L.P., Sprint Telecommunication Services GmbH and RSL COM Deutschland GmbH.
*10.36 --Transition Services Agreement, dated May 8, 1996, by and between Global One Communications World
Operations, Limited and RSL COM Deutschland GmbH.
10.37 --Asset Purchase Agreement, August 12, 1996, by and between RSL COM UK Limited and Incom (UK) Ltd.
10.38 --Stock Purchase Agreement, dated July 3, 1996, between RSL Communications PLC and Charles Piluso.
10.39 --Secured Promissory Note, dated September 9, 1996, from RSL Communications PLC to Charles Piluso.
10.40 --Stock Pledge and Security Agreement, dated September 9, 1996 between RSL Communications PLC,
Charles Piluso and Fletcher, Heald & Hildreth, P.L.C.
10.41 --Shareholders Agreement, dated as of September 9, 1996 among Charles Piluso, Jacqueline and Victoria
Piluso, Richard Rebetti, RSL Communications PLC and RSL Communications, Ltd.
10.42 --Stock Purchase Agreement, dated September 9, 1996, between RSL Communications PLC and Richard
Rebetti.
10.43 --Secured Promissory Note, dated September 9, 1996, from RSL Communications PLC to Richard Rebetti.
10.44 --Stock Pledge and Security Agreement, dated September 9, 1996, between RSL Communications PLC,
Richard Rebetti and Fletcher, Heald & Hildreth, P.L.C.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.45 --Agreement and Plan of Reorganization, dated September 9, 1996, among RSL Communications PLC, RSL
Communications, Ltd. and Charles Piluso.
10.46 --Tax Agreement, dated September 9, 1996, between RSL Communications PLC, RSL Communications, Ltd.
and Charles Piluso.
10.47 --Stock Purchase Agreement, dated September 22, 1995, by and between RSL Communications Inc. and
Charles Piluso.
10.48 --Stock Purchase Agreement, dated September 22, 1995, by and between Richard Rebetti and RSL
Communications Inc.
10.49 --Amendment to the Stock Purchase Agreement, dated September 22, 1995, between and among
International Telecommunications Group, Ltd., International Telecommunications Corporation and RSL
Communications Inc.
10.50 --Stock Purchase Agreement, dated March 10, 1995, between RSL Communications Ltd. and International
Telecommunications Group, Ltd.
10.51 --Amendment to Shareholder's Agreement, dated March 10, 1995, between and among Charles Piluso,
Richard Rebetti, Incom (UK) Ltd., International Telecommunications Group, Ltd. and RSL
Communications Inc.
10.52 --Indemnity Agreement, dated March 10, 1995, between and among International Telecommunications
Group, Ltd., International Telecommunications Corporation and RSL Communications Inc.
10.53 --Sublease, dated July 18, 1996, between RSL Communications, Ltd. and RSL Management Corporation.
10.54 --Lease, dated as of January 15, 1997, between Longstreet Associates, L.P. and RSL COM U.S.A., Inc.
10.55 --Amendment of Lease, dated as of December 6, 1995, between Hudson Telegraph Associates and
International Telecommunications Corporation.
12.1 --Statement of Computation of the Ratios of Earnings to Fixed Charges.
21.1 --Subsidiaries of the Company.
23.1 --Consent of Deloitte & Touche LLP (included on page II-10).
23.2 --Consent of Brown, Leifer, Slatkin + Berns (included on page II-11).
23.3 --Consent of Rosenman & Colin LLP (included in Exhibit 8.1 hereto).
23.4 --Consent of Levinson Gray (included in Exhibit 5.1 hereto).
23.5 --Consent of Conyers, Dill & Pearman (included in Exhibit 5.2 hereto).
24.1 --Powers of Attorney (included in the signature pages to the Registration Statement).
25.1 --Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank.
99.1 --Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Confidential treatment has been requested with respect to certain
information contained in this exhibit.
(b) Financial Statement Schedules.
For the year ended December 31, 1996.
Schedule I--Condensed Financial Information of RSL Communications PLC
(included at page S-1).
Schedule II--Schedule of Valuation Allowances (included at page S-4).
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of this chapter at
the start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section 10(a)(3)
of the Act need not be furnished, provided, that the registrant includes in
the prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (4) and other information necessary to
ensure that all other information in the prospectus is at least as current
as the date of those financial statements.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (3)
immediately proceeding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, State of New
York on the 23rd day of April, 1997.
RSL COMMUNICATIONS PLC
By /s/ ITZHAK FISHER
-----------------------------------------
Itzhak Fisher
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* /s/ RONALD S. LAUDER Chairman of the Board and April 23, 1997
- ------------------------------ Director
(Ronald S. Lauder)
/s/ ITZHAK FISHER President, Chief Executive April 23, 1997
- ------------------------------ Officer and Director
(Itzhak Fisher) (Principal Executive
Officer)
* /s/ ANDREW GASPAR Vice Chairman and Director April 23, 1997
- ------------------------------
(Andrew Gaspar)
* /s/ JACOB Z. SHUSTER Chief Financial Officer, April 23, 1997
- ------------------------------ Secretary, Treasurer and
(Jacob Z. Shuster) Director (Principal
Financial Officer)
* /s/ KAREN VAN DE VRANDE Vice President of Marketing April 23, 1997
- ------------------------------
(Karen Van De Vrande)
* /s/ NIR TARLOVSKY Vice President of Business April 23, 1997
- ------------------------------ Development, Director
(Nir Tarlovsky)
* /s/ NESIM N. BILDIRICI Vice President of Mergers April 23, 1997
- ------------------------------ and Acquisitions,
(Nesim N. Bildirici) Director
* /s/ MARK J. HIRSCHHORN Global Controller, April 23, 1997
- ------------------------------ Assistant Secretary
(Mark J. Hirschhorn) (Principal Accounting
Officer)
* /s/ EUGENE SEKULOW Director April 23, 1997
- ------------------------------
(Eugene Sekulow)
*By: /s/ ITZHAK FISHER
-------------------------------------
NAME: Itzhak Fisher
TITLE: ATTORNEY-IN-FACT
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, State of New
York on the 23rd day of April, 1997.
RSL COMMUNICATIONS, LTD.
By /s/ ITZHAK FISHER
-----------------------------------------
Itzhak Fisher
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* /s/ RONALD S. LAUDER Chairman of the Board and April 23, 1997
- ------------------------------ Director
(Ronald S. Lauder)
/s/ ITZHAK FISHER President, Chief Executive April 23, 1997
- ------------------------------ Officer and Director
(Itzhak Fisher) (Principal Executive
Officer)
* /s/ ANDREW GASPAR Vice Chairman and Director April 23, 1997
- ------------------------------
(Andrew Gaspar)
* /s/ JACOB Z. SCHUSTER Chief Financial Officer, April 23, 1997
- ------------------------------ Assistant Secretary,
(Jacob Z. Schuster) Treasurer and Director
(Principal Financial
Officer)
* /s/ KAREN VAN DE VRANDE Vice President of Marketing April 23, 1997
- ------------------------------
(Karen Van De Vrande)
* /s/ NIR TARLOVSKY Vice President of Business April 23, 1997
- ------------------------------ Development, Director
(Nir Tarlovsky)
* /s/ NESIM N. BILDIRICI Vice President of Mergers April 23, 1997
- ------------------------------ and Acquisitions,
(Nesim N. Bildirici) Director
* /s/ MARK J. HIRSCHHORN Global Controller, April 23, 1997
- ------------------------------ Assistant Secretary
(Mark J. Hirschhorn) (Principal Accounting
Officer)
* /s/ TUCKER HALL Secretary April 23, 1997
- ------------------------------
(Tucker Hall)
* /s/ GUSTAVO CISNEROS Director April 23, 1997
- ------------------------------
(Gustavo Cisneros)
* /s/ LEONARD A. LAUDER Director April 23, 1997
- ------------------------------
(Leonard A. Lauder)
II-8
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* /s/ EUGENE SEKULOW Director April 23, 1997
- ------------------------------
(Eugene Sekulow)
* /s/ NICOLAS G. TROLLOPE Director April 23, 1997
- ------------------------------
(Nicolas G. Trollope)
*By: /s/ ITZHAK FISHER
-------------------------------------
NAME: Itzhak Fisher
TITLE: ATTORNEY-IN-FACT
II-9
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of RSL Communications
PLC and RSL Communications, Ltd. on Form S-4 of our report dated March 7, 1997
relating to the financial statements of RSL Communications, Ltd. and of our
reports dated March 14, 1997, relating to the financial statements of
International Telecommunications Group, Ltd. and subsidiaries appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Summary of
Selected Consolidated Financial Data" and "Experts" in such Prospectus.
Deloitte & Touche LLP
New York, New York
April 23, 1997
II-10
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of RSL Communications
PLC and RSL Communications, Ltd. on Form S-4 of our report dated August 30, 1996
on Cyberlink, Inc. and subsidiaries appearing in the Prospectus, which is part
of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Brown, Leifer, Slatkin + Berns
Studio City, California
April 23, 1997
II-11
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RSL COMMUNICATIONS PLC
RSL COMMUNICATIONS PLC
BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets................................................................ $201,734,395
Marketable Securities--Held to maturity....................................... 104,370,011
Property and Equipment........................................................ 31,941,441
Other Assets.................................................................. 88,819,629
-----------
Total................................................................... $426,865,476
-----------
-----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS EQUITY
<S> <C>
Current Liabilities........................................................... $74,949,341
Long Term Debt................................................................ 94,555,559
Senior Notes, 12 1/4% Due 2006................................................ 300,000,000
Shareholder's Equity.......................................................... (42,639,424)
-----------
Total................................................................... $426,865,476
-----------
-----------
</TABLE>
S-1
<PAGE>
SCHEDULE I (CONTINUED)
RSL COMMUNICATIONS PLC
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
--------------
<S> <C>
REVENUES.......................................................................................... $ 113,257,340
COST OF SERVICES.................................................................................. 98,461,406
--------------
Gross Profit................................................................................ 14,795,934
EXPENSES.......................................................................................... 41,618,912
--------------
LOSS FROM OPERATIONS.............................................................................. (26,822,978)
INTEREST EXPENSE.................................................................................. (7,384,097)
OTHER EXPENSE-Net................................................................................. (285,092)
FOREIGN CURRENCY TRANSACTION GAIN................................................................. 757,696
MINORITY INTEREST................................................................................. (180,100)
INCOME TAXES...................................................................................... (394,556)
--------------
NET LOSS.......................................................................................... $ (34,309,127)
--------------
--------------
</TABLE>
S-2
<PAGE>
SCHEDULE I (CONTINUED)
RSL COMMUNICATIONS PLC
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
1996
---------------
<S> <C>
Net Loss......................................................................................... $ (34,309,127)
Depreciation and amortization.................................................................... 6,617,788
Working capital change and other................................................................. 16,911,146
---------------
Net cash used in operating activities...................................................... (10,780,193)
---------------
Purchases of Property and Equipment.............................................................. (15,983,227)
Acquisitions of Subsidiaries..................................................................... (38,552,408)
Purchase of Marketable Securities................................................................ (82,529,263)
Proceeds from Sales of Marketable Securities..................................................... 14,700,903
Purchase of Restricted Marketable Securities..................................................... (102,807,652)
Other............................................................................................ 171,367
---------------
Net cash used in investing activities...................................................... (225,000,280)
---------------
Proceeds from notes payable...................................................................... 300,000,000
Advances from Parent............................................................................. 61,006,697
Offering Cost and Other.......................................................................... (11,968,884)
Net cash provided by financing activities.................................................. 349,037,813
---------------
Net increase in cash....................................................................... 113,257,340
Cash, January 1, 1996...................................................................... --
---------------
Cash, December 31, 1996.................................................................... $ 113,257,340
---------------
---------------
</TABLE>
S-3
<PAGE>
SCHEDULE II
SCHEDULE OF VALUATION ALLOWANCES
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER DECEMBER 31,
1996 EXPENSES ACCOUNTS DEDUCTIONS 1996
------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Bad debt provision........................ $ 1,595,766 $ 2,829,578 -- $ (543,870) $ 3,881,474
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER DECEMBER31,
1995 EXPENSES ACCOUNTS(1) DEDUCTIONS 1995
--------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Bad debt provision........................... -- $ 148,690 $ 1,447,076 -- $1,595,766
</TABLE>
- ------------------------
(1) The bad debt provision was previously recorded in the financial statements
of RSL Communications, Ltds.'s (the "Company") predecessor, International
Telecommunications Group, Ltd. ("ITG"). The Company began consolidating ITG
effective with its acquisition of interests in ITG in September 1996.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- -----
<C> <S> <C>
3.1 --Certificate of Incorporation of RSL Communications PLC, issued by the Registrar of Companies
for England and Wales on July 25, 1996.
3.2 --Memorandum of Association of RSL Communications PLC, filed with the Registrar of Companies
for England and Wales on July 25, 1996.
3.3 --Articles of Association of RSL Communications PLC, filed with the Registrar of Companies for
England and Wales on July 25, 1996.
3.4 --Certificate of Incorporation of RSL Communications, Ltd., issued by the Bermuda Registrar of
Companies on March 14, 1996.
3.5 --Memorandum of Association of RSL Communications, Ltd., filed with the Bermuda Registrar of
Companies on March 14, 1996.
3.6 --Bye-Laws of RSL Communications, Ltd.
4.1 --Placement Agreement, dated as of September 30, 1996, by and among RSL Communications PLC,
RSL Communications, Ltd. and Morgan Stanley & Co. Incorporated, Bear Stearns Co. Inc. and
Dillon Read & Co. Inc.
4.2 --Indenture, dated October 3, 1996, by and among RSL Communications PLC, RSL Communications,
Ltd. and The Chase Manhattan Bank, as Trustee, containing, as exhibits, specimens of 12 %
Senior Notes due 2006.
4.3 --Notes Registration Rights Agreement, dated October 3, 1996, by and among RSL Communications
PLC, RSL Communications, Ltd. and the Placement Agents.
4.4 --Note Deposit Agreement, dated October 3, 1996, by and among RSL Communications PLC, RSL
Communications, Ltd. and The Chase Manhattan Bank, as Book Entry Depositary.
4.5 --Collateral Pledge and Security Agreement, dated October 3, 1996, by and among RSL
Communications PLC and Trustee.
4.6 --Form of Letter of Transmittal.
5.1 --Opinion of Levinson Gray.
5.2 --Opinion of Conyers, Dill and Pearman.
8.1 --Opinion of Rosenman & Colin LLP.
8.2 --Opinion of Levinson Gray (included in Exhibit 5.1 hereto).
10.1 --Warrant Agreement, dated October 3, 1996, between RSL Communications, Ltd., as Issuer, and
The Chase Manhattan Bank, as warrant agent.
10.2 --Warrant Registration Rights Agreement, dated October 3, 1996, between RSL Communications,
Ltd., as issuer, and The Chase Manhattan Bank, as warrant agent
10.3 --Amendment to the Revolving Credit Facility, dated August 20, 1996, from The Chase Manhattan
Bank to RSL Communications, Ltd.
10.4 --Amendment to the Revolving Credit Facility, dated September 10, 1996, from The Chase
Manhattan Bank to RSL Communications, Ltd.
10.5 --Subordinated Promissory Note, dated September 10, 1996 from RSL Communications, Ltd. to
Ronald S. Lauder.
10.6 --Warrant for 210,000 shares of Class B Common Stock of RSL Communications, Ltd. issued to
Ronald S. Lauder on September 10, 1996.
10.7 --Standby Facility Agreement, dated October 1, 1996, by and between RSL Communications, Ltd.
and Ronald S. Lauder.
10.8 --Consulting Agreement, dated September 15, 1995, between Eugene Sekulow and RSL Inc.
10.9 --Extension of Agreement, dated August 8, 1996, between Eugene Sekulow and RSL Inc.
10.10 --RSL Communications, Ltd.'s 1995 Amended and Restated Stock Option Plan.
10.11 --Employment Agreement, dated September 15, 1995, between Itzhak Fisher and International
Telecommunications Group Ltd.
10.12 --Employment Agreement, dated September 15, 1995, between Itzhak Fisher and RSL Communications
Inc.
10.13 --Employment Agreement, dated April 1, 1995, between Nir Tarlovsky and International
Telecommunications Group Ltd.
10.14 --Employment Agreement, dated April 1, 1995, between Nir Tarlovsky and RSL Communications Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.15 --Employment Agreement, dated August 9, 1995, between RSL COM Europe Limited and Richard
Williams.
10.16 --Memorandum of Agreement, dated July 30, 1996, between International Telecommunications
Corporation and Codetel.
10.17 --General Purchase Agreement, dated September 14, 1995, between Ericsson Inc. and
International Telecommunications Corporation.
10.18 --Lease Agreement between AB LM Ericsson and International Telecommunications Corporation.
10.19 --Lease Agreement, dated April 10, 1996, between RSL COM Europe Ltd. and AB LM Ericsson
Finans.
10.20 --Lease Agreement, dated December 30, 1996, between RSL COM Europe Ltd. and AB LM Ericsson
Finans.
10.21 --Loan and Security Agreement, dated September 8, 1995, between Cyberlink Inc. and CoastFed
Business Credit Corporation.
10.22 --Accounts Collateral Security Agreement, dated September 8, 1995, between Cyberlink Inc. and
CoastFed Business Credit.
10.23 --Equipment Collateral Security Agreement, dated September 8, 1995, between Cyberlink Inc. and
CoastFed Business Credit.
10.24 --Security Stock Pledge Agreement, dated September 8, 1995, between CoastFed Business Credit
and Cyberlink Inc.
10.25 --Security Agreement, dated September 8, 1995, between CoastFed Business Credit and
Cyberlink-California Inc.
10.26 --Security Agreement, dated September 8, 1995, between CoastFed Business Credit and
Cyberlink-Nevada Inc.
*10.27 --Asset Purchase Agreement, dated as of May 8, 1996, by and between RSL COM France S.A. and
Sprint Telecommunications France Inc.
*10.28 --Transition Services Agreement, dated May 8, 1996, by and among Sprint Telecommunications
France Inc., Sprint International France S.A. and RSL COM France S.A.
*10.29 --Transition Services Agreement, dated May 8, 1996, by and between Sprint Communications
Company L.P. and RSL COM France S.A.
*10.30 --Amendment No. 1 to the Transition Services Agreement, effective as of May 8, 1996, among
Sprint Communications Company L.P., Sprint International France S.A. and RSL COM France S.A.
*10.31 --Transition Services Agreement, dated May 8, 1996, by and between Global One Communications
World Operations, Limited and RSL COM France S.A.
*10.32 --Asset Purchase Agreement, dated as of May 8, 1996, by and among RSL COM Deutschland GmbH,
Sprint Telecommunication Services GmbH and Sprint Fon Inc.
*10.33 --Transition Services Agreement, dated May 8, 1996, by and among Sprint Telecommunication
Services GmbH, Sprint Fon Inc. and RSL COM Deutschland GmbH.
*10.34 --Transition Services Agreement, dated May 8, 1996, by and between Sprint Communications
Company L.P. and RSL COM Deutschland GmbH.
*10.35 --Amendment No. 1 to the Transition Services Agreement, effective as of May 8, 1996, among
Sprint Communications Company L.P., Sprint Telecommunication Services GmbH and RSL COM
Deutschland GmbH.
*10.36 --Transition Services Agreement, dated May 8, 1996, by and between Global One Communications
World Operations, Limited and RSL COM Deutschland GmbH.
10.37 --Asset Purchase Agreement, August 12, 1996, by and between RSL COM UK Limited and Incom (UK)
Ltd.
10.38 --Stock Purchase Agreement, dated July 3, 1996, between RSL Communications PLC and Charles
Piluso.
10.39 --Secured Promissory Note, dated September 9, 1996, from RSL Communications PLC to Charles
Piluso.
10.40 --Stock Pledge and Security Agreement, dated September 9, 1996 between RSL Communications PLC,
Charles Piluso and Fletcher, Heald & Hildreth, P.L.C.
10.41 --Shareholders Agreement, dated as of September 9, 1996 among Charles Piluso, Jacqueline and
Victoria Piluso, Richard Rebetti, RSL Communications PLC and RSL Communications, Ltd.
10.42 --Stock Purchase Agreement, dated September 9, 1996, between RSL Communications PLC and
Richard Rebetti.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.43 --Secured Promissory Note, dated September 9, 1996, from RSL Communications PLC to Richard
Rebetti.
10.44 --Stock Pledge and Security Agreement, dated September 9, 1996, between RSL Communications
PLC, Richard Rebetti and Fletcher, Heald & Hildreth, P.L.C.
10.45 --Agreement and Plan of Reorganization, dated September 9, 1996, among RSL Communications PLC,
RSL Communications, Ltd. and Charles Piluso.
10.46 --Tax Agreement, dated September 9, 1996, between RSL Communications PLC, RSL Communications,
Ltd. and Charles Piluso.
10.47 --Stock Purchase Agreement, dated September 22, 1995, by and between RSL Communications Inc.
and Charles Piluso.
10.48 --Stock Purchase Agreement, dated September 22, 1995, by and between Richard Rebetti and RSL
Communications Inc.
10.49 --Amendment to the Stock Purchase Agreement, dated September 22, 1995, between and among
International Telecommunications Group, Ltd., International Telecommunications Corporation
and RSL Communications Inc.
10.50 --Stock Purchase Agreement, dated March 10, 1995, between RSL Communications Ltd. and
International Telecommunications Group, Ltd.
10.51 --Amendment to Shareholder's Agreement, dated March 10, 1995, between and among Charles
Piluso, Richard Rebetti, Incom (UK) Ltd., International Telecommunications Group, Ltd. and
RSL Communications Inc.
10.52 --Indemnity Agreement, dated March 10, 1995, between and among International
Telecommunications Group, Ltd., International Telecommunications Corporation and RSL
Communications Inc.
10.53 --Sublease, dated July 18, 1996, between RSL Communications, Ltd. and RSL Management
Corporation.
10.54 --Lease, dated as of January 15, 1997, between Longstreet Associates, L.P. and RSL COM U.S.A.,
Inc.
10.55 --Amendment of Lease, dated as of December 6, 1995, between Hudson Telegraph Associates and
International Telecommunications Corporation.
12.1 --Statement of Computation of the Ratios of Earnings to Fixed Charges.
21.1 --Subsidiaries of the Company.
23.1 --Consent of Deloitte & Touche LLP (included on page II-10).
23.2 --Consent of Brown, Leifer, Slatkin + Berns (included on page II-11).
23.3 --Consent of Rosenman & Colin LLP (included in Exhibit 8.1 hereto).
23.4 --Consent of Levinson Gray (included in Exhibit 5.1 hereto).
23.5 --Consent of Conyers, Dill & Pearman (included in Exhibit 5.2 hereto).
24.1 --Powers of Attorney (included in the signature pages to the Registration Statement).
25.1 --Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939
of The Chase Manhattan Bank.
99.1 --Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Confidential treatment has been requested with respect to certain
information contained in this exhibit.
<PAGE>
Exhibit 3.1
[SEAL]
CERTIFICATE OF INCORPORATION
OF A PUBLIC LIMITED COMPANY
Company No. 3231791
The Registrar of Companies for England and Wales hereby certifies that
RSL COMMUNICATIONS PLC
is this day incorporated under the Companies Act 1985 as a public company and
that the company is limited.
Given at Companies House, London, the 25th July 1996
/s/ S. Bashar
MISS S. BASHAR
For The Registrar Of Companies
[Logo]
COMPANIES HOUSE
<PAGE>
Exhibit 3.2
- --------------------------------------------------------------------------------
03231791
- --------------------------------------------------------------------------------
30 - 07 - 06
- --------------------------------------------------------------------------------
[STAMP]
The Companies Acts 1985 and 1989
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
R S L COMMUNICATIONS PLC
-----------------
1. The Company's name is "R S L COMMUNICATIONS PLC".
2. The Company is to be a public company.
3. The Company's registered office is to be situated in England and Wales.
4. The Company's objects are:-
(A)To carry on business as a holding company and to acquire and hold
shares, stocks, debentures, debenture stock, perpetual or otherwise, bonds,
obligations and securities issued or guaranteed by any company, government,
sovereign, ruler, commissions, public body or authority, supreme,
municipal, local or otherwise, whether at home or abroad and to acquire any
such shares, stocks, debentures, debenture stock, bonds, obligations or
securities by original subscription, tender, purchase, exchange,
underwriting, participation in syndicates or otherwise, and whether or not
fully paid up, and to make payments thereon as called upon or in advance of
calls or otherwise, and to subscribe for the same either conditionally or
otherwise with power to exercise and enforce all rights. Provided that if
it shall be found necessary or advisable for the Company to realise all or
any part of its property or assets the Company shall have power to do so.
(B)To carry on any other trade or business whatever which can in the
opinion of the Board of Directors be advantageously carried on in
connection with or ancillary to any of the businesses of the Company.
(C)To purchase or by any other means acquire and take options over any
property whatever, and any rights or privileges of any kind over or in
respect of any property.
1
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<PAGE>
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03231791
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30 - 07 - 06
- --------------------------------------------------------------------------------
(D)To apply for, register, purchase, or by other means acquire and protect,
prolong and renew, whether in the United Kingdom or elsewhere any patents,
patent rights, brevets, d'invention, licences, secret processes, trade
marks, designs, protections and concessions and to disclaim, alter, modify,
use and turn to account and to manufacture under or grant licences or
privileges in respect of the same, and to expend money in experimenting
upon, testing and improving any patents, inventions or rights which the
Company may acquire or propose to acquire.
(E) To acquire or undertake the whole or any part of the business,
goodwill, and assets of any person, firm, or company carrying on or
proposing to carry on any of the businesses which the Company is authorised
to carry on and as part of the consideration for such acquisition to
undertake all or any of the liabilities of such person, firm or company, or
to acquire an interest in, amalgamate with, or enter into partnership or
into an arrangement for sharing profits, or for cooperation, or for mutual
assistance with any such person, firm or company, or for subsidising or
otherwise assisting any such person, firm or company, and to give or
accept, by way of consideration for any of the acts or things aforesaid or
property acquired, any shares, debentures, debenture stock or securities
that may be agreed upon, and to hold and retain, or sell, mortgage and deal
with any shares, debentures, debenture stock or securities so received.
(F) To improve, manage, construct, repair, develop, exchange, let on lease
or otherwise, mortgage, charge, sell, dispose of, turn to account, grant
licences, options, rights and privileges in respect of, or otherwise deal
with all or any part of the property and rights of the Company.
(G) To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined and to hold
or otherwise deal with any investments made.
(H) To lend and advance money or give credit on any terms and with or
without security to any person, firm or company (including without
prejudice to the generality of the foregoing any holding company,
subsidiary or fellow subsidiary of, or any other company associated in any
way with the Company), to enter into guarantees, contracts of indemnity and
suretyships of all kinds, to receive money on deposit or loan upon any
terms, and to secure or guarantee in any manner and upon any terms the
payment of any sum of money or the performance of any obligation by any
person, firm or company (including without prejudice to the generality of
the foregoing any such holding company, subsidiary, fellow subsidiary or
associated company as aforesaid).
(I) To borrow and raise money in any manner and to secure the repayment of
any money borrowed, raised or owing by mortgage, charge, standard security,
lien or other security upon the whole or any part of the Company's property
or assets (whether present or future), including its uncalled capital, and
also by a similar mortgage, charge, standard security, lien or security to
secure any guarantee the performance by the Company of any obligation or
liability it may undertake or which may become binding on it.
2
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<PAGE>
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03231791
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30 - 07 - 06
- --------------------------------------------------------------------------------
(J)To draw, make, accept, endorse, discount, negotiate, execute and issue
cheques, bills of exchange, promissory notes, bills of lading, warrants,
debentures, and other negotiable or transferable instruments.
(K)To apply for, promote and obtain any Act of Parliament, order or licence
of the Department of Trade or other authority for enabling the Company to
carry any of its objects into effect, or for effecting any modification of
the Company's constitution, or for any other purpose which may seem
calculated directly or indirectly to promote the Company's interests, and
to oppose any proceedings or applications which may seem calculated
directly or indirectly to prejudice the Company's interests.
(L) To enter into any arrangement with any government or authority
(supreme, municipal, local or otherwise) that may seem conducive to the
attainment of the Company's objects or any of them, and to obtain from any
such government or authority any charters, decrees, rights, privileges or
concessions which the Company may think desirable and to carry out,
exercise, and comply with any such charters, decrees, rights, privileges,
and concessions.
(M) To subscribe for, take, purchase, or otherwise acquire, hold, sell,
deal with and dispose of, place and underwrite shares, stocks, debentures,
debenture stocks, bonds, obligations or securities issued or guaranteed by
any other company constituted or carrying on business in any part of the
world, and debentures, debenture stocks, bonds, obligations or securities
issued or guaranteed by any government or authority, municipal, local or
otherwise, in any part of the world.
(N) To control, manage, finance, subsidise, co-ordinate or otherwise assist
any company or companies in which the Company has a direct or indirect
financial interest, to provide secretarial, administrative, technical,
commercial, and other services and facilities of any kind for any such
company or companies and to make payments by way of subvention or otherwise
and any other arrangements which may seen desirable with respect to any
business or operations of or generally with respect to any such company or
companies.
(O) To promote any other company for the purpose of acquiring the whole or
any part of the business or property or undertaking or any of the
liabilities of the Company, or of undertaking any business or operations
which may appear likely to assist or benefit the Company or to enhance the
value of any property or business of the Company, and to place or guarantee
the placing of, underwrite, subscribe for, or otherwise acquire all or any
part of the shares or securities of any such company as aforesaid.
(P) To sell or otherwise dispose of the whole or any part of the business
or property of the Company, either together or in portions, for such
consideration as the Company may think fit, and in particular for shares,
debentures, or securities of any company purchasing the same.
(Q) To act as agents or brokers and as trustees for any person, firm or
company, and to undertake and perform sub-contracts.
3
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<PAGE>
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03231791
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30 - 07 - 06
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(R) To remunerate any person, firm or company rendering services to the
Company either by cash payment or by the allotment to him or them of shares
or other securities of the Company credited as paid up in full or in part
or otherwise as may be thought expedient.
(S) To pay all or any expenses incurred in connection with the promotion,
formation and incorporation of the Company, or to contract with any person,
firm or company to pay the same, and to pay commissions to brokers and
others for underwriting, placing, selling, or guaranteeing the subscription
of any shares or other securities of the Company.
(T) to support and subscribe to any charitable or public object and to
support and subscribe to any institution, society, or club which may be for
the benefit of the Company or its Directors or employees, or may be
connected with any town or place where the Company carries on business; to
give or award pensions, annuities, gratuities, and superannuation or other
allowances or benefits or charitable aid and generally to provide
advantages; facilities and services for any persons who are or have been
Directors of, or who are or have been employed by, or who are serving or
have served the Company, or any company which is a subsidiary of the
Company or the holding company of the Company or a fellow subsidiary of the
Company or the predecessors in business of the Company or of any such
subsidiary, holding or fellow subsidiary company and to the wives, widows,
children and other relatives and dependents of such persons; to make
payments towards insurance; and to set up, establish, support and maintain
superannuation and other funds or schemes (whether contributory or
non-contributory) for the benefit of any of such persons and of their
wives, widows, children and other relatives and dependents; and to set up,
establish, support and maintain profit sharing or share purchase schemes
for the benefit of any of the employees of the Company or any such
subsidiary, holding or fellow subsidiary company and to lend money to any
such employees or to trustees on their behalf to enable any such purchase
schemes to be established or maintained.
(U) To distribute among the Members of the Company in kind any property of
the Company of whatever nature.
(V) To procure the Company to be registered or recognised in any part of
the world.
(W) To do all or any of the things or matters aforesaid in any part of the
world and either as principals, agents, contractors or otherwise, and by or
through agents, brokers, sub-contractors or otherwise and either alone or
in conjunction with others.
(X) To do all such other things as may be deemed incidental or conducive to
the attainment of the Company's objects or any of them.
AND so that: -
(1) None of the objects set forth in any sub-clause of this Clause shall be
restrictively construed but the widest interpretation shall be given to
each such object, and none of such objects shall, except where the context
expressly so
4
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<PAGE>
- --------------------------------------------------------------------------------
03231791
- --------------------------------------------------------------------------------
30 - 07 - 06
- --------------------------------------------------------------------------------
requires, be in any way limited or restricted by reference to or inference
from any other object or objects set forth in such sub-clause, or by
reference to or inference from the terms of any other sub-clause of this
Clause, or by reference to or inference from the name of the Company.
(2) None of the sub-clauses of this Clause and none of the objects therein
specified shall be deemed subsidiary or ancillary to any of the objects
specified in any other such sub-clause, and the Company shall have as full
a power to exercise each and every one of the objects specified in each
sub-clause of this Clause as though each such sub-clause contained the
objects of a separate Company.
(3) The word "Company" in this Clause, except where used in reference to
the Company, shall be deemed to include any partnership or other body of
persons, whether incorporated or unincorporated and whether domiciled in
the United Kingdom or elsewhere.
5. The liability of the Members is limited.
6. The Company's share capital is (pound)50,000 divided into 50,000 shares of
(pound)1.00 each.
5
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<PAGE>
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03231791
- --------------------------------------------------------------------------------
30 - 07 - 06
- --------------------------------------------------------------------------------
We, the subscribers to this Memorandum of Association, wish to be formed into a
Company pursuant to this Memorandum; and we agree to take the number of shares
shown opposite our respective names.
- --------------------------------------------------------------------------------
NAMES AND Number of
ADDRESSES OF taken by each
SUBSCRIBERS Subscriber
- --------------------------------------------------------------------------------
William Tester /s/ William Tester ONE
16 St John Street
London EC1M 4AY
Howard Thomas /s/ Howard Thomas ONE
16 St John Street
London EC1M 4AY
DATED this 25th day of July 1996
WITNESS to the above Signatures: -
David J. Wootton
16 St John Street
London EC1M 4AY
6
<PAGE>
Exhibit 3.3
- --------------------------------------------------------------------------------
03231791
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30 - 07 - 06
- --------------------------------------------------------------------------------
THE COMPANIES ACT 1985 and 1989
----------------
PUBLIC COMPANY LIMITED BY SHARES
----------------
ARTICLES OF ASSOCIATION
of
R S L COMMUNICATIONS PLC
----------------
PRELIMINARY
1. (a) The Regulations contained in Table A in the Schedule to the Companies
(Tables A to F) Regulations 1985 and 1989 as amended by the Companies (Tables A
to F) (Amendment) Regulations 1985 and 1989 (such Table being hereinafter called
"Table A") shall apply to the Company save in so far as they are excluded or
varied hereby and such Regulations (save as so excluded or varied) and the
Articles hereinafter contained shall be the regulations of the Company.
(b) In these Articles the expressions "the Act" means the Companies Act
1985 and 1989, but so that any reference in these Articles to any provision of
the Act shall be deemed to include a reference to any statutory modification or
re-enactment of that provision for the time being in force.
ALLOTMENT OF SHARES
2. (a) Shares which are comprised in the authorised but unissued share capital
of the Company shall be under the control of the Directors who may (subject to
Sections 80 and 89 of the Act and to paragraphs (b) and (c) below) allot, grant
options over or otherwise dispose of the same, to such persons, on such terms
and in such manner as they think fit.
(b) The Directors are generally and unconditionally authorised for the
purposes of Section 80 of the Act, to exercise any power of the Company to allot
and grant rights to subscribe for or convert securities into shares of the
Company up to the amount of the authorised share capital with which the Company
is incorporated at any time or times during the period of five years from the
date of incorporation and the Directors may, after that period, allot any shares
or grant any such rights under this authority in pursuance of an offer of
agreement so to do made by the Company within that period. The authority hereby
given may at any time (subject to the said Section 80) be renewed, revoked or
varied by Ordinary Resolution of the Company in General Meeting.
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(c) The Directors are empowered to allot and grant rights to subscribe for
or convert securities into shares of the Company pursuant to the authority
conferred under paragraph (b) above as if Section 89(1) of the Act did not
apply. This power shall enable the Directors to allot and grant rights to
subscribe for or convert securities into shares of the Company after its expiry
in pursuance of an offer or agreement so to do made by the Company before its
expiry.
(d) Save as authorised by the Act, the Company shall not give, whether
directly or indirectly, any financial assistance (as defined in Section 152(1(a)
of the Act) for any such purposes as is specified in Section 151 of the Act.
(e) Save as permitted by Section 101(2) of the Act, no shares of the
Company shall be allotted except as paid up at least as to one quarter of their
nominal value and the whole of any premium.
SHARES
3. The liability of any Member in default in respect of a call shall be
increased by the addition at the end of the first sentence of Clause 18 in Table
A of the words "and all expenses that may have been incurred by the Company by
reason of such non-payment".
GENERAL MEETINGS AND RESOLUTIONS
4. (a) A notice convening a General Meeting shall be required to specify the
general nature of the business to be transacted only in the case of special
business and Clause 38 in the Table A shall be modified accordingly.
All business shall be deemed special that is transacted at an Extraordinary
General Meeting, and also all that is transacted at an Annual General Meeting,
with the exception of declaring a dividend, the consideration of the accounts,
balance sheets, and the reports of the Directors and Auditors, and the
appointment of, and the fixing of the remuneration of, the Auditors.
(b) Every notice convening a General Meeting shall comply with the
provisions of Section 372(3) of the Act as to giving information to Members in
regard to their right to appoint proxies; and notices of and other
communications relating to any General Meeting which any Member is entitled to
receive shall be sent to the Directors and to the Auditors for the time being of
the Company.
5. (a) Clause 40 in Table A shall be read and construed as if the words "at the
time when the Meeting proceeds to business" were added at the end of the first
sentence.
(b) If a quorum is not present within half an hour form the time appointed
for a General Meeting the General Meeting shall stand adjourned to the same day
in the next week at the same time and place or to such other day and at such
other time and place as the Directors may determine; and if at the adjourned
General Meeting a quorum is not present within half an hour from the time
appointed therefore such adjourned General Meeting shall be dissolved.
(c) Clause 41 in Table A shall not apply to the Company.
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APPOINTMENT OF DIRECTORS
6. (a) Clause 64 in Table A shall not apply to the Company.
(b) The maximum number and minimum number respectively of the Directors may
be determined from time to time by Ordinary Resolution in General Meeting of the
Company. Subject to and in default of any such determination there shall be no
maximum number of Directors and the minimum number of directors shall be two.
(c) The Directors shall not be required to retire by rotation and Clauses
73 to 80 (inclusive) in Table A shall not apply to the Company.
(d) No person shall be appointed a Director at any General Meeting unless
either:
(i) he is recommended by the Directors; or
(ii) not less than fourteen nor more than thirty-five clear days before the
date appointed for the General Meeting, notice executed by a Member
qualified to vote at the General Meeting has been given to the Company of
the intention to propose that person for appointment, together with notice
executed by that person of his willingness to be appointed.
(e) Subject to paragraph (d) above, the Company may by Ordinary Resolution
in General Meeting appoint any person who is willing to act to be a Director,
either to fill a vacancy or as an additional Director.
(f) The Directors may appoint a person who is willing to act to be a
Director, either to fill a vacancy or as an additional Director, provided that
the appointment does not cause the number of Directors to exceed any number
determined in accordance with paragraph (b) above as the maximum number of
Directors and for the time being in force.
BORROWING POWERS
7. The Directors may exercise all the powers of the Company to borrow money
without limit as to amount and upon such terms and in such manner as they think
fit, and subject (in the case of any security convertible into shares) to
Section 80 of the Act to grant any mortgage, charge or standard security over
its undertaking, property and uncalled capital, or any part thereof and to issue
debentures, debenture stock, and other securities whether outright or as
security for any debt, liability or obligation of the Company or of any third
party.
ALTERNATE DIRECTORS
8. (a) An alternate Director shall not be entitled as such to receive any
remuneration from the Company, save that he may be paid by the Company such part
(if any) of the remuneration otherwise payable to his appointor as such
appointor may by notice in writing to the Company from time to time direct, and
the first sentence of Clause 66 in Table A shall be modified accordingly.
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(b) A Director, or any such other person as is mentioned in Clause 65 in
Table A, may act as an alternate Director to represent more than one Director,
and an alternate Director shall be entitled at any meeting of the Directors or
of any committee of the Directors to one vote for every Director whom he
represents in addition to his own vote (if any) as a Director, but he shall
count as only one for the purpose of determining whether a quorum is present.
DISQUALIFICATION OF DIRECTORS
9. The office of a Director shall be vacated if he becomes incapable by reason
of illness or injury of managing and administering his property and affairs, and
Clause 81 in Table A shall be modified accordingly.
GRATUITIES AND PENSIONS
10. (a) The Directors may exercise the powers of the Company conferred by Clause
4(f) of the Memorandum of Association of the Company and shall be entitled to
retain any benefit received by them or any of them by reason of the exercise of
any such powers.
(b) Clause 87 in Table A shall not apply to the Company.
PROCEEDINGS OF DIRECTORS
11. (a) A Director may vote, at any meeting of the Directors or of any committee
of the Directors, on any resolution, notwithstanding that it in any way concerns
or relates to a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such resolution as aforesaid
he shall (whether or not he shall vote on the same) be taken into account to
calculating the quorum present at the meeting.
(b) Clause 94 to 97 (inconclusive) in Table A shall not apply to the
Company.
INDEMNITY
12. (a) Every Director or other officer of the Company shall be indemnified out
of the assets of the Company against all losses or liabilities which he may
sustain or incur in or about the execution of the duties of his office or
otherwise, in relation thereto, including any liability incurred by him in
defending any proceedings, whether civil or criminal, in which judgement is
given in his favour or in which he is acquitted or in connection with any
application under Section 144 or Section 727 of the Act in which relief is
granted to him by the Court, and no Director or other officer shall be liable
for any loss, damage or misfortune which may happen to or be incurred by the
Company in the execution of the duties of his office or in relation thereto. But
this Article shall only have effect in so far as its provisions are not avoided
by Section 310 of the Act.
(b) Clause 118 in Table A shall not apply to the Company.
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NAMES AND ADDRESSES OF SUBSCRIBERS
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William Tester
16 St John Street
London EC1M 4AY
Howard Thomas
16 St John Street
London EC1M 4AY
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DATED this 25th day of July 1996
WITNESS to the above Signatures:-
David J. Wootton
16 St John Street
London EC1M 4AY
11
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<PAGE>
Exhibit 3.4
FORM NO. 6 Registration No. EC21727
[SEAL]
Bermuda
CERTIFICATE OF INCORPORATION
I hereby in accordance with the provisions of section 14 of the Companies Act
1981, of Bermuda issue this Certificate of Incorporation and do certify that on
the 14th day of March 1996
RSL Communications, Ltd.
was registered by me in the Register maintained by me under the provisions of
the said section and that the status of the said company is that of an exempted
company.
Given under my hand this 2nd day of April 1996.
/s/ for Acting REGISTRAR OF COMPANIES
for Acting REGISTRAR OF COMPANIES
<PAGE>
Exhibit 3.5
[SEAL]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(Section 7(1) and (2))
MEMORANDUM OF ASSOCIATION
OF
RSL Communications, Ltd.
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held to them.
2. We, the undersigned, namely,
<TABLE>
<CAPTION>
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF SHARES SUBSCRIBED
STATUS
(Yes/No)
<S> <C> <C> <C> <C>
Graham Collis Clarendon House Yes British One
Church Street
Hamilton
Bermuda
Edwin S. Mortimer Clarendon House Yes British One
Church Street
Hamilton
Bermuda
John C.R. Collis Clarendon House Yes British One
Church Street
Hamilton
Bermuda
</TABLE>
do hereby respectively agree to take such number of shares of the Company as may
be allotted to us respectively by the provisional directors of the Company, not
exceeding the number of shares for which we have respectively subscribed, and to
satisfy such calls as may be made by the directors, provisional directors or
promoters of the Company in respect of the shares allotted to us respectively.
<PAGE>
The Company is to be an exempted Company as defined by the Companies Act of
1981.
The Company has power to hold land situated in Bermuda not exceeding in
all, including the following parcels-
N/A
5. The authorised share capital of the Company is US$12,000 divided into
shares of US$0.01 each. The minimum subscribed share capital of the Company
is US$12,000.
6. The objects for which the Company is formed and incorporated are -
1. outside the Islands, to act and to perform all the functions of a
telecommunications company in all of its branches, including without
limitation, to acquire, dispose of or let any telecommunications
licence, telecommunications equipment or rights in regard thereto, to
provide telecommunications services, to provide specialised advice,
assistance or consultancy services in the communications field, and in
these Islands as the Minister of Finance may permit.
2. As set out in paragraphs (b) to (n) and (p) to (u) inclusive of the
Second Schedule to the Act.
7. Powers of the Company
1. The Company shall, pursuant to Section 42 of the Companies Act 1981,
have the power to issue preference shares which are, at the option of
the holder, liable to be redeemed.
<PAGE>
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof -
/s/ John C. R. Collis /s/ John C. R. Collis
- ----------------------- --------------------------
John C. R. Collis
- ----------------------- --------------------------
/s/ Edwin S. Mortimer /s/ Edwin S. Mortimer
- ----------------------- --------------------------
Edwin S. Mortimer /s/ Edwin S. Mortimer
- ----------------------- --------------------------
(Subscribers) (Witnesses)
SUBSCRIBED this 26th day of February, 1996.
<PAGE>
STAMP DUTY (To be affixed)
RC3
<PAGE>
THE COMPANIES ACT 1981
(Section 11(2))
A company limited by shares may amongst its objects by reference include in
its memorandum any of the objects set out in the Second Schedule.
SECOND SCHEDULE
A company may by reference include in its memorandum any of the following
objects that is to say the business of -
(a) packaging of goods of all kinds;
(b) buying, selling and dealing in goods of all kinds;
(c) designing and manufacturing of goods of all kinds;
(d) mining and quarrying and exploration for metals, minerals, fossil fuels and
precious stones of all kinds and their preparation for sale or use;
(e) exploring for, the drilling for, the moving, transporting and refining
petroleum and hydro carbon products including oil and oil products;
(f) scientific research including the improvement, discovery and development of
processes, inventions, patents and designs and the construction,
maintenance and operation of laboratories and research centres;
(g) land, sea and air undertakings including the land, ship and air carriage of
passengers, mails and goods of all kinds;
(h) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(i) acquiring, owning, selling, chartering, repairing or dealing in ships and
aircraft;
(j) travel agents, freight contractors and forwarding agents;
(k) dock owners, wharfingers, warehousemen;
(l) ship chandlers and dealing in rope, canvas oil and ship stores of all
kinds;
(m) all forms of engineering;
(n) farmers, livestock breeders and keepers, graziers, butchers, tanners and
processors of and dealers in all kinds of live and dead stock, wool, hides,
tallow, grain, vegetables and other produce;
(o) acquiring by purchase or otherwise and holding as an investment inventions,
patents, trade marks, trade names, trade secrets, designs and the like;
-4-
<PAGE>
THE COMPANIES ACT 1981
(p) buying, selling, hiring, letting and dealing in conveyances of any sort;
and
(q) employing, providing, hiring out and acting as agent for artists, actors,
entertainers of all sorts, authors, composers, producers, directors,
engineers and experts or specialists of any kind.
(r) to acquire by purchase or otherwise and hold, sell dispose of and deal in
real property situated outside Bermuda and in personal property of all
kinds wheresoever situated.
(s) to enter into any guarantee, contract of indemnity or suretyship and to
assure, support or secure with or without consideration or benefit the
performance of any obligations of any person or persons and to guarantee
the fidelity of individuals filling or about to fill situations of trust or
confidence.
<PAGE>
FORM NO. 1a
[SEAL]
BERMUDA
THE COMPANIES ACT 1981
CONSENT
Pursuant to section 6(1)
In exercise of the powers conferred upon him by section 6(1) of the Companies
Act 1981, the Minister of Finance hereby gives his consent to
RSL Communications, Ltd.
to be registered as an exempted Company under the Companies Act 1981, subject to
the provisions of the said Act.
Dated this 13th day of March, 1996
/s/ Minister of Finance
Minister of Finance
<PAGE>
Form No. 5
[SEAL]
BERMUDA
THE COMPANIES ACT OF 1981
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION
AND CONSENT GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association
of
RSL Communications, Ltd.
and the consent granted by the Minister under section 6(1) of the Act were
delivered to the Office of the Registrar of Companies on the 14th day of March,
1996 in accordance with the provisions of section 14(2) of the Act.
IN WITNESS WHEREOF I have hereto set my
hand this 2nd day of April, 1996.
/s/ for REGISTRAR OF COMPANIES
----------------------------------------
for REGISTRAR OF COMPANIES
Minimum Capital of the Company: US$12,000.00
Authorised Capital of the Company: US$12,000.00
<PAGE>
FORM NO. 7a Registration No. EC21727
[SEAL]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital
of
RSL Communications, Ltd.
was delivered to the Registrar of Companies on the 19th day of July, 1996 in
accordance with section 45(3) of the Companies Act 1981 ("the Act")
Given under my hand this 23rd day of July, 1996.
/s/ for Registrar of Companies
for Registrar of Companies
Capital prior to increase: US $12,000.00
Amount of increase: US$388,000.00
Present Capital: US$400,000.00
<PAGE>
Exhibit 3.6
BYE-LAWS
of
RSL Communications, Ltd.
TABLE OF CONTENTS
Bye-Law
Page
1 Interpretation 1
2 Board of Directors 2
3 Management of the Company 3
4 Power to appoint managing director or chief executive officer 3
5 Power to appoint manager 3
6 Power to authorise specific actions 4
7 Power to appoint attorney 4
8 Power to delegate to a committee 4
9 Power to appoint and dismiss employees 5
10 Power to borrow and charge property 6
11 Exercise of power to purchase shares of or discontinue the
Company 5
12 Election of Directors 6
13 Defects in appointment of Directors 6
14 Alternate Directors 7
15 Removal of Directors 7
16 Vacancies on the Board 8
17 Notice of meetings of the Board 9
18 Quorum at meetings of the Board 9
19 Meetings of the Board 9
20 Unanimous written resolutions 10
21 Contracts and disclosure of Directors' interests 10
22 Remuneration of Directors 10
23 Officers of the Company 11
24 Appointment of Officers 11
25 Remuneration of Officers 11
26 Duties of Officers 11
27 Chairman of meetings 12
28 Register of Directors and Officers 12
29 Obligations of Board to keep minutes 13
30 Indemnification of Directors and Officers of the Company 13
31 Waiver of claim by Member 14
32 Notice of annual general meeting 14
33 Notice of special general meeting 15
34 Accidental omission of notice of general meeting 15
35 Meeting called on requisition of members 15
<PAGE>
(ii)
36 Short notice 15
37 Postponement of meetings 16
38 Quorum for general meetings 16
39 Adjournment of meetings 16
40 Attendance at meetings 16
41 Written resolutions 17
42 Attendance of Directors 18
43 Voting at meetings 18
44 Voting on show of hands 18
45 Decision of chairman 19
46 Demand for a poll 19
47 Seniority of joint holders voting 21
48 Instrument of proxy 21
49 Representation of corporations at meetings 21
50 Rights of shares 22
51 Power to issue shares 25
51A Warrants 27
52 Variation of rights, alteration of share
capital and purchase of shares of the
Company 27
53 Registered holder of shares 28
54 Death of a joint holder 28
55 Share certificates 29
56 Calls on shares 29
57 Forfeiture of Shares 30
58 Contents of Register of Members 30
59 Inspection of Register of Members 31
60 Determination of record dates 31
61 Instrument of transfer 31
62 Restriction on Transfer 32
63 Transfers by joint holders 32
64 Representative of deceased Member 32
65 Registration on death or bankruptcy 33
66 Declaration of dividends by Board 33
67 Other distributions 34
68 Reserve fund 34
69 Deduction of amounts due to the Company 34
70 Issue of bonus shares 34
71 Records of account 35
72 Financial year end 35
73 Financial statements 35
<PAGE>
(iii)
74 Appointment of Auditor 36
75 Remuneration of Auditor 36
76 Vacation of office of Auditor 36
77 Access to books of the Company 36
78 Report of the Auditor 37
79 Notices to Members of the Company 37
80 Notices to joint Members 37
81 Service and delivery of notice 38
82 The seal 38
83 Manner in which seal is to be affixed 38
84 Winding-up/distribution by liquidator 39
85 Alteration of Bye-laws 39
<PAGE>
INTERPRETATION
1. Interpretation
(1) In these Bye-laws the following words and expressions shall, where not
inconsistent with the context, have the following meanings respectively:-
(a) "Act" means the Companies Act 1981 as amended from time to time;
(b) "Alternate Director" means an alternate Director appointed in
accordance with these Bye-laws;
(c) "Auditor" includes any individual or partnership;
(d) "Board" means the Board of Directors appointed or elected
pursuant to these Bye-laws and acting by resolution in accordance
with the Act and these Bye-laws or the Directors present at a
meeting of Directors at which there is a quorum;
(e) "Company" means the company for which these Bye-laws are approved
and confirmed;
(f) "Director" means a director of the Company and shall include an
Alternate Director;
(g) "Member" means the person registered in the Register of Members
as the holder of shares in the Company and, when two or more
persons are so registered as joint holders of shares, means the
person whose name stands first in the Register of Members as one
of such joint holders or all of such persons as the context so
requires;
(h) "notice" means written notice as further defined in these
Bye-laws unless otherwise specifically stated;
(i) "Officer" means any person appointed by the Board to hold an
office in the Company;
(j) "Register of Directors and Officers" means the Register of
Directors and Officers referred to in these Bye-laws;
<PAGE>
- 2 -
(k) "Register of Members" means the Register of Members referred to
in these Bye-laws; and
(l) "Secretary" means the person appointed to perform any or all the
duties of secretary of the Company and includes any deputy or
assistant secretary
(2) In these Bye-laws, where not inconsistent with the context:-
(a) words denoting the plural number include the singular number and
vice versa;
(b) words denoting the masculine gender include the feminine gender;
(c) words importing persons include companies, associations or bodies
of persons whether corporate or not;
(d) the word:-
(i) "may" shall be construed as permissive;
(ii) "shall" shall be construed as imperative; and
(e) unless otherwise provided herein words or expressions defined in
the Act shall bear the same meaning in these Bye-laws.
(3) Expressions referring to writing or written shall, unless the contrary
intention appears, include facsimile, printing, lithography, photography and
other modes of representing words in a visible form.
(4) Headings used in these Bye-laws are for convenience only and are not to
be used or relied upon in the construction hereof.
<PAGE>
- 3 -
BOARD OF DIRECTORS
2. Board of Directors
The business of the Company shall be managed and conducted by the Board.
3. Management of the Company
(1) In managing the business of the Company, the Board may exercise all
such powers of the Company as are not, by statute or by these Bye-laws, required
to be exercised by the Company in general meeting subject, nevertheless, to
these Bye-laws, the provisions of any statute and to such regulations as may be
prescribed by the Company in general meeting.
(2) No regulation or alteration to these Bye-laws made by the Company in
general meeting shall invalidate any prior act of the Board which would have
been valid if that regulation or alteration had not been made.
(3) The Board may procure that the Company pays all expenses incurred in
promoting and incorporating the Company
4. Power to appoint managing director or chief executive officer
The Board may from time to time appoint one or more Directors to the office
of managing director or chief executive officer of the Company who shall,
subject to the control of the Board, supervise and administer all of the general
business and affairs of the Company.
5. Power to appoint manager
The Board may appoint a person to act as manager of the Company's day to
day business and may entrust to and confer upon such manager such powers and
duties as
<PAGE>
- 4 -
it deems appropriate for the transaction or conduct of such business.
6. Power to authorise specific actions
The Board may from time to time and at any time authorise any company,
firm, person or body of persons to act on behalf of the Company for any specific
purpose and in connection therewith to execute any agreement, document or
instrument on behalf of the Company.
7. Power to appoint attorney
The Board may from time to time and at any time by power of attorney
appoint any company, firm, person or body of persons, whether nominated directly
or indirectly by the Board, to be an attorney of the Company for such purposes
and with such powers, authorities and discretions (not exceeding those vested in
or exercisable by the Board) and for such period and subject to such conditions
as it may think fit and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such attorney as
the Board may think fit and may also authorise any such attorney to sub-delegate
all or any of the powers, authorities and discretions so vested in the attorney.
Such attorney may, if so authorised under the seal of the Company, execute any
deed or instrument under such attorney's personal seal with the same effect as
the affixation of the seal of the Company.
8. Power to delegate to a committee
(1) The Board may delegate any of its powers to a committee appointed by
the Board and every such committee shall conform to such directions as
the Board shall impose on them.
(2) The Company shall have an executive committee consisting of three
members (the "Executive Committee"), which shall have the exclusive
power and authority
<PAGE>
- 5 -
to initiate and, only if approved by such Executive Committee acting
unanimously, pass on to the Board for its consideration, the following:
(i) all investments and borrowing commitments in excess of $100,000
and the entering into of any agreement requiring payment by the
Company of an amount in excess of $100,000 or that is otherwise
material to the business and operations of the Company;
(ii) all potential acquisitions and amalgamations of the Company or
acquisitions or dispositions of material assets;
(iii) the budget approval;
(iv) nomination and election of all officers;
(v) all amendments to the Company's Memorandum of Association and
Bye-laws;
(vi) all major strategic decisions (such as entering new markets,
providing new services, etc.); and
(vii) all decisions of the Company with respect to raising additional
capital from the Company's Members generally and, in connection
therewith, the valuation of the Company at such time;
and the members of such Executive Committee shall be Itzhak Fisher, Andrew
Gaspar and Ronald S. Lauder, for so long as they remain members of the Board.
9. Power to appoint and dismiss employees
The Board may appoint, suspend or remove any manager, secretary, clerk,
agent or employee of the Company and may fix their remuneration and determine
their duties.
<PAGE>
- 6 -
10. Power to borrow and charge property
The Board may exercise all the powers of the Company to borrow money and to
mortgage or charge its undertaking, property and uncalled capital, or any part
thereof, and may issue debentures, debenture stock and other securities whether
outright or as security for any debt, liability or obligation of the Company or
any third party.
11. Exercise of power to purchase shares of or discontinue the Company
(1) The Board may exercise all the powers of the Company to purchase all
or any part of its own shares pursuant to Section 42A of the Act.
(2) The Board may exercise all the powers of the Company to discontinue
the Company to a named country or jurisdiction outside Bermuda
pursuant to Section 132G of the Act.
12. Election of Directors
The Board shall consist of not less than two Directors or such number in
excess thereof as the Members may from time to time determine who shall be
elected or appointed in the first place at the statutory meeting of the Company
and thereafter, except in the case of casual vacancy, at the annual general
meeting or at any special general meeting called for the purpose and who shall
hold office for such term as the Members may determine or, in the absence of
such determination, until the next annual general meeting or until their
successors are elected or appointed or their office is otherwise vacated, and
any general meeting may authorise the Board to fill any vacancy in their number
left unfilled at a general meeting.
13. Defects in appointment of Directors
All acts done bona fide by any meeting of the Board or by a committee of
the Board or by any person acting as a Director shall, notwithstanding that it
be afterwards discovered
<PAGE>
- 7-
that there was some defect in the appointment of any Director or person acting
as aforesaid, or that they or any of them were disqualified, be as valid as if
every such person had been duly appointed and was qualified to be a Director.
14. Alternate Directors
(1) Any general meeting of the Company may elect a person or persons to act
as a Director in the alternative to any one or more of the Directors of the
Company or may authorise the Board to appoint such Alternate Directors. Unless
the Members otherwise resolve, any Director may appoint a person or persons to
act as a Director in the alternative to himself or herself by notice in writing
deposited with the Secretary. Any person so appointed shall have all the rights
and powers of the Director or Directors for whom such person is appointed in the
alternative provided that such person shall not be counted more than once in
determining whether or not a quorum is present.
(2) An Alternate Director shall be entitled to receive notice of all
meetings of the Board and to attend and vote at any such meeting at which a
Director for whom such Alternate Director was appointed in the alternative is
not personally present and generally to perform at such meeting all the
functions of such Director for whom such Alternate Director was appointed.
(3) An Alternate Director shall cease to be such if the Director for whom
such Alternate Director was appointed ceases for any reason to be a Director but
may be re-appointed by the Board as alternate to the person appointed to fill
the vacancy in accordance with these Bye-laws.
15. Removal of Directors
(1) Subject to any provision to the contrary in these Bye-laws, the Members
may, at any special general meeting convened and held in accordance with these
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Bye-laws, remove a Director provided that the notice of any such meeting
convened for the purpose of removing a Director shall contain a statement of the
intention so to do and be served on such Director not less than 14 days before
the meeting and at such meeting such Director shall be entitled to be heard on
the motion for such Director's removal.
(2) A vacancy on the Board created by the removal of a Director under the
provisions of subparagraph (1 ) of this Bye-law may be filled by the Members at
the meeting at which such Director is removed and, in the absence of such
election or appointment, the Board may fill the vacancy.
16. Vacancies on the Board
(1) The Board shall have the power from time to time and at any time to
appoint any person as a Director to fill a vacancy on the Board occurring as the
result of the death, disability, disqualification or resignation of any Director
and to appoint an Alternate Director to any Director so appointed.
(2) The Board may act notwithstanding any vacancy in its number but, if and
so long as its number is reduced below the number fixed by these Bye-laws as the
quorum necessary for the transaction of business at meetings of the Board, the
continuing Directors or Director may act for the purpose of (i) summoning a
general meeting of the Company or (ii) preserving the assets of the Company.
(3) The office of Director shall be vacated if the Director:-
(a) is removed from office pursuant to these Bye-laws or is
prohibited from being a Director by law;
(b) is or becomes bankrupt or makes any arrangement or composition
with his creditors generally;
(c) is or becomes of unsound mind or dies;
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(d) resigns his or her office by notice in writing to the Company.
17. Notice of meetings of the Board
(1) A Director may, and the Secretary on the requisition of a Director
shall, at any time summon a meeting of the Board.
(2) Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to such Director verbally in person or by telephone or
otherwise communicated or sent to such Director by post, cable, telex,
telecopier, facsimile or other mode of representing words in a legible and
non-transitory form at such Director's last known address or any other address
given by such Director to the Company for this purpose.
18. Quorum at meetings of the Board
The quorum necessary for the transaction of business at a meeting of the
Board shall be two Directors.
19. Meetings of the Board
(1) The Board may meet for the transaction of business, adjourn and
otherwise regulate its meetings as it sees fit.
(2) Directors may participate in any meeting of the Board by means of such
telephone, electronic or other communication facilities as permit all persons
participating in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.
(3) A resolution put to the vote at a meeting of the Board shall be carried
by the affirmative votes of a majority of the votes cast and in the case of an
equality of votes the resolution shall fail.
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20. Unanimous written resolutions
A resolution in writing signed by all the Directors which may be in
counterparts, shall be as valid as if it had been passed at a meeting of the
Board duly called and constituted, such resolution to be effective on the date
on which the last Director signs the resolution. For the purposes of this
Bye-law only "Director" shall not include an Alternate Director.
21. Contracts and disclosure of Directors' interests
(1) Any Director, or any Director's firm, partner or any company with whom
any Director is associated, may act in a professional capacity for the Company
and such Director or such Director's firm, partner or such company shall be
entitled to remuneration for professional services as if such Director were not
a Director, provided that nothing herein contained shall authorise a Director or
Director's firm, partner or such company to act as Auditor of the Company.
(2) A Director who is directly or indirectly interested in a contract or
proposed contract or arrangement with the Company shall declare the nature of
such interest as required by the Act.
(3) Following a declaration being made pursuant to this Bye-law, and unless
disqualified by the chairman of the relevant Board meeting, a Director may vote
in respect of any contract or proposed contract or arrangement in which such
Director is interested and may be counted in the quorum at such meeting.
22. Remuneration of Directors
The remuneration, (if any) of the Directors shall be determined by the
Company in general meeting and shall be deemed to accrue from day to day. The
Directors may also be paid all travel, hotel and other expenses properly
incurred by them in attending and returning from meetings of the Board. any
committee appointed by the Board, general
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meetings of the Company, or in connection with the business of the Company or
their duties as Directors generally.
OFFICERS
23. Officers of the Company
The Officers of the Company shall consist of a President and a Vice
President or a Chairman and a deputy Chairman, a Treasurer, a Secretary and such
additional Officers as the Board may from time to time determine all of whom
shall be deemed to be Officers for the purposes of these Bye-laws.
24. Appointment of Officers
(1) The Board shall, as soon as possible after the statutory meeting of
Members and after each annual general meeting appoint a President and Vice
President or a Chairman and Deputy Chairman who shall be Directors.
(2) The Secretary and additional Officers, if any, shall be appointed by
the Board from time to time.
25. Remuneration of Officers
The Officers shall receive such remuneration as the Board may from time to
time determine.
26. Duties of Officers
The Officers shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to them by
the Board from time to time.
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27. Chairman of meetings
Unless otherwise agreed by a majority of those attending and entitled to
attend and vote thereat, the Chairman, if there be one, and if not the President
shall act as chairman at all meetings of the Members and of the Board at which
such person is present. In their absence the Deputy Chairman or Vice President,
if present, shall act as chairman and in the absence of all of them a chairman
shall be appointed or elected by those present at the meeting and entitled to
vote.
28. Register of Directors and Officers
(1) The Board shall cause to be kept in one or more books at its registered
office a Register of Directors and Officers and shall enter therein the
following particulars with respect to each Director and the President, each
Vice-President, the Chairman, and each Deputy Chairman, provided that each such
person is a Director and the Secretary, that is to say:
(a) first name and surname; and
(b) address.
(2) The Board shall, within the period of fourteen days from the occurrence
of -
(a) any change among its Directors, the President, any Vice-President, the
Chairman, and any Deputy Chairman, provided that each such person is a
Director, and in the Secretary; or
(b) any change in the particulars contained in the Register of Directors
and Officers,
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cause to be entered on the Register of Directors and Officers the particulars of
such change and the date on which such change occurred.
(3) The Register of Directors and Officers shall be open to inspection at
the office of the Company on every business day, subject to such reasonable
restrictions as the Board may impose, so that not less than two hours in each
business day be allowed for inspection.
MINUTES
29. Obligations of Board to keep minutes
The Board shall cause minutes to be duly entered in books provided for the
purpose:-
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting of the Board and
of any committee appointed by the Board; and
(c) of all resolutions and proceedings of general meetings of the Members,
meetings of the Board, meetings of managers and meetings of committees
appointed by the Board.
INDEMNITY
30. Indemnification of Directors and Officers of the Company
The Directors, Secretary and other Officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them, and their
heirs, executors and administrators, shall be indemnified and secured harmless
out of the assets of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their heirs, executors
or administrators, shall or may incur or sustain by or by reason of any act
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or
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in their respective offices or trusts, and none of them shall be answerable for
the acts, receipts, neglects or defaults of the others of them or for joining in
any receipts for the sake of conformity, or for any bankers or other persons
with whom any moneys or effects belonging to the Company shall or may be lodged
or deposited for safe custody, or for insufficiency or deficiency of any
security upon which any moneys of or belonging to the Company shall be placed
out on or invested, or for any other loss, misfortune or damage which may happen
in the execution of their respective offices or trusts, or in relation thereto,
PROVIDED THAT this indemnity shall not extend to any matter in respect of any
fraud or dishonesty which may attach to any of said persons.
31. Waiver of claim by Member
Each Member agrees to waive any claim or right of action such Member might
have, whether individually or by or in the right of the Company, against any
Director or Officer on account of any action taken by such Director or Officer,
or the failure of such Director or Officer to take any action in the performance
of his duties with or for the Company, PROVIDED THAT such waiver shall not
extend to any matter in respect of any fraud or dishonesty which may attach to
such Director or Officer.
MEETINGS
32. Notice of annual general meeting
The annual general meeting of the Company shall be held in each year other
than the year of incorporation at such time and place as the President or the
Chairman or any two Directors or any Director and the Secretary or the Board
shall appoint. At least five days notice of such meeting shall be given to each
Member stating the date, place and time at which the meeting is to be held, that
the election of Directors will take place thereat, and as far as practicable,
the other business to be conducted at the meeting.
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33. Notice of special general meeting
The President or the Chairman or any two Directors or any Director and the
Secretary or the Board may convene a special general meeting of the Company
whenever in their judgment such a meeting is necessary, upon not less than five
days' notice which shall state the date, time, place and the general nature of
the business to be considered at the meeting.
34. Accidental omission of notice of general meeting
The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a general meeting by, any person entitled to receive
notice shall not invalidate the proceedings at that meeting.
35. Meeting called on requisition of Members
Notwithstanding anything herein, the Board shall, on the requisition of
Members holding at the date of the deposit of the requisition not less than
one-tenth of such of the paid-up share capital of the Company as at the date of
the deposit carries the right to vote at general meetings of the Company,
forthwith proceed to convene a special general meeting of the Company and the
provisions of section 74 of the Act shall apply.
36. Short notice
A general meeting of the Company shall, notwithstanding that it is called
by shorter notice than that specified in these Bye-laws, be deemed to have been
properly called if it is so agreed by (i) all the Members entitled to attend and
vote thereat in the case of an annual general meeting; and (ii) by a majority in
number of the Members having the right to attend and vote at the meeting, being
a majority together holding not less than 95% in nominal value of the shares
giving a right to attend and vote thereat in the case of a special general
meeting.
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37. Postponement of meetings
The Board may postpone any general meeting called in accordance with the
provisions of these Bye-laws (other than a meeting requisitioned under these
Bye-laws) provided that notice of postponement is given to each Member before
the time for such meeting. Fresh notice of the date, time and place for the
postponed meeting shall be given to each Member in accordance with the
provisions of these Bye-laws.
38. Quorum for general meeting
At any general meeting of the Company two persons present in person and
representing in person or by proxy in excess of 50% of the total issued voting
shares in the Company throughout the meeting shall form a quorum for the
transaction of business, PROVIDED that if the Company shall at any time have
only one Member, one Member present in person or by proxy shall form a quorum
for the transaction of business at any general meeting of the Company held
during such time. If within half an hour from the time appointed for the meeting
a quorum is not present, the meeting shall stand adjourned to the same day one
week later, at the same time and place or to such other day, time or place as
the Board may determine.
39. Adjournment of meetings
The chairman of a general meeting may, with the consent of the Members at
any general meeting at which a quorum is present (and shall if so directed),
adjourn the meeting. Unless the meeting is adjourned to a specific date and
time, fresh notice of the date, time and place for the resumption of the
adjourned meeting shall be given to each Member in accordance with the provision
of these Bye-laws.
40. Attendance at meetings
Members may participate in any general meeting by means of such telephone,
electronic or other communication facilities as permit all persons participating
in the
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meeting to communicate with each other simultaneously and instantaneously, and
participation in such a meeting shall constitute presence in person at such
meeting.
41. Written resolutions
(1) Subject to paragraph (6), anything which may be done by resolution of
the Company in general meeting or by resolution of a meeting of any class of the
Members of the Company, may, without a meeting and without any previous notice
being required, be done by resolution in writing signed by, or, in the case of a
Member that is a corporation whether or not a company within the meaning of the
Act, on behalf of, all the Members who at the date of the resolution would be
entitled to attend the meeting and vote on the resolution.
(2) A resolution in writing may be signed by, or, in the case of a Member
that is a corporation whether or not a company within the meaning of the Act, on
behalf of, all the Members, or any class thereof, in as many counterparts as may
be necessary.
(3) For purposes of this Bye-law, the date of the resolution is the date
when the resolution is signed by, or, in the case of a Member that is a
corporation whether or not a company within the meaning of the Act, on behalf
of, the last Member to sign and any reference in any Bye-law to the date of
passing of a resolution is, in relation to a resolution made in accordance with
this Bye-law, a reference to such date.
(4) A resolution in writing made in accordance with this Bye-law is as
valid as if it had been passed by the Company in general meeting or by a meeting
of the relevant class of Members, as the case may be, and any reference in any
Bye-law to a meeting at which a resolution is passed or to Members voting in
favour of a resolution shall be construed accordingly.
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(5) A resolution in writing made in accordance with this Bye-law shall
constitute minutes for the purposes of sections 81 and 82 of the Act.
(6) This Bye-law shall not apply to:-
(a) a resolution passed pursuant to section 89(5) of the Act; or
(b) a resolution passed for the purpose of removing a Director before
the expiration of his term of office under these Bye-laws.
42. Attendance of Directors
The Directors of the Company shall be entitled to receive notice of and to
attend and be heard at any general meeting.
43. Voting at meetings
(1) Subject to the provisions of the Act and these Bye-laws, any question
proposed for the consideration of the Members at any general meeting shall be
decided by the affirmative vote of a majority of the votes cast in accordance
with the provisions of these Bye-laws and in the case of an equality of votes
the resolution shall fail.
(2) No Member shall be entitled to vote at any general meeting unless such
Member has paid all the calls on all shares held by such Member.
43. Voting on show of hands
At any general meeting a resolution put to the vote of the meeting shall,
in the first instance, be voted upon by a show of hands and, subject to any
rights or restrictions for the time being lawfully attached to any class of
shares and subject to the provisions of these Bye-laws, every Member present in
person and every person holding a valid proxy at such meeting shall be entitled
to one vote and shall cast such vote by raising his or her
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hand.
45. Decision of chairman
At any general meeting a declaration by the chairman of the meeting that a
question proposed for consideration has, on a show of hands, been carried, or
carried unanimously, or by a particular majority, or lost, and an entry to that
effect in a book containing the minutes of the proceedings of the Company shall,
subject to the provisions of these Bye-laws, be conclusive evidence of that
fact.
46. Demand for a poll
(1) Notwithstanding the provisions of the immediately preceding two
Bye-laws, at any general meeting of the Company, in respect of any question
proposed for the consideration of the Members (whether before or on the
declaration of the result of a show of hands as provided for in these Byelaws),
a poll may be demanded by any of the following persons:-
(a) the chairman of such meeting; or
(b) at least three Members present in person or represented by proxy; or
(c) any Member or Members present in person or represented by proxy and
holding between them not less than one-tenth of the total voting
rights of all the Members having the right to vote at such meeting; or
(d) any Member or Members present in person or represented by proxy
holding shares in the Company conferring the right to vote at such
meeting, being shares on which an aggregate sum has been paid up equal
to not less than one-tenth of the total sum paid up on all such shares
conferring such right.
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(2) Where, in accordance with the provisions of subparagraph (1) of this
Bye-law, a poll is demanded, subject to any rights or restrictions for the time
being lawfully attached to any class of shares, every person present at such
meeting shall have one vote for each share of which such person is the holder or
for which such person holds a proxy and such vote shall be counted in the manner
set out in subparagraph (4) of this Bye-Law or in the case of a general meeting
at which one or more Members are present by telephone in such manner as the
chairman of the meeting may direct and the result of such poll shall be deemed
to be the resolution of the meeting at which the poll was demanded and shall
replace any previous resolution upon the same matter which has been the subject
of a show of hands.
(3) A poll demanded in accordance with the provisions of subparagraph (1) of
this Bye-law, for the purpose of electing a chairman or on a question of
adjournment, shall be taken forthwith and a poll demanded on any other question
shall be taken in such manner and at such time and place as the chairman may
direct and any business other than that upon which a poll has been demanded may
be proceeded with pending the taking of the poll.
(4) Where a vote is taken by poll, each person present and entitled to vote
shall be furnished with a ballot paper on which such person shall record his or
her vote in such manner as shall be determined at the meeting having regard to
the nature of the question on which the vote is taken, and each ballot paper
shall be signed or initialled or otherwise marked so as to identify the voter
and the registered holder in the case of a proxy. At the conclusion of the poll,
the ballot papers shall be examined and counted by
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a committee of not less than two Members or proxy holders appointed by the
chairman for the purpose and the result of the poll shall be declared by the
chairman.
47. Seniority of joint holders voting
In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the votes
of the other joint holders, and for this purpose seniority shall be determined
by the order in which the names stand in the Register of Members.
48. Instrument of proxy
The instrument appointing a proxy shall be in writing in the form, or as
near thereto as circumstances admit, of Form "A" in the Schedule hereto, under
the hand of the appointor or of the appointor's attorney duly authorised in
writing, or if the appointor is a corporation, either under its seal, or under
the hand of a duly authorised officer or attorney. The decision of the chairman
of any general meeting as to the validity of any instrument of proxy shall be
final.
49. Representation of corporations at meetings
A corporation which is a Member may, by written instrument, authorise each
person as it thinks fit to act as its representative at any meeting of the
Members and the person so authorised shall be entitled to exercise the same
powers on behalf of the corporation which such person represents as that
corporation could exercise if it were an individual Member. Notwithstanding the
foregoing, the chairman of the meeting may accept such assurances as he or she
thinks fit as to the right of any person to attend and vote at general meetings
on behalf of a corporation which is a Member.
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SHARE CAPITAL AND SHARES
50. Rights of shares
The Company shall be authorized to issue preferred shares (the "Preferred
Shares") and Class A common shares, Class B common shares and Class C common
shares (the "Common Shares") which shall have the following powers,
designations, preferences, rights, limitations and qualifications:
(a) Preferred Shares
(i) Dividends. Dividends shall accrue on each Preferred Share on a cumulative
basis at a rate of 8% of the liquidation preference amount per share per annum
and shall be paid when and if declared out of surplus. Cumulative dividends
shall be declared by the Board and payable (to the extent of surplus)
immediately in the event of a liquidation, dissolution or winding up of the
Company, or the sale of the Company to, or amalgamation of the Company into,
another entity. Cumulative dividends shall not be payable and shall be deemed
cancelled and waived upon conversion of the Preferred Shares.
(ii) Voting Rights. Each holder of Preferred Shares shall be entitled to the
number of votes per share, and shall vote together with holders of Class A
Common Shares and Class B Common Shares as a single class, on matters submitted
to the vote of shareholders of the Company, equal to the number of Class B
Common Shares into which a Preferred Share is convertible at the record date.
(iii) Liquidation Preference
(a) In the event of the voluntary or involuntary liquidation, dissolution
or winding up of the Company, and provided there are sufficient assets
after payment
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of all outstanding debts and other liabilities, holders of Preferred Shares
then outstanding shall be entitled to receive $1000.00 per share (to the
extent a share is paid up) plus an amount per share equal to the accrued
and unpaid dividends thereon.
(b) Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property and assets of the Company, nor the amalgamation or consolidation
of the Company into or with any other Company nor the amalgamation of any
other Company into the Company, shall be deemed to be a dissolution,
liquidation or winding up of the Company.
(iv) Conversion
Each Preferred Share shall, at the option of the holder thereof, be
convertible at any time into one Class B Common Share, and all Preferred
Shares shall be automatically converted into Class B Common Shares, on a
one for one basis, in the event of a firmly underwritten public offering of
the Class A Common Shares of the Company which has aggregate net proceeds
to the Company of at least U.S.$25,000,000.
(v) Reservation of Shares
There are hereby reserved for issuance upon conversion of the Preferred
Shares 9,243,866 shares of the authorized but unissued Class B Common
Shares of the Company.
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(b) Common Shares
The Common Shares of the Company shall be divided into Class A Common
Shares, Class B Common Shares and Class C Common Shares.
(i) Dividends The holders of Common Shares shall be entitled to receive
dividends when, as and if declared by the Directors out of funds legally
available therefor with dividends being paid equally on the Class A Common
Shares, the Class B Common Shares and the Class C Common Shares after the
payment of any dividends declared but unpaid on any Preferred Shares.
(ii) Voting Rights The holders of Class A Common Shares shall be entitled to
cast one vote per Class A Common Share on all matters submitted for the
vote of the Members of the Company and as otherwise required by law and
shall vote as a single class with the holders of the Class B Common Shares
and the Preferred Shares on all matters subject to approval of the Members
and any matter requiring class voting under the Act. The holders of Class B
Common Shares shall be entitled to cast ten votes per Class B Common Share
held on all matters submitted for the vote of the Members of the Company
and as otherwise required by law and shall vote as a single class with the
holders of the Class A Common Shares and the Preferred Shares on all
matters subject to approval of the Members and any matter requiring class
voting under the Act. The holders of Class C Common Shares shall not be
entitled to any votes in respect of such Class C Common Shares, except as
may otherwise be provided by law.
(iii)Liquidation In the event of the voluntary or involuntary liquidation or
winding up of the Company, the holders of Common Shares are entitled to
share ratably in all assets remaining after payment of all debts and other
liabilities and after distribution
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in full of the preferential amounts to be distributed to the holders of any
Preferred Shares then outstanding.
(iv) Convertibility The holders of Class A Common Shares have no rights to
convert their Class A Common Shares into an other securities. The Class B
Common Shares shall be convertible into Class A Common Shares on a one for
one basis at the option of the holder thereof. The Class C Common Shares
shall be convertible into Class A Common Shares on such terms and
conditions, if any, as the Board may determine.
(v) Transfer Class B Common Shares may be transferred only to other original
holders of Class B Common Shares or to a member of the family of the
original holder by gift, devise or otherwise through laws of inheritance,
descent, distribution or to a trust established by the holder for the
holder's family members, to corporations the majority of beneficial owners
of which are or will be owned by the holders of Class B Common Shares, to
their shareholders or partners as the case may be. Any purported transfer
or Class B Common Shares other than in accordance with this subclause (v)
shall be void. For the purposes of this sub-clause (v) , "member of the
family" means a spouse, a sibling, brother, sister, mother, or father.
51. Power to issue shares
(1) Subject to these Bye-laws and to any resolution of the Members to the
contrary and without prejudice to any special rights previously conferred on the
holders of any existing shares or class of shares, the Board shall have power to
issue any unissued shares of the Company on such terms and conditions as it may
determine and any shares or class of shares may be issued with such preferred,
deferred or other special rights or such restrictions, whether in regard to
dividend, voting, return of capital or otherwise as the Company may from time to
time by resolution of the Members prescribe.
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(2) The Board shall, in connection with the issue of any share, have the
power to pay such commission and brokerage as may be permitted by law.
(3) The Company shall not give, whether directly or indirectly, whether by
means of loan, guarantee, provision of security or otherwise, any financial
assistance for the purpose of a purchase or subscription made or to be made by
any person of or for any shares in the Company, but nothing in this Bye-Law
shall prohibit transactions mentioned in Sections 39A, 39B and 39C of the Act.
(4) The Company may from time to time do any one or more of the following
things:
(a) make arrangements on the issue of shares for a difference between
the Members in the amounts and times of payments of calls on
their shares;
(b) accept from any Member the whole or a part of the amount
remaining unpaid on any shares held by him, although no part of
that amount has been called up;
(c) pay dividends in proportion to the amount paid up on each share
where a larger amount is paid up on some shares than on others;
and
(d) issue its shares in fractional denominations and deal with such
fractions to the same extent as its whole shares and shares in
fractional denominations shall have in proportion to the
respective fractions represented thereby all of the rights of
whole shares including (but without limiting the generality of
the foregoing) the right to vote, to receive dividends and
distributions and to participate in a winding up.
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51A. Warrants
The Board may issue warrants conferring the rights upon the holders thereof
to subscribe for any class of shares or securities in the capital of the Company
on such terms as it may from time to time determine.
52. Variation of rights, alteration of share capital and purchase of shares of
the Company
(1) Subject to the provisions of Sections 42 and 43 of the Act any
preference shares may be issued or converted into shares that, at a determinable
date or at the option of the Company, are liable to be redeemed on such terms
and in such manner as the Company before the issue or conversion may by
resolution of the Members determine.
(2) If at any time the share capital is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by the terms
of issue of the shares of that class) may, whether or not the Company is being
wound-up, be varied with the consent in writing of the holders of three-fourths
of the issued shares of that class or with the sanction of a resolution passed
by a majority of the votes cast at a separate general meeting of the holders of
the shares of the class in accordance with Section 47(7) of the Act. The rights
conferred upon the holders of the shares of any class issued with preferred or
other rights shall not, unless otherwise expressly provided by the terms of
issue of the shares of that class, be deemed to be varied by the creation or
issue of further shares ranking pari passu therewith.
(3) The Company may from time to time by resolution of the Members change
he currency denomination of, increase, alter or reduce its share capital in
accordance with the provisions of Sections 45 and 46 of the Act. Where, on any
alteration of share capital, fractions of shares or some other difficulty would
arise, the Board may deal with or resolve the same in such manner as it thinks
fit including, without limiting the generality of the
<PAGE>
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foregoing, the issue to Members, as appropriate, of fractions of shares and/or
arranging for the sale or transfer of the fractions of shares of Members.
(4) The Company may from time to time purchase its own shares in accordance
with the provisions of Section 42A of the Act.
53. Registered holder of shares
(1) The Company shall be entitled to treat the registered holder of any
share as the absolute owner thereof and accordingly shall not be bound to
recognise any equitable or other claim to, or interest in, such share on the
part of any other person.
(2) Any dividend, interest or other moneys payable in cash in respect of
shares may be paid by cheque or draft sent through the post directed to the
Member or such Member's address in the Register of Members or, in the case of
joint holders, to such address of the holder first named in the Register of
Members, or to such person and to such address as the holder or joint holders
may in writing direct. If two or more persons are registered as joint holders of
any shares any one can give an effectual receipt for any dividend paid in
respect of such shares.
54. Death of a joint holder
Where two or more persons are registered as joint holders of a share or
shares then in the event of the death of any joint holder or holders the
remaining joint holder or holders shall be absolutely entitled to the said share
or shares and the Company shall recognise no claim in respect of the estate of
any joint holder except in the case of the last survivor of such joint holders.
<PAGE>
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55. Share certificates
(1) Every Member shall be entitled to a certificate under the seal of the
Company (or a facsimile thereof) specifying the number and, where appropriate,
the class of shares held by such Member and whether the same are fully paid up
and, if not, how much has been paid thereon. The Board may by resolution
determine, either generally or in a particular case, that any or all signatures
on certificates may be printed thereon or affixed by mechanical means.
(2) The Company shall be under no obligation to complete and deliver a
share certificate unless specifically called upon to do so by the person to whom
such shares have been allotted.
(3) If any such certificate shall be proved to the satisfaction of the
Board to have been worn out, lost, mislaid or destroyed the Board may cause a
new certificate to be issued and request an indemnity for the lost certificate
if it sees fit.
56. Call on shares
(1) The Board may from time to time make such calls as it thinks fit upon
the Members in respect of any monies unpaid on the shares allotted to or held by
such Members and, if a call is not paid on or before the day appointed for
payment thereof, the Member may at the discretion of the Board be liable to pay
the Company interest on the amount of such call at such rate as the Board may
determine, from the date when such call was payable up to the actual date of
payment. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
(2) The Board may, on the issue of shares, differentiate between the
holders as to the amount of calls to be paid and the times of payment of such
calls.
<PAGE>
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57. Forfeiture of shares
(1) If any Member fails to pay, on the day appointed for payment thereof,
any call in respect of any share allotted to or held by such Member, the Board
may, at any time thereafter during such time as the call remains unpaid, direct
the Secretary to forward to such Member a notice in the form, or as near thereto
as circumstances admit, of Form "B" in the Schedule hereto.
(2) If the requirements of such notice are not complied with, any such
share may at any time thereafter before the payment of such call and the
interest due in respect thereof be forfeited by a resolution of the Board to
that effect, and such share shall thereupon become the property of the Company
and may be disposed of as the Board shall determine.
(3) A Member whose share or shares have been forfeited as aforesaid shall,
notwithstanding such forfeiture, be liable to pay to the Company all calls owing
on such share or shares at the time of the forfeiture and all interest due
thereon.
REGISTER OF MEMBERS
58. Contents of Register of Members
The Board shall cause to be kept in one or more books a Register of Members
and shall enter therein the following particulars:-
(a) the name and address of each Member, the number and, where
appropriate, the class of shares held by such Member and the amount
paid or agreed to be considered as paid on such shares;
(b) the date on which each person was entered in the Register of Members;
and
<PAGE>
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(c) the date on which any person ceased to be a Member for one year after
such person so ceased.
59. Inspection of Register of Members
The Register of Members shall be open to inspection at the registered
office of the Company on every business day, subject to such reasonable
restrictions as the Board may impose, so that not less than two hours in each
business day be allowed for inspection. The Register of Members may, after
notice has been given by advertisement in an appointed newspaper to that effect,
be closed for any time or times not exceeding in the whole thirty days in each
year.
60. Determination of record dates
Notwithstanding any other provision of these Bye-laws, the Board may fix
any date as the record date for:-
(a) determining the Members entitled to receive any dividend; and
(b) determining the Members entitled to receive notice of and to vote at
any General meeting of the Company.
TRANSFER OF SHARES
61. Instrument of transfer
(1) An instrument of transfer shall be in the form or as near thereto as
circumstances admit of Form "C" in the Schedule hereto or in such other common
form as the Board may accept. Such instrument of transfer shall be signed by or
on behalf of the transferor and transferee provided that, in the case of a fully
paid share, the Board may accept the instrument signed by or on behalf of the
transferor alone. The transferor shall be deemed to remain the holder of such
share until the same has been transferred to the transferee in the Register of
Members.
<PAGE>
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(2) The Board may refuse to recognise any instrument of transfer unless it
is accompanied by the certificate in respect of the shares to which it relates
and by such other evidence as the Board may reasonably require to show the right
of the transferor to make the transfer.
62. Restriction on transfer
(1) The Board shall refuse to register a transfer unless all applicable
consents, authorisations and permissions of any governmental body or agency in
Bermuda have been obtained.
(2) If the Board refuses to register a transfer of any share the Secretary
shall, within three months after the date on which the transfer was lodged with
the Company, send to the transferor and transferee notice of the refusal.
63. Transfers by joint holders
The joint holders of any share or shares may transfer such share or shares
to one or more of such joint holders, and the surviving holder or holders of any
share or shares previously held by them jointly with a deceased Member may
transfer any such share to the executors or administrators of such deceased
Member.
TRANSMISSION OF SHARES
64. Representative of deceased Member
In the case of the death of a Member, the survivor or survivors where the
deceased Member was a joint holder, and the legal personal representatives of
the deceased Member where the deceased Member was a sole holder, shall be the
only persons recognised by the Company as having any title to the deceased
Member's interest in the shares. Nothing herein contained shall release the
estate of a deceased joint holder from
<PAGE>
-33-
any liability in respect of any share which had been jointly held by such
deceased Member with other persons. Subject to the provisions of Section 52 of
the Act, for the purpose of this Bye-law, legal personal representative means
the executor or administrator of a deceased Member or such other person as the
Board may in its absolute discretion decide as being properly authorised to deal
with the shares of a deceased Member.
65. Registration on death or bankruptcy
Any person becoming entitled to a share in consequence of the death or
bankruptcy of any Member may be registered as a Member upon such evidence as the
Board may deem sufficient or may elect to nominate some person to be registered
as a transferee of such share, and in such case the person becoming entitled
shall execute in favour of such nominee an instrument of transfer in the form,
or as near thereto as circumstances admit, of Form "D" in the Schedule hereto.
On the presentation thereof to the Board, accompanied by such evidence as the
Board may require to prove the title of the transferor, the transferee shall be
registered as a Member but the Board shall, in either case, have the same right
to decline or suspend registration as it would have had in the case of a
transfer of the share by that Member before such Member's death or bankruptcy,
as the case may be.
DIVIDENDS AND OTHER DISTRIBUTIONS
66. Declaration of dividends by the Board
The Board may, subject to these Bye-laws and in accordance with Section 54
of the Act, declare a dividend to be paid to the Members, in proportion to the
number of shares held by them, and such dividend may be paid in cash or wholly
or partly in specie in which case the Board may fix the value for distribution
in specie of any assets.
<PAGE>
-34-
67. Other distributions
The Board may declare and make such other distributions (in cash or in
specie) to the Members as may be lawfully made out of the assets of the Company.
68. Reserve fund
The Board may from time to time before declaring a dividend set aside, out
of the surplus or profits of the Company, such sum as it thinks proper as a
reserve fund to be used to meet contingencies or for equalising dividends or for
any other special purpose.
69. Deduction of Amounts due to the Company
The Board may deduct from the dividends or distributions payable to any
Member all monies due from such Member to the Company on account of calls or
otherwise.
CAPITALISATION
70. Issue of bonus shares
(1) The Board may resolve to capitalise any part of the amount for the time
being standing to the credit of any of the Company's share premium or other
reserve accounts or to the credit of the profit and loss account or otherwise
available for distribution by applying such sum in paying up unissued shares to
be allotted as fully paid bonus shares pro rata to the Members.
(2) The Company may capitalise any sum standing to the credit of a reserve
account or sums otherwise available for dividend or distribution by applying
such amounts in paying up in full partly paid shares of those Members who would
have been entitled to such sums if they were distributed by way of dividend or
distribution.
<PAGE>
-35-
ACCOUNTS AND FINANCIAL STATEMENTS
71. Records of account
The Board shall cause to be kept proper records of account with respect to
all transactions of the Company and in particular with respect to:-
(a) all sums of money received and expended by the Company and the matters
in respect of which the receipt and expenditure relates;
(b) all sales and purchases of goods by the Company; and
(c) the assets and liabilities of the Company.
Such records of account shall be kept at the registered office of the Company
or, subject to Section 83 (2) of the Act, at such other place as the Board
thinks fit and shall be available for inspection by the Directors during normal
business hours.
72. Financial year end
The financial year end of the Company may be determined by resolution of
the Board and failing such resolution shall be 31st December in each year.
73. Financial statements
Subject to any rights to waive laying of accounts pursuant to Section 88 of
the Act, financial statements as required by the Act shall be laid before the
Members in general meeting.
<PAGE>
-36-
AUDIT
74. Appointment of Auditor
Subject to Section 88 of the Act, at the annual general meeting or at a
subsequent special general meeting in each year, an independent representative
of the Members shall be appointed by them as Auditor of the accounts of the
Company. Such Auditor may be a Member but no Director, Officer or employee of
the Company shall, during his or her continuance in office, be eligible to act
as an Auditor of the Company.
75. Remuneration of Auditor
The remuneration of the Auditor shall be fixed by the Company in general
meeting or in such manner as the Members may determine.
76. Vacation of office of Auditor
If the office of Auditor becomes vacant by the resignation or death of the
Auditor, or by the Auditor becoming incapable of acting by reason of illness or
other disability at a time when the Auditor's services are required, the Board
shall, as soon as practicable, convene a special general meeting to fill the
vacancy thereby created.
77. Access to books of the Company
The Auditor shall at all reasonable times have access to all books kept by
the Company and to all accounts and vouchers relating thereto, and the Auditor
may call on the Directors or Officers of the Company for any information in
their possession relating to the books or affairs of the Company.
<PAGE>
-37-
78. Report of the Auditor
(1) Subject to any rights to waive laying of accounts or appointment of an
Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be
audited at least once in every year.
(2) The financial statements provided for by these Bye-laws shall be
audited by the Auditor in accordance with generally accepted auditing standards.
The Auditor shall make a written report thereon in accordance with generally
accepted auditing standards and the report of the Auditor shall be submitted to
the Members in general meeting.
(3) The generally accepted auditing standards referred to in subparagraph
(2) of this Bye-law may be those of a country or jurisdiction other than
Bermuda. If so, the financial statements and the report of the Auditor must
disclose this fact and name such country or jurisdiction.
NOTICES
79. Notices to Members of the Company
A notice may be given by the Company to any Member either by delivering it
to such Member in person or by sending it to such Member's address in the
Register of Members or to such other address given for the purpose. For the
purposes of this Bye-law, a notice may be sent by mail, courier service, cable,
telex, telecopier, facsimile or other mode of representing words in a legible
and non-transitory form.
80. Notices to joint Members
Any notice required to be given to a Member shall, with respect to any
shares held jointly by two or more persons, be given to whichever of such
persons is named first in the
<PAGE>
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Register of Members and notice so given shall be sufficient notice to all the
holders of such shares.
81. Service and delivery of notice
Any notice shall be deemed to have been served at the time when the same
would be delivered in the ordinary course of transmission and, in proving such
service, it shall be sufficient to prove that the notice was properly addressed
and prepaid, if posted, and the time when it was posted, delivered to the
courier or to the cable company or transmitted by telex, facsimile or other
method as the case may be.
SEAL OF THE COMPANY
82. The seal
The seal of the Company shall be in such form as the Board may from time to
time determine. The Board may adopt one or more duplicate seals for use outside
Bermuda.
83. Manner in which seal is to be affixed
The seal of the Company shall not be affixed to any instrument except
attested by the signature of a Director and the Secretary or any two Directors,
or some other person appointed by the Board for the purpose, provided that any
Director, or Officer, may affix the seal of the Company attested by such
Director or Officer's signature only to any authenticated copies of these
Bye-laws, the incorporating documents of the Company, the minutes of any
meetings or any other documents required to be authenticated by such Director or
Officer.
<PAGE>
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WINDING-UP
84. Winding-up/distribution by liquidator
If the Company shall be wound up the liquidator may, with the sanction of a
resolution of the Members, divide amongst the Members in specie or in kind the
whole or any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and may, for such purpose, set such value as
he or she deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the Members or
different classes of Members. The liquidator may, with the like sanction, vest
the whole or any part of such assets in trustees upon such trusts for the
benefit of the Members as the liquidator shall think fit, but so that no Member
shall be compelled to accept any shares or other securities or assets whereon
there is any liability.
ALTERATION OF BYE-LAWS
85. Alteration of By-laws
No Bye-law shall be rescinded, altered or amended and no new Bye-law shall
be made until the same has been approved by a resolution of the Board and by a
resolution of the Members, provided that no recision, alteration or amendment to
Bye-law 8 shall be made until the same has been approved by every director of
the Company (either in a meeting at which each director attends and votes to
approve the resolution, or by a unanimous written resolution) and by a
resolution of the Members..
*****
***
*
<PAGE>
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SCHEDULE - FORM A (Bye-law 48)
PROXY
I
of
the holder of _______ share in the above-named Company hereby appoint _________
or failing him/her _____________ or failing him/her _________________ as my
proxy to vote on my behalf at the General Meeting of the Company to be held on
the ___ day of _______, 19__, and at any adjournment thereof.
Dated this day of , 19
*GIVEN under the seal of the company
*Signed by the above-named
__________________________________
__________________________________
Witness
*Delete as applicable.
<PAGE>
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SCHEDULE - FORM B (Bye-law 57)
NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL
You have failed to pay the call of [amount of call] made on the ______ day of
_____, 19, last, in respect of the [number] share(s) [numbers in figures]
standing in your name in he register of Members of the Company, on the day of
______, 19, last, the day appointed for payment of such call. You are hereby
notified that unless you pay such call together with interest thereon at the
rate of per annum computed from the said day of ______, 19 last, on or before
the day of _____, 19 next at the place of business of the said Company the
share(s) will be liable to be forfeited.
Dated this ____ day of _____, 19__
[Signature of Secretary]
By order of the Board
<PAGE>
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SCHEDULE - FORM C (Bye-law 61)
TRANSFER OF A SHARE OR SHARES
FOR VALUE RECEIVED ____________________________________________________ [amount]
___________________________________________________________________ [transferor]
hereby sell assign and transfer unto ______________________________ [transferee]
of____________________________________________________________________ [address]
_____________________________________________________________ [number of shares]
shares of ____________________________________________________ [name of Company]
Dated __________________________
______________________________
(Transferor)
In the presence of:
_____________________________
(Witness)
______________________________
(Transferor)
In the presence of:
_____________________________
(Witness)
<PAGE>
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SCHEDULE - FORM D (Bye-law 65)
TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH/BANKRUPTCY OF A MEMBER
I/We having become entitled in consequence of the [death/bankruptcy] of [name of
the deceased Member] to [number] share(s) numbered [number in figures] standing
in the register of members of [Company] in the name of the said [name of
deceased Member] instead of being registered myself/ourselves elect to have
[name of transferee] (the "Transferee") registered as a transferee of such
share(s) and I/we do hereby accordingly transfer the said share(s) to the
Transferee to hold the same and assigns subject to the conditions on which the
same were held at the time of the execution thereof; and the Transferee does
hereby agree to take the said share(s) subject to the same conditions.
WITNESS our hands this __ day of ___, 19__
Signed by the above-named )
[person or persons entitled] )
in the presence of: )
Signed by the above-named )
[transferee] )
in the presence of: )
<PAGE>
Exhibit 4.1
RSL COMMUNICATIONS, LTD.
RSL COMMUNICATIONS PLC
PLACEMENT AGREEMENT
September 30, 1996
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
Dillon, Read & Co. Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Ladies and Gentlemen:
RSL COMMUNICATIONS, LTD., a Bermuda corporation ("Holdings" or the
"Warrant Issuer"), and RSL COMMUNICATIONS PLC, a United Kingdom corporation and
wholly owned subsidiary of Holdings (the "Note Issuer" and, together with
Holdings, the "Issuers"), propose to issue and sell to you (the "Placement
Agents") 300,000 Units (the "Units"). Each Unit will consist of (i) 12 1/4%
Senior Notes due 2006 (collectively, the "Notes") having a principal amount
equal to $1,000 to be issued by the Note Issuer pursuant to the provisions of an
Indenture (the "Indenture") to be dated as of the Closing Date (as defined
below) among the Issuers and The Chase Manhattan Bank, as trustee (in such
capacity, the "Trustee") and (ii) one Warrant (collectively, the "Warrants") to
be issued by the Warrant Issuer entitling the holder thereof to purchase 1.805
Class A common shares, par value $0.01 per share, of Holdings (collectively, the
"Warrant Shares") from Holdings at an exercise price of $0.01 per share, subject
to adjustment as provided in the Warrant Agreement (as defined below). The
obligations of the Note Issuer under the Notes and the Indenture will be
guaranteed (the "Note Guarantee") by Holdings on an unsubordinated basis
pursuant to the terms of the Indenture. The Warrants will be issued pursuant to
the provisions of a Warrant Agreement to be dated as of the Closing Date (the
"Warrant Agreement") between Holdings and The Chase Manhattan Bank, as warrant
agent (in such capacity, the "Warrant Agent"), substantially in the form
attached hereto as Exhibit A. The Note Issuer will pledge pursuant to a Pledge
Agreement dated as of the Closing Date (the "Pledge Agreement") among the Note
Issuer, Holdings and the Trustee a portion of the net proceeds from the issuance
and sale of the Units as security for the payment of the first six scheduled
interest payments due on the Notes. The Class A common shares of Holdings are
referred to herein as the "Common Shares."
The Units will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), to qualified
institutional buyers (as defined in Rule
<PAGE>
2
144A under the Securities Act) in compliance with the exemption from
registration provided by Rule 144A under the Securities Act ("Rule 144A"), in
offshore transactions in reliance on Regulation S under the Securities Act
("Regulation S") and to institutional accredited investors (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that deliver a letter in
the form annexed to the Final Memorandum (as defined below).
The Placement Agents and their direct and indirect transferees will
be entitled to the benefits of (i) a registration rights agreement relating to
the Notes (the "Notes Registration Rights Agreement"), to be dated as of the
Closing Date and to be substantially in the form attached hereto as Exhibit B
and (ii) a registration rights agreement relating to the Warrant Shares (the
"Warrant Registration Rights Agreement") to be dated as of the Closing Date and
to be substantially in the form attached hereto as Exhibit C.
In connection with the sale of the Units, the Issuers have prepared
a preliminary private placement memorandum (the "Preliminary Memorandum") and
will prepare a final private placement memorandum (the "Final Memorandum" and,
with the Preliminary Memorandum, each a "Memorandum") setting forth or including
a description of the terms of the Units, the Notes, the Warrants and the Common
Shares, the terms of the offering and a description of the Issuers and their
business. As used herein, "subsidiary" means any Subsidiary (as defined in the
Final Memorandum under the caption "Description of the Notes") of either of the
Issuers.
1. Representations and Warranties. Each of the Issuers represents
and warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Placement Agents to confirm sales and on the
Closing Date (as defined below), will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 1(a) do not apply to statements or omissions in either Memorandum based
upon information relating to any Placement Agent furnished to the Issuers in
writing by such Placement Agent expressly for use therein.
(b) Each of Holdings and the Note Issuer has been duly organized
and, is validly existing as a corporation under the laws of Bermuda and the
United Kingdom, respectively, has the corporate power and authority to own its
property and to conduct its business as described in each Memorandum and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on
Holdings and its subsidiaries, taken as a whole.
<PAGE>
3
(c) Each subsidiary of Holdings has been duly incorporated, is
validly existing as a corporation and where applicable, is in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business as described in
each Memorandum and is duly qualified to transact business and/or is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on Holdings and its subsidiaries, taken as a whole;
set forth on Schedule I hereto are Holdings' significant subsidiaries (as
defined in Rule 1-02 of Regulation S-X under the U.S. Federal securities laws,
the "Significant Subsidiaries") and principal operating subsidiaries (the
"Operating Subsidiaries").
(d) This Agreement has been duly authorized, executed and delivered
by Holdings and the Note Issuer.
(e) The Notes have been duly authorized by the Note Issuer and, when
executed, authenticated and delivered in accordance with the Indenture and paid
for by the Placement Agents in accordance with the terms of this Agreement, will
(x) be valid and binding obligations of the Note Issuer enforceable against the
Note Issuer in accordance with their terms, except as (A) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (B) rights of acceleration, if applicable, and
the availability of equitable remedies may be limited by equitable principles of
general applicability and (y) be entitled to the benefits of the Indenture and
the Notes Registration Rights Agreement.
(f) The Note Guarantee has been duly authorized by Holdings and,
upon execution and delivery of the Indenture by the parties thereto (assuming
due authorization, execution and delivery thereof by the Trustee) and when the
Notes are duly executed, authenticated, delivered and paid for in accordance
with the Indenture and this Agreement, will (x) be a valid and binding
obligation of Holdings enforceable against Holdings in accordance with its
terms, except as (A) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (B) rights
of acceleration, if applicable, and the availability of equitable remedies may
be limited by equitable principles of general applicability and (y) be entitled
to the benefits of the Indenture.
(g) Each of the Indenture, the Pledge Agreement and the Notes
Registration Rights Agreement has been duly authorized by each of Holdings and
the Note Issuer, when executed and delivered by the parties thereto (assuming
due authorization, execution and delivery thereof by the other parties thereto),
will be a valid and binding agreement of Holdings and the Note Issuer,
enforceable in accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of acceleration, if applicable, and
the
<PAGE>
4
availability of equitable remedies may be limited by equitable principles of
general applicability.
(h) (i) The Deposit Agreement (as defined in the Final Memorandum)
has been duly authorized by the Note Issuer and, when executed and delivered by
the parties thereto (assuming due authorization, execution and delivery thereof
by the Book-Entry Depositary), will be a valid and binding agreement of the Note
Issuer, enforceable against the Note Issuer in accordance with its terms, except
as (x) the enforceability thereof may be limited by bankruptcy, insolvency
affecting creditors' rights generally, and (y) rights of acceleration, if
applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability; and (ii) the Deposit Agreement or
the Warrant Agreement, as applicable, and the Book-Entry Interests or beneficial
interests in the Global Warrants (each as defined in the Final Memorandum)
conform in all material respects to the descriptions thereof in the Final
Memorandum.
(i) The Warrants have been duly authorized by Holdings and, when
executed by Holdings and countersigned by the Warrant Agent as provided in the
Warrant Agreement (assuming due authorization, execution and delivery thereof by
the Warrant Agent), and delivered to and paid for by the Placement Agents in
accordance with the terms of this Agreement, will (x) be valid and binding
obligations of Holdings enforceable against Holdings in accordance with their
terms, except as (A) the enforceability thereof may be limited by the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to or affecting creditors' rights generally
and (B) rights of acceleration, if applicable, and the availability of equitable
remedies may be limited by equitable principles of general applicability and (y)
be entitled to the benefits of the Warrant Agreement and the Warrant
Registration Rights Agreement.
(j) The Warrant Agreement and the Warrant Registration Rights
Agreement have been duly authorized by Holdings and, when executed and delivered
by the parties thereto (assuming due authorization, execution and delivery
thereof by the Warrant Agent), will be valid and binding agreements of Holdings,
enforceable against Holdings in accordance with their respective terms except as
(x) the enforceability thereof may be limited by the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and (y)
the availability of equitable remedies may be limited by equitable principles of
general applicability.
(k) The Warrant Shares have been duly authorized and reserved by
Holdings and, when issued and delivered upon exercise of the Warrants in
accordance with the terms of the Warrants and the Warrant Agreement, will be
validly issued, fully paid and non-assessable and will not be subject to any
preemptive or similar rights.
<PAGE>
5
(l) The execution and delivery by each of Holdings and the Note
Issuer of, and the performance by each of its obligations under, this Agreement,
the Indenture, the Notes Registration Rights Agreement, the Pledge Agreement,
the Deposit Agreement, the Warrants, the Warrant Agreement, the Warrant
Registration Rights Agreement, the Notes, the Note Guarantee, the Subordinated
Shareholder Loan, the Shareholder Equity Investment, the Shareholder Standby
Facility and the amendment to the Revolving Credit Facility described in the
Final Memorandum (each as defined in the Memorandum) (collectively, the
"Transaction Documents"), as applicable, and the issuance and sale and delivery
of the Units, Notes and Warrants and the issuance of the Warrant Shares upon
exercise of the Warrants will not contravene any provision of applicable law or
the Articles of Association, the Memorandum of Association or the bye-laws of
Holdings or the Note Issuer, as the case may be, or any agreement or other
instrument binding upon either of the Issuers or any of their subsidiaries or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over either of the Issuers or any of their subsidiaries and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency (U.S., U.K., Bermuda or otherwise) is required for
the performance by each of Holdings and the Note Issuer of its obligations under
the Transaction Documents, as applicable, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Units, Notes or Warrants.
(m) There has not occurred any material adverse change, or any
development which could reasonably be executed to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business
or operations of the Issuers and their subsidiaries, taken as a whole, from that
set forth in the Preliminary Memorandum. Furthermore, (1) the Issuers and their
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (2) neither of the Issuers has purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or distribution
of any kind on its capital stock other than ordinary and customary dividends;
and (3) there has not been any material change in the capital stock, short-term
debt or long-term debt of the Issuers and their subsidiaries, except in each
case as described in or contemplated by the Final Memorandum.
(n) As of the date of each Memorandum, there were no legal or
governmental proceedings pending or, to the knowledge of the Issuers,
threatened, to which the Issuers or any of their subsidiaries is a party or to
which any of the properties of the Issuer or any of their subsidiaries is
subject other than proceedings accurately described in all material respects in
such Memorandum and proceedings that would not have a material adverse effect on
the Issuers and their subsidiaries, taken as a whole, or on the power or ability
of Holdings or the Note Issuer to perform their respective obligations under the
Transaction Documents, as applicable, or to consummate the transactions
contemplated by the Final Memorandum.
<PAGE>
6
(o) Neither of the Issuers, nor any of their affiliates (as defined
in Rule 501(b)) of Regulation D under the Securities Act, an "Affiliate") has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Units, the
Notes or the Warrants in a manner that would require the registration under the
Securities Act of the Units, the Notes or the Warrants or (ii) engaged in any
form of general solicitation or general advertising in connection with the
offering of the Units, the Notes or the Warrants (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(p) Neither of the Issuers is nor, after giving effect to the
offering and sale of the Units and the application of the proceeds thereof as
described in the Final Memorandum, will be an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(q) It is not necessary in connection with the offer, sale and
delivery of the Units, the Notes and the Warrants to the Placement Agents in the
manner contemplated by this Agreement to register the Units, the Notes and the
Warrants under the Securities Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended.
(r) The Issuers and their subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on Holdings and its subsidiaries, taken as a whole.
(s) None of the Issuers, any of their Affiliates or any person
acting on their behalf (other than the Placement Agents) has engaged in any
prohibited directed selling efforts (as that term is defined in Regulation S)
with respect to the Units, the Notes or the Warrants and such persons (other
than the Placement Agents) have complied with the offering restrictions
requirement of Regulation S.
(t) The Issuers and their subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of Holdings
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in each Memorandum or such as do not
materially affect the value of such property and do not
<PAGE>
7
interfere with the use made and proposed to be made of such property by Holdings
and its subsidiaries; and any real property and buildings held under lease by
Holdings and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by
Holdings and its subsidiaries, in each case except as described in or
contemplated by each Memorandum.
(u) The Issuers and their subsidiaries own or possess all material
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), service marks and trade names
currently employed by them in connection with the business now operated by them,
and neither Holdings, the Note Issuer nor any of their subsidiaries has received
any notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would reasonably be
expected to result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of Holdings and its
subsidiaries, taken as a whole.
(v) No material labor dispute with the employees of Holdings, the
Note Issuer or any of their subsidiaries exists, except as described in or
contemplated by each Memorandum, or, to the knowledge of each of the Issuers, is
imminent; and neither of the Issuers is aware of any existing, threatened or
imminent labor disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that would reasonably be expected to result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of Holdings and its subsidiaries, taken as a
whole.
(w) The Issuers and their subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither Holdings nor any such subsidiary has been refused any insurance
coverage sought or applied for; and neither Holdings nor any such subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the company and its subsidiaries,
taken as a whole, except as described in or contemplated by each Memorandum.
(x) The Issuers and their subsidiaries (i) possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conflict their respective businesses
(excepting any certificate, authorization or permit, the failure to possess
which would not reasonably be expected to result in a material adverse change in
the condition, financial or otherwise, or in the earnings, business or
operations of Holdings and its subsidiaries, taken as a whole, except as
<PAGE>
8
described in or contemplated by each Memorandum) and (ii) have not received any
notice of proceedings relating to revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would reasonably be
expected to result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of Holdings and its
subsidiaries, taken as a whole, except as described in or contemplated by each
Memorandum.
(y) The Issuers and their subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) The terms of the Units, the Warrants, the Notes, the Indenture
and the Common Shares conform in all material respects to the description
thereof contained in the Final Memorandum under the headings "Description of the
Units," "Description of the Warrants," "Description of the Notes," and
"Description of Capital Stock," respectively.
(aa) Other than as described in the Final Memorandum or as for which
Holdings or the Note Issuer has agreed to pay, no stamp or other issuance or
transfer taxes or duties are payable by or on behalf of the Placement Agents in
New York State, the United Kingdom, Bermuda or any political subdivision or
taxing authority thereof or therein on (i) the authorization, issue or delivery
by the Issuers of the Units or (ii) assuming all of the following transactions
take place outside New York State, the United Kingdom or Bermuda (and assuming
any instrument granting the Warrants or any transfer of the Warrants or a
beneficial interest in the Global Warrants, is not brought into the United
Kingdom), the deposit of the Units by the Issuers and the issuance of
Book-Entry Interests or beneficial interests in the Global Warrants), the
purchase by the Placement Agents of the Units, the sale and delivery by the
Placement Agents of the Units as described in the Final Memorandum, or the
execution and delivery of the Transaction Documents.
2. Offering. You have advised the Issuers that the Placement Agents
will make an offering of the Units purchased by the Placement Agents hereunder
on tile terms set forth in the Final Memorandum as soon as practicable after
this Agreement is entered into as in your judgment is advisable.
3. Purchase and Delivery. The Issuers hereby agree to sell to the
several Placement Agents, and the Placement Agents, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agree, severally
<PAGE>
9
and not jointly, to purchase from the Issuers the number of Units set forth in
Schedule II hereto opposite their names at a purchase price of $970.00 per Unit.
Payment for the Units shall be made against delivery of the Units at
a closing (the "Closing") to be held at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York, at 10:00 A.M., local time, on October 3,
1996, or at such other time on the same or such other date, not later than
October 15, 1996, as shall be designated in writing by you (the "Closing Date").
Payment for the Units shall be made to the Note Issuer for itself (with respect
to the Notes) and on behalf of Holdings (with respect to the Warrants) in
Federal or other funds immediately available in New York City.
Certificates for the Global Notes (as defined in the Memorandum)
shall be in bearer form and in such denominations as you shall request in
writing not less than one full business day prior to the Closing Date.
Certificates for the Global Warrants (as defined in the Memorandum) shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not less than one full business day prior to the
Closing Date. The certificates evidencing the Notes and the Warrants shall be
delivered on the Closing Date as you shall request, with any transfer taxes
payable in connection with the transfer of the Units, the Notes or the Warrants
to the Placement Agent duly paid, against payment of the purchase price
therefor.
4. Conditions to Closing. The several obligations of the Placement
Agents under this Agreement to purchase the Units will be subject to the
following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date, there shall not have occurred any change, or any development which
is reasonably likely to result in a change, in the condition, financial or
otherwise, or in the earnings, business or operations of Holdings and its
subsidiaries, taken as a whole, from that set forth in the Preliminary
Memorandum that, in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Units on the terms and in the manner
contemplated in the Final Memorandum.
(b) You shall have received on the Closing Date certificates, dated
the Closing Date and signed, respectively, by an executive officer of Holdings
and the Note Issuer, to the effect that the representation and warranties of
each of Holdings and the Note Issuer contained in this Agreement are true and
correct in all material respects as of the Closing Date and that each of
Holdings and the Note Issuer has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied in all
material respects on or before the Closing Date.
<PAGE>
10
(c) You shall have received on the Closing Date an opinion of
Rosenman & Colin LLP, U.S. counsel for the Issuers, dated the Closing Date, to
the effect set forth in Exhibit D.
(d) You shall have received on the Closing Date an opinion of
Levinson Gray, UK counsel for the Note Issuer, dated the Closing Date, to the
effect set forth in Exhibit E.
(e) You shall have received on the Closing Date an opinion from
Conyers, Dill & Pearman, Bermuda counsel for Holdings, dated the Closing Date,
to the effect set forth in Exhibit F.
(f) You shall have received on the Closing Date opinions of foreign
local counsel in France, Germany, Sweden and Finland, dated the Closing Date, to
the effect set forth in Exhibit G.
(g) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Placement Agents, dated the Closing Date,
in form and substance satisfactory to you.
(h) You shall have received on the Closing Date an opinion of
Fletcher, Heald & Hildreth, special U.S. regulatory counsel for the Issuers,
dated the Closing Date, to the effect set forth in Exhibit H.
(i) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from the independent public
accountants for the Issuers, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Final Memorandum.
(j) You shall have received on the Closing Date a certificate with
respect to the pro forma financials of Holdings, dated the Closing Date and
signed by an executive officer of Holdings, to the effect set forth in Exhibit
I.
(k) You shall have received on the Closing Date a certificate from
the independent public accountants for the issuers, dated the Closing Date, to
the effect that, based on valuations provided to such accountants, the U.S.
government securities purchased pursuant to the Pledge Agreement are sufficient
to Secure the first six scheduled interest payments due on the Notes.
(l) Each of the Transaction Documents shall have been (or shall,
simultaneously with the Closing, be) executed and delivered by all other parties
thereto and
<PAGE>
11
the Shareholder Equity Investment shall have been made as described in the Final
Memorandum.
(m) You shall have received on the Closing Date an opinion of
California counsel for Cyberlink, Inc., dated the Closing Date, to the effect
set forth on Exhibit J.
(n) You shall have received such other documents as you and your
counsel shall reasonably request.
5. Covenants of Holdings and the Note Issuer. In further
consideration of the agreements of the Placement Agents contained in this
Agreement, each of Holdings and the Note Issuer covenants as follows:
(a) To furnish to you, without charge, during the period mentioned
in paragraph (c) below, as many copies of either Memorandum and any
supplements and amendments thereto as you may reasonably request and, with
respect to the Final Memorandum to use its best efforts to deliver such
copies to you by 5 p.m. (New York time) on the business day next
following the execution of this Agreement.
(b) Before amending or supplementing either Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use
any such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Units shall have been sold by the Placement
Agents, any event shall occur or condition exist as a result of which it
is necessary in your judgment to amend or supplement the Final Memorandum
in order to make the statements therein, in the light of the circumstances
when such Memorandum is delivered to a purchaser, not misleading, or if,
in the opinion of counsel to the Placement Agents it is necessary to amend
or supplement such Memorandum to comply with applicable law, forthwith to
prepare and finish, at its own expense, to the Placement Agents, either
amendments or supplements to such Memorandum so that the statements in
such Memorandum as so amended or supplemented will not, in the light of
the circumstances when such Memorandum is delivered to a purchaser, be
misleading or so that such Memorandum, as so amended or supplemented, will
comply with applicable law.
(d) To endeavor to qualify the Units, the Notes and the Warrants for
offer and sale under the securities or Blue Sky laws of such jurisdictions
as you shall reasonably request; provided that neither of the Issuers
shall be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself
<PAGE>
12
to taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject.
(e) Whether or not any sale of the Units is consummated, to pay all
expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation of each Memorandum and all
amendments and supplements thereto, (ii) the preparation, issuance and
delivery of the Units (iii) the fees and disbursements of the Issuers'
counsel, accountants, the Trustee and the Warrant Agent and their
respective counsel, (iv) the qualification of the Units, the Notes and the
Warrants under securities or Blue Sky laws in accordance with the
provisions of Section 5(d), including filing fees and the fees and
disbursements of counsel for the Placement Agents in connection therewith
and in connection with the preparation of any Blue Sky or legal investment
memoranda, (v) the printing and delivery to the Placement Agents in
quantities as hereinabove stated of copies of either Memorandum and any
amendments or supplements thereto, (vi) the fees and expenses incurred in
connection with the admission of the Units, the Notes and the Warrants for
trading in PORTAL or any other appropriate market system, (vii) the costs
and expenses of the Issuers relating to investor presentations on any
"road show" undertaken in connection with the marketing of the Units,
including, without limitation, expenses associated with the production of
road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Issuers, travel and lodging expense of the representatives
and officers of the Issuers and any such consultants, and the cost of any
aircraft chartered in connection with the road show, subject to the prior
approval of the Issuers and (viii) all other costs and expenses incident
to the performance of the obligations of the Issuers hereunder for which
provision is not otherwise made in this Section, but excluding the fees
and expenses of counsel for the Placement Agents other than as provided in
(iv) above.
(f) Neither of the Issuers nor any Affiliate will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which could be integrated with
the sale of the Units, Notes or Warrants in a manner which would require
the registration under the Securities Act of such Units, Notes or
Warrants.
(g) Not to solicit any offer to buy or offer or sell the Units, the
Notes or the Warrants by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering with the
meaning of Section 4(2) of the Securities Act.
(h) While any of the Units, the Notes or the Warrants remain
outstanding, to make available, upon request, to any seller of the Units,
Notes or Warrants the information specified in Rule 144A(d)(4) under the
Securities Act, unless Holdings or
<PAGE>
13
the Note Issuer, as applicable, is then subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(i) Neither of the Issuers, their Affiliates or any person acting on
its or their behalf (other than the Placement Agents) will engage in any
prohibited directed selling efforts (as that term is defined in Regulation
S) with respect to the Units, Notes or Warrants, and the Issuers and their
Affiliates and each person acting on its or their behalf (other than the
Placement Agents) will comply with the offering restrictions of Regulation
S.
(j) To use its best efforts to permit the Units, the Notes and the
Warrants to be designated PORTAL securities in accordance with the rules
and regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market.
(k) The Issuers will, and will cause the Trustee to, refuse to
register any transfer of the Notes sold pursuant to Regulation S if such
transfer is not made in accordance with the provisions of Regulation S and
the Indenture.
(l) Holdings will, and will cause the Warrant Agent to, refuse to
register any transfer of the Warrants and cause the registrar for the
Warrant Shares to refuse any transfer of the Warrants or the Warrant
Shares sold pursuant to Regulation S, if such transfer is not made in
accordance with the provisions of Regulation S.
6. Offering of Securities: Restrictions on Transfer. (a) Each
Placement Agent, severally and not jointly, represents and warrants that such
Placement Agent is a qualified institutional buyer as defined in Rule 144A
under the Securities Act (a "QIB"). Each Placement Agent, severally and not
jointly, agrees with the Issuers that (i) it will not solicit offers for, or
offer or sell, Units, Notes or Warrants by any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act and (ii) it will solicit offers for Units,
Notes, or Warrants only from, and will offer Units, Notes or Warrants only to,
persons that it reasonably believes to be (A)in the case of offers inside the
United States, (x) QIBs or (y) other institutional accredited investors (as
defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act)
("Institutional Accredited Investors") that, prior to their purchase of the
Units, deliver to such Placement Agent a letter containing the representations
and agreements set forth in Appendix A to the Memorandum and (B) in the case of
offers outside the United States, persons other than U.S. persons ("foreign
purchasers", which term shall include dealers or other professional fiduciaries
in the United States acting on a discretionary basis
<PAGE>
14
for foreign beneficial owners (other than an estate or trust)) that, in each
case, in purchasing such Units, Notes or Warrants are deemed to have represented
and agreed as provided in the Final Memorandum under the caption "Transfer
Restrictions."
(b) Each Placement Agent, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) it understands that no action has been or will be taken in any
jurisdiction by either of the Issuers that would permit a pubic offering
of the Units, Notes or Warrants or possession or distribution of either
Memorandum or any other offering or publicity material relating to the
Units, Notes or Warrants in any country or jurisdiction where action for
that purpose is required;
(ii) such Placement Agent will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Units, Notes or Warrants or has in its possession or distributes
either Memorandum or any such other material, in all cases at its own
expense;
(iii) the Units, the Notes and the Warrants have not been and will
not be registered under the Securities Act and may not be offered or sold
within the United States except pursuant to an exemption from the
registration requirements of the Securities Act, or outside the United
States except to foreign purchasers in accordance with Regulation S under
the Securities Act;
(iv) such Placement Agent has not offered the Units, the Notes or
the Warrants and will not offer and sell the Units, the Notes or the
Warrants (A) as part of its distribution at any time or (B) otherwise
until 40 days with respect to the Notes and one year after the later of
the commencement of the offering and the Closing Date with respect to the
Warrants, only in accordance with Rule 903 of Regulation S or another
exemption from the registration requirements of the Securities Act, and it
will send to any dealer to whom it sells Notes and Warrants during such
period a confirmation or other notice setting forth the restrictions on
offers and sales of the Units within the United States or to, or for the
account or benefit of, U.S. Persons. Accordingly, neither such Placement
Agent, its Affiliates nor any persons acting on its or their behalf have
engaged or will engage in any prohibited directed selling efforts (within
the meaning of Regulation S) with respect to the Units, the Notes or the
Warrants, and any such Placement Agent, its Affiliates and any such
persons have complied and will comply with the offering restrictions
requirements of Regulation S;
(v) such Placement Agent has (A) not offered or sold and will not
offer or sell any of the Units, Notes or Warrants to persons in the United
Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to
<PAGE>
15
the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995 (the "Regulations"); (B) complied and will
comply with all applicable provisions of the Financial Services Act 1986
and the Regulations with respect to anything done by in relation to the
Units, the Notes or the Warrants in, from or otherwise involving the
United Kingdom; and (C) only issued or passed on and will only issue or
pass on to any person in the United Kingdom any document received by it in
connection with the issue of the Units, the Notes or the Warrants if that
person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom such document may otherwise lawfully be issued or passed
on; and
(vi) such Placement Agent understands that the Units, the Notes and
the Warrants have not been and will not be registered under the Securities
and Exchange Law of Japan, and represents that it has not offered or sold,
and agrees that it will not offer or sell, any Units, Notes or Warrants
directly or indirectly in Japan or to any resident of Japan except (A)
pursuant to an exemption from the registration requirements of the
Securities and Exchange Law of Japan and (B) in compliance with any other
applicable requirements of Japanese law.
Terms used in this Section 6 have the meanings given to them by Regulation S.
7. Indemnification and Contribution. (a) Each of Holdings and the
Note Issuer agrees to indemnify and hold harmless each Placement Agent, and each
person, if any, who controls such Placement Agent within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Placement Agent, from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Placement
Agent or any such controlling or affiliated person in connection with defending
or investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Issuers shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except (i) insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Placement Agent furnished to the Issuers in writing
by such Placement Agent through you expressly for use therein and (ii) provided
that the foregoing indemnity with respect to the Preliminary Memorandum shall
not inure to the benefit of any Placement Agent from whom the person asserting
any such losses, claims, damages or liabilities purchased Units, or any person
controlling such Placement Agent, if a copy of the Final Memorandum (as then
amended or supplemented if the Issuers shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Placement
Agent to such person, at or prior to the written confirmation of the sale of the
Units to such
<PAGE>
16
person, and if the Final Memorandum (as so amended or supplemented) would have
cured the defect giving rise to such losses, claims, damages or liabilities.
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless each of the Issuers their directors, officers and
each person, if any, who controls each of the Issuers within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from each of the Issuers to such
Placement Agent, but only with reference to information relating to such
Placement Agent furnished to the Issuers in writing by such Placement Agent
through you expressly for use in either Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or reasonably
likely potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Morgan Stanley &
Co. Incorporated in the case of parties indemnified pursuant to paragraph (a)
above and by Holdings in the case of parties indemnified pursuant to paragraph
(b) above. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
<PAGE>
17
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 7 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Note Issuer and Holdings on the one hand, and the Placement Agents, on the other
hand, from the offering of the Units or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Note Issuer and Holdings on the one
hand, and the Placement Agents on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Note Issuer and Holdings on the one hand, and
the Placement Agents on the other hand, in connection with the offering of the
Units shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Units (before deducting expenses) received by
the Note Issuer and Holdings and the total discounts and commissions received by
the Placement Agents in respect thereof bear to the aggregate offering price of
the Units. The relative fault of the Note Issuer and Holdings, on the one hand,
and of the Placement Agents, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Note Issuer and Holdings on the one hand,
or by the Placement Agents, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Placement Agents' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the respective principal amount of
Securities they have purchased hereunder, and not joint.
(e) Holdings, the Note Issuer and the Placement Agents agree that it
would not be just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Placement Agents were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Placement Agent shall be required to contribute
any amount in excess of the amount by which the total price at which the Units
resold by it in the initial placement of Units were offered to investors exceeds
the amount of any damages that such Placement Agent has otherwise been
<PAGE>
18
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The indemnity and contribution provisions contained in this
Section 7 and the representations and warranties of the Placement Agents,
Holdings and the Note Issuer contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of the Placement Agents
or any person controlling the Placement Agents or by or on behalf of Holdings or
the Note Issuer, their officers or directors or any person controlling the
Issuers and (iii) acceptance of and payment for any of the Units. The remedies
provided for in this Section 7 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
8. Jurisdiction. Each of the parties hereto agrees that any legal
suit, action or proceeding arising out of or relating to the Transaction
Documents, as applicable, may be instituted in any U.S. federal or New York
State court in the Borough of Manhattan in the City of New York (each a "New
York court") and each of the parties hereto hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any such
proceeding, and irrevocably submits to the jurisdiction of such courts and to
the courts of its corporate domicile, with respect to actions brought against it
as defendant, in any suit, action or proceeding. Holdings and the Note Issuer
each agrees that a final judgment in any such suit, action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law in accordance with applicable law. Each
of Holdings and the Note Issuer hereby irrevocably waives any right with respect
to matters governed by this Agreement to invoke jurisdiction it may have to any
court by virtue of Bermuda or U.K. law, as applicable.
If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than United
States dollars, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be the rate at which in
accordance with normal banking procedures Morgan Stanley & Co. Incorporated
could purchase United States dollars with such other currency in the City of New
York on the business day preceding that on which final judgment is given. The
obligation of each of Holdings and the Note Issuer in respect of any sum due
from it to any Placement Agent shall, notwithstanding any judgment in a currency
other than United States dollars, not be discharged until the first business
day, following receipt by such Placement Agent of any sum adjudged to be so due
in such other currency, on which (and only to the extent that) such Placement
Agent may in accordance with normal banking procedures purchase United States
dollars with such other currency; if the United States dollars so purchased are
less that the sum originally due to such Placement Agent hereunder, each of
Holdings and the Note Issuer agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Placement Agent against
such loss. If the United States dollars so purchased are greater than the sum
originally due to such Placement Agent hereunder, such Placement Agent agrees to
pay to each of Holdings and the Note Issuer an
<PAGE>
19
amount equal to the excess of the dollars so purchased over the sum originally
due to such Placement Agent hereunder.
Each of Holdings and the Note Issuer irrevocably appoints RSL
Communications N. America, Inc. ("RSL USA"), 767 Fifth Avenue, Suite 4300, New
York, New York 10153 (together with any successor, the "Process Agent"), as its
authorized agent in the Borough of Manhattan in the City of New York upon which
process may be served in any such suit, action or proceeding, acknowledges that
the Process Agent has accepted such designation and agrees that service of
process upon the Process Agent, and written notice of such service to Holdings
and the Note Issuer, by the person serving the same, shall be deemed in every
respect effective service of process upon Holdings and the Note Issuer in any
such suit, action or proceeding. RSL USA hereby agrees that prior to any
dissolution, liquidation, winding-up or sale of RSL USA or incorporation of RSL
USA in a jurisdiction outside of the United States, RSL USA shall cause such
obligation of RSL USA to be assumed by (i) CT Corporation System ("CT
Corporation"), 1633 Broadway, New York, New York 10019 or (ii) any other direct
or indirect subsidiary of Holdings organized under the laws of the United States
(provided that such subsidiary also agrees in writing to be bound by the terms
of this sentence as if such terms applied to such subsidiary) as each of
Holdings' and the Note Issuer's authorized agent upon which process may be
served in any such action and agrees to take any and all action as may be
necessary to maintain such designation and appointment of a Process Agent in
full force and effect for so long as any Units, Notes or Warrants shall be
outstanding.
9. Termination. This Agreement shall be subject to termination by
notice given by you to Holdings and the Note Issuer, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your reasonable judgment,
is material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iii), such event singly or together with any other such
event makes it, in your reasonable judgment, impracticable to market the Units
on the terms and in the manner contemplated in the Final Memorandum.
10. Miscellaneous. If, on the Closing Date, any one or more of the
Placement Agents shall fail or refuse to purchase Units that it or they have
agreed to purchase hereunder on such date, and the amount of Units which such
defaulting Placement Agent or Placement Agents agreed but failed or refused to
purchase is not more than one-tenth of the aggregate amount of Units to be
purchased on such date, the other Placement Agents shall be obligated severally
in the proportions that the amount of Units set forth opposite their respective
names in Schedule I bears to the aggregate principal amount of
<PAGE>
20
Units set forth opposite the names of all such non-defaulting Placement Agents,
or in such other proportions as you may specify, to purchase the Units which
such defaulting Placement Agent or Placement Agents agreed but failed or refused
to purchase on such date; provided that in no event shall the amount of Units
that any Placement Agent has agreed to purchase pursuant to Section 3 be
increased pursuant to this Section 10 by an amount in excess of one ninth of
such amount of Units without the written consent of such Placement Agent. If, on
the Closing Date, any Placement Agent or Placement Agents shall fail or refuse
to purchase Units which it or they have agreed to purchase hereunder on such
date and the aggregate amount of Units with respect to which such default occurs
is more than one-tenth of the aggregate amount of Units to be purchased on such
date and arrangements satisfactory to you and the Issuers for the purchase of
such Units are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Placement Agent,
either of Holdings or the Note Issuer. In any such case either you or the
Issuers shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the Final
Memorandum or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Placement Agent from
liability in respect of any default of such Placement Agent under this
Agreement.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
If this Agreement shall be terminated by the Placement Agents, or
any of them, because of any failure or refusal on the part of Holdings or the
Note Issuer to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason either of Holdings or the Note Issuer shall be
unable to perform its obligations under this Agreement, the Note Issuer and/or
Holdings will reimburse the Placement Agents or such Placement Agents as have so
terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Placement Agents in connection with this Agreement
or the offering contemplated hereunder
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed a part of this
Agreement.
<PAGE>
21
Please confirm your agreement to the foregoing by signing in the
space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
RSL COMMUNICATIONS, LTD.
By /s/ Itzhak Fisher
-------------------
Name: Itzhak Fisher
Title: President
RSL COMMUNICATIONS PLC
By /s/ Itzhak Fisher
-------------------
Name: Itzhak Fisher
Title: President
/s/ N. Tarlovsky
-------------------
Agreed, September 30, 1996
MORGAN STANLEY & CO. INCORPORATED
BEAR STEARNS & CO. INC.
DILLON, READ & CO. INC.
By MORGAN STANLEY & CO. INCORPORATED
By ____________________________
Name:
Title:
<PAGE>
21
Please confirm your agreement to the foregoing by signing in the
space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
RSL COMMUNICATIONS, LTD.
By _____________________
Name:
Title:
RSL COMMUNICATIONS PLC
By _____________________
Name:
Title:
Agreed, September 30, 1996
MORGAN STANLEY & CO. INCORPORATED
BEAR STEARNS & CO. INC.
DILLON, READ & CO. INC.
By MORGAN STANLEY & CO. INCORPORATED
By /s/ Carol S. Goldstein
----------------------
Name: Carol S. Goldstein
Title: Principal
<PAGE>
SCHEDULE I
Significant Subsidiaries
International Telecommunications Group, Ltd.
International Telecommunications Corporation
Cyberlink, Inc.
RSL COM France S.A.
RSL COM Germany GmbH
Operating Subsidiaries
International Telecommunications Group, Ltd.
International Telecommunications Corporation
Cyberlink, Inc.
RSL COM UK Ltd.
RSL COM France S.A.
RSL COM Germany GmbH
RSL COM Finland OY f/k/a Cyberlink International OY
Cyberlink Sweden AB
<PAGE>
SCHEDULE II
Number of Units
Placement Agent To Be Purchased
--------------- -------------------
Morgan Stanley & Co. Incorporated .................... 195,000
Bear, Stearns & Co. Inc. ............................. 70,000
Dillon, Read & Co. Inc. .............................. 35,000
-------
Total ........................ 300,000
=======
<PAGE>
EXHIBIT A
---------
[Warrant Agreement]
<PAGE>
EXHIBIT B
---------
[Notes Registration Rights Agreement]
<PAGE>
EXHIBIT C
---------
[Warrant Registration Rights Agreement]
<PAGE>
EXHIBIT D
---------
[Opinion of Rosenman & Colin LLP]
<PAGE>
EXHIBIT E
---------
[Opinion of Levinson Gray as UK Counsel
for the Note Issuer]
<PAGE>
EXHIBIT F
---------
[Opinion of Conyers, Dill &
Pearman, Bermuda counsel for RSL]
<PAGE>
EXHIBIT G
---------
[Local Counsel Opinion]
<PAGE>
EXHIBIT H
---------
[Opinion of Fletcher, Heald & Hildreth as Special U.S.
Regulatory Counsel]
<PAGE>
EXHIBIT I
---------
RSL COMMUNICATIONS, LTD.
Officers' Certificate
The undersigned, the duly qualified and elected President and Chief
Executive Officer of RSL Communications, Ltd., a Bermuda corporation
("Holdings"), does hereby certify in such capacity and on behalf of Holdings
that:
the pro forma financial information of Holdings contained in the
Offering Memorandum dated [September 30], 1996, complies in every
respect with the requirements of Rules 11-01 and 11-02 of Regulation
S-X that would be applicable to an offering registered under the
Securities Act of 1933.
Dated: [October] __, 1996
RSL COMMUNICATIONS, LTD.
By:_________________________
Name: Itzhak Fisher
Title: President and Chief Executive
Officer
<PAGE>
EXHIBIT J
---------
Opinion of California Counsel
for Cyberlink, Inc.
(A) Cyberlink, Inc. ("Cyberlink") has been duly incorporated and has
the corporate power and authority to own its property and to conduct its
business as described in the Final Memorandum (references herein to the
Final Memorandum being taken to mean the same, as amended or supplemented)
and is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation.
(B) All of the issued shares of capital stock of Cyberlink have been
duly authorized and validly issued and, to such counsel's knowledge, are
fully paid and nonassessable; except as disclosed in the Offering
Memorandum, all of such shares are owned of record by the Company,
directly or through one or more subsidiaries, free and clear of any
perfected security interest or, to our knowledge after due inquiry, any
other pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind; no holder thereof is subject to personal
liability by reason of being such a holder and none of such shares was
issued in violation of the preemptive rights of any stockholder of
Cyberlink pursuant to the certificate of incorporation or by laws of such
Subsidiary or any agreement of such Subsidiary known to such counsel.
<PAGE>
Exhibit 4.2
- --------------------------------------------------------------------------------
RSL COMMUNICATIONS PLC,
as Issuer,
RSL COMMUNICATIONS, LTD.,
as Guarantor,
and
THE CHASE MANHATTAN BANK,
as Trustee
------------------------------
Senior Notes Indenture
Dated as of October 3, 1996
------------------------------
12 1/4% Senior Notes due 2006
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Sections Indenture Sections
- ------------ ------------------
ss 310(a)(1) ............................................... 7.10
(a)(2) ............................................... 7.10
(b) .................................................. 7.08
ss 313(c) .................................................. 7.06
ss 314(a) .................................................. 4.18
(a)(4) ............................................... 4.19
ss 315(b) .................................................. 7.05
ss 316(a)(1)(A) ............................................ 6.05
(a)(1)(B) ............................................ 6.04
(b) .................................................. 6.07
ss 317(a)(1) ............................................... 6.08
(a)(2) ............................................... 6.09
- ----------
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
RECITALS OF THE ISSUER ..................................................... 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions .................................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act ............ 23
SECTION 1.03. Rules of Construction ........................................ 23
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating .............................................. 24
SECTION 2.02. Execution and Authentication ................................. 26
SECTION 2.03. Registrar and Paying Agent ................................... 26
SECTION 2.04. Holders to Be Treated as Owners; Payments of Interest ........ 27
SECTION 2.05. Paying Agent to Hold. Money in Trust ......................... 28
SECTION 2.06. Holder Lists ................................................. 28
SECTION 2.07. Transfer and Exchange ........................................ 28
SECTION 2.08. Replacement Notes ............................................ 41
SECTION 2.09. Outstanding Notes ............................................ 42
SECTION 2.10. Treasury Notes ............................................... 42
SECTION 2.11. Temporary Notes .............................................. 42
SECTION 2.12. Cancellation ................................................. 42
SECTION 2.13. Defaulted Interest ........................................... 43
SECTION 2.14. CUSIP, CINS or ISIN Number ................................... 43
SECTION 2.15. Deposit of Moneys ............................................ 43
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption .......................................... 44
SECTION 3.02. Notices to Trustee ........................................... 44
SECTION 3.03. Selection of Notes to Be Redeemed ............................ 45
SECTION 3.04. Notice of Redemption ......................................... 45
SECTION 3.05. Deposit of Redemption Price .................................. 46
SECTION 3.06. Payment of Notes Called for Redemption ....................... 46
SECTION 3.07. Notes Redeemed in Part ....................................... 47
- ----------
Note: The Table of Contents shall not for any purposes be deemed to be a part of
the Indenture.
<PAGE>
ii
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes ............................................. 47
SECTION 4.02. Additional Amounts ........................................... 47
SECTION 4.03. Limitation on Indebtedness ................................... 48
SECTION 4.04. Limitation on Restricted Payments ............................ 51
SECTION 4.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries ............ 54
SECTION 4.06. Limitation on the Issuance of Capital Stock
of Restricted Subsidiaries ................................ 55
SECTION 4.07. Limitation on Issuances of Guarantees
by Restricted Subsidiaries ................................ 55
SECTION 4.08. Limitation on Transactions with Shareholders
and Affiliates ............................................ 56
SECTION 4.09. Limitation on Liens .......................................... 57
SECTION 4.10. Limitation on Sale-Leaseback Transactions .................... 58
SECTION 4.11. Limitation on Asset Sales .................................... 58
SECTION 4.12. Limitation on the Shareholder Standby Facility ............... 59
SECTION 4.13. Repurchase of Notes upon a Change of Control ................. 59
SECTION 4.14. Existence .................................................... 59
SECTION 4.15. Payment of Taxes and Other Claims ............................ 59
SECTION 4.16. Maintenance of Properties and Insurance ...................... 60
SECTION 4.17. Notice of Defaults ........................................... 60
SECTION 4.18. Compliance Certificates ...................................... 60
SECTION 4.19. Commission Reports and Reports to Holders .................... 61
SECTION 4.20. Waiver of Stay, Extension or Usury Laws ...................... 61
SECTION 4.21. Listing the Notes on An Exchange ............................. 62
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Consolidation, Merger and Sale of Assets ..................... 62
SECTION 5.02. Successor Substituted ........................................ 63
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default ............................................ 64
SECTION 6.02. Acceleration ................................................. 65
SECTION 6.03. Other Remedies ............................................... 65
SECTION 6.04. Waiver of Past Defaults ...................................... 66
SECTION 6.05. Control by Majority .......................................... 66
SECTION 6.06. Limitation on Suits .......................................... 66
SECTION 6.07. Rights of Holders to Receive Payment ......................... 67
SECTION 6.08. Collection Suit by Trustee ................................... 67
SECTION 6.09. Trustee May File Proofs of Claim ............................. 67
SECTION 6.10. Priorities ................................................... 68
<PAGE>
iii
SECTION 6.11. Undertaking for Costs ........................................ 68
SECTION 6.12. Restoration of Rights and Remedies ........................... 68
SECTION 6.13. Rights and Remedies Cumulative ............................... 68
SECTION 6.14. Delay or Omission Not Waiver ................................. 69
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General ...................................................... 69
SECTION 7.02. Certain Rights of Trustee .................................... 69
SECTION 7.03. Individual Rights of Trustee ................................. 70
SECTION 7.04. Trustee's Disclaimer ......................................... 70
SECTION 7.05. Notice of Default ............................................ 71
SECTION 7.06. Reports by Trustee to Holders ................................ 71
SECTION 7.07. Compensation and Indemnity ................................... 71
SECTION 7.08. Replacement of Trustee ....................................... 72
SECTION 7.09. Successor Trustee by Merger, Etc. ............................ 73
SECTION 7.10. Eligibility .................................................. 73
SECTION 7.11. Money Held in Trust .......................................... 73
SECTION 7.12. Withholding Taxes ............................................ 73
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Issuer's Obligations .......................... 74
SECTION 8.02. Defeasance and Discharge of Indenture ........................ 75
SECTION 8.03. Defeasance of Certain Obligations ............................ 77
SECTION 8.04. Application of Trust Money ................................... 79
SECTION 8.05. Repayment to Issuer .......................................... 79
SECTION 8.06. Reinstatement ................................................ 79
SECTION 8.07. Insiders ..................................................... 79
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders ................................... 80
SECTION 9.02. With Consent of Holders ...................................... 80
SECTION 9.03. Revocation and Effect of Consent ............................. 81
SECTION 9.04. Notation on or Exchange of Notes ............................. 82
SECTION 9.05. Trustee to Sign Amendments, Etc. ............................. 82
SECTION 9.06. Conformity with Trust Indenture Act .......................... 82
ARTICLE TEN
SECURITY
SECTION 10.01. Security .................................................... 82
<PAGE>
iv
ARTICLE ELEVEN
GUARANTEE OF SECURITIES
SECTION 11.0l. Guarantee ................................................... 84
SECTION 11.02. Obligations Unconditional ................................... 85
SECTION 11.03. Notice to Trustee ........................................... 85
SECTION 11.04. This Article Not to Prevent Events of Default ............... 86
SECTION 11.05. Net Worth Limitation ........................................ 86
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act of 1939 ................................. 86
SECTION 12.02. Notices ..................................................... 86
SECTION 12.03. Certificate and Opinion as to Conditions Precedent .......... 87
SECTION 12.04. Statements Required in Certificate or Opinion ............... 88
SECTION 12.05. Rules by Trustee, Paying Agent or Registrar ................. 88
SECTION 12.06. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities ................................... 88
SECTION 12.07. Payment Date Other Than a Business Day ...................... 89
SECTION 12.08. Governing Law ............................................... 89
SECTION 12.09. No Adverse Interpretation of Other Agreements ............... 89
SECTION 12.10. No Recourse Against Others .................................. 89
SECTION 12.11. Successors .................................................. 89
SECTION 12.12. Duplicate Originals ......................................... 90
SECTION 12.13. Separability ................................................ 90
SECTION 12.14. Table of Contents, Headings, Etc. ........................... 90
EXHIBIT A Form of Global Note ......................................... A-1
EXHIBIT B Form of Definitive Registered Note .......................... B-1
EXHIBIT C Form of Certificate of Transfer ............................. C-1
EXHIBIT D Form of Certificate of Exchange ............................. D-1
EXHIBIT E Form of Certificate from Acquiring
Institutional Accredited Investor ......................... E-1
EXHIBIT F Subsidiary Guarantee ........................................ F-1
EXHIBIT G Form of Pledge Agreement .................................... G-1
<PAGE>
INDENTURE, dated as of October 3,1996, between RSL COMMUNICATIONS
PLC, a United Kingdom corporation, as issuer (the "Issuer"), RSL COMMUNICATIONS,
LTD., a Bermuda corporation, as guarantor (including its successors and assigns,
the ("Guarantor"), and THE CHASE MANHATTAN BANK, as trustee (the "Trustee").
RECITALS OF THE ISSUER
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $300,000,000 aggregate principal
amount of the Issuer's 12 1/4 % Senior Notes due 2006 as well as the Exchange
Notes (collectively, the "Notes") issuable as provided in this Indenture and for
the issuance of Exchange Notes. Pursuant to the terms of a Placement Agreement
dated as of September 30, 1996 (the "Placement Agreement") between the Issuer,
the Guarantor and Morgan Stanley & Co. Incorporated, as the manager for itself
and the other placement agents therein (the "Manager"), the Issuer has agreed to
issue and sell 300,000 units (collectively, the "Units"), each Unit consisting
of $1,000 principal amount of the Notes and one warrant (the "Warrants") to
purchase initially 1.815 shares of Class A Common Stock, par value $.01 per
share, of the Guarantor (the "Class A Common Stock"), issuable pursuant to the
terms of a Warrant Agreement dated as of the date hereof (the "Warrant
Agreement") between the Guarantor and The Chase Manhattan Bank, as the warrant
agent (the "Warrant Agent"). The Notes will be secured pursuant to the terms of
a Pledge Agreement (as defined herein) by Government Securities as provided by
Article Ten of this Indenture. All things necessary to make this Indenture a
valid agreement of the Issuer and the Guarantor, in accordance with its terms,
have been done, and the Issuer has done all things necessary to make the Notes
and the Note Guarantee, when executed by the Issuer and authenticated and
delivered by the Trustee hereunder and duly issued by the Issuer and the
Guarantor, respectively, the valid obligations of the Issuer as hereinafter
provided.
This Indenture is subject to, and shall be governed by, the
provisions of the United States Trust Indenture Act of 1939, as amended, that
are required to be a part of and to govern indentures qualified under the United
States Trust Indenture Act of 1939, as amended.
For and in consideration of the premises and the purchase of the
Notes by the Holders thereto it is mutually covenanted and agreed, for the equal
and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"144A Book-Entry Interests" means the Book-Entry Interests in the
144A Global Note.
"144A Global Note" means the Global Note bearing the Private
Placement Legend in bearer form without interest coupons that will be issued in
a denomination equal to the
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outstanding principal amount of the Notes sold in reliance on Rule 144A and
deposited with the Book-Entry Depositary pursuant to the terms of the Deposit
Agreement.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Restricted Subsidiary or assumed in connection
with an Asset Acquisition by a Restricted Subsidiary and not Incurred in
connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person
which is redeemed, defeased, retired or otherwise repaid at the time of or
immediately upon consummation of the transactions by which such Person becomes a
Restricted Subsidiary or such Asset Acquisition shall not be Indebtedness.
"Additional Amounts" has the meaning provided in Section 4.02.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Guarantor and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person (other than the
Guarantor or any of its Restricted Subsidiaries) has a joint interest and the
net income of any Unrestricted Subsidiary, except to the extent of the amount of
dividends or other distributions actually paid to the Guarantor or any of its
Restricted Subsidiaries by such other Person or such Unrestricted Subsidiary
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04 below (and, in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any Person
accrued prior to the date it becomes a Restricted Subsidiary or is merged into
or consolidated with the Guarantor or any of its Restricted Subsidiaries or all
or substantially all of the property and assets of such Person are acquired by
the Guarantor or any of its Restricted Subsidiaries; (iii) the net income of any
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by such Restricted Subsidiary of such net income is not
at the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Restricted Subsidiary, (iv) any gains or losses
(on an after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of Section 4.04 below, any amount paid or
accrued as dividends on Preferred Stock of the Guarantor or any Restricted
Subsidiary owned by Persons other than the Guarantor and any of its Restricted
Subsidiaries; and (vi) all extraordinary gains and extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount
of assets of the Guarantor and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Guarantor and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most
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recent quarterly or annual consolidated balance sheet of the Guarantor and its
Restricted Subsidiaries, prepared in conformity with GAAP and filed with the
Commission pursuant to the "Commission Reports and Reports to Holders" covenant.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent or
co-Registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of Book-Entry Interests, the rules and procedures of the Book-Entry
Depositary, the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Acquisition" means (i) an investment by the Guarantor or any
of its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Guarantor or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of the Guarantor and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Guarantor or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Guarantor
or any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the
Guarantor or any of its Restricted Subsidiaries (other than to the Guarantor or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary of the Guarantor or (ii) all or substantially
all of the assets that constitute a division or line of business of the
Guarantor or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Guarantor or any of its
Restricted Subsidiaries to any Person other than the Guarantor or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Guarantor or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Guarantor or any of
its Restricted Subsidiaries outside the ordinary course of business of the
Guarantor or such Restricted Subsidiary and, in each case, that is not governed
by the provisions of the Indenture applicable to mergers, consolidations and
sales of assets of the Guarantor; provided that "Asset Sale" shall not include
(a) sales or other dispositions of
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inventory, receivables and other current assets or obsolete or outdated
equipment; provided that each such sale or other disposition or series of such
sales or other dispositions shall not involve assets that are material to the
business of the Guarantor and its Restricted Subsidiaries, taken as a whole, (b)
transfers of up to 25% of the Common Stock of RSLC Prepaid, Inc. to Marvin
Josephson and transfers of up to 15% of the Common Stock of Global Information
Systems, Inc., in each case provided that the consideration received has a value
equal to the fair market value of the Common Stock so transferred, (c) a
transfer of assets to the extent the consideration received (1) is equal to the
fair market value of the assets transferred and (2) takes the form of
Investments described in clause (iv) of the definition of Permitted Investment
or (d) sales or other dispositions of assets for consideration at least equal to
the fair market value of the assets sold or disposed of, provided that the
consideration received consists of assets used or useful in the
telecommunications business and would satisfy clause (B) of Section 4.11 below.
"Average Life" means, at any date of determination with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of (a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Guarantor
or any committee of such Board of Directors duly authorized to act with respect
to this Indenture from time to time.
"Board Resolution" means a copy of a resolution, certified by any
Director of the Issuer or the Secretary or Assistant Secretary of the Guarantor
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Book-Entry Depositary" means The Chase Manhattan Bank in its
capacity as book-entry depositary pursuant to the terms of the Deposit
Agreement.
"Book-Entry Interest" means an indirect beneficial interest in a
Global Note held through a corresponding Depositary Interest and shown on, and
transferred only through, records maintained in book-entry form by the
Depositary (with respect to the Participants) and its Participants.
"Business Day" means a day (other than a Saturday or Sunday) on
which DTC, Euroclear, Cedel and banks in New York are open for business.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now outstanding
or issued after the Closing Date, including, without limitation, all Common
Stock and Preferred Stock.
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"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person; and
"Capitalized Lease Obligations" means the discounted present value of the rental
obligations under such lease.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means such time as (i) (a) prior to the
occurrence of a Public Market, a "person" or "group" (within the meaning of
Section 13(d) or 14(d)(2) of the Exchange Act) becomes the ultimate "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act) of Voting Stock
representing a greater percentage of the total voting power of the Voting Stock
of the Guarantor, on a fully diluted basis, than is held by the Existing
Stockholders and their Affiliates on such date and (b) after the occurrence of a
Public Market, a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total
voting power of the Voting Stock of the Guarantor on a fully diluted basis and
such ownership is greater than the amount of voting power of the Voting Stock of
the Guarantor, on a fully diluted basis, held by the Existing Stockholders and
their Affiliates on such date; (ii) individuals who on the Closing Date
constitute the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
Guarantor's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office; or (iii) all
of the Common Stock of the Issuer is not beneficially owned by the Guarantor.
"Chief Executive Officer" means the chief executive officer of
the Guarantor.
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the TIA, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated, whether voting or non-voting) of such Person's common stock or
ordinary shares, whether or not outstanding at the Closing Date and includes,
without limitation, all series and classes of such common stock or ordinary
shares.
"Closing Date" means the date on which the Notes are originally
issued under the Indenture.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, to the extent
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such amount was deducted in calculating Adjusted Consolidated Net Income, (iii)
income taxes, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income (other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales of
assets), (iv) depreciation expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, (v) amortization expense, to the
extent such amount was deducted in calculating Adjusted Consolidated Net Income,
and (vi) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a consolidated
basis for the Guarantor and its Restricted Subsidiaries in conformity with GAAP;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the quotient of (1) the number of shares of outstanding Common
Stock of such Restricted Subsidiary not owned on the last day of such period by
the Guarantor or any of its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding Common Stock of such Restricted Subsidiary on
the last day of such period.
"Consolidated Indebtedness" means the aggregate amount of
Indebtedness of the Guarantor and its Restricted Subsidiaries on a consolidated
basis.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Guarantor or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Guarantor and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the
ratio of (i) the aggregate amount of Indebtedness of the Guarantor and its
Restricted Subsidiaries on a consolidated basis outstanding on such Transaction
Date to (ii) the aggregate amount of Consolidated EBITDA for the then most
recent four fiscal quarters for which financial statements of the Guarantor have
been filed with the Commission pursuant to the "Commission Reports and
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Reports to Holders" covenant described below (such four fiscal quarter period
being the "Four Quarter Period"); provided that (A) pro forma effect shall be
given to (x) any Indebtedness Incurred from the beginning of the Four Quarter
Period through the Transaction Date (the "Reference Period"), to the extent such
Indebtedness is outstanding on the Transaction Date, and (y) any Indebtedness
that was outstanding during such Reference Period but that is not outstanding or
is to be repaid on the Transaction Date; (B) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions (including giving pro forma effect to
the application of proceeds of any Asset Disposition) that occur during such
Reference Period, as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; and (C) pro forma effect shall be given
to asset dispositions and asset acquisitions (including giving pro forma effect
to the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted Subsidiary or has been merged with or
into the Guarantor or any Restricted Subsidiary during such Reference Period and
that would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary as if such
asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed of for which financial information is,
in the good faith opinion of the Board of Directors, available.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Guarantor and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to the
date of such computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Disqualified Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of the Capital Stock of the Guarantor or any of its Restricted Subsidiaries,
each item to be determined in conformity with GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 450 West 33rd Street, New York, New York 10001-2697.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Guarantor or any Restricted Subsidiary against fluctuations in currency values.
"Debt Securities" means any debt security issued pursuant to an
indenture, fiscal agency agreement or other similar agreement and distributed on
the date of issuance thereof on an underwritten or agented basis by an
underwriter or placement agent pursuant to a registration
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statement filed under the Securities Act or one or more exemptions pursuant to
Section 4(2) of the Securities Act or Rule 144A or Regulation S under the
Securities Act (including Eurobond offerings) or offerings exclusively within
the United Kingdom.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Definitive Registered Note" means a certificated Note registered in
the name of the Holder thereof and issued in accordance with Section 2.07
hereof, substantially in the form of Exhibit B hereto.
"Deposit Agreement" means the Note Deposit Agreement, dated as of
the date hereof, between the Issuer and The Chase Manhattan Bank, as Book-Entry
Depositary, with respect to the Global Notes, as amended from time to time in
accordance with the terms thereof.
"Depositary" shall mean The Depository Trust Company, its nominees
and their respective successors.
"Depositary Interest" means a certificateless depositary interest
representing a 100% beneficial interest in a Global Note.
"Disqualified Stock" means any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder
of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Sections 4.11 and 4.13 below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Issuer's
repurchase of such Notes as are required to be repurchased pursuant to Sections
4.11 and 4.13 below.
"DTC" means the Depositary Trust Company.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
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"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exchange Notes" means the notes issued in the Exchange Offer
pursuant to Section 2.07(f).
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Existing Stockholders" means (i) R.S. Lauder, Gaspar & Co., L.P.
("LGC"), (ii) partners in LGC and Lauder Gaspar Ventures LLC ("LGV") and LGV and
their Affiliates, in each case as of the Closing Date, (iii) Ithhak Fisher,
Ronald S. Lauder, Leonard Lauder, Jacob Z. Schuster, Nir Tarlovsky, Nesim N.
Bildirici, Andrew Gaspar and Eugene Sekulow, (iv) family members of any of the
foregoing, (v) trusts, the only beneficiaries of which are persons or entities
described in clauses (i) through (iv) above and (vi) partnerships which are
controlled by the persons or entities described in clauses (i) through (iv)
above.
"fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained or referred
to in the Indenture shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of the
Indenture shall be made without giving effect to (i) the amortization of any
expenses incurred in connection with the offering of the Notes and (ii) except
as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion No. 16.
"Global Note" means each of the Restricted Global Notes and the
Unrestricted Global Notes, substantially in the form of Exhibit A hereto issued
in accordance with Section 2.01, 2.07(b)(iv), 2.07(d)(ii) or 2.07(f) hereof.
"Government Securities" means direct obligations of, obligations
fully guaranteed by, or participations in pools consisting solely of obligations
of or obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and
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credit of the United States of America is pledged and which are not callable or
redeemable at the option of the issuer thereof.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term Guarantee
used as a verb has a corresponding meaning.
"Guarantor" means RSL Communications, Ltd. and its successors and
assigns.
"Holder" means (a) in the case of any Global Note, the bearer
thereof, which shall initially be the Book-Entry Depositary, and (b) in the case
of any Definitive Registered Note, the Person in whose name such Note is
registered in the Register.
"IAI Book-Entry Interests" means the Book-Entry Interests in the
IAI Global Note.
"IAI Global Note" means the Global Note bearing the Private
Placement Legend in bearer form without interest coupons that will be issued in
a denomination equal to the outstanding principal amount of the Notes sold to
Institutional Accredited Investors and deposited with the Book-Entry Depositary
pursuant to the terms of the Deposit Agreement.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Indebtedness by reason of a Person
becoming a Restricted Subsidiary of the Guarantor; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in clause (i) or (ii) above or
clause (v), (vi) or (vii) below) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not drawn upon or, if
drawn upon, to the extent such drawing is reimbursed no later than the third
Business Day following
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receipt by such Person of a demand for reimbursement), (iv) all obligations of
such Person to pay the deferred and unpaid purchase price of property or
services, which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, except Trade Payables, (v) all obligations of such
Person as lessee under Capitalized Leases, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B)the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided (A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the original issue price of such Indebtedness,
(B) that Indebtedness shall not include any amount of money borrowed, at the
time of the Incurrence of the related Indebtedness, for the purpose of
pre-funding any interest that will be payable on such related Indebtedness and
(C) that Indebtedness shall not include any liability for federal, state, local
or other taxes.
"Indenture" means this Indenture as originally executed or as it may
be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Indirect Participant" means a Person who holds an interest
through a Participant.
"Institutional Accredited Investor" shall mean an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act.
"Interest Payment Date" means each semiannual interest payment date
of May 15 and November 15 of each year, commencing May 15, 1997.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect the Issuer or any of its Restricted Subsidiaries
against fluctuations in interest rates in respect of Indebtedness to or under
which the Issuer or any of its Restricted Subsidiaries is a party or a
beneficiary on the date of this Indenture or becomes a party or a beneficiary
hereafter; provided that the notional principal amount thereof does not exceed
the principal amount of the Indebtedness of the Issuer and its Restricted
Subsidiaries that bears interest at floating rates.
"Interest Rate Protection Obligation" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled
<PAGE>
12
to receive from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount and shall
include, without limitation, interest rate swaps, caps, floors, collars, forward
interest rate agreements and similar agreements.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Guarantor or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the fair market value of the Capital Stock (or any other
Investment), held by the Guarantor or any of its Restricted Subsidiaries, of (or
in) any Person that has ceased to be a Restricted Subsidiary, including, without
limitation, by reason of any transaction permitted by clause (iii) of Section
4.06 below. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04 below, (i) "Investment" shall include the fair market value of the
assets (net of liabilities (other than liabilities to the Guarantor or any of
its Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Guarantor or
any of its Subsidiaries)) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer. Notwithstanding the foregoing, an
acquisition of assets (including, without limitation, Capital Stock or rights to
acquire Capital Stock) by the Guarantor or any of its Restricted Subsidiaries
shall be deemed not to be an Investment to the extent that the consideration
therefor consists of Common Stock of the Guarantor.
"Issuer" means the party named as such in the first paragraph of
this Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means such successor.
"Issuer Order" means a written request or order signed in the name
of the Issuer (i) by the Chairman of the Board, the Chief Executive Officer or a
Director and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary and delivered to the Trustee; provided, however, that such
written request or order may be signed by any two of the officers or directors
listed in clause (i) above m lieu of being signed by one of such officers or
directors listed in such clause (i) and one of the officers listed in clause
(ii) above.
"ITG" means International Telecommunications Group, Ltd., a Delaware
corporation, and its successors.
<PAGE>
13
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof or any
agreement to give any security interest).
"Liquidated Damages" has the meaning provided in Section 2(f) of
the Registration Rights Agreement.
"Manager" means Morgan Stanley & Co. Incorporated, as manager for
itself and the several other placement agents named in the Placement Agreement.
"Maturity Date" means the Stated Maturity of the Notes.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Guarantor or any Restricted Subsidiary) and
proceeds from the conversion of other property received when converted to cash
or cash equivalents, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes
will actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of the Guarantor and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Guarantor or any Restricted Subsidiary of the Guarantor as a
reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP, and (b) with respect to any issuance or sale of Capital
Stock, the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Guarantor or any
Restricted Subsidiary of the Guarantor) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net of
attorney's fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-U.S. Person" means a person who is not a U.S. Person.
<PAGE>
14
"Note Guarantee" means the Guarantee of the Notes by the Guarantor
as provided for in the Indenture.
"Notes" means the 12 1/4 % Senior Notes due 2006 of the Issuer
issued pursuant to this Indenture, including the Exchange Notes.
"Offer to Purchase" means an offer to purchase Notes by the Issuer
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Issuer defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
at maturity of $1,000 or integral multiples thereof. On the Payment Date, the
Issuer shall (i) accept for payment on a pro rata basis Notes or portions
thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee
all Notes or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Issuer. The
Paying Agent shall promptly mail to the Holders of Notes so accepted payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Issuer will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The Trustee
shall act as the Paying Agent for an Offer to Purchase. The Issuer will comply
with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable,
in the event that the Issuer is required to repurchase Notes pursuant to an
Offer to Purchase.
"Officer" means, with respect to the Issuer or the Guarantor, (i)
the Chairman of the Board, the Chief Executive Officer or any other Director of
the Guarantor or (ii) the
<PAGE>
15
Treasurer or any Assistant Treasurer, the Guarantor's Secretary or any Assistant
Secretary of the Guarantor.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; provided, however, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e), if applicable.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Issuer. Each such Opinion of Counsel
shall include the statements provided for in TIA Section 314(e), if applicable.
"Other Qualified Notes" means any outstanding Indebtedness that
ranks pari passu in right of payment with the Notes issued pursuant to an
indenture or other agreement having a provision substantially similar to the
provisions of Section 4.11.
"Participant" means, with respect to DTC, Euroclear or Cedel, a
Person who has an account with DTC, Euroclear or Cedel, respectively (and, with
respect to DTC, shall include Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Paying Agent" has the meaning provided in Section 2.03, except
that, for the purposes of Article Eight, the Paying Agent shall not be the
Issuer or a Subsidiary of the Issuer or an Affiliate of any of them. The term
"Paying Agent" includes any additional Paying Agent.
"Payment Date" means with respect to any Offer to Purchase, the date
of purchase of the Notes pursuant thereto, which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date a notice is mailed
pursuant to such Offer to Purchase.
"Permanent Regulation S Global Notes" means the permanent global
Notes issued in exchange for one or more Temporary Regulation S Global Notes
upon certification that the beneficial interests in such global Note are owned
by either non-U.S. persons or U.S. persons who purchased such interests pursuant
to an exemption from, or in transactions not subject to, the registration
requirements of the Securities Act.
"Permitted Investment" means (i) an Investment in the Guarantor or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Guarantor
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Guarantor and its
<PAGE>
16
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) notes and other evidences of Indebtedness, not to
exceed $2 million at any one time outstanding; and (v) stock, obligations or
securities received in satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory and common law
Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other similar Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances
and similar charges, encumbrances, title defects or other irregularities that do
not materially interfere with the ordinary course of business of the Guarantor
or any of its Restricted Subsidiaries; (vi) Liens (including extensions and
renewals thereof) upon real or personal property or any other asset acquired
after the Closing Date; provided that (a) such Lien is created solely for the
purpose of securing Indebtedness Incurred, in accordance with Section 4.03
below, (1) to finance the cost (including the cost of improvement or
construction) of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property, (2) to refinance any Indebtedness so secured, or (3)
as Interest Rate Agreements and Currency Agreements relating solely to the
Indebtedness described in clause (1) or (2) above, (b)the principal amount of
the Indebtedness secured by such Lien as of the time of the Incurrence thereof
does not exceed 100% of such cost and (c) any such Lien does not extend to or
cover any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Guarantor
and its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial payments
by a customer of the Guarantor or its Restricted Subsidiaries relating to such
property or assets; (ix) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xi) Liens
on property of, or on shares of Capital Stock or Indebtedness of, any Person
existing at the time such Person becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens do not extend to or cover any property or
assets of the Guarantor or any Restricted Subsidiary other than the property or
assets acquired; (xii) Liens
<PAGE>
17
in favor of the Guarantor or any Restricted Subsidiary; (xiii) Liens arising
from the rendering of a final judgment or order against the Guarantor or any
Restricted Subsidiary of the Guarantor that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are within
the general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contacts, options, future
contracts, futures options or similar agreements or arrangements designed solely
to protect the Guarantor or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities; (xvii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Guarantor or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Guarantor and its Restricted Subsidiaries prior to the Closing
Date; and (xviii) Liens on or sales of receivables.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Placement Agreement" means the Placement Agreement dated September
30, 1996 between the Issuer, the Guarantor, the Manager and the other Placement
Agents named therein.
"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Issuer with a portion of the proceeds from the sale
of the Notes.
"Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of the date of this Indenture, made by the Issuer in favor
of the Trustee, governing the disbursement of funds from the Pledge Account, as
such Agreement may be amended, restated, supplemented or otherwise modified from
time to time.
"Pledged Securities" means the securities originally purchased by
the Issuer with a portion of the proceeds from the sale of the Notes, which
shall consist of Government Securities, to be deposited in the Pledge Account,
all in accordance with the terms of the Pledge Agreement.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock, whether now outstanding or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
<PAGE>
18
"Private Placement Legend" means the legend initially set forth on
the Notes in the form set forth in Section 2.07(g)(i).
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Issuer or the Guarantor pursuant to an effective
registration statement under the Securities Act.
A "Public Market" Shall be deemed to exist if (i) a Public Equity
Offering has been consummated and (ii) at least 15% of the total issued and
outstanding Common Stock of the Issuer or the Guarantor has been distributed by
means of an effective registration statement under the Securities Act or sales
pursuant to Rule 144 under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Redemption Date," when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price at which such Note is to be redeemed pursuant to this
Indenture.
"Register" has the meaning provided in Section 2.03.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof between the Issuer, the Guarantor, the
Manager and the other placement agents named in the Placement Agreement.
"Registration Statement" means the registration statement(s) as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the May 1 or December 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Book-Entry Interests" means the Book-Entry
Interests in the Regulation S Global Note.
"Related Person" means any holder (or any Affiliate of such holder)
of 5% or more of any class of Capital Stock of the Guarantor and any Affiliate
of the Guarantor or any Restricted Subsidiary.
<PAGE>
19
"Responsible Officer," when used with respect to the Trustee, means
any vice president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, or any trust officer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his or her knowledge of and familiarity with the particular
subject.
"Restricted Book-Entry Interest" means the 144A Book-Entry
Interests, the Regulation S Book-Entry Interests and the IAI Book-Entry
Interests.
"Restricted Definitive Registered Note" means a Definitive
Registered Note bearing the Private Placement Legend.
"Restricted Global Notes" means the 144A Global Note, the Regulation
S Global Note and the IAI Global Note, each of which shall bear the Private
Placement Legend.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Guarantor
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest of (i) the date that is 180
days following the Closing Date, (ii) the commencement of the Exchange Offer and
(iii) the effective date of a shelf registration statement with respect to the
Notes.
"Shareholder Standby Facility" means the contractual obligation of
Ronald S. Lauder, pursuant to a written agreement dated as of the Closing Date,
to lend $35 million to the Guarantor or cause a bank to lend $35 million to the
Guarantor and to personally guarantee such bank loan and also means such loan.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Guarantor, accounted for more than 10% of the
consolidated revenues of the Guarantor and its Restricted Subsidiaries or (ii)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Guarantor and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Guarantor for such fiscal year.
"S&P" means Standard & Poor's Ratings Group and its successors.
<PAGE>
20
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subordinated Shareholder Loan" means the $35 million loan from
Ronald S. Lauder to the Guarantor that was paid in full on the Closing Date.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Guarantee" means the Guarantee of the Notes by any
Subsidiary of the Issuer substantially in the form of Exhibit F hereto.
"Tax" means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Guarantor) organized and
in existence under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America with a rating
at the time as of which any investment therein is made of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P, (v) securities with
maturities of six months or less from the date of acquisition issued or fully
and unconditionally guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof and rated at least "A" by S&P or Moody's and (vi) time deposits,
certificates of deposit,
<PAGE>
21
bank promissory notes and bankers' acceptances maturing not more than 180 days
after the acquisition thereof and guaranteed or issued by any of the ten largest
banks (based on assets as of the immediately preceding December 31) organized
under the laws of any jurisdiction in which one of the Restricted Subsidiaries
does business and which are not under intervention, bankruptcy or similar
proceeding, not to exceed $10 million outstanding at any one time.
"Temporary Regulation S Global Note" means the Global Note bearing
the Private Placement Legend in bearer form without interest coupons, that will
be issued in a denomination equal to the outstanding principal amount of the
Notes sold in reliance on Regulation S and deposited with the Book-Entry
Depositary pursuant to the terms of the Deposit Agreement.
"TIA" or "Trust Indenture Act" means the United States Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbb), as in
effect on the date this Indenture was executed, except as provided in Section
9.06.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services and required to be paid within one year of the incurrence thereof.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Guarantor or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of Article Seven of this Indenture and thereafter means such successor.
"Units" has the meaning provided in the recitals to this Indenture.
"Unrestricted Book-Entry Interest" means a Book-Entry Interest in
the Unrestricted Global Note.
"Unrestricted Global Notes" means one or more Global Notes that do
not and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Restricted Subsidiary (including any newly acquired or newly formed Subsidiary
of the Guarantor) to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the
Guarantor or any Restricted Subsidiary; provided that (A) any Guarantee by the
Guarantor or any Restricted Subsidiary of any Indebtedness of the Subsidiary
being so designated shall be deemed an
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22
"Incurrence" of such Indebtedness and an "Investment" by the Guarantor or such
Restricted Subsidiary (or both, if applicable) at the time of such designation;
(B) either (I) the Subsidiary to be so designated has total assets of $1,000 or
less or (II) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under Section 4.04 below and (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of this
proviso would be permitted under Sections 4.03 and 4.04 below. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that immediately after giving effect to such designation
(x) the Guarantor could Incur $1.00 of additional Indebtedness under the first
paragraph of Section 4.03 below and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act.
"Voting Stock" means, with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Warrants" means the warrants to purchase Class A Common Stock of
the Guarantor issued as part of a unit with the Notes.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
the ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
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23
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Issuer or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all references to Sections, Articles or Exhibits refer to
Sections, Articles or Exhibits of this Indenture unless otherwise
indicated; and
(viii) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections
of the Securities Act or rules adopted by the Commission from time to
time.
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24
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. (a) Global Notes. Notes offered and
sold to QIBs in reliance on Rule 144A shall be issued initially in the form of a
144A Global Note, which shall be deposited on behalf of the purchasers of the
Notes represented thereby with the Book-Entry Depositary at its New York
corporate trust office, duly executed by the Issuer and authenticated by the
Trustee as hereinafter provided. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Temporary Regulation S
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Book-Entry Depositary at its New York corporate
trust office, duly executed by the Issuer and authenticated by the Trustee as
hereinafter provided. The Temporary Regulation S Global Note will be
exchangeable for one or more permanent Regulation S Global Notes (the "Permanent
Regulation S Global Note" and together with the Temporary Regulation S Global
Note, the "Regulation S Global Note") as or after November 12, 1996 upon written
certification that the beneficial interests in such global Note are owned by
either non-U.S. persons or U.S. persons who purchased such interests pursuant to
an exemption from, or in transactions not subject to, the Registration
Requirements or the Securities Act. Notes offered and sold to Institutional
Accredited Investors who are not also QIBs shall be issued initially in the form
of an IAI Global Note, which shall be deposited on behalf of the purchasers of
the Notes represented thereby with the Book-Entry Depositary at its New York
corporate trust office, duly executed by the Issuer and authenticated by the
Trustee as hereinafter provided. Unrestricted Global Notes representing
Unrestricted Book-Entry Interests shall be issued initially in accordance with
Sections 2.07(b)(iv), 2.07(d)(ii) and 2.07(f) and shall be deposited with the
Book-Entry Depositary at its New York corporate trust office, duly executed by
the Issuer and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of each of the Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee as
hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges, redemptions and transfers of interests therein in accordance
with the terms of this Indenture. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the principal amount of outstanding
Notes represented thereby shall be made by the Trustee in accordance with
written instructions given by the Holder thereof as required by Section 2.07
hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel shall be applicable
to interests in the Regulation S Global Note that are held by the Participants
through Euroclear or Cedel.
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25
Except as set forth in Section 2.07(a) hereof the Global Notes may
be transferred, in whole and not in part, only to a successor of the Book-Entry
Depositary.
(b) Book-Entry Provisions. The Issuer shall execute and the Trustee
shall, in accordance with this Section 2.01 (b) and Section 2.02 hereof,
authenticate and deliver the Global Notes to the Book-Entry Depositary.
Upon receipt of the Restricted Global Notes and the Regulation S
Global Note authenticated and delivered by the Trustee, the Book-Entry
Depositary shall issue to the Depositary a Depositary Interest in such Global
Note by recording the Depositary Interest in the register of the Book-Entry
Depositary in the name of Cede & Co., as nominee of the Depositary. Ownership of
Book-Entry Interests shall be limited to Participants, including Euroclear and
Cedel, and Indirect Participants. Upon the issuance of the Depositary Interest
in such Global Note to the Depositary, the Depositary shall credit, on its
internal book-entry registration and transfer system, its Participant's accounts
with the respective interests owned by such Participants.
Neither the Depositary nor its Participants shall have any rights
either under this Indenture or under any Global Note with respect to such Global
Note held on their behalf by the Book-Entry Depositary, and the Book-Entry
Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer
or the Trustee as the absolute owner of such Global Note for the purpose of
receiving payment of or on account of the principal of and, subject to the
provisions of this Indenture, interest and Liquidated Damages on the Global
Notes and for all other purposes. Notwithstanding the foregoing, nothing herein
shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Book-Entry Depositary or impair, as between the Book-Entry
Depositary and the Depositary and its Participants, the operation of customary
practices of such Depositary governing the exercise of the rights of an owner of
a beneficial interest in any Global Note.
(c) Note Forms. The provisions of the forms of Notes contained
in Exhibits A and B hereto are incorporated herein by reference.
(d) Dating. Each Note shall be dated the date of its
authentication.
SECTION 2.02 Execution and Authentication. Any director or officer
of the Issuer shall execute the Notes on behalf of the Issuer by manual or
facsimile signature. The Issuer's common seal may be reproduced on the Notes and
may be in facsimile form.
If the director whose manual or facsimile signature is on a Note no
longer holds that office at the time the Trustee authenticates the Note or at
any time thereafter, the Note nevertheless shall be valid.
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26
A Note shall not be valid until an authorized officer of the Trustee
manually signs the certificate of authentication on the Note. Such signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate Notes for original issue in an
aggregate principal amount not to exceed $300,000,000 upon receipt of a
certificate signed by any Officer of the Issuer directing the Trustee to
authenticate the Notes. The aggregate principal amount of Notes outstanding at
any time may not exceed $300,000,000 except as provided in Section 2.08. The
Global Notes shall be issuable only in bearer form and the Definitive Registered
Notes shall be issuable only in registered form. The Notes shall be issued
without coupons and only in denominations of U.S. $1,000 principal amount or any
integral multiple thereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuer to authenticate Notes. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same rights as the Trustee in any dealings hereunder with the Issuer or
with any of the Issuer's Affiliates.
SECTION 2.03. Registrar and Paying Agent. The Issuer shall maintain
an office or agency (which shall be located in the Borough of Manhattan in The
City of New York, State of New York) where Definitive Registered Notes may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency (which shall be located in the Borough of Manhattan, The City
of New York, State of New York) where Notes may be presented for payment (the
"Paying Agent"), and an office or agency where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The
Registrar shall keep a register containing the names and addresses of all
Holders (the "Register") and of the transfer and exchange of Definitive
Registered Notes. Any notice to be given under this Indenture or under the Notes
by the Trustee or the Issuer to Holders shall be mailed by first class mail to
each Holder at his address as it appears at the time of such mailing in the
Register and to the Holder of a Global Note at the address of the Book-Entry
Depositary referred to in Section 12.02. The Issuer may have one or more
co-Registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent. Except as otherwise provided herein, the
Issuer or any Subsidiary thereof may act as Paying Agent. The Issuer may also
from time to time designate one or more other offices or agencies where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations. The Issuer will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuer shall notify the Trustee in writing of the name
and address of any such Agent. If the Issuer fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
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27
The Issuer initially appoints the Corporate Trust Office of the
Trustee in the Borough of Manhattan located at the address set forth in Section
12.02 as Registrar, Paying Agent and agent for service of notices and demands in
connection with the Notes and this Indenture.
SECTION 2.04. Holders to Be Treated as Owners; Payments of Interest.
(a) The Issuer, the Paying Agent, the Registrar, the Trustee and any agent of
the Issuer, the Paying Agent, the Registrar or the Trustee may deem and treat
each Holder of a Note as the absolute owner of such Note for the purpose of
receiving payment of or on account of the principal of and, subject to the
provisions of this Indenture, interest and Liquidated Damages on such Note and
for all other purposes. Neither the Issuer, the Paying Agent, the Registrar, the
Trustee nor any agent of the Issuer, the Paying Agent, the Registrar or the
Trustee shall be affected by any notice to the contrary. All such payments so
made to any such Person, or upon his order, shall be valid, and, to the extent
of the sum or sums so paid, effectual to satisfy and discharge the liability for
moneys payable upon any Note.
(b) The Holder of a Definitive Registered Note at the close of
business on the Regular Record Date with respect to any Interest Payment Date
shall be entitled to receive the interest and Liquidated Damages, if any,
payable on such Interest Payment Date notwithstanding any transfer or exchange
of such Definitive Registered Note subsequent to the Regular Record Date and
prior to such Interest Payment Date, except if and to the extent the Issuer
shall default in the payment of the interest or Liquidated Damages due on such
Interest Payment Date, in which case such defaulted interest or Liquidated
Damages shall be paid in accordance with Section 2.13; provided that, in the
event of an exchange of a Definitive Registered Note for a beneficial interest
in any Global Note subsequent to a Regular Record Date or any special record
date and prior to or on the related Interest Payment Date or other payment date
under Section 2.13, any payment of interest or Liquidated Damages payable on
such payment date with respect to any such Definitive Registered Note shall be
made to the Person in whose name such Definitive Registered Note was registered
on such record date. Payments of interest on the Global Notes will be made to
the Holder of the Global Note on each Interest Payment Date; provided that, in
the event of an exchange of all or a portion of the Global Note for Definitive
Registered Notes subsequent to the Regular Record Date or any special record
date and prior to or on the related Interest Payment Date or other payment date
under Section 2.13, any payment of interest or Liquidated Damages payable on
such payment date with respect to the Definitive Registered Note shall be made
to the Holder of the Global Note.
(c) The Trustee shall pay interest to the extent funds therefore are
available and Liquidated Damages, if any, to the Book-Entry Depositary, with
respect to any Global Note held by the Book-Entry Depositary, in accordance with
written instructions received from the Book-Entry Depositary at least five
business days before the applicable Interest Payment Date.
SECTION 2.05. Paying Agent to Hold Money in Trust. The Issuer shall
require each Paying Agent other than the Trustee to agree in writing that such
Paying Agent will hold in trust for the benefit of the Holders or the Trustee
all money held by the Paying Agent for the payment of principal of, Liquidated
Damages, if any, or interest on the Notes (whether such
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money has been paid to it by the Issuer or any other obligor on the Notes), and
the Issuer and the Paying Agent shall notify the Trustee in writing of any
default by the Issuer (or any other obligor on the Notes) in making any such
payment. Unless the Issuer or any Subsidiary is the Paying Agent, money held in
trust by the Paying Agent need not be segregated except as required by law and
in no event shall the Paying Agent be liable for any interest on any money
received by it hereunder. The Issuer at any time may require the Paying Agent to
pay all money held by it to the Trustee and account for any funds disbursed and
the Trustee may at any time during the continuance of any Event of Default
specified in Section 6.01(a) or (b), upon written request to the Paying Agent,
require such Paying Agent to pay forthwith all money so held by it to the
Trustee and to account for any funds disbursed. Upon making such payment, the
Paying Agent shall have no further liability for the money delivered to the
Trustee. If the Issuer or any Subsidiary of the Issuer acts as Paying Agent it
shall, on or before each due date of the principal of or interest on the Notes,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal, Liquidated Damages, if any, or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
SECTION 2.06. Holder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it from
the Registrar of the names and addresses of the Holders of Notes. If the Trustee
is not the Registrar, the Issuer shall furnish to the Trustee at least five
Business Days before each Interest Payment Date, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes, if any.
SECTION 2.07. Transfer and Exchange. (a) Transfer and Exchange of
Global Notes. Transfer of the Global Notes shall be by delivery. The Issuer and
the Book-Entry Depositary have agreed that the Global Notes shall only be
delivered in the circumstances described in Deposit Agreement. All Global Notes
will be exchanged by the Issuer for Definitive Registered Notes if (i) the
Book-Entry Depositary or the Issuer delivers to the Trustee notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Issuer within 90
days after the date of such notice from the Depositary; (ii) the Book-Entry
Depositary or the Issuer delivers to the Trustee notice that the Book-Entry
Depositary is unwilling or unable to continue as Book-Entry Depositary and a
successor Book-Entry Depositary is not appointed by the Issuer within 90 days
after the date of such notice from the Book-Entry Depositary, (iii) the Issuer
in its sole discretion determines that the Global Notes (in whole but not in
part) should be exchanged for Definitive Registered Notes and delivers a written
notice to such effect to the Trustee; (iv) at any time after consummation of the
Exchange Offer, if an Event of Default under this Indenture occurs, upon the
request in writing delivered to the Depositary by the Book-Entry Depositary; or
(v) at any time after the consummation of the Exchange Offer, if the owner of a
Book-Entry Interest requests such exchange in writing delivered to DTC and
through DTC to the Book-Entry Depositary and the Trustee. Upon the occurrence of
any of the preceding events, Definitive Registered Notes shall be issued in such
names as the Book-Entry Depositary shall instruct the Trustee based on the
instructions of the Depositary. Global Notes may also be exchanged or
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29
replaced, in whole or in part, as provided in Sections 2.08 and 2.11. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to Section 2.08 or 2.11 hereof shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global Note may not
be exchanged for another Note other than as provided in this Section 2.07(a).
Additional Amounts otherwise payable pursuant to Section 4.02 hereof will not be
payable if the Certificated Notes were issued pursuant to a transfer or exchange
of Global Notes as described in this Section 2.07(a) unless the Definitive
Registered Notes have been issued in exchange for the entire principal amount of
Notes then outstanding.
(b) Transfer and Exchange of Book-Entry Interests. The transfer and
exchange of Book-Entry Interests shall be effected through the Depositary, in
accordance with this Indenture and the procedures of the Depositary therefor.
Book-Entry Interests in Restricted Global Notes shall be subject to restrictions
on transfer comparable to those set forth herein to the extent required by the
Securities Act. The Trustee shall have no obligation to ascertain the
Depositary's compliance with any such restrictions on transfer. Transfers of
Book-Entry Interests shall also require compliance with subparagraph (i) below,
as well as one or more of the other following subparagraphs as applicable:
(i) All Transfers and Exchanges of Book-Entry Interests. In
connection with all transfers and exchanges of Book-Entry Interests (other
than transfers of Book-Entry Interests in a Global Note to Persons who
take delivery thereof in the form of a Book-Entry Interest in the same
Global Note), the transferor of such Book-Entry Interest must deliver to
the Registrar either (A) (1) instructions given in accordance with the
Applicable Procedures from a Participant or an Indirect Participant
directing the Depositary to credit or cause to be credited a Book-Entry
Interest in the specified Global Note in an amount equal to the Book-Entry
Interest to be transferred or exchanged, (2) a written order given in
accordance with the Applicable Procedures containing information regarding
the Participant account to be credited with such increase and (3)
instructions given by the Holder of the Global Note to effect the transfer
referred to in (1) and (2) above or (B) (1) instructions given in
accordance with the Applicable Procedures from a Participant or an
Indirect Participant directing the Depositary to cause to be issued a
Definitive Registered Note in an amount equal to the Book-Entry Interest
to be transferred or exchanged and (2) instructions given by the Holder of
the Global Note to effect the transfer referred to in (1) above.
(ii) Transfer of Book-Entry Interests in the Same Restricted Global
Note. Book-Entry Interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
Book-Entry Interest in the same Restricted Global Note in accordance with
the transfer restrictions set forth in the Private Placement Legend;
provided, however, that transfer of a Book-Entry Interest in the IAI
Global Note to another Institutional Accredited Investor shall be effected
pursuant to Section 2.07(b)(iii)(C) hereof, and not this Section
2.07(b)(ii).
(iii) Transfer of Book-Entry Interests to Another Restricted
Global Note. Book-Entry Interests in any Restricted Global Note may be
transferred to Persons who take
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30
delivery thereof in the form of a Book-Entry Interest in another
Restricted Global Note if the Registrar receives the following:
(A) if the transferee will take delivery in the form of a
Book-Entry Interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit C hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
Book-Entry Interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit C
hereto, including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
Book-Entry Interest in the IAI Global Note, then the transferor must
deliver (x) a certificate in the form of Exhibit C hereto, including
the certification in item (3) thereof, (y) to the extent required by
item 3(d) of Exhibit C hereto, an Opinion of Counsel in form
reasonably acceptable to the Issuer to the effect that such transfer
is in compliance with the Securities Act and such Book-Entry
Interest is being transferred in compliance with any applicable blue
sky securities laws of any state of the United States and (z) if the
transfer is being made to an Institutional Accredited Investor and
effected pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 144A, Rule 144 under the
Securities Act or Rule 904 under the Securities Act, a certificate
from the transferee in the form of Exhibit E hereto.
(iv) Transfer and Exchange of Book-Entry Interests in Restricted
Global Note for Book-Entry Interests in Unrestricted Global Note.
Book-Entry Interests in any Restricted Global Note may be exchanged by the
holder thereof for a Book-Entry Interest in the Unrestricted Global Note
or transferred to a Person who takes delivery thereof in the form of a
Book-Entry Interest in the Unrestricted Global Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder, in the case of an exchange, or the transferee, in
the case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuer;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the holder of such Book-Entry Interest in a
Restricted Global Note proposes to exchange such Book-Entry Interest
for a Book-Entry Interest in the Unrestricted Global Note, a
certificate from such holder in the form of Exhibit D hereto,
including the certifications in item (l)(a) thereof;
(2) if the holder of such Book-Entry Interest in a
Restricted Global Note proposes to transfer such Book-Entry Interest
to a Person who shall take delivery thereof in the form of a
Book-Entry Interest in an Unrestricted Global Note, a certificate in
the form of Exhibit C hereto, including the certification in item
(4) thereof; and
(3) in each such case set forth in this paragraph (D),
an Opinion of Counsel in form reasonably acceptable to the Issuer,
to the effect that such exchange or transfer is in compliance with
the Securities Act, that the restrictions on transfer contained
herein and in the Private Placement Legend are not required in order
to maintain compliance with the Securities Act, and such Book-Entry
Interest is being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United
States.
If any such transfer is effected pursuant to paragraph (B)
above at a time when an Unrestricted Global Note has not yet been issued,
the Issuer shall issue and, upon receipt of an authentication order in
accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Book-Entry Interests transferred pursuant to paragraph
(B) above.
(v) Notation by the Trustee of Transfer of Book-Entry Interests
Among Global Notes. Upon satisfaction of the requirements for transfer of
Book-Entry Interests pursuant to clauses (iii) or (iv) above, the Trustee,
as Registrar, shall reduce or cause to be reduced the aggregate principal
amount of the relevant Global Note from which the Book-Entry Interest is
being transferred, and increase or cause to be increased the aggregate
principal amount of the Global Note to which the Book-Entry Interest is
being transferred, in each case, by the principal amount of the Book-Entry
Interest being transferred and shall direct the Book-Entry Depositary to
make corresponding adjustments in its book-entry system of the
corresponding Depositary Interests. No transfer of Book-Entry Interests
shall be effected until, and any transferee pursuant thereto shall succeed
to the rights of a holder of Book-Entry Interests only when, the
requirements for transfer of Book-Entry Interests pursuant to clause (iii)
or (iv) above shall have been satisfied and the Registrar has made
appropriate adjustments to the applicable Global Note in accordance with
this paragraph.
(c) Transfer or Exchange of Book-Entry Interests for Definitive
Registered Notes.
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(i) If any holder of a Book-Entry Interest in a Restricted Global
Note proposes to exchange such Book-Entry Interests for a Definitive
Registered Note or to transfer such Book-Entry Interest to a Person who
takes delivery thereof in the form of a Definitive Registered Note, then,
upon receipt by the Registrar of the following documentation (all of which
may be submitted by facsimile):
(A) if the holder of such Book-Entry Interest in a Restricted
Global Note proposes to exchange such Book-Entry Interest for a
Restricted Definitive Registered Note, a certificate from such
holder in the form of Exhibit D hereto, including the certifications
in item (2)(a) thereof;
(B) if such Book-Entry Interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit C hereto, including the
certifications in item (1) thereof;
(C) if such Book-Entry Interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
904 under the Securities Act, a certificate to the effect set forth
in Exhibit C hereto, including the certifications in item (2)
thereof;
(D) if such Book-Entry Interest is being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act, a certificate to the effect set forth in Exhibit
C hereto, including the certifications in item (3)(a) thereof;
(E) if such Book-Entry Interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit C hereto, including the certifications
in item (3)(d) thereof, a certificate from the transferee to the
effect set forth in Exhibit E hereof and, to the extent required by
item 3(d) of Exhibit C, an Opinion of Counsel from the transferee or
the transferor reasonably acceptable to the Issuer to the effect
that such transfer is in compliance with the Securities Act and such
Book-Entry Interest is being transferred in compliance with any
applicable blue sky securities laws of any state of the United
States;
(F) if such Book-Entry Interest is being transferred to the
Issuer or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Book-Entry Interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit C hereto, including
the certifications in item (3)(c) thereof,
<PAGE>
33
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly and direct the Book-Entry Depositary
to make a corresponding reduction in its book-entry system of the
corresponding Depositary Interests, and the Issuer shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Registered Note in the appropriate principal
amount; provided, however, that no Definitive Registered Notes shall be
delivered until all applicable requirements set forth in this Section
2.07(c) shall have been satisfied. Definitive Registered Notes issued in
exchange for a Book-Entry Interest pursuant to this Section 2.07(c) shall
be registered in such names and in such authorized denominations as the
Holder shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Registered Notes to the Persons in whose names
such Notes are so registered. Definitive Registered Notes issued in
exchange for a Book-Entry Interest pursuant to this Section 2.07(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein unless:
(I) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder, in the case of an exchange, or the transferee, in
the case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuer;
(II) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(III) any such transfer is effected by a Participating Broker
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(IV) the Registrar receives the following:
(1) if the holder of such Book-Entry Interest in a
Restricted Global Note proposes to exchange such Book-Entry Interest
for a Definitive Registered Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit D hereto, including the certifications in item (1)(b)
thereof; and
(2) if the holder of such Book-Entry Interest in a
Restricted Global Note proposes to transfer such Book-Entry Interest
to a Person who will take delivery thereof in the form of a
Definitive Registered Note that does not bear the Private Placement
Legend, a certificate in the form of Exhibit C hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in this paragraph (IV),
an Opinion of Counsel in form reasonably acceptable to the Issuer,
to the effect that
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34
such exchange or transfer is in compliance with the Securities Act,
that the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Book-Entry Interest is
being exchanged or transferred in compliance with any applicable
blue sky securities laws of any State of the United States.
(ii) If any holder of a Book-Entry Interest in an Unrestricted
Global Note proposes to exchange such Book-Entry Interest for a Definitive
Registered Note or to transfer such Book-Entry Interest to a Person who
takes delivery thereof in the form of a Definitive Registered Note, then,
upon satisfaction of the conditions set forth in Section 2.O7(b)(i), the
Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly and direct the Book-Entry Depositary
to make a corresponding reduction in its book-entry system of the
corresponding Depositary Interests, and the Issuer shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Registered Note in the appropriate principal
amount. Definitive Registered Notes issued in exchange for a Book-Entry
Interest pursuant to this Section 2.07(c)(ii) shall be registered in such
names and in such authorized denominations as the Holder shall instruct
the Registrar through instructions from the Depositary and the Participant
or Indirect Participant. The Trustee shall deliver such Definitive
Registered Notes to the Persons in whose names such Notes are so
registered. Definitive Registered Notes issued in exchange for a
Book-Entry Interest pursuant to this Section 2.07(c)(ii) shall not bear
the Private Placement Legend.
(d) Transfer or Exchange of Restricted Definitive Registered Notes
for Book-Entry interests.
(i) If any holder of Restricted Definitive Registered Notes proposes
to exchange such Notes for a Book-Entry Interest in a Restricted Global
Note or to transfer such Restricted Definitive Registered Notes to a
Person who takes delivery thereof in the form of a Book-Entry Interest in
a Restricted Global Note, then, upon receipt by the Registrar of the
following documentation (all of which may be submitted by facsimile):
(A) if the holder of such Restricted Definitive Registered
Notes proposes to exchange such Notes for a Book-Entry Interest in a
Restricted Global Note, a certificate from such holder in the form
of Exhibit D hereto, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Registered Notes are being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (1) thereof;
(C) if such Definitive Registered Notes are being transferred
to a Non-U.S. Person in an offshore transaction in accordance with
Rule 904 under the
<PAGE>
35
Securities Act, a certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (2) thereof;
(D) if such Definitive Registered Notes are being transferred
pursuant to an exemption from registration in accordance with Rule
144 under the Securities Act, a certificate to the effect set forth
in Exhibit C hereto, including the certifications in item (3)(a)
thereof;
(E) if such Definitive Registered Notes are being transferred
to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in the subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit C hereto, including
the certifications in item (3)(d) thereof, a certificate from the
transferee to the effect set forth in Exhibit E hereof and, to the
extent required by item (3)(d) of Exhibit C, an Opinion of Counsel
from the transferee or the transferor reasonably acceptable to the
Issuer to the effect that such transfer is in compliance with the
Securities Act and such Book-Entry Interest is being transferred in
compliance with any applicable blue sky securities laws of any state
of the United States;
(F) if such Definitive Registered Notes are being transferred
to the Issuer or one of its Subsidiaries, a certificate to the
effect set forth in Exhibit C hereto, including the certifications
in item (3)(b) thereof; or
(G) if such Definitive Registered Notes are being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit C hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Definitive Registered Notes, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (B) above, the 144A Global Note, in the case of clause (C) above,
the Regulation S Global Note, and in all other cases, the IAI Global Note
and direct the Book-Entry Depositary to make a corresponding increase in
its book-entry system of the corresponding Depositary Interest.
(ii) A holder of Restricted Definitive Registered Notes may exchange
such Notes for a Book-Entry Interest in the Unrestricted Global Note or
transfer such Restricted Definitive Registered Notes to a Person who takes
delivery thereof in the form of a Book-Entry Interest in the Unrestricted
Global Note only:
(A) if such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder, in the case of an exchange, or the transferee, in the
case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuer;
<PAGE>
36
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) upon receipt by the Registrar of the following
documentation (all of which may be submitted by facsimile):
(1) if the holder of such Restricted Definitive
Registered Notes proposes to exchange such Notes for a Book-Entry
Interest in the Unrestricted Global Note, a certificate from such
holder in the form of Exhibit D hereto, including the certifications
in item (l)(c) thereof;
(2) if the holder of such Restricted Definitive
Registered Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of a Book-Entry Interest in
the Unrestricted Global Note, a certificate in the form of Exhibit C
hereto, including the certifications in item (4) thereof; and
(3) in each such case set forth in this paragraph (D), an
Opinion of Counsel in form reasonably acceptable to the Issuer, to
the effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein
and in the Private Placement Legend are not required in order to
maintain compliance with the Securities Act, and such Book-Entry
Interest is being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United
States.
If any such transfer is effected pursuant to paragraph (B)
above at a time when an Unrestricted Global Note has not yet been issued,
the Issuer shall issue and, upon receipt of an authentication order in
accordance with Section 2.02, the Trustee shall authenticate (i) one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the principal amount of Definitive Registered Notes transferred pursuant
to paragraph (B) above.
(e) Transfer and Exchange of Definitive Registered Notes. When
Definitive Registered Notes are presented by a Holder to the Registrar with a
request to register the transfer of the Definitive Registered Notes or to
exchange such Definitive Registered Notes for an equal principal amount of
Definitive Registered Notes of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested only if the
Definitive Registered Notes are presented or surrendered for registration of
transfer or exchange and are endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing and upon receipt of such
certificates and Opinions of Counsel as shall be necessary to evidence
compliance with the restrictions on transfer contained in the Private Placement
Legend and this Indenture.
<PAGE>
37
(f) Exchange offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuer shall issue and,
upon receipt of an authentication order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Book-Entry Interests tendered for acceptance by persons that are not (x)
broker-dealers, (y) Persons participating in the distribution of the Exchange
Notes or (z) Persons who are affiliates (as defined in Rule 144) of the Issuer
and accepted for exchange in the Exchange Offer and (ii) Definitive Registered
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Registered Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly and direct the Book-Entry Depositary to make a corresponding
reduction in its book-entry system of the corresponding Depositary Interests,
and the Issuer shall execute and the Trustee shall authenticate and deliver to
the Persons designated by the Holders of Definitive Registered Notes so accepted
Definitive Registered Notes in the appropriate principal amount.
(g) Legends.
(i) Each Restricted Global Note and, except as permitted by clause
(ii) below, each Definitive Registered Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF REGULATION D
UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE
144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d), IF APPLICABLE)
AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO RSL COMMUNICATIONS, LTD. OR ANY SUBSIDIARY
THEREOF, (B)TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING
<PAGE>
38
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION
OF COUNSEL ACCEPTABLE TO RSL COMMUNICATIONS PLC THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH
INSTITUTIONAL ACCREDITED INVESTOR THAT IS NOT A QIB WILL ALSO BE REQUIRED
TO EFFECT ANY TRANSFER OF THIS NOTE THROUGH ONE OF MORGAN, STANLEY & CO.
INCORPORATED, BEAR, STEARNS & CO. INC. OR DILLON, READ & CO. INC. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER
THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF
THE FOREGOING RESTRICTIONS."
(ii) Notwithstanding the foregoing, any Definitive Registered Notes
issued pursuant to Section 2.07(f) shall not bear the Private Placement
Legend. In addition, in connection with the transfer or exchange of any
Restricted Definitive Registered Notes, if the Registrar receives the
following:
(A) if the Holder of such Restricted Definitive Registered
Notes proposes to exchange such Notes for a Definitive Registered
Note that does not
<PAGE>
39
bear the Private Placement Legend, a certificate from such holder in
the form of Exhibit D hereto, including the certifications in item
(1)(d) thereof;
(B) if the Holder of such Restricted Definitive Registered
Notes proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of a Definitive Registered Note that
does not bear the Private Placement Legend, a certificate in the
form of Exhibit C hereto, including the certifications in item (4)
thereof; and
(C) in each case set forth in these subparagraphs (A) and (B),
an Opinion of counsel in form reasonably acceptable to the Issuer,
to the effect that such exchange or transfer is in compliance with
the Securities Act, that the restrictions on transfer contained
herein and in the Private Placement Legend are not required in order
to maintain compliance with the Securities Act, and such Book-Entry
Interest is being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United
States,
then, upon compliance with the provisions of Section 2.07(e), the Trustee shall
authenticate and issue Definitive Registered Notes that do not bear the Private
Placement Legend and all restrictions on the transfer of such Definitive
Registered Notes shall be rescinded.
(h) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS NOTE IS HELD BY THE BOOK-ENTRY DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND
(IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR BOOK-ENTRY
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF RSL COMMUNICATIONS PLC."
(i) Unit Legend. Each Note issued prior to the Separation Date
shall bear the following legend (the "Unit Legend") on the face thereof:
"THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF
12 1/4% SENIOR NOTES DUE 2006 OF RSL COMMUNICATIONS PLC (THE "NOTES") AND
ONE WARRANT (EACH, A "WARRANT" AND COLLECTIVELY, THE "WARRANTS") INITIALLY
<PAGE>
40
ENTITLING THE HOLDER THEREOF TO PURCHASE 1.815 SHARES OF CLASS A COMMON
STOCK, PAR VALUE $.O1 PER SHARE, OF RSL COMMUNICATIONS, LTD. (THE "CLASS A
SHARES"). PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i)
180 DAYS AFTER OCTOBER 3,1997 (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER
WITH RESPECT TO THE NOTES AND (iii) THE EFFECTIVENESS OF A SHELF
REGISTRATION STATEMENT WITH RESPECT TO THE NOTES, THE NOTES EVIDENCED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS."
(k) Cancellation and/or Adjustment of Global Notes. At such time as
all Book-Entry Interests have been exchanged for Definitive Registered Notes,
all Global Notes shall be returned to or retained and cancelled by the Trustee
in accordance with Section 2.12 hereof. At any time prior to such cancellation,
if any Book-Entry Interest is exchanged for an interest in another Global Note
or for Definitive Registered Notes, the principal amount of Notes represented by
such Global Note shall be reduced accordingly and an endorsement shall be made
on such Global Note, by the Trustee or the Book-Entry Depositary, at the
direction of the Trustee, to reflect such reduction.
(l) General Provisions Relating to All Transfers and Exchanges. (i)
To permit registrations of transfers and exchanges, the Issuer shall execute and
the Trustee shall authenticate Global Notes and Definitive Registered Notes upon
the Issuer's order or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any stamp or transfer tax or similar governmental charge
payable in connection therewith (other than any such stamp or transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.11, 3.07, 4.11, 4.13 and 9.04 hereof).
(iii) All Global Notes and Definitive Registered Notes issued upon
any registration of transfer or exchange of Global Notes or Definitive
Registered Notes shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Registered Notes surrendered upon such registration of
transfer or exchange.
(iv) The Issuer shall not be required (A) to issue, to register the
transfer of or to exchange Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption under
Section 3.03 hereof and ending at the close of business on the day of selection,
(B) to register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part or (C) to register the transfer of or to exchange a Note
between a record date and the next succeeding Interest Payment Date.
<PAGE>
41
(v) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Issuer may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and for
all other purposes, and neither the Trustee, any Agent nor the Issuer shall be
affected by notice to the contrary.
(vi) The Trustee shall authenticate Global Notes and Definitive
Registered Notes in accordance with the provisions of Section 2.02 hereof.
SECTION 2.08. Replacement Notes. If a mutilated Definitive
Registered Note is surrendered to the Registrar or the Trustee, if a mutilated
Global Note is surrendered to the Issuer or the Trustee or if the Issuer and the
Trustee receive evidence to their satisfaction that any Note has been lost,
destroyed or stolen, the Issuer shall issue and the Trustee shall authenticate a
replacement Note in such form as the Notes mutilated, lost, destroyed or
wrongfully taken if (i) in the case of a lost, destroyed or stolen Note, the
Holder of such Note furnishes to the Issuer, the Trustee and, in the case of a
Definitive Registered Note, the Registrar, evidence reasonably acceptable to
them of the ownership and the destruction, loss or theft of such Note and (ii)
an indemnity bond shall be posted by the Holder requesting replacement,
sufficient in the judgment of each to protect the Issuer, the Guarantor, the
Registrar (in the case of a Definitive Registered Note ), the Trustee or any
Agent from any loss that any of them may suffer if such Note is replaced. Prior
to the issuance of any such replacement Note, the Trustee shall notify the
Issuer of any request therefor. The Issuer may charge such Holder for the
Issuer's out-of-pocket expenses in replacing such Note and the Trustee may
charge the Holder for the Trustee's expenses in replacing such Note. Every
replacement Note shall constitute an additional obligation of the Issuer and
shall be entitled to all of the benefits of this Indenture equally and
proportionally with all other Notes issued hereunder. The provisions of this
Section 2.08 are exclusive and shall preclude (to the extent permitted by
applicable law) all other rights and remedies with respect to the replacement of
mutilated, lost, destroyed or stolen Notes.
SECTION 2.09. Outstanding Notes. The Notes outstanding at any time
are all Notes that have been authenticated by the Trustee except for (a) those
cancelled by it, (b) those delivered to it for cancellation, (c) to the extent
set forth in Sections 8.01 and 8.02, on or after the date on which the
conditions set forth in Section 8.01 or 8.02 have been satisfied, those Notes
theretofore authenticated and delivered by the Trustee hereunder and (d) those
described in this Section 2.09 as not outstanding. Subject to Section 2.10, a
Note does not cease to be outstanding because the Issuer or one of its
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser in whose hands such Note is a
legal, valid and binding obligation of the Issuer.
If the principal amount of any Note is considered to be paid under
Section 4.01, it ceases to be outstanding and interest thereon shall cease to
accrue.
<PAGE>
42
If the Paying Agent holds, in its capacity as such, on the Stated
Maturity of a Note, on any Redemption Date or on any Payment Date, money
sufficient to pay all accrued interest and Liquidated Damages and principal with
respect to such Notes payable on that date and is not prohibited from paying
such money to the Holders thereof pursuant to the terms of this Indenture, then
on and after that date such Notes cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.10. Treasury Notes. In determining whether the Holders of
the required principal amount of Notes have concurred in any direction, waiver
or consent or any amendment, modification or other change to this Indenture,
Notes owned by the Issuer or an Affiliate of the Issuer shall be disregarded as
though they were not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent or any amendment, modification or other change to this Indenture,
only Notes that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded.
SECTION 2.11. Temporary Notes. Until definitive Notes are prepared
and ready for delivery, the Issuer may prepare and the Trustee shall, upon
receipt of a Issuer Order, authenticate temporary Notes. Temporary Notes shall
be substantially in the form of definitive Notes but may have variations that
the Issuer considers appropriate for temporary Notes. Without unreasonable
delay, the Issuer shall prepare and the Trustee shall authenticate definitive
Notes in exchange for temporary Notes. Until such exchange, temporary Notes
shall be entitled to the same rights, benefits and privileges as definitive
Notes.
SECTION 2.12. Cancellation. The Issuer at any time may deliver Notes
to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange, payment or purchase. The Trustee shall cancel all Notes
surrendered for registration of transfer, exchange, payment, replacement,
cancellation or purchase and shall destroy all cancelled Global Notes, and shall
otherwise dispose of all cancelled Notes in accordance with its customary
procedures (in each case subject to the record retention requirement of the
Exchange Act) unless the Issuer directs the Trustee to return such Notes to the
Issuer, and, if so destroyed or disposed of, shall deliver a certificate of
disposition thereof to the Issuer. The Issuer may not reissue or resell, or
issue new Notes to replace, Notes that the Issuer has redeemed or paid or
purchased, or that have been delivered to the Trustee for cancellation; provided
that the Issuer may re-issue Notes in accordance with Section 2.07.
SECTION 2.13. Defaulted Interest. If the Issuer defaults on a
payment of interest or Liquidated Damages on the Notes, it shall pay the
defaulted interest or Liquidated Damages, plus (to the extent permitted by law)
any interest payable on the defaulted interest or Liquidated Damages, in
accordance with the terms hereof, to (a) the Persons who are Holders of
Definitive Registered Notes, if any, on a subsequent special record date, which
date shall be at least five Business Days prior to the payment date for such
defaulted interest, and (b) if any Global Notes are outstanding on such payment
date, to the Holder of the Global Notes on such payment date. The Issuer shall
fix such special record date and payment date in a manner
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reasonably satisfactory to the Trustee. At least 15 days before such special
record date, the Issuer shall mail to each Holder of Definitive Registered
Notes, if any, and if the Global Notes are still outstanding, to the Holder
thereof and the Depositary, a notice that states the special record date, the
payment date and the amount of defaulted interest or Liquidated Damages and
interest payable on such defaulted interest or Liquidated Damages, if any, to be
paid.
SECTION 2.14. CUSIP, CINS or ISIN Number. The Issuer in issuing the
Notes may use a "CUSIP,' "CINS" or "ISIN" number, and if so, such CUSIP, CINS or
ISIN number shall be included in notices of redemption, repurchase or exchange
as a convenience to Holders, provided, however, that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP,
CINS or ISIN number printed in the notice or on the Notes, and that reliance may
be placed only on the other identification numbers printed on the Notes. The
Issuer will promptly notify the Trustee of any change in the CUSIP, CINS or ISIN
number.
SECTION 2.15. Deposit of Moneys. Prior to 12:00 noon, New York City
time, on each Interest Payment Date, at the Stated Maturity of the Notes, on
each Redemption Date, on each Payment Date and on the Business Day immediately
following any acceleration of the Notes pursuant to Section 6.02, the Issuer
shall deposit with the Paying Agent in immediately available funds money (in
United States dollars) sufficient to make cash payments, if any, due on such
Interest Payment Date, Stated Maturity, Redemption Date, Payment Date or
Business Day, as the case may be, in a timely manner which permits the Trustee
to remit payment to the Holders on such Interest Payment Date, Stated Maturity,
Redemption Date, Payment Date or Business Day, as the case may be.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. The Notes will be redeemable, at
the Issuer's option, in whole or in part, at any time or from time to time, on
or after October 3, 2001 and prior to maturity, upon not less than 30 nor more
than 60 days' prior notice mailed by first class mail to each Holders' last
address as it appears in the Register, at the following Redemption Prices
(expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period commencing November 15, of the years set forth below:
Year Redemption Price
---- ----------------
2001 ............................... 106.1250%
2002 ............................... 103.0625%
2003 and thereafter ................ 100.0000%
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In addition, at any time and from time to time prior to November 15,
1999, the Issuer may redeem Notes having a principal amount of up to $90 million
with the Net Cash Proceeds that are (A) actually received by the Issuer
(including such proceeds received by the Guarantor and contributed to the
Issuer) from one or more Public Equity Offerings following which a Public Market
occurs and (B) not used to repay Indebtedness of the Guarantor under the
Shareholder Standby Facility, at any time as a whole or from time to time in
part, at a Redemption Price (expressed as a percentage of principal amount) of
112.2500%, plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date); provided that (1) at least $210.0 million aggregate
principal amount of Notes remains outstanding after each such redemption and (2)
each such redemption occurs within 180 days of the related Public Equity
Offering.
Furthermore, the event that (i) the Guarantor or the Issuer has
become or would become obligated to pay, on the next date on which any amount
would be payable under or with respect to the Notes, any Additional Amounts as a
result of changes affecting withholding tax laws (as provided for in Section
4.02), and (ii) the Guarantor and the Issuer cannot reasonably arrange for
another obligor to make such payment so as to avoid the requirement to pay such
Additional Amounts, then the Issuer may redeem all, but not less than all, the
Notes at any time at 100% of the principal amount thereof on the redemption
date, together with accrued interest thereon, if any, to the redemption date.
SECTION 3.02. Notices to Trustee. If the Issuer elects to redeem
Notes pursuant to Section 3.01, it shall notify the Trustee in writing of (i)
the clause of the Indenture pursuant to which the redemption shall occur, (ii)
the Redemption Date, (iii) the principal amount of Notes to be redeemed plus
interest accrued thereon, if any, to the Redemption Date and (iv) the Redemption
Price.
The Issuer shall give each notice provided for in this Section 3.02
in an Officers' Certificate at least 5 days before mailing the notice to Holders
referred to in Section 3.01.
SECTION 3.03. Selection of Notes to Be Redeemed. In the case of any
partial redemption, selection of the Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not listed
on a national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Note of $1,000 in principal amount or less shall
be redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
at maturity thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
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45
SECTION 3.04. Notice of Redemption. With respect to any redemption
of Notes pursuant to Section 3.01, at least 30 days but not more than 60 days
before a Redemption Date, the Issuer shall mail a notice of redemption by first
class mail to each Holder whose Notes are to be redeemed at such Holder's
registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(e) the paragraph of the Notes and/or the Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed;
(f) that, unless the Issuer defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is
to receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Paying Agent;
(g) that, if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 in principal amount or any integral
multiple thereof) of such Note to be redeemed and that, on and after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be reissued;
and
(h) that, if any Note contains a CUSIP, CINS, ISIN or other
identification number as provided in Section 2.14, no representation is
being made as to the correctness of the CUSIP, CINS, ISIN or other
identification number either as printed on the Notes or as contained in
the notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Notes.
At the Issuer's request contained in a Issuer Order (which request
may be revoked by the Issuer at any time prior to the time at which the Trustee
shall have given such notice to the Holders), made to the Trustee at least 5
days before mailing the notice to Holders referred to in Section 3.01, the
Trustee shall give such notice of redemption in the name and at the expense of
the Issuer. If, however, the Issuer gives such notice to the Holders, the Issuer
shall concurrently deliver to the Trustee an Officers' Certificate stating that
such notice has been given. Notice of redemption shall be deemed to be given
when mailed, whether or not the Holder receives the notice. In any event,
failure to give such notice, or any defect therein, shall
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46
not affect the validity of the proceedings for the redemption of Notes held by
Holders to whom such notice was properly given.
SECTION 3.05. Deposit of Redemption Price. On or prior to any
Redemption Date, the Issuer shall deposit with the Paying Agent (or, if the
Issuer is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.05) money sufficient to pay the Redemption Price of, and
accrued and unpaid interest and Liquidated Damages, if any, on, all Notes to be
redeemed on that date other than Notes or portions thereof called for redemption
on that date that have been delivered by the Issuer to the Trustee for
cancellation.
SECTION 3.06. Payment of Notes Called for Redemption. If notice of
redemption has been given to Holders in the manner provided above, the Notes or
portion of Notes specified in such notice to be redeemed shall become
irrevocably due and payable on the Redemption Date at the Redemption Price
stated therein, together with accrued interest to such Redemption Date, and on
and after any such Redemption Date (unless the Issuer shall default in the
payment of Notes to be redeemed on such date at the Redemption Price, plus
accrued interest and Liquidated Damages, if any, to the Redemption Date, in
which case the principal, until paid, shall bear interest from the Redemption
Date at the rate prescribed in the Notes), such Notes shall cease to accrue
interest and Liquidated Damages. Upon surrender of any Note for redemption in
accordance with a notice of redemption, such Note shall be paid and redeemed by
the Issuer at the Redemption Price, plus accrued interest and Liquidated
Damages, if any, to the Redemption Date, provided that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders registered as such at the close of business on the relevant Regular
Record Date.
SECTION 3.07. Notes Redeemed in Part. Upon cancellation of any Note
that is redeemed in part, the Issuer shall issue and the Trustee shall
authenticate and deliver to the Holder a new Note equal in principal amount to
the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Issuer shall pay the principal
of, premium, if any, and interest and Liquidated Damages, if any, on the Notes
on the dates and in the manner provided in the Notes, this Indenture and the
Registration Rights Agreement. An installment of principal, premium, interest or
Liquidated Damages shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Issuer, a Subsidiary of the Issuer, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Issuer, any Subsidiary of the Issuer or any
Affiliate of any of them, acts as Paying Agent, an installment of principal,
premium, interest or Liquidated Damages shall be considered paid on the due date
if the entity acting as Paying Agent complies with the penultimate sentence of
Section 2.05. Upon any bankruptcy or reorganization procedure relating to the
Issuer, the Trustee shall serve as the Paying Agent for the Notes.
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SECTION 4.02. Additional Amounts. In the event of any change in the
laws of England or Bermuda or of any political subdivision or taxing authority
thereof or therein or any change in the interpretation or administration
thereof, the effect of which is to require the withholding or deduction by the
Issuer or the Guarantor pursuant to the Notes or the Note Guarantee,
respectively, of any amount for taxes, the Issuer or the Guarantor will pay, to
the extent it may then lawfully do so, such additional amounts ("Additional
Amounts") as may be necessary in order that every net payment of the principal
of and interest on the Notes, after deduction for withholding for or on account
of any future tax, assessment or other governmental charge will not be less than
the amount provided for in the Notes to be then due and payable; provided,
however, that the foregoing obligation to pay Additional Amounts shall not apply
in respect of:
(a) any tax, withholding, assessment or other governmental charge
which would not have been imposed but for (i) the existence of any present
or former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, trust, partnership or corporation)
and England or Bermuda or any political subdivision or taxing authority
thereof including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen or resident thereof or being or having been present or
engaged in trade or business therein or having or having had a permanent
establishment therein or (ii) the presentation of a Note or a Note
Guarantee (where presentation is required) for payment on a date more than
30 days after the date on which such payment became due and payable or the
date on which payment thereof is duly provided for, whichever occurs
later;
(b) any estate, inheritance, gift, sale, transfer or personal
property tax;
(c) any tax, assessment or other governmental charge that is
withheld by reason of the failure to timely comply by the holder or the
beneficial owner of the Note or a Note Guarantee with a request in writing
of the Issuer or the Guarantor (i) to provide information concerning the
nationality, residence or identity of the holder or such beneficial owner
or (ii) to make any declaration or other similar claim or satisfy any
information or reporting requirement, which, in the case of (i) or (ii),
is required or imposed by a statute, treaty, regulation or administrative
practice of the taxing or domicile jurisdiction as a precondition to
exemption from or reduction of all or part of such tax, assessment or
other governmental charge; provided, however, that this clause (c) shall
not apply to limit the Issuer's or Guarantor's obligation to pay
Additional Amounts if the completing and filing of the information
described in sublease (i) or the declaration or other claim described in
subclause (ii) would be materially more onerous in form, in procedure or
in substance of information disclosed, in comparison to the information
reporting requirements imposed under U.S. tax law with respect to Forms
1001, W-8 and W-9; or
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(d) any combination of items (a), (b) and (c) above; nor shall
Additional Amounts be paid with respect to any payment of the principal
of, or any interest on, any Note or Note Guarantee to any holder who is
not the sole beneficial owner of such Note or Note Guarantee or is a
fiduciary or partnership, but only to the extent that a beneficial owner,
a beneficiary or a settlor with respect to a fiduciary or a member of the
partnership would not have been entitled to the payment of the Additional
Amount had the beneficial owner, beneficiary, settlor or member of such
partnership received directly its beneficial or distributive share of the
payment.
At least 30 days prior to each date on which any payment under or
with respect to the Notes is due and payable, if the Issuer or the Guarantor
will be obligated to pay Additional Amounts with respect to such payment, the
Issuer or the Guarantor will deliver to the Trustee an Officer's Certificate
stating the fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date. Whenever
in the Indenture there is mentioned, in any context, the payment of principal
(and premium, if any), redemption price, interest or any other amount payable
under or with respect to any Note, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
SECTION 4.03 Limitation on Indebtedness. (a) The Guarantor will not,
and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes, the Note Guarantee and Indebtedness existing
on the Closing Date); provided that the Guarantor and any Restricted Subsidiary
may Incur Indebtedness (including Acquired Indebtedness), if, after giving
effect to the Incurrence of such Indebtedness and the receipt and application of
the proceeds therefrom, the pro forma Consolidated Leverage Ratio would be
greater than zero and less than 5 to 1; provided that no more than 50% of the
Indebtedness Incurred under this clause may be incurred by Restricted
Subsidiaries other than the Issuer.
Notwithstanding the foregoing, the Guarantor and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal amount not to
exceed the greater of (A) $225 million and (B) Consolidated EBITDA for the
preceding four quarters for which reports have been filed pursuant to Section
4.19, in each case less any amount of Indebtedness permanently repaid as
provided under Section 4.11 below, provided that the aggregate amount of
Indebtedness of Restricted Subsidiaries (other than the Issuer) outstanding at
any one time under this clause (i) shall not exceed one-half of the greater of
the amounts referred to in clause (A) and clause (B) above; (ii) Indebtedness
(A) to the Guarantor evidenced by an unsubordinated promissory note or (B) to
any of its Restricted Subsidiaries; provided that any event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Issuer or another
Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness issued in exchange for, or the net proceeds of which are used to
refinance or refund, then outstanding Indebtedness (including, without
limitation, the Notes and the Note Guarantee), other than Indebtedness Incurred
under clause (i), (ii), (iv), (vi), (viii), (ix) or (x)
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49
of this paragraph (which clauses provide for the refinancing of Indebtedness
Incurred thereunder), and any refinancings thereof in an amount not to exceed
the amount so refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is pari passu with, or
subordinated in right of payment to, the Notes or the Note Guarantee shall only
be permitted under this clause (iii) if (A) in case the Notes are refinanced in
part or the Indebtedness to be refinanced is pari passu with the Notes or the
Note Guarantee, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is outstanding,
is expressly made pari passu with, or subordinate in right of payment to, the
remaining Notes or Note Guarantee, as the case may be, (B) in case the
Indebtedness to be refinanced is subordinated in right of payment to the Notes
or the Note Guarantee, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made subordinate in right of payment to the Notes or
the Note Guarantee, as the case may be, at least to the extent that the
Indebtedness to be refinanced is subordinated to the Notes or the Note
Guarantee, as the case may be, and (C) such new Indebtedness, determined as of
the date of Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and the
Average Life of such new Indebtedness is at least equal to the remaining Average
Life of the Indebtedness to be refinanced or refunded (assuming such
Indebtedness had a final Stated Maturity three months later than its actual
final stated maturity); and provided further that in no event may Indebtedness
of the Guarantor or the Issuer be refinanced by means of any Indebtedness of any
Restricted Subsidiary (other than the Issuer) pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided
in the ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements (a) are designed solely to
protect the Guarantor or its Subsidiaries against fluctuations in foreign
currency exchange notes or interest notes and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange notes or interest notes or by reason
of fees, indemnities and compensation payable thereunder; and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Issuer or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of the Issuer (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted Subsidiary
of the Issuer for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Issuer or any
Restricted Subsidiary in connection with such disposition; (v) Indebtedness of
the Guarantor or the Issuer, to the extent the net proceeds thereof are promptly
(A) used to purchase Notes tendered in an Offer to Purchase made as a result of
a Change in Control or (B) deposited to defease the Notes as described below
under "Defeasance"; (vi) Guarantees of the Notes or Guarantees of Indebtedness
of the Guarantor or the Issuer by any Restricted Subsidiary, provided the
Guarantee of such Indebtedness is permitted by and made in accordance with
Section 4.07 below; (vii) secured Indebtedness Incurred to finance the cost
(including the cost of design, development, construction, installation or
integration) of equipment, inventory or ownership rights with respect to
indefeasible rights of use or minimum investment units (or similar
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50
ownership interests) in transnational fiber optic cable or other transmission
facilities, in each case acquired by the Guarantor or a Restricted Subsidiary
after the Closing Date; (viii) Indebtedness of the Guarantor or the Issuer not
to exceed, at any one time outstanding, two times the Net Cash Proceeds (less
the amount of such proceeds applied as provided in clause (ii) or (iii) of the
second paragraph of Section 4.04 below or applied to repay Indebtedness of the
Guarantor or the Issuer under the Shareholder Standby Facility) received by the
Guarantor or the Issuer (or any other Restricted Subsidiary that Guarantees the
Notes in accordance with Section 4.07 below; provided that the Issuer delivers
to the Trustee an Opinion of Counsel to the effect (subject to customary
caveats) that such Guarantee is enforceable and provided further that such
Capital Stock is not subsequently repurchased by the Guarantor or any Restricted
Subsidiary) after the Closing Date from the issuance and sale of its Capital
Stock (other than Disqualified Stock), to a Person that is not a Subsidiary of
the Guarantor; provided that such Indebtedness matures after the Stated Maturity
of the Notes and has an Average Life longer than the Notes; (ix) Indebtedness of
the Guarantor, the Issuer and each other Restricted Subsidiary, not to exceed in
aggregate at any one time outstanding, 60% of the accounts receivable (net of
accounts more than 60 days past due, reserves and allowances for doubtful
accounts, determined in accordance with GAAP) of the Guarantor and its
Restricted Subsidiaries on a consolidated basis as set forth on the balance
sheet of the Guarantor most recently filed with the Commission pursuant to
Section 4.19 below; provided that any such Indebtedness of any Restricted
Subsidiary (other than the Issuer) is not Guaranteed by the Guarantor or the
Issuer; and (x) Indebtedness of any Restricted Subsidiary, not to exceed at any
one time outstanding, the amount of the commitment to lend to such Restricted
Subsidiary by any Person not an Affiliate thereof on the Closing Date (and
refinancings of such Indebtedness).
(b) Notwithstanding any other provision of this Section 4.03, (1)
the maximum amount of Indebtedness that the Guarantor or a Restricted Subsidiary
may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness, due solely to the result of
fluctuations in interest rates or the exchange notes of currencies and (2) the
Guarantor and the Issuer may not Incur any Indebtedness that is expressly
subordinated to any other Indebtedness of the Guarantor or the Issuer, as the
case may be, unless such Indebtedness, by its terms or the terms of any
agreement or instrument pursuant to which such Indebtedness is outstanding, is
also expressly made subordinate to the Note Guarantee or the Securities, as the
case may be, at least to the extent that such Indebtedness is subordinated to
such other Indebtedness; provided that the limitation in this clause (ii) shall
not apply to distinctions between categories of unsubordinated Indebtedness
which exist by reason of (a) any Liens or other encumbrances arising or created
in respect of some but not all unsubordinated Indebtedness, (b) intercreditor
agreements between holders of different classes of unsubordinated Indebtedness
or (c) different maturities or prepayment provisions.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included, (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 4.09
below shall not be treated as Indebtedness and (3) (A) Indebtedness of the
Guarantor Incurred pursuant to the Subordinated Shareholder Loan or its
revolving credit
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facility, in effect on the Closing Date, with The Chase Manhattan Bank (in its
capacity thereunder) on or prior to the Closing Date shall be treated as having
been Incurred pursuant to the second paragraph of Section 4.03(a) (i) and (B)
Indebtedness of any Restricted Subsidiary of the Guarantor Incurred on or prior
to the Closing Date pursuant to any agreement (including equipment leasing or
financing agreements) of such Restricted Subsidiary in effect on the Closing
Date shall be treated as Incurred pursuant to Section 4.03(a)(x). For purposes
of determining compliance with this Section 4.03, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses, the Issuer, in its sole discretion, shall
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. The Guarantor will
not, and will not permit any Restricted Subsidiary, directly or indirectly, to
(i) declare or pay any dividend or make any distribution on or with respect to
its Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries held
by minority stockholders, provided that such dividends do not in the aggregate
exceed the minority stockholders' pro rata share of such Restricted
Subsidiaries' net income from the first day of the fiscal quarter beginning
immediately following the Closing Date) held by Persons other than the Guarantor
or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of (A) the Guarantor or
the Issuer, any Person that has sold Capital Stock which allows the Issuer or
the Guarantor or such Person to Incur Indebtedness under clause (viii) of the
second paragraph of Section 4.03 above or an Unrestricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Person or (B) a Restricted Subsidiary (including options, warrants or
other rights to acquire such shares of Capital Stock) held by any Affiliate of
the Guarantor (other than a Wholly Owned Restricted Subsidiary) or any holder
(or any Affiliate of such holder) of 5% or more of the Capital Stock of the
Guarantor, (iii) make any voluntary or optional principal payment, or voluntary
or optional redemption, repurchase, defeasance, or other acquisition or
retirement for value, prior to the scheduled maturity, of Indebtedness of the
Guarantor or the Issuer that is subordinated in right of payment to the Notes or
the Note Guarantee (other than the purchase, repurchase or the acquisition of
Indebtedness in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in any case due within one year of the date of
acquisition) or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) being collectively "Restricted Payments") if at the time of, and after
giving effect to, the proposed Restricted Payment: (A) a Default or Event of
Default shall have occurred and be continuing, (B) except with respect to
Investments, the Guarantor could not Incur at least $1.00 of Indebtedness under
the first paragraph of Section 4.03 above or (C) the aggregate amount of all
Restricted Payments (the amount, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) made after the Closing Date shall exceed the
sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income
(or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount
of such loss) (determined by excluding income resulting from transfers of assets
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by the Guarantor or a Restricted Subsidiary to an Unrestricted Subsidiary)
accrued on a cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter immediately following the
Closing Date and ending on the last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed pursuant to Section 4.19
below plus (2) the aggregate Net Cash Proceeds received by the Guarantor or the
Issuer after the Closing Date from the issuance and sale permitted by the
Indenture of Capital Stock of the Guarantor or the Issuer (other than
Disqualified Stock), to a Person who is not a Subsidiary of the Guarantor or
from the issuance to a Person who is not a Subsidiary of the Guarantor of any
options, warrants or other rights to acquire Capital Stock of the Issuer or the
Guarantor (in each case, exclusive of any Disqualified Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the Notes) plus (3) an
amount equal to the net reduction in Investments (other than reductions in
Permitted Investments) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Guarantor or any Restricted Subsidiary or from the
Net Cash Proceeds from the sale of any such Investment (except, in each case, to
the extent any such payment or proceeds are included in the calculation of
Adjusted Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed, in each case, the amount of
Investments previously made by the Guarantor or any Restricted Subsidiary in
such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment to
the Notes or the Note Guarantee, including premium, if any, and accrued and
unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred
under clause (iii) of the second paragraph of part (a) of Section 4.03 above;
(iii) the repurchase, redemption or other acquisition of Capital Stock of the
Guarantor or the Issuer (or options, warrants or other rights to acquire such
Capital Stock) in exchange for, or out of the proceeds of a substantially
concurrent offering of, shares of Capital Stock (other than Disqualified Stock)
of the Guarantor or the Issuer; (iv) the making of any principal payment or the
repurchase, redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Guarantor or the Issuer which is subordinated in right of
payment to the Notes or the Note Guarantee, as the case may be, in exchange for,
or out of the proceeds of, a substantially concurrent offering of, shares of the
Capital Stock of the Guarantor or the Issuer (other than Disqualified Stock);
(v) the declaration or payment of dividends on the Common Stock of the Guarantor
or the Issuer following a Public Equity Offering of such Common Stock, of up to
6% per annum of the Net Cash Proceeds received by the Guarantor or the Issuer,
as the case may be, in such Public Equity Offering; (vi) payments or
distributions, to dissenting stockholders pursuant to applicable law, pursuant
to or in connection with a consolidation, merger or transfer of assets that
complies with the provisions of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of the Guarantor; (vii) any Investments described in clause (A), (B) or
(C) below, provided that the sum of such Investments does not exceed $25
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53
million at any one time outstanding: (A) Investments that the Board of Directors
of the Guarantor has determined in good faith will enable the Guarantor or any
of its Restricted Subsidiaries to obtain additional business that it might not
be able to obtain without making such Investment; (B) any Investments; and (C)
Investments in entities the principal function of which is to perform research
and development with respect to products and services that may be used or useful
in the telecommunications business; provided that the Guarantor or one of its
Restricted Subsidiaries will obtain rights to such products or services as a
result of such Investment; (viii) acquisitions of a minority equity interest in
entities engaged in the telecommunications business; provided that (A) the
acquisition of a majority equity interest in such entities is not then permitted
or practicable under applicable law without regulatory consent, (B) the Board of
Directors of the Guarantor determines in good faith that there is a substantial
probability that such approval will be obtained, (C) the Guarantor or one of its
Restricted Subsidiaries has the right to acquire Capital Stock representing a
majority of the voting power of the Voting Stock of such entity upon receipt of
regulatory consent and does acquire such Voting Stock reasonably promptly upon
receipt of such consent and (D) in the event that such consent has not been
obtained within 18 months of funding such Investment, the Guarantor or one of
its Restricted Subsidiaries has the right to sell such minority equity interest
to the Person from whom it acquired such interest, for consideration consisting
of the consideration originally paid by the Guarantor and its Restricted
Subsidiaries for such minority equity interest; (ix) purchases or other
acquisitions of Capital Stock of ITG in compliance with the terms of written
agreements in effect on the Closing Date, as amended; (x) cash payments in lieu
of the issuance of fractional shares upon the exercise of the Warrants; or (xi)
repayment of Indebtedness Incurred under the Shareholder Standby Facility, as
long as the commitment of Ronald S. Lauder thereunder remains in effect;
provided that the Board of Directors determines that each such amendment is not
adverse to the interests of any Holder; provided that, except in the case of
clauses (i) and (iii), no Default or Event of Default shall have occurred and be
continuing or occur as a consequence of the actions or payments set forth
therein. Any Restricted Payments made other than in cash shall be valued at fair
market value. The amount of any Investment "outstanding" at any time shall be
deemed to be equal to the amount of such Investment on the date made, less the
return of capital to the Guarantor and its Restricted Subsidiaries with respect
to such Investment (up to the amount of such Investment on the date made).
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof
and an exchange of Capital Stock for Capital Stock or Indebtedness referred to
in clause (iii) or (iv) thereof, the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii) and (iv) and the amount of any
payment pursuant to clause (xi) thereof) shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this Section 4.04
have been met with respect to any subsequent Restricted Payments. In the event
the proceeds of an issuance of Capital Stock of the Guarantor are used for the
redemption, repurchase or other acquisition of the Notes, or Indebtedness that
is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall
be included in clause (C) of the first paragraph of this Section 4.04 only to
the extent such proceeds are not used for such redemption, repurchase or other
acquisition of Indebtedness.
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SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Guarantor will not, and will not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary (other than the Issuer) to (i) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Guarantor or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Guarantor or any
other Restricted Subsidiary, (iii) make loans or advances to the Guarantor or
any other Restricted Subsidiary or (iv) transfer any of its property or assets
to the Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those encumbrances
or restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law, rule or
regulation or, to the extent not material to the Guarantor, at the behest of
regulatory authorities; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Guarantor or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this Section 4.05, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Guarantor or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Guarantor or any Restricted Subsidiary in
any manner material to the Guarantor or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary; (vi)
with respect to Restricted Subsidiaries in which, on and subsequent to the
Closing Date, the Guarantor and its Restricted Subsidiaries only make
Investments that are evidenced by unsubordinated promissory notes that bear a
reasonable rate of interest and are payable prior to the Stated Maturity of the
Notes; provided that such encumbrances and restrictions expressly allow the
payment of interest and principal on such promissory notes; or (vii)
encumbrances or restrictions solely of the type referred to in clause (iii) or
(iv) of the first paragraph of this Section 4.05 that are contained in any
stockholders' agreement, joint venture agreement or similar agreement among
owners of Common Stock of a Restricted Subsidiary; provided that such
restrictions consist solely of requirements that transactions between such
Restricted Subsidiaries and affiliates thereof (including the Guarantor and its
Restricted Subsidiaries) be on fair and reasonable terms no less favorable to
such Restricted Subsidiary than could be obtained in a comparable arm's-length
transaction with a Person that is not such an affiliate. Nothing
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55
contained in this Section 4.05 shall prevent the Guarantor or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in Section 4.09 below or (2) restricting the sale or
other disposition of property or assets of the Guarantor or any of its
Restricted Subsidiaries that secure Indebtedness of the Guarantor or any of its
Restricted Subsidiaries.
SECTION 4.06. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries. The Guarantor will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Guarantor or
a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to non-U.S. nationals of shares of Capital Stock of non-U.S.
Restricted Subsidiaries, to the extent required by applicable law; (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary, provided any
Investment in such Person remaining after giving effect to such issuance or sale
would have been permitted to be made under Section 4.04 above, if made on the
date of such issuance or sale; (iv) issuances or sales of Common Stock, the Net
Cash Proceeds of which are promptly applied pursuant to clause (A) or (B) of
Section 4.11 below; (v) issuances and sales of up to 6% of the Common Stock of
each Restricted Subsidiary in connection with employee benefit plans or
arrangements; and (vi) the issuance of 3,954 non-voting shares of common stock
of ITG (and subsequent anti-dilution issuances with respect thereto) to Incom
(UK) Limited.
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries. The Guarantor will not permit any Restricted Subsidiary, directly
or indirectly, to Guarantee any Indebtedness of the Guarantor or the Issuer
which is pari passu with or subordinate in right of payment to the Notes
("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Notes by
such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Guarantor, the Issuer or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided
that this paragraph shall not be applicable to any Guarantee of any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari
passu with the Notes or the Note Guarantee, then the Guarantee of such
Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Notes or the Note Guarantee,
then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes or the Note Guarantee, as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Guarantor, of all
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56
of the Guarantor's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Subsidiary
Guarantee, except a discharge or release by or as a result of payment under such
Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders and
Affiliates. The Guarantor will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any holder
(or any Affiliate of such holder) of 5% or more of any class of Capital Stock of
the Guarantor or with any Affiliate of the Guarantor or any Restricted
Subsidiary, except upon fair and reasonable terms no less favorable to the
Guarantor or such Restricted Subsidiary than could be obtained, at the time of
such transaction or, if such transaction is pursuant to a written agreement, at
the time of the execution of the agreement providing therefor, in a comparable
arm's-length transaction with a Person that is not such a holder or an
Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Guarantor or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm (or a subsidiary or affiliate thereof) in the United States stating
that the transaction is fair to the Guarantor or such Restricted Subsidiary from
a financial point of view; (ii) any transaction solely between the Guarantor and
any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and customary regular
fees to directors of the Guarantor or the Issuer who are not employees of the
Guarantor or the Issuer; (iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Guarantor and any other Person with which the
Guarantor files a consolidated tax return or with which the Guarantor is part of
a consolidated group for tax purposes; (v) any Restricted Payments not
prohibited by Section 4.04 above; or (vi) the Shareholder Standby Facility, as
in effect on the Closing Date. Notwithstanding the foregoing, any transaction
covered by the first paragraph of this Section 4.08 and not covered by clauses
(ii) through (v) of this paragraph, the aggregate amount of which exceeds $1
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
SECTION 4.09. Limitation on Liens. The Guarantor will not, and will
not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any of its assets or properties of any character, or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without
making effective provision for all of the Notes and all other amounts due under
the Indenture to be directly secured equally and ratably with (or, if the
obligation or liability to be secured by such Lien is subordinated in right of
payment to the Notes or the Note Guarantee, prior to) the obligation or
liability secured by such Lien.
The foregoing limitation does not apply to:
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(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Issuer or its Restricted Subsidiaries created in favor of the
Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Guarantor or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Guarantor or
such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause (iii)
of the second paragraph of Section 4.03 above; provided that such Liens do
not extend to or cover any property or assets of the Guarantor or any
Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced;
(v) Permitted Liens;
(vi) (A) Liens securing obligations not in excess of $2 million and
(B) Liens on assets having a fair market value not in excess of $2 million
at the time of Incurrence of such Liens; or
(vii) Liens on stock of ITG acquired from Charles Piluso or Richard
Rebetti prior to the Closing Date or pursuant to written agreements, as in
effect on the Closing Date.
SECTION 4.10. Limitation on Sale-Leaseback Transactions. The
Guarantor will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into any sale-leaseback transaction involving any of its
assets or properties whether now owned or hereafter acquired, whereby the
Guarantor or a Restricted Subsidiary sells or transfers such assets or
properties and then or thereafter leases such assets or properties or any part
thereof or any other assets or properties which the Guarantor or such Restricted
Subsidiary, as the case may be, intends to use for substantially the same
purpose or purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Guarantor
and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned
Restricted Subsidiaries; or (iv) the Guarantor or such Restricted Subsidiary,
within twelve months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the net proceeds received from such
sale in accordance with clause (A) or (B) of the first paragraph of Section
4.11 below.
SECTION 4.11. Limitation on Asset Sales. The Guarantor will not,
and will not permit any Restricted Subsidiary to, consummate any Asset Sale,
unless (i) the consideration
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received by the Guarantor or such Restricted Subsidiary is at least equal to the
fair market value of the assets sold or disposed of and (ii) at least 85% of the
consideration received consists of cash or Temporary Cash Investments. In the
event and to the extent that the Net Cash Proceeds received by the Guarantor or
any of its Restricted Subsidiaries from one or more Asset Sales occurring on or
after the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date closest to
the commencement of such 12-month period for which a consolidated balance sheet
of the Guarantor and its subsidiaries have been filed pursuant to Section 4.19
below), then the Guarantor or the Issuer shall or shall cause the relevant
Restricted Subsidiary to (i) within twelve months after the date Net Cash
Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A)
apply an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Guarantor or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to Section 4.07 above or Indebtedness
of any other Restricted Subsidiary, in each case owing to a Person other than
the Guarantor or any of its Restricted Subsidiaries or (B) invest an equal
amount, or the amount not so applied pursuant to clause (A) (or enter into a
definitive agreement committing to so invest within twelve months after the date
of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company having property
and assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Guarantor and its Restricted Subsidiaries existing on the date of such
investment and (ii) apply (no later than the end of the twelve-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the following paragraph of this
Section 4.11. The amount of such excess Net Cash Proceeds required to be applied
(or to be committed to be applied) during such twelve-month period as set forth
in clause (i) of the preceding sentence and not applied as so required by the
end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.11 totals at least $10 million, the Issuer must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes on the relevant Payment Date equal to the Excess Proceeds on such date, at
a purchase price equal to 101% of the principal amount of the Notes, plus, in
each case, accrued interest (if any) to the Payment Date.
SECTION 4.12. Limitation on the Shareholder Standby Facility. The
Guarantor will not, and will not permit any Subsidiary to, (i) pay interest in
cash on the Shareholder Standby Facility prior to December 15, 2001, (ii) amend
the terms of the Shareholder Standby Facility in any manner that, in the good
faith opinion of the Board of Directors, would be materially adverse to the
interests of holders of the Notes, (iii) make any payment with respect to the
Shareholder Standby Facility at any time when a Default exists under the
Indenture or (iv) allow the commitment of Ronald S. Lauder under the Shareholder
Standby Facility to expire prior to December 15,2006 unless amounts outstanding
under such Facility were prepaid with the proceeds of an equity offering having
net proceeds to the Guarantor of at least $35 million. In addition, the
Guarantor agrees that it will not merge or enter into any similar transaction
with
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the Issuer unless lenders, if any, with respect to the Shareholder Standby
Facility agree that the Shareholder Standby Facility will be subordinated to the
Notes to the same extent that it is subordinated to the Note Guarantee.
SECTION 4.13. Repurchase of Notes upon a Change of Control. The
Issuer must commence, within 30 days of the occurrence of a Change of Control,
and consummate an Offer to Purchase for all Notes then outstanding, at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date.
SECTION 4.14. Existence. Subject to Article Five of this Indenture,
the Guarantor and the Issuer will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence in accordance with the
respective organizational documents of the Issuer and each such Restricted
Subsidiary and the rights (whether pursuant to charter, partnership certificate,
agreement, statute or otherwise), material licenses and franchises of the
Guarantor and the Issuer.
SECTION 4.15. Payment of Taxes and Other Claims. The Guarantor will
pay or discharge and shall cause each Restricted Subsidiary to pay or discharge,
or cause to be paid or discharged, before the same shall become delinquent (i)
all material taxes, assessments and governmental charges levied or imposed upon
(a) the Issuer or any such Restricted Subsidiary, (b) the income or profits of
any such Restricted Subsidiary which is a corporation or (c) the property of the
Issuer or any such Restricted Subsidiary and (ii) all material lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of the Guarantor or any such Restricted Subsidiary, provided that
the Guarantor shall not be required to pay or discharge, or cause to be paid or
discharged, any such tax, assessment, charge or claim the amount, applicability
or validity of which is being contested in good faith by appropriate proceedings
or by the Guarantor and its Restricted Subsidiaries where the failure to effect
such payment is not adverse in any material respect to the Holders.
SECTION 4.16. Maintenance of Properties and Insurance. The Guarantor
will cause all properties owned by the Guarantor and its Restricted Subsidiaries
and used in the Guarantor's business or the business of any of its Restricted
Subsidiaries to be maintained and kept in a condition sufficient to conduct
their respective businesses; provided that nothing in this Section 4.16 shall
prevent the Guarantor or any such Subsidiary from discontinuing the use,
operation or maintenance of any of such properties or disposing of any of them,
if such discontinuance or disposal is, in the judgment of the Guarantor,
desirable in the conduct of the business of the Guarantor or such Restricted
Subsidiary.
The Guarantor will provide or cause to be provided, for itself and
its Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds considered reasonable by the Issuer in the
conduct of its business.
SECTION 4.17. Notice of Defaults. In the event that the Issuer
becomes aware of any Default or Event of Default, the Issuer, promptly after it
becomes aware thereof, will give written notice thereof to the Trustee.
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SECTION 4.18. Compliance Certificates. (a) Both of the two principal
accounting officers of the Guarantor and the Issuer shall certify, on or before
a date not more than 90 days after the end of each fiscal year of the Guarantor,
that a review has been conducted of the activities of the Guarantor or the
Issuer, as the case may be, and its Restricted Subsidiaries and the Guarantor's
or the Issuer's and its Restricted Subsidiaries' performance under the Indenture
and that the Guarantor and the Issuer has fulfilled all obligations thereunder,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default and the nature and status thereof. The Guarantor
and the Issuer shall also notify the Trustee of any default or defaults in the
performance of any covenants or agreements under the Indenture.
(b) The Issuer shall (to the extent not prohibited by applicable
accounting rules) deliver to the Trustee, within 90 days after the end of its
fiscal year, a certificate signed by the Issuer's independent certified public
accountants stating (i) that their audit examination has included a review of
the terms of this Indenture and the Notes as they relate to accounting matters,
(ii) that they have read the most recent Officers' Certificate delivered to the
Trustee pursuant to paragraph (a) of this Section 4.18 and (iii) whether, in
connection with their audit examination, anything came to their attention that
caused them to believe that the Issuer was not in compliance with any of the
terms, covenants, provisions or conditions of Article Four and Section 5.01 of
this Indenture as they pertain to accounting matters and, if any Default or
Event of Default has come to their attention, specifying the nature and period
of existence thereof, provided that such independent certified public
accountants shall not be liable in respect of such statement by reason of any
failure to obtain knowledge of any such Default or Event of Default.
(c) Within 90 days of the end of each of the Issuer's fiscal years,
the Issuer shall deliver to the Trustee a list of all Significant Subsidiaries
at the Issuer's expense. The Trustee shall have no duty with respect to any such
list except to keep it on file and available for inspection by the Holders.
SECTION 4.19. Commission Reports and Reports to Holders. At all
times from and after the earlier of (i) the date of the commencement of an
Exchange Offer or the effectiveness of the Shelf Registration Statement (the
"Registration") and (ii) June 1, 1997, in either case, whether or not the Issuer
or the Guarantor is then required to file reports with the Commission, the
Guarantor and the Issuer shall file with the Commission all such reports and
other information as they would be required to file with the Commission by
Section 13(a) or 15(d) under the Exchange Act if they were subject thereto, it
being understood that separate reports and other information for the Issuer are
not required by this covenant unless they would be required by the Commission if
the Guarantor and the Issuer were subject to Section 13(a) or 15(d) under the
Exchange Act. The Issuer shall supply the Trustee and each Holder or shall
supply to the Trust for forwarding to each such Holder at the Issuer's expense,
without cost to such Holder, copies of such reports and other information. In
addition, at all times prior to the earlier of the date of the Registration and
June 1, 1997, the Guarantor and the Issuer shall, at their cost, deliver to each
Holder of the Notes, or shall provide to the Trustee for forwarding to each
Holder, quarterly and annual reports substantially equivalent to those which
would be required by the Exchange Act. In addition, at all times prior to the
Registration, upon the
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request of any Holder or any prospective purchaser of the Notes designated by a
Holder, the Guarantor and the Issuer shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act. Notwithstanding any other provision contained in this Indenture,
whenever this Indenture refers to balance sheet or income statement data filed
with the Commission pursuant to this Section, during the period prior to which
any such reports are required to be so filed, such reference shall be deemed to
refer to the most recent data prepared by the Guarantor and approved by its
Board of Directors.
SECTION 4.20. Waiver of Stay, Extension or Usury Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Issuer from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereinafter in force, or that may affect
the covenants or the performance of this Indenture, and (to the extent that it
may lawfully do so) the Issuer hereby expressly waives all benefit or advantage
of any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.21. Listing the Notes on An Exchange. The Issuer shall
cause the Notes to be listed on such exchange as may be necessary to avoid the
imposition of withholding of taxes upon the payment of interest hereunder, prior
to the first date upon which interest is required to be paid hereunder.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Consolidation, Merger and Sale of Assets. Neither the
Guarantor nor the Issuer will consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Issuer or the Guarantor unless:
(i) the Guarantor or the Issuer shall be the continuing Person, or
the Person (if other than the Guarantor or the Issuer) formed by such
consolidation or into which the Guarantor or the Issuer is merged or that
acquired or leased such property and assets of the Guarantor or the Issuer
shall be a corporation organized and validly existing under the laws of
the jurisdiction of incorporation of the Guarantor or the Issuer
immediately prior to such transaction, the United States of America, the
British Virgin Islands, the Cayman Islands, the Netherlands, the
Netherlands Antilles, Ireland or Jersey or any jurisdiction thereof and
shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Guarantor or the
Issuer, as the case may be, on all of the Notes and under the Indenture;
provided that, with respect to
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any such transaction immediately subsequent to which the continuing Person
is incorporated in a jurisdiction other than the United States or the
jurisdiction in which such Person was incorporated immediately prior to
such transaction, (A) the Issuer delivers to the Trustee an Opinion of
Counsel stating that the obligations of the continuing Person under the
Indenture are enforceable under the laws of the new jurisdiction of its
incorporation to the same extent as the obligations of the Issuer or the
Guarantor, as the case may be, under the Indenture immediately prior to
such transaction; (3) the continuing Person agrees in writing to submit to
jurisdiction and appoints an agent for the service of process, each under
terms substantially similar to the terms contained in Section 12.06 of
this Indenture with respect to the Issuer or the Guarantor, as the case
may be; (C) the continuing Person agrees in writing to pay Additional
Amounts as provided under Section 4.02 of the Indenture with respect to
the Issuer or the Guarantor, as the case may be, except that such
Additional Amounts shall relate to any withholding tax whatsoever
regardless of any change of law (subject to exceptions substantially
similar to those contained in Section 4.02 of the Indenture); (D) the
Board of Directors of the Guarantor determines in good faith that such
transaction will have no material adverse effect on any Holder and a Board
Resolution to that effect is delivered to the Trustee; and (E) the
principal purpose of such transaction is to obtain tax benefits for the
Guarantor, the Issuer, their direct and indirect stockholders or the
Noteholders;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Guarantor or the Issuer, as the case may be, or any
Person becoming the successor obligor of the Notes or the Note Guarantee,
as the case may be, shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Guarantor or the Issuer, as
the case may be, immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis, the Guarantor or the Issuer, as the case may be, or any
Person becoming the successor obligor of the Notes or the Note Guarantee,
as the case may be, would have a Consolidated Leverage Ratio no higher
(or, if negative, no lower) than the Consolidated Leverage Ratio of the
Guarantor or the Issuer, as the case may be, immediately prior to such
transaction; provided that, in connection with any such merger or
consolidation, no consideration (other than Common Stock in the surviving
Person, the Guarantor or the Issuer) shall be issued or distributed to the
stockholders of the Guarantor or the Issuer, as the case may be; and
(v) the Issuer delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided
for herein relating to such transaction have been complied with;
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provided, however, that clauses (iii) and (iv) above do not apply if, in
the good faith determination of the Board of Directors of the Guarantor,
whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state or
jurisdiction of incorporation of the Guarantor or the Issuer; and provided
further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of the Issuer in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Issuer is merged or to which such sale,
conveyance, transfer or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such successor Person had been named
as the Issuer herein and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Notes.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Notes if:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days; provided that a failure to make any of the first six scheduled
interest payments on the Notes in a timely manner will constitute an Event
of Default with no grace or cure period;
(c) defaults in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Guarantor and the Issuer or the
failure to make or consummate an Offer to Purchase in accordance with
Section 4.11 or Section 4.13;
(d) the Guarantor or the Issuer defaults in the performance of or
breaches any other covenant or agreement of the Guarantor or the Issuer,
as the case may be, in the Indenture or under the Notes (other than a
default specified in clause (a), (b) or (c) above) and such default or
breach continues for a period of 30 consecutive days after written notice
to the Issuer by the Trustee or the Holders of 25% or more in aggregate
principal amount at maturity of the Notes;
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(e) there occurs with respect to any issue or issues of Indebtedness
of the Guarantor, the Issuer or any Significant Subsidiary having an
outstanding principal amount of $10 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full
or such acceleration has not been rescinded or annulled within 30 days of
such acceleration and/or (II) the failure to make a principal payment at
the final (but not any interim) fixed maturity and such defaulted payment
shall not have been made, waived or extended within 30 days of such
payment default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Guarantor, the Issuer or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed
$10 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Guarantor, the Issuer or any
Significant Subsidiary 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 the Guarantor, the Issuer or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Guarantor, the Issuer or any Significant Subsidiary or (C)
the winding up or liquidation of the affairs of the Guarantor, the Issuer
or any Significant Subsidiary and, in each case, such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days;
or
(h) the Guarantor, the Issuer or any Significant Subsidiary (A)
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, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Guarantor, the Issuer or any Significant Subsidiary or for all or
substantially all of the property and assets of the Guarantor, the Issuer
or any Significant Subsidiary or (C) effects any general assignment for
the benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in clause (g)or (h) above that occurs with respect
to the Guarantor or the Issuer) occurs and is continuing under the Indenture,
the Trustee or the Holders of at least 25% in aggregate principal amount at
maturity of the Notes, then outstanding, by written notice to the Issuer (and to
the Trustee if such notice is given by the Holders), may, and the Trustee at
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the request of such Holders shall, declare the principal amount of, premium, if
any, and accrued interest on the Notes to be immediately due and payable. Upon a
declaration of acceleration, such principal amount of, premium, if any, and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Guarantor, the Issuer or the relevant Significant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause
(g) or (h) above occurs with respect to the Guarantor or the Issuer, the
principal amount of, premium, if any, and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, interest or
Liquidated Damages, if any, on the Notes or to enforce the performance of any
provision of the Notes, the Pledge Agreement or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Section 9.02, at
any time after a declaration of acceleration, but before a judgment or decree
for the payment of the money due has been obtained by the Trustee, the Holders
of at least a majority in principal amount of the outstanding Notes, by notice
to the Issuer and to the Trustee, may waive all past Defaults and Events of
Default and rescind and annul a declaration of acceleration and its consequences
(except a Default in the payment of principal of, premium, if any, interest or
Liquidated Damages, if any, on any Note as specified in clause (a) or (b) of
Section 6.01 (but not as a result of such acceleration) or in respect of a
covenant or provision of this Indenture which cannot be modified or amended
without the consent of the holder of each outstanding Note affected) if all
existing Events of Default, other than the nonpayment of principal of, premium,
if any, interest or Liquidated Damages, if any, on the Notes that have become
due solely by such declaration of acceleration, have been cured or waived and
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. However, the Trustee may refuse to follow any
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direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes.
SECTION 6.06. Limitation on Suits. A Holder may not pursue any
remedy with respect to the Indenture or the Notes unless:
(i) the Holder gives the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of outstanding Notes make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount at maturity of the outstanding Notes do not
give the Trustee a direction that is inconsistent with the request.
For purposes of Section 6.05 and this Section 6.06, the Trustee
shall comply with TIA Section 316(a) in making any determination of whether the
Holders of the required aggregate principal amount of outstanding Notes have
concurred in any request or direction of the Trustee to pursue any remedy
available to the Trustee or the Holders with respect to this Indenture or the
Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment. Subject to
Sections 6.04 and 9.02, notwithstanding any other provision of this Indenture,
the right of any Holder of a Note to receive payment of principal of, premium,
if any, or interest on, such Note or to bring suit for the enforcement of any
such payment or after the due date expressed in the Notes shall not be impaired
or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in
payment of principal, premium or interest specified in clause (a) or (b) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Issuer or any other
obligor of the Notes for the whole amount of principal, premium, if any, on
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue
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installments of interest, in each case at the rate specified in the Notes, and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Issuer (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon any exchange of the
Notes or upon any such claims and to distribute the same, and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.07. Nothing herein contained shall be deemed to empower
the Trustee to authorize or consent to, or accept or adopt on behalf of any
Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following
order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest, if any, on the Notes in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Notes for principal, premium, if any, and interest, if
any, respectively; and
Third: to the Issuer or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Issuer, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
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faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 of this Indenture, or a suit by Holders of more than 10% in principal
amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then,
and in every such case, subject to any determination in such proceeding, the
Issuer, the Trustee and the Holders shall be restored severally and respectively
to their former positions hereunder and thereafter all rights and remedies of
the Issuer, the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in Section 2.08, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article Six or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the
Trustee shall be as provided by the TIA and as set forth herein. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA Sections
315(a) through (d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
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presented by the proper person. The Trustee need not investigate any fact
or matter stated in any such document and may in good faith conclusively
rely on such document as to the truth of the statements and the
correctness of the opinions therein;
(b) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate, advice of counsel, subsequently confirmed in
writing, or an Opinion of Counsel. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
Officers' Certificate, written advice of counsel or Opinion of Counsel;
(c) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture or the Pledge Agreement at
the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee security or indemnity reasonably satisfactory
to it against the costs, expenses and liabilities that might be incurred
by it in compliance with such request or direction;
(e) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the direction of the Holders of a majority in principal amount of the
outstanding Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture or the
Pledge Agreement; provided that the Trustee's conduct does not constitute
negligence or bad faith;
(f) whenever in the administration of this Indenture or the Pledge
Agreement the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, conclusively rely upon an
Officers' Certificate;
(g) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Issuer personally or by agent or attorney at the expense
of the Issuer; and
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(h) any request or direction of the Issuer mentioned herein or in
the Pledge Agreement shall be sufficiently evidenced by a Issuer Order and
any resolution of the Board of Directors may be sufficiently evidenced by
a Board Resolution.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture, the Pledge
Agreement or the Notes, (ii) shall not be accountable for the Issuer's use or
application of the proceeds from the Notes and (iii) shall not be responsible
for any statement contained herein, in the Pledge Agreement or in the Notes
other than its certificate of authentication. The Trustee shall not be charged
with knowledge of any Default or Event of Default unless (i) a Responsible
Officer of the Trustee assigned to its Global Trust Services Department (or
successor department or group) shall have actual knowledge thereof or (ii) the
Trustee shall have received written notice thereof at its Corporate Trust office
from the Issuer or any Holder. No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. The Trustee shall have no
responsibility for perfecting or maintaining the perfection of its security
interest in the Pledged Securities provided for in the Pledge Agreement and
shall not be required to file or refile any notice or document in any public
office at any time or times.
SECTION 7.05. Notice of Default. If any Default or any Event of
Default occurs and is continuing and if such Default or Event of Default is
actually known to a Responsible Officer of the Trustee, the Trustee shall mail
to each Holder in the manner and to the extent provided in TIA Section 313(c)
notice of such Default or Event of Default within 90 days after it occurs,
unless such Default or Event of Default has been cured; provided, however, that,
except in the case of a default in the payment of the principal of, premium, if
any, or interest on any Note, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
SECTION 7.06. Reports by Trustee to Holders. To the extent required
by TIA Section 313(a), within 60 days after May 15 of each year commencing with
1997 and for as long as there are Notes outstanding hereunder, the Trustee shall
mail to each Holder the Trustee's brief report dated as of such date that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b) and TIA Section 313(c) and (d). A copy of such report at the time of its
mailing to Holders shall be filed with the Commission, if required, and each
stock exchange, if any, on which the Notes are listed.
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The Issuer shall promptly notify the Trustee if the Notes become
listed on any stock exchange, and the Trustee shall comply with TIA Section
313(d).
SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to
the Trustee from time to time such reasonable compensation as shall be agreed
upon in writing for its services. The reasonable compensation of the Trustee
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses and advances incurred or made by the Trustee. Such
expenses shall include the reasonable compensation and expenses of the Trustee's
agents and counsel.
The Issuer shall indemnify the Trustee and its officers, directors,
employees and agents for, and hold them harmless against, any loss or liability
or expense incurred by them without negligence or bad faith on their part in
connection with the acceptance or administration of this Indenture and the
Pledge Agreement and their duties under this Indenture, the Pledge Agreement and
the Notes, including, without limitation, the costs and expenses of defending
themselves against any claim or liability and of complying with any process
served upon them or any of their officers in connection with the exercise or
performance of any of its powers or duties under this Indenture, the Pledge
Agreement and the Notes.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
Notwithstanding anything herein to the contrary, the provisions of
this Section 7.07 shall survive the termination or discharge of this Agreement
or the earlier resignation or removal of the Trustee.
Without prejudice to any other rights available to the Trustee under
applicable law, if the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section
6.01, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.08. Replacement of Trustee. A resignation or removal of
the Trustee and appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign at any time by so notifying the Issuer in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Issuer.
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The Issuer may at any time remove the Trustee, by Issuer Order given
at least 30 days prior to the date of the proposed removal; provided that at
such date no Event of Default shall have occurred and be continuing.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuer. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
The Trustee shall not be liable for any acts or omissions of any
Successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture and the Pledge
Agreement. A successor Trustee shall mail notice of its succession to each
Holder. The Company agrees to pay the Trustee all amounts due to the Trustee
hereunder upon the appointment of any successor Trustee.
Subject to Section 6.11, if the Trustee is no longer qualified or
eligible under Section 7.10, any Holder who satisfies the requirements of TIA
Section 310(b) may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
The Issuer shall give written notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuer's obligations under Section 7.07 shall continue indefinitely
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
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SECTION 7.10. Eligibility. This Indenture shall always have a
Trustee that satisfies the requirements of TIA Section 310(a)(1) and (5). The
Trustee shall have a combined capital and surplus of at least $100,000,000 as
set forth in its most recent published annual report of condition. The Trustee
shall be subject to TIA Section 310(b), subject to the penultimate paragraph
thereof.
SECTION 7.11. Money Held in Trust. The Trustee shall not be liable
for interest on any money received by it except as the Trustee may agree in
writing with the Issuer. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law, and except for
money held in trust under Article Eight of this Indenture and money held in
trust pursuant to the Pledge Agreement.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for the
Issuer, shall exclude and withhold from each payment of principal and interest
and other amounts due hereunder or under the Notes any and all U.S. withholding
taxes applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Notes, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the Holders of
the Notes, that it will file any necessary withholding tax returns or statements
when due, and that, as promptly as possible after the payment thereof, it will
deliver to each Holder of a Note appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such Holders may
reasonably request from time to time.
SECTION 7.13. Investments. The Trustee shall not be liable for
the selection of, or losses incurred in respect of, Permitted Investments.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Issuer's Obligations. Except as
otherwise provided in this Section 8.01, each of the Issuer and the Guarantor
may terminate its obligations under the Notes and this Indenture if:
(a) all Notes previously authenticated and delivered (other than
destroyed, lost or stolen Notes that have been replaced or Notes for whose
payment money or securities have theretofore been held in trust and
thereafter repaid to the Issuer, as provided in Section 8.05) have been
delivered to the Trustee for cancellation and the Issuer has paid all sums
payable by it hereunder; or
(b) (i) all such Notes mature within one year or all of them are to
be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (ii) the Issuer
irrevocably deposits in trust with the Trustee during such one-year
period, under the terms of an irrevocable trust agreement in form
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satisfactory to the Trustee, as trust funds solely for the benefit of
the Holders of such Notes for that purpose, money or U.S. Government
Obligations sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee), without consideration of any
reinvestment of any interest thereon, to pay principal, premium, if any,
and interest on such Notes to maturity or redemption, as the case may be,
and to pay all other sums payable by it hereunder, (iii) no Default or
Event of Default with respect to the Notes shall have occurred and be
continuing on the date of such deposit, (iv) such deposit will not result
in a breach or violation of, or constitute a default under, this
Indenture or any other agreement or instrument to which the Issuer is a
party or by which it is bound, (v) if at such time the Notes are listed
on a national securities exchange, the Notes will not be delisted as a
result of such deposit, defeasance and discharge, and (vi) the Issuer has
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, in each case stating that all conditions precedent provided for
herein relating to the satisfaction and discharge of this Indenture have
been complied with.
With respect to the foregoing clause (a), the Issuer's obligations
under Section 7.07 shall survive. With respect to the foregoing clause (b), the
Issuer's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09,
2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes
have matured or have been redeemed. Thereafter, only the Issuer's obligations in
Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Issuer's obligations under the Notes and this Indenture, and the Guarantor's
obligations under the Guarantee and this Indenture, except for those surviving
obligations specified above.
Section 8.02. Defeasance and Discharge of Indenture. The Issuer will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (a) of this Section 8.02 if:
(a) with reference to this Section 8.02, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and has
conveyed all right, title and interest for the benefit of the Holders,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee as trust funds in trust, specifically pledged to the Trustee
for the benefit of the Holders as security for payment of the principal
of, premium, if any, and interest, if any, on the Notes, and dedicated
solely to, the benefit of the Holders, in and to (i) money in an amount,
(ii) U.S. Government Obligations that, through the payment of interest,
premium, if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (a), money in an amount or (iii) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on the outstanding Notes at the
Stated Maturity of such principal or
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interest or upon earlier redemption; provided that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to the payment of such principal, premium, if
any, and interest with respect to the Notes and to give any related
notice of redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Issuer or any of its Subsidiaries is a party or by
which the Issuer or any of its Subsidiaries is bound;
(c) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both could become a Default or Event of
Default, shall have occurred and be continuing on the date of such deposit
or during the period ending on the 123rd day after the date of such
deposit;
(d) the Issuer shall have delivered to the Trustee either (i) a
ruling based on relevant law and practice at the time directed to the
Trustee from the Inland Revenue or other relevant tax authority to the
effect that the Holders will not recognize income, gain or loss for U.K.
income tax or other tax purposes as a result of the Issuer's exercise,
disregarding income tax on any amounts that would have been received but
for such exercise, of its option under this Section 8.02 and will be
subject to income tax on the same amount and in the same manner and at the
same time as would have been the case if such option had not been
exercised or (ii) an Opinion of Counsel to the same effect as the ruling
described in clause (i) above;
(e) the Issuer shall have delivered to the Trustee (i) either (A) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the Holders will not recognize additional income, gain
or loss for federal income tax purposes as a result of the Issuer's
exercise of its option under this Section 8.02 and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised or (B) an Opinion of Counsel to the same effect as the ruling
described in clause (A) above accompanied by a ruling to that effect
published by the Internal Revenue Service, unless there has been a change
in the applicable federal income tax law since the date of this Indenture
such that a ruling from the Internal Revenue Service is no longer required
and (ii) an Opinion of Counsel to the effect that (A) the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and
(B) after the passage of 123 days following the deposit (except, with
respect to any trust funds for the account of any Holder who may be deemed
to be "connected" with the Issuer for purposes of the Insolvency Act 1986
after two years following the deposit), the trust funds will not be
subject to the effect of Section 547 of the United States Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law and either (I) the
trust funds will no longer remain the property of the Issuer (and
therefore will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors'
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rights generally) or (II) if a court were to rule under any such law in
any case or proceeding that the trust funds remained property of the
Issuer (a) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to the Holders,
the Trustee will hold, for the benefit of the Holders, a valid and
perfected security interest in such trust funds that is not avoidable in
bankruptcy or otherwise and (b) no property, rights in property or other
interests granted to the Trustee or the Holders in exchange for, or with
respect to, such trust funds will be subject to any prior rights of
holders of other Indebtedness of the Issuer or any of its Notes;
(f) if at such time the Notes are listed on a national securities
exchange, the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result of
the Issuer's exercise of its opinion under this Section 8.02; and
(g) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the post deposit
period referred to in clause (e)(ii)(B) of this Section 8.02, none of the
Issuer's obligations under this Indenture shall be discharged. Subsequent to the
end of such period with respect to this Section 8.02, the Issuer's obligations
in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14,4.01, 4.02,
7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes mature or are
redeemed. Thereafter, only the Issuer's obligations in Sections 7.07, 8.05 and
8.06 shall survive. If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (e)(i) of this Section 8.02 may be
provided specifically without regard to, and not in reliance upon, the
continuance of the Issuer's obligations under the first sentence of Section
4.01, then the Issuer's obligations under such sentence shall cease upon
delivery to the Trustee of such ruling or Opinion of Counsel and compliance with
the other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Issuer's obligations under the
Notes, any Subsidiary Guarantee, if any, and this Indenture except for those
surviving obligations in the immediately preceding paragraph
SECTION 8.03. Defeasance of Certain Obligations. The Issuer may omit
to comply with any term, provision or condition set forth in clauses (iii) and
(iv) of Section 5.01 and Sections 4.03 through 4.18 (except for any covenant
otherwise required by the TIA), and clauses (c) and (d) of Section 6.01 with
respect to clauses (iii) and (iv) of Section 5.01, clause (e) of Section 6.01
with respect to Sections 4.03 through 4.18, except as aforesaid, and clause (f)
of Section 6.01 shall be deemed not to be Events of Default, in each case with
respect to the outstanding Notes if:
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(a) with reference to this Section 8.03, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and
conveyed all right, title and interest to the Trustee for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of the Holders as
security for payment of the principal of, premium, if any, and interest,
if any, on the Notes, and dedicated solely to, the benefit of the Holders,
in and to (i) money in an amount, (ii) U.S. Government Obligations that,
through the payment of interest and principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (a), money in an
amount or (iii) a combination thereof in an amount sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity or upon earlier redemption of such principal or
interest; provided that the Trustee shall have been irrevocably instructed
to apply such money or the proceeds of such U.S. Government Obligations to
the payment of such principal, premium, if any, and interest with respect
to the Notes and to give any related notice of redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Issuer or any of its Subsidiaries is a party or by
which the Issuer or any of its Subsidiaries is bound;
(c) immediately after giving effect to such deposit or a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both would become a Default or Event of
Default, shall have occurred and be continuing on the date of such deposit
or during the period ending on the 123rd day after the day of such
deposit;
(d) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, (ii) the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and the defeasance of the obligations referred to in the first
paragraph of this Section 8.03 and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred and
(iii) after the passage of 123 days following the deposit (except with
respect to any trust funds for the account of any Holder who may be deemed
to be "connected" with the Issuer for purposes of the Insolvency Act 1986
after two years following the deposit), the trust funds will not be
subject to the effect of Section 547 of the United States Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law, and either (A) the
trust funds will no longer remain the property of the Issuer (and
therefore will not be subject to the effect of any
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applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditor's rights generally) or (B) if a court were to rule
under any such law in any case or proceeding that the trust funds
remained property of the Issuer (1) assuming such trust funds remained in
the possession of the Trustee prior to such court ruling to the extent
not paid to the Holders, the Trustee will hold, for the benefit of the
Holders, a valid and perfected security interest in such trust funds that
is not avoidable in bankruptcy or otherwise and (2) no property, rights
in property or other interests granted to the Trustee or the Holders in
exchange for, or with respect to, such trust funds will be subject to any
prior rights or holders of other Indebtedness of the Issuer or any of its
Notes;
(e) if at such time the Notes are listed on a national securities
exchange, the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of the Issuer's
exercise of its option under Section 8.03; and
(f) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section 8.06,
the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 8.05. Repayment to Issuer. Subject to Sections 7.07, 8.01,
8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the Issuer
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Issuer any money
held by them for the payment of principal, premium, if any, or interest that
remains unclaimed for two years; provided that the Trustee or such Paying Agent
before being required to make any payment may cause to be published at the
expense of the Issuer once in a newspaper of general circulation in the City of
New York or mail to each Holder entitled to such money notice that such money
remains unclaimed and that after a date specified therein (which shall be at
least 30 days from the date of such publication or mailing) any unclaimed
balance of such money then remaining will be repaid to the Issuer. After payment
to the Issuer, Holders entitled to such money must look to the Issuer for
payment as general creditors unless an applicable law designates another Person,
and all liability of the Trustee and such Paying Agent with respect to such
money shall cease.
SECTION 8.06. Reinstatement. if the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Issuer's obligations under this Indenture, the Guarantee, and the Notes shall
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be revived and reinstated as though no deposit had occurred pursuant to Section
8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that,
if the Issuer has made any payment of principal of, premium, if any, or interest
on any Notes because of the reinstatement of its obligations, the Issuer shall
be subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
SECTION 8.07. Insiders. With respect to the determination of the
Persons constituting beneficial owners of Notes and whether any such Person is
"connected" with the Issuer for purposes of Sections 8.02(e)(ii)(B) and
8.03(d)(iii), the Trustee may rely on an Officers' Certificate.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Issuer and the
Guarantor, when authorized by Board Resolution, and the Trustee may amend or
supplement this Indenture, the Notes and the Pledge Agreement without notice to
or the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(b) to comply with Article Five and to provide for amendments to the
Pledge Agreement pursuant to Section 10.01 and to add Pledged Securities
to the Pledge Account;
(c) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA or to comply with
comments received from the Commission in connection with Commission's
review of any registration statement in connection with the Exchange Offer
or any registration statement in connection with any shelf registration of
the Notes, provided that such amendments or supplements do not adversely
affect the rights of the Holders under this Indenture;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes;
(e) to make any change that, in the opinion of the Board of
Directors of the Issuer evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder; or
(f) to add a Guarantor.
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SECTION 9.02. With Consent of Holders. Subject to Sections 6.04 and
6.07 and without prior notice to the Holders, the Issuer and the Guarantor, when
authorized by the Board of Directors (as evidenced by a Board Resolution) and a
resolution of the board of directors of the Guarantors and the Trustee may amend
this Indenture, the Notes and the Pledge Agreement with the consent of the
Holders of not less than a majority in aggregate principal amount at maturity of
the Notes then outstanding.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, or premium, if any, or interest
on, any Note;
(iii) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Note;
(iv) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity (or, in the case of a redemption,
on or after the Redemption Date) of any Note;
(v) reduce the above-stated percentage of outstanding Notes the
consent of whose Holders is necessary to modify or amend the Indenture;
(vi) waive a default in the payment of principal of, premium, if
any, or interest on the Notes;
(vii) reduce the percentage or aggregate principal amount at
maturity of outstanding Notes the consent of whose Holders is necessary
for waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults; or
(viii) release the Guarantor from its Note Guarantee.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Issuer shall mail to the Holders affected thereby a
notice briefly describing such amendment, supplement or waiver. The Issuer will
mail supplemental indentures to Holders upon request. Any failure of the Issuer
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
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SECTION 9.03. Revocation and Effect of Consent. Until an amendment
or waiver becomes effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date any such amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Definitive Registered Notes entitled
to consent to any amendment, supplement or waiver. If a record date is fixed,
then, notwithstanding the last two sentences of the immediately preceding
paragraph, those persons who were Holders of Definitive Registered Notes at such
record date (or their duly designated proxies) and only those persons shall be
entitled to consent to such amendment, supplement or waiver or to revoke any
consent previously given, whether or not such persons continue to be Holders of
such Definitive Registered Notes after such record date. No such consent shall
be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in any of clauses (i)
through (viii) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (viii) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Note that evidences the same indebtedness as the Note of such consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver such Note to the Trustee. The Trustee may place an appropriate
notation on the Note about the changed terms and return it to the Holder and the
Trustee may place an appropriate notation on any Note thereafter authenticated.
Alternatively, if the Issuer or the Trustee so determines, the Issuer in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments. Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. The Trustee shall execute any such amendment, supplement or waiver
upon satisfaction of the conditions precedent thereto contained herein, unless
such amendment, supplement or waiver adversely affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
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SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
SECURITY
SECTION 10.01. Security. (a) The Issuer shall (i) enter into the
Pledge Agreement (in the form attached hereto as Exhibit G) and comply with the
terms and provisions thereof and (ii) use a portion of the net proceeds of the
placement of Notes on the Closing Date to purchase the Pledged Securities to be
pledged to the Trustee for the benefit of the Holders of the Notes in such
amount as will be sufficient upon receipt of scheduled interest and principal
payments of the Pledged Securities, in the opinion of a nationally recognized
firm of independent public accountants selected by the Issuer, to provide for
payment in full of the first six scheduled interest payments due on the Notes.
The Pledged Securities shall be pledged by the Issuer to the Trustee for the
benefit of the Holders of the Notes and shall be held by the Trustee in the
Pledge Account pending disbursement pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Note, consents and agrees to
the terms of the Pledge Agreement (including, without limitation, the provisions
providing for foreclosure and release of the Pledged Securities) as the same may
be in effect or may be amended from time to time in accordance with its terms,
and authorizes and directs the Trustee to enter into the Pledge Agreement and to
perform its respective obligations and exercise its respective rights thereunder
in accordance therewith The Issuer will do or cause to be done all such acts and
things as may be necessary or proper, or as may be required by the provisions of
the Pledge Agreement, to assure and confirm to the Trustee the security interest
in the Pledged Securities contemplated hereby, by the Pledge Agreement or any
part thereof, as from time to time constituted, so as to render the same
available for the security and benefit of this Indenture and of the Notes
secured hereby, according to the intent and purposes herein expressed. The
Issuer shall take, or shall cause to be taken, upon request of the Trustee, any
and all actions reasonably required to cause the Pledge Agreement to create and
maintain, as security for the obligations of the Issuer under this Indenture and
the Notes, valid and enforceable first priority liens in and on all the Pledge
Securities, in favor of the Trustee, superior to and prior to the rights of all
third Persons and subject to no other Liens other than as provided herein.
(c) The release of any Pledged Securities pursuant to the Pledge
Agreement will not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Issuer shall cause TIA Section 314(d) relating to the
release of property or securities from the Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge
Agreement to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an officer of the Issuer, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
<PAGE>
83
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care.
(d) The Issuer shall cause TIA Section 314(b), relating to opinions
of counsel regarding the Lien under the Pledge Agreement, to be complied with.
The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof,
accept as conclusive evidence of compliance with the foregoing provisions the
appropriate statements contained in such instruments.
(e) The Trustee may, in its sole discretion and without the consent
of the Holders, on behalf of the Holders, but shall have absolutely no duty to
take all actions it deems necessary or appropriate in order to (i) enforce any
of the terms of the Pledge Agreement and (ii) collect and receive any and all
amounts payable in respect of the obligations of the Issuer thereunder. The
Trustee shall have power to institute and to maintain such suits and proceedings
as the Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Pledged Securities (including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders or of the Trustee).
ARTICLE ELEVEN
GUARANTEE OF SECURITIES
SECTION 11.01. Guarantee. Subject to the provisions of this Article
Eleven, the Guarantor hereby fully, unconditionally and irrevocably guarantees
to each Holder and to the Trustee on behalf of, the Holders: (i) the due and
punctual payment of the principal of, premium, if any, on and interest on each
Note, when and as the same shall become due and payable, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of and interest, if any, on the Notes, to the extent lawful,
and the due and punctual performance of all other obligations of the Issuer to
the Holders or the Trustee, all in accordance with the terms of such Note and
this Indenture and (ii) in the case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, at Stated Maturity, by acceleration or otherwise. The
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of merger or bankruptcy of the Issuer, any
right to require a proceeding first against the Issuer, the benefit of
discussion, protest or notice with respect to any such Note or the debt
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged as to any such Note except by payment in full of the
principal thereof and interest thereon and as provided in Section 8.01 and
Section 8.02 (subject to Section 8.06). The maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Six for the purposes
of this Article Eleven. In the event of any declaration of acceleration of such
obligations as provided in Article Six, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantor for the purpose
of this Article Eleven. In
<PAGE>
84
addition, without limiting the foregoing provisions, upon the effectiveness of
an acceleration under Article Six, the Trustee shall promptly make a demand for
payment on the Notes under the Guarantee provided for in this Article Eleven.
If the Trustee or the Holder of any Note is required by any court or
otherwise to return to the Issuer or the Guarantor, or any custodian, receiver,
liquidator, trustee, sequestrator or other similar official acting in relation
to the Issuer or the Guarantor, any amount paid to the Trustee or such Holder in
respect of a Note, this Guarantee, to the extent theretofore discharged, shall
be reinstated in full force and effect. The Guarantor further agrees, to the
fullest extent that it may lawfully do so, that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six
hereof for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition extant under any applicable bankruptcy law preventing such
acceleration in respect of the obligations guaranteed hereby.
Until such time as the Notes are fully and finally paid, including
all interest, premium, principal and liquidated damages with respect thereto,
the Guarantor hereby irrevocably waives any claim or other rights which it may
now or hereafter acquire against the Issuer that arise from the existence,
payment, performance or enforcement of its obligations under this Guarantee and
this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the Holders against the Issuer or any
collateral which any such Holder or the Trustee on behalf of such Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Issuer, directly or indirectly, in cash or
other property or by set off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to the
Guarantor in violation of the preceding sentence and the principal of, premium,
if any, and accrued interest on the Notes shall not have been paid in full, such
amount shall be deemed to have been paid to the Guarantor for the benefit of,
and held in trust for the benefit of, the Holders, and shall forthwith be paid
to the Trustee for the benefit of the Holders to be credited and applied upon
the principal of, premium, if any, and accrued interest on the Notes. The
Guarantor acknowledges that it will receive direct and indirect benefits from
the issuance of the Notes pursuant to this Indenture and that the waivers set
forth in this Section 11.01 are knowingly made in contemplation of such
benefits.
The Guarantee set forth in this Section 11.01 shall not be valid or
become obligatory for any purpose with respect to a Note until the certificate
of authentication on such Note shall have been signed by or on behalf of the
Trustee.
SECTION 11.02. Obligations Unconditional. Subject to Section 11.05,
nothing contained in this Article Eleven or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Guarantor and the
holders of the Notes, the obligation of the Guarantor, which is absolute and
unconditional, upon failure by the Issuer, to pay to the holders of the Notes
the principal of, premium, if any, and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect
<PAGE>
85
the relative rights of the holders of the Notes and creditors of the Guarantor,
nor shall anything herein or therein prevent the holder of any Notes or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture.
Without limiting the foregoing, nothing contained in this Article
Eleven will restrict the right of the Trustee or the holders of the Notes to
take any action to declare the Guarantee to be due and payable prior to the
Stated Maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder.
SECTION 11.03. Notice to Trustee. The Guarantor shall give prompt
written notice to the Trustee of any fact known to the Guarantor which would
prohibit the making of any payment to or by the Trustee in respect of the
Guarantee pursuant to the provisions of this Article Eleven.
SECTION 11.04. This Article Not to Prevent Events of Default. The
failure to make a payment on account of principal of, premium, if any, or
interest on the Notes by reason of any provision of this Article will not be
construed as preventing the occurrence of an Event of Default.
SECTION 11.05. Net Worth Limitation. Notwithstanding any other
provision of this Indenture or the Notes, the Guarantee shall not be enforceable
against the Guarantor in an amount in excess of the net worth of the Guarantor
at the time that determination of such net worth is, under applicable law,
relevant to the enforceability of the Guarantee. Such net worth shall include
any claim or future claim of the Guarantor against the Issuer for reimbursement
and any claim against any grantor of a Guarantee for contribution.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of and
to govern indentures qualified under the TIA. After the effectiveness of the
Registration Statement, this Indenture shall be subject to the provisions of the
TIA that are required to be a part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 12.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:
if to the Issuer:
RSL Communications PLC
<PAGE>
86
Victoria House
London Square
Cross lanes
Guild Ford, Surrey GUl 1UJ
Attention: President
with a copy to:
RSL Communications, LTD.
767 Fifth Avenue
Suite 4300
New York, New York 10153
Attention: President
and to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert L. Kohl
if to the Trustee or the Book-Entry Depositary:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Department
The Issuer, the Trustee or the Book-Entry Depositary by notice to
the other may designate additional or different addresses for subsequent notices
or communications.
Any notice or communication mailed to a Holder of a Definitive
Registered Note shall be mailed to him at his address as it appears on the
Register by first class mail and shall be sufficiently given to him if so mailed
within the time prescribed. Copies of any such communication or notice to a
Holder shall also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder as provided
herein or any defect in it shall not affect its sufficiency with respect to
other Holders. Except for a notice to the Trustee, which is deemed given only
when received, and except as otherwise provided in this Indenture, if a notice
or communication is mailed in the manner provided in this Section 12.02, it is
duly given.
<PAGE>
87
where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 12.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer to the Trustee to take any action
under this Indenture, the Issuer shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(a) a statement that each person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(c) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 12.05. Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
<PAGE>
88
SECTION 12.06. Agent for Service: Submission to Jurisdiction: Waiver
of Immunities. By the execution and delivery of this Indenture, each of the
Issuer and the Guarantor (i) represents that it has designated and appointed RSL
Communications N. America, Inc. ("RSLNA"), as its authorized agent upon which
process may be served in any suit, action or proceeding arising out of or
relating to the Notes or this Indenture that may be instituted in any federal or
state court in the State of New York, Borough of Manhattan, or brought under
federal or state securities laws or brought by the Trustee (whether in its
individual capacity or in its capacity as Trustee hereunder), and that RSLNA has
accepted such designation, (ii) submits to the non-exclusive jurisdiction of any
such court in any such suit, action or proceeding, (iii) agrees that service of
process upon RSLNA and written notice of said service to the Issuer and the
Guarantor (mailed or delivered to its President at its principal office as
specified in Section 12.02) shall be deemed in every respect effective service
of process upon it in any such suit or proceeding and (iv) agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments as may be necessary to continue such designation and appointment
of the Process Agent in full force and effect so long as any of the Notes shall
be outstanding. The Issuer and the Guarantor further agree to take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
RSLNA in full force and effect so long as this Indenture shall be in full
force and effect or any of the Notes shall be outstanding.
To the extent that the Issuer has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Issuer hereby irrevocably waives such immunity in respect of its obligations
under this Indenture and the Notes, to the extent permitted by law.
SECTION 12.07. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Payment Date or Stated Maturity of any
Note shall not be a Business Day, then payment of principal of, premium, if any,
or interest on such Note, as the case may be, need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date, Payment Date or Redemption Date, or at
the Stated Maturity of such Note, provided that no interest shall accrue for the
period from and after such Interest Payment Date, Payment Date, Redemption Date
or Stated Maturity, as the case may be.
SECTION 12.08. Governing law. This Indenture and the Notes shall
be governed by the laws of the State of New York.
SECTION 12.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Issuer or any Subsidiary of the Issuer. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
<PAGE>
89
SECTION 12.10. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the Notes,
or for any claim based thereon or otherwise in respect thereof and no recourse
under or upon any obligation, covenant or agreement of the Issuer or the
Guarantor contained in this Indenture, the Pledge Agreement or in any of the
Notes, or because of the creation of any Indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer, director, employee or
controlling person, as such, of the Issuer or the Guarantor or of any successor
Person thereof, either directly or through the Issuer or any successor Person,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture, the
Pledge Agreement and the issue of the Notes.
SECTION 12.11. Successors. All agreements of the Issuer and the
Guarantor in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.12. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
SECTION 12.13. Separability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.14. Table of Contents. Headings. Etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
to be considered a part hereof and shall in no way modify or restrict any of
the terms and provisions hereof.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
----------------------------------
Name: Itzhak Fisher
Title: President and CEO
RSL COMMUNICATIONS, LTD.
By:__________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ James D. Heaney
----------------------------------
Name: JAMES D. HEANEY
Title: Vice President
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
RSL COMMUNICATIONS, PLC
By:__________________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ James D. Heaney
----------------------------------
Name: JAMES D. HEANEY
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF GLOBAL NOTE
[FACE OF NOTE]
[insert Private Placement Legend, if applicable]
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF THE
NOTES AND ONE WARRANT (EACH, A "WARRANT" AND COLLECTIVELY, THE "WARRANTS")
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.815 SHARES OF CLASS A
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF RSL COMMUNICATIONS, LTD. (THE "CLASS
A SHARES"). PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) 180
DAYS AFTER OCTOBER 3, 1997, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH
RESPECT TO THE NOTES AND (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES. THE NOTES EVIDENCED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.
THIS NOTE IS HELD BY THE BOOK-ENTRY DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF,
AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I)
THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE
BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12
OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
BOOK-ENTRY DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF RSL COMMUNICATIONS PLC.
<PAGE>
A-2
RSL COMMUNICATIONS PLC
12 1/4% Senior Note Due 2006
CUSIP 781076ABO
No.______________
Closing Date: October 3, 1996
RSL COMMUNICATIONS PLC, a United Kingdom corporation, with registration
number 3231791 (the "Company", which term includes any successor under the
Indenture hereinafter referred to), for value received, promises to pay to the
bearer upon surrender hereof the principal sum of ______________________ United
States Dollars (U.S.$ )on October 3, 2006.
Interest Payment Dates: May 15 and November 15, commencing May 15, 1997.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which provisions shall have the same effect as if set
forth hereon.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
Date: RSL COMMUNICATIONS PLC
By:______________________________________
Name:
Title:
This is one of the 12 1/4% Senior Notes due 2006 described in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:______________________________________
Authorized Officer
<PAGE>
A-4
[REVERSE SIDE OF NOTE]
RSL COMMUNICATIONS PLC
12 1/4% Senior Note due 2006
1. Principal and Interest.
RSL Communications Plc (the "Company") will pay the principal of
this Note on October 3, 2006.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest on the Notes shall accrue at the rate of 12 1/4% per annum
(the "Interest Rate") and shall be payable in U.S. dollars in cash semi-annually
in arrears on May 15 and November 15 (each an "Interest Payment Date"); provided
that the first Interest Payment Date shall be May 15, 1997. Interest on the
Notes will accrue from the most recent date to which interest has been paid or
duly provided for, or if no interest has been paid or duly provided for, from
the date of original issuance hereof. Interest will be computed on the basis of
a 36O day year comprised of twelve 3O-day months.
The Company shall pay interest on overdue principal and premium, if
any, and (to the extent lawful) interest on overdue installments of interest and
Liquidated Damages, if any, at the rate of 14 1/4% per annum.
Under certain circumstances described in the Indenture, the Company
also shall pay Additional Amounts to the Holders of Notes equal to an amount
that the Company may be required to withhold or deduct for or on account of
Taxes imposed by a Taxing Authority within the United Kingdom, or within any
other jurisdiction in which the Company is organized or engaged in business for
tax purposes, from any payment made under or with respect to the Notes.
2. Method of Payment.
The Company will pay interest and Liquidated Damages, if any, on the
Notes to the Holder of this Note upon presentment hereof at the office of the
Paying Agent of the Company maintained for that purpose in the Borough of
Manhattan, the City of New York. Holders must surrender Notes to such Paying
Agent to collect principal payments. The Company will pay principal, premium, if
any, and interest and Liquidated Damages, if any, in money of the United States
of America that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal, premium, if any, interest
and Liquidated Damages, if any, by check payable in such money. If a payment
date is a date other than a Business Day at a place of payment, payment may be
made at that place on the next succeeding
<PAGE>
A-5
day that is a Business Day and no interest and Liquidated Damages, if any, shall
accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent and Registrar without notice in accordance
with the Indenture. The Company, any Affiliate or any Subsidiary thereof may act
as the Paying Agent or Registrar.
4. Indenture: Limitations.
The Company issued the Notes under an Indenture dated as of October
3, 1996 (the "Indenture"), between the Company, RSL Communications, Ltd., as
guarantor, and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized
terms herein are used as defined in the Indenture unless otherwise indicated.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act. The Notes are subject
to all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are unsecured senior indebtedness of the Company. The
Indenture limits the aggregate principal amount of the Notes to $300,000,000.
5. Optional Redemption.
The Notes will be redeemable, at the Company's option, in whole or
in part, at any time or from time to time on or after November 15, 2001 and
prior to maturity, upon not less than 30 nor more than 60 days' prior notice, at
the following Redemption Prices (expressed in percentages of their principal
amount), plus accrued and unpaid interest, if any, and Liquidated Damages, if
any, to the Redemption Date if redeemed during the 12-month period commencing on
November 15 of the applicable years set forth below:
Year Redemption Price
---- ----------------
2001 106.1250%
2002 103.0625%
2003 and thereafter 100.0000%
In addition, in the event of one or more Public Equity Offerings
prior to November 15, 1999, the Company may, at its option, use some or all of
the Net Cash Proceeds thereof (including such process received by the Guarantor
and contributed to the Company) thereof to redeem up to a maximum of $90,000,000
of the original aggregate principal amount of the Notes at a redemption price
equal to 112.2500% of the principal amount of the Notes, plus accrued and
<PAGE>
A-6
unpaid interest, if any, and Liquidated Damages, if any, to the date of
redemption (determined at the Redemption Date) subject to certain provisos set
forth in Article Three of the Indenture; provided that (i) at least $210.0
million aggregate principal amount of Notes remains outstanding after each such
redemption and (ii) each such redemption occurs within 180 days of the related
Public Equity Offering. Any such redemption must be effected upon not less than
30 nor more than 60 days' notice by the Company.
6. Selection of Notes for Partial Redemption: Effect of Redemption Notice.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Note of $1,000 in principal amount or less shall
be redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Upon the giving of any redemption notice,
interest on Notes called for redemption will cease to accrue from and after the
date fixed for redemption (unless the Company defaults in providing the funds
for such redemption) and such Notes will then cease to be outstanding.
7. Redemption for Changes in Withholding Taxes.
The Notes are subject to redemption as a whole, but not in part, at
the option of the Company at any time at 100% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, and Liquidated Damages, if
any, to the Redemption Date, if (i) the Company or the Guarantor has become or
would become obligated to pay, on the next date on which any amount would be
payable with respect to the Notes, any Additional Amounts as a result of a
change in laws (including any regulations promulgated thereunder or any
amendment to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority), if such change is announced and becomes effective on or after the
Closing Date and (ii) the Guarantor and the Company cannot reasonably arrange
for another obligor to make such payment so as to avoid the requirement to pay
such Additional Amounts.
8. Notice of Redemption.
Notice of any optional redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to the Holders of Notes to
be redeemed at such Holder's registered address as it appears in the Register.
9. Repurchase upon Change of Control.
Upon the occurrence of any Change of Control, the Company will be
obligated to make an offer to purchase all outstanding Notes pursuant to the
Offer to Purchase described in the Indenture at a purchase price equal to 101%
of the aggregate principal amount thereof plus
<PAGE>
A-7
accrued and unpaid interest, if any, and Liquidated Damages, if any, to the date
of purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days
after any Change of Control occurs to each Holder of Notes at such Holder's
registered address as it appears in the Register. Notes in original
denominations larger than $1,000 may be sold to the Company in part; provided
that Notes will only be issued in denominations of $1,000 principal amount at
maturity or integral multiples thereof. On and after the Payment Date, interest
ceases to accrue on Notes or portions of Notes surrendered for purchase by the
Company, unless the Company defaults in the payment of the Change of Control
Payment.
10. Registration Rights.
The Holders of the Notes are entitled to the benefits of the
Registration Rights Agreement, dated as of October 3, 1996, between the Company,
the Manager and the other Placement Agents. Pursuant to the Registration Rights
Agreement, the Company has agreed with the Placement Agents, for the benefit of
the Holders, that the Company will use its reasonable best efforts, at its cost,
to file and cause to become effective a registration statement (the "Exchange
Offer Registration Statement") with respect to a registered offer to exchange
the Notes for an issue of unsubordinated notes of the Company (the "Exchange
Notes") with terms identical to the Notes (except that the Exchange Notes will
not bear legends restricting transfer thereof). Upon the Exchange Offer
Registration Statement being declared effective, the Company and the Guarantor
shall offer the Exchange Notes in return for surrender of the Notes (the
"Exchange Offer"). In the event that applicable interpretations of the staff of
the Commission do not permit the Company and the Guarantor to effect the
Exchange Offer or if any Holder notifies the Company and the Guarantor that it
or any beneficial owner of the Notes is not permitted for any reason by
applicable law or the interpretations thereof of the staff of the Commission to
participate in the Exchange Offer, the Company and the Guarantor shall, at their
cost, use their reasonable best efforts to cause to become effective a Shelf
Registration Statement with respect to resales of the Notes (the "Shelf
Registration Statement") and to keep such Shelf Registration Statement effective
until the earlier to occur of (i) expiration of the time period referred to in
Rule l44(k) under the Securities Act as in effect from time to time and (ii)
such time as all Notes registered thereunder have been sold. In the event that
the Exchange Offer is not consummated and a Shelf Registration Statement is not
declared effective on or prior to June 1, 1997, the annual interest date borne
by the Notes shall be permanently increased to 12 3/4% per annum.
11. Denomination.
This Global Note is in bearer form without coupons and is
denominated in an amount equal to $1,000 of principal amount or an integral
multiple thereof and is transferable by delivery. This Note is a Global Note.
12. Persons Deemed Owners.
The bearer of this Note shall be treated as the owner of this Note
for all purposes.
<PAGE>
A-8
13. Unclaimed Money.
If money for the payment of principal, premium, if any, interest or
Liquidated Damages, if any, remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company at its request. After that,
Holders entitled to the money must look to the Company for payment, unless an
applicable law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, accrued interest and Liquidated Damages, if any, on the Notes to redemption
or Stated Maturity, (a) the Company will be discharged from the Indenture and
the Notes, except in certain circumstances for certain sections thereof, or (b)
the Company will be discharged from certain covenants set forth in the
Indenture.
15. Amendment: Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
materially and adversely affect the rights of any Holder.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company, the Guarantor and the Restricted Subsidiaries, among other things, to
Incur additional Indebtedness; create Liens; pay dividends or make distributions
in respect of their Capital Stock; make Investments or make certain other
Restricted Payments; engage in Asset Sales; issue or sell stock of Restricted
Subsidiaries; enter into transactions with stockholders or Affiliates; modify
the Shareholder Standby Facility; or, with respect to the Company, consolidate,
merge or sell all or substantially all of its assets. Within 90 days after the
end of the last fiscal quarter of each year, the Company must report to the
Trustee on compliance with such limitations.
17. Security.
The Company has entered into the Pledge Agreement and applied a portion of
the net proceeds of the Notes to purchase the Pledged Securities to be pledged
to the Trustee for the benefit of the Holders of the Notes in such amount as
will be sufficient upon receipt of scheduled interest and principal payments on
such securities in the written opinion, delivered to the Trustee,
<PAGE>
A-9
of a nationally recognized firm of independent public accountants selected by
the Company, to provide for payment in full of the first six scheduled interest
payments due on the Notes. The Pledged Securities will be pledged by the Company
to the Trustee for the benefit of the Holders of the Notes and will be held by
the Trustee in the Pledge Account pending disbursement pursuant to the Pledge
Agreement.
18. Successor Persons.
Generally, when a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
19. Defaults and Remedies.
The following events will be defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; provided that a failure to make any of the first six scheduled interest
payments on the Notes in a timely manner will constitute an Event of Default
with no grace or cure period; (c) defaults in the performance or breach of the
provisions of the Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the assets of the Guarantor and the Company or
the failure to make or consummate an Offer to Purchase in accordance with
Section 4.11 or Section 4.13 of the Indenture, (d) the Guarantor or the Company
defaults in the performance of or breaches any other covenant or agreement of
the Guarantor or the Company, as the case may be, in the Indenture or under the
Notes (other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after written
notice to the Company by the Trustee or the Holders of 25% or more in aggregate
principal amount at maturity of the Notes; (e) there occurs with respect to any
issue or issues of Indebtedness of the Guarantor, the Company or any Significant
Subsidiary having an outstanding principal amount of $10 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $10 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Guarantor, the Company or any
Significant Subsidiary and shall not be paid or discharged, and there shall be
any period of 30 consecutive days following entry of the final judgment or order
that causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed $10
million during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or
<PAGE>
A-10
otherwise, shall not be in effect; (g) a court having jurisdiction in the
premises enters a decree or order for (A) relief in respect of the Guarantor,
the Company or any Significant Subsidiary 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 the Guarantor, the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Guarantor, the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Guarantor, the Company or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or (h) the
Guarantor, the Company or any Significant Subsidiary (A) 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, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Guarantor, the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Guarantor, the Company or any Significant Subsidiary or (C)
effects any general assignment for the benefit of creditors. If an Event of
Default (other than an Event of Default specified in clause (g) or (h) above
that occurs with respect to the Guarantor or the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the Notes, then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
principal amount of, premium, if any, and accrued interest on the Notes to be
immediately due and payable. Upon a declaration of acceleration, such principal
amount of premium, if any, and accrued interest shall be immediately due and
payable. In the event of a declaration of acceleration because an Event of
Default set forth in clause (e) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
event of default triggering such Event of Default pursuant to clause (e) shall
be remedied or cured by the Guarantor, the Company or the relevant Significant
Subsidiary or waived by the holders of the relevant Indebtedness within 60 days
after the declaration of acceleration with respect thereto. If an Event of
Default specified in clause (g) or (h) above occurs with respect to the
Guarantor or the Company, the principal amount of, premium, if any, and accrued
interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount at maturity of the outstanding Notes by written notice to the Company and
to the Trustee, may waive all past defaults and rescind and annul a declaration
of acceleration and its consequences if (i) all existing Events of Default,
other than the nonpayment of the principal of, premium, if any, and interest on
the Notes that have become due solely by such declaration of acceleration, have
been cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
The Holders of at least a majority in aggregate principal amount at
maturity of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. However, the Trustee may refuse to
follow any direction that conflicts with law or the Indenture, that may involve
the Trustee in personal liability, or that the Trustee determines in good faith
may
<PAGE>
A-11
be unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of Notes. A
Holder may not pursue any remedy with respect to the Indenture or the Notes
unless: (i) the Holder gives the Trustee written notice of a continuing Event of
Default; (ii) the Holders of at least 25% in aggregate principal amount at
maturity of outstanding Notes make a written request to the Trustee to pursue
the remedy; (iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense; (iv) the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day period, the
Holders of a majority in aggregate principal amount at maturity of the
outstanding Notes do not give the Trustee a direction that is inconsistent with
the request. However, such limitations do not apply to the right of any Holder
of a Note to receive payment of the principal of, premium, if any, or interest
on, such Note or to bring suit for the enforcement of any such payment, on or
after the due date expressed in the Notes, which right shall not be impaired or
affected without the consent of the Holder.
20. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
21. No Recourse Against Others.
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company or the Guarantor in the Indenture, or in any of the
Notes or because of the creation of any Indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer, director, employee or
controlling person of the Company or the Guarantor or of any successor Person
thereof. Each Holder, by accepting the Notes, waives and releases all such
liability.
22. Authentication.
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this Note.
23. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
<PAGE>
A-12
24. Guarantee.
This Note is Guaranteed by RSL Communications PLC, as set forth in
the Indenture.
This Note shall be governed by the laws of the State of New York.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to RSL
Communications PLC, 767 Fifth Avenue, Suite 4300, New York, New York 10153,
Attention: President.
<PAGE>
A-13
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS
EVIDENCED BY THIS NOTE
The initial principal amount of indebtedness evidenced by this
Note Shall be $__, __, __. The following decreases/increases in the principal
amount evidenced by this Note have been made:
Decrease in Increase in Total Principal
Principal Principal Amount of this Notation Made
Date of Amount of Amount of Global Note by or on
Decrease/ this Global this Global Following such Behalf of
Increase Note Note Decrease/increase Trustee
- -------- ---- ---- ----------------- -------
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
__________ ____________ ____________ __________________ _____________
<PAGE>
A-14
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 4.11 or Section 4.13 of the Indenture, check the box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.13 or Section 4.12 of the Indenture, state the amount (in
principal amount): $______________ ($1000 or integral multiple thereof).
Date:___________________
Your Signature:_________________________________________________________________
Signature Guarantee:______________________________
<PAGE>
EXHIBIT B
FORM OF DEFINITIVE REGISTERED NOTE
[FACE OF NOTE]
[insert Private Placement Legend, if applicable]
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF THE
NOTES AND ONE WARRANT (EACH, A "WARRANT" AND COLLECTIVELY, THE "WARRANTS")
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.815 SHARES OF CLASS A
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF RSL COMMUNICATIONS, LTD. (THE "CLASS
A SHARES"). PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) 180
DAYS AFTER OCTOBER 3, 1997, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH
RESPECT TO THE NOTE OR (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT
WITH RESPECT TO THE NOTES, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED
ONLY TOGETHER WITH, THE WARRANTS.
RSL COMMUNICATIONS PLC
12 1/4% Senior Note Due 2006
CUSIP 781076ABO
No. R-________________ $_______________
HOLDERS SHOULD BE AWARE THAT, UNDER CURRENT U.K. LAW, UPON THE ISSUANCE TO
A HOLDER OF CERTIFICATED NOTES, SUCH HOLDER WILL BECOME SUBJECT TO U.K. INCOME
TAX (CURRENTLY 20%) TO BE WITHHELD ON ANY PAYMENTS OF INTEREST ON THE DEFINITIVE
REGISTERED NOTES. A U.S. HOLDER OF DEFINITIVE REGISTERED NOTES WILL BE ENTITLED
TO RECEIVE ADDITIONAL AMOUNTS WITH RESPECT TO SUCH DEFINITIVE REGISTERED NOTES.
ADDITIONAL AMOUNTS WILL NOT BE PAYABLE IF SUCH CERTIFICATED NOTES WERE ISSUED AT
THE REQUEST OF A HOLDER (INCLUDING FOLLOWING AN EVENT OF DEFAULT) OR IF AT THE
TIME OF THE PAYMENT IN QUESTION CERTIFICATED NOTES HAVE NOT BEEN ISSUED IN
EXCHANGE FOR THE ENTIRE PRINCIPAL AMOUNT OF NOTES. HOWEVER, A U.S. HOLDER OF
DEFINITIVE REGISTERED NOTES MAY BE ENTITLED TO RECEIVE A REFUND OF WITHHELD
AMOUNTS FROM THE INLAND REVENUE IN CERTAIN CIRCUMSTANCES.
<PAGE>
B-2
Closing Date: October 3, 1996
RSL COMMUNICATIONS PLC, a United Kingdom corporation with registration
number 3231791 (the "Issuer", which term includes any successor under the
Indenture hereinafter referred to), for value received, promises to pay to
____________________ or its registered assigns, the principal sum of
__________________________________ United States dollars (U.S.$ )
on October 3, 2006.
Interest Payment Dates: May 15 and November 15, commencing November 15,
1997
Regular Record Dates: May 1 and November 1
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
RSL COMMUNICATIONS PLC
By:______________________________________
Name:
Title:
This is one of the 12 1/4% Senior Notes due 2006 described in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:______________________________________
Authorized Officer
<PAGE>
B-3
[REVERSE SIDE OF NOTE]
RSL COMMUNICATIONS PLC
12 1/4% Senior Note due 2006
1. Principal and Interest.
RSL Communications PLC (the "Issuer") will pay the principal of this
Note on October 3, 2006.
The Issuer promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest on the Notes shall accrue at the rate of 12 1/4% per annum
(the "Interest Rate") and shall be payable in U.S. dollars in cash semiannually
in arrears on May 15 and November 15 (each an "Interest Payment Date"); provided
that the first Interest Payment Date shall be May 15, 1997. Interest on the
Notes will accrue from the most recent date to which interest has been paid or
duly provided for, or if no interest has been paid or duly provided for from the
date of original issuance hereof. Interest will be computed on the basis of a
360-day year comprised of twelve 3O-day months.
The Issuer shall pay interest on overdue principal and premium, if
any, and (to the extent lawful) interest on overdue installments of interest and
Liquidated Damages, if any, at the rate of 14 1/4% per annum.
Under certain circumstances described in the Indenture, the Issuer
also shall pay Additional Amounts to the Holders of Notes equal to an amount
that the Issuer may be required to withhold or deduct for or on account of Taxes
imposed by a Taxing Authority within the United Kingdom, or within any other
jurisdiction in which the Issuer is organized or engaged in business for tax
purposes, from any payment made under or with respect to the Notes.
2. Method of Payment.
The Issuer will pay interest and Liquidated Damages, if any, on the
Notes to the Persons who are registered Holders thereof at the close of business
on the Regular Record Date next preceding the Interest Payment Date. Holders
must surrender Notes to such Paying Agent to collect principal payments. The
Issuer will pay principal, premium, if any, and interest and Liquidated Damages,
if any, in money of the United States of America that at the time of payment is
legal tender for payment of public and private debts. However, the Issuer may
pay principal premium, if any, and interest and Liquidated Damages, if any, by
check payable in such money. If a payment date is a date other than a Business
Day at a place of payment, payment may be
<PAGE>
B-4
made at that place on the next succeeding day that is a Business Day and no
interest Shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Issuer may change any Paying Agent and Registrar without notice in accordance
with the Indenture. The Issuer, any Affiliate or any Subsidiary thereof may act
as the Paying Agent or Registrar.
4. Indenture: Limitations.
The Issuer issued the Notes under an Indenture dated as of October
3, 1996 (the "Indenture"), between the Issuer, RSL Communications, Ltd., as
guarantor, and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized
terms herein are used as defined in the Indenture unless otherwise indicated.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act. The Notes are subject
to all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are unsecured senior indebtedness of the Issuer. The
Indenture limits the aggregate principal amount of the Notes to $200,000,000.
5. Optional Redemption.
The Notes will be redeemable, at the Issuer's option, in whole or in
part, at any time or from time to time on or after November 15, 2001 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice, at the
following Redemption Prices (expressed in percentages of their principal
amount), plus accrued and unpaid interest, if any, and Liquidated Damages, if
any, to the Redemption Date if redeemed during the 12-month period commencing on
November 15 of the applicable years set forth below:
Year Redemption Price
---- ----------------
2001 106.1250%
2002 103.0625%
2003 and thereafter 100.0000%
In addition, in the event of one or more Public Equity Offerings
prior to November 15, 1999, the Issuer may, at its option, use some or all of
the Net Cash Proceeds thereof (including such proceeds received by the Guarantor
and contributed to the Issuer) to redeem up to a maximum of $90,000,000 of the
original aggregate principal amount of the Notes at a redemption price equal to
112.2500% of the principal amount of the Notes, plus accrued and unpaid
interest, if any, and Liquidated Damages, if any, to the date of redemption
(determined at the Redemption Date) subject to certain provisos set forth in
Article Three of the Indenture; provided that (i) at
<PAGE>
B-5
least $210.0 million aggregate principal amount of Notes remains outstanding
after each such redemption and (ii) each such redemption occurs within 180 days
of the related Public Equity Offering. Any such redemption must be effected upon
not less than 30 nor more than 60 days' notice given within 30 days following
the Public Equity Offering giving rise to the right optionally to redeem Notes.
6. Selection of Notes for Partial Redemption: Effect of Redemption Notice.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Note of $1,000 in principal amount or less shall
be redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Upon the giving of any redemption notice,
interest on Notes called for redemption will cease to accrue from and after the
date fixed for redemption (unless the Issuer defaults in providing the fluids
for such redemption) and such Notes will then cease to be outstanding.
7. Redemption for Changes in Withholding Taxes.
The Notes are subject to redemption as a whole, but not in part, at
the option of the Issuer at any time at 100% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, and Liquidated Damages, if
any, to the Redemption Date, if (i) the Issuer or the Guarantor has become or
would become obligated to pay, on the next date on which any amount would be
payable with respect to the Notes, any Additional Amounts as a result of a
change in laws (including any regulations promulgated thereunder or any
amendment to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority), if such change is announced and becomes effective on or after the
Closing Date and (ii) the Guarantor and the Issuer cannot reasonably arrange for
another obligor to make such payment so as to avoid the requirement to pay such
Additional Amounts.
8. Notice of Redemption.
Notice of any optional redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to the Holders of Notes to
be redeemed at such Holder's registered address as it appears in the Register.
9. Repurchase upon Change of Control.
Upon the occurrence of any Change of Control, the Issuer will be
obligated to make an offer to purchase all outstanding Notes pursuant to the
Offer to Purchase described in the Indenture at a purchase price equal to 101%
of the aggregate principal amount thereof plus
<PAGE>
B-6
accrued and unpaid interest, if any, and Liquidated Damages, if any, to the date
of purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days
after any Change of Control occurs to each Holder of Notes at such Holder's
registered address as it appears in the Register. Notes in original
denominations larger than $1,000 may be sold to the Issuer in part; provided
that Notes will only be issued in denominations of $1,000 principal amount at
maturity or integral multiples thereof. On and after the Payment Date, interest
ceases to accrue on Notes or portions of Notes surrendered for purchase by the
Issuer, unless the Issuer defaults in the payment of the Change of Control
Payment.
10. Registration Rights.
The Holders of the Notes are entitled to the benefits of the
Registration Rights Agreement, dated as of October 3, 1996, between the Issuer,
the Manager and the other Placement Agents. Pursuant to the Registration Rights
Agreement, the Issuer has agreed with the Placement Agents, for the benefit of
the Holders, that the Issuer will use its reasonable best efforts, at its cost,
to file and cause to become effective a registration statement (the "Exchange
Offer Registration Statement") with respect to a registered offer to exchange
the Notes for an issue of unsubordinated Notes of the Issuer and the Guarantor
(the "Exchange Notes") with terms identical to the Notes (except that the
Exchange Notes will not bear legends restricting transfer thereof). Upon the
Exchange Offer Registration Statement being declared effective, the Issuer and
the Guarantor shall offer the Exchange Notes in return for surrender of the
Notes (the "Exchange Offer"). In the event that applicable interpretations of
the staff of the Commission do not permit the Issuer and the Guarantor to effect
the Exchange Offer or if any Holder notifies the Issuer and the Guarantor that
it or any beneficial owner of the Notes is not permitted for any reason by
applicable law or the interpretations thereof of the staff of the Commission to
participate in the Exchange Offer, the Issuer and the Guarantor shall, at their
cost, use their reasonable best efforts to cause to become effective a Shelf
Registration Statement with respect to resales of the Notes (the "Shelf
Registration Statement") and to keep such Shelf Registration Statement effective
until the earlier to occur of (i) expiration of the time period refereed to in
Rule l44(k) under the Securities Act as in effect from time to time and (ii)
such time as all Notes registered thereunder have been sold. In the event that
the Exchange Offer is not consummated and a Shelf Registration Statement is not
declared effective on or prior to June 1, 1997, the annual interest date borne
by the Notes shall be permanently increased to 12 3/4 % per annum.
11. Denomination. Transfer and Exchange.
This Note is in certificated registered form and is denominated in an amount
equal to $1,000 principal amount or an integral multiple thereof. The transfer
of Definitive Registered Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuer may require a Holder to furnish an Opinion of Counsel and to pay
any taxes and fees required by law or permitted by the Indenture. The Issuer
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except
<PAGE>
B-7
for the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Note for a period of 15 days before a
selection of Notes to be redeemed or during the period between a Regular Record
Date and the corresponding Interest Payment Date.
12. Persons Deemed Owners.
The Holder of this Note shall be treated as the owner of this Note
for all purposes.
13. Unclaimed Money.
If money for the payment of principal, premium, if any, interest or
Liquidated Damages, if any, remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Issuer at its request. After that,
Holders entitled to the money must look to the Issuer for payment, unless an
applicable law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity.
If the Issuer deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, accrued interest and Liquidated Damages, if any, on the Notes to redemption
or Stated Maturity, (a) the Issuer will be discharged from the Indenture and the
Notes, except m certain circumstances for certain sections thereof, or (b) the
Issuer will be discharged from certain covenants set forth in the Indenture.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
materially and adversely affect the rights of any Holder.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Issuer, the Guarantor and the Restricted Subsidiaries, among other things, to
Incur additional Indebtedness; create Liens; pay dividends or make distributions
in respect of their Capital Stock; make Investments or make certain other
Restricted Payments; engage in Asset Sales; issue or sell stock of Restricted
Subsidiaries; enter into transactions with stockholders or Affiliates; modify
the Shareholder Standby Facility; or, with respect to the Issuer, consolidate,
merge or sell all or substantially all
<PAGE>
B-8
of its assets. Within 90 days after the end of the last fiscal quarter of each
year, the Issuer must report to the Trustee on compliance with such limitations.
17. Security.
The Issuer has entered into the Pledge Agreement and applied a
portion of the net proceeds of the Notes to purchase the Pledged Securities to
be pledged to the Trustee for the benefit of the Holders of the Notes in such
amount as will be sufficient upon receipt of scheduled interest and principal
payments of such securities, in the written opinion, delivered to the Trustee,
of a nationally recognized firm of independent public accountants selected by
the Issuer, to provide for payment in full of the first six scheduled interest
payments due on the Notes. The Pledged Securities will be pledged by the Issuer
to the Trustee for the benefit of the Holders of the Notes and will be held by
the Trustee in the Pledge Account pending disbursement pursuant to the Pledge
Agreement.
18. Successor Persons.
Generally, when a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
19. Defaults and Remedies.
The following events will be defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; provided that a failure to make any of the first six scheduled interest
payments on the Notes in a timely manner will constitute an Event of Default
with no grace or cure period; (c) defaults in the performance or breach of the
provisions of the Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the assets of the Guarantor and the Issuer or the
failure to make or consummate an Offer to Purchase in accordance with Section
4.11 or Section 4.13 of the Indenture; (d) the Guarantor or the Issuer defaults
in the performance of or breaches any other covenant or agreement of the
Guarantor or the Issuer, as the case may be, in the Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after written
notice to the Issuer by the Trustee or the Holders of 25% or more in aggregate
principal amount at maturity of the Notes; (e) there occurs with respect to any
issue or issues of Indebtedness of the Guarantor, the Issuer or any Significant
Subsidiary having an outstanding principal amount of $10 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a
<PAGE>
B-9
principal payment at the final (but not any interim) fixed maturity and such
defaulted payment shall not have been made, waived or extended within 30 days of
such payment default; (f) any final judgment or order (not covered by insurance)
for the payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Guarantor, the Issuer or any Significant Subsidiary and shall not be paid or
discharged, and there shall be any period of 30 consecutive days following entry
of the final judgment or order that causes the aggregate amount for all such
final judgments or orders outstanding and not paid or discharged against all
such Persons to exceed $10 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; (g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Guarantor, the Issuer or any Significant
Subsidiary 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
the Guarantor, the Issuer or any Significant Subsidiary or for all or
substantially all of the property and assets of the Guarantor, the Issuer or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Guarantor, the Issuer or any Significant Subsidiary and, in each case, such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (h) the Guarantor, the Issuer or any Significant Subsidiary
(A) 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, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Guarantor, the
Issuer or any Significant Subsidiary or for all or substantially all of the
property and assets of the Guarantor, the Issuer or any Significant Subsidiary
or (C) effects any general assignment for the benefit of creditors. If an Event
of Default (other than an Event of Default specified in clause (g) or (h) above
that occurs with respect to the Guarantor or the Issuer) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the Notes, then outstanding, by
written notice to the Issuer (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
principal amount of, premium, if any, and accrued interest on the Notes to be
immediately due and payable. Upon a declaration of acceleration, such principal
amount of, premium, if any, and accrued interest shall be immediately due and
payable. In the event of a declaration of acceleration because an Event of
Default set forth in clause (e) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
event of default triggering such Event of Default pursuant to clause (e) shall
be remedied or cured by the Guarantor, the Issuer or the relevant Significant
Subsidiary or waived by the holders of the relevant Indebtedness within 60 days
after the declaration of acceleration with respect thereto. If an Event of
Default specified in clause (g) or (h) above occurs with respect to the
Guarantor or the Issuer, the principal amount of premium, if any, and accrued
interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount at maturity of the outstanding Notes by written notice to the Issuer and
to the Trustee, may waive all past defaults and rescind and annul a declaration
of acceleration and its consequences if (i) all existing Events of Default,
other than the nonpayment of the principal of, premium, if any, and interest on
the
<PAGE>
B-10
Notes that have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction.
The Holders of at least a majority in aggregate principal amount at
maturity of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. However, the Trustee may refuse to
follow any direction that conflicts with law or the Indenture, that may involve
the Trustee in personal liability, or that the Trustee determines in good faith
may be unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of Notes. A
Holder may not pursue any remedy with respect to the Indenture or the Notes
unless: (i) the Holder gives the Trustee written notice of a continuing Event of
Default; (ii) the Holders of at least 25% in aggregate principal amount at
maturity of outstanding Notes make a written request to the Trustee to pursue
the remedy; (iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense; (iv) the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day period, the
Holders of a majority in aggregate principal amount at maturity of the
outstanding Notes do not give the Trustee a direction that is inconsistent with
the request. However, such limitations do not apply to the right of any Holder
of a Note to receive payment of the principal of, premium, if any, or interest
on, such Note or to bring suit for the enforcement of any such payment, on or
after the due date expressed in the Notes, which right shall not be impaired or
affected without the consent of the Holder.
20. Trustee Dealings with Issuer.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates as if it were not the Trustee.
21. No Recourse Against Others.
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof and no recourse under or upon any obligation, covenant or
agreement of the Issuer or the Guarantor in the Indenture, or in any of the
Notes or because of the creation of any Indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer, director, employee or
controlling person of the Issuer or the Guarantor or of any successor Person
thereof. Each Holder, by accepting the Notes, waives and releases all such
liability.
<PAGE>
B-1l
22. Authentication.
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this Note.
23. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
24. Guarantee.
This Note is Guaranteed by RSL Communications PLC, as set forth in
the Indenture.
This Indenture shall be governed by the internal laws of the State
of New York.
The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to RSL
Communications PLC, 767 Fifth Avenue, Suite 4300, New York, New York, 10153,
Attention: President.
<PAGE>
B-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Issuer pursuant to
Section 4.11 or Section 4.13 of the Indenture, check the box: |_|
If you wish to have a portion of this Note purchased by the Issuer
pursuant to or Section 4.13 of the Indenture, state the amount (in principal
amount):$_____________________ ($1000 or integral multiple thereof).
Date: ____________
Your Signature:_________________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:____________________________________
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
RSL Communications Plc
767 Fifth Avenue
Suite 4300
New York, New York 10153
Attention: President
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trust Department
[CHECK ONE IF TRANSFEROR IS AN INSTITUTIONAL ACCREDITED INVESTOR (AND NOT A
QIB)]
The Transferor hereof hereby certifies that this Transfer is being made through
the Placement Agent through which the Holder acquired the Notes or Book-Entry
Interests so transferred. The Placement Agent through which this Transfer is
being made, and that is receiving this certificate, is:
|_| Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
|_| Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
|_| Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
Re: 12 1/4% Senior Notes due 2006 of RSL Communications Plc
Reference is hereby made to the Indenture, dated as of October 3,
1996 (the "Indenture"), between RSL Communications Plc, as issuer (the
"Issuer"), RSL Communications, Ltd, as guarantor, and The Chase Manhattan Bank,
as trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
_______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___ in such
<PAGE>
C-2
Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as
further specified in Annex A hereto. In connection with the Transfer, the
Transferor hereby certifies that:
[CHECK ALL THAT APPLY)
1. |_| Check if Transferee will take delivery of Book-Entry Interests in the
144A Global Note or Definitive Registered Notes pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the Book-Entry
Interests or Definitive Registered Notes are being transferred to a Person that
the Transferor reasonably believes is purchasing the Book-Entry Interests or
Definitive Registered Notes for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Any such Transfer of a Book-Entry Interest in
the Regulation S Global Note for Definitive Registered Notes shall only occur on
or after November 12, 1996. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred Book-Entry Interest
or Definitive Registered Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Note
and/or the Definitive Registered Note and in the Indenture and the Securities
Act.
2. |_| Check if Transferee will take delivery of Book-Entry Interests in the
Regulation S Global Note or Definitive Registered Notes pursuant to Regulation
S. The Transfer is being effected pursuant to and in accordance with Rule 904
under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of Regulation S under the
Securities Act and (iii) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act. Any such Transfer of
a Book-Entry Interest in the Regulation S Global Note for Definitive Registered
Notes shall only occur on or after November 12, 1996. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
Book-Entry Interest or Definitive Registered Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note and/or the Definitive Registered Note and in the
Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of Book-Entry
Interests in the IAI Global Note or Definitive Registered Notes pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in
<PAGE>
C-3
compliance with the transfer restrictions applicable to Book-Entry Interests in
Restricted Global Notes (including with respect to Book-Entry Interests in the
Regulation S Global Notes other than pursuant to (b) or (c) below, on or after
November 12, 1996) and Definitive Registered Notes bearing the Private Placement
Legend and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any State of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance with
Rule 144 or under the Securities Act;
or
(b) |_| such Transfer is being effected to the Issuer or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
(d) |_| such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to Book-Entry Interests in a Restricted Global Note
(including with respect to Regulation S Global Notes, on or after November 12,
1996) or Definitive Registered Notes bearing the Private Placement Legend and
the requirements of the exemption claimed, which certification is supported by
(x) if such Transfer is in respect of a principal amount of Notes at the time of
Transfer of $250,000 or more, a certificate executed by the Transferee in the
form of Exhibit E to the Indenture, or (y) if such Transfer is in respect of a
principal amount of Notes at the time of transfer of less than $250,000, (1) a
certificate executed by the Transferee in the form of Exhibit E to the Indenture
and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect
that (1) such Transfer is in compliance with the Securities Act and (2) such
Transfer complies with any applicable blue sky securities laws of any state of
the United States. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred Book-Entry Interest or Definitive
Registered Note will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the IAI Global Note and/or the
Definitive Registered Notes and in the Indenture and the Securities Act.
4. |_| Check if Transferee will take delivery of Book-Entry Interests in the
Unrestricted Global Note or in Definitive Registered Notes that do not bear the
Private Placement Legend.
<PAGE>
C-4
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States,
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred Book-Entry Interests or Definitive
Registered Notes will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Definitive Registered Notes being the Private Placement Legend and in
the Indenture.
(b) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144 and in
compliance with the transfer restrictions contained in the Indenture and any
applicable blue sky securities laws of any State of the United States and (ii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred Book-Entry Interests or Definitive
Registered Notes will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Definitive Registered Notes bearing the Private Placement Legend and in the
Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer.
_________________________________
[Insert Name of Transferor]
By:______________________________
Name:
Title:
Dated:_____________________________
<PAGE>
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| Book-Entry Interests in the
(i) |_| 144A Global Note (CUSIP ______), or
(ii) |_| Regulation S Global Note (CUSIP _______), or
(iii) |_| IAI Global Note (CUSIP _________); or
(b) |_| Definitive Registered Note.
2. that the Transferee will hold:
[CHECK ONE]
(a) |_| Book-Entry Interests in the:
(i) |_| 144A Global Note (CUSIP ______), or
(ii) |_| Regulation S Global Note (CUSIP ______), or
(iii) |_| IAI Global Note (CUSIP _________); or
(iv) |_| Unrestricted Global Note (CUSIP ________); or
(b) |_| Restrictive Definitive Registered Notes;
(c) |_| Definitive Registered Note that does not bear the Private
Placement Legend;
in accordance with the teems of the Indenture.
<PAGE>
FORM OF CERTIFICATE OF EXCHANGE
RSL Communications Plc
767 Fifth Avenue
Suite 4300
New York, New York 10153
Attention: President
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trust Department
[CHECK ONE IF HOLDER IS AN INSTITUTIONAL ACCREDITED INVESTOR (AND NOT A QIB)]
The Placement Agent through which the Holder acquired the Notes or Book-Entry
Interests, and that is receiving this certificate, is
|_| Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
|_| Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
|_| Dillon, Read & Co., Inc.
535 Madison Avenue
New York, New York 10022
Re: 12 1/4% Senior Notes due 2006 of RSL Communications Plc
(CUSIP 781076 [ILLEGIBLE]
Reference is hereby made to the Indenture, dated as of October 3,
1996 (the "Indenture") between RSL Communications Plc as Issuer (the "Issuer"),
RSL Communications, Ltd. as guarantor, and The Chase Manhattan Bank, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
<PAGE>
D-2
_______________, (the "Holder") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of $______
in such Note[s] or interests (the "Exchange"). In connection with the Exchange,
the Holder hereby certifies that:
1. Exchange of Restricted Definitive Registered Notes or Restricted Book-Entry
Interests for Definitive Registered Notes that do not bear the Private Placement
Legend or Unrestricted Book-Entry Interests
(a) |_| Check if Exchange is from Restricted Book-Entry Interest to
Unrestricted Book-Entry Interest. In connection with the Exchange of the
Holder's Restricted Book-Entry Interest for Unrestricted Book-Entry Interests in
an equal principal amount, the Holder hereby certifies (i) the Unrestricted
Book-Entry Interests are being acquired for the Holder's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in accordance
with the United States Securities Act of 1933, as amended (the "Securities
Act"), (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Unrestricted Book-Entry Interests are being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) |_| Check if Exchange is from Restricted Book-Entry Interest
Definitive Registered Notes that do not bear the Private Placement Legend. In
connection with the Exchange of the Holder's Restricted Book-Entry Interests for
Definitive Registered Notes that do not bear the Private Placement Legend, the
Holder hereby certifies (i) the Definitive Registered Notes are being acquired
for the Holder's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Registered Notes are being acquired
in compliance with any applicable blue sky securities laws of any state of the
United States.
(c) |_| Check if Exchange is from Restricted Definitive Registered Notes
to Unrestricted Book-Entry Interests. In connection with the Holder's Exchange
of Restricted Definitive Registered Notes for Unrestricted Book-Entry Interests,
(i) the Unrestricted Book-Entry Interests are being acquired for the Holder's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Registered
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Book-Entry Interests are being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
<PAGE>
D-3
(d) |_|Check if Exchange is from Restricted Definitive Registered Notes to
Definitive Registered Notes that do not bear the Private Placement Legend. In
connection with the Holder's Exchange of a Restricted Definitive Registered Note
for Definitive Registered Notes that do not bear the Private Placement Legend,
the Holder hereby certifies (i) the Definitive Registered Notes that do not bear
the Private Placement Legend are being acquired for the Holder's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Registered Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Notes are being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
2. Exchange of Restricted Definitive Registered Notes or Restricted
Book-Entry Interests for Restricted Definitive Registered Notes or Restricted
Book-Entry Interests
(a) |_| Check if Exchange is from Restricted Book-Entry Interests to
Restricted Definitive Registered Note. In connection with the Exchange of the
Holder's Restricted Book-Entry Interest for Restricted Definitive Registered
Notes with an equal principal amount, (i) the Restricted Definitive Registered
Notes are being acquired for the Holder's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes (including with respect to the
Book-Entry Interests in the Regulation S Global Notes, on or after November 12,
1996) and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with the
terms of the Indenture, the Restricted Definitive Registered Notes issued will
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Definitive Registered Notes and in the
Indenture and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Registered Notes
to Restricted Book-Entry Interests. In connection with the Exchange of the
Holder's Restricted Definitive Registered Note for Restricted Book-Entry
Interests in the [CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note,
|_| IAI Global Note with an equal principal amount, (i) the Definitive
Registered Notes are being acquired for the Holder's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Book-Entry Interests and
pursuant to and in accordance with the Securities Act, and in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Registered Notes issued will be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Registered Notes and in the Indenture and the
Securities Act.
<PAGE>
D-4
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer.
_________________________________
[Insert Name of Holder]
By:______________________________
Name:
Title:
Dated:____________________
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
RSL COMMUNICATIONS LTD.
RSL COMMUNICATIONS PLC
767 Fifth Avenue, Suite 4300
New York, New York 10153
MORGAN STANLEY & CO. INCORPORATED
BEAR, STEARNS & CO. INCORPORATED
DILLON, READ & CO. INC.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
USA
Ladies and Gentlemen:
In connection with our proposed purchase of Units (the "Units"),
each Unit consisting of one 12 1/4% Senior Note due 2006 (collectively, the
"Notes") of RSL Communications PLC (the "Issues" and one Warrant (collectively,
the "Warrants") to purchase 1.815 Class A common shares (the "Class A Common
Shares") of RSL Communications, LTD. ("RSL"), we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture (the "Indenture"), dated as of October 3, 1996, relating to the
Notes and that any subsequent transfers of the Warrants or Warrant Shares is
subject to certain restrictions and conditions set forth under "Transfer
Restrictions" and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered, sold, pledged or otherwise transferred within the United
States or to or for the account or benefit of U.S. persons, except as permitted
in the following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should sell
the Notes or any interest therein, we will do so only (A) to the Issuer or any
subsidiary thereof (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to the Trustee under
the Indenture (the "Trustee"), (i) a signed letter containing certain
representations and agreements relating to the restrictions or transfer of the
Notes (the form of which letter can be obtained from
<PAGE>
E-2
the Trustee) and (ii), if such transfer is in respect of a principal amount of
Notes at the time of transfer of less than $250,000, an Opinion of Counsel
acceptable to the Issuer that such transfer is in compliance with the Securities
Act, (D) outside the United States in accordance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and, in each case, in
accordance with applicable state securities laws and securities laws of any
other applicable jurisdictions; and we further agree to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein. We understand that if we
are an Institutional Accredited Investor and not a QIB we will need to effect
any transfer of Securities (other than pursuant to an effective registration
statement) through the Placement Agents (as defined in the Offering Memorandum).
3. We understand that, on any proposed resale of the Notes or Book-Entry
Interests, we will be required to furnish to RSL and the Issuer such
certifications, legal opinions and other information as RSL or the Issuer, as
the case may be, and the Trustee may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further understand
that the Notes purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(l), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or Book-Entry Interests purchased by us for
our own account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
<PAGE>
E-3
You, the Issuer, RSL and the Trustee are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Insert Name of Accredited Investor)
By:________________________________________
Name:
Title:
Dated:___________________________
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE TO BE
DELIVERED BY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of
_______________, between ______________________ (the "Subsidiary Guarantor"), a
subsidiary of RSL Communications Plc (or its successor), a United Kingdom
corporation (the "Issuer"), RSL Communications, Lid., as guarantor (the
"Guarantor"), and The Chase Manhattan Bank, as trustee under the indenture
refereed to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Issuer and the Guarantor have heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as of October 3,
1996, providing for the issuance of an aggregate principal amount of
$200,000,000 of 12 1/4% Senior Notes due 2006 (the "Notes");
WHEREAS, Section 4.07 of the Indenture provides that, if the
Subsidiary Guarantor guarantees any indebtedness of the Issuer which is pari
passu with, or subordinate in right of payment to, the Notes, the Issuer is
required to cause the Subsidiary Guarantor to execute and deliver to the Trustee
a subsidiary guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES.
This Supplemental Indenture is being executed and delivered pursuant to Section
4.07 of the Indenture.
3. AGREEMENTS TO GUARANTEE. The Subsidiary Guarantor hereby agrees
as follows:
(a) The Subsidiary Guarantor, jointly and severally with all other
Subsidiary Guarantors, if any, unconditionally guarantees to each Holder
of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, regardless of
<PAGE>
F-2
the validity and enforceability of the Indenture, the Notes and the
obligations of the Issuer under the Indenture and the Notes, that:
(i) the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes shall be promptly paid in
full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of, premium, if
any, and interest and Liquidated Damages, if any, on the Notes, to
the extent lawful, and all other obligations of the Issuer to the
Holders or the Trustee thereunder shall be promptly paid in full,
all in accordance with the terms thereof; and
(ii) in case of any extension of time for payment or renewal
of any Notes or any of such other obligations, that the same shall
be promptly paid in full when due in accordance with the terms of
the extension or renewal, whether at Stated Maturity, by
acceleration or otherwise.
Notwithstanding the foregoing, in the event that this Subsidiary Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of
the Subsidiary Guarantor under this Supplemental Indenture and its
Subsidiary Guarantee shall be limited to such amount as will not, after
giving effect thereto, and to all other liabilities of the Subsidiary
Guarantor, result in such amount constituting a fraudulent transfer or
conveyance.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee set forth in this
Supplemental Indenture, the Subsidiary Guarantor hereby agrees that a
notation of such Subsidiary Guarantee substantially in the form of Annex A
hereto shall be endorsed by an officer of such Subsidiary Guarantor on
each Note authenticated and delivered by the Trustee after the date
hereof.
(b) Notwithstanding the foregoing, the Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee set forth herein shall remain in full
force and effect notwithstanding any failure to endorse on each Note a
notation of such Subsidiary Guarantee.
(c) if an officer whose signature is on this Supplemental Indenture
or on the Subsidiary Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of the Note by the Trustee, after the
authentication thereof under the Indenture, shall constitute due delivery
of the Subsidiary Guarantee set forth in this Supplemental Indenture on
behalf of the Subsidiary Guarantor.
<PAGE>
F-3
(e) The Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be unconditional, regardless of the validity, regularity
or enforceability of the Notes or the Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgement
against the Issuer, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(f) The Subsidiary Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Issuer, any right to require a proceeding
first against the Issuer, protest, notice and all demands whatsoever and
covenants that its Subsidiary Guarantee made pursuant to this Supplemental
Indenture will not be discharged except by complete performance of the
obligations contained in the Notes and the Indenture or pursuant to
Section 5(b) of this Supplemental Indenture.
(g) If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Supplemental Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then, and in every
such case, subject to any determination in such proceeding, the Subsidiary
Guarantor, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights
and remedies of the Subsidiary Guarantor, the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
(h) The Subsidiary Guarantor hereby waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Issuer or any other Guarantor as a result of any payment by such Guarantor
under its Subsidiary Guarantee. The Subsidiary Guarantor further agrees
that, as between the Subsidiary Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand:
(i) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six of the Indenture for the
purposes of the Subsidiary Guarantee made pursuant to this
Supplemental Indenture, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby; and
(ii) in the event of any declaration of acceleration of such
obligations as provided in Article Six, such obligations (whether or
not due and payable) shall forthwith become due and payable by the
Subsidiary Guarantor for the purpose of the Subsidiary Guarantee
made pursuant to this Supplemental Indenture.
(i) The Subsidiary Guarantor shall have the right to seek
contribution from any other non-paying Guarantor, if any, so long as the
exercise of such right does not impair
<PAGE>
F-4
the rights of the Holders under the Subsidiary Guarantee made pursuant to
this Supplemental Indenture.
5. GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS
(a) Except as set forth in Articles Four and Five of the Indenture,
nothing contained in the Indenture, this Supplemental Indenture or in the
Notes shall prevent any consolidation or merger of the Subsidiary
Guarantor with or into the Issuer or any other Subsidiary Guarantor or
shall prevent any transfer, sale or conveyance of the property of the
Subsidiary Guarantor as an entirety or substantially as an entirety, to
the Issuer or any other Subsidiary Guarantor.
(b) Except as set forth in Article Five of the Indenture, upon the
sale or disposition of all of the Capital Stock of a Subsidiary Guarantor
by the Issuer or a Subsidiary of the Issuer, or upon the consolidation or
merger of a Subsidiary Guarantor with or into any Person, or the sale of
all or substantially all of the assets of any Subsidiary Guarantor (in
each case, other than to an Affiliate of the Issuer), such Subsidiary
Guarantor shall be deemed automatically and unconditionally released and
discharged from all obligations under this Subsidiary Guarantee without
any further action required on the part of the Trustee or any Holder if no
Default shall have occurred and be continuing; provided, that in the event
of an Asset Sale, the Net Cash Proceeds therefrom are treated in
accordance with Section 4.11 of the Indenture. Except with respect to
transactions set forth in the preceding sentence, the Issuer and the
Subsidiary Guarantor covenant and agree that upon any such consolidation,
merger or transfer of assets, the performance of all covenants and
conditions of this Supplemental Indenture to be performed by such
Subsidiary Guarantor shall be expressly assumed by supplemental indenture
satisfactory in form to the Trustee, by the corporation formed by such
consolidation, or into which the Subsidiary Guarantor shall have merged,
or by the corporation which shall have acquired such property. Upon
receipt of an Officer's Certificate of the Issuer or a Subsidiary
Guarantor, as the case may be, to the effect that the Issuer or such
Subsidiary Guarantor has complied with the first sentence of this Section
5(b), the Trustee shall execute any documents reasonably requested by the
Issuer or a Subsidiary Guarantor, at the cost of the Issuer or such
Subsidiary Guarantor, as the case may be, in order to evidence the release
of such Subsidiary Guarantor from its obligations under its Guarantee
endorsed on the Notes and under the Indenture and this Supplemental
Indenture.
6. RELEASES UPON RELEASE OF GUARANTEE OF GUARANTEED INDEBTEDNESS.
Concurrently with the release or discharge of the Guarantor's guarantee of the
Guaranteed Indebtedness (other than a release or discharge by or as a result of
payment under such guarantee of Guaranteed Indebtedness), the Subsidiary
Guarantor shall automatically be released from and relieved of its obligations
under this Supplemental Indenture and its Subsidiary Guarantee made pursuant
hereto or Section 4 of this Supplemental Indenture, as the case may be. Upon
delivery by the issuer to the Trustee of an Officers' Certificate to the effect
that such release or discharge has occurred, the Trustee shall execute any
documents reasonably required
<PAGE>
F-5
in order to evidence the release of the Subsidiary Guarantor from its
obligations under this Supplemental Indenture and its Subsidiary Guarantee made
pursuant hereto.
7. NEW YORK LAW TO GOVERN. This Supplemental Indenture shall be
governed by the laws of the State of New York.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written. Dated: [GUARANTOR]
Dated:___________________ [GUARANTOR]
By:_____________________________
Name:
Title
Dated:____________________ THE CHASE MANHATTAN BANK,
as Trustee
By:______________________________
Name:
Title:
<PAGE>
ANNEX A TO SUPPLEMENTAL INDENTURE
FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE
Each Subsidiary Guarantor (as defined in the Indenture) has jointly
and severally unconditionally guaranteed (a) the due and punctual payment of the
principal of, premium, if any, interest and Liquidated Damages, if any, on the
Notes, whether at Stated Maturity or an Interest Payment Date, by acceleration,
call for redemption or otherwise, (b) the due and punctual payment of interest
on the overdue principal and premium of, and interest and Liquidated Damages, to
the extent lawful, on the Notes and (c) that in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same will
be promptly paid in full when due in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration or otherwise.
Notwithstanding the foregoing, in the event that the Subsidiary
Guarantee would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to such
amount as will not, after giving effect thereto, and to all other liabilities of
the Subsidiary Guarantor, result in such amount constituting a fraudulent
transfer or conveyance.
The Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which the
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual or facsimile signature of one of its authorized
officers.
[GUARANTOR]
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT G
COLLATERAL PLEDGE AND SECURITY AGREEMENT
This COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "Pledge
Agreement") is made and entered into as of October 3, 1996 by RSL COMMUNICATIONS
PLC, a United Kingdom corporation (the "Pledgor"), having its principal office
at 767 Fifth Avenue, Suite 4300, New York, New York, 10153, in favor of THE
CHASE MANHATTAN BANK, a banking corporation duly organized and existing under
the laws of the State of New York, having an office at 450 West 33rd Street, New
York, New York 10001, Attention: Global Trust Services Department, as trustee
(the "Trustee") for the holders (the "Holders") of the Notes (as defined herein)
issued by the Pledgor under the Indenture referred to below.
W I T N E S S E T H
WHEREAS, the Pledgor, RSL Communications, Ltd., a Bermuda
corporation, as guarantor, and The Chase Manhattan Bank, as Trustee, have
entered into that certain indenture dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor is issuing on the date hereof
$300,000,000 in aggregate principal amount of 12 1/4% Senior Notes due 2006 (the
"Notes"); capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Indenture; and
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to (i)
purchase Government Securities (the "Pledged Securities") in an amount that will
be sufficient upon receipt of scheduled interest and principal payments in
respect thereof, in the opinion of a nationally recognized firm of independent
accountants selected by the Pledgor and delivered to the Trustee, to provide for
payment of the first six scheduled interest payments due on the Notes and (ii)
place the Pledged Securities in an account held by the Trustee for the benefit
of Holders of the Notes; and
WHEREAS, upon the purchase of the Pledged Securities, the Pledgor
will be the beneficial owner of the Pledged Securities; and
WHEREAS, to secure the obligation of the Pledgor under the Indenture
and the Notes to pay in full the first six scheduled interest payments on the
Notes and to secure repayment of the Notes in the event that the Notes become
due and payable prior to such time as the first six scheduled interest payments
thereon shall have been paid in full (the "Obligations"), the Pledgor has agreed
to (i) pledge to the Trustee for its benefit and the ratable benefit of the
Holders of the Notes, a security interest in the Pledged Securities, all
book-entry interests therein and the Pledge Account and any and all proceeds of
the foregoing (as defined herein) and (ii) execute and deliver this Pledge
Agreement.
<PAGE>
G-2
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and in order to induce the Holders of the Notes to purchase the
Notes, the Pledgor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. The Pledgor hereby
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a first priority security interest
in and to (a) all of Pledgor's right, title and interest in the Pledged
Securities and the Pledge Account, (b) all book-entry interests in the Pledged
Securities and any certificates or other evidence of ownership representing the
Pledged Securities and the Pledge Account, and (c) except as otherwise provided
herein, all products and proceeds of any of the Pledged Securities and the
Pledge Account, including, without limitation, all dividends, interest,
principal payments, cash, options, warrants, rights, instruments, subscriptions
and other property or proceeds from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange for any or
all of the Pledged Securities or the Pledge Account (collectively, the
"Collateral").
SECTION 2. Security for Obligation. This Pledge Agreement secures
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Obligations.
SECTION 3. Delivery of Collateral; Pledge Account; Interest. (a)
All certificates or instruments, if any, representing or evidencing the
Collateral shall be delivered to and held by or on behalf of the Trustee
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form reasonably satisfactory to the Trustee, and all book-entry interests
in the Pledged Securities shall be transferred to the Pledge Account through the
individual account of the Trustee at the Federal Reserve Bank of New York. The
Trustee in its individual capacity shall confirm in writing (such confirmation
to be in the form of Exhibit A hereto) to me Pledgor and to the Trustee in its
capacity as Trustee hereunder that it is holding the book-entry Pledged
Securities for the benefit of the Trustee in its capacity as Trustee hereunder
and the ratable benefit of the Holders of Notes and the Trustee shall duly
record in its books and records that the Pledgor has pledged and granted a
security interest in such book-entry interests in the Pledged Securities and in
the Pledge Account to the Trustee on behalf of itself and the holders of the
Notes.
(b) Concurrently with the execution and delivery hereof and prior to
the delivery of any certificates or instruments representing or evidencing
the Collateral or transfer of book-entry interests in the Pledged
Securities as provided in subsection (a) of this Section 3, the Trustee
shall establish an account segregated from all other custodial or
collateral accounts for the deposit of the Pledged Securities (the "Pledge
Account") at its office at 450 West 33rd Street, New York, New York 10001.
Subject to the other terms and conditions of this Pledge Agreement, all
funds or other property accepted by the
<PAGE>
G-3
Trustee pursuant to this Pledge Agreement shall be held in the Pledge
Account for the benefit of the Trustee and for the ratable benefit of the
Holders of the Notes and segregated from all other funds or other property
otherwise held by the Trustee and all book-entry interests in the Pledged
Securities shall be transferred to and held in the Pledge Account for the
benefit of the Trustee and for the ratable benefit of the Holders of the
Notes.
(c) All interest earned on any Collateral shall be retained in the
Pledge Account for the benefit of the Pledgor, pending disbursement
pursuant to the terms hereof.
SECTION 4. Disbursements. (a) Up to three (3) Business Days prior to
the due date of any of the first six scheduled interest payments on the Notes,
the Pledgor may, pursuant to an Issuer Order, direct the Trustee, in writing, to
release from the Pledge Account proceeds sufficient to provide for payment in
full of such interest then due on the Notes. Upon receipt of an Issuer Order,
the Trustee will take any action necessary to provide for the payment of the
interest on the Notes in accordance with the payment provisions of the Indenture
to the Holders of the Notes from (and to the extent of) proceeds of the Pledged
Securities in the Pledge Account. Nothing in this Section 4 shall affect the
Trustee's rights to apply any Collateral in satisfaction of the Obligations at
any time upon acceleration of the Notes.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Pledged Securities are collateral from a
source of funds other than the Pledge Account ("Pledgor Funds"), the
Pledgor may, after payment in full of such interest payment or portion
thereof from proceeds of the Pledged Securities or such Pledgor Funds or
both, direct the Trustee to release to the Pledgor or to another party at
the direction of the Pledgor (the "Pledgor's Designee") proceeds from the
Pledge Account in an amount less than or equal to the amount of Pledgor
Funds applied to such interest payment. Upon receipt of an Issuer Order by
the Trustee and any other documentation reasonably satisfactory to the
Trustee to substantiate such use of Pledgor Funds by the Pledgor
(including the certificate described in the following sentence), the
Trustee will pay over to the Pledgor or the Pledgor's Designee, as the
case may be, the requested amount from proceeds in the Pledge Account.
Concurrently with any release of funds to the Pledgor pursuant to this
Section 4(b), the Pledgor will deliver to the Trustee an Officers'
Certificate stating that such release has been duly authorized by the
Pledgor and will not contravene any provision of applicable law or the
Memorandum of Association or Articles of Association of the Pledgor or any
material agreement or other material instrument binding upon the Pledgor
or any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor or
any of its subsidiaries.
(c) If at any time the principal of and interest on the Pledged
Securities held in the Pledge Account exceeds 100% of the amount
sufficient, in the written opinion of a nationally recognized firm of
independent accountants selected by the Pledgor and delivered to the
Trustee, to provide for payment in full of the first six scheduled
interest payments due on the Notes (or, in the event one or more interest
payments have been
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made thereon, an amount sufficient to provide for the payment in full of
any and all interest payments on the Notes then remaining, up to and
including the sixth scheduled interest payment), the Pledgor may direct
the Trustee, in writing, to release any such overfunded amount to the
Pledgor or to such other party as the Pledgor may direct. Upon receipt of
an Issuer Order and any other documentation reasonably satisfactory to the
Trustee to substantiate such excess (including such written opinion of a
nationally recognized accounting firm), the Trustee shall pay over to the
Pledgor or the Person designated by the Pledgor, as the case may be, any
such overfunded amount.
(d) Upon payment in full of the first six scheduled interest
payments on the Notes in a timely mannner and provided that no principal
amount of the Notes has become or is due and payable at such time, the
security interest in the Collateral evidenced by this Pledge Agreement
will automatically and indefeasibly terminate and be of no further force
and effect. Furthermore, upon the release of any Collateral from the
Pledge Account in accordance with the terms of this Pledge Agreement,
whether upon release of Collateral to Holders as payment of interest or
otherwise, the security interest evidenced by this Pledge Agreement in
such released Collateral will automatically and indefeasibly terminate and
be of no further force and effect.
(e) The Pledgor covenants to give the Trustee at least three (3)
Business Days' notice (by Issuer Order) as to whether payment of interest
will be made pursuant to Section 4(a) or 4(b) and as to the respective
amounts of interest that will be paid pursuant to Section 4(a) or 4(b).
The Pledgor also covenants to give the Trustee written notice as to which
Pledged Securities, if any, shall be liquidated in order to make such
interest payment. If no such notice is given, the Trustee will act
pursuant to Section 4(a) as if it had received an Issuer Order pursuant
thereto for the payment in full of the interest then due.
(f) The Trustee shall not be required to liquidate any Pledged
Security in order to make any scheduled payment of interest or any release
hereunder unless instructed to do so by Issuer Order.
SECTION 5. Representations and Warranties. The Pledgor hereby
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge Agreement
will not contravene any provision of applicable law or the Memorandum of
Association or Articles of Association of the Pledgor or any material
agreement or other material instrument binding upon the Pledgor or any of
its subsidiaries or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition of any Lien on any
assets of the Pledgor, except for the security interest granted under this
Pledge Agreement; no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for (i)
the
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performance by the Pledgor of its obligations under this Pledge Agreement
or (ii) the pledge by the Pledgor of the Collateral pursuant to this
Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the
security interests granted under this Pledge Agreement). No financing
statement covering the Pledged Securities is on file in any public office
other than the financing statements, if any, filed pursuant to this Pledge
Agreement and forms 395 or 397 filed with the Registrar of Companies in
the United Kingdom.
(c) This Pledge Agreement has been duly authorized, validly executed
and delivered by the Pledgor and (assuming the due authorization and valid
execution and delivery of this Pledge Agreement by the Trustee and
enforceability of the Pledge Agreement against the Trustee in accordance
with its terms) constitutes a valid and binding agreement of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as
(i) the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or similar
laws now or hereafter in effect relating to or affecting creditors' rights
or remedies generally, (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability and the
discretion of the court before which any proceeding therefor may be
brought, (iii) rights to indemnification hereunder may be limited by U.S.
federal and state securities laws and public policy considerations and
(iv) the waiver of rights and defenses contained in Section 12(b), Section
15.11 and Section 15.16 hereof may be limited by applicable law.
(d) Upon the delivery to the Trustee of the certificates or
instruments, if any, representing or evidencing the Pledged Securities,
the filing of financing statements, if any, required by the Uniform
Commercial Code (the "UCC") in the appropriate offices in the State of New
York and the filing of form 395 or 397 with the Registrar of Companies in
the United Kingdom, and upon the transfer by the Trustee in its individual
capacity and the due recording in the books and records of the Trustee in
its capacity as trustee hereunder of interests in the Pledged Securities
to and in the name of the Trustee for its benefit and the ratable benefit
of the Holders of the Notes and the due recording by the Trustee in its
books and records that the Pledgor has pledged and granted a security
interest in such interests in the Pledged Securities to the Trustee on
behalf of itself and the holders of the Notes and receipt by the Trustee
and the Pledgor of written confirmation thereof in the form of Exhibit A
hereto, the pledge of and grant of a security interest in the Collateral
securing the payment of the Obligations for the benefit of the Trustee and
the Holders of the Notes will constitute a first priority perfected
security interest in such Collateral, enforceable as such against all
creditors of the Pledgor and any persons purporting to purchase any of the
Collateral from the Pledgor.
(e) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or
any of its subsidiaries is a party or to which any of the properties of
the Pledgor or any such subsidiary is subject that
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would materially and adversely affect the power or ability of the Pledgor
to perform its obligations under this Pledge Agreement or to consummate
the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge Agreement
is not prohibited by any applicable law or governmental regulation,
release, interpretation or opinion of the Board of Governors of the
Federal Reserve System or other regulatory agency (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System).
(g) No Event of Default exists.
SECTION 6. Further Assurances. The Pledgor will, promptly upon
request by the Trustee, execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all stock powers,
proxies, assignments, instruments and other documents, all in form and substance
reasonably satisfactory to the Trustee, deliver any instruments to the Trustee
and take any other actions that are necessary or, in the reasonable opinion of
the Trustee, desirable to perfect, continue the perfection of, or protect the
first priority of the Trustee's security interest in and to the Collateral, to
protect the Collateral against the rights, claims, or interests of third persons
or to effect the purposes of this Pledge Agreement. The Pledgor also hereby
authorizes the Trustee to file any financing or continuation statements in the
United States or any form with the Registrar of Companies in the United Kingdom
with respect to the Collateral without the signature of the Pledgor (to the
extent permitted by applicable law). The Trustee shall provide the Pledgor, at
the Pledgor's expense, with a copy of any such filing. The Pledgor will promptly
pay all reasonable costs incurred in connection with any of the foregoing within
45 days of receipt of an invoice therefor. The Pledgor also agrees, whether or
not requested by the Trustee, to take all actions that are necessary to perfect
or continue the perfection of, or to protect the first priority of, the
Trustee's security interest in and to the Collateral, including the filing of
all necessary financing and continuation statements or forms with the Registrar
of Companies in the United Kingdom, and to protect the Collateral against the
rights, claims or interests of third persons. The Trustee shall have no duty to
perform or monitor the foregoing, except to the extent that the failure to do so
would constitute bad faith or negligent or willful misconduct by the Trustee.
Upon the written request of the Pledgor and at the Pledgor's request, the
Trustee agrees to take all actions that are necessary or reasonably desirable to
release the security interest of the Trustee in the Collateral, or any portion
thereof, pursuant to the terms hereof.
SECTION 7. Covenants. Tile Pledgor covenants and agrees with the
Trustee and the Holders of the Notes from and after the date of this Pledge
Agreement until the earlier of payment in full in cash of (x) each of the first
six scheduled interest payments due on the Notes under the terms of the
Indenture or (y) all obligations due and owing under the Indenture and the Notes
in the event such obligations become due and payable prior to the payment of the
first six scheduled interest payments on the Notes:
(a) that it will not (i) sell or otherwise dispose of, or transfer,
or grant any option or warrant with respect to, any of the Collateral or
(ii) create or permit to exist any
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Lien upon or with respect to any of the Collateral (except for the Lien
created pursuant to this Pledge Agreement) and at all times will be the
sole beneficial owner of the Collateral; or
(b) that it will not (i) enter into any agreement or understanding
that purports to or may restrict or inhibit the Trustee's rights or
remedies hereunder, including, without limitation, the Trustee's right to
sell or otherwise dispose of the Collateral or (ii) fail to pay or
discharge any tax, assessment or levy of any nature with respect to the
Collateral not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment with respect to the
Collateral.
SECTION 8. Power of Attorney. In addition to all of the powers
granted to the Trustee pursuant to the Indenture, the Pledgor hereby appoints
and constitutes the Trustee as the Pledgor's attorney-in-fact (with full power
of substitution) to exercise to the fullest extent permitted by law all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default; (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof: (d)
making of any payments or taking any acts under Section 9 hereof and (e) paying
or discharging taxes or Liens levied or placed upon the Collateral, the legality
or validity thereof and the amounts necessary to discharge the same to be
determined by the Trustee in its sole reasonable discretion, and such payments
made by the Trustee to become part of the Obligations of the Pledgor to the
Trustee, due and payable immediately upon demand. The Trustee's authority under
this Section 8 shall include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of Collateral in the
name of the Pledgor, execute and give receipt for any certificate of ownership
or any document constituting Collateral, transfer title to any item of
Collateral, sign the Pledgor's name on all financing statements or forms to be
filed with the Registrar of Companies in the United Kingdom (to the extent
permitted by applicable law) or any other documents deemed necessary or
appropriate by the Trustee to preserve, protect or perfect the security interest
in the Collateral and to file the same, prepare, file and sign the Pledgor's
name on any notice of Lien, and to take any other actions arising from or
incident to the powers granted to the Trustee in this Pledge Agreement. This
power of attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 9. Trustee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Trustee may itself perform, or cause the
performance of, such agreement, and the reasonable fees and expenses of the
Trustee incurred in connection therewith shall be payable by the Pledgor under
Section 13 hereof.
SECTION 10. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Trustee hereunder are being granted in order to preserve
and protect the Trustee's and the Holders' of the Notes security interest in and
to the Collateral granted hereby and shall not be interpreted to, and shall not
impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided by
applicable law, the Trustee shall be deemed to have exercised reasonable care in
the custody and
<PAGE>
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preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Trustee accords similar property
in similar situations, it being understood that, except as expressly set forth
herein, the Trustee shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Collateral, whether or not the Trustee has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral.
SECTION 11. Indemnity. The Pledgor shall indemnify, hold harmless
and defend the Trustee and its directors, officers, agents and employees, from
and against any and all claims, actions, obligations, liabilities and expenses,
including reasonable defense costs, reasonable investigative fees and costs, and
reasonable legal fees and expenses and damages arising from the Trustee's
performance under this Pledge Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person.
SECTION 12. Remedies Upon Event of Default. If any Event of Default
under the Indenture or default hereunder (any such Event of Default or default
being referred to in this Pledge Agreement as an "Event of Default") shall have
occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral
of a secured party under the UCC in effect in the State of New York at
that time. In addition, with respect to any Collateral that shall then be
in or shall thereafter come into the possession or custody of the Trustee,
the Trustee may sell or cause the same to be sold at any broker's board or
at public or private sale, in one or more sales or lots, at such price or
prices as the Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of any or
all Collateral so sold shall thereafter hold the same absolutely, free
from any claim, encumbrance or right of any kind whatsoever created by or
through the Pledgor. Unless any of the Collateral is likely, in the
reasonable judgment of the Trustee, to decline speedily in value, the
Trustee will give the Pledgor reasonable notice of the time and place of
any public sale thereof, or of the time after which any private sale or
other intended disposition is to be made. Any sale of the Collateral
conducted in conformity with reasonable commercial practices of banks,
insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable
notice shall be met if such notice is mailed to the Pledgor as provided in
Section 15.1 hereof at least ten (10) days before the time of the sale or
disposition. The Trustee or any Holder of Notes may, in its own name or in
the name of a designee or nominee, buy any of the Collateral at any public
sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees, expenses
and disbursements) of, or incident to, the enforcement of any of the
provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Collateral.
<PAGE>
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(b) The Pledgor further agrees to use its reasonable best efforts
to do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to
this Section 12 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 12 will cause
irreparable injury to the Trustee and the Holders of the Notes, that the
Trustee and the Holders of the Notes have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 12 shall be specifically enforceable against the
Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred.
SECTION 13. Expenses. The Pledgor will upon written demand or
invoice pay to the Trustee the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, experts and agents retained by the Trustee, that the Trustee may
incur m connection with (a) the review, negotiation and administration of this
Pledge Agreement, (b) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof. The lien in favor of the Trustee created by Section 7.07 of
the Indenture shall in addition to securing the Pledgor's payment obligations
under such Section 7.07 secure the Pledgor's payment obligations under Section
11 and 13 hereof.
SECTION 14. Security Interest Absolute. All rights of the Trustee
and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Pledge
Agreement.
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SECTION 15. Miscellaneous Provisions.
Section 15.1. Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner, and delivered to each of the parties hereto at their respective
addresses, as set forth or provided for in Section 12.02 of the Indenture.
Section 15.2. No Adverse Interpretation of Other Agreements. This
Pledge Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement may be used to interpret this Pledge Agreement.
Section 15.3. Severability. The provisions of this Pledge Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
Section 15.4. Headings. The headings in this Pledge Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15.5. Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
Section 15.6. Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
Section 15.7. Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Pledge Agreement by the parties hereto and any
consent to any departure by the Pledgor from any provision of this Pledge
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Trustee nor any
Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Trustee or any Holder of Notes to exercise, or
delay in exercising, any right, power or privilege hereunder shall not preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder of Notes would otherwise have on
any future occasion. The rights
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G-1l
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
Section 15.8. Interpretation of Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the applicable
UCC, except where the context otherwise requires. To the extent a term or
provision of this Pledge Agreement conflicts with the Indenture, the Indenture
shall control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Pledge Agreement shall not be relevant to determine the meaning of this Pledge
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
Section 15.9. Continuing Security Interest; Termination. (a) This
Pledge Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in the Indenture or in this
Pledge Agreement, remain in full force and effect until the earlier of payment
in full in cash of (i) each of the first six scheduled interest payments due on
the Notes under the terms of the Indenture or (ii) all obligations due and owing
under the Indenture and the Notes in the event such obligations become payable
prior to the payment of the first six scheduled interest payments on the Notes.
This Pledge Agreement shall be binding upon the Pledgor, its transferees,
successors and assigns, and shall inure, together with the rights and remedies
of the Trustee hereunder, to the benefit of the Trustee, the Holders of the
Notes and their respective successors, transferees and assigns.
(b) Subject to the provisions of Section 15.10 hereof, this Pledge
Agreement shall terminate upon the earlier of payment in full in cash of
(i) each of the first six scheduled interest payments due on the Notes
under the terms of the Indenture or (ii) all obligations due and owing
under the Indenture and the Notes in the event such obligations become
payable prior to the payment of the first six scheduled interest payments
on the Notes. At such time, the Trustee shall, pursuant to an Issuer
Order, reassign and redeliver to the Pledgor all of the Collateral
hereunder that has not been sold, disposed of, retained or applied by the
Trustee in accordance with the terms of this Pledge Agreement and the
Indenture. Such reassignment and redelivery shall be without warranty by
or recourse to the Trustee, except as to the absence of any prior
assignments by the Trustee of its interest in the Collateral, and shall be
at the reasonable expense of the Pledgor.
Section 15.10. Survival Provisions. All representations, warranties
and covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge Agreement, and shall terminate only upon the termination
of this Pledge Agreement. The obligations of the Pledgor under Sections 11 and
13 hereof shall survive the termination of this Agreement.
Section 15.11. Waivers. The Pledgor waives presentment and demand
for payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
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Section 15.12. Authority of the Trustee. (a) The Trustee shall have
and be entitled to exercise all powers hereunder that are specifically granted
to the Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Neither the Trustee nor any director, officer,
employee, attorney or agent of the Trustee shall be liable to the Pledgor for
any action taken or omitted to be taken by it hereunder, except for its own bad
faith, gross negligence or wilful misconduct, and the Trustee shall not be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Trustee and its directors,
officers, employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document believed by it or them to be genuine and
correct and to have been signed or sent by the proper person or persons.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken
by the Trustee or the exercise or non-exercise by the Trustee of any
option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as
between the Trustee and the Holders of the Notes, be governed by the
Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Trustee and the Pledgor,
the Trustee shall be conclusively presumed to be acting as agent for the
Holders of the Notes with full and valid authority so to act or refrain
from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
Section 15.13. Limitation by Law. All rights, remedies and powers
provided herein may be exercised only to the extent that they will not render
this Pledge Agreement not entitled to be recorded, registered or filed under
provisions of any applicable law.
Section 15.14. Final Expression. This Pledge Agreement, together
with any other agreement executed in connection herewith, is intended by the
parties as a final expression of this Pledge Agreement and is intended as a
complete and exclusive statement of the terms and conditions thereof.
Section 15.15. Rights of Holders of the Notes. No Holder of Notes
shall have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 6.06 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
Section 15.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN
CONNECTION WITH THIS
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PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) THE PLEDGOR HAS APPOINTED RSL COMMUNICATIONS N. AMERICA, INC.,
767 FIFTH AVENUE, SUITE 4300, NEW YORK, NEW YORK 10153 AS ITS AGENT FOR SERVICE
OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND
FOR ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT TO
THE JURISDICTION OF ANY SUCH COURT.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR ITS PROPERTY, AS THE
CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE PLEDGOR
AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY
PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THE PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AND THE TRUSTEE EACH WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS PLEDGE AGREEMENT.
INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
(e) THE PLEDGOR AGREES THAT NEITHER THE TRUSTEE NOR ANY HOLDER OF
NOTES SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER ARISING IN TORT, CONTRACT
OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP
ESTABLISHED BY THE PLEDGE AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS SUCH LOSSES WERE THE RESULT OF ACTS OR
<PAGE>
OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY
BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS (1)
ADMITTED BY THE TRUSTEE IN WRITING, (2) AGREED UPON BY THE PARTIES HERETO IN
WRITING OR (3) SET FORTH IN A JUDGMENT OF A COURT WHICH IS NOT SUBJECT TO APPEAL
OR WITH RESPECT TO WHICH THE TIME FOR FILING AN APPEAL HAS EXPIRED.
(f) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT, THE PLEDGOR WAIVES All RIGHTS OF
NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE TRUSTEE OR ANY
HOLDER OF NOTES OF ITS RIGHTS DURING THE CONTINUANCE OF ALL EVENTS OF DEFAULT TO
REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY
UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION WITH ANY
JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF REPLEVY, ATTACH OR LEVY
UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF
NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR
PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY OTHER
AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE TRUSTEE AND/OR
THE HOLDERS OF THE NOTES ON THE OTHER HAND.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
G-15
IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused
this Pledge Agreement to be duly executed and delivered as of the date first
above written.
Pledgor:
RSL COMMUNICATIONS PLC
By:_________________________________________
Name:
Title:
Trustee:
THE CHASE MANHATTAN BANK,
as Trustee
By:_________________________________________
Name:
Title:
<PAGE>
G-16
EXHIBIT A TO THE
COLLATERAL PLEDGE
AND SECURITY AGREEMENT
RSL Communications PLC
767 Fifth Avenue
Suite 4300
New York, New York 10153
Attention: President
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Department
Ladies and Gentlemen:
Reference is made to the Indenture dated as of October 3, 1996
between RSL Communications PLC, as issuer (the "Issuer"), RSL Communications,
Ltd., as guarantor, and The Chase Manhattan Bank, as trustee thereunder (the
"Trustee") relating to the 12 1/4% Senior Notes due 2006 of the Issuer (the
"Notes") and the Collateral Pledge and Security Agreement dated as of October 3,
1996 (the "Pledge Agreement") between the Issuer and the Trustee, for the
benefit of the Trustee and the ratable benefit of the holders of the Notes.
We hereby confirm that we are holding the Pledged Securities (as
defined in the Pledge Agreement) in account no. C24179A (the "Account") at our
office at 450 West 33rd Street, New York, New York, 10001-2697, for the benefit
of the Trustee and the ratable benefit of the holders of the Notes as provided
in the Pledge Agreement and that we have indicated the same in our books and
records relating to the Pledged Securities and the Account.
Very truly yours,
THE CHASE MANHATTAN BANK,
in its individual capacity
By _________________________________________
Name:
Title:
<PAGE>
Exhibit 4.3
- --------------------------------------------------------------------------------
NOTES REGISTRATION RIGHTS AGREEMENT
Dated October 3, 1996
among
RSL COMMUNICATIONS PLC
RSL COMMUNICATIONS, LTD.
and
MORGAN STANLEY & CO. INCORPORATED
BEAR, STEARNS & CO. INC.
DILLON, READ & CO. INC.
- --------------------------------------------------------------------------------
<PAGE>
NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into October 3, 1996, among RSL COMMUNICATIONS, LTD., a Bermuda
corporation ("Holdings), RSL COMMUNICATIONS PLC, a United Kingdom corporation
(the "Note Issuer", and together with Holdings, the "Issuers"), and MORGAN
STANLEY & CO. INCORPORATED, BEAR, STEARNS & CO. INC. and DILLON, READ & CO. INC.
(the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement dated
September 30, 1996, among Holdings, the Note Issuer and the Placement Agents
(the "Placement Agreement"), which provides for the sale by Holdings and the
Company to the Placement Agents of 300,000 Units. Each Unit consists of (i) 12
1/4% Senior Notes due 2006 having a principal amount equal to $1,000 (the
"Notes") to be issued pursuant to the Indenture (as hereinafter defined) and
(ii) one Warrant (collectively, the "Warrants") entitling the holder thereof to
purchase 1.815 Class A common shares, par value $0.01 per share, of Holdings at
an exercise price of $0.01 per share, subject to adjustment. The obligations of
the Note Issuer under the Notes and the Indenture will be guaranteed by Holdings
pursuant to the terms of the Indenture (the "Note Guarantee"). In order to
induce the Placement Agents to enter into the Placement Agreement, the Issuers
have agreed to provide to the Placement Agents and their direct and indirect
transferees the registration rights with respect to the Notes and the Note
Guarantee set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Closing Date" shall mean the Closing Date as defined in the Placement
Agreement.
"Exchange Dates" shall have the meaning set forth in Section 2(a)(ii)
hereof.
<PAGE>
2
"Exchange Notes" shall mean securities issued by the Note Issuer and
guaranteed on an unsubordinated basis by Holdings under the Indenture
containing terms identical to the Notes (except that (i) interest thereon
shall accrue from the last date on which interest was paid on the Notes and
(ii) the Exchange Notes will not contain terms with respect to transfer
restrictions) and to be offered to Holders of Notes in exchange for Notes
pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Note Issuer of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form F-4 (or other appropriate form) and all
amendments and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Holder" shall mean any of the Placement Agents, for so long as they
own any Registrable Notes, and each of their successors, assigns and direct
and indirect transferees who become registered owners of Registrable Notes
under the Indenture; provided that for purposes of Sections 4 and 5 of this
Agreement, the term "Holder" shall include Participating Broker-Dealers (as
defined in Section 4(a)).
"Holdings" shall have the meaning set forth in the preamble and shall
also include Holdings' successors.
"Indenture" shall mean the Indenture relating to the Notes dated as of
the date hereof among Holdings, the Note Issuer and The Chase Manhattan
Bank, as trustee, and as the same may be amended from time to time in
accordance with the terms thereof.
"Issuers" shall mean Holdings and the Note Issuer, collectively.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Note
Issuer or any of its affiliates (as such term is defined in Rule 405 under
the 1933 Act), other than the Placement Agents or subsequent holders of
Registrable Notes if such subsequent holders are deemed to be such
affiliates solely by reason of their holding of such Registrable
<PAGE>
3
Notes, shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage or amount.
"Note Guarantee" shall have the meaning set forth in the preamble.
"Notes" shall have the meaning set forth in the preamble.
"Note Issuer" shall have the meaning set forth in the preamble and
shall also include the Note Issuer's successors.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 4.
"Person" shall mean an individual, partnership, limited liability
company, limited liability partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Placement Agents" shall have the meaning set forth in the preamble.
"Placement Agreement" shall have the meaning set forth in the
preamble.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Shelf Registration Statement,
and by all other amendments and supplements to such prospectus, and in each
case including all material incorporated by reference therein.
"Registrable Notes" shall mean the Notes; provided, however, that the
Notes shall cease to be Registrable Notes (i) when a Registration Statement
with respect to such Notes shall have been declared effective under the
1933 Act and such Notes shall have been disposed of pursuant to such
Registration Statement, (ii) when such Notes have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force, but not
Rule 144A) under the 1933 Act, (iii) when such Notes shall have ceased to
be outstanding or (iv) when the Exchange Offer is consummated (except in
the case of Notes purchased from the Note Issuer that continue to be held
by a Placement Agent).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by Holdings and the Note Issuers with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and filing
fees, (ii) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws (including
<PAGE>
4
reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with blue sky qualification of any of the Exchange
Notes or Registrable Notes), (iii) all expenses of any Persons in preparing
or assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) all fees and disbursements
relating to the qualification of the Indenture under applicable securities
laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii)
the fees and disbursements of counsel for Holdings and the Note Issuer and,
in the case of a Shelf Registration Statement, the fees and disbursements
of one counsel for the Holders (which counsel shall be selected by the
Majority Holders and which counsel may also be counsel for the Placement
Agents) and (viii) the fees and disbursements of the independent public
accountants of Holdings and the Note Issuer, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees and expenses of counsel to
the underwriters (other than fees and expenses set forth in clause (ii)
above) or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Notes by a Holder.
"Registration Statement" shall mean any registration statement of
Holdings and the Note Issuer that covers any of the Exchange Notes or
Registrable Notes pursuant to the provisions of this Agreement and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of Holdings and the Note Issuer pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable Notes
(but no other securities unless approved by the Holders whose Registrable
Notes are covered by such Shelf Registration Statement) on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
<PAGE>
5
"Trustee" shall mean the trustee with respect to the Notes under the
Indenture.
"Underwritten Registration" or "Underwritten Offering" shall mean a
registration in which Registrable Notes are sold to an underwriter for
reoffering to the public.
"Warrants" shall have the meaning set forth in the preamble.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Note Issuer and Holdings shall use
their best efforts to file and cause to become effective an Exchange Offer
Registration Statement covering the offer by the Note Issuer and Holdings to the
Holders to exchange all of the Registrable Notes for Exchange Notes, to have
such Registration Statement remain effective until the closing of the Exchange
Offer and to consummate the Exchange Offer on or prior to June 1, 1997. The Note
Issuer and Holdings shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement has been declared effective by the SEC.
The Note Issuer and Holdings shall commence the Exchange Offer by mailing the
related exchange offer Prospectus and accompanying documents to each Holder
stating, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this Agreement
and that all Registrable Notes validly tendered will be accepted for
exchange;
(ii) the dates of acceptance for exchange (which shall be a period of
at least 20 business days from the date such notice is mailed) (the
"Exchange Dates");
(iii) that any Registrable Note not tendered will remain outstanding
and continue to accrue interest or original issue discount, as applicable,
but will not retain any rights under this Agreement;
(iv) that Holders electing to have a Registrable Note exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Note, together with the enclosed letters of transmittal to the
institution and at the address (located in the Borough of Manhattan, The
City of New York) specified in the notice prior to the close of business on
the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last Exchange Date, by sending to
the institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice a telegram, telex, facsimile
transmission or letter setting forth the name
<PAGE>
6
of such Holder, the principal amount of Registrable Notes delivered for
exchange and a statement that such Holder is withdrawing his election to
have such Notes exchanged.
As soon as practicable after the last Exchange Date, the Note Issuer
and Holdings shall:
(i) accept for exchange Registrable Notes or portions thereof duly
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes or portions thereof so accepted for
exchange by the Note Issuer and Holdings and issue, and cause the Trustee
to promptly authenticate and mail to each Holder, an Exchange Note equal in
principal amount to the principal amount of the Registrable Note
surrendered by such Holder.
The Note Issuer and Holdings shall use their best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the 1933 Act, the 1934 Act and other applicable laws and
regulations in connection with the Exchange Offer. The Exchange Offer shall not
be subject to any condition other than that the Exchange Offer not violate
applicable law or any applicable interpretation of the Staff of the SEC. The
Note Issuer and Holdings shall inform the Placement Agents of the names and
addresses of the Holders to whom the Exchange Offer is made, and the Placement
Agents shall have the right, subject to applicable law, to contact such Holders
and otherwise facilitate the tender of Registrable Notes in the Exchange Offer.
(b) In the event that (i) the Note Issuer and Holdings determine that
the Exchange Offer Registration provided for in Section 2(a) above is not
available or may not be consummated as soon as practicable after the last
Exchange Date because it would violate applicable law or the applicable
interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any
other reason consummated by June 1, 1997 or (iii) the Exchange Offer has been
completed and, in the opinion of counsel for the Placement Agents, a
Registration Statement must be filed and a Prospectus must be delivered by a
Placement Agent in connection with any offering or sale by it of Registrable
Notes, the Note Issuer and Holdings shall use their best efforts to cause to
become effective as soon as practicable after such determination, date or notice
of such opinion of counsel is given to the Note Issuer, as the case may be, a
Shelf Registration Statement providing for the sale by the Holders of all of the
Registrable Notes and to keep such registration statement effective until the
expiration of the time period referred to in Rule 144(k) under the 1933 Act
after the Closing Date or such shorter period that will terminate when all of
the Registrable Notes covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement. The Note Issuer and Holdings
further agree to supplement or amend the Shelf Registration
<PAGE>
7
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Note Issuer and Holdings for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by a Holder with
respect to information relating to such Holder, and to use their best efforts to
cause any such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable. The Note Issuer
and Holdings agree to furnish to the Holders of Registrable Notes copies of any
such supplement or amendment promptly after its being used or filed with the
SEC.
(c) The Note Issuer and Holdings shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) or Section 2(b).
Each Holder shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Notes pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that, if, after it has been declared effective, the
offering of Registrable Notes pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume. As provided for in the Indenture, in
the event the Exchange Offer is not consummated and a Shelf Registration
Statement is not declared effective on or prior to June 1, 1997, the annual
interest rate borne by the Notes shall be permanently increased by 0.5% per
annum, and such additional interest will accrue from such date and be payable in
cash, semiannually, in arrears, on each May 15 and November 15, commencing
November 15, 1997. If a Shelf Registration Statement is required solely by the
matters referred to in clause (iii) of the first sentence of Section 2(b), the
foregoing interest shall be payable only to the Placement Agents, with respect
to Notes held by them, and only with respect to any period (after June 1, 1997)
during which such Shelf Registration Statement is not effective.
(e) Without limiting the remedies available to the Placement Agents
and the Holders, the Note Issuer and Holdings acknowledge that any failure by
the Note Issuer and Holdings to comply with their respective obligations under
Section 2(a) and Section 2(b) hereof may result in material irreparable injury
to the Placement Agents or the Holders for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of any such failure, the Placement Agents or any Holder
may obtain such relief as may be required to specifically enforce the Note
Issuer's and Holdings's obligations under Section 2(a) and Section 2(b) hereof.
<PAGE>
8
3. Registration Procedures.
In connection with the obligations of the Note Issuer and Holdings
with respect to the Registration Statements pursuant to Section 2(a) and Section
2(b) hereof, the Note Issuer and Holdings shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by
the Note Issuer and Holdings and (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Notes by the
selling Holders thereof and (z) shall comply as to form in all material
respects with the requirements of the applicable form and include all
financial statements required by the SEC to be filed therewith, and use its
best efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to
keep each Prospectus current during the period described under Section 4(3)
and Rule 174 under the 1933 Act that is applicable to transactions by
brokers or dealers with respect to the Registrable Notes or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, to counsel for the Placement Agents, to counsel for the
Holders and to each underwriter of an Underwritten Offering of Registrable
Notes, if any, without charge, as many copies of each Prospectus, including
each preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder or underwriter may reasonably request,
in order to facilitate the public sale or other disposition of the
Registrable Notes; and the Note Issuer and Holdings consent to the use of
such Prospectus and any amendment or supplement thereto in accordance with
applicable law by each of the selling Holders of Registrable Notes and any
such underwriters in connection with the offering and sale of the
Registrable Notes covered by and in the manner described in such Prospectus
or any amendment or supplement thereto in accordance with applicable law;
(d) use their best efforts to register or qualify the Exchange and
Registrable Notes under all applicable state securities or "blue sky" laws
of such jurisdictions as any Holder of Registrable Notes covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with such Holders in connection with any filings
<PAGE>
9
required to be made with the National Association of Securities Dealers,
Inc. and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the disposition
in each such jurisdiction of such Exchange and Registrable Notes owned by
such Holder; provided, however, that neither the Note Issuer nor Holdings
shall be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general consent to service
of process or (iii) subject itself to taxation in any such jurisdiction if
it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes, counsel for the Holders and counsel for the Placement
Agents promptly and, if requested by any such Holder or counsel, confirm
such advice in writing (i) when the Shelf Registration Statement has become
effective and when any post-effective amendment thereto has been filed and
becomes effective, (ii) of any request by the SEC or any state securities
authority for amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration Statement
and the closing of any sale of Registrable Notes covered thereby, the
representations and warranties of the Note Issuer and Holdings contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and correct in
all material respects or if the Note Issuer and Holdings receive any
notification with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (v) of the happening of any event during the
period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related Prospectus
untrue in any material respect or which requires the making of any changes
in such Registration Statement or Prospectus in order to make the
statements therein not misleading and (vi) of any determination by the Note
Issuer and Holdings that a post-effective amendment to a Registration
Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the
withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of the Shelf
<PAGE>
10
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and not
bearing any restrictive legends and enable such Registrable Notes to be in
such denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders may reasonably request at
least two business days prior to the closing of any sale of Registrable
Notes;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use their best efforts to
prepare and file with the SEC a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes,
such Prospectus will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Note Issuer and Holdings agree to notify the Holders to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and the Holders hereby agree to suspend use of the Prospectus until
the Note Issuer and Holdings have amended or supplemented the Prospectus to
correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Placement Agents and their counsel (and, in the case of a
Shelf Registration Statement, the Holders and their counsel) and make such
of the representatives of the Note Issuer and Holdings as shall be
reasonably requested by the Placement Agents or their counsel (and, in the
case of a Shelf Registration Statement, the Holders or their counsel)
available for discussion of such document, and shall not at any time file
or make any amendment to the Registration Statement, any Prospectus or any
amendment of or supplement to a Registration Statement or a Prospectus or
any document which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Placement Agents and their counsel
(and, in the case of a Shelf Registration Statement, the Holders and their
counsel) shall not have previously been advised and furnished a copy or to
which the Placement Agents or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall reasonably
object;
<PAGE>
11
(k) obtain a CUSIP number and, if applicable, a CINS number, for all
Exchange Notes or Registrable Notes, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, cooperate with the
Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms
of the TIA and execute, and use their best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes and all
other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for inspection
by a representative of the Holders of the Registrable Notes, any
underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and attorneys and accountants designated by the
Holders, at reasonable times and in a reasonable manner, all financial and
other records, pertinent documents and properties of the Note Issuer and
Holdings, and cause the respective officers, directors and employees of the
Note Issuer and Holdings to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant in connection
with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use their best efforts to
cause all Registrable Notes to be listed on any securities exchange or any
automated quotation system on which similar securities issued by the Note
Issuer and Holdings are then listed if requested by the Majority Holders,
to the extent such Registrable Notes satisfy applicable listing
requirements;
(o) use their best efforts to cause the Exchange Notes or Registrable
Notes, as the case may be, to be rated by two nationally recognized
statistical rating organizations (as such term is defined in Rule 436(g)(2)
under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable Notes covered
by a Registration Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information with respect to
such Holder as such Holder reasonably requests to be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as the Note Issuer and Holdings have
received notification of the matters to be incorporated in such filing; and
<PAGE>
12
(q) in the case of a Shelf Registration, enter into such customary
agreements and take all such other actions in connection therewith
(including those requested by the Holders of a majority of the Registrable
Notes being sold) in order to expedite or facilitate the disposition of
such Registrable Notes including, but not limited to, an Underwritten
Offering and in such connection, (i) to the extent possible, make such
representations and warranties to the Holders and any underwriters of such
Registrable Notes with respect to the business of the Note Issuer, Holdings
and their subsidiaries, the Registration Statement, Prospectus and
documents incorporated by reference or deemed incorporated by reference, if
any, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same if
and when requested, (ii) obtain opinions of counsel to the Note Issuer and
Holdings (which counsel and opinions, in form, scope and substance, shall
be reasonably satisfactory to the Holders and such underwriters and their
respective counsel) addressed to each selling Holder and underwriter of
Registrable Notes, covering the matters customarily covered in opinions
requested in underwritten offerings, (iii) obtain "cold comfort" letters
from the independent certified public accountants of the Note Issuer and
Holdings (and, if necessary, any other certified public accountant of any
subsidiary of the Note Issuer and Holdings, or of any business acquired by
the Note Issuer or Holdings for which financial statements and financial
data are or are required to be included in the Registration Statement)
addressed to each selling Holder and underwriter of Registrable Notes, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority in aggregate
principal amount of the Registrable Notes being sold or the underwriters,
and which are customarily delivered in underwritten offerings, to evidence
the continued validity of the representations and warranties of the Note
Issuer and Holdings made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in an underwriting
agreement.
In the case of a Shelf Registration Statement, the Note Issuer and
Holdings may require each Holder of Registrable Notes to furnish to the Note
Issuer and Holdings such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Notes as the Note Issuer and
Holdings may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees that
during any consecutive 365-day period, the Note Issuer may suspend availability
of the Shelf Registration Statement for (a) up to two consecutive 30-day periods
if the Note Issuer's Board of Directors determines in good faith that there is a
valid purpose for the suspension and (b) five additional, non-consecutive
three-day periods if the Note Issuer's Board of
<PAGE>
13
Directors determines in good faith that the Note Issuer cannot provide adequate
disclosure during such period due to circumstances beyond its control, and
further agrees that, with respect to any such suspension, if so directed by the
Note Issuer and Holdings, such Holder will deliver to the Note Issuer and
Holdings (at its expense) all copies in its possession, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Registrable Notes current at the time of receipt of such notice and agrees that
upon receipt of written notice of such suspension, it will forthwith discontinue
disposition of Registrable Notes pursuant to such Shelf Registration Statement
until it receives copies of the amended or supplemented Prospectus contemplated
by Section 3(i) hereof. If the Note Issuer and Holdings shall give any such
notice to suspend the disposition of Registrable Notes pursuant to a
Registration Statement, the Note Issuer and Holdings shall extend the period
during which the Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when the Holders
shall have received copies of the supplemented or amended Prospectus necessary
to resume such dispositions.
The Holders of Registrable Notes covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Notes in an Underwritten
Offering. In any such Underwritten Offering, the investment banker or investment
bankers and manager or managers (the "underwriters") that will administer the
offering will be selected by the Majority Holders of the Registrable Notes
included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any broker-dealer
that receives Exchange Notes for its own account in the Exchange Offer in
exchange for Notes that were acquired by such broker-dealer as a result of
market-making or other trading activities (a "Participating Broker-Dealer"),
may be deemed to be an "underwriter" within the meaning of the 1933 Act and must
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Notes.
The Note Issuer and Holdings understand that it is the Staff's
position that if the Prospectus contained in the Exchange Offer Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Notes, without naming the Participating Broker-Dealers or specifying
the amount of Exchange Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Notes for their own
accounts, so long as the Prospectus otherwise meets the requirements of the 1933
Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Note Issuer and Holdings agree that the provisions of this
Agreement as they
<PAGE>
14
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Notes by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
(i) the Note Issuer and Holdings shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i), for a period
exceeding 180 days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3 of this
Agreement) and Participating Broker-Dealers shall not be authorized by the
Note Issuer and Holdings to deliver and shall not deliver such Prospectus
after such period in connection with the resales contemplated by this
Section 4; and
(ii) the application of the Shelf Registration procedures set forth in
Section 3 of this Agreement to an Exchange Offer Registration, to the
extent not required by the positions of the Staff of the SEC or the 1933
Act and the rules and regulations thereunder, will be in conformity with
the reasonable request to the Note Issuer and Holdings by the Placement
Agents or with the reasonable request in writing to the Note Issuer and
Holdings by one or more broker-dealers who certify to the Placement Agents,
the Note Issuer and Holdings in writing that they anticipate that they will
be Participating Broker-Dealers; and provided further that, in connection
with such application of the Shelf Registration procedures set forth in
Section 3 to an Exchange Offer Registration, the Note Issuer and Holdings
shall be obligated (x) to deal only with one entity representing the
Participating Broker-Dealers, which shall be Morgan Stanley & Co.
Incorporated, unless it advises the Note Issuer and Holdings in writing
that it elects not to act as such representative, (y) to pay the fees and
expenses of only one counsel representing the Participating Broker-Dealers,
which shall be counsel to the Placement Agents unless such counsel elects
not to so act and (z) to cause to be delivered only one, if any, "cold
comfort" letter with respect to the Prospectus in the form existing on the
last Exchange Date and with respect to each subsequent amendment or
supplement, if any, effected during the period specified in clause (i)
above.
(c) The Placement Agents shall have no liability to the Note Issuer,
Holdings or any Holder with respect to any request that it may make pursuant to
Section 4(b) above.
5. Indemnification and Contribution.
<PAGE>
15
(a) The Note Issuer and Holdings agree, jointly and severally, to
indemnify and hold harmless each Placement Agent, each Holder and each Person,
if any, who controls any Placement Agent or any Holder within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under
common control with, or is controlled by, any Placement Agent or any Holder,
from and against all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Placement
Agent, any Holder or any such controlling or affiliated person in connection
with defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Exchange
Note or Registrable Notes were registered under the 1933 Act, including all
documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Note Issuer and Holdings shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Placement Agent or any Holder
furnished to the Note Issuer and Holdings in writing by such Placement Agent or
any selling Holder expressly for use therein. In connection with any
Underwritten Offering permitted by Section 3 hereof, the Note Issuer and
Holdings will also indemnify the underwriters, if any, selling brokers, dealers
and similar securities industry professionals participating in the distribution,
their officers and directors and each Person who controls such Persons (within
the meaning of the 1933 Act and the 1934 Act) to the same extent as provided
above with respect to the indemnification of the Holders, if requested in
connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Note Issuer, Holdings, each Placement Agent and the other
selling Holders, and each of their respective directors and officers who sign
the Registration Statement and each Person, if any, who controls the Note
Issuer, Holdings, any Placement Agent and any other selling Holder within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to
the same extent as the foregoing indemnity from the Note Issuer to the Placement
Agent and the Holders, but only with reference to information relating to such
Holder furnished to the Note Issuer and Holdings in writing by such Holder
expressly for use in any Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any Person in respect of which indemnity may be
sought pursuant to
<PAGE>
16
either paragraph (a) or paragraph (b) above, such Person (the "indemnified
party") shall promptly notify the Person against whom such indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or reasonably
likely potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (a) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Placement
Agents and all Persons, if any, who control any Placement Agent within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for the Note Issuer and Holdings, their directors, their officers who
sign the Registration Statement and each Person, if any, who controls the Note
Issuer or Holdings within the meaning of either such Section and (c) the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Holders and all Persons, if any, who control any Holders within the
meaning of either such Section, and that all such fees and expenses shall be
reimbursed as they are incurred. In such case involving any Placement Agent and
persons who control such Placement Agent, such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated. In such case involving the Holders
and such Persons who control Holders, such firm shall be designated in writing
by the Majority Holders. In all other cases, such firm shall be designated by
the Note Issuer and Holdings. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but, if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity could have
<PAGE>
17
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 5 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Note Issuer and Holdings, the Holders
and the Placement Agents shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Note Issuer and Holdings, the Holders or the Placement Agents
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective number of Registrable Notes of such Holder that
were registered pursuant to a Registration Statement.
(e) The Note Issuer and Holdings and each Holder agree that it would
not be just or equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Notes were sold by such Holder exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The remedies provided for in this Section 5
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this
<PAGE>
18
Agreement, (ii) any investigation made by or on behalf of any Placement Agent,
any Holder or any person controlling any Placement Agent or any Holder, or by or
on behalf of the Note Issuer and Holdings, their officers or directors or any
Person controlling the Note Issuer or Holdings, (iii) acceptance of any of the
Exchange Notes and (iv) any sale of Registrable Notes pursuant to a Shelf
Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Note Issuer and Holdings have not
entered into, and on or after the date of this Agreement will not enter into,
any agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise materially conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Note Issuer's or Holdings' other issued and outstanding securities under any
such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Note Issuer and Holdings have obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or consent; provided that the signatories hereto may make any
amendment hereto that does not, in the good faith opinion of the Board of
Directors of Holdings (and evidenced by a resolution of such board) materially
adversely effect any Holder; provided, however, that notwithstanding the
foregoing no amendment, modification, supplement, waiver or consents to any
departure from the provisions of Section 5 hereof shall be effective as against
any Holder of Registrable Notes unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Note Issuer and Holdings by means of a notice given in accordance with the
provisions of this Section 6(c), which address initially is, with respect to the
Placement Agents, the address set forth in the Placement Agreement; (ii) if to
the Note Issuer, initially at the Note Issuer's address set forth in the
Indenture and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c); and (iii) if to Holdings,
initially at Holdings' address set forth in the Indenture and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 6(c).
<PAGE>
19
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms of the Placement Agreement. If any transferee of any
Holder shall acquire Registrable Notes, in any manner, whether by operation of
law or otherwise, such Registrable Notes shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Notes such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such person shall be
entitled to receive the benefits hereof. The Placement Agents (in their capacity
as Placement Agents) shall have no liability or obligation to the Note Issuer or
Holdings with respect to any failure by a Holder to comply with, or any breach
by any Holder of, any of the obligations of such Holder under this Agreement.
(e) Purchases and Sales of Notes. The Note Issuer and Holdings shall
not, and shall use their best efforts to cause their affiliates (as defined in
Rule 405 under the 1933 Act) not to, purchase and then resell or otherwise
transfer any Notes.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Note Issuer and
Holdings, on the one hand, and the Placement Agents, on the other hand, and each
Holder shall have the right to enforce such agreements directly to the extent it
deems such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
20
(i) Designation of Process Agent; Submission to Jurisdiction. Each of
the parties hereto hereby agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
herein may be instituted in any U.S. federal or New York State court in the
Borough of Manhattan in the City of New York (each a "New York court") and each
of the parties hereto hereby irrevocably waives any objection it may now or
hereafter have to the laying of venue of any such proceeding and irrevocably
submits to the jurisdiction of such courts and to the courts of its corporate
domicile, with respect to actions brought against it as defendant, in any suit,
action or proceeding. The Note Issuer and Holdings hereby each (i) represents
that it has irrevocably designated and appointed RSL Communications N. America,
Inc. ("RSL USA"), 767 Fifth Avenue, Suite 4300, New York, New York 10153
(together with any successor, the "Process Agent") as its authorized agent in
the Borough of Manhattan in the City of New York upon which process may be
served in any such suit, action or proceeding, or brought under U.S. federal or
state securities laws, and acknowledges that the Process Agent has accepted such
designation, (ii) agrees that prior to any dissolution, liquidation, winding-up
or sale of RSL USA, or incorporation of RSL USA in a jurisdiction outside the
United States, it will cause such obligation of RSL USA to be assumed by (A) CT
Corporation System ("CT Corporation"), 1633 Broadway, New York, New York 10019
or (B) any other direct or indirect subsidiary of Holdings organized under the
laws of the United States; provided that such subsidiary also agrees to be bound
by the terms of this subclause (ii) as if such terms applied to such subsidiary,
(iii) agrees that service of process upon the Process Agent, and written notice
of such service to the Note Issuer and Holdings, shall be deemed in every
respect effective service of process upon the Note Issuer and Holdings in any
such suit, action or proceeding and (iv) agrees to take any and all action,
including the execution and filing of any and all such documents and instruments
as may be necessary to continue such designation and appointment of the Process
Agent in full force and effect so long as any of the Notes shall be outstanding.
(j) Governing Law. This Agreement shall be governed by the laws of the
State of New York.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Waiver of immunity. To the extent that the Note Issuer or Holdings
has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service of notice, attachment prior to
judgement, attachment in aid of execution, execution or otherwise) with respect
to itself or its property, each of them
<PAGE>
21
hereby irrevocably waives such immunity in respect of their obligations under
this Agreement to the fullest extent permitted by law.
(m) The Issuers agree to cause Cyberlink, Inc. to be in good standing
in New Jersey and Massachusetts as soon as practicable after the date hereof.
<PAGE>
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
RSL COMMUNICATIONS PLC
By /s/ Itzhak Fisher
--------------------------------
Name: Itzhak Fisher
Title:
RSL COMMUNICATIONS, LTD.
By /s/ Itzhak Fisher
--------------------------------
Name: Itzhak Fisher
Title:
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By_______________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By_______________________________
Name:
Title:
DILLON READ & CO. INC.
By_______________________________
Name:
Title:
<PAGE>
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
RSL COMMUNICATIONS PLC
By _________________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.
By_________________________________
Name:
Title:
Confirmed and accepted on
behalf of the Placement Agents
as of the date first above
written:
MORGAN STANLEY & CO. INCORPORATED
By /s/ Carol S. Goldstein
-------------------------------
Name: Carol S. Goldstein
Title: Principal
<PAGE>
Exhibit 4.4
================================================================================
RSL COMMUNICATIONS PLC
as Issuer, with RSL Communications, Ltd. of $300,000,000 in Units,
Each Unit Consisting of $1,000 Principal Amount of Senior Notes Due 2006
of RSL Communications PLC
and One Warrant to Purchase 1.815
Class A Common Shares of RSL Communications, Ltd.
and
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
NOTE DEPOSIT AGREEMENT
Dated as of October 3, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS AND OTHER GENERAL PROVISIONS .............. 1
SECTION 1.01 Definitions .................................................... 1
SECTION 1.02 Rules of Construction .......................................... 4
ARTICLE TWO
GLOBAL NOTES, DEPOSITARY INTERESTS
AND IAI BENEFICIAL INTERESTS ..................... 4
SECTION 2.01 Deposit of the Global Notes .................................... 4
SECTION 2.02 Book-Entry System .............................................. 4
SECTION 2.03 Registration of Transfer of Depositary Interests ............... 5
SECTION 2.04 Transfer of Global Notes and Depositary Interests; Termination . 5
SECTION 2.05 Cancellation ................................................... 6
SECTION 2.06 Payments in Respect of the Global Notes ........................ 6
SECTION 2.07 Changes in Principal Amount of the Global Notes ................ 7
SECTION 2.08 Record Date .................................................... 7
SECTION 2.09 Action in Respect of the Depositary Interests .................. 7
SECTION 2.10 Changes Affecting the Global Notes ............................. 9
SECTION 2.11 Surrender of the Global Notes .................................. 9
SECTION 2.12 Reports ........................................................ 9
ARTICLE THREE
THE BOOK-ENTRY DEPOSITARY ........................ 9
SECTION 3.01 Certain Duties and Responsibilities ............................ 9
SECTION 3.02 Notice of Default .............................................. 10
SECTION 3.03 Certain Rights of Book-Entry Depositary ........................ 10
SECTION 3.04 Not Responsible for Recitals or Issuance of Notes .............. 11
SECTION 3.05 Money Held in Trust ............................................ 12
SECTION 3.06 Compensation and Reimbursement ................................. 12
SECTION 3.07 Book-Entry Depositary Required: Eligibility .................... 12
SECTION 3.08 Resignation and Removal; Appointment of Successor .............. 13
SECTION 3.09 Acceptance of Appointment by Successor ......................... 14
SECTION 3.10 Merger, Conversion, Consolidation or Succession to Business .... 15
SECTION 3.11 Compliance with Letter of Representations ...................... 15
ARTICLE IV
MISCELLANEOUS PROVISIONS ........................ 15
SECTION 4.01 Notices to Book-Entry Depositary or Note Issuer ................ 15
SECTION 4.02 Notice to the Depositary; Waiver ............................... 16
SECTION 4.03 Effect of Headings and Table of Contents ....................... 16
SECTION 4.04 Successors and Assigns ......................................... 16
SECTION 4.05 Separability Clause ............................................ 17
SECTION 4.06 Benefits of Agreement .......................................... 17
SECTION 4.07 GOVERNING LAW .................................................. 17
SECTION 4.08 Jurisdiction ................................................... 17
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SECTION 4.09 Counterparts ................................................... 17
SECTION 4.10 Inspection of Agreement ........................................ 18
SECTION 4.11 Satisfaction and Discharge ..................................... 18
SECTION 4.12 Amendments ..................................................... 18
SECTION 4.13 Book-Entry Depositary To Sign Amendments ....................... 18
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THIS NOTE DEPOSIT AGREEMENT is made as of this 3rd day of October, 1996 by
and between RSL Communications PLC, a United Kingdom corporation (the "Note
Issuer") and The Chase Manhattan Bank, a New York banking corporation, as
book-entry depositary (the "Book-Entry Depositary").
ARTICLE ONE
DEFINITIONS AND OTHER GENERAL PROVISIONS
SECTION 1.01 Definitions.
The following terms, as used herein, have the following meanings:
"144A Depositary Interest" means the book-entry interest representing a
100% beneficial interest in the principal of, premium, if any, and interest on
the underlying 144A Global Note, and issued to the Depositary by the Book-Entry
Depositary.
"144A Global Note" means one or more global bearer bonds issued by the Note
Issuer to the Book-Entry Depositary and bearing the Private Placement Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Rule 144A under the Securities Act.
"Asset Sale" has the meaning set forth in the Indenture.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of either of the Issuers in full force and effect on the date of
certification, certified by any Director, Secretary or Assistant Secretary of
the applicable Issuer.
"Book-Entry Depositary" means The Chase Manhattan Bank or, in the event
that The Chase Manhattan Bank is succeeded as Book-Entry Depositary hereunder,
the Person designated as its successor pursuant to Section 3.08 hereof.
"Book-Entry Notes" means an indirect beneficial interest in a Global Note
held through a corresponding Depositary Interest.
"Book-Entry Register" has the meaning set forth in Section 2.03 hereof.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" has the meaning set forth in the Indenture.
"Corporate Trust Office" means the office of the Book-Entry Depositary in
the Borough of Manhattan, The City of New York, from which at any particular
time its corporate trust business shall be principally administered, which at
the date hereof is located at 450 West 33rd Street, New York, New York
10001-2697, Attention: Global Trust Services.
"Depositary" means DTC, or any successor, as the holder of the Depositary
Interests as recorded on the Book-Entry Register.
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"Depositary Interests" means each of the 144A Depositary Interests, the
Regulation S Depositary Interests, the IAI Depositary Interests and the
Unrestricted Depositary Interests.
"DTC" means The Depository Trust Company and its nominees.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" shall have the meaning set forth in the Indenture.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Global Notes" means each of the 144A Global Note, the Regulation S Global
Note and the IAI Global Note.
"Holdings" means RSL Communications, Ltd., guarantor of the Notes pursuant
to the Indenture until a successor replaces it pursuant to the applicable
provisions of the Indenture and, thereafter, means such successor.
"IAI Depositary Interest" means the book-entry interest representing a 100%
beneficial interest in the principal, premium, if any, and interest on the
underlying IAI Global Note, issued to the Depositary by the Book-Entry
Depositary.
"IAI Global Note" means one or more global bearer bonds issued by the Note
Issuer to the Book-Entry Depositary and bearing the Private Placement Legend
representing the total aggregate principal amount of the Notes sold to
Institutional Accredited Investors.
"Indenture" means the indenture dated as of October 3, 1996 among the Note
Issuer, Holdings and the Trustee relating to the Notes, as originally executed
or as it may be supplemented, modified or amended from time to time.
"Institutional Accredited Investors" means institutional "accredited
investors" as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act.
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Note Issuer by two Officers thereof.
"Letter of Representations" means the Letter of Representations to DTC
dated as of October 2, 1996 from the Note Issuer, the Trustee, the Book-Entry
Depositary and the Warrant Agent (as defined in the Warrant Agreement).
"Note Issuer" means RSL Communications PLC until a successor replaces it
pursuant to the applicable provisions of the Indenture and, thereafter, means
such successor.
"Notes" means the $300,000,000 aggregate principal amount of the Note
Issuer's 12 1/4 % Senior Notes due 2006 issued under the Indenture.
"Offer to Purchase" has the meaning set forth in the Indenture.
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"Officer" means, with respect to the Note Issuer, (i) the Chairman of the
Board, the Chief Executive Officer and other Directors and (ii) the Treasurer or
any Assistant Treasurer, or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers, at
least one of which must be an Officer listed in clause (i) of the definition
thereof.
"Opinion of Counsel" means a written opinion from legal counsel, who may be
an employee of or counsel to the Note Issuer, and who shall be reasonably
acceptable to the Book-Entry Depositary.
"Participant" means, with respect to DTC, Euroclear or Cedel, any Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Paying Agent" means The Chase Manhattan Bank and any successor paying
agent hereunder.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Private Placement Legend" means the legend set forth in Section 2.07(g)(i)
of the Indenture.
"Registered Notes" means certificated Notes registered in the name of the
holder thereof issued pursuant to the Indenture in substantially the form of
Exhibit B thereto.
"Regulation S Depositary Interest" means the book-entry interest
representing a 100% beneficial interest in the principal of, premium, if any,
and interest on the underlying Regulation S Global Note, and issued to the
Depositary by the Book-Entry Depositary.
"Regulation S Global Note" means one or more global bearer bonds issued by
the Note Issuer to the Book-Entry Depositary and bearing the Private Placement
Legend representing the total aggregate principal amount of the Notes sold in
reliance on Regulation S under the Securities Act.
"Responsible Officer", with respect to the Book-Entry Depositary, means any
Vice President, Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, or any Trust Officer or any
other officer of the Book-Entry Depositary customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust or agency matter, any other
officer to whom such matter is referred because of his or her knowledge and
familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trustee" means The Chase Manhattan Bank acting as trustee under the
Indenture or, in the event The Chase Manhattan Bank is succeeded as trustee
under the Indenture, such Person who shall be appointed to succeed as trustee
pursuant to the applicable provisions of the Indenture.
"Warrant Agreement" means the agreement relating to the warrants issued as
parts of units together with the Notes, dated as of October 3, 1996, between
Holdings as warrant issuer and The Chase Manhattan Bank, as warrant agent.)
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SECTION 1.02 Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) "including" means including without limitation;
(4) words in the singular include the plural and words in the plural
include the singular;
(5) references herein to interest shall include Liquidated Damages, if any,
(as such term is defined in the Indenture); and
(6) references herein to holders of Depositary Interests shall mean
references to the Depositary.
ARTICLE TWO
GLOBAL NOTES, DEPOSITARY INTERESTS
AND IAI BENEFICIAL INTERESTS
SECTION 2.01 Deposit of the Global Notes.
The Book-Entry Depositary hereby accepts custody of the Global Notes from
the Trustee and shall act as Book-Entry Depositary in accordance with the terms
of this Agreement. The Book-Entry Depositary shall hold each such Global Note at
its Corporate Trust Office or at such place or places as it shall determine with
the prior written consent of the Note Issuer and shall issue the Depositary
Interests in accordance with the Letter of Representations. In the event that
the Note Issuer shall issue and execute, and the Trustee, upon the order of the
Note Issuer, shall authenticate additional Global Notes, the Book-Entry
Depositary shall hold each such Global Note at its Corporate Trust Office or at
such place or places as it shall determine with the prior written consent of the
Note Issuer and shall issue the Depositary Interests in such Global Notes to the
Depositary in accordance with the Letter of Representations.
SECTION 2.02 Book-Entry System.
(a) Upon acceptance by DTC of the Depositary Interests for entry into its
book-entry settlement system in accordance with the terms of the Letter of
Representations, Book-Entry Notes shall be issued by DTC and traded through
DTC's book-entry system, and ownership of such Book-Entry Notes shall be shown
in, and the transfer of such ownership shall be effected only through, a
book-entry system maintained by (i) DTC or its successors or (ii) Participants.
Book-Entry Notes shall be transferable (x) only as units representing authorized
denominations of the Notes, and (y) until the Separation Date (as defined in the
Warrant Agreement and the Indenture), only together with the corresponding
beneficial interests in Global Warrants (as defined in the Warrant Agreement).
DTC shall treat the holders of Book-Entry Notes and their successors as the
absolute owners of the Depositary Interests for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Note Issuer, the
Trustee, the Book-Entry Depositary or any agent of the Note Issuer, the Trustee
or the Book-Entry Depositary from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Book-Entry Depositary and the Depositary and its Participants, the operation
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of customary practices of such Depositary governing the exercise of the rights
of an owner of a beneficial interest in any Global Note or Depositary Interest.
(b) The Depositary Interests shall be issuable only to DTC, or successors
of DTC or their respective nominees. Except as provided in Section 2.04 hereof
and Section 2.07(a) of the Indenture, no owner of beneficial interests in such
Depositary Interests shall be entitled to receive a Note on account of such
beneficial interest, and such beneficial owner's interest therein shall be shown
only in accordance with the procedures of DTC as set forth in the Letter of
Representations.
SECTION 2.03 Registration of Transfer of Depositary Interests.
(a) The Note Issuer appoints the Book-Entry Depositary as its agent to
maintain at the Book-Entry Depositary's Corporate Trust Office a register (the
"Book-Entry Register") in which the Book-Entry Depositary shall (i) record the
right of the Depositary to receive payment of principal of, premium, if any, and
interest on the Global Notes and (ii) record the registration and transfer of
the Depositary Interests. No Depositary Interest can be transferred unless such
transfer is recorded on the Book-Entry Register.
(b) With respect to any Global Note, clause (a) of this Section 2.03 shall
not (i) impose an obligation on the Book-Entry Depositary to record the
interests in or transfers of Book-Entry Notes held by institutions that have
accounts with DTC or its successors or Persons that may hold Book-Entry Notes
through such institutions and (ii) restrict transfers of such Book-Entry Notes
held by such institutions or Persons. The Book-Entry Depositary shall treat the
Depositary or its nominee as the absolute owner of the Depositary Interests for
all purposes whatsoever and shall not be bound or affected by any notice to the
contrary, other than an order of a court having jurisdiction over the Book-Entry
Depositary.
SECTION 2.04 Transfer of Global Notes and Depositary Interests; Termination.
The Book-Entry Depositary shall hold the Global Notes in custody for the
benefit of the Depositary. The Book-Entry Depositary shall not transfer or lend
any Global Note or any interest therein except that (i) the Book-Entry
Depositary shall deliver Global Notes to the Trustee in accordance with Section
2.07 of the Indenture so that the Trustee may make such notations on the Global
Notes as may be required to evidence transfers and exchanges of Book-Entry
Notes, (ii) a Global Note may be exchanged in whole but not in part pursuant to
Section 2.07(a) of the Indenture, (iii) a Global Note may be exchanged or
replaced pursuant to Sections 2.08 and 2.11 of the Indenture, (iv) any Global
Note may be delivered to the Trustee for cancellation pursuant to Section 2.12
of the Indenture and (v) the Global Notes may be transferred to a successor
Book-Entry Depositary with the prior written consent of the Note Issuer.
Notwithstanding the foregoing, the Depositary may not under any circumstances
request the Book-Entry Depositary to surrender or deliver the Global Notes.
If the Book-Entry Depositary notifies the Note Issuer and the Trustee in
writing under Section 3.08 hereof that it is unwilling or unable to continue as
Book-Entry Depositary and no successor Book-Entry Depositary has been appointed
by the Note Issuer within 90 days of such notification, then the Book-Entry
Depositary shall promptly notify the Trustee and request the Trustee to issue
Registered Notes in such names and denominations as the Depositary shall specify
in writing in accordance with Section 2.07 of the Indenture and the Book-Entry
Depositary agrees that in such event it shall promptly surrender the Global
Notes held by it to the Trustee in connection with such exchange and that such
Global Notes shall be canceled upon issuance of such Registered Notes.
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If DTC notifies the Note Issuer in writing that it or its nominee is
unwilling or unable to continue as Depositary with respect to any or all of the
Depositary Interests or if at any time it or its nominee is unable to or ceases
to be a clearing agency under the Exchange Act and a successor Depositary
registered as a clearing agency under the Exchange Act is not appointed by the
Note Issuer within 90 days, then the Book-Entry Depositary shall promptly notify
the Trustee and request the Trustee to issue Registered Notes with respect to
the Global Notes in such names and denominations as the Depositary shall specify
in writing in accordance with Section 2.07 of the Indenture and the Book-Entry
Depositary agrees that in such event it shall promptly surrender the applicable
Global Notes held by it to the Trustee in connection with such exchange and that
such Global Notes shall be canceled upon issuance of such Registered Notes.
If at any time the Note Issuer, in its sole discretion, determines that the
Global Notes should be exchanged, in whole but not in part, for Registered
Notes, then the Book-Entry Depositary shall promptly notify the Trustee and
request the Trustee to issue Registered Notes with respect to the Global Notes
in such names and denominations as the Depositary shall specify in writing in
accordance with Section 2.07 of the Indenture and the Book-Entry Depositary
agrees that in such event it shall promptly surrender the applicable Global
Notes held by it to the Trustee in connection with such exchange and that such
Global Notes shall be canceled upon issuance of such Registered Notes.
Upon the issuance of Registered Notes in exchange for Global Notes
representing the entire principal amount of Notes, this Agreement will
terminate.
SECTION 2.05 Cancellation.
If any Global Note is surrendered for payment, or for redemption or
purchase of Notes evidenced thereby or in exchange for Registered Notes, then
such Global Note shall, if surrendered to any Person other than the Trustee
notwithstanding the first paragraph of Section 2.04 hereof, be delivered to the
Trustee for cancellation.
SECTION 2.06 Payments in Respect of the Global Notes.
(a) Except for payments made pursuant to an Offer to Purchase with respect
to any Asset Sale or Change of Control, whenever the Book-Entry Depositary shall
receive from the Trustee (or other paying agent under the Indenture) any payment
of the principal of, premium, if any, and interest on the Global Notes, such
payments shall be distributed promptly to the Depositary on the payment date for
the Global Notes.
(b) Whenever the Book-Entry Depositary shall receive from the Trustee (or
other paying agent under the Indenture) any payment of the principal of,
premium, if any, and interest on the Global Notes pursuant to an Offer to
Purchase by the Note Issuer with respect to any Asset Sale or Change of Control,
the Book-Entry Depositary shall distribute such payment to the Depositary for
the accounts of holders of Book-Entry Notes who elected to have Book-Entry Notes
repurchased pursuant to such Offer to Purchase.
(c) So long as DTC or its nominee is the Depositary, payments pursuant to
Section 2.06(a) and 2.06(b) hereof with respect to the Global Notes shall be
made in accordance with the Letter of Representations. In the event that DTC or
its nominee shall cease to be the Depositary, such payments shall be made
according to procedures agreed between the Book-Entry Depositary and the
successor Depositary, which shall be reasonably satisfactory to the Note Issuer.
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(d) The Book-Entry Depositary shall forward to the Note Issuer or its
agents at the Note Issuer's cost and expense such information from its records
as the Note Issuer may reasonably request to enable the Note Issuer or its
agents to file necessary reports with governmental agencies, and the Book-Entry
Depositary, the Note Issuer or its agents may (but shall not be required to)
file any such reports necessary to obtain benefits under any applicable tax
treaties for the Depositary or the holders of Book-Entry Notes.
SECTION 2.07 Changes in Principal Amount of the Global Notes.
(a) In the event that the Note Issuer exercises any right of redemption in
respect of any Notes constituting a part of the Global Notes or purchases any
Notes constituting a part of the Global Notes pursuant to an Offer to Purchase
under Section 4.11 or 4.13 of the Indenture, the Book-Entry Depositary shall,
promptly upon receipt of the redemption price or purchase price, deliver such
Global Notes to the Trustee (i) and request the Trustee to endorse Schedule A to
such Global Note to reflect the reduction in the principal amount of such Global
Note as a result of such redemption or purchase or (ii) in exchange for a Global
Note with a principal amount that represents only the portion of such Global
Note not so redeemed or purchased. The redemption price or purchase price in
connection with the redemption of a portion of such Global Note shall be equal
to the amount received by the Book-Entry Depositary in respect of the aggregate
principal amount of the Notes so redeemed or repurchased.
(b) Pursuant to Section 2.07 of the Indenture, upon written notice from the
Trustee to the Book-Entry Depositary of an increase or decrease in the aggregate
principal amount of any Global Note, the Book-Entry Depositary shall enter or
cause to be entered in the Book-Entry Register a corresponding increase or
decrease in the aggregate principal amount of the Depositary Interest
corresponding to such Global Note.
SECTION 2.08 Record Date.
Whenever any payment is to be made in respect of the Global Notes or the
Book-Entry Depositary shall receive written notice of any action to be taken by
the Depositary, or whenever the Book-Entry Depositary otherwise deems it
appropriate in respect of any other matter, the Book-Entry Depositary shall fix
a record date for the determination of the holders of the Depositary Interests
who shall be entitled to receive payment in respect of the Depositary Interests,
or to take any such action or to act in respect of any such matter. Subject to
the provisions of this Agreement, only the Depositary which is registered on the
Book-Entry Register at the close of business on such record date shall be
entitled to receive any such payment, to give instructions as to such action or
to act in respect of any such matter.
The Depositary shall be entitled to rely on such record date as the date of
determination for purposes of further distribution of the payments disbursed,
and so long as DTC or its nominee is the Depositary, such record date applicable
to the Depositary shall comply with the requirements of the Letter of
Representations.
SECTION 2.09 Action in Respect of the Depositary Interests.
(a) As soon as practicable after receipt by the Book-Entry Depositary of
notice from the Note Issuer of any solicitation of consents or request for a
waiver or other action by the Depositary under this Agreement or the Indenture,
the Book-Entry Depositary shall mail to the Depositary a notice containing (i)
such information as is contained in such notice, (ii) a statement that the
holders of Depositary Interests
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at the close of business on a specified record date (established in accordance
with Section 2.08 hereof) will be entitled, subject to the provisions of or
governing the Depositary Interests, to instruct the Book-Entry Depositary as to
the consent, waiver or other action, if any, pertaining to the Global Notes and
(iii) a statement as to the manner in which such instructions may be given. Upon
the written request of the Depositary received on or before the date established
by the Book-Entry Depositary for such purpose, the Book-Entry Depositary shall
endeavor insofar as practicable and permitted under the provisions of or
governing the Depositary Interests to take such action regarding the requested
consent, waiver or other action in respect of the Global Notes in accordance
with any instructions set forth in such request. The Book-Entry Depositary shall
not itself exercise any discretion in the granting of consents or waivers or the
taking of any other action in respect of the Global Notes and, as holder of the
Global Notes, the Book-Entry Depositary promptly shall cause such consents or
waivers to be granted and such action to be taken with respect to the Global
Notes as the Depositary had given or had taken.
(b) As soon as practicable after receipt by the Book-Entry Depositary of an
Offer to Purchase with respect to the Global Notes, the Book-Entry Depositary
shall mail to the Depositary a notice containing (i) such information as is
contained in such notice, (ii) a statement that the holders of Depositary
Interests at the close of business on a specified record date (established in
accordance with Section 2.08 hereof) will be entitled, subject to the provisions
of or governing the Depositary Interests, to elect to have all or any portion of
their interest in the Global Notes repurchased in accordance with such Offer to
Purchase and (iii) such documentation provided by the Note Issuer as is
necessary for the Depositary to elect to have all or any portion of the
Depositary Interests repurchased pursuant to such Offer to Purchase. So long as
DTC or its nominee is acting as Depositary, such notice shall also comply with
the Letter of Representations. Upon receipt of elections relating to such Offer
to Purchase from the Depositary received on or before the date established by
the Note Issuer for such purpose, the Book-Entry Depositary shall endeavor
insofar as practicable and permitted under the provisions of or governing the
Depositary Interests and the Global Notes to tender the Global Notes or portions
thereof requested to be tendered by the Depositary for repurchase in accordance
with such Offer to Purchase. The Book-Entry Depositary shall not itself exercise
any discretion in the tender of any Global Notes pursuant to an Offer to
Purchase.
(c) As soon as practicable after receipt by the Book-Entry Depositary of
any notice of redemption with respect to the Global Notes pursuant to Section
3.01 of the Indenture, the Book-Entry Depositary shall mail to the Depositary a
notice containing (i) such information as is contained in such notice and (ii) a
statement that Notes called for redemption must be surrendered to the Paying
Agent in order to collect the Redemption Price. So long as DTC or its nominee is
acting as Depositary, such notice shall also comply with the Letter of
Representations.
(d) The Depositary may direct the time, method and place of conducting any
proceeding for any remedy available to the Book-Entry Depositary with respect to
the Global Notes or exercising any power conferred on the Book-Entry Depositary.
However, the Book-Entry Depositary may refuse to follow any direction that
conflicts with law, the Indenture or this Agreement, that may involve the
Book-Entry Depositary in personal liability, or that the Book-Entry Depositary
determines in good faith may be unduly prejudicial to the rights of the holders
of Book-Entry Notes not joining in the giving of such direction and may take any
other action it deems proper that is not inconsistent with any directions
received from the Depositary pursuant to this Section 2.09(d).
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SECTION 2.10 Changes Affecting the Global Notes.
Upon any reclassification of the Global Notes, or upon any
recapitalization, reorganization, merger or consolidation or sale of assets
affecting the Note Issuer or to which the Note Issuer is a party, any securities
that shall be received by the Book-Entry Depositary in exchange for or in
respect of a Global Note shall be treated as a new Global Note under this
Agreement and any corresponding Depositary Interests shall thenceforth represent
such new securities so received; provided, however, that any security issued in
exchange for or in respect of a Global Note under such circumstances shall not
be deemed to be a new security if the Note Issuer delivers to the Book-Entry
Depositary an Opinion of Counsel, stating that the recapitalization,
reorganization, merger or consolidation or sale of assets, as appropriate, did
not result in the creation of a security materially different from that
represented by such Global Note.
SECTION 2.11 Surrender of the Global Notes.
In the event of the redemption, payment or purchase in full of all the
Notes represented by any of the Global Notes, then the applicable Global Note
shall become void and the Book-Entry Depositary shall surrender such Global Note
to the Trustee for cancellation. In the event of a partial redemption of the
Notes represented by a Global Note, the Book-Entry Depositary shall comply with
the requirements of Section 2.07 hereof.
SECTION 2.12 Reports.
The Book-Entry Depositary shall promptly send to the Depositary any
notices, reports and other communications received from the Note Issuer that are
received by the Book-Entry Depositary as holder of the Global Notes.
ARTICLE THREE
THE BOOK-ENTRY DEPOSITARY
SECTION 3.01 Certain Duties and Responsibilities.
(a) The Book-Entry Depositary undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement.
(b) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own grossly negligent action, its
own grossly negligent failure to act, or its own bad faith or willful
misconduct, except that:
(1) the duties and obligations of the Book-Entry Depositary with respect to
the Global Notes and the Depositary Interests shall be determined solely by
the express provisions of this Agreement and neither the Book-Entry Depositary
nor its officers, directors, employees and agents shall be liable except for
the performance of such duties and obligations as are specifically set forth
in this Agreement, and no implied covenants or obligations shall be read into
this Agreement against the Book-Entry Depositary; and
(2) in the absence of bad faith on its part, the Book-Entry Depositary may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any
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statements, certificates or opinions furnished to the Book-Entry Depositary
and conforming to the requirements of this Agreement, but in the case of any
such statements, certificates or opinions that by any provision hereof are
specifically required to be furnished to the Book-Entry Depositary, the
Book-Entry Depositary shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Agreement.
(c) The Book-Entry Depositary shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Book-Entry Depositary, unless
it shall be proved that the Book-Entry Depositary was grossly negligent in
ascertaining the pertinent facts.
(d) The Book-Entry Depositary shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
direction of the Depositary pursuant to Section 2.09 hereof relating to the
time, method and place of conducting any proceeding for any remedy available to
the Book-Entry Depositary, or exercising any power conferred upon the Book-Entry
Depositary, under this Agreement.
(e) No provision of this Agreement shall require the Book-Entry Depositary
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Book-Entry Depositary shall be subject to the provisions of
this Section.
(g) The Book-Entry Depositary owes no fiduciary duties to any person by
virtue of this Agreement except as expressly set forth herein.
SECTION 3.02 Notice of Default.
Within 90 days after the occurrence of any Event of Default in respect of
the Global Notes of which a Responsible Officer of the Book-Entry Depositary
assigned to its Global Trust Services department has actual knowledge, the
Book-Entry Depositary shall transmit by mail to the Depositary in the manner
provided in Section 4.02, notice of such Event of Default, unless such Event of
Default shall have been cured or waived.
SECTION 3.03 Certain Rights of Book-Entry Depositary.
Subject to the provisions of Section 3.01 hereof:
(a) the Book-Entry Depositary may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon, security, or other paper or document
delivered to it in accordance with the terms of this Agreement and believed by
it to be genuine and to have been signed or presented by the proper party or
parties;
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(b) any request, direction, order or demand of the Note Issuer mentioned
herein shall be sufficiently evidenced by an Officers' Certificate, Issuer Order
or Issuer Request, and any resolution of the Board of Directors of the Note
Issuer may be sufficiently evidenced by a Board Resolution;
(c) the Book-Entry Depositary may consult with counsel and the advice of
such counsel confirmed in writing or any Opinion of Counsel shall be full and
complete authorization and protection with respect to any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Book-Entry Depositary shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document,
but the Book-Entry Depositary, in its discretion, may make reasonable further
inquiry or investigation into such facts or matters related to the issuance of
the Global Notes and, if the Book-Entry Depositary shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Note Issuer, at the Note Issuer's expense, at
reasonable times during normal business hours, personally or by agent or
attorney;
(e) the Book-Entry Depositary may execute any of the powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Book-Entry Depositary shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed
with due care;
(f) the Book-Entry Depositary shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request, order or
direction of the Depositary pursuant to this Agreement, unless the Depositary
shall have offered or caused to be offered to the Book-Entry Depositary security
or indemnity reasonably satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction, provided that such request, order or direction shall not expose the
Book-Entry Depositary to personal liability;
(g) the Book-Entry Depositary shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this Agreement; and
(h) whenever in the administration of its duties under this Agreement the
Book-Entry Depositary shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of gross negligence or bad faith on
the part of the Book-Entry Depositary, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Book-Entry Depositary,
and such certificate, in the absence of gross negligence or bad faith on the
part of the Book-Entry Depositary, shall be full warrant to the Book-Entry
Depositary for any action taken, suffered or omitted by it under the provisions
of the Agreement, upon the faith thereof.
SECTION 3.04 Not Responsible for Recitals or Issuance of Notes
The recitals contained in the Indenture and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Note Issuer, and the Book-Entry Depositary assumes no responsibility for
their correctness. The Book-Entry Depositary makes no representation as to (i)
the validity or sufficiency of the Indenture or of the Notes, (ii) the
sufficiency of this Agreement
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or (iii) the validity, with respect to the Note Issuer, of this Agreement. The
Book-Entry Depositary shall not be accountable for the use or application by the
Note Issuer of the proceeds with respect to the Notes.
SECTION 3.05 Money Held in Trust.
Money held by the Book-Entry Depositary in trust hereunder need not be
segregated from other funds held by the Book-Entry Depositary, except to the
extent required by law. The Book-Entry Depositary shall be under no obligation
to invest or pay interest on any money received by it hereunder, except as
otherwise agreed in writing with the Note Issuer. Any interest accrued on funds
deposited with the Book-Entry Depositary under this Agreement shall be paid to
the Note Issuer from time to time and the Depositary shall have no claim to any
such interest.
SECTION 3.06 Compensation and Reimbursement.
The Note Issuer agrees:
(a) to pay to the Book-Entry Depositary from time to time reasonable
compensation agreed in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law with regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Book-Entry Depositary upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Book-Entry Depositary in
accordance with any provision of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its gross
negligence, bad faith or willful misconduct; and
(c) to indemnify the Book-Entry Depositary and its directors, officers,
agents and employees for, and to hold it harmless against, any loss, liability
or expense incurred without gross negligence, bad faith or willful misconduct on
its part, arising out of or in connection with the acceptance or administration
of this Agreement and its duties hereunder, including the costs and expenses of
defending itself against or investigating any claim of liability in connection
with the exercise or performance of any of its powers or duties hereunder.
The obligations of the Note Issuer under this Section to compensate and
indemnify the Book-Entry Depositary and to pay or reimburse the Book-Entry
Depositary for reasonable expenses, disbursements and advances shall survive the
satisfaction and discharge of this Agreement. Such obligations shall be a senior
claim to that of the Notes upon all property and funds held or collected by the
Book-Entry Depositary as such, except funds held in trust for the benefit of the
holders of the Notes.
SECTION 3.07 Book-Entry Depositary Required; Eligibility.
At all times when there is a Book-Entry Depositary hereunder, such
Book-Entry Depositary shall be a corporation organized and doing business under
the laws of the United States of America, any State thereof or the District of
Columbia, having, together with its parent, a combined capital and surplus of at
least $50,000,000, subject to supervision or examination by federal, state or
District of Columbia authority, willing to act on reasonable terms. Such
corporation shall have its principal place of business in the Borough of
Manhattan, The City of New York, if there be such a corporation in such location
willing to act upon reasonable and customary terms and conditions. If such
corporation, or its parent,
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publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. The Book-Entry Depositary shall have
executed a letter of representations to DTC acceptable in form and substance to
DTC and the Note Issuer with respect to the Depositary Interests. The Book-Entry
Depositary hereunder shall at all times be the Trustee under the Indenture,
subject to receipt by the Note Issuer of an Opinion of Counsel that the same
Person is precluded by law from acting in such capacities. If at any time the
Book-Entry Depositary shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 3.08 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Book-Entry Depositary and no
appointment of a successor Book-Entry Depositary pursuant to this Article shall
become effective until (i) the approval in writing of a successor Book-Entry
Depositary by the Note Issuer and the acceptance of the appointment by such
successor Book-Entry Depositary in accordance with the applicable requirements
of Section 3.09 hereof or (ii) the issuance of Registered Notes in accordance
with Section 2.04 hereof and the Indenture.
(b) The Book-Entry Depositary may resign all of its rights and duties with
respect to the Global Notes and the Depositary Interests by giving written
notice thereof to the Note Issuer and the Depositary in accordance with Sections
4.01 and 4.02 hereof. The Book-Entry Depositary may be removed at any time upon
30 days' notice by the filing with it of an instrument in writing signed on
behalf of the Note Issuer and specifying such removal and the date when it is
intended to become effective. If the instrument of acceptance by a successor
Book-Entry Depositary or the approval by the Note Issuer required by Section
3.09 hereof shall not have been delivered to the Book-Entry Depositary within 30
days after the giving of such notice of resignation, the resigning Book-Entry
Depositary may petition any court of competent jurisdiction for the appointment
of a successor Book-Entry Depositary.
(c) If at any time:
(1) the Book-Entry Depositary shall cease to be eligible under Section 3.07
hereof or shall cease to be eligible as Trustee under the Indenture, and shall
fail to resign after written request therefor by the Note Issuer or the
Depositary, or
(2) the Book-Entry Depositary shall become incapable of acting with respect
to the Global Notes and the Depositary Interests, or shall be adjudged
bankrupt or insolvent, or a receiver or liquidator of the Book-Entry
Depositary or its property shall be appointed or any public officer shall take
charge or control of the Book-Entry Depositary or its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Note Issuer, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary and (ii) if
the Note Issuer does not remove the Book-Entry Depositary and appoint a
successor pursuant to clause (i), the Depositary, upon the direction of holders
of at least a majority of the total aggregate principal amount of the Book-Entry
Notes outstanding, may petition any court of competent jurisdiction for the
removal of the Book-Entry Depositary with respect to the Global Notes and the
Depositary Interests and the appointment of a successor Book-Entry Depositary or
Book-Entry Depositaries unless Registered Notes have been issued in accordance
with the Indenture. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe,
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remove the Book-Entry Depositary with respect to the Global Notes and the
Depositary Interests and appoint a successor Book-Entry Depositary for the
Global Notes and the Depositary Interests.
(d) If the Book-Entry Depositary shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Note Issuer, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Note Issuer) and shall
comply with the applicable requirements of Section 3.09 hereof. If no successor
Book-Entry Depositary with respect to the Notes shall have been so appointed by
the Note Issuer and accepted appointment in the manner required by Section 3.09,
the Depositary, upon direction of holders of at least a majority of the total
aggregate principal amount of Book-Entry Notes outstanding, may petition any
court of competent jurisdiction for the appointment of a successor Book-Entry
Depositary unless Registered Notes have been issued in accordance with the
Indenture and Section 2.04 hereof.
(e) The Note Issuer shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the
Depositary in accordance with Section 4.02 hereof. Each notice shall include the
name of the successor Book-Entry Depositary and the address of its Corporate
Trust Office.
(f) If a Book-Entry Depositary hereunder shall resign, it shall not be
relieved of any responsibility for its actions or omissions hereunder solely by
virtue of such resignation.
SECTION 3.09 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Book-Entry
Depositary, every such successor Book-Entry Depositary so appointed shall
execute, acknowledge and deliver to the Note Issuer and to the retiring
Book-Entry Depositary an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Book-Entry Depositary shall become
effective and such successor Book-Entry Depositary, without any further act,
deed or conveyance, shall become vested with all the rights, powers, agencies
and duties of the retiring Book-Entry Depositary, with like effect as if
originally named as Book-Entry Depositary hereunder; but, on the request of the
Note Issuer or the successor Book-Entry Depositary, such retiring Book-Entry
Depositary shall, upon payment of all amounts due and payable to it pursuant to
Section 3.06 hereof, execute and deliver an instrument transferring to such
successor Book-Entry Depositary all the rights and powers of the retiring
Book-Entry Depositary and shall duly assign, transfer and deliver to such
successor Book-Entry Depositary all property and money held by such retiring
Book-Entry Depositary hereunder. Any retiring Book-Entry Depositary shall,
nonetheless, retain a prior claim upon all property or funds held or collected
by such Book-Entry Depositary to secure any amounts then due it pursuant to
Section 3.06 hereof. The Book-Entry Depositary will not be liable for any acts
or omissions of any successor Book-Entry Depositary appointed pursuant to
Section 3.08 hereof.
(b) Upon request of any such successor Book-Entry Depositary, the Note
Issuer shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Book-Entry Depositary all such
rights, powers and agencies referred to in paragraph (a) of this Section.
(c) No successor Book-Entry Depositary shall accept its appointment unless
at the time of such acceptance such successor Book-Entry Depositary shall be
eligible to serve as such under this Article.
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(d) Upon acceptance of appointment by any successor Book-Entry Depositary
as provided in this Section, the Note Issuer shall give notice thereof to the
Depositary in accordance with Section 4.02 hereof. If the acceptance of
appointment is substantially contemporaneous with the resignation of the
Book-Entry Depositary, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 3.08 hereof. If the Note
Issuer fails to give such notice within ten days after acceptance of appointment
by the successor Book-Entry Depositary, the successor Book-Entry Depositary
shall cause such notice to be given at the expense of the Note Issuer.
SECTION 3.10 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Book-Entry Depositary may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Book-Entry Depositary
shall be a party, or any corporation succeeding to all or substantially all the
agency business of the Book-Entry Depositary, shall be the successor of the
Book-Entry Depositary hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto; provided that such
corporation shall be otherwise eligible to serve as Book-Entry Depositary under
this Article.
SECTION 3.11 Compliance with Letter of Representations.
As long as DTC or its nominee is the Depositary, the Book-Entry Depositary
shall comply with all of its representations made to DTC in the Letter of
Representations, and any successor Book-Entry Depositary shall comply with all
representations made to DTC in a similar letter of representations in form and
substance acceptable to DTC and the Note Issuer.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01 Notices to Book-Entry Depositary or Note Issuer.
Any request, demand, authorization, direction, notice, consent, or waiver
or other document provided or permitted by this Agreement to be made upon, given
or furnished to, or filed with:
(a) the Book-Entry Depositary by the Depositary, by the Trustee or by the
Note Issuer shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if made, given, furnished or filed in writing and
personally delivered or mailed, by overnight delivery or certified mail, postage
prepaid, to the Book-Entry Depositary at the following address:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Global Trust Services
Facsimile: 1-212-946-7799
or at any other address furnished in writing by the Book-Entry Depositary to the
Depositary, the Trustee and the Note Issuer; or
(b) the Note Issuer by the Book-Entry Depositary or by the Depositary shall
be sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed
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in writing and personally delivered or mailed, by overnight delivery or
first-class postage prepaid, to the following address:
RSL Communications PLC
767 Fifth Avenue
Suite 4300
New York, New York 10153
with a copy to:
Robert L. Kohl
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Facsimile: (212) 940-8607
or at any other addresses furnished in writing to the Book-Entry Depositary by
the Note Issuer. Any communication sent pursuant to this Section 4.01 shall be
deemed given when delivered, if personally delivered or sent by overnight
delivery and three days after deposit in the U.S. mail, if sent by certified
mail.
SECTION 4.02 Notice to the Depositary: Waiver.
Where this Agreement provides for notice to the Depositary of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided or as provided in the Letter of Representations) if in writing and
mailed, first-class postage prepaid, to the Depositary at the address that the
Depositary has notified in writing to the Book-Entry Depositary, in each case
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. Where this Agreement provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by the
Depositary shall be filed with the Book-Entry Depositary, but such filing shall
not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Book-Entry Depositary
shall constitute a sufficient notification for every purpose hereunder.
SECTION 4.03 Effect of Headings and Table of Contents.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
SECTION 4.04 Successors and Assigns.
All covenants and agreements in this Agreement and the Notes by the Note
Issuer shall bind its successors and assigns, whether so expressed or not.
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SECTION 4.05 Separability Clause.
In case any provision in this Agreement or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.
SECTION 4.06 Benefits of Agreement.
Nothing in this Agreement, the Notes, or the Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any benefits or any legal or equitable right, remedy or claim under
this Agreement. By the acceptance of the Depositary Interests representing the
Notes, the Depositary shall be party to this Agreement and shall be bound by all
of the terms and conditions hereof and of the Indenture and the Notes.
SECTION 4.07 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 4.08 Jurisdiction.
The Note Issuer agrees that any legal suit, action or proceeding against
the Note Issuer brought by the Depositary or the Book-Entry Depositary arising
out of or based upon this Agreement may be instituted in any state or federal
court in the Borough of Manhattan, The City of New York, and waives any
objection which it may now or hereafter have to the laying of venue of any such
proceeding and irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. The Note Issuer has appointed RSL
Communications N. America, Inc., 767 Fifth Avenue, Suite 4300, New York, New
York 10153, as its authorized agent (together with any successor, the
"Authorized Agent") upon whom process may be served in any legal suit, action or
proceeding arising out of or based upon this Agreement which may be instituted
in any state or federal court in the Borough of Manhattan, The City of New York,
by the Depositary or the Book-Entry Depositary and expressly accepts the
non-exclusive jurisdiction of any such court in respect of any such action. The
Note Issuer represents and warrants that the Authorized Agent has agreed to act
as said agent for service of process, and the Note Issuer agrees to take any and
all action, including the filing of any and all documents and instruments, that
may be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent shall be deemed, in
every respect, effective service of process upon the Note Issuer.
Notwithstanding the foregoing, any action based on this Agreement may be
instituted by the Book-Entry Depositary in any competent court in England.
SECTION 4.09 Counterparts.
This Agreement may be executed in any number of counterparts by the parties
hereto on separate counterparts, each of which, when so executed and delivered,
shall be deemed an original, but all of which shall together constitute one and
the same instrument.
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SECTION 4.10 Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable times during
normal business hours at the Corporate Trust Office of the Book-Entry Depositary
for inspection by the Depositary.
SECTION 4.11 Satisfaction and Discharge.
Upon Issuer Request to terminate this Agreement, this Agreement shall cease
to be of further effect and the Book-Entry Depositary shall execute proper
instruments acknowledging satisfaction and discharge of this Agreement, when (i)
the Indenture has been satisfied and discharged pursuant to the provisions
thereof or Registered Notes have been issued and all Global Notes have been
cancelled in accordance with the provisions of Sections 2.07 and 2.12 thereof,
(ii) the Note Issuer has paid or caused to be paid all sums payable hereunder by
the Note Issuer and (iii) the Note Issuer has delivered to the Book-Entry
Depositary an Officers' Certificate, stating that all conditions precedent
provided herein relating to the satisfaction and discharge of this Agreement
have been complied with.
SECTION 4.12 Amendments.
The Note Issuer and the Book-Entry Depositary may amend this Agreement
without the consent of the Depositary:
(a) to cure any ambiguity, defect or inconsistency, provided that such
amendment or supplement does not adversely affect the rights of the Depositary
or any holder of Book-Entry Notes;
(b) to evidence the succession of another person to the Note Issuer (when a
similar amendment with respect to the Indenture is being executed) and the
assumption by any such successor of the covenants of the Note Issuer herein;
(c) to evidence or provide for a successor Book-Entry Depositary,
(d) to make any amendment, change or supplement that does not adversely
affect the Depositary or holders of Book-Entry Notes;
(e) to add to the covenants of Holdings or the Note Issuer or the
Book-Entry Depositary;
(f) to add a guarantor when a guarantor is made a party to the Indenture
pursuant to the Indenture; or
(g) to comply with the United States federal and English securities laws.
No amendment may be made to this Agreement that adversely affects the
Depositary without the consent of the Depositary and no amendment may be made to
this Agreement that adversely affects the holders of Book-Entry Notes without
the consent of a majority of the aggregate principal amount of Book-Entry Notes
outstanding.
SECTION 4.13 Book-Entry Depositary To Sign Amendments.
The Book-Entry Depositary shall sign any amendment authorized pursuant to
Section 4.12 hereof if the amendment does not adversely affect the rights,
duties, liabilities or immunities of the Book-
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Entry Depositary. If it does, the Book-Entry Depositary may but need not sign
it. In signing such amendment the Book-Entry Depositary shall be entitled to
receive indemnity satisfactory to it and to receive, and shall be fully
protected in reasonably relying upon, an Officers' Certificate (which need only
cover the matters set forth in clause (a) below) and an Opinion of Counsel
stating that:
(a) such amendment is authorized or permitted by this Agreement;
(b) the Note Issuer has all necessary corporate power and authority to
execute and deliver the amendment and that the execution, delivery and
performance of such amendment has been duly authorized by all necessary
corporate action;
(c) the execution, delivery and performance of the amendment do not
conflict with, or result in the breach of or constitute a default under any of
the terms, conditions or provisions of (i) this Agreement, (ii) the Memorandum
and Articles of Association of the Note Issuer, (iii) any law or regulation
applicable to the Note Issuer, (iv) any material order, writ, injunction or
decree of any court or governmental instrumentality applicable to the Note
Issuer or (v) any material agreement or instrument to which the Note Issuer is
subject; and
(d) such amendment has been duly and validly executed and delivered by the
Note Issuer, and this Agreement together with such amendment constitutes a
legal, valid and binding obligation of the Note Issuer enforceable against the
Note Issuer in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
----------------------------------
Name: Itzhak Fisher
Title:
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
By: /s/ James D. Heaney
----------------------------------
Name: James D. Heaney
Title: Vice President
<PAGE>
Exhibit 4.5
COLLATERAL PLEDGE AND SECURITY AGREEMENT
This COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "Pledge
Agreement") is made and entered into as of October 3, 1996 by RSL COMMUNICATIONS
PLC, a United Kingdom corporation (the "Pledgor"), having its principal office
at 767 Fifth Avenue, Suite 4300, New York, New York, 10153, in favor of THE
CHASE MANHATTAN BANK, a banking corporation duly organized and existing under
the laws of the State of New York, having an office at 450 West 33rd Street, New
York, New York 10001, Attention: Global Trust Services Department, as trustee
(the "Trustee") for the holders (the "Holders") of the Notes (as defined herein)
issued by the Pledgor under the Indenture referred to below.
WITNESSETH
WHEREAS, the Pledgor, RSL Communications, Ltd., a Bermuda
corporation, as guarantor, and The Chase Manhattan Bank, as Trustee, have
entered into that certain indenture dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor is issuing on the date hereof
$300,000,000 in aggregate principal amount of 12 1/4% Senior Notes due 2006 (the
"Notes"); capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Indenture; and
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to (i)
purchase Government Securities (the "Pledged Securities") in an amount that will
be sufficient upon receipt of scheduled interest and principal payments in
respect thereof, in the opinion of a nationally recognized firm of independent
accountants selected by the Pledgor and delivered to the Trustee, to provide for
payment of the first six scheduled interest payments due on the Notes and (ii)
place the Pledged Securities in an account held by the Trustee for the benefit
of Holders of the Notes; and
WHEREAS, upon the purchase of the Pledged Securities, the Pledgor
will be the beneficial owner of the Pledged Securities; and
WHEREAS, to secure the obligation of the Pledgor under the Indenture
and the Notes to pay in full the first six scheduled interest payments on the
Notes and to secure repayment of the Notes in the event that the Notes become
due and payable prior to such time as the first six scheduled interest payments
thereon shall have been paid in full (the "Obligations"), the Pledgor has agreed
to (i) pledge to the Trustee for its benefit and the ratable benefit of the
Holders of the Notes, a security interest in the Pledged Securities, all
book-entry interests therein and the Pledge Account and any and all proceeds of
the foregoing (as defined herein) and (ii) execute and deliver this Pledge
Agreement.
<PAGE>
2
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein
contained. and in order to induce the Holders of the Notes to purchase the
Notes, the Pledgor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. The Pledgor hereby
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a first priority security interest
in and to (a) all of Pledgor's right, title and interest in the Pledged
Securities and the Pledge Account, (b) all book-entry interests in the Pledged
Securities and any certificates or other evidence of ownership representing the
Pledged Securities and the Pledge Account, and (c) except as otherwise provided
herein, all products and proceeds of any of the Pledged Securities and the
Pledge Account, including, without limitation, all dividends, interest,
principal payments, cash, options, warrants, rights, instruments, subscriptions
and other property or proceeds from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange for any or
all of the Pledged Securities or the Pledge Account (collectively, the
"Collateral").
SECTION 2. Security for Obligation. This Pledge Agreement secures
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Obligations.
SECTION 3. Delivery of Collateral; Pledge Account; Interest. (a) All
certificates or instruments, if any, representing or evidencing the Collateral
shall be delivered to and held by or on behalf of the Trustee pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form
reasonably satisfactory to the Trustee, and all book-entry interests in the
Pledged Securities shall be transferred to the Pledge Account through the
individual account of the Trustee at the Federal Reserve Bank of New York. The
Trustee in its individual capacity shall confirm in writing (such confirmation
to be in the form of Exhibit A hereto) to the Pledgor and to the Trustee in its
capacity as Trustee hereunder that it is holding the book-entry Pledged
Securities for the benefit of the Trustee in its capacity as Trustee hereunder
and the ratable benefit of the Holders of Notes and the Trustee shall duly
record in its books and records that the Pledgor has pledged and granted a
security interest in such book-entry interests in the Pledged Securities and in
the Pledge Account to the Trustee on behalf of itself and the holders of the
Notes.
(b) Concurrently with the execution and delivery hereof and prior to
the delivery of any certificates or instruments representing or evidencing
the Collateral or transfer of book-entry interests in the Pledged
Securities as provided in subsection (a) of
<PAGE>
3
this Section 3, the Trustee shall establish an account segregated from all
other custodial or collateral accounts for the deposit of the Pledged
Securities (the "Pledge Account") at its office at 450 West 33rd Street,
New York, New York 10001. Subject to the other terms and conditions of
this Pledge Agreement, all funds or other property accepted by the Trustee
pursuant to this Pledge Agreement shall be held in the Pledge Account for
the benefit of the Trustee and for the ratable benefit of the Holders of
the Notes and segregated from all other funds or other property otherwise
held by the Trustee and all book-entry interests in the Pledged Securities
shall be transferred to and held in the Pledge Account for the benefit of
the Trustee and for the ratable benefit of the Holders of the Notes.
(c) All interest earned on any Collateral shall be retained in the
Pledge Account for the benefit of the Pledgor, pending disbursement
pursuant to the terms hereof.
SECTION 4. Disbursements. (a) Up to three (3) Business Days prior to
the due date of any of the first six scheduled interest payments on the Notes,
the Pledgor may, pursuant to an Issuer Order, direct the Trustee, in writing, to
release from the Pledge Account proceeds sufficient to provide for payment in
full of such interest then due on the Notes. Upon receipt of an Issuer Order,
the Trustee will take any action necessary to provide for the payment of the
interest on the Notes in accordance with the payment provisions of the Indenture
to the Holders of the Notes from (and to the extent of) proceeds of the Pledged
Securities in the Pledge Account. Nothing in this Section 4 shall affect the
Trustee's rights to apply any Collateral in satisfaction of the Obligations at
any time upon acceleration of the Notes.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Pledged Securities are collateral from a
source of funds other than the Pledge Account ("Pledgor Funds"), the
Pledgor may, after payment in full of such interest payment or portion
thereof from proceeds of the Pledged Securities or such Pledgor Funds or
both, direct the Trustee to release to the Pledgor or to another party at
the direction of the Pledgor (the "Pledgor's Designee") proceeds from the
Pledge Account in an amount less than or equal to the amount of Pledgor
Funds applied to such interest payment. Upon receipt of an Issuer Order by
the Trustee and any other documentation reasonably satisfactory to the
Trustee to substantiate such use of Pledgor Funds by the Pledgor
(including the certificate described in the following sentence), the
Trustee will pay over to the Pledgor or the Pledgor's Designee, as the
case may be, the requested amount from proceeds in the Pledge Account.
Concurrently with any release of funds to the Pledgor pursuant to this
Section 4(b), the Pledgor will deliver to the Trustee an Officers'
Certificate stating that such release has been duly authorized by the
Pledgor and will not contravene any provision of applicable law or the
Memorandum of Association or Articles of Association of the Pledgor or any
material agreement or other material instrument binding upon the Pledgor
or any of its subsidiaries or any judgment,
<PAGE>
4
order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries.
(c) If at any time the principal of and interest on the Pledged
Securities held in the Pledge Account exceeds 100% of the amount
sufficient, in the written opinion of a nationally recognized firm of
independent accountants selected by the Pledgor and delivered to the
Trustee, to provide for payment in full of the first six scheduled
interest payments due on the Notes (or, in the event one or more interest
payments have been made thereon, an amount sufficient to provide for the
payment in full of any and all interest payments on the Notes then
remaining, up to and including the sixth scheduled interest payment), the
Pledgor may direct the Trustee, in writing, to release any such overfunded
amount to the Pledgor or to such other party as the Pledgor may direct.
Upon receipt of an Issuer Order and any other documentation reasonably
satisfactory to the Trustee to substantiate such excess (including such
written opinion of a nationally recognized accounting firm), the Trustee
shall pay over to the Pledgor or the Person designated by the Pledgor, as
the case may be, any such overfunded amount.
(d) Upon payment in full of the first six scheduled interest
payments on the Notes in a timely manner and provided that no principal
amount of the Notes has become or is due and payable at such time, the
security interest in the Collateral evidenced by this Pledge Agreement
will automatically and indefeasibly terminate and be of no further force
and effect. Furthermore, upon the release of any Collateral from the
Pledge Account in accordance with the terms of this Pledge Agreement,
whether upon release of Collateral to Holders as payment of interest or
otherwise, the security interest evidenced by this Pledge Agreement in
such released Collateral will automatically and indefeasibly terminate and
be of no further force and effect.
(e) The Pledgor covenants to give the Trustee at least three (3)
Business Days' notice (by Issuer Order) as to whether payment of interest
will be made pursuant to Section 4(a) or 4(b) and as to the respective
amounts of interest that will be paid pursuant to Section 4(a) or 4(b).
The Pledgor also covenants to give the Trustee written notice as to which
Pledged Securities, if any, shall be liquidated in order to make such
interest payment. If no such notice is given, the Trustee will act
pursuant to Section 4(a) as if it had received an Issuer Order pursuant
thereto for the payment in full of the interest then due.
(f) The Trustee shall not be required to liquidate any Pledged
Security in order to make any scheduled payment of interest or any release
hereunder unless instructed to do so by Issuer Order.
<PAGE>
5
SECTION 5. Representations and Warranties. The Pledgor hereby
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge Agreement
will not contravene any provision of applicable law or the Memorandum of
Association or Articles of Association of the Pledgor or any material
agreement or other material instrument binding upon the Pledgor or any of
its subsidiaries or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition of any Lien on any
assets of the Pledgor, except for the security interest granted under this
Pledge Agreement; no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for (i)
the performance by the Pledgor of its obligations under this Pledge
Agreement or (ii) the pledge by the Pledgor of the Collateral pursuant to
this Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the
security interests granted under this Pledge Agreement). No financing
statement covering the Pledged Securities is on file in any public office
other than the financing statements, if any, filed pursuant to this Pledge
Agreement and forms 395 or 397 filed with the Registrar of Companies in
the United Kingdom.
(c) This Pledge Agreement has been duly authorized, validly executed
and delivered by the Pledgor and (assuming the due authorization and valid
execution and delivery of this Pledge Agreement by the Trustee and
enforceability of the Pledge Agreement against the Trustee in accordance
with its terms) constitutes a valid and binding agreement of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as
(i) the enforceability hereof may be limited by bankruptcy, insolvency.
fraudulent conveyance, preference, reorganization, moratorium or similar
laws now or hereafter in effect relating to or affecting creditors' rights
or remedies generally, (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability and the
discretion of the court before which any proceeding therefor may be
brought, (iii) rights to indemnification hereunder may be limited by U.S.
federal and state securities laws and public policy considerations and
(iv) the waiver of rights and defenses contained in Section 12(b),
Section 15.11 and Section 15.16 hereof may be limited by applicable law.
(d) Upon the delivery to the Trustee of the certificates or
instruments, if any, representing or evidencing the Pledged Securities,
the filing of financing statements, if any, required by the Uniform
Commercial Code (the "UCC") in the appropriate offices in the State of New
York and the filing of form 395 or 397 with the Registrar of
<PAGE>
6
Companies in the United Kingdom, and upon the transfer by the Trustee in
its individual capacity and the due recording in the books and records of
the Trustee in its capacity as trustee hereunder of interests in the
Pledged Securities to and in the name of the Trustee for its benefit and
the ratable benefit of the Holders of the Notes and the due recording by
the Trustee in its books and records that the Pledgor has pledged and
granted a security interest in such interests in the Pledged Securities to
the Trustee on behalf of itself and the holders of the Notes and receipt
by the Trustee and the Pledgor of written confirmation thereof in the form
of Exhibit A hereto, the pledge of and grant of a security interest in the
Collateral securing the payment of the Obligations for the benefit of the
Trustee and the Holders of the Notes will constitute a first priority
perfected security interest in such Collateral, enforceable as such
against all creditors of the Pledgor and any persons purporting to
purchase any of the Collateral from the Pledgor.
(e) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or
any of its subsidiaries is a party or to which any of the properties of
the Pledgor or any such subsidiary is subject that would materially and
adversely affect the power or ability of the Pledgor to perform its
obligations under this Pledge Agreement or to consummate the transactions
contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge Agreement
is not prohibited by any applicable law or governmental regulation,
release, interpretation or opinion of the Board of Governors of the
Federal Reserve System or other regulatory agency (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System).
(g) No Event of Default exists.
SECTION 6. Further Assurances. The Pledgor will, promptly upon
request by the Trustee, execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all stock powers,
proxies, assignments, instruments and other documents, all in form and substance
reasonably satisfactory to the Trustee, deliver any instruments to the Trustee
and take any other actions that are necessary or, in the reasonable opinion of
the Trustee, desirable to perfect, continue the perfection of, or protect the
first priority of the Trustee's security interest in and to the Collateral, to
protect the Collateral against the rights, claims, or interests of third persons
or to effect the purposes of this Pledge Agreement. The Pledgor also hereby
authorizes the Trustee to file any financing or continuation statements in the
United States or any form with the Registrar of Companies in the United Kingdom
with respect to the Collateral without the signature of the Pledgor (to the
extent permitted by applicable law). The Trustee shall provide the Pledgor, at
the Pledgor's expense, with a copy of any such filing. The Pledgor will promptly
pay all reasonable costs incurred in connection with any of the foregoing within
45 days of receipt of an invoice therefor. The Pledgor also agrees, whether
<PAGE>
7
or not requested by the Trustee, to take all actions that are necessary to
perfect or continue the perfection of, or to protect the first priority of, the
Trustee's security interest in and to the Collateral, including the filing of
all necessary financing and continuation statements or forms with the Registrar
of Companies in the United Kingdom, and to protect the Collateral against the
rights, claims or interests of third persons. The Trustee shall have no duty to
perform or monitor any of the foregoing, except to the extent that the failure
to do so would constitute bad faith or negligent or willful misconduct by the
Trustee. Upon the written direction of the Pledgor and at the Pledgor's
expense, the Trustee agrees to take all actions that are necessary or reasonably
desirable to release the security interest of the Trustee in the Collateral, or
any portion thereof, pursuant to the terms hereof.
SECTION 7. Covenants. The Pledgor covenants and agrees with the
Trustee and the Holders of the Notes from and after the date of this Pledge
Agreement until the earlier of payment in full in cash of (x) each of the first
six scheduled interest payments due on the Notes under the terms of the
Indenture or (y) all obligations due and owing under the Indenture and the Notes
in the event such obligations become due and payable prior to the payment of the
first six scheduled interest payments on the Notes:
(a) that it will not (i) sell or otherwise dispose of, or transfer,
or grant any option or warrant with respect to, any of the Collateral or
(ii) create or permit to exist any Lien upon or with respect to any of the
Collateral (except for the Lien created pursuant to this Pledge Agreement)
and at all times will be the sole beneficial owner of the Collateral; or
(b) that it will not (i) enter into any agreement or understanding
that purports to or may restrict or inhibit the Trustee's rights or
remedies hereunder, including, without limitation, the Trustee's right to
sell or otherwise dispose of the Collateral or (ii) fail to pay or
discharge any tax, assessment or levy of any nature with respect to the
Collateral not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment with respect to the
Collateral.
SECTION 8. Power of Attorney. In addition to all of the powers
granted to the Trustee pursuant to the Indenture, the Pledgor hereby appoints
and constitutes the Trustee as the Pledgor's attorney-in-fact (with full power
of substitution) to exercise to the fullest extent permitted by law all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default; (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof: (d)
making of any payments or taking any acts under Section 9 hereof and (e) paying
or discharging taxes or Liens levied or placed upon the Collateral, the legality
or validity thereof and the amounts necessary to discharge the same to be
determined by the Trustee in its sole reasonable discretion, and such payments
made by the Trustee to become part of the Obligations of the Pledgor to the
Trustee, due and payable
<PAGE>
8
immediately upon demand. The Trustee's authority under this Section 8 shall
include, without limitation, the authority to endorse and negotiate any checks
or instruments representing proceeds of Collateral in the name of the Pledgor,
execute and give receipt for any certificate of ownership or any document
constituting Collateral, transfer title to any item of Collateral, sign the
Pledgor's name on all financing statements or forms to be filed with the
Registrar of Companies in the United Kingdom (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee to preserve, protect or perfect the security interest in the Collateral
and to file the same, prepare, file and sign the Pledgor's name on any notice of
Lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Pledge Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Pledgor.
SECTION 9. Trustee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Trustee may itself perform, or cause the
performance of, such agreement, and the reasonable fees and expenses of the
Trustee incurred in connection therewith shall be payable by the Pledgor under
Section 13 hereof.
SECTION 10. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Trustee hereunder are being granted in order to preserve
and protect the Trustee's and the Holders' of the Notes security interest in and
to the Collateral granted hereby and shall not be interpreted to, and shall not
impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided by
applicable law, the Trustee shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the Trustee
accords similar property in similar situations, it being understood that, except
as expressly set forth herein, the Trustee shall not have any responsibility for
(a) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities or other matters relative to any Collateral, whether or not the
Trustee has or is deemed to have knowledge of such matters, (b) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral or (c) investing or reinvesting any of the Collateral.
SECTION 11. Indemnify. The Pledgor shall indemnify, hold harmless
and defend the Trustee and its directors, officers, agents and employees, from
and against any and all claims, actions, obligations, liabilities and expenses,
including reasonable defense costs, reasonable investigative fees and costs, and
reasonable legal fees and expenses and damages arising from the Trustee's
performance under this Pledge Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person.
<PAGE>
9
SECTION 12. Remedies Upon Event of Default. If any Event of Default
under the Indenture or default hereunder (any such Event of Default or default
being referred to in this Pledge Agreement as an "Event of Default") shall have
occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral
of a secured party under the UCC in effect in the State of New York at
that time. In addition, with respect to any Collateral that shall then be
in or shall thereafter come into the possession or custody of the Trustee,
the Trustee may sell or cause the same to be sold at any broker's board or
at public or private sale, in one or more sales or lots, at such price or
prices as the Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of any or
all Collateral so sold shall thereafter hold the same absolutely, free
from any claim, encumbrance or right of any kind whatsoever created by or
through the Pledgor. Unless any of the Collateral is likely, in the
reasonable judgment of the Trustee, to decline speedily in value, the
Trustee will give the Pledgor reasonable notice of the time and place of
any public sale thereof or of the time after which any private sale or
other intended disposition is to be made. Any sale of the Collateral
conducted in conformity with reasonable commercial practices of banks,
insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable
notice shall be met if such notice is mailed to the Pledgor as provided in
Section 15.1 hereof at least ten (10) days before the time of the sale or
disposition. The Trustee or any Holder of Notes may, in its own name or in
the name of a designee or nominee, buy any of the Collateral at any public
sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees, expenses
and disbursements) of, or incident to, the enforcement of any of the
provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best efforts to
do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to
this Section 12 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 12 will cause
irreparable injury to the Trustee and the Holders of the Notes, that the
Trustee and the Holders of the Notes have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 12 shall be specifically enforceable against the
Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred.
<PAGE>
10
SECTION 13. Expenses. The Pledgor will upon written demand or
invoice pay to the Trustee the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, experts and agents retained by the Trustee, that the Trustee may
incur in connection with (a) the review, negotiation and administration of this
Pledge Agreement, (b) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof. The lien in favor of the Trustee created by Section 7.07 of
the Indenture shall in addition to securing the Pledgor's payment obligations
under such Section 7.07 secure the Pledgor's payment obligations under Section
11 and 13 hereof.
SECTION 14. Security Interest Absolute. All rights of the Trustee
and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of. all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Pledge
Agreement.
SECTION 15. Miscellaneous Provisions.
Section 15.1. Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner, and delivered to each of the parties hereto at their respective
addresses, as set forth or provided for in Section 12.02 of the Indenture.
Section 15.2. No Adverse Interpretation of Other Agreements. This
Pledge Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement may be used to interpret this Pledge Agreement.
<PAGE>
11
Section 15 3. Severability. The provisions of this Pledge Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
Section 15.4. Headings. The headings in this Pledge Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15.5. Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
Section 15.6. Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
Section 15.7. Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Pledge Agreement by the parties hereto and any
consent to any departure by the Pledgor from any provision of this Pledge
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Trustee nor any
Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Trustee or any Holder of Notes to exercise, or
delay in exercising, any right, power or privilege hereunder shall not preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder of Notes would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
Section 15.8. Interpretation of Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the applicable
UCC, except where the context otherwise requires. To the extent a term or
provision of this Pledge Agreement conflicts with the Indenture, the Indenture
shall control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Pledge Agreement shall not be relevant to determine the meaning of this Pledge
Agreement even though
<PAGE>
12
the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
Section 15.9. Continuing Security Interest; Termination. (a) This
Pledge Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in the Indenture or in this
Pledge Agreement, remain in full force and effect until the earlier of payment
in full in cash of (i) each of the first six scheduled interest payments due on
the Notes under the terms of the Indenture or (ii) all obligations due and owing
under the Indenture and the Notes in the event such obligations become payable
prior to the payment of the first six scheduled interest payments on the Notes.
This Pledge Agreement shall be binding upon the Pledgor, its transferees,
successors and assigns, and shall inure, together with the rights and remedies
of the Trustee hereunder, to the benefit of the Trustee, the Holders of the
Notes and their respective successors, transferees and assigns.
(b) Subject to the provisions of Section 15.10 hereof, this Pledge
Agreement shall terminate upon the earlier of payment in full in cash of
(i) each of the first six scheduled interest payments due on the Notes
under the terms of the Indenture or (ii) all obligations due and owing
under the Indenture and the Notes in the event such obligations become
payable prior to the payment of the first six scheduled interest payments
on the Notes. At such time, the Trustee shall, pursuant to an Issuer
Order, reassign and redeliver to the Pledgor all of the Collateral
hereunder that has not been sold, disposed of, retained or applied by the
Trustee in accordance with the terms of this Pledge Agreement and the
Indenture. Such reassignment and redelivery shall be without warranty by
or recourse to the Trustee, except as to the absence of any prior
assignments by the Trustee of its interest in the Collateral, and shall be
at the reasonable expense of the Pledgor.
Section 15.10. Survival Provisions. All representations, warranties
and covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge Agreement, and shall terminate only upon the termination
of this Pledge Agreement. The obligations of the Pledgor under Sections 11 and
13 hereof shall survive the termination of this Agreement.
Section 15.11. Waivers. The Pledgor waives presentment and demand
for payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
<PAGE>
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Section 15.12. Authority of the Trustee. (a) The Trustee shall have
and be entitled to exercise all powers hereunder that are specifically granted
to the Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Neither the Trustee nor any director, officer,
employee, attorney or agent of the Trustee shall be liable to the Pledgor for
any action taken or omitted to be taken by it hereunder, except for its own bad
faith, gross negligence or wilful misconduct, and the Trustee shall not be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Trustee and its directors,
officers, employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document believed by it or them to be genuine and
correct and to have been signed or sent by the proper person or persons.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken
by the Trustee or the exercise or non-exercise by the Trustee of any
option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as
between the Trustee and the Holders of the Notes, be governed by the
Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Trustee and the Pledgor,
the Trustee shall be conclusively presumed to be acting as agent for the
Holders of the Notes with full and valid authority so to act or refrain
from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
Section 15.13. Limitation by Law. All rights, remedies and powers
provided herein may be exercised only to the extent that they will not render
this Pledge Agreement not entitled to be recorded, registered or filed under
provisions of any applicable law.
Section 15.14. Final Expression. This Pledge Agreement, together
with any other agreement executed in connection herewith, is intended by the
parties as a final expression of this Pledge Agreement and is intended as a
complete and exclusive statement of the terms and conditions thereof.
Section 15.15. Rights of Holders of the Notes. No Holder of Notes
shall have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 6.06 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
Section 15.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED UNDER THE LAWS OF THE STATE
<PAGE>
14
OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH. RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND
THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
(b) THE PLEDGOR HAS APPOINTED RSL COMMUNICATIONS N. AMERICA, INC.,
767 FIFTH AVENUE, SUITE 4300, NEW YORK, NEW YORK 10153 AS ITS AGENT FOR SERVICE
OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND
FOR ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT TO
THE JURISDICTION OF ANY SUCH COURT.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR ITS
PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR ITS PROPERTY, AS THE
CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE PLEDGOR
AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY
PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AND THE TRUSTEE EACH WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS PLEDGE AGREEMENT.
INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
<PAGE>
15
(e) THE PLEDGOR AGREES THAT NEITHER THE TRUSTEE NOR ANY HOLDER OF
NOTES SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER ARISING IN TORT, CONTRACT
OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP
ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON
THE PART OF THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE,
CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS (1) ADMITTED
BY THE TRUSTEE IN WRITING, (2) AGREED UPON BY THE PARTIES HERETO IN WRITING OR
(3) SET FORTH IN A JUDGMENT OF A COURT WHICH IS NOT SUBJECT TO APPEAL OR WITH
RESPECT TO WHICH THE TIME FOR FILING AN APPEAL HAS EXPIRED.
(f) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT, THE PLEDGOR WAIVES ALL RIGHTS OF
NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE TRUSTEE OR ANY
HOLDER OF NOTES OF ITS RIGHTS DURING THE CONTINUANCE OF ALL EVENTS OF DEFAULT TO
REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY
UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION WITH ANY
JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF REPLEVY, ATTACH OR LEVY
UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF
NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR
PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY OTHER
AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE TRUSTEE AND/OR
THE HOLDERS OF THE NOTES ON THE OTHER HAND.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused
this Pledge Agreement to be duly executed and delivered as of the date first
above written.
Pledgor:
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
------------------------------------
Name: Itzhak Fisher
Title:
Trustee:
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ James D. Heaney
------------------------------------
Name: James D. Heaney
Title: Vice Pesident
<PAGE>
EXHIBIT A TO THE
COLLATERAL PLEDGE
AND SECURITY AGREEMENT
RSL Communications PLC
767 Fifth Avenue
Suite 4300
New York, New York 10153
Attention: President
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Department
Ladies and Gentlemen:
Reference is made to the Indenture dated as of October 3, 1996
between RSL Communications PLC, as issuer (the "Issuer"), RSL Communications,
Ltd., as guarantor, and The Chase Manhattan Bank, as trustee thereunder (the
"Trustee") relating to the 12 1/4% Senior Notes due 2006 of the Issuer (the
"Notes") and the Collateral Pledge and Security Agreement dated as of October 3,
1996 (the "Pledge Agreement") between the Issuer and the Trustee, for the
benefit of the Trustee and the ratable benefit of the holders of the Notes.
We hereby confirm that we are holding the Pledged Securities (as
defined in the Pledge Agreement) in account no. C24179A (the "Account") at our
office at 450 West 33rd Street, New York, New York, 10001-2697, for the benefit
of the Trustee and the ratable benefit of the holders of the Notes as provided
in the Pledge Agreement and that we have indicated the same in our books and
records relating to the Pledged Securities and the Account.
Very truly yours,
THE CHASE MANHATTAN BANK,
in its individual capacity
By /s/ James D. Heaney
----------------------------------
Name: James D. Heaney
Title: Vice President
<PAGE>
Exhibit 4.6
[Form of]
LETTER OF TRANSMITTAL
for
Offer to Exchange
12 1/4% Senior Notes due 2006
for all Outstanding
12 1/4% Senior Notes due 2006
-----------------------------
RSL COMMUNICATIONS PLC
The Exchange Offer Will Expire at 5:00 P.M., New York City Time,
On _________ ___, 1997, Unless Extended By
RSL Communications PLC (the "Expiration Date").
-----------------------
The Exchange Agent
for the Exchange Offer is:
THE CHASE MANHATTAN BANK
By Registered or Certified Mail by Overnight Courier or by Hand:
The Chase Manhattan Bank
450 W. 33rd Street
15th Floor
New York, New York 10001-2697
Attention: James D. Heaney
or
By Facsimile:
The Chase Manhattan Bank
Attention: James D. Heaney
Facsimile Number: (212) 946-8161/8162
-----------------------
Delivery of this Letter of Transmittal to an address other than as set forth
above or transmission of instructions via a facsimile transmission to a number
other than as set forth above will not constitute a valid delivery. The
instructions contained herein should be read carefully before this Letter of
Transmittal is completed.
<PAGE>
This Letter of Transmittal is to be used either if certificates of
Original Notes are to be forwarded herewith to the Exchange Agent or if delivery
of Original Notes is to be made by book-entry transfer to an account maintained
by the Exchange Agent at The Depository Trust Company, pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer - Book-Entry Transfer." Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent.
Holders whose Original Notes are not immediately available or who
cannot deliver their Original Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date may tender their Original
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer - Guaranteed Delivery Procedures."
The undersigned must check the appropriate boxes at page 7 below and
sign this Letter of Transmittal to indicate the action the undersigned desires
to take with respect to the Exchange Offer.
-2-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus dated
April ___, 1997 (the "Prospectus") of RSL Communications PLC (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange $1,000
in principal amount of 12 1/4% Senior Notes due 2006 (the "Exchange Notes"), for
each $1,000 in principal amount of outstanding 12 1/4 % Senior Notes due 2006
(the "Original Notes"). The terms of the Exchange Notes are substantially
identical in all respects (including principal amount, interest rate and
maturity) to the terms of the Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange Notes are freely
transferable by holders thereof (except as provided herein or in the Prospectus)
and are issued without any right to registration under the Securities Act of
1933, as amended (the "Securities Act"). Capitalized terms used herein but not
defined herein have the meanings ascribed to them in the Prospectus.
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Company the principal amount of the
Original Notes indicated in Box 1, below. The undersigned is the registered
owner of all the Original Notes, and the undersigned represents that it has
received from each beneficial owner of tendered Original Notes ("Beneficial
Owner(s)") a duly completed and executed form of "Instructions to Registered
Holder from Beneficial Owner" accompanying this Letter of Transmittal,
instructing the undersigned to take the action described in this Letter of
Transmittal.
Subject to, and effective upon, the acceptance for exchange of the
Original Notes tendered herewith, the undersigned hereby irrevocably exchanges,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Original Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent acts as the agent of the Company in connection with the Exchange Offer) to
cause the Original Notes to be assigned, transferred and exchanged. The
undersigned agrees that acceptance of any and all validly tendered Original
Notes by the Company and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Company of it obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder.
The undersigned hereby represents and warrants that the undersigned
accepts the terms and conditions of the Exchange Offer and has full power and
authority to tender, exchange, assign and transfer the Original Notes tendered
hereby and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when such tendered Original Notes are accepted for
exchange, the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The undersigned and each Beneficial Owner will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete and give effect to the
transactions contemplated hereof.
The undersigned represents that it and each Beneficial Owner
acknowledge that the Exchange Offer is being made in reliance on an
interpretation by the staff of the Securities and Exchange Commission (the
"SEC"), not issued in connection with the Company or the Exchange Offer, to the
effect that the Exchange Notes issued pursuant to the Exchange Offer in exchange
for the Original Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
or understanding with any person to participate in the distribution of such
Exchange Notes, and as to broker-dealer prospectus delivery requirements,
subject to the provisions of the paragraph below. See "Shearman & Sterling," SEC
No-Action Letter (available July 2, 1993). Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely
-3-
<PAGE>
on such interpretation by the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. See "Morgan Stanley & Co., Inc."
SEC No-Action Letter (available June 5, 1991), and "Exxon Capital Holdings
Corporation," SEC No-Action Letter (available May 13, 1988).
The undersigned hereby represents and warrants that (i) the Exchange
Notes or interests therein received by the undersigned and any Beneficial
Owner(s) pursuant to the Exchange Offer are being acquired by the undersigned
and any Beneficial Owner(s) in the ordinary course of business of the
undersigned and any Beneficial Owner(s) receiving such Exchange Notes, (ii)
neither the undersigned nor any Beneficial Owner(s) is participating, intends to
participate or has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes, (iii) the undersigned
and any Beneficial Owner(s) acknowledge that any person who is a broker-dealer
under the Exchange Act or is participating in the Exchange Offer for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Exchange Notes and any interest therein acquired by such
person and cannot rely on the position of the Staff of the SEC set forth in the
no-action letters that are discussed above, (iv) the undersigned and each
Beneficial Owner understand that a secondary resale transaction described in the
preceding clause (iii) and any resale of the Exchange Notes and any interest
therein obtained by the undersigned and in exchange for the Original Notes
originally acquired by the undersigned directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 and 508, as applicable of Regulation S-K
of the SEC, and (v) neither the undersigned nor any Beneficial Owner(s) is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company, or
if either the undersigned or any Beneficial Owner(s) is an affiliate, that the
undersigned and any such Beneficial Owner(s) will comply with the prospectus
delivery requirements of the Securities Act in connection with the disposition
of any Exchange Notes to the extent applicable. If the undersigned or any
Beneficial Owner(s) is a broker-dealer, the undersigned further represents that
(x) it and any such Beneficial Owner(s) acquired Original Notes for the
undersigned's and any such Beneficial Owner's own account as a result of
market-making activities or other trading activities, (y) neither the
undersigned nor any Beneficial Owner(s) has entered into any arrangement or
understanding with the Company or any "affiliate" of the Company (within the
meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes
to be received in the Exchange Offer and (z) the undersigned and any Beneficial
Owner(s) acknowledge that the undersigned and any Beneficial Owner(s) will
deliver a copy of a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. The Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resales of Exchange Notes received in exchange for
Original Notes where Original Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company
intends to make the Prospectus (as it may be amended or supplemented) available
to any broker-dealer for use in connection with any such resale for a period of
180 days after the expiration date of the Exchange Offer.
The Exchange Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of the Original Notes in any jurisdiction
in which the making of the Exchange Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction or would otherwise not be in
compliance with any provision of any applicable security law. For purposes of
compliance with state blue sky laws, the undersigned represents and warrants to
the Company that the state in which each Beneficial Owner's principal business
office is located or the state of each Beneficial Owner's principal residence is
one of the states which is listed on Schedule A attached hereto. The undersigned
hereby represents and warrants that the information set forth in Box 2 is true
and correct.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange - Conditions of the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Original Notes rendered hereby, and in such event, the Original Notes not
exchanged will be returned to the undersigned at the address indicated below.
The undersigned acknowledges that prior to the Exchange Offer, there has been no
public market for the Original Notes or the Exchange Notes. The Company does not
intend to list the Exchange Notes on a national securities exchange. There can
be no assurance that an active market for the Exchange Notes will develop. The
undersigned understands and acknowledges that the Company reserves the right in
its sole discretion to purchase or make offers for any Original
-4-
<PAGE>
Notes that remain outstanding subsequent to the Expiration Date and, to the
extent permitted by applicable law, purchase Original Notes in the open market,
in privately negotiated transactions or otherwise.
The undersigned understands that tenders of the Original Notes
pursuant to any one of the procedures described in the Prospectus under the
caption "The Exchange Offer" and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.
All questions as to the validity, form, eligibility (including time
of receipt), and withdrawal of the tendered Original Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Original
Notes not properly tendered or if, in the sole judgment of the Company, the
Exchange Offer would violate any law, statute, rule or regulation or an
interpretation thereof of the SEC staff. The Company also reserves the right to
waive any irregularities or conditions of tender as to particular Original
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects are final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Original Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Original Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Original Notes will not be deemed to have
been made until such irregularities have been cured or waived. Any Original
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Original Notes, as soon as practicable following the Expiration Date.
All authority herein conferred or agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any Beneficial Owner(s), and every obligation of the undersigned or any
Beneficial Owner(s) shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned and any Beneficial Owner(s). The
undersigned also agrees that, except, as provided in the Prospectus and set
forth in Instruction 3, below, the Original Notes tendered hereby cannot be
withdrawn.
Certificates for all Exchange Notes delivered in exchange for
tendered Original Notes and any Original Notes delivered herewith but not
exchanged, and registered in the name of the undersigned, shall be delivered to
the undersigned at the address shown below the signature of the undersigned,
unless otherwise indicated on page 7.
-5-
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL
NOTES TENDERED HEREWITH" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE ORIGINAL NOTES AND MADE THE REPRESENTATIONS DESCRIBED HEREIN AND IN
THE PROSPECTUS.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Holder(s)
Date:________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Original Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 4.
Name(s):________________________________________________________________________
________________________________________________________________________
(Please Print)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.:____________________________________________________
Taxpayer Identification No.:____________________________________________________
GUARANTEE OF SIGNATURE(S)
(If Required - See Instruction 4)
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
Title:__________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
Name of Firm:___________________________________________________________________
Area Code and Telephone No.:____________________________________________________
Date:__________________________, 1997
-6-
<PAGE>
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:___________ |_| The Depository Trust Company
Account Number:___________________________________________________________
Transaction Code Number:__________________________________________________
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):_____________________________________________
Name of Eligible Institution that Guaranteed Delivery:____________________
If Delivered by Book-Entry Transfer:
Account Number:______________________________________________________
|_| CHECK HERE ONLY IF EXCHANGE NOTES OR UNEXCHANGED ORIGINAL NOTES DELIVERED
HEREWITH ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Notes to:
Name:_____________________________________________________________________
(Please Print)
Address:__________________________________________________________________
__________________________________________________________________
Tax Identification Number:________________________________________________
Social Security No.:______________________________________________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:_____________________________________________________________________
Address:__________________________________________________________________
__________________________________________________________________
-7-
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
A holder that is a participant in The Depository Trust Company's system
may utilize The Depository Trust Company's Automated Tender Offer Program to
tender Original Notes.
List in Box 1 the Original Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, information should be listed
on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF ORIGINAL NOTES TENDERED HEREWITH
- --------------------------------------------------------------------------------
Name(s) and Address(es) Aggregate Principal
of Registered Holder(s) Certificate Amount Represented Principal Amount
(Please fill in) Number(s)* by Original Notes Tendered**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Original Notes.
See Instruction 3.
- --------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNERS(S)
State of Principal Residence Principal Amount of Tendered
or Principal Place of Business Original Notes held
or Each Beneficial Owner of for Account of Beneficial Owner
Tendered Original Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-8-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures.
Certificates for all physically delivered Original Notes or confirmation
of any book-entry transfer to the Exchange Agent's account at a book-entry
transfer facility of Original Notes tendered by book-entry transfer, as well as
a properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth on the front page of this Letter of Transmittal on or prior to the
Expiration Date (as defined in the Prospectus).
The method of delivery of this Letter of Transmittal, the Original Notes
and any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. If such delivery is by mail, it is
suggested that registered mail with return receipt requested be used, proper
insurance be obtained and the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent on or before the
Expiration Date.
Holders who wish to tender their Original Notes but whose Original Notes
are not immediately available or who cannot deliver their Original Notes and all
other required documents to the Exchange Agent on or prior to the Expiration
Date or comply with book-entry transfer procedures on a timely basis may tender
their Original Notes pursuant to the guaranteed delivery procedure set forth in
the Prospectus under "The Exchange Offer-Guaranteed Delivery Procedures." Such
holders' tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as
defined below);
(b) on or prior to the Expiration Date, the Exchange Agent has
received from such Eligible Institution (a) either a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) or a
properly transmitted Agent's Message and (b) a Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address
of such holder of Original Notes and the amount of Original Notes
tendered, stating that the tender is being made thereby and guaranteeing
that within five New York Stock Exchange ("NYSE") trading days after the
date of execution of the Notice of Guaranteed Delivery, a Book-Entry
Confirmation or the certificates relating to the Original Notes in
registered form and all other documents required by this Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) a Book-Entry Confirmation or the certificates relating to the
Definitive Registered Notes and all other documents required by this
Letter of Transmittal, are received by the Exchange Agent within five NYSE
trading days after the date of execution of the Notice of Guaranteed
Delivery.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Original Notes for exchange.
2. Beneficial Owner Instructions to Registered Holders. Only a holder in whose
name tendered Original Notes are registered on the books of the registrar (or
the legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of tendered
Original Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
"Instructions to Registered Holder from Beneficial Owner" form accompanying this
Letter of Transmittal.
-9-
<PAGE>
3. Partial Tender; Withdrawals.
If less than the entire principal amount of Original Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Original Notes submitted
but not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Original Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. For a withdrawal to be effective, a
written telegraphic, telex or facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier) notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal (a) must specify (i) the person named in the Letter of Transmittal as
having tendered Original Notes to be withdrawn, (ii) the certificate numbers of
the Original Notes to be withdrawn, (iii) the principal amount of Original Notes
delivered for exchange, (iv) a statement that such holder is withdrawing his or
her election to have such Original Notes exchanged and (v) the name of the
registered holder of such Original Notes, and (b) must be signed by the holder
in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accepted by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Original Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Original Notes promptly following
receipt of notice of withdrawal. If Original Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Original Notes or otherwise comply with the
book-entry transfer facility procedure. All questions as to the validity, form
and eligibility (including time of receipt) of such withdrawal notices shall be
determined by the Company, whose determination shall be final and binding on all
parties.
4. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s) of the
Original Notes tendered hereby, the signature must correspond with the name(s)
as written on the face of the certificates without alteration or any change
whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any of the Original Notes tendered hereby are registered in several
names, it will be necessary to complete, sign and submit as many separate copies
of this Letter of Transmittal as there are different registrations of Original
Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include a
book-entry transfer facility whose name appears on a security listing as the
owner of the Original Notes) of Original Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Original Notes listed, such Original Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
holder, in either case signed exactly as the name or names of the registered
holder or holders appear(s) on the Original Notes.
If this Letter of Transmittal or any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporation or others
acting
-10-
<PAGE>
in a fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 4 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal or notice of withdrawal need not
be guaranteed by an Eligible Institution, provided the Original Notes are
tendered: (i) by a registered holder of such Original Notes or (ii) for the
account of an Eligible Institution.
For purposes of this Letter of Transmittal, an "Eligible Institution"
shall mean any firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States.
5. Transfer Taxes.
The Company shall pay all transfer taxes, if any, applicable to the
transfers and exchange of Original Notes to it or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Original Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Original Notes listed in this Letter of
Transmittal.
6. Mutilated, Lost, Stolen or Destroyed Original Notes.
Any holder whose Original Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
7. Acceptance of tendered Original Notes and Issuance of Exchange Notes;
Return of Original Notes.
Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Original Notes the first business
day following the Expiration Date, or as soon as practicable thereafter, and
will issue Exchange Notes therefor promptly after acceptance of the Original
Notes. For purposes of the Exchange Offer, the Company shall be deemed to have
accepted tendered Original Notes when, as and if the Company has given written
or oral notice thereof to the Exchange Agent. If any tendered Original Notes are
not exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Original Notes will be returned, without expense, to the undersigned at the
address indicated above.
-11-
<PAGE>
Schedule A
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
RSL COMMUNICATIONS PLC
12 1/4% Senior Notes due 2006
The undersigned hereby acknowledges receipt of the Prospectus dated
____________ , 1997 (the "Prospectus") of RSL Communications PLC (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 12 1/4% Senior Notes due
2006 (the "Exchange Notes") for each $1,000 in principal amount of its
outstanding 12 1/4% Senior Notes due 2006 (the "Original Notes"). Capitalized
terms used herein but not defined herein have the meaning ascribed to them in
the Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the Original Notes
held by you for the account of the undersigned.
The aggregate face amount of the Original Notes held by you for the
account of the undersigned is (fill in amount):
$_______________ of the 12 1/4% Senior Notes due 2006.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
|_| To TENDER the following Original Notes held by you for the
account of the undersigned (insert principal amount of
Original Notes to be tendered, *if any):
$________________ of the 12 1/4% Senior Notes due 2006.
* The minimum permitted tender is $1,000 in principal amount
of Original Notes. All other tenders must be in integral
multiples of $1,000 of principal amount.
|_| NOT to TENDER any Original Notes held by you for the account
of the undersigned.
If the undersigned instructs you to tender the Original Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including, but not
limited to, representations to the effect that (i) the undersigned's principal
residence or principal business office is in the state of (fill in state)
which is listed on Schedule A attached to the Letter of
Transmittal, (ii) the undersigned is acquiring the Exchange Notes or interests
therein in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the Exchange Notes, (iv) the undersigned acknowledges that any person who is
a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the Exchange Notes or any interest
therein acquired by such person and cannot rely on the position of the Staff of
the Securities and Exchange Commission ("SEC") set forth in the no-action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer" and the Letter of Transmittal; (v) the undersigned understands
that a secondary resale transaction described in clause (iv) above and any
resale of the Exchange Notes and any interest therein obtained by the
undersigned in exchange for the Original Notes originally acquired by the
undersigned directly from the Company should be covered by an effective
registration statement containing the selling security holder information
required by Items 507 and 508, as applicable, of Regulation S-K of the SEC, and
(vi) except as otherwise disclosed in writing herewith, the undersigned is not
an "affiliate," as defined in Rule 405 under the Securities Act, of the Company,
(b) to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and (c) to take such other action as may be necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Original Notes. If the undersigned is a broker-dealer, the undersigned further
(x) represents that it acquired Original Notes for the undersigned's own account
as a result of market-making activities or other trading activities, (y)
represents that it has not entered into any arrangement or understanding with
the Company or any "affiliate" of the Company (within the meaning of Rule 405
under the Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer and (z) acknowledges that it will deliver a copy of a Prospectus
meeting the requirements of the Securities Act in connection with any resale of
Exchange Notes.
<PAGE>
SIGN HERE
Name of Beneficial Owner(s): ___________________________________________________
Signature(s):________________________________________________________________
Name(s) (please print): _____________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
<PAGE>
Exhibit 5.1
[LETTERHEAD OF LEVINSON GRAY]
RSL Communications Plc and April 23,1997
RSL Communications, Ltd
Clarendon House
Church Street
Hamilton
HM CX Bermuda
Dear Sirs,
RSL Communications Plc: and RSL Communications Ltd ("the Companies")
1. We are Solicitors of the Supreme Court of Judicature of England and Wales
and have acted as English law advisers to the Companies in connection with
an offer to exchange US $1,000, principal amount, 12 1/4% Senior Notes due
2006 of RSL Communications Plc ("New Notes") which have been registered
under the US Securities Act of 1933, as amended ("Securities Act"),
pursuant to a Registration Statement, for each US $1,000 principal
amount, of the 12 1/4% Senior Notes due 2006 ("Old Notes") issued in
October 1996 ("Exchange Offer") as described in the Form S-4 Registration
Statement of the Companies filed with the Securities and Exchange
Commission on April 24, 1997 ("Registration Statement")
2. For the purposes of giving this opinion we have examined a specimen of the
New Notes and originals or copies, certified or otherwise of such
corporate records, and such certificates or comparable documents of
public officials or bodies as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth
3. In such examination we have assumed:
3.1 that all documents submitted to us as copies conform to the originals;
3.2 that where any liability or obligation or right or benefit of a holder
of the New Notes is dependent upon the satisfaction of conditions
precedent, that such conditions have been or will be duly and properly
satisfied;
<PAGE>
3.3 that since the Old Notes were issued, no party has by its words, actions
or conduct waived any of the rights it may have under the Old Notes or
given rise to an estoppel against such party so preventing it from relying
on any particular provision;
3.4 that there are no agreements or arrangements in existence, made prior to
the Exchange Offer, which affect the enforceability of the Exchange Offer
or the New Notes or the Old Notes in accordance with their terms;
3.5 that any document referred to in this opinion and executed by the
Companies has been properly authorised, executed and delivered in
accordance with the laws of the state of New York and of the United States
and of any other relevant jurisdiction (other than England and Wales) and
that the obligations of the Companies constitute legal, valid, binding and
enforceable obligations under the laws of the State of New York and of the
United States and of any other relevant jurisdiction (other than England
and Wales);
3.6 you have relied as to matters governed by the laws of the state of New
York and of the United States upon the opinion or opinions of Rosenman &
Colin LLP, United States counsel for the Companies;
3.7 that there are no facts or circumstances in existence and no events have
occurred which would render the Old Notes or the New Notes void or
voidable or repudiated or frustrated or capable of rescission for any
reason, and in particular (but without limitation) by reason of lack
consideration or any fraud or misrepresentation on the part of any of the
parties thereto;
3.8 that the Warrants for the acquisition of shares in RSL Communications Ltd
are detachable Warrants as opposed to conversion rights in the Notes
themselves
4. This opinion is given on the basis that it is governed by and will be
construed in accordance with the laws of England and Wales. In particular,
we express no opinion as to the enforceability, outside England and
Wales, of any order or judgment obtained in the English Courts.
5. Based upon the foregoing, and subject to the qualifications stated herein,
it is our opinion that:
(a) when the Registration Statement has become effective under the
Securities Act and the New Notes have been duly issued and exchanged
for the Old Notes in the
<PAGE>
manner described in the Registration Statement, that the New Notes
will constitute legal, valid and binding obligations of RSL
Communications Plc enforceable in accordance with their terms,
except as enforcement may be limited by bankruptcy, insolvency,
re-organisation or similar laws affecting a creditor's rights
generally, by rights of preference if applicable, and the
availability of equitable or discretionary remedies may be limited
by principles of general applicability
(b) the statements contained in the Registration Statement under the
heading "Summary - The Exchange Offer - Certain U.K. Related
Regulatory Issues" are accurate in all material respects
(c) the statements contained in the Registration Statement under the
heading "Description of the Exchange Notes - Additional Amounts"
are accurate in all material respects
(d) in accordance with United Kingdom law and practice (which may change
prospectively or retrospectively) the statements in the Registration
Statement under the heading "United Kingdom Tax Considerations for
U.S. Holders of the Notes", insofar as they describe provisions of
United Kingdom tax law, reflect the material United Kingdom
taxation considerations relating to the Exchange Offer and are
accurate in all material respects.
7. This opinion is delivered as of the date of this letter and addressed to
you and is for your benefit and the benefit of holders of the Old Notes in
connection with the Exchange Offer, and accordingly it may not be relied
upon for any other purpose, or by any other person or entity, and may not
be made available to any other person or entity without our prior written
consent.
We consent to the filing of this Opinion as an exhibit to the Registration
Statement relating to the New Notes and to the references to us under the
headings "Service of Process and Enforcement of Liabilities", "Description of
the Exchange Notes - Additional Amounts", "Legal Matters" and "Certain Tax
Considerations" in the Registration Statement.
Yours faithfully,
/s/ Levinson Gray
- ------------------------
Levinson Gray
<PAGE>
Exhibit 5.2
[LETTERHEAD OF CONYERS DILL & PEARMAN]
23rd April, 1997
RBX/ss/305867/d.337595
RSL Communications, Ltd.
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs
Re: RSL Communications, Ltd.
Registration Statement on Form S-4
We have acted as special legal counsel in Bermuda to RSL Communications, Ltd.
(the "Company") in connection with the registration of US$300,000,000 12 1/4%
Senior Notes due 2006 (the "Notes") issued by RSL Communications PLC (the
"Issuer") and guaranteed by the Company as described in the Registration
Statement on Form S-4 filed with the United States Securities and Exchange
Commission on 24th April, 1997 (the "Registration Statement").
For the purposes of giving this opinion, we have examined and relied upon the
following documents:
(i) a photocopy of the Registration Statement; and
(ii) a photocopy of an Indenture dated as of October 3, 1996 between the
Issuer, the Company as guarantor and The Chase Manhattan Bank as trustee
containing the guarantee of the Notes by the Company (the "Note
Guarantee").
<PAGE>
Page 2
DATE
ADDRESS
We also have reviewed a copy of the Memorandum of Association and the Bye-laws
of the Company, the Chairmans Written Consent of the Company's Board of
Directors dated as of September 30, 1996 and such other documents and made such
enquiries as to questions of law as we have deemed necessary in order to render
the opinions set forth below.
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is to be governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the headings "Business -
Service of Process and Enforcement of Liabilities", "Description of the Exchange
Notes - Additional Amounts" and "Legal Matters".
On the basis of and subject to the foregoing, we are of the opinion that;
1. The Note Guarantee has been duly authorised by the Company.
2. The statements contained in the penultimate paragraph of page 127 of the
Registration Statement under the heading "Description of the Exchange
Notes - Additional Amounts" are accurate.
Yours faithfully
/s/ Conyers Dill & Pearman
<PAGE>
Exhibit 8.1
ROSENMAN
[ROSENMAN & COLIN LLP LETTERHEAD]
April 23, 1997
RSL Communications PLC
RSL Communications, Ltd.
Clarendon House
Church Street
Hamilton HM CX Bermuda
Gentlemen:
You have requested our opinion regarding the discussion of U.S. federal income
tax consequences under the caption "Certain U.S. Federal Income Tax
Considerations" in the prospectus (the "Prospectus") that is included in the
Registration Statement on Form S-4 (the "Registration Statement") of RSL
Communications PLC (the "Company") and RSL Communications, Ltd. filed with the
Securities and Exchange Commission on April 24, 1997. The Prospectus relates to
the Company's offer to exchange certain notes for substantially identical notes.
We have reviewed the Prospectus and such other materials as we have deemed
necessary or appropriate as a basis for our opinion described therein, and have
considered the applicable provisions of the Internal Revenue Code of 1986, as
amended, Treasury Regulations, pertinent judicial authorities, rulings of the
Internal Revenue Service, and such other authorities as we have considered
relevant to such opinion.
Based upon the foregoing, it is our opinion that the statements made under the
caption "Certain U.S. Federal Income Tax Considerations" in the Prospectus set
forth the material United States federal income tax consequences of the exchange
transaction described in the Prospectus as of the date hereof.
We hereby consent to the use of our name under the caption "Certain U.S. Federal
Income Tax Considerations" in the Prospectus and to the filing of this opinion
as an exhibit to the Registration Statement.
Very truly yours,
Rosenman & Colin LLP
By: /s/ Jill E. Darrow
--------------------------
A Partner
<PAGE>
Exhibit 10.1
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
between
RSL COMMUNICATIONS, LTD.
and
THE CHASE MANHATTAN BANK,
as Warrant Agent
Dated as of October 3, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS ............................ 2
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates ......................... 5
Section 2.2. Restrictive Legends .................................. 6
Section 2.3. Execution and Delivery of Warrant Certificates ....... 9
Section 2.4. Certificated Warrants ................................10
ARTICLE III
EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 3.1. Exercise Price .......................................10
Section 3.2. Exercise; Restrictions on Exercise ...................10
Section 3.3. Method of Exercise; Payment of Exercise Price ........10
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments ..........................................12
Section 4.2. Notice of Adjustment .................................19
Section 4.3. Statement on Warrants ................................19
Section 4.4. Notice of Consolidation, Merger, Etc. ................19
Section 4.5. Fractional Interests .................................20
Section 4.6. When Issuance or Payment May be Deferred .............20
ARTICLE V
DECREASE IN EXERCISE PRICE .........................20
ARTICLE VI
LOSS OR MUTILATION .............................21
<PAGE>
ii
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF CLASS A SHARES ............................21
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange ................................22
Section 8.2. Book-Entry Provisions for the Global Warrants ........23
Section 8.3. Special Transfer Provisions ..........................24
Section 8.4. Surrender of Warrant Certificates ....................27
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder ..................28
Section 9.2. Right of Action ..........................................28
ARTICLE X
THE WARRANT AGENT
Section 10.1. Duties and Liabilities ...............................28
Section 10.2. Right to Consult Counsel .............................30
Section 10.3. Compensation; Indemnification ........................30
Section 10.4. No Restrictions on Actions ...........................30
Section 10.5. Discharge or Removal; Replacement Warrant Agent ......30
Section 10.6. Successor Warrant Agent ..............................31
ARTICLE XI
MISCELLANEOUS
Section 11.1. Monies Deposited with the Warrant Agent ...........32
Section 11.2. Payment of Taxes ..................................32
Section 11.3. No Merger, Consolidation or Sale of Assets of
the Company .......................................32
Section 11.4. Reports to Holders ................................33
Section 11.5. Notices; Payment ..................................33
iii
<PAGE>
Section 11.6. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities; Governing Law ...............34
Section 11.7. Binding Effect ....................................34
Section 11.8. Counterparts ......................................35
Section 11.9. Amendments ........................................35
Section 11.10. Headings ..........................................35
Section 11.11. Class A Shares Legend .............................35
Section 11.12. Third Party Beneficiaries .........................37
Section 11.13. Termination .......................................37
EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
SCHEDULE LIST OF FINANCIAL EXPERTS
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of October 3, 1996 (this "Agreement"),
between RSL COMMUNICATIONS, LTD., a Bermuda corporation (the "Company"), and THE
CHASE MANHATTAN BANK, as warrant agent (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Placement Agreement dated as of
September 30, 1996 (the "Placement Agreement"), among the Company, RSL
Communications PLC, a United Kingdom corporation and wholly-owned subsidiary of
the Company (the "Note Issuer"), and Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), as manager (the "Manager"), for itself and the other placement agents
named therein (collectively with the Manager, the "Placement Agents"), the
Company has agreed to issue and sell to the Placement Agents an aggregate of
300,000 warrants (each, a "Warrant"), each Warrant initially entitling the
holder thereof to purchase 1.815 shares of Class A Common Stock (as defined
below) of the Company at an exercise price of $.01 per Class A Share (as defined
below) as part of 300,000 units (the "Units"), each Unit consisting of $1,000
principal amount of Senior Notes Due 2006 of the Note Issuer (each a "Note" and
collectively, the "Notes") to be issued pursuant to the provisions of an
Indenture, dated as of the date hereof, among the Note Issuer, the Company, as
guarantor, and The Chase Manhattan Bank, as trustee, and one Warrant;
WHEREAS, the Note and the Warrant included in each Unit will become
separately transferable at the close of business upon the earliest to occur of
(i) the date that is 180 days after the Closing Date (as defined below), (ii)
the commencement of an exchange offer with respect to the Notes undertaken
pursuant to the Notes Registration Rights Agreement (as defined below) or (iii)
the effectiveness of a shelf registration statement with respect to resales of
the Notes (the "Separation Date"); and
WHEREAS, the Company desires to engage the Warrant Agent to act on
the Company's behalf, and the Warrant Agent desires to act on behalf of the
Company, in connection with the issuance of the Warrant Certificates (as defined
below) and the other matters as provided herein, including, without limitation,
for the purpose of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder of the Company and the record
holders thereof (together with the holders of shares of Class A Common Stock (or
other securities) received upon exercise thereof, the "Holders").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Placement Agreement, the Company and the
Warrant Agent hereby agree as follows:
<PAGE>
2
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the
Company at such time.
"Board" means the board of directors of the Company from time to
time.
"Business Day" means a day (other than a Saturday or Sunday) on
which DTC, Euroclear, Cedel and banks in New York are open for business.
"Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Class A Common Stock" means the Class A common shares, par value
$.O1 per share, of the Company.
"Class A Shares" means the shares of the Class A Common Stock of the
Company.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Company" has the meaning specified in the preamble to this
Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
<PAGE>
3
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Expiration Date" means October 3, 2006.
"Financial Expert" means one of the Persons listed in Schedule I
hereto.
"Global Warrants" has the meaning specified in Section 2.1 hereof.
"Holders" has the meaning specified in the recitals to this
Agreement.
"IAI Global Warrant" has the meaning specified in Section 2.1
hereof.
"Independent Financial Expert" means a Financial Expert that does
not (or whose directors, executive officers or 5% stockholders do not) have a
direct or indirect financial interest in the Company or any of its subsidiaries,
which has not been for at least five years, and, at the time it is called upon
to give independent financial advice to the Company is not (and none of its
directors, executive officers or 5% stockholders is) a promoter, director, or
officer of the Company or any of its subsidiaries. The Independent Financial
Expert may be compensated and indemnified by the Company for opinions or
services it provides as an Independent Financial Expert.
"Institutional Accredited Investor" shall mean an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(l), (2), (3)
or (7) of Regulation D under the Securities Act.
"Non-U.S. Person" means a person who is not a U.S. person as defined
in Rule 902 of Regulation S.
"Note Issuer" has the meaning specified in the recitals to this
Agreement.
"Notes" has the meaning specified in the recitals to this Agreement.
"Notes Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Notes dated as of the date hereof between the Note
Issuer and Morgan Stanley, as Manager, and the other Placement Agents named in
the Placement Agreement.
"Officer" means, with respect to the Company, (i) the Chairman of
the Board, the Chief Executive Officer or any other Director of the Company or
(ii) the Treasurer or any Assistant Treasurer, the Company's Secretary or any
Assistant Secretary of the Company.
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4
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; provided, however, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof.
"Offshore Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Placement Agreement" has the meaning specified in the recitals to
this Agreement.
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a) hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registration Statement" has the meaning specified in Section 2 of
the Warrant Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in Section
2.1 hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Spread" means, with respect to any Warrant, the Current Market
Value of the Class A Shares subject to such Warrant, less the Exercise Price of
such Warrant, in each case as adjusted as provided herein.
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5
"Subscription Form" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"U.S. Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Underlying Securities" shall mean the Class A Shares issuable upon
exercise of the Warrants.
"Units" has the meaning specified in the recitals to this Agreement.
"Value Report" has the meaning specified in Section 4.1(k) hereof.
"Warrant" has the meaning specified in the recitals to this
Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant
Registration Rights Agreement, dated as of October 3, 1996, between the Company
and the Warrant Agent.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates representing
the Warrants (the "Warrant Certificates") shall be substantially in the form
attached hereto as Exhibit A, shall be dated the date on which countersigned by
the Warrant Agent and shall have such insertions as are appropriate or required
or permitted by this Agreement and may have such letters, numbers or other marks
of identification and such legends and endorsements stamped, printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation pursuant thereto or with any
rule or regulation of any securities exchange on which the Warrants may be
listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Warrant Certificates in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "Restricted Global Warrant"), deposited with the Warrant Agent,
as custodian for the Depositary, duly executed by the Company and countersigned
by the Warrant Agent as hereinafter provided. The aggregate number of Warrants
represented by the Restricted Global Warrant may from time to time be increased
or decreased
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6
by adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Warrant Certificates in definitive, fully registered form, substantially
in the form set forth in Exhibit A (the "Regulation S Global Warrant"),
deposited with the Warrant Agent, as custodian for the Depositary, duly executed
by the Company and countersigned by the Warrant Agent as hereinafter provided.
The aggregate number of Warrants represented by the Regulation S Global Warrants
may from time to time be increased or decreased by adjustments made on the
records of the Warrant Agent, as custodian for the Depositary, or its nominee,
as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold to Institutional Accredited Investors
shall be issued initially in the form of one or more permanent global Warrant
Certificates in definitive, fully registered form, substantially in the form set
forth in Exhibit A (the "IAI Global Warrant"), deposited with the Warrant Agent,
as custodian for the Depositary, duly executed by the Company and countersigned
by the Warrant Agent as hereinafter provided. The aggregate number of Warrants
represented by the IAI Global Warrant may from time to time be increased or
decreased by adjustments made on the records of the Warrant Agent, as custodian
for the Depositary, or its nominee, as provided in Section 2.4 and Section 8.3
hereof.
Warrants issued in exchange for interests in the Restricted Global
Warrant or the IAI Global Warrant pursuant to Sections 2.4 and 8.2(b) are
referred to herein as the "U.S. Certificated Warrants". Warrants issued pursuant
to Sections 2.4 and 8.2(b) in exchange for interests in the Regulation S Global
Warrants are referred to herein as the "Offshore Certificated Warrants". The
U.S. Certificated Warrants and the Offshore Certificated Warrants are sometimes
collectively herein referred to as the "Certificated Warrants". The Restricted
Global Warrant, the Regulation S Global Warrant and the IAI Global Warrant are
sometimes herein collectively referred to as the "Global Warrants."
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Warrant Certificates shall
bear the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND, AS OF THE DATE
THIS WARRANT CERTIFICATE WAS ORIGINALLY ISSUED, THE CLASS A COMMON SHARES
ISSUABLE
<PAGE>
7
UPON THE EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS WARRANT FOR THE ACCOUNT OR BENEFIT OF A U.S.
PERSON AND IS ACQUIRING THIS WARRANT IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT
AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS WARRANT, RESELL OR
OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
EXCEPT (A) TO RSL COMMUNICATIONS, LTD. OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE WARRANT AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS WARRANT (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE WARRANT AGENT) AND AN OPINION OF COUNSEL ACCEPTABLE TO RSL
COMMUNICATIONS, LTD. AND ITS COUNSEL THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
ARE TRANSFERRED
<PAGE>
8
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS WARRANT CERTIFICATE TO THE WARRANT AGENT.
EACH INSTITUTIONAL ACCREDITED INVESTOR THAT IS NOT A QIB WILL BE REQUIRED
TO EFFECT ANY TRANSFER OF THIS WARRANT (OTHER THAN PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT) THROUGH ONE OF MORGAN STANLEY & CO.
INCORPORATED, BEAR, STEARNS & CO. INC. AND DILLON, READ & CO. INC. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER
THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING
THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THE WARRANTS
REPRESENTED BY THIS WARRANT CERTIFICATE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Warrant shall also bear the following legend on the
face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO RSL COMMUNICATIONS, LTD.
OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
<PAGE>
9
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT.
(c) Each Warrant Certificate issued prior to the Separation Date
shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF
12 1/4% SENIOR NOTES DUE 2006 OF RSL COMMUNICATIONS PLC (THE "NOTES") AND
ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.815 CLASS
A COMMON SHARES, PAR VALUE $.O1 PER SHARE, OF RSL COMMUNICATIONS PLC.
PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) APRIL 3,
1997, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES
AND (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT
TO THE NOTES, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Section 2.3. Execution and Delivery of Warrant Certificates. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
544,500 Class A Shares may be executed, on or after the date of this Agreement,
by the Company and delivered to the Warrant Agent for countersignature, and the
Warrant Agent shall thereupon countersign and deliver such Warrant Certificates
upon the order and at the written direction of the Company signed by its Chief
Executive Officer or other duly authorized executive officer to the purchasers
thereof on the date of issuance. The Warrant Agent is hereby authorized to
countersign and deliver Warrant Certificates as required by this Section 2.3 or
by Section 3.3, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, Chief Executive Officer or other duly authorized
executive director of the Company either manually or by facsimile signature
printed thereon. The Warrant Certificates shall be countersigned by manual or
facsimile signature of the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any officer or director of the Company whose
signature shall have been placed upon any of the Warrant Certificates shall
cease to be such officer or director of the Company before countersignature by
the Warrant Agent and the issuance and delivery thereof, such Warrant
Certificates may nevertheless be countersigned by the Warrant Agent and issued
and delivered with the same force and effect as though such person had not
ceased to be such officer or director of the Company.
<PAGE>
10
Section 2.4. Certificated Warrants. Beneficial owners of interests
in a Global Warrant may receive Certificated Warrants (which, except as set
forth in Section 8.3(e) shall bear the Private Placement Legend) in accordance
with the procedures of the Warrant Agent and the Depositary. In connection with
the execution and delivery of such Certificated Warrants, the Warrant Agent
shall reflect on its books and record a decrease in the number of Warrants
represented by the relevant Global Warrant equal to the number of such
Certificated Warrants and the Company shall execute and the Warrant Agent shall
countersign and deliver to said beneficial owners one or more Certificated
Warrants in an equal aggregate number.
ARTICLE III
EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 3.1. Exercise; Price. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Class A
Shares indicated thereon at a purchase price (the "Exercise Price") of $.01 per
Class A Share, subject to adjustment as provided in Section 4.1 and Article V
hereof.
Section 3.2. Exercise; Restrictions on Exercise. At any time after
October 3, 1997 and on or before the Expiration Date, outstanding Warrants may
be exercised on any Business Day by the Holders thereof; provided, however, that
Warrants may not be exercised at any time during which the availability of the
Warrant Shelf Registration Statement (as defined in the Warrant Registration
Rights Agreement) is suspended pursuant to Section 4 of the Warrant Registration
Rights Agreement or such other time as prohibited by law. Any Warrants not
exercised by 5:00 p.m. (New York City time) on the Expiration Date shall expire
and all rights of the Holders of such Warrants shall terminate.
Section 3.3. Method of Exercise; Payment of Exercise Price. (a) In
order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof must surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office address set forth
in Section 11.5 hereof, with the Subscription Form set forth on the reverse of
the Warrant Certificate duly executed, together with payment in full of the
Exercise Price then in effect for each Class A Share issuable upon exercise of
the Warrants as to which a Warrant is exercised; such payment may be made by
wire transfer or by certified or official bank or bank cashier's check payable
to the order of the Company and shall be made to the Warrant Agent at its
corporate trust office address set forth in Section 11.5 hereof prior to the
close of business on the date the Warrant Certificate are surrendered to the
Warrant Agent for exercise. Notwithstanding the foregoing, the Exercise Price
may be paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. All payments received upon exercise of
<PAGE>
11
Warrants shall be delivered to the Company by the Warrant Agent as instructed in
writing by the Company. If less than all the Warrants represented by a Warrant
Certificate are exercised, such Warrant Certificate shall be surrendered and a
new Warrant Certificate of the same tenor and for the number of Warrants which
were not exercised shall be executed by the Company and delivered to the Warrant
Agent and the Warrant Agent shall countersign the new Warrant Certificate,
registered in such name or names as may be directed in writing by the Holder,
and shall deliver the new Warrant Certificate to the Person or Persons entitled
to receive the same. Upon the exercise of any Warrants following the surrender
of a Warrant Certificate in conformity with the foregoing provisions, the
Warrant Agent shall instruct the Company to transfer promptly to the Holder or,
upon the written order of the Holder of such Warrant Certificate, appropriate
evidence of ownership of any Class A Shares to which it is entitled, registered
or otherwise placed in such name or names as may be directed in writing by the
Holder, and to deliver such evidence of ownership to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 4.5 hereof; provided that the Holder
of such Warrant shall be responsible for the payment of any transfer taxes
required as the result of any change in ownership of such Warrants or the
issuance of such Class A Shares other than to the Holder of such Warrants. Upon
the exercise of a Warrant or Warrants, the Warrant Agent is hereby authorized
and directed to requisition from any transfer agent of the Class A Shares (and
all such transfer agents are hereby irrevocably authorized to comply with all
such requests) certificates (bearing the legend set forth in Section 11.11
hereof, if applicable, unless a Registration Statement relating to such Class A
Shares shall then be in effect or the Company and the Holder exercising such
Warrant or Warrants otherwise agree) for the necessary number of Class A Shares
to which said Holder may be entitled. The Company shall enter, or shall cause
any transfer agent of the Class A Shares to enter, the name of the Person
entitled to receive the Class A Shares upon exercise of the Warrants into the
Company's register of shareholders within 14 calendar days of such exercise. A
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of the surrender for exercise, as provided above, of the
Warrant Certificate representing such Warrant and, for all purposes under this
Agreement, the Person entitled to receive any Class A Shares deliverable upon
such exercise shall, as between such Person and the Company, be deemed to be the
Holder of such Class A Shares of record as of the close of business on such date
and shall be entitled to receive, and the Warrant Agent shall deliver to such
Person, any Class A Shares to which such Person would have been entitled had
such Person been the registered holder on such date.
(b) In addition to the requirements of paragraph (a) above, in
connection with any exercise of Warrants represented by Offshore Certificated
Warrants or the Regulation S Global Warrants, the Holder thereof shall be
required to provide to the Warrant Agent (i) (x) written certification
substantially in the form of Exhibit B hereto that it is a Non-U.S. Person and
the Warrant is not being exercised on behalf of a U.S. person within the meaning
of Rule 902 of Regulation S or (y) a written opinion of counsel reasonably
satisfactory to the Company and its counsel to the effect that the Warrant and
the Class A Shares issuable upon exercise
<PAGE>
12
thereof have been registered under the Securities Act or are exempt from
registration thereunder and (ii) if an opinion is not being furnished, written
certification that the Holder exercising the Warrant is located outside the
United States at the time of the exercise thereof.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number of Class
A Shares issuable upon exercise of each Warrant shall be subject to adjustment
from time to time as follows:
(a) Divisions: Consolidations: Reclassifications. In case the
Company shall, on or before the Expiration Date, (i) issue any Class A Shares in
payment of a dividend or other distribution with respect to its Class A Shares,
(ii) subdivide its issued and outstanding Class A Shares, (iii) consolidate its
issued and outstanding Class A Shares into a smaller number of shares, or (iv)
reclassify or convert the Class A Shares (other than a reclassification in
connection with a merger, consolidation or other business combination which will
be governed by Section 4.1(j)), then the number of Class A Shares purchasable
upon exercise of each Warrant immediately prior to the record date for such
issue or distribution or the effective date of such subdivision, consolidation
or reclassification shall be adjusted so that the Holder of each Warrant shall
thereafter be entitled to receive the kind and number of Class A Shares which
such Holder would have been entitled to receive after the happening of any of
the events described above had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this Section 4.1(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) Rights; Options; Warrants. In case the Company shall issue
rights, options, warrants or convertible or exchangeable securities (other than
a convertible or exchangeable security subject to Section 4.1(a)) to all holders
of its Class A Shares, entitling them to subscribe for or purchase Class A
Shares at a price per share which is lower (at the record date for such
issuance) than the then Current Market Value per Class A Share, then the Company
shall ensure that at the same time, the same or a like offer or invitation is
made to the Holders of the Warrants as if their Warrants had been exercised on
the day immediately preceding the record date of such offer or invitation on the
terms (subject to any adjustment pursuant to Section 4.1(a) for a prior event)
on which such Warrants could have been exercised on such date; provided that if
the Board so resolves, the Company shall not be required to ensure that the same
offer or invitation is made to the Holders of the Warrants, but the number of
Class A Shares thereafter purchasable upon the exercise of each Warrant shall
instead be adjusted and shall be determined by multiplying the number of Class A
Shares theretofore purchasable upon exercise of each Warrant by a fraction, the
numerator of which shall be the
<PAGE>
13
sum of (i) the number of Class A Shares outstanding immediately prior to the
issuance of such rights, options, warrants or convertible or exchangeable
securities plus (ii) the number of additional Class A Shares offered for
subscription or purchase, and the denominator of which shall be the sum of (x)
the number of Class A Shares outstanding immediately prior to the issuance of
such rights, options, warrants or convertible or exchangeable securities plus
(y) the number of shares which the aggregate offering price of the total number
of such rights, options, warrants or convertible or exchangeable securities so
offered would purchase at the then Current Market Value per Class A Share.
Except as otherwise provided above, such adjustment shall be made whenever such
rights, options, warrants or convertible or exchangeable securities are issued,
and shall become effective retroactively immediately after the record date for
the determination of shareholders entitled to receive such rights, options,
warrants or convertible or exchangeable securities.
(c) Issuance of Class A Shares at Lower Values. In case the Company
shall sell and issue any Class A Share or Right (as defined below) (excluding
(i) any Right issued in any of the transactions described in Section 4.1(a) or
(b) above, (ii) any Class A Share issued pursuant to (x) any Right outstanding
on the date of this Agreement and (y) a Right, if on the date such Right was
issued, the exercise, conversion exchange price per Class A Share with respect
thereto was at least equal to the then Current Market Value per Class A Share
and (iii) any Class A Share or Right issued as consideration when any
corporation or business is acquired, merged into or becomes part of the Company
or a subsidiary of the Company in an arm's-length transaction between the
Company and a Person other than an Affiliate of the Company) at a price per
Class A Share (determined in the case of any such Right, by dividing (x) the
total amount receivable by the Company in consideration of the sale and issuance
of such Right, plus the total consideration payable to the Company upon
exercise, conversion or exchange thereof, by (y) the total number of Class A
Shares covered by such Right) that is lower than the Current Market Value per
Class A Share in effect immediately prior to such sale or issuance, then the
number of Class A Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of Class A Shares
theretofore purchasable upon exercise of such Warrant by a fraction, the
numerator of which shall be the number of Class A Shares outstanding immediately
after such sale or issuance and the denominator of which shall be the number of
Class A Shares outstanding immediately prior to such sale or issuance plus the
number of Class A Shares which the aggregate consideration received (determined
as provided below) for such sale or issuance would purchase at such Current
Market Value per Class A Share. For purposes of this Section 4.1(c), the Class A
Shares which the holder of any such Right shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such Right, plus
the consideration or premiums stated in such Right to be paid for the Class A
Shares covered thereby. In case the Company shall sell and issue any Right
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per Class A Share" and the "consideration
received by the Company" for
<PAGE>
14
purposes of the first sentence of this Section 4.1(c), the Board shall
determine, in good faith, the fair value of the Right then being sold as part of
such unit. For purposes of this paragraph, a "Right" shall mean any right,
option, warrant or convertible or exchangeable security containing the Right to
subscribe for or acquire one or more Class A Shares, excluding the Warrants.
This Section 4.1(c) shall not apply to: (i) the exercise of Warrants, or the
conversion or exchange of other securities convertible or exchangeable for Class
A Shares; or (ii) Class A Shares issued upon the exercise of Rights or warrants
issued to all holders of Class A Shares.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible Securities. In case the Company shall make a distribution to all
holders of its Class A Shares of evidences of its indebtedness, or assets, or
other distributions (excluding any issuance of Class A Shares referred to in
Section 4.1(a) above and excluding distributions in connection with the
dissolution, liquidation or winding-up of the Company which shall be governed by
Section 4.1(j) and distributions of securities referred to in Section 4.1(a),
Section 4.1(b) or Section 4.1(c)), then, in each case, the number of Class A
Shares purchasable after such record date upon the exercise of each Warrant
shall be determined by multiplying the number of Class A Shares purchasable upon
the exercise of such Warrant immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Value per Class A
Share immediately prior to the record date for such distribution and the
denominator of which shall be the Current Market Value per Class A Share
immediately prior to the record date for such distribution less the then fair
value (as determined in good faith by the Board) of the portion of the assets,
evidence of indebtedness, cash dividends or distributions or securities so
distributed attributable to one Class A Share. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
(e) Expiration of Rights, Options and Conversion Privileges. Upon
the expiration of any rights, options, warrants or conversion or exchange
privileges that have previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the Exercise Price and the number of
Class A Shares issuable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter, upon any future exercise, be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
Class A Shares so issued were the Class A Shares, if any, actually issued or
sold upon the exercise of such rights, options, warrants or conversion or
exchange rights and (ii) such Class A Shares, if any, were issued or sold for
the consideration actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for issuance, sale or
grant of all such rights, options, warrants or conversion or exchange rights
whether or not exercised.
(f) Current Market Value. For the purposes of any computation under
this Article IV, the "Current Market Value" per Class A Share or of any other
security (herein collectively referred to as a "security") at any date herein
specified shall be:
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15
(i) if the security is not registered under the Exchange Act, the
value of the security (1) most recently determined as of a date within the
six months preceding such date by an Independent Financial Expert selected
by the Company in accordance with the criteria for such valuation set out
in Section 4.1(k), or (2) if no such determination shall have been made
within such six-month period or if the Company so chooses, determined as
of such a date by an Independent Financial Expert selected by the Company
in accordance with the criteria for such valuation set out in Section
4.1(k), or
(ii) if the security is registered under the Exchange Act, the
average of the daily market prices of the security for the 20 consecutive
trading days immediately preceding such date or, if the security has been
registered under the Exchange Act for less than 20 consecutive trading
days before such date, then the average of the daily market prices for all
of the trading days before such date for which daily market prices are
available. The market price for each such trading day shall be: (A) in the
case of a security listed or admitted to trading on any national
securities exchange, the closing sales price, regular way, on such day, or
if no sale takes place on such day, the average of the closing bid and
asked prices on such day on the principal national securities exchange on
which such security is listed or admitted, as determined by the Board, in
good faith, (B) in the case of a security not then listed or admitted to
trading on any national securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable
quotation source designated by the Company, (C) in the case of a security
not then listed or admitted to trading on any national securities exchange
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation service, or a newspaper of
general circulation in the Borough of Manhattan, City and State of New
York customarily published on each Business Day, designated by the
Company, or, if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most
recent day (not more than 30 days prior to the date in question) for which
prices have been so reported and (D) if there are no bid and asked prices
reported during the 30 days prior to the date in question, the Current
Market Value of the security shall be determined as if the security were
not registered under the Exchange Act.
(g) Consideration Received. For purposes of any computation
respecting consideration received pursuant to this Section 4.1, the following
shall apply:
(i) in the case of the issuance of Class A Shares for cash, the
consideration shall be the amount of such cash, provided that in no case
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
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16
(ii) in the case of the issuance of Class A Shares for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board (irrespective of the accounting
treatment thereof), whose determination shall be conclusive and described
in reasonable detail in a board resolution which shall be provided as soon
as practicable thereafter to the Holders; and
(iii) in the case of the issuance of rights, options, warrants or
securities convertible into or exchangeable for Class A Shares, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such securities
plus the additional minimum consideration, if any, to be received by the
Company upon the exercise, conversion or exchange thereof (the
consideration in each case to be determined in the same manner as provided
in clauses (i) and (ii) of this Section 4.1(g)).
(h) De Minimis Adjustments. No adjustment in the number of Class A
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1 %) in the number of
Class A Shares purchasable upon the exercise of each Warrant; provided, however,
that any adjustments which by reason of this Section 4.1(h) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-thousandth of a
share.
(i) Adjustment of Exercise Price. Whenever the number of Class A
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Class A Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $.O1) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction the numerator of which shall be the number of
Class A Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment and the denominator of which shall be the number of Class A
Shares so purchasable immediately thereafter. Following any adjustment to the
Exercise Price pursuant to this Article IV, the amount payable, when adjusted,
shall never be less than the par value per Class A Share at the time of such
adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of it
may receive shares of two or more classes in the capital of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
such classes of shares in a manner that the Board deems fair and equitable to
the Holders. After such allocation, the exercise privilege and the Exercise
Price of each class of shares shall thereafter be subject to adjustment on terms
comparable to those applicable to Class A Shares in this Article IV.
<PAGE>
17
Such adjustment shall be made successively whenever any event listed
above shall occur.
(j) Consolidation. Merger. Etc. (i) Subject to the provisions of
Subsection (ii) below of this Section 4.1(j), in case of the consolidation
of the Company with, or merger of the Company with or into, or of the sale
of all or substantially all of the properties and assets of the Company
to, any Person, and in connection therewith consideration is payable to
holders of Class A Shares (or other securities or property purchasable
upon exercise of Warrants) in exchange therefor, the Warrants shall remain
subject to the terms and conditions set forth in this Agreement and each
Warrant shall, after such consolidation, merger or sale, entitle the
Holder to receive upon exercise the number of shares in the capital or
other securities or property (including cash) of or from the Person
resulting from such consolidation or surviving such merger or to which
such sale shall be made or of the parent of such Person, as the case may
be, that would have been distributable or payable on account of the Class
A Shares if such Holder's Warrants had been exercised immediately prior to
such merger, consolidation or sale (or, if applicable, the record date
therefor); and in any such case the provisions of this Agreement with
respect to the rights and interests thereafter of the Holders of Warrants
shall be appropriately adjusted by the Board in good faith so as to be
applicable, as nearly as may reasonably be, to any shares, other
securities or any property thereafter deliverable on the exercise of the
Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and
assets to, another Person (other than an Affiliate of the Company) and
consideration is payable to holders of Class A Shares in exchange for
their Class A Shares in connection with such merger, consolidation or sale
which consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the Holders of Warrants
shall be entitled to receive distributions on the date of such event pari
passu with holders of Class A Shares as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and
such Holder's Warrants shall expire. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring Person and, in
the event of any dissolution, liquidation or winding up of the Company,
the Company shall deposit promptly with the Warrant Agent the funds, if
any, necessary to pay the Holders of the Warrants. After receipt of such
deposit from such Person or the Company and after receipt of surrendered
Warrant Certificates, the Warrant Agent shall make payment by delivering a
check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is appropriate) to such
Person or Persons as it may be directed in writing by the Holder
surrendering such Warrants.
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18
(k) If required pursuant to Section 4.1(f)(i), the Current Market
Value shall be deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which shall be
selected by the Board in its sole discretion, and retained on customary terms
and conditions, using one or more valuation methods that the Independent
Financial Expert, in its best professional judgment, determines to be most
appropriate. The Company shall cause the Independent Financial Expert to deliver
to the Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert, a value report (the "Value
Report") stating the value of the Class A Shares and other securities or
property of the Company, if any, being valued as of the Valuation Date and
containing a brief statement as to the nature and scope of the examination or
investigation upon which the determination of value was made. The Warrant Agent
shall have no duty with respect to the Value Report of any Independent Financial
Expert, except to keep it on file and available for inspection by the Holders.
The determination as to Current Market Value in accordance with the provisions
of this Section 4.1(k) shall be conclusive on all Persons. The Independent
Financial Expert shall consult with management of the Company in order to allow
management to comment on the proposed value prior to delivery to the Company of
any Value Report.
(l) [Intentionally Omitted]
(m) When No Adjustment Required. No adjustment need be made for:
(i) a transaction referred to in this Section 4.1 if all Holders
agree to participate in any such transaction on a basis and
with notice that the Board determines to be fair and
appropriate in light of the basis and notice on which holders
of Class A Shares participate in such transaction;
(ii) grants or exercises of Rights or issuances of equity
securities to employees of the Company and its subsidiaries
(to the extent that all such securities do not have an
aggregate value in excess of 15% of the equity value of the
Company, as determined in good faith by the Board);
(iii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into prior to the date of
the issuance of the Warrants;
(iv) rights to purchase Class A Shares pursuant to a Company plan
for reinvestment of dividends or interest; and
(v) a change in the par value of the Class A Shares (including a
change from par value to no par value or vice versa).
<PAGE>
19
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
Section 4.2. Notice of Adjustment. Whenever the number of Class A
Shares purchasable upon the exercise of each Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall cause, so far as it is able, the
Warrant Agent promptly to mail, at the expense of the Company, to each Holder
notice of such adjustment or adjustments and shall deliver to the Warrant Agent
a certificate of the Auditors setting forth the number of Class A Shares
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not at
any time be under any duty or responsibility to any Holders to determine whether
any facts exist which may require any adjustment of the Exercise Price or the
number of Class A Shares purchasable on exercise of the Warrants or any of the
other adjustments set forth in Section 4.1, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment, or the validity or value (or the kind or amount) of
any Class A Shares which may be purchasable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Class A Shares or share
certificates upon the exercise of any Warrant.
Section 4.3. Statement on Warrants. Irrespective of any adjustment
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger. Etc. In case at any
time after the date hereof and prior to 5:00 p.m. (New York City time) on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Class A Shares receive no consideration in respect of their shares)
or (ii) any other transaction contemplated by Section 4.1(j)(ii) above then, in
any one or more of such cases, the Company shall cause to be mailed to the
Warrant Agent and shall cause the Warrant Agent to mail to at Company's expense
each Holder of a Warrant, at the earliest practicable time (and, in any event,
not less than 20 calendar days before any date set for definitive action),
notice of the date on which such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also set forth such facts as shall
<PAGE>
20
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the kind and amount of the
Class A Shares and other securities, money and other property deliverable upon
exercise of the Warrants. Such notice shall also specify the date as of which
the holders of record of the Class A Shares or other securities or property
issuable upon exercise of the Warrants shall be entitled to exchange their
shares for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up, as the case may be.
Section 4.5. Fractional Interests. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full Class A Shares which shall be issuable upon such exercise thereof shall
be computed on the basis of the aggregate number of Class A Shares purchasable
on exercise of the Warrants so presented. The Company shall not be required to
issue fractional Class A Shares upon the exercise of Warrants. If any fraction
of a Class A Share would, except for the provisions of this Section 4.5, be
issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall pay an amount in cash calculated by it to be equal to the then
Current Market Value per Class A Share multiplied by such fraction computed to
the nearest whole cent.
Section 4.6. When Issuance or Payment May Be Deferred. In any case
in which this Article IV shall require that an adjustment in the Exercise Price
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the holder of
any Warrant exercised after such record date the Class A Shares and other shares
in the capital of the Company, if any, issuable upon such exercise over and
above the Class A Shares and other shares in the capital of the Company, if any,
issuable upon such exercise on the basis of the Exercise Price and (ii) paying
such holder any amount in cash in lieu of a fractional share; provided, however,
that the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional Class A
Shares, other shares and cash upon the occurrence of the event requiring such
adjustment.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any time,
or from time to time, to decrease the Exercise Price of the Warrants and/or
increase the number of shares issuable upon the exercise of the Warrants.
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21
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance of
any new Warrant Certificate under this Article VI, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and other expenses (including the fees and
expenses of the Warrant Agent) in connection therewith. Every new Warrant
Certificate executed and delivered pursuant to this Article VI in lieu of any
lost, stolen or destroyed Warrant Certificate shall constitute a contractual
obligation of the Company whether or not the allegedly lost, stolen or destroyed
Warrant Certificates shall be at any time enforceable by anyone and shall be
entitled to the benefits of this Agreement equally and proportionately with any
and all other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Article VI are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF CLASS A SHARES
The Company shall at all times maintain authorized for allotment
upon the exercise of Warrants such number of its authorized but unissued Class A
Shares deliverable upon exercise of Warrants as will be sufficient to permit the
exercise in full of all outstanding Warrants and will cause appropriate evidence
of ownership of such Class A Shares to be delivered to the Warrant Agent upon
its request for delivery thereof upon the exercise of Warrants. The Company
covenants that all Class A Shares of the Company that may be issued upon the
exercise of the Warrants will, upon issuance, be duly authorized, validly
issued, fully paid and not subject to any calls for funds and free from
pre-emptive rights and all taxes, liens, charges and security interests with
respect to the issue thereof.
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22
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The Warrant Certificates shall
be issued in registered form only. The Warrant Agent shall keep at its office a
register for the registration of Warrant Certificates and transfers or exchanges
of Warrant Certificates as herein provided and other appropriate data as
determined by the Warrant Agent. The Company shall, upon reasonable notice to
the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon any registration of
transfer or exchange of Warrant Certificates shall be the valid obligations of
the Company, evidencing the same obligations, and entitled to the same benefits
under this Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance of
the Units. Prior to the Separation Date, the Warrants may not be transferred or
exchanged separately from, but may be transferred or exchanged only together
with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by written application to
the Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Furthermore,
any holder of a Global Warrant shall, by acceptance of such Global Warrant,
agree that transfers of beneficial interests in such Global Warrant may be
effected only through a book-entry system maintained by the holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a
book-entry. When Warrant Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange them for an equal amount of
Warrants of other authorized denominations, the Warrant Agent shall register
such transfer or make such exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates at the Warrant Agent's request. No
service charge shall be made for any registration of transfer or exchange of
Warrants, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer of Warrants.
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23
Section 8.2. Book-Entry Provisions for the Global Warrants. (a) The
Global Warrants initially shall (i) be registered in the name of the Depositary
for such Global Warrants or the nominee of such Depositary, (ii) be delivered to
the Warrant Agent as custodian for such Depositary and (iii) bear legends as set
forth in Section 2.2 hereof. Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Agreement with respect to the
Global Warrants held on their behalf by the Depositary or the Warrant Agent as
its custodian, and the Depositary may be treated by the Company, the Warrant
Agent and any agent of the Company or the Warrant Agent as the absolute owner of
such Restricted Global Warrant, Regulation S Global Warrant or IAI Global
Warrant, as the case may be, for all purposes whatsoever. Nothing herein shall
prevent the Company, the Warrant Agent or any agent of the Company or the
Warrant Agent, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Warrants.
(b) Transfers of a Global Warrant shall be limited to transfers of
such Global Warrant in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in the Global
Warrants may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 8.3 hereof. U.S. Certificated Warrants
and Offshore Certificated Warrants shall be transferred to all beneficial owners
in exchange for their beneficial interests in the Restricted Global Warrant, the
Regulation S Global Warrant, or the IAI Global Warrant, as the case may be, if
the Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for any such Global Warrant and a successor depositary is not
appointed by the Company within 90 days of such notice.
(c) Any beneficial interest in one of the Global Warrants that is
transferred to a person who takes delivery in the form of an interest in any
other Global Warrant will, upon transfer, cease to be an interest in such Global
Warrant and become an interest in such other Global Warrant and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Warrant for
as long as it remains such an interest.
(d) In connection with the transfer of the entire Restricted Global
Warrant, Regulation S Global Warrant or IAI Global Warrant to the beneficial
owners thereof pursuant to paragraph (b) of this Section 8.2, the Restricted
Global Warrant, the Regulation S Global Warrant or IAI Global Warrant, as the
case may be, shall be surrendered to the Warrant Agent for cancellation, and the
Company shall execute, and the Warrant Agent shall countersign and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the Restricted Global Warrant, the Regulation S Global
Warrant or IAI Global Warrant, as the case may be, U.S. Certificated Warrants or
Offshore Certificated Warrants, as the case may be, of authorized denominations
representing, in the aggregate, the number of
<PAGE>
24
Warrants theretofore represented by the Restricted Global Warrant, the
Regulation S Global Warrant or IAI Global Warrant, as the case may be.
(e) Any Certificated Warrant delivered in exchange for an interest
in a Global Warrant pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 8.3 hereof, bear the legend
regarding transfer restrictions set forth in Section 2.2 hereof.
(f) The registered holder of a Global Warrant may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Warrants.
Section 8.3. Special Transfer Provisions. The following provisions
shall apply:
(a) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of Warrants to a QIB
(excluding non-U.S. Persons):
(i) If the Warrants to be transferred will be represented by
Certificated Warrants, the Warrant Agent shall register the duly stamped
transfer if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Warrant Certificate stating,
or has otherwise advised the Company and the Warrant Agent in writing,
that the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the form
of Warrant Certificate stating, or has otherwise advised the Company and
the Warrant Agent in writing, that it is purchasing the Warrants for its
own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
(ii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in the Regulation S Global Warrant or the IAI Global
Warrant, upon receipt by the Warrant Agent of the documents referred to in
clause (i) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Warrant Agent shall
reflect on its books and records the date and a decrease in the number of
Warrants represented by the Regulation S Global Warrant or the IAI Global
Warrant, as the case may be, and (B) if the proposed transferee is an
Agent Member that is a QIB, and the Warrants to be transferred are
represented by Certificated Warrants or an interest
<PAGE>
25
in the Regulation S Global Warrant or the IAI Global Warrant, upon receipt
by the Warrant Agent of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants represented by
the interest in the Restricted Global Warrant in an amount equal to the
number of Warrants represented by the Certificated Warrants or the
interest in the Regulation S Global Warrant, or the IAI Global Warrant, as
the case may be, to be transferred, and the Warrant Agent shall cancel the
Certificated Warrant or decrease the number of Warrants represented by the
Regulation S Global Warrant or the IAI Global Warrant, as the case may be.
(b) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to the registration of any proposed transfer
of Warrants to a Non-U.S. Person:
(i) The Warrant Agent shall register any proposed duly stamped
transfer of Certificated Warrants to a Non-U.S. Person only upon receipt
of a certificate substantially in the form of Exhibit B from the proposed
transferor.
(ii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant or the IAI Global
Warrant, upon receipt by the Warrant Agent of (x) the documents required
by paragraph (i) and (y) instructions in accordance with the Depositary's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on its
books and records the date and a decrease in the number of Warrants
represented by the Restricted Global Warrant or the IAI Global Warrant, as
the case may be, to be transferred, and (B) if the proposed transferee is
an Agent Member and the Warrants to be transferred are represented by
Certificated Warrants or an interest in the Restricted Global Warrant or
the IAI Global Warrant, upon receipt by the Warrant Agent of the documents
referred to in clause (i) above and instructions given in accordance with
the Depositary's and the Warrant Agent's procedures, the Warrant Agent
shall reflect on its books and records the date and an increase in the
number of Warrants represented by the Regulation S Global Warrant in an
amount equal to the number of Warrants represented by the Certificated
Warrants or the Restricted Global Warrant or the IAI Global Warrant, as
the case may be, to be transferred, and the Warrant Agent shall cancel the
Certificated Warrant, if any, so transferred or decrease the number of
Warrants represented by the Restricted Global Warrant or the IAI Global
Warrant, as the case may be.
(c) Transfers to Any Other Person. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants to
any Person not specified in
<PAGE>
26
paragraphs (a) and (b) above (including any Institutional Accredited Investor
which is not a QIB).
(i) The Warrant Agent shall register the duly stamped transfer of
any Certificated Warrant to any such Person, whether or not such Warrant
Certificate bears the Private Placement Legend, if (x) the transferor has
delivered to the Warrant Agent, the Company and, if applicable, the
relevant Placement Agent a certificate substantially in the form of
Exhibit C-1 hereto and, if required by paragraph (d) thereof, an Opinion
of Counsel to the effect set forth therein and (y) the proposed transferee
has delivered to the Warrant Agent and the Company a certificate
substantially in the form of Exhibit C-2 hereto if such transferee is an
Institutional Accredited Investor that is not a QIB. If the transferor is
an Institutional Accredited Investor that is not a QIB, then such
certificate shall also be delivered to the Placement Agent through which
such transfer is being made.
(ii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant or the Regulation S
Global Warrant (after October 3, 1997), upon receipt by the Warrant Agent,
the Company and the Placement Agents of (x) the documents required by
paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Warrant Agent shall
reflect on its books and records the date and a decrease in the number of
Warrants represented by the Restricted Global Warrant or the Regulation S
Global Warrant, as the case may be, to be transferred, and (B) if the
proposed transferee is an Agent Member and the Warrants to be transferred
are represented by Certificated Warrants or an interest in the Restricted
Global Warrant or the Regulation S Global Warrant, upon receipt by the
Warrant Agent of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants represented by
the IAI Global Warrant in an amount equal to the number of Warrants
represented by Certificated Warrants or the Restricted Global Warrant or
the Regulation S Global Warrant, as the case may be, to be transferred and
the Warrant Agent shall cancel the Certificated Warrant, if any, so
transferred or decrease the number of Warrants represented by the
Restricted Global Warrant or the Regulation S Global Warrant, as the case
may be.
(d) Each transfer of Warrants by an Institutional Accredited
Investor that is not a QIB must include a representation that such transfer is
hereby effected through the Placement Agent through which such transferor
acquired the Warrants being transferred.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Warrant Agent shall deliver Warrant Certificates that do not bear the
Private Placement Legend. Upon the transfer,
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27
exchange or replacement of Warrant Certificates bearing the Private Placement
Legend, the Warrant Agent shall deliver only Warrant Certificates that bear the
Private Placement Legend unless there is delivered to the Warrant Agent an
opinion of counsel reasonably satisfactory to the Company and its Counsel and
the Warrant Agent to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(f) General. (i) By its acceptance of any Warrants represented by a
Warrant Certificate bearing the Private Placement Legend, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the Private Placement Legend and agrees that it will
transfer such Warrants only as provided in this Agreement. The Warrant Agent
shall not register a transfer of any Warrants unless such transfer complies with
the restrictions on transfer of such Warrants set forth in this Agreement. In
connection with any transfer of Warrants, each Holder agrees by its acceptance
of Warrants to furnish the Warrant Agent or the Company such certifications,
legal opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act;
provided that the Warrant Agent shall not be required to determine (but may rely
on a determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters, notices
and other written communications received pursuant to Section 8.2 hereof or this
Section 8.3. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Agent.
Section 8.4. Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Article
VIII in case of an exchange, Article III hereof in case of the exercise of less
than all the Warrants represented thereby or Article VI in case of a mutilated
Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Warrant Agent shall deliver to the Company from time to time or
otherwise dispose of such cancelled Warrant Certificates as the Company may
direct in writing.
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28
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder. The Company
and the Warrant Agent may deem and treat the registered Holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof. Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote or to consent to any
action of the shareholders, to receive dividends or other distributions, to
exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of action with respect to
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's right
to exercise such Warrants in the manner provided in the Warrant Certificate
representing such Warrants and in this Agreement.
ARTICLE X
THE WARRANT AGENT
Section 10.1. Duties and Liabilities. The Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth, by all of which the Company and
the Holders of Warrants, by their acceptance thereof, shall be bound. The
Warrant Agent shall not, by countersigning Warrant Certificates or by any other
act hereunder, be deemed to make any representations as to the validity or
authorization of the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any Class A Shares issued upon exercise of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of Class A Shares deliverable upon exercise of any
Warrant or the correctness of the representations of the Company made in the
certificates that the Warrant Agent receives. The
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29
Warrant Agent shall not be accountable for the use or application by the Company
of the proceeds of the exercise of any Warrant. The Warrant Agent shall not have
any duty to calculate or determine any adjustments with respect to either the
Exercise Price or the kind and amount of Class A Shares receivable by Holders
upon the exercise of Warrants required from time to time and the Warrant Agent
shall have no duty or responsibility in determining the accuracy or correctness
of such calculation. The Warrant Agent shall not be (a) liable for any recital
or statement of fact contained herein or in the Warrant Certificates or for any
action taken, suffered or omitted by it in good faith in the belief that any
Warrant Certificate or any other documents or any signatures are genuine or
properly authorized, (b) responsible for any failure on the part of the Company
to comply with any of its covenants and obligations contained in this Agreement
or in the Warrant Certificates or (c) liable for any act or omission in
connection with this Agreement except for its own gross negligence, bad faith or
willful misconduct. The Warrant Agent is hereby authorized to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, Chief Executive Officer or other executive director of
the Company and to apply to any such officer for instructions (which
instructions will be promptly given in writing when requested) and the Warrant
Agent shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with the instructions of any such officer; however, in
its discretion, the Warrant Agent may, in lieu thereof, accept other evidence of
such or may require such further or additional evidence as it may deem
reasonable. The Warrant Agent shall not be liable for any action taken with
respect to any matter in the event it requests instructions from the Company as
to that matter and does not receive such instructions within a reasonable period
of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees; provided due care has in the appointment of
any such attorney, agent or employee. The Warrant Agent shall not be under any
obligation or duty to institute, appear in or defend any action, suit or legal
proceeding in respect hereof unless first indemnified to its reasonable
satisfaction. The Warrant Agent shall promptly notify the Company in writing of
any claim made or action, suit or proceeding instituted against it arising out
of or in connection with this Agreement.
The Company will perform, execute, acknowledge and deliver or cause
to be delivered all such further acts, instruments and assurances as are
consistent with this Agreement and as may reasonably be required by the Warrant
Agent in order to enable it to carry out or perform its duties under this
Agreement.
The Warrant Agent shall act solely as agent of the Company
hereunder. The Warrant Agent shall not be liable except for the failure to
perform such duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement
<PAGE>
30
against the Warrant Agent, whose duties and obligations shall be determined
solely by the express provisions hereof.
Section 10.2. Right to Consult Counsel. The Warrant Agent may at any
time consult with legal counsel (who may be legal counsel for the Company), and
the opinion or advice of such counsel shall be full and complete authorization
and protection to the Warrant Agent and the Warrant Agent shall incur no
liability or responsibility to the Company or to any Holder for any action
taken, suffered or omitted by it in good faith in accordance with the opinion or
advice of such counsel.
Section 10.3. Compensation: Indemnification. The Company agrees
promptly to pay the Warrant Agent from time to time and in any case within 30
days of receipt of an invoice, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
upon its request for reasonable fees or expenses and reasonable counsel fees and
expenses incurred in connection with the execution and administration of this
Agreement, and further agrees to indemnify the Warrant Agent and save it
harmless against any losses, liabilities or expenses arising out of or in
connection with the acceptance and administration of this Agreement, including
the reasonable costs and expenses of investigating or defending any claim of
such liability, except that the Company shall have no liability hereunder to the
extent that any such loss, liability or expense results from the Warrant Agent's
own gross negligence, bad faith or willful misconduct. The obligations of the
Company under this Section 10.3 shall survive the exercise and the expiration of
the Warrants, the termination of this Agreement and the resignation or removal
of the Warrant Agent in respect of services or expenses incurred in connection
with the Warrants or this Agreement.
Section 10.4. No Restrictions on Actions. Nothing in this Agreement
shall be deemed to prevent the Warrant Agent and any shareholder, director,
officer or employee of the Warrant Agent from buying, selling or dealing in any
of the Warrants or other securities of the Company or becoming pecuniarily
interested in transactions in which the Company may be interested, or
contracting with or lending money to the Company or otherwise acting as fully
and freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
Section 10.5. Discharge or Removal: Replacement Warrant Agent. The
Warrant Agent may resign from its position as such and be discharged from all
further duties and liabilities hereunder (except liability arising as a result
of the Warrant Agent's own gross negligence, bad faith or willful misconduct),
after giving one month's prior written notice to the Company. The Company may at
any time remove the Warrant Agent upon one month's written notice specifying the
date when such discharge shall take effect, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall mail to each Holder of a
Warrant, at the Company's
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31
expense, a copy of said notice of resignation or notice of removal, as the case
may be. Upon such resignation or removal the Company shall appoint in writing a
new warrant agent. If the Company shall fail to make such appointment within a
period of 30 calendar days after it has been notified in writing of such
resignation by the resigning Warrant Agent or after such removal, then the
resigning Warrant Agent or the Holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. After 30
calendar days from receipt of, or giving, notice, as the case may be, and
pending appointment of a successor to the original Warrant Agent, either by the
Company or by such a court, the duties of the Warrant Agent shall be carried out
by the Company. Any new warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company doing business under the laws of
the United States or any state thereof in good standing and having a combined
capital and surplus of not less than $25,000,000. The combined capital and
surplus of any such new warrant agent shall be deemed to be the combined capital
and surplus as set forth in the most recent annual report of its condition
published by such warrant agent prior to its appointment, provided that such
reports are published at least annually pursuant to law or to the requirements
of a federal or state supervising or examining authority. After acceptance in
writing of such appointment by the new warrant agent, it shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; however, the original Warrant Agent shall in all events
deliver and transfer to the successor Warrant Agent all property (including,
without limitation, documents and recorded information), if any, at the time
held hereunder by the original Warrant Agent and if for any reason it shall be
necessary or expedient to execute and deliver any further assurance, conveyance,
act or deed, the same shall be done at the expense of the Company and shall be
legally and validly executed and delivered by the resigning or removed Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall file notice thereof with the resigning or removed Warrant Agent and shall
forthwith cause a copy of such notice to be mailed by the successor Warrant
Agent to each Holder of a Warrant. Failure to give any notice provided for in
this Section 10.5, however, or any defect therein, shall not affect the legality
or validity of the resignation of the Warrant Agent or the appointment of a new
warrant agent, as the case may be. No Warrant Agent hereunder shall be liable
for any acts or omissions of any successor Warrant Agent.
Section 10.6. Successor Warrant Agent. Any corporation into which
the Warrant Agent or any new warrant agent may be merged or converted, or any
corporation resulting from any consolidation to which the Warrant Agent or any
new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be a
successor Warrant Agent under this Agreement without any further act, provided
that such corporation would be eligible for appointment as successor to the
Warrant Agent under the provisions of Section 10.5 hereof. Any such successor
Warrant Agent shall promptly cause notice of its succession as Warrant Agent to
be mailed to each Holder of a Warrant.
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32
ARTICLE XI
MISCELLANEOUS
Section 11.1. Monies Deposited with the Warrant Agent. The Warrant
Agent shall not be required to pay interest on any monies deposited pursuant to
the provisions of this Agreement except such as it shall agree in writing with
the Company to pay thereon. Any monies, securities or other property which at
any time shall be deposited by the Company or on its behalf with the Warrant
Agent pursuant to this Agreement shall be and are hereby assigned, transferred
and set over to the Warrant Agent in trust for the purpose for which such
monies, securities or other property shall have been deposited; but such monies,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. Any monies, securities
or other property deposited with the Warrant Agent for payment or distribution
to the Holders that remains unclaimed for one year after the date the monies,
securities or other property was deposited with the Warrant Agent shall be
delivered to the Company upon its request therefor.
Section 11.2. Payment of Taxes. Subject to Article VI hereof, all
Class A Shares issuable upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of
England and Wales and the United States of America or any political subdivision
or taxing authority thereof or therein in respect of the issue or delivery
thereof upon exercise of Warrants (other than income taxes imposed on the
Holders). The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for Class A Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company shall
not be required to issue any share certificate or pay any cash until such tax or
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Section 11.3. No Merger. Consolidation or Sale of Assets of the
Company. Except as otherwise provided herein, the Company will not merge into or
consolidate with any other Person, or sell or otherwise transfer its property,
assets and business substantially as an entirety to a successor of the Company,
unless the Person resulting from such merger or consolidation, or such successor
of the Company, shall expressly assume, by supplemental agreement satisfactory
in form to the Warrant Agent and executed and delivered to the Warrant Agent,
the due and punctual performance and observance of each and every covenant and
condition of this Agreement or contained in the Warrants to be performed and
observed by the Company.
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33
Section 11.4. Reports to Holders. At all times from and after the
earlier of (i) the Separation Date and (ii) June 1, 1997, in either case,
whether or not the Company is then required to file reports with the Commission,
the Company shall file with the Commission all such reports and other
information it would be required to file with the Commission by Section 13(a) or
15(d) under the Exchange Act if it were subject thereto. The Company shall
supply the Warrant Agent and each Holder or shall supply to the Warrant Agent
for forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information. In addition, at all times prior to the earlier of
the Separation Date and June 1, 1997, the Company shall, at its cost, deliver to
each Holder quarterly and annual reports substantially equivalent to those which
would be required by the Exchange Act. In addition, at all times, upon the
request of any Holder or any prospective purchaser of the Warrants designated by
a Holder, the Company shall supply to such Holder or such prospective purchaser
the information required under Rule 144A under the Securities Act.
Section 11.5. Notices: Payment. (a) Except as otherwise provided in
Section 12.5(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
RSL Communications, Ltd.
Clarendon House
Church Street
Hamilton HM CX Bermuda
Attention: President
To the Warrant Agent:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Department
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
<PAGE>
34
(b) Payment of the Exercise Price should be made in accordance with
the provisions of this Agreement at the office of the Warrant Agent set forth
above.
(c) Any notice required to be given by the Company to the Holders
shall be made by mailing by registered mail, return receipt requested, to the
Holders at their last known addresses appearing on the register maintained by
the Warrant Agent. The Company hereby irrevocably authorizes the Warrant Agent,
in the name and at the expense of the Company, to mail any such notice upon
receipt thereof from the Company. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
Section 11.6. Agent for Service; Submission to Jurisdiction; Waiver
of Immunities; Governing Law. By the execution and delivery of this Agreement,
the Company (i) represents that it has designated and appointed RSL
Communications N. America, Inc. ("RSLNA") 767 Fifth Avenue, Suite 4300, New
York, N.Y. 10153, as its authorized agent upon which process may be served in
any suit, action or proceeding arising out of or relating to the Warrants or
this Agreement that may be instituted in any federal or state court in the State
of New York, Borough of Manhattan, or brought under federal or state securities
laws or brought by the Warrant Agent, and that RSLNA has accepted such
designation, (ii) submits to the non-exclusive jurisdiction of any such court in
any such suit, action or proceeding, and (iii) agrees that service of process
upon RSLNA and written notice of said service to the Company (mailed or
delivered to its President at its principal office as specified in Section
11.05) shall be deemed in every respect effective service of process upon it in
any such suit or proceeding. The Company further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
RSLNA in full force and effect so long as this Agreement shall be in full force
and effect or any of the Warrants shall be outstanding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the Warrants, to the extent permitted by law.
With respect to the Company, this Agreement shall be governed by the
laws of Bermuda and the Company hereby submits to the jurisdiction of the courts
of Bermuda. With respect to the Warrant Agent, this Agreement shall be governed
by the laws of New York and the Warrant Agent hereby submits to the jurisdiction
of the courts of New York.
Section 11.7. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the Holders from time to time of the
Warrants. Nothing in this Agreement is
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35
intended or shall be construed to confer upon any Person, other than the
Company, the Warrant Agent and the Holders of the Warrants, any right, remedy or
claim under or by reason of this Agreement or any part hereof.
Section 11.8. Counterparts. This Agreement may be executed manually
or by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together constitute one and the same instrument.
Section 11.9. Amendments. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; provided that in either case such changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders of Warrants. Upon the Warrant Agent's
request, the Company shall promptly provide an Officer's Certificate and Opinion
of Counsel which provide all conditions precedent to adoption of an amendment
that have been satisfied.
Section 11.10. Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 11.11. Class A Shares Legend. Unless and until the Class A
Shares issuable upon the exercise of the Warrants are registered under the
Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Class A Shares will bear a legend to the following effect:
THE CLASS A SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND ACCORDINGLY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
(B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THESE CLASS A SHARES FOR THE
ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THE CLASS A SHARES EVIDENCED
HEREBY IN AN OFFSHORE
<PAGE>
36
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR
(C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN
THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(d), IF APPLICABLE) UNDER THE SECURITIES ACT AS IN
EFFECT WITH RESPECT TO THE TRANSFER OF THE CLASS A SHARES EVIDENCED
HEREBY, RESELL OR OTHERWISE TRANSFER THE CLASS A SHARES EVIDENCED HEREBY
EXCEPT (A) TO RSL COMMUNICATIONS, LTD. OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRANSFER AGENT AND REGISTRAR A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE CLASS A SHARES EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT AND REGISTRAR)
AND, IF REQUESTED BY RSL COMMUNICATIONS, LTD., AN OPINION OF COUNSEL
ACCEPTABLE TO RSL COMMUNICATIONS, LTD. AND ITS COUNSEL THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH APPLICABLE STATE LAWS AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM ANY CLASS A SHARE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE CLASS A SHARES EVIDENCED HEREBY WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON
THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRANSFER AGENT AND REGISTRAR. EACH INSTITUTIONAL
ACCREDITED INVESTOR THAT IS NOT A QIB WILL BE REQUIRED TO EFFECT ANY
TRANSFER OF CLASS A SHARES (OTHER THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT) THROUGH ONE OF MORGAN STANLEY & CO. INCORPORATED,
BEAR, STEARNS & CO. INC. OR DILLON,
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37
READ & CO. INC. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE AGREEMENT BETWEEN RSL
COMMUNICATIONS, LTD. AND THE TRANSFER AGENT AND REGISTRAR CONTAINS A
PROVISION REQUIRING THE TRANSFER AGENT AND REGISTRAR TO REFUSE TO REGISTER
ANY TRANSFER OF THESE CLASS A SHARES IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
Section 11.12. Third Party Beneficiaries. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Warrant Agent, on the other hand, and each Holder shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations may
be applicable to such Holder.
Section 11.13. Termination. Except as otherwise specified herein,
this Agreement shall terminate at 5:00 p.m. (New York City time) on the tenth
anniversary of the Closing Date. Notwithstanding the foregoing, this Agreement
shall terminate on any earlier date as of which all Warrants have been
exercised.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed, as of the day and year first above written.
RSL COMMUNICATIONS, LTD.
By:__________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Warrant Agent
By:__________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed,
as of the day and year first above written.
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Warrant Agent
By: /s/ James D. Heaney
------------------------------------------
Name: James D. Heaney
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF WARRANT CERTIFICATE
RSL COMMUNICATIONS, LTD.
[CUSIP] [CINS] [ISIN] No. _____
No. ___
WARRANTS TO PURCHASE CLASS A SHARES
This certifies that ____________, or its registered assigns, is the
owner of the number of Warrants set forth above, each of which represents the
right to purchase, after [_______________], 1997, from RSL COMMUNICATIONS, LTD.,
a Bermuda corporation (the "Company"), Class A common shares, par value $.O1 per
share, of the Company (the "Class A Shares") at an exercise price (the "Exercise
Price") of $.O1 per Class A Share (subject to adjustment as provided in the
Warrant Agreement hereinafter referred to below), upon surrender hereof at the
office of The Chase Manhattan Bank, or to its successor, as the warrant agent
under the Warrant Agreement (any such warrant agent being herein called the
"Warrant Agent"), with the Subscription Form on the reverse hereof duly
executed, with signature guaranteed as therein specified and simultaneous
payment in full by wire transfer or by certified or official bank or bank
cashier's check payable to the order of the Company.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of October 3, 1996 (the "Warrant Agreement"), between
the Company and The Chase Manhattan Bank, as Warrant Agent, and a Registration
Rights Agreement dated as of October 3, 1996 (the "Warrant Registration Rights
Agreement"), between the Company and The Chase Manhattan Bank, as warrant agent,
and is subject to the Memorandum of Association and Bye-laws of the Company and
to the terms and provisions contained therein, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
The terms of the Warrant Agreement and the Warrant Registration Rights Agreement
are hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement and the Warrant Registration Rights
Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Company and the Holders of
the Warrants. The summary of the terms of the Warrant Agreement and the Warrant
Registration Rights Agreement contained in this Warrant Certificate is qualified
in its entirety by express reference to the Warrant Agreement and the Warrant
Registration Rights Agreement. All terms used in this Warrant Certificate that
are defined in the Warrant Agreement and the Warrant Registration Rights
Agreement shall have the meanings assigned to them in such agreements.
<PAGE>
A-2
Copies of the Warrant Agreement and the Warrant Registration Rights
Agreement are on file at the office of the Warrant Agent and may be obtained by
writing to the Warrant Agent at the following address:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Department
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of Class A Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Class A Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price).
The number of Class A Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph, in
the event the Company merges or consolidates with, or sells all or substantially
all of its assets to, another Person, each Warrant will, upon exercise, entitle
the Holder thereof to receive the number of shares of capital stock or other
securities or the amount of money and other property which the holder of an
Class A Share (or other securities or property issuable upon exercise of a
Warrant) is entitled to receive upon completion of such merger, consolidation or
sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company shall pay the cash value thereof
determined as provided in the Warrant Agreement.
Subject to Article VI of the Warrant Agreement, all Class A Shares
issuable by the Company upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of the
England and Wales and the United States of America or any political subdivision
or taxing authority thereof or therein in respect of the issue or delivery
thereof upon exercise of Warrants (other than income taxes imposed on the
Holders). The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for Class A Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company shall
not
<PAGE>
A-3
be required to issue any share certificate or pay any cash until such tax or
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set forth
in Article VIII of the Warrant Agreement, this Warrant Certificate and all
rights hereunder are transferable by the registered Holder hereof, in whole or
in part, on the register of the Company maintained by the Warrant Agent for such
purpose at the Warrant Agent's office in New York, New York, upon surrender of
this Warrant Certificate duly endorsed, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote or
to consent to any action of the shareholders, to receive any distributions, to
exercise any pre-emptive right or to receive any notice of meetings of
shareholders, and shall not be entitled to receive any notice of any proceedings
of the Company except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced
hereby shall cease on October 3, 2006, unless sooner terminated by the
liquidation, dissolution or winding-up of the Company or as otherwise provided
in the Warrant Agreement upon the consolidation or
<PAGE>
A-4
merger of the Company with, or sale of the Company to, another Person or unless
such date is extended as provided in the Warrant Agreement.
The Company hereby designates and appoints RSL Communications N.
America, Inc. ("RSLNA"), 767 Fifth Avenue, Suite 4300, New York, NY 10153, as
its authorized agent upon which process may be served in any suit, action or
proceeding arising out of or relating to the Warrants or the Warrant Agreement
that may be instituted in any federal or state court in the State of New York,
Borough of Manhattan, or brought under federal or state securities laws or
brought by the Warrant Agent, and that RSLNA has accepted such designation, (ii)
submits to the non-exclusive jurisdiction of any such court in any such suit,
action or proceeding, and (iii) agrees that service of process upon RSLNA and
written notice of said service to the Company (mailed or delivered to its
President at its principal office as specified in Section 11.05 of the Warrant
Agreement) shall be deemed in every respect effective service of process upon it
in any such suit or proceeding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under the Warrant Agreement and the Warrants, to the extent permitted by law.
With respect to the Company, this Agreement shall be governed by the
laws of Bermuda and the Company hereby submits to the jurisdiction of the courts
of Bermuda. With respect to the Warrant Agent, this Agreement shall be governed
by the laws of New York and the Warrant Agent hereby submits to the jurisdiction
of the courts of New York.
<PAGE>
A-5
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
Dated: ______________
RSL COMMUNICATIONS, LTD.
By:___________________________________
Name:
Title:
Countersigned:
THE CHASE MANHATTAN BANK,
as Warrant Agent
By: ____________________________
Authorized Officer
<PAGE>
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Chase Manhattan Bank, as Warrant Agent
450 West 33rd Street
New York, New York 10001
The undersigned irrevocably exercises [_____________] of the
Warrants represented by this Warrant Certificate and herewith makes payment of
$[______] (such payment being by wire transfer or by certified or official bank
or bank cashier's check payable to the order or at the direction of RSL
Communications, Ltd.), all at the exercise price and on the terms and conditions
specified in this Warrant Certificate and in the Warrant Agreement and the
Warrant Registration Rights Agreement referred to herein and surrenders this
Warrant Certificate and all right, title and interest therein to and directs
that the Class A shares, par value $.01 per share, of RSL Communications, Ltd.
(the "Class A Shares") deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY ON OFFSHORE
CERTIFICATED WARRANTS]
The undersigned certifies that:
Check One
[_] (a) (i) it is not a U.S. person (as defined in Rule 902
of Regulation S under the Securities Act) and the
Warrants are not being exercised on behalf of a U.S.
person.
or
[_] (ii) it is furnishing to the Warrant Agent a written
opinion of counsel to the effect that the Warrants and
the Class A Shares issuable upon exercise of the
Warrants have been registered under the Securities Act
or are exempt from registration thereunder.
<PAGE>
A-7
and (b) if an opinion is not being furnished, the undersigned is located outside
the United States at the time of the exercise hereof.
Dated: ________________________________
(Signature of Owner)
________________________________
(Street Address)
________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
Name(s) of Assignee(s): ____________________________________________
Address: ___________________________________________________________
No. of Warrants: ___________________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL
CERTIFICATES EXCEPT OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[_] (a) these Warrants are being transferred in compliance with the
exemption from registration under the U.S. Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[_] (b) these Warrants are being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
(ii) These Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as amended.
<PAGE>
A-9
(iii) If the undersigned is an Institutional Accredited Investor that is
not a QIB, the undersigned certifies that the transfer of Warrants pursuant
hereto is being effected through the Placement Agent through which the
undersigned acquired such Warrants. Such Placement Agent is:
[Check One]
[_] (a) Morgan Stanley & Co. Incorporated
or
[_] (B) Bear, Stearns & Co. Inc.
or
[_] (c) Dillon, Read & Co. Inc.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
<PAGE>
Dated: ________________________________
(Signature of Owner)
________________________________
(Street Address)
________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the U.S. Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding RSL Communications, Ltd. as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:___________
______________________________________________
[NOTE: To be executed by an executive officer]
<PAGE>
EXHIBIT B
Form of Certificate to be Delivered
in Connection with
Transfers Pursuant to Regulation S
[Date]
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Corporate Trustee Administration Department
Re: RSL Communications, Ltd.
(the "Company") Warrants to Purchase
Class A Shares (the "Warrants")
Ladies and Gentlemen:
In connection with our proposed sale of [ ] Warrants, we confirm
that either (i) we are an Institutional Accredited Investor that is a QIB or
(ii) we are an Institutional Accredited Investor that is not a QIB and the sale
of such Warrants by us is being made through the Placement Agent through which
we acquired such Warrants and such Placement Agent is:
[Check One]
[_] (a) Morgan Stanley & Co. Incorporated
or
[_] (B) Bear, Stearns & Co. Inc.
or
[_] (c) Dillon, Read & Co. Inc.
In addition, we hereby certify that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
<PAGE>
B-2
(1) the offer of the Warrants was not made to a person in the United
States and not to a U.S. Person (as defined in Regulation S under
the Securities Act);
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United
States;
(3) no directed selling efforts (as such term is defined in Rule
902(b) of Regulations S under the Securities Act) have been made by
us, any of our affiliates or any persons acting on our behalf in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S under the Securities Act, as applicable;
and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor] By:
By:______________________________
Authorized Signature
<PAGE>
EXHIBIT C-1
Form of Certificate to be
Delivered by Transferor in Connection with
Transfers to Institutional Accredited Investors
[Date]
RSL Communications, Ltd.
Clarendon House
Church Street
Hamilton HMCX Bermuda
Attention: President
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Corporate Trustee Administration Department
[CHECK ONE IF TRANSFEROR IS AN INSTITUTIONAL ACCREDITED INVESTOR]
In connection with our proposed transfer of _______________
aggregate number of Warrants, we hereby certify that the transfer of such
Warrants by us to _______________ is being made through the Placement Agent
through which we acquired the Warrants being transferred in connection herewith.
The Placement Agent through which this transfer is being made, and that is
receiving this certificate, is:
[_] Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
[_] Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
[_] Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
Re: Warrants (the "Warrants") to Purchase
Class A Shares of RSL Communications, Ltd. (the "Company")
<PAGE>
C-1-2
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in compliance
with the transfer restrictions applicable to the Warrants or interests therein
transferred pursuant to and in accordance with the Securities Act, and
accordingly we hereby further certifies that (check one):
(a) [_] such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [_] such transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
(d) [_] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904, and we hereby further certify that such transfer complies with the
transfer restrictions applicable to the Warrants or interests therein
transferred to Institutional Accredited Investors and in accordance with the
requirements of the exemption claimed, which certification is supported by, if
such transfer is after the Separation Date, an Opinion of Counsel provided by us
or the transferee (a copy of which we have attached to this certification), to
the effect that (a) such transfer is in compliance with the Securities Act and
such (b) such transfer complies with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed transfer in
accordance with the terms of the Warrant Agreement, the transferred Warrants or
interests therein will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the IAI Global Warrant and in the
Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By:_______________________________
Authorized Signatory
<PAGE>
EXHIBIT C-2
Form of Certificate to be
Delivered By Transferees in Connection with
Transfers to Institutional Accredited Investors
[Date]
RSL Communications, Ltd.
Clarendon House
Church Street
Hamilton HM CX Bermuda
Attention: President
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Corporate Trustee Administration Department
Re: Warrants (the "Warrants") to Purchase
Class A Shares of
RSL Communications, Ltd. (the "Company")
Dear Sirs:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the Warrants, any
interest therein or the Class A Shares issuable upon exercise of any
Warrant (the "Warrant Shares") is subject to certain restrictions and
conditions set forth in the Warrant Agreement dated as of October 3, 1996
relating to the Warrants (the "Warrant Agreement") and the Warrant
Registration Rights Agreement dated October 3, 1996 relating to the
Warrants (the "Warrant Registration Rights Agreement") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Warrants or Warrant Shares except in compliance with, such restrictions
and conditions and the U.S. Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the Warrants represented by this Warrant
Certificate and, as of the date this Warrant Certificate was originally
issued, the Warrant Shares have not been registered under the Securities
Act, and accordingly may not be offered, sold, pledged or otherwise
transferred within the United States or to, or for the account or benefit
of, U.S. Persons except as set forth in the following sentence. We agree
that we
<PAGE>
C-2-2
will not, within the time period referred to under Rule 144(k) of the
Securities Act (taking into account the provisions of Rule 144(d) under
the Securities Act, if applicable) under the Securities Act as in effect
on the date of the transfer of this Warrant, resell or otherwise transfer
the Warrants represented by this Warrant Certificate except (a) to RSL
Communications, Ltd. or any subsidiary thereof, (B) to a qualified
institutional buyer in compliance with Rule 144A under the Securities Act,
(c) outside the United States in an offshore transaction in compliance
with Rule 904 under the Securities Act, (d) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
(e) to an institutional accredited investor that, prior to such transfer,
furnishes to you, to the Company and, in the case of the Warrant Shares,
to the transfer agent and registrar therefor, a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of the Warrants represented by this Warrant certificate (the form
of which letter can be obtained from the Warrant Agent) and an opinion of
counsel acceptable to RSL communications, Ltd. and its counsel that such
transfer is in compliance with the Securities Act or (f) pursuant to an
effective registration statement under the Securities Act and, in each
case, in accordance with applicable state securities laws.
3. We understand that, on any proposed resale of any Warrants, any
interest therein or Warrant Shares, we will be required to furnish to you
and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further understand that
the Warrants purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Warrants, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment for an indefinite period
of time.
5. We are acquiring the Warrants purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
<PAGE>
C-2-3
You, the Company and, if applicable, the transfer agent and
registrar for the Warrant Shares are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_______________________________
Authorized Signature
<PAGE>
SCHEDULE I
LIST OF FINANCIAL EXPERTS
Alex, Brown & Sons
Bear, Stearns & Co., Inc.
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Lazard Freres & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc
Lehman Brothers
<PAGE>
Exhibit 10.2
- -------------------------------------------------------------------------------
WARRANT REGISTRATION RIGHTS AGREEMENT
between
RSL COMMUNICATIONS, LTD.
and
THE CHASE MANHATTAN BANK,
as Warrant Agent
Dated as of October 3, 1996
- --------------------------------------------------------------------------------
<PAGE>
WARRANT REGISTRATION RIGHTS AGREEMENT
WARRANT REGISTRATION RIGHTS AGREEMENT, dated as of October 3, 1996
(this "Agreement"), between RSL COMMUNICATIONS, LTD., a Bermuda corporation (the
"Company") and THE CHASE MANHATTAN BANK, as warrant agent (the "Warrant Agent").
Pursuant to the terms of a Placement Agreement dated as of September
30, 1996 (the "Placement Agreement"), among the Company, RSL Communications PLC
and Morgan Stanley & Co. Incorporated ("Morgan Stanley"), as manager (the
"Manager"), for itself and the other placement agents named therein
(collectively with the Manager, the "Placement Agents"), the Company has agreed
to issue and sell to the Placement Agents an aggregate of 300,000 warrants
(each, a "Warrant"), each Warrant initially entitling the holder thereof to
purchase 1.815 shares of Class A Common Shares (as defined below) of the Company
at an exercise price of $.01 per Class A Share, as part of 300,000 units (the
"Units"), each Unit consisting of $1,000 principal amount of Senior Notes due
2006 of RSL Communications PLC, a wholly owned subsidiary of the Company (each a
"Note" and collectively, the "Notes") to be issued pursuant to the provisions of
an Indenture dated as of the date hereof among RSL Communications PLC, as issuer
(the "Note Issuer"), the Company, as guarantor, and The Chase Manhattan Bank, as
trustee, and one Warrant. The Note and the Warrant included in each Unit will
become separately transferable at the close of business upon the earliest to
occur of (i) the date that is 180 days after the Closing Date (as defined
below), (ii) the commencement of an exchange offer with respect to the Notes
undertaken pursuant to the Notes Registration Rights Agreement (as defined
below) or (iii) the effectiveness of a shelf registration statement with respect
to resales of the Notes (the "Separation Date").
In consideration of the foregoing and of the mutual agreements
contained herein and in the Placement Agreement, the Company and the Warrant
Agent hereby agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Auditors" means, at any time, the independent auditors of the
Company at such time.
"Board" means the board of directors of the Company from time to
time.
"Class A Common Stock" means the Class A common shares, par value
$.01 per share, of the Company.
"Class A Shares" means the shares of the Class A Common Stock of the
Company.
<PAGE>
2
"Closing Date" means the date hereof.
"Comfort Letter" has the meaning specified in Section 3 hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Company" means RSL Communications, Ltd., a Bermuda corporation.
"Company IPO Shares" has the meaning specified in Section 2 hereof.
"Cutback Notice" has the meaning specified in Section 2 hereof.
"Expiration Date" means the tenth anniversary of the date hereof.
"Holders" means the record holders of the Warrants and the holders
of Class A Shares (or other securities) received upon exercise thereof.
"Includible Secondary Shares" has the meaning specified in Section 2
hereof.
"Indenture" means the Indenture, dated as of October 3, 1996, among
the Company, RSL Communications PLC and the Warrant Agent.
"Manager" has the meaning specified in the recitals to this
Agreement.
"managing underwriter" has the meaning specified in Section 2
hereto.
"Morgan Stanley" has the meaning specified in the recitals to this
Agreement.
"Note Issuer" has the meaning specified in the recitals to this
Agreement.
"Notes" has the meaning specified in the recitals to this Agreement.
"Opinion" has the meaning specified in Section 3 hereof.
"Other IPO Shares" has the meaning specified in Section 2 hereof.
"Piggy-back Registration Rights" has the meaning specified in
Section 2 hereof.
"Placement Agents" has the meaning specified in the recitals to this
Agreement.
"Placement Agreement" has the meaning specified in the recitals to
this Agreement.
<PAGE>
3
"Registration Statement" has the meaning specified in Section 2
hereof.
"Resale Shelf" has the meaning specified in Section 3 hereof.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Underlying Securities" shall mean the Class A Shares issuable upon
exercise of the Warrants or such other securities as shall be issuable upon the
exercise of the Warrants, pursuant to the Warrant Agreement.
"Units" has the meaning specified in the recitals to this Agreement.
"Warrant" has the meaning specified in the recitals to this
Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Agreement" means the Warrant Agreement dated as of October
3, 1996 between the Company and the Warrant Agent.
"Warrant Shares" has the meaning specified in Section 2 hereof.
"Warrant Registration Statement" has the meaning specified in
Section 3 hereof.
2. Piggy-Back Registration Rights.
(a) If the Company proposes to file a Registration Statement with
the Commission respecting an offering of any of its equity securities (other
than an offering registered solely on Form S-4 or S-8 or any successor form
thereto and other than the initial public offering of its equity securities if
no shareholder of the Company participates therein), the Company shall give
prompt written notice to all the Holders of Warrants or Class A Shares received
upon exercise thereof at least 30 days prior to the initial filing of the
registration statement relating to such offering (the "Registration Statement").
Each such Holder shall have the right, within 20 days after delivery of such
notice, to request in writing that the Company include all or a portion of such
the Class A Shares issuable upon exercise of such Holder's Warrants or such
other securities as shall be issuable upon the exercise of the Warrants,
pursuant to the Warrant Agreement, ("Warrant Shares") in such Registration
Statement ("Piggy-back Registration Rights"). The Company shall include in the
public offering all of the Warrant Shares that a Holder has requested be
included, unless the underwriter for the public offering or the underwriter
managing the public offering (in either case, the "managing underwriter")
delivers
<PAGE>
4
a notice (a "Cutback Notice") pursuant to Section 2(b) or 2(c) hereof. The
managing underwriter may deliver one or more Cutback Notices at any time prior
to the execution of the underwriting agreement for the public offering.
(b) If a proposed public offering includes both securities to be
offered for the account of the Company ("Company IPO Shares") and shares to be
sold by shareholders, the provisions of this Section 2(b) shall be applicable if
the managing underwriter delivers a Cutback Notice stating that, in its opinion,
the number of Class A Shares that selling shareholders propose to sell therein,
whether or not such selling shareholders have the right to include shares
therein (the "Other IPO Shares"), plus the number of Warrant Shares that the
Holders have requested to be sold therein, plus the Company IPO Shares, exceeds
the maximum number of shares specified by the managing underwriter in such
Cutback Notice that may be distributed without adversely affecting the price,
timing or distribution of the Company IPO Shares. Such maximum number of shares
that may be so sold, excluding the Company IPO Shares, are referred to as the
"Includible Shares."
If the managing underwriter delivers such Cutback Notice, the
Company shall be entitled to include all of the Company IPO Shares in the public
offering and each requesting Holder shall be entitled to include in the public
offering up to its pro rata portion of the Includible Shares and in priority to
the inclusion of any Other IPO Shares that are proposed to be sold in such
public offering. No shareholder that proposes to sell Other IPO Shares in the
proposed initial public offering may sell any such shares therein unless all
Warrant Shares requested by the Holders to be sold therein are so included.
(c) If a proposed public offering is entirely a secondary offering,
the provisions of this Section 2(c) shall be applicable if the managing
underwriter delivers a Cutback Notice stating that, in its opinion, the
aggregate number of Warrant Shares and Other IPO Shares proposed to be sold
therein exceeds the maximum number of shares (the "Includible Secondary Shares")
specified by the managing underwriter in such Cutback Notice that may be
distributed without adversely affecting the price, timing or distribution of the
Class A Shares being distributed. If the managing underwriter delivers such
Cutback Notice, each requesting Holder shall be entitled to include in the
public offering up to its pro rata portion of the Includible Shares and in
priority to the inclusion of any Other IPO Shares that are proposed to be sold
in such public offering. No shareholder that proposes to sell Other IPO Shares
in the proposed initial public offering may sell any such shares therein unless
all Warrant Shares requested by the Holders to be sold therein are so included.
(d) The underwriting agreement for such public offering shall
provide that each requesting Holder shall have the right to sell its Warrant
Shares to the underwriters and that the underwriters shall purchase the Warrant
Shares at the price paid by the underwriters for the Class A Shares sold by the
Company and/or selling shareholders, as the case may be.
<PAGE>
5
3. Shelf Registration.
(a) If only the Company sells Class A Shares in an initial public
offering or all of the Warrant Shares have not been sold in a public offering,
the Company shall use its reasonable best efforts to cause to be filed pursuant
to Rule 415 under the Securities Act a shelf registration statement on the
appropriate form (the "Warrant Registration Statement") covering the issuance of
the Warrant Shares upon exercise of the Warrants and shall use its reasonable
best efforts to cause the Warrant Registration Statement to become effective
under the Securities Act within 180 days after the closing date of the initial
public offering; provided, however, that (1) in no event may the Warrant
Registration Statement be declared effective prior to the first anniversary of
the Closing Date and (2) if the Commission shall request that the Company
register the resale of the Warrant Shares instead of the issuance thereof, the
Warrant Registration Statement shall register such resale as opposed to such
issuance. The Company shall use reasonable efforts to keep the Warrant
Registration Statement continuously effective until the earlier of (i) such time
as all Warrants have been exercised thereunder or all Warrant Shares have been
sold thereunder, as the case may be, and (ii) the third anniversary of the
Closing Date. Prior to filing the Warrant Registration Statement or any
amendment thereto, the Company shall provide a copy thereof to Morgan Stanley
and its counsel and afford them a reasonable time to comment thereon.
(b) If the Warrant Registration Statement shall register the sale of
the Warrant Shares (a "Resale Shelf") as provided in Section 3(a) above, the
Company agrees to:
(i) make available for inspection by a representative of the
Holders, any underwriter participating in any disposition pursuant to such
Resale Shelf and attorneys and accountants designated by the Holders, at
reasonable times and in a reasonable manner, financial and other records,
documents and properties of the Company that are pertinent to the conduct
of due diligence, and cause the officers, directors and employees of the
Company to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with a
Resale Shelf;
(ii) use its best efforts to cause all Warrant Shares sold under a
Resale Shelf to be listed on any securities exchange or any automated
quotation system on which similar securities issued by the Company are
then listed if requested by the Holders of Warrant Shares representing a
majority of the Warrants originally issued, to the extent such Warrant
Shares satisfy applicable listing requirements;
(iii) provide, at reasonable times, copies of the prospectus
included in such Resale Shelf to Holders that are selling Warrant Shares
pursuant to such Resale Shelf;
(iv) cause to be provided to the Warrant Agent, on behalf of the
Holders and beneficial owners of Warrant Shares, upon the effectiveness of
such Resale Shelf, a
<PAGE>
6
customary "10b-5" opinion of independent counsel (an "Opinion") and a
customary "cold comfort" letter of independent auditors (a "Comfort
Letter");
(v) cause to be provided to Holders and beneficial owners of Warrant
Shares an Opinion and Comfort Letter with respect to each Form 10-K and
Form l0-Q, including any amendments thereto, that is incorporated by
reference in such Resale Shelf; provided that such Opinion and Comfort
Letter shall not be required to be provided unless Holders or beneficial
owners of Warrant Shares relating to at least 33 1/3% of the Warrants
originally issued shall so request in writing with respect to a specific
sale or sales by such persons of Warrant Shares relating to at least 33
1/3% of the Warrants originally issued; and
(vi) notify the Warrant Agent, for distribution to the Holders, (A)
when the Resale Shelf has become effective and when any post-effective
amendment thereto has been filed and becomes effective, (B) of any request
by the Commission or any state securities authority for amendments and
supplements to the Resale Shelf or of any material request by the
Commission or any state securities authority for additional information
after the Resale Shelf has become effective, (C) of the issuance by the
Commission or any state securities authority of any stop order suspending
the effectiveness of the Resale Shelf or the initiation of any proceedings
for that purpose, (D) if, between the effective date of the Resale Shelf
and the closing of any sale of Warrant Shares covered thereby, the
representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar
agreement, including this Agreement, relating to disclosure cease to be
true and correct in all material respects or if the Company receives any
notification with respect to the suspension of the qualification of the
Warrant Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (E) of the happening of any event during the
period the Resale Shelf is effective which makes any statement made in
such Resale Shelf or the related prospectus untrue in any material respect
or which requires the making of any changes in such Resale Shelf or
prospectus in order to make the statements therein not misleading and (F)
of any determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate.
4. Suspension.
Notwithstanding the foregoing, during any consecutive 365-day
period, the Company shall have the privilege to suspend availability of the
Warrant Registration Statement and the related prospectus for (i) up to two
consecutive 30-day periods, except for the consecutive 30-day period immediately
prior to the Expiration Date, if the Board determines in good faith that there
is a valid purpose for such suspension and (ii) five additional, non-consecutive
three-day periods, except during the 30-day period immediately prior to the
Expiration Date, if the Board determines in good faith that the Company cannot
provide
<PAGE>
7
adequate disclosure during such period due to circumstances beyond its control.
Notice of such suspension shall be given promptly to the Warrant Agent.
5. Blue Sky.
The Company Shall use its reasonable best efforts to register or
qualify the Underlying Securities proposed to be sold or issued pursuant to the
Registration Statement or the Warrant Registration Statement under all
applicable securities or "blue sky" laws of all jurisdictions in the United
States in which any Holder of Warrants may or may be deemed to purchase
Underlying Securities upon the exercise of Warrants or resale of the Warrant
Shares, as the case may be, and shall use its reasonable best efforts to
maintain such registration or qualification through the earlier of (A) the date
upon which all Warrants have been exercised or all Warrant Shares have been
resold, as the case may be, under the Warrant Shelf Registration Statement and
(B) the Expiration Date; provided, however, that the Company shall not be
required to (i) qualify as a foreign corporation or as a broker or a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 5, (ii) file any general consent to service of
process or (iii) subject itself to taxation in any jurisdiction if it is not
otherwise so subject.
6. Accuracy of Disclosure.
The Company (and its successors) represents and warrants to each
Holder (and each beneficial owner of a Warrant or Warrant Share) and agrees for
the benefit of each Holder (and each beneficial owner of a Warrant or Warrant
Share) that, except during any period in which the availability of the Warrant
Registration Statement has been suspended, (i) the Warrant Registration
Statement and the documents incorporated by reference therein will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading; and (ii) the prospectus
delivered to such Holder upon its exercise of Warrants or pursuant to which such
Holder sells its Warrant Shares, as the case may be, and the documents
incorporated by reference therein will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
7. Indemnity.
The Company hereby indemnifies each beneficial owner of a Warrant
(whether or not it is, at the time the indemnity provided for in this Section 7
is sought, such a beneficial owner) against all losses, damages or liabilities
which such beneficial owner suffers as a result of any breach, on the date of
any exercise of a Warrant by such beneficial owner or the resale of any Warrant
Share by such Holder, in either case pursuant to the Warrant Registration
Statement, of the representations, warranties or agreements contained in Section
6. Each beneficial owner of a Warrant Share sold pursuant to a Resale Shelf, by
accepting its beneficial
<PAGE>
8
ownership of a Warrant, hereby (i) agrees to provide the Company with
information with respect to it that the Company reasonably requests in
connection with any Resale Shelf and (ii) indemnifies the Company against any
liability incurred by it as a result of any misstatement of information provided
by such beneficial owner to the Company expressly for inclusion in the Resale
Shelf.
8. Expenses.
All expenses incident to the Company's performance of or compliance
with its obligations under this Agreement will be borne by the Company,
regardless of whether a Registration Statement or Warrant Registration Statement
becomes effective, including without limitation (i) all Commission or National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
reasonable fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws, (iii) all reasonable expenses of any persons
incurred by or on behalf of the Company in preparing or assisting in preparing,
word processing, printing and distributing any registration statement, any
prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Agreement, (iv) the reasonable
fees (including legal fees and expenses) and disbursements of the Warrant Agent,
(v) the reasonable fees and disbursements of counsel for the Company and (vi)
the fees and disbursements, if any, of the Auditors but excluding (x) fees and
disbursements of counsel retained by the participating Holders and (y) the
Holder's share of underwriting discounts and commissions.
9. Miscellaneous.
(a) No Inconsistent Agreements. Each of the Company and the Warrant
Agent represent to the other that it has not entered into, and agrees that on or
after the date of this Agreement it will not enter into, any agreement which is
inconsistent with the rights granted to the Holders of Warrants or Warrant
Shares in this Agreement or otherwise conflicts with the provisions hereof. The
Company represents that the rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any
agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company and the Warrant Agent have obtained the
written consent of Holders of at least a majority of the outstanding Warrants
affected by such amendment, modification, supplement, waiver or consent;
provided that any amendment, modification or supplement to this Agreement which,
in the good faith opinion of the Board of Directors of the Company (and
evidenced by a resolution of such
<PAGE>
9
board), does not materially adversely affect any Holder, shall not be subject to
such requirement for written consent.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 9(c); (ii) if to the Company, initially at the Company's address set
forth in the Indenture and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 9(c); and (iii) if to
the Warrant Agent, initially at the Warrant Agent address set forth in the
Indenture and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 9(c).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation, subsequent Holders; provided that
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Warrants in violation of the terms of the Placement Agreement or
the Warrant Agreement. If any transferee of any Holder shall acquire Warrants,
in any manner, whether by operation of law or otherwise, such Warrants shall be
held subject to all of the terms of this Agreement and the Warrant Agreement,
and by taking and holding such Warrants such person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions of
this Agreement or the Warrant Agreement and such person shall be entitled to
receive the benefits hereof.
(e) Purchases and Sales of Warrants. The Company shall not, and
shall use their best efforts to cause their affiliates (as defined in Rule 405
under the 1933 Act) not to, purchase and then resell or otherwise transfer any
Warrants.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Warrant Agent, and each Holder shall have the right to enforce such agreements
directly to the extent it deems such enforcement necessary or advisable to
protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed
<PAGE>
10
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Designation of Process Agent; Submission to Jurisdiction. Each
of the parties hereto hereby agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
herein may be instituted in any U.S. federal or New York State court in the
Borough of Manhattan in the City of New York (each a "New York court") and each
of the parties hereto hereby irrevocably waives any objection it may now or
hereafter have to the laying of venue of any such proceeding and irrevocably
submits to the jurisdiction of such courts and to the courts of its corporate
domicile, with respect to actions brought against it as defendant, in any suit,
action or proceeding. The Company hereby (i) represents that it has irrevocably
designated and appointed RSL Communications N. America, Inc. ("RSL USA"), 767
Fifth Avenue, Suite 4300, New York, New York 10153 (together with any successor,
the "Process Agent") as its authorized agent in the Borough of Manhattan in the
City of New York upon which process may be served in any such suit, action or
proceeding, or brought under U.S. federal or state securities laws, and
acknowledges that the Process Agent has accepted such designation, (ii) agrees
that prior to any dissolution, liquidation, winding-up or sale of RSL USA, or
incorporation of RSL USA in a jurisdiction outside the United States, it will
cause such obligation of RSL USA to be assumed by (A) CT Corporation System ("CT
Corporation"), 1633 Broadway, New York, New York 10019 or (B) any other direct
or indirect subsidiary of the Company organized under the laws of the United
States; provided that such subsidiary also agrees to be bound by the terms of
this subclause (ii) as if such terms applied to such subsidiary, (iii) agrees
that service of process upon the Process Agent, and written notice of such
service to the Company, shall be deemed in every respect effective service of
process upon the Company in any such suit, action or proceeding and (iv) agrees
to take any and all action, including the execution and filing of any and all
such documents and instruments as may be necessary to continue such designation
and appointment of the Process Agent in full force and effect so long as any of
the Notes shall be outstanding.
(j) Governing Law. This Agreement shall be governed by the laws of
the State of New York.
(k) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(l) Waiver of Immunity. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through
<PAGE>
11
service of notice, attachment prior to judgement, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of their obligations under
this Agreement to the fullest extent permitted by law.
(m) Initial Public Offering. Notwithstanding anything to the
contrary herein contained, if the Company or any of the subsidiaries or any
parent entity of the Company conducts an initial public offering of equity
securities other than Class A Common Shares, the Company will give the Holders
the opportunity to convert such Warrants into warrants to purchase such equity
securities and such Warrant Shares into such equity securities. Such conversion
opportunity will be on terms and conditions determined to be fair and reasonable
by the Company's Board of Directors.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
RSL COMMUNICATIONS, LTD.
By /s/ Itzhak Fisher
----------------------------------
Name: Itzhak Fisher
Title: President
THE CHASE MANHATTAN BANK
By /s/ James D. Heaney
----------------------------------
Name: James D. Heaney
Title: Vice President
<PAGE>
Exhibit 10.3
[Letterhead of Chase Manhattan Private Bank]
John J. Volk
Vice President
August 20, 1996
Mr. Ronald S. Lauder
c/o R.S.L. Communications, Inc.
767 Fifth Avenue
New York, New York 10153
Dear Mr. Lauder:
It is my pleasure to confirm to you that The Chase Manhattan Bank (the "Bank")
is prepared to increase the line of credit (the "Line") to R.S.L.
Communications, Inc. by $10,000,000 up to a maximum amount of $50,000,000. The
Line will be provided subject to the following terms and conditions:
Borrower: R.S.L. Communications, Inc.
Guarantor: Ronald S. Lauder
Amount: Up to $50,000,000
Purpose: Working capital
Rate: At the Borrower's option:
1) the Prime Rate, or
2) LIBOR + 1%, with all specific provisions outlined in
the documentation.
The "Prime Rate" is the rate announced from time to time
by the Bank at its head office as its prime commercial
lending rate.
Interest Payments: Prime loans: Interest shall be payable monthly in arrears
and on any payment of principal.
Fixed rate loans: Interest shall be payable at the
maturity of the loan and, for loans with maturity dates
extending more than three months, at three month
intervals, and on any payment of principal. Broken funding
and other protective provisions shall apply to fixed rate
loans.
Fees: 1) 1/8% on $10,000,000 ($12,500) shall be payable upon
acceptance of this increase.
2) An additional fee of 1/8% on $25,000,000 will be
imposed if the amount outstanding under the Line
remains above $25,000,000 after November 30, 1996.
<PAGE>
Expiration Date: The Line will be available until April 30, 1997, unless
terminated earlier by the Bank or by the Borrower.
Conditions: Signed personal financial statements of the Guarantor,
including a balance sheet listing assets and liabilities
(both direct and contingent) and statement of sources and
uses, to be provided to the Bank semi-annually and at the
Bank's request.
The most recent signed statements of R.S.L.
Communications, Inc. to be provided to the Bank at
inception of this Line and annually thereafter and at the
Bank's request.
Corporate resolutions authorizing the Borrower to enter
into this Line and incumbency certificate indicating
officers authorized to sign documentation for the Line.
Opinion of counsel to the Borrower acceptable to the Bank.
Any additional information that the Bank may reasonably
request from time to time to be furnished promptly upon
the Bank's request.
Expenses: All legal and other expenses (including allocated costs of
in-house counsel) are for the account of the Borrower,
whether or not loans are advanced under the Line.
This Line is subject to satisfactory review by the Bank of all relevant
documents including R.S.L. Communications, Inc.'s ability to borrow. The Line
will be evidenced by documentation in form and substance satisfactory to the
Bank, including the Amendment to the Grid Demand Promissory Note dated June 26,
1996.
This letter is for your information only and does not constitute a commitment by
the Bank. The Line is extended at the Bank's discretion and is subject to the
Borrower's and Guarantor's maintenance of a satisfactory relationship with, and
a financial condition acceptable to the Bank.
Please acknowledge acceptance of the terms of this letter by signing below and
returning it to my attention together with the above referenced Amendment along
with a check to cover our $12,500 fee.
We are pleased to make these additional funds available under this Line and look
forward to continuing to meet your Private Banking needs.
Sincerely,
Accepted: R.S.L. Communications, Inc.
By: /s/ R.S.L. Communications, Inc. Date: 8/27/96
------------------------------------
Title: Treasurer
Acknowledged: /s/ Ronald S. Lauder Date: 8/27/96
------------------------------------
Ronald S. Lauder
<PAGE>
AMENDMENT TO
GRID DEMAND PROMISSORY NOTE
(EURODOLLAR/PRIME RATE)
THIS AMENDMENT, dated as of August 20, 1996, (the "Amendment"), is by and
between THE CHASE MANHATTAN BANK, N.A. (the "Bank") and R.S.L. Communications,
Inc. (the "Borrower").
The Bank and the Borrower have entered into a Grid Demand Promissory Note dated
June 26, 1996, (the "Note"). The Bank and the Borrower desire to amend the Note
to increase the amount from $40,000000 to $50,000,000.
Except as otherwise provided herein, the capitalized terms used in this
Amendment shall have the respective meanings assigned to such terms in the Note.
AGREEMENT
In consideration of the foregoing, and the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
1. AMENDMENT. The first paragraph of the Note is hereby amended to read in full
as follows:
"For value received, R.S.L., Communications, Inc. (the Borrower") hereby
promises to pay to the order of The Chase Manhattan Bank, N.A. (the "Bank") at
its office at 1211 Avenue of the Americas, New York, New York 10036 for the
account of the Lending Office of the Bank, the principal amount of Fifty Million
Dollars ($50,000,000) or, if less, the principal amount of each loan (the
"Loans") made by the Bank to the Borrower, ON DEMAND.
2. CONDITIONS PRECEDENT. This Amendment shall not become effective until the
Bank has received executed counterparts of this Amendment signed by each of the
parties hereto.
3. CONTINUED EFFECTIVENESS. Except to the extent expressly amended hereby, all
the terms of the Note remain in full force and effect.
4. APPLICABLE LAW. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
5. COUNTERPARTS. This Amendment may be executed in two or more counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute but one agreement.
IN WITNESS WHEREOF, the Bank and the Borrower have duly executed this Amendment,
all as of the day and year first above written.
R.S.L. Communications, Inc.
By: /s/ R.S.L. Communications, Inc.
--------------------------------
Title: Treasurer
AGREED TO:
The Chase Manhattan Bank, N.A.
By: _________________________________
John Volk, Vice President
All references to Chemical Bank,
The Chase Manhattan Bank, N.A.
or The Chase Manhattan Bank,
(National Association) shall mean
The Chase Manhattan Bank, a
New York State chartered bank.
<PAGE>
Exhibit 10.4
[Letterhead of Chase]
September 10,1996
Mr. Ronald S. Lauder
c/o R.S.L. Communications, Ltd.
767 Fifth Avenue
New York, NY 10153
Dear Mr. Lauder:
It is my pleasure to confirm to you that The Chase Manhattan Bank (the "Bank")
is prepared to extend a line of credit (the "Line") to R.S.L. Communications,
Ltd. up to a maximum amount of $15,000,000. This letter will supersede and
replace the letter sent to you by Chase dated August 20,1996. The Line will be
provided subject to the following terms and conditions:
Borrower: R.S.L. Communications, Ltd.
Guarantor. Ronald S. Lauder
Amount: Up to $15,000,000
Purpose: Working capital
Rate: At the Borrower's option:
1) the Prime Rate, or
2) LIBOR + 1%, with all specific provisions outlined in the
documentation.
The "Prime Rate" is the rate announced from time to time by the
Bank at its head office as its prime commercial lending rate.
Interest Prime loans: Interest shall be payable monthly in arrears and on
Payments: any payment of principal.
Fixed rate loans: Interest shall be payable at the maturity of the
loan and, for loans with maturity dates extending more than three
months, at three month intervals, and on any payment of principal.
Broken funding and other protective provisions shall apply to
fixed rate loans.
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Fee: 1) 1/8% on the unused amount of the Line shall be payable
quarterly in arrears.
Expiration The Line will be available until April 30,1997, unless terminated
Date: earlier by the Bank or by the Borrower.
Conditions: Signed personal financial statements of the Guarantor, including a
balance sheet listing assets and liabilities (both direct and
contingent) and statement of sources and uses, to be provided to
the Bank semi-annually and at the Bank's request.
The most recent signed statements of R.S.L. Communications, Ltd.
to be provided to the Bank at inception of this Line and annually
thereafter and at the Bank's request.
Corporate resolutions authorizing the Borrower to enter into this
Line and incumbency certificate indicating officers authorized to
sign documentation for the Line.
Opinion of counsel to the Borrower acceptable to the Bank.
Any additional information that the Bank may reasonably request
from time to time to be furnished promptly upon the Bank's
request.
Expenses: All legal and other expenses (including allocated costs of
in-house counsel) are for the account of the Borrower, whether or
not loans are advanced under the Line.
This Line is subject to satisfactory review by the Bank of all relevant
documents including R.S.L. Communications, Ltd.'s ability to borrow. The Line
will be evidenced by documentation in form and substance satisfactory to the
Bank.
This letter is for your information only and does not constitute a commitment by
the Bank. The Line is extended at the Bank's discretion and is subject to the
Borrower's and Guarantor's maintenance of a satisfactory relationship with, and
a financial condition acceptable to the Bank.
Please acknowledged acceptance of the terms of this letter by signing below and
returning it to my attention. All other documentation will be forwarded to you
within the week.
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We are pleased to make these additional funds available under this Line and look
forward to continuing to meet your Private Banking needs.
Sincerely,
/s/ Robin E. Ross
- --------------------------
Robin E. Ross
Vice President
Accepted: R.S.L. Communications, Ltd.
By: /s/ R.S.L. Communications, Ltd. Date: 9/16/96
------------------------------- ----------
Title: Treasurer
/s/ Ronald S. Lauder Date: 9/16/96
----------------------------------- ----------
Acknowledged: Ronald S. Lauder
<PAGE>
Exhibit 10.5
SUBORDINATED PROMISSORY NOTE
$59,785,056.00 September 10, 1996
New York, New York
FOR VALUE RECEIVED, RSL Communications, Ltd., a Bermuda corporation
("RSL"), promises to pay to the order of Ronald S. Lauder ("Lauder"), or
assigns, on November 10, 2006, at Lauder's New York City offices or at such
other place as Lauder may from time to time designate, the principal sum at
maturity of $59,785,056 ($35,000,000 initial Accreted Value), together with
interest thereon calculated from September 10, 2001, which interest shall be
payable at the times and at the rate set forth below in Section 2, and which
aggregate amount shall be payable in United States dollars.
The following terms shall apply to this Note:
1. Accreted Value. (a) Subject to subparagraphs (b), (c) and (d) below,
the "Accreted Value" of this Note, as of any specified date (each a "Specified
Date"), shall be as set forth below:
Semi-Annual Accreted
Accrual Date Value
------------- ---------
March 10, 1997 $36,925,000
September 10, 1997 $38,955,875
March 10, 1998 $41,098,448
September 10, 1998 $43,358,863
March 10, 1999 $45,743,600
September 10, 1999 $48,259,498
March 10, 2000 $50,913,771
September 10, 2000 $53,714,028
March 10, 2001 $56,668,300
September 10, 2001 $59,785,056
(b) If the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (i) $35,000,000 and (ii) an
amount equal to the product of (x) the Accreted Value for the first Semi-Annual
Accrual Date less $35,000,000 multiplied by (y) a fraction, the numerator of
which is the number of days from the date hereof to the Specified Date, using a
360-day year of twelve 30-day months, and the denominator of which is the number
of days elapsed from the date hereof to the first Semi-Annual Accrual Date,
using a 360-day year of twelve 30-day months.
(c) If the Specified Date occurs between two Semi-Annual Accrual Dates,
the Accreted Value will equal the sum of (i) the Accreted Value for the
Semi-Annual Accrual Date
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immediately preceding such Specified Date and (ii) an amount equal to the
product of (x) the Accreted Value for the Semi-Annual Accrual Date immediately
following such Specified Date less the Accreted Value for the Semi-Annual
Accrual Date immediately preceding such Specified Date multiplied by (y) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day year
of twelve 30-day months, and the denominator of which is 180.
(d) If the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $59,785,056.
2. Interest. This Note is being issued at a substantial discount from its
principal amount at maturity and there will not be any payment of interest on
this Note prior to September 10, 2001. From and after September 10, 2001, the
Accreted Value of this Note and any unpaid interest thereon will bear interest
at a rate of 11% per annum, payable semiannually in arrears on each May 10 and
November 10, commencing on May 10, 2002.
3. Payment not on a Business Day. If any payment of the Accreted Value of
or accrued interest on this Note shall become due on a Saturday, Sunday or a
public holiday under the laws of the State of New York or the United States of
America, such payment shall be made on the next succeeding business day and such
extension of time shall in such case be included in computing interest in
connection with such payment.
4. Prepayment. RSL may prepay the Accreted Value of this Note, plus any
accrued but unpaid interest thereon, in whole or in part, without premium or
penalty at any time subsequent to the sale by RSL of an amount of RSL's equity
securities which have an aggregate value of greater than $35 million (an "Equity
Offering"); provided, however, that the amount of such prepayment of the
Accreted Value of this Note shall not exceed the amount of the net cash proceeds
received by RSL in such Equity Offering.
5. Demand. RSL promises to pay the Accreted Value of this Note, plus any
accrued but unpaid interest thereon, to Lauder on demand made at any time
subsequent to (i) the Equity Offering, provided that the amount of such payment
of the Accreted Value of this Note shall not exceed the amount of such Equity
Offering, or (ii) the prepayment of all of the principal amount of the Senior
Notes due 2006 (the "Senior Notes"), plus any accrued but unpaid interest
thereon, issued by RSL Communications PLC, a United Kingdom corporation and a
wholly owned subsidiary of RSL (the "Note Issuer"), and guaranteed by RSL (the
"Guaranty").
6. Costs and Expenses. RSL shall pay all reasonable costs and expenses,
including reasonable attorneys' fees, incurred by Lauder in collecting or
enforcing this Note.
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<PAGE>
7. Subordination. (a) Except as otherwise set forth in Sections 4 and 5
hereof, the payment of any and all of the Accreted Value of, interest on and any
other amount due in respect of this Note is subordinated and made junior to (i)
the Guaranty and (ii) the payment of the principal amount, redemption premium,
if any, all interest and any other amounts due on the Senior Notes.
(b) Except as otherwise set forth in Sections 4 and 5 hereof and
subject to subparagraph (c) below, until the Senior Notes shall have been paid
in full, RSL shall not make any direct or indirect payment or reduction (whether
by way of loan, set-off or otherwise) in respect of the Accreted Value of,
interest on or any other amount due in respect of this Note, whether such
amounts shall have become payable on maturity, by acceleration or otherwise, if
on the date such payment would (but for this Section 7) be payable to Lauder
pursuant to this Note (hereinafter referred to as a "Payment Date"), (i) either
RSL or the Note Issuer shall have failed to make payments required to be made on
or with respect to the Guaranty or all or any portion of the Senior Notes as and
when the same became or becomes due and payable and such failures to pay have
not been cured or waived, (ii) any Default (as defined in the Indenture pursuant
to which the Senior Notes are issued) or event of default shall have occurred
and be continuing under the Senior Notes, whether or not the holders of the
Senior Notes (the "Senior Lenders") shall, pursuant to such Senior Notes, have
declared all or any portion of the Senior Notes due and payable in full on the
basis of the occurrence of such default or event of default, or (iii) if such a
default or event of default shall not be continuing on any Payment Date, but the
Senior Lenders shall, pursuant to the Senior Notes, have declared all or any
portion of the Senior Notes due and payable in full on the basis of the
occurrence of such default or event of default and such acceleration shall not
have been specifically rescinded in writing by the Senior Lenders. Scheduled
payments of interest on this Note and the payment of the Accreted Value of this
Note which are not otherwise prohibited pursuant to this Section 7 from being
made, may be made, but only upon, subject and pursuant to the other terms and
provisions set forth in this Note; provided, however, that until the Senior
Notes shall have been paid in full, RSL shall not, other than as set forth in
Sections 4 and 5 hereof, make any prepayment of the Accreted Value of or
interest on this Note.
(c) In the event of (x) any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, readjustment of debt, arrangement,
composition, assignment for the benefit of creditors, or other similar
proceeding relative to RSL, as such, or its property, or (y) any proceeding for
voluntary liquidation, dissolution or other winding up or bankruptcy proceedings
relative to RSL, then the Senior Notes shall first be paid in full before any
payment or distribution of
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<PAGE>
any character, whether in cash, securities, obligations or other property, shall
be made in respect of this Note.
8. Default. (a) The occurrence of any of the following shall constitute an
"Event of Default":
(i) failure to pay the Accreted Value when due, or to pay interest
within five business days of any interest payment due date hereunder;
(ii) the commencement by RSL of any case, proceeding or other action
relating to it in bankruptcy or seeking any relief under any bankruptcy,
insolvency, or similar act or law of any jurisdiction, domestic or
foreign, now or hereafter existing; RSL shall apply for a receiver,
custodian or trustee for itself or for all or a substantial part of its
property; RSL shall make a general assignment for the benefit of its
creditors; RSL shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or RSL shall take any action
indicating its consent to, approval of, or acquiescence in any of the
foregoing;
(iii) any other commencement of any case, proceeding or other action
against RSL in bankruptcy or seeking any relief under any bankruptcy,
insolvency, or similar act or law of any jurisdiction, domestic or
foreign, now or hereafter existing; or a receiver, custodian or trustee
for RSL or for all or a substantial part of its property shall be
appointed; and in each such case such condition shall continue unstayed
and in effect for a period of 90 days; and
(iv) any default or event of default that has caused the trustee of
the Indenture which evidences the Senior Notes or the holders of 25% in
aggregate principal amount at maturity of the Senior Notes to declare the
Senior Notes to be due and payable prior to the stated maturity of the
Senior Notes and such acceleration has not been rescinded or annulled
within 30 days of such acceleration.
(b) RSL shall notify Lauder of the occurrence of any Event of
Default promptly after RSL obtains knowledge thereof.
(c) Subject to Section 7 hereof, upon the occurrence of any Event of
Default, the Accreted Value of, interest on and any other amount due in respect
of this Note shall automatically and immediately become due and payable.
9. Waivers. (a) RSL hereby waives presentment, demand for payment, notice
of dishonor, notice of protest, and protest
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<PAGE>
in connection with the delivery, acceptance, performance, default, endorsement
or guaranty of this Note.
(b) No delay by Lauder in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise. No waiver or
modification of the terms hereof shall be valid unless set forth in writing by
Lauder.
10. Assignability. This Note may be assigned, in whole or in part, at any
time or from time to time.
11. Binding Nature. This Note shall inure to the benefit of and be
enforceable by Lauder and his heirs, executors, successors and assigns and shall
be binding and enforceable against RSL and its assigns and successors.
12. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
13. Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law. Any action or proceedings to enforce
or arising out of this Note may be commenced in any court of the State of New
York or in the United States District Court for the Southern District of New
York. RSL agrees that venue will be proper in such courts in any such matters,
and agrees that New York is the most convenient forum for litigation in any
suit, action or legal proceeding. RSL agrees that a final judgment in any such
action or proceeding may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
5
<PAGE>
IN WITNESS WHEREOF, RSL has executed this Note as of the date first above
written.
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
-------------------------------
Name: Itzhak Fisher
Title: President
6
<PAGE>
Exhibit 10.6
- --------------------------------------------------------------------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. NEITHER THIS WARRANT NOR SUCH
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED
OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND THE
APPLICABLE RULES AND REGULATIONS THEREUNDER.
- --------------------------------------------------------------------------------
RSL COMMUNICATIONS, LTD.
Warrant for the Purchase of Shares of Common Stock
210,000 Shares
FOR VALUE RECEIVED, RSL COMMUNICATIONS, LTD. (the "Company"), a Bermuda
corporation, hereby certifies that RONALD S. LAUDER, or his registered assigns
(the "Holder") is entitled, subject to the provisions of this Warrant, to
purchase from the Company, at any time or from time to time during the Exercise
Period, as hereinafter defined, an aggregate of 210,000 fully paid and
nonassessable shares of Class B Common Stock of the Company, par value $0.01 per
share (which class of common stock is contemplated to be authorized for issuance
by the Company in September 1996 and will entitle the holders of such class of
common stock to ten votes per share), at a purchase price per share equal to the
Exercise Price as hereinafter defined. The term "Common Stock" shall mean the
aforementioned Class B Common Stock, par value $0.01 per share, of the Company,
together with any other equity securities that may be issued by the Company in
substitution therefor. The number of shares of Common Stock to be received upon
the exercise of this Warrant and the Exercise Price are subject to adjustment
from time to time as hereinafter set forth.
Section 1. Definitions. The following terms, as used herein, have the
following respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
"Exercise period" means the period of time from September 10, 1997 until
5:00 P.M., local time in New York City, on September 10, 2006.
"Exercise Price" shall be a price of $.01 per share of Common Stock.
"Subordinated Promissory Note" means the $35,000,000 initial value
Subordinated Promissory Note dated the date hereof of RSL to the Holder.
"Unit Warrants" means the Warrants to purchase the Company's Class A
Common Stock initially attached to the Senior Notes due 2006 issued by RSL
Communications PLC, a United Kingdom corporation and wholly owned subsidiary of
the Company.
"Warrant Shares" means the shares of Common Stock deliverable upon
exercise of this Warrant, as adjusted from time to time, except as provided in
Section 10 hereof.
Section 2. Exercise of Warrant. Subject to the provisions of Section 10,
this Warrant may be exercised in whole or in part, at any time or from time to
time, during the Exercise Period, by presentation and surrender hereof to the
Company at its principal office at the address set forth on the signature page
hereof (or at such other address as the Company may hereafter notify the Holder
in writing), or at the office of its stock transfer agent or warrant agent, if
any, with the Purchase Form annexed hereto duly executed and accompanied by
proper payment of the Exercise Price for the number of Warrant Shares specified
in such form. The Exercise Price shall be paid in cash, in currency of the
United States of America. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant and such Purchase Form, together with the applicable Exercise Price, at
such office, in proper form for exercise, the Holder shall be deemed to be the
holder of record of the Warrant Shares, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Warrant Shares shall not then be actually delivered to the Holder. The Company
shall pay any and all documentary stamp or similar issue taxes payable in
respect of the issue of the Warrant Shares. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance or delivery of certificates representing Warrants or Warrant
Shares in a name other than that of the Holder at the time of surrender for
exercise and, until the payment of such tax, shall not be required to issue such
Warrant Shares.
2
<PAGE>
Section 3. Reservation of Shares. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and nonassessable, free and clear of all liens,
security interests, charges and other encumbrance or restrictions on sale and
free and clear of all preemptive rights, subject, however, to the provisions of
Section 10.
Section 4. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(i) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such an exchange, the
current market value shall be the last reported sale price of the Common
Stock on such exchange on the last Business Day prior to the date of
exercise of this Warrant or if no such sale is made on such day, the mean
of the closing bid and asked prices for such day on such exchange; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
bid and asked prices reported on the last Business Day prior to the date
of the exercise of this Warrant (A) by the National Association of
Securities Dealers, Inc. Automated Quotation System or (B) if reports are
unavailable under clause (A) above by the National Quotation Bureau
Incorporated; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
Section 5. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other Warrants of different
denominations, entitling the Holder or Holders thereof to purchase in the
aggregate the same number of Warrant Shares. The Holder of this
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<PAGE>
Warrant shall be entitled without obtaining the consent of the Company, to
assign its interest in this Warrant in whole or in part to any person or
persons, subject to the provisions of Section 10. Subject to the provisions of
Section 10, upon surrender of this Warrant to the Company, with the Assignment
Form annexed hereto duly executed and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees named in such instrument of assignment
and, if the Holder's entire interest is not being assigned, in the name of the
Holder, and this Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other Warrants that carry the same rights upon
presentation hereof at the office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder hereof. The term "Warrant" as used herein includes any
Warrants into which this Warrant may be divided or for which it may be
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
Section 6. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
Section 7. Anti-dilution Provisions. In case the Company shall, while this
Warrant remains in effect, (i) declare a dividend or make a distribution on its
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class), (ii) subdivide shares of its
Common Stock into a greater number of shares, (iii) combine its outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), the Holder shall be entitled to purchase
the aggregate number and kind of shares which, if the Warrant had been exercised
immediately prior to such event, the Holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination or reclassification; and the Exercise Price shall
automatically be adjusted immediately after the record date, in the case of a
dividend or distribution, or the effective date, in the case of a subdivision,
combination or reclassification, to allow the purchase of such aggregate number
and kind of shares. Such adjustments shall be made successively whenever any
event listed above shall occur.
4
<PAGE>
No adjustment pursuant to this Section 7 in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one whole share; provided, however, that any
adjustments which by reason of this sentence are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 7 shall be made to the nearest share. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 7, the Holder shall become entitled to receive any shares of the capital
stock of the Company other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in this
Section 7, and the provisions of this Warrant with respect to the Common Stock
shall apply on like terms to any such other shares.
Section 8. Officers' Certificate. Whenever the number of Warrant Shares
purchasable hereunder shall be adjusted as required by the provisions of Section
7, the Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office an officers' certificate showing the
adjusted number of Warrant Shares purchasable hereunder determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officers' certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officers' certificate shall be made available at all reasonable times for
inspection by the Holder or any holder of a Warrant executed and delivered
pursuant to Section 4 hereof and the Company shall, forthwith after each such
adjustment, mail a copy, by certified mail, of such certificate to the Holder or
any such holder.
Section 9. Reclassification, Reorganization, Consolidation or Merger. In
case of any Reorganization Transaction (as hereinafter defined), the Company
shall, as a condition precedent to such transaction, cause effective provisions
to be made so that the Holder shall have the right thereafter, by exercising
this Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization Transaction by a
holder of the number of shares of Common Stock that might have been received
upon exercise of this Warrant immediately prior to such Reorganization
Transaction. Any such provision shall include provision for adjustments in
respect of such shares of stock and other securities and property that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Warrant. The foregoing provisions of this Section 9 shall similarly apply
to successive Reorganization Transactions. For purposes of this Section 9,
"Reorganization Transaction" shall mean (excluding any
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<PAGE>
transaction covered by Section 7) any reclassification, capital reorganization
or other change of outstanding shares of Common Stock of the Company (other than
a subdivision or combination of the outstanding Common Stock and other than a
change in the par value of the Common Stock) or any consolidation or merger of
the Company with or into another corporation (other than a merger in which the
Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock issuable upon exercise of this Warrant) or any sale, lease
transfer or conveyance to another corporation of the property and assets of the
Company as an entirety.
Section 10. Transfer to Comply with the Securities Act of 1933. The
Holder, by his acceptance hereof, represents and warrants that he is acquiring
the Warrants and any Warrant Shares for investment purposes, for his own account
and not in conjunction with any other person, directly or indirectly, and not
with an intent to sell or distribute the Warrants or any Warrant Shares except
in compliance with applicable United States federal and state securities law in
a manner which would not result in the issuance of the Warrants being treated as
a public offering. This Warrant and the Warrant Shares may be transferred and
assigned; provided, however, that neither this Warrant nor any of the Warrant
Shares, nor any interest in either, may be sold, assigned, pledged,
hypothecated, encumbered or in any other manner transferred or disposed of, in
whole or in part, except in compliance with applicable United States federal and
state securities laws and the terms and conditions hereof. Each Certificate for
Warrant Shares issued upon exercise of this Warrant, unless at the time of
exercise such Warrant Shares are registered under the Act, shall bear the
following legend:
This certificate and the securities evidenced hereby have not been
registered under the Securities Act of 1933. Neither this certificate nor
such securities nor any interest or participation therein may be sold,
assigned, pledged, hypothecated, encumbered or in any other manner
transferred or disposed of except in compliance with the Securities Act of
1933 and the applicable rules and regulations thereunder.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such legend unless, in the
opinion of counsel for the Company, the securities represented thereby need no
longer be subject to the restriction contained herein. The provisions of this
Section 10 shall be binding upon all subsequent holders of certificates bearing
the above legend and all subsequent holders of this Warrant, if any.
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<PAGE>
Section 11. Registration Rights. The Holder shall be entitled to the same
rights as the holders of Unit Warrants to registration of the offering of such
Holder's Warrant Shares under the Act.
Section 12. Listing on Securities Exchanges. The Company shall use its
best efforts to list the Warrant Shares on each national securities exchange on
which any Common Stock may at any time be listed, subject to official notice of
issuance upon the exercise of this Warrant, and shall use its best efforts to
maintain, so long as any other shares of its Common Stock shall be so listed,
such listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall use its best efforts to so list
on each national securities exchange, and shall use its best efforts to maintain
such listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of capital stock of
the same class shall be listed on such national securities exchange by the
Company. Any such listing shall be at the Company's expense.
Section 13. Availability of Information. The Company shall comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act to the
extent it is required to do so under the Exchange Act. The Company shall also
cooperate with each Holder of any Warrants and holder of any Warrant Shares in
supplying such information as may be necessary for such holder to complete and
file any information reporting forms currently or hereafter required by the
Securities and Exchange Commission as a condition to the availability of an
exemption from the Act for the sale of any Warrants or Warrant Shares. The
provisions of this Section 13 shall survive termination of this Warrant, whether
upon exercise of this Warrant in full or otherwise.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
by its duly authorized officer and to be dated as of September 10, 1996.
RSL COMMUNICATIONS, LTD.
By: Itzhak Fisher
---------------------------
Title: President
Address: 767 Fifth Avenue,
New York, New York 10153
7
<PAGE>
WARRANT EXERCISE FORM
Dated ________________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing ___________ shares of Common Stock and hereby makes
payment of ______________ in payment of the exercise price thereof.
------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
Signature _________________________________________________
------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________________________ hereby sells,
assigns and transfers unto
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
its right to purchase _____________ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint______________________
___________________________________ Attorney, to transfer the same on the books
of the Company, with full power of substitution in the premises.
Date: _______________, 19__
Signature ____________________________
<PAGE>
Exhibit 10.7
AGREEMENT
The undersigned, RSL Communications, Ltd., a Bermuda corporation ("RSL")
and Ronald S. Lauder having an address at 767 Fifth Avenue, Suite 4200, New
York, New York 10153 ("Lauder"), in consideration for the mutual promises
contained herein, agree as follows:
1. RSL shall prepay, on October 1, 1996, the outstanding Accreted Value of
the Subordinated Promissory Note, dated September 10, 1996, issued by RSL to
Lauder. Such payment shall be made in accordance with Sections 1(b) and 4 of the
Subordinated Promissory Note.
2. In consideration for such prepayment, Lauder agrees that he will, upon
ten (10) business days prior written notice from RSL with respect to each
request for funding, either (at Lauder's option) (i) (in addition to his
existing $15,000,000 Chase Manhattan Bank guarantee) guarantee one or more
subordinated bank borrowings by RSL in an aggregate amount not to exceed
$35,000,000 at any one time outstanding, each such personal guarantee to be in
such form as is normal and customary for the bank from which RSL shall borrow;
(ii) directly loan funds to RSL on a subordinated basis in an amount not in
excess of $35,000,000 at any one time outstanding at an interest rate of 11% per
annum which amounts may be repaid and reborrowed; or (iii) provide a combination
of loan guarantees or direct loans, as set forth above, in an amount not in
excess of $35,000,000 at any one time outstanding. The terms of such
subordination shall be substantially in accordance with
<PAGE>
Schedule I hereto. Such obligation with respect to guaranteed bank loans or
direct loans shall remain until the earlier of (i) December 15, 2006 or (ii) the
date on which RSL receives net proceeds from an equity offering in excess of
$35,000,000 (the "Equity Proceeds") provided, that if any loans are then
outstanding, the Equity Proceeds are utilized to repay such loans, at which time
Lauder's obligation to provide loan guarantees and/or direct loans shall cease.
Interest on the loan or loans hereunder shall not be paid in cash prior to
December 15, 2001.
The undersigned have executed this Agreement as of this 30th day of
September, 1996.
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
-------------------------
Itzhak Fisher, President
/s/ Ronald S. Lauder
-----------------------------
Ronald S. Lauder
2
<PAGE>
SCHEDULE I TO
AGREEMENT DATED AS OF SEPTEMBER 30, 1996
Subordination. (a) Except as otherwise provided with respect to Equity
Proceeds, principal, interest on and any other amount due in respect of loans
under this Agreement (the "Loans") shall, as provided in (b) and (c) below, be
subordinated and made junior to (i) the payment of the principal amount,
redemption premium, if any, all interest and any other amounts due on the
12 1/4% Senior Notes due 2006 (the "Senior Notes") issued by RSL Communications
PLC, a United Kingdom corporation and wholly owned subsidiary or RSL (the "Note
Issuer"), and guaranteed by RSL (the "Guaranty") (ii) and the Guaranty.
(b) Except as otherwise provided with respect to Equity Proceeds, and
subject to subparagraph (c) below, until the Senior Notes shall have been paid
in full, RSL shall not make any direct or indirect payment or reduction (whether
by way of loan, set-off or otherwise) in respect of the principal amount or
accreted value of, or interest on or any other amount due in respect of the
Loans, whether such amounts shall have become payable on maturity, by
acceleration or otherwise, if on the date such payment would (but for this
Section (b)) be payable pursuant to the Loans (hereinafter referred to as a
"Payment Date"), (i) either RSL or the Note Issuer shall have failed to make
payments required to be made on or with respect to the Guaranty or all or any
portion of the Senior Notes as and when the same became or becomes due and
payable and such failures to pay have not been cured or waived, (ii) any Default
(as defined in the Indenture pursuant to which the Senior Notes are issued) or
event of default shall have occurred and be continuing under the Senior Notes,
whether or not the holders of the Senior Notes (the "Senior Lenders") shall,
pursuant to such Senior Notes, have declared all or any portion of the Senior
Notes due and payable in full on the basis of the occurrence of such default or
event of default, or (iii) if such a Default or event of default shall not be
continuing on any Payment Date, but the Senior Lenders shall, pursuant to the
Senior Notes, have declared all or any portion of the Senior Notes due and
payable in full on the basis of the occurrence of such Default or event of
default and such acceleration shall not have been specifically rescinded in
writing by the Senior Lenders. Scheduled payments of interest on the Loans and
the payment of the principal amount or accreted value the Loans which are not
otherwise prohibited pursuant to this Schedule I from being made, may be made,
but only upon, subject and pursuant to the other terms and provisions set forth
herein.
3
<PAGE>
(c) In the event of (x) any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, readjustment of debt, arrangement,
composition, assignment for the benefit of creditors, or other similar
proceeding relative to RSL, as such, or its property, or (y) any proceeding for
voluntary liquidation, dissolution or other winding up or bankruptcy proceedings
relative to RSL, then the Senior Notes shall first be paid in full before any
payment or distribution of any character, whether in cash, securities,
obligations or other property, shall be made in respect to the Loans.
4
<PAGE>
Exhibit 10.8
CONSULTING AGREEMENT
AGREEMENT made as of this 15 day of September, 1995, by and between RSL
Communications, Inc. (the "Company"), a British Virgin Island corporation and
Eugene A. Sekulow ("Sekulow").
WITNESSETH:
WHEREAS, the Company is engaged in the business of international
telecommunications; and
WHEREAS, Sekulow has substantial experience in international
telecommunications;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties hereto agree as follows:
1. Services. Sekulow shall act as a consultant to the Company. Sekulow
shall perform general services relating primarily to providing strategic advice
to the management and in assisting the Company in (i) identifying investment
opportunities; (ii) obtaining operating agreements on behalf of the Company's
affiliates; (iii) identifying strategic partners as potential investors in the
Company's affiliates; and (iv) identifying key management personnel. During the
term of this Agreement, Sekulow shall report directly to Itzhak Fisher,
President and Chief Executive Officer of the RSL Communications, Inc.
2. Term. The term of this Agreement shall commence as of September 1,
1995, and shall continue through August 31,1996 (the "Term"). The Company shall
have an option (the "Option") to renew this Agreement, with Sekulow's consent,
for an additional one (1) year term. The Option may be executed at any time
within ninety (90) days prior to the expiration of the Term by the Company
delivering written notice of such exercise to Sekulow. This agreement is
terminated immediately in the event of Sekulow's death or disability.
3. Compensation. In consideration of the Services, the Company shall pay
to Sekulow a consulting fee of $6,000 on the first day of each quarter during
the Term. Such fee shall serve as a retainer for 10 hours per month of services
(the "Service Hours") to be provided by Sekulow. Travel time, time during
weekends and holidays shall be included in the "Service Hours." Any additional
services above 10 hours must be approved by the Company in writing and the fee
for the additional services shall be $300 per hour. If Sekulow cannot meet his
commitment of the Service Hours due to his other commitments, the Service Hours
shall be adjusted by Sekulow with the consent of the Company. The Company shall
not unreasonably withhold its consent, provided that Sekulow will make his best
effort to complete his commitment over the Term. In addition, the Company shall
grant to Sekulow options to purchase 10,000 shares of the Company's common stock
at the end of the Term at a price of the most recent sale of equity prior to the
grant of such option.
<PAGE>
RSL Communications, Inc.
Eugene A. Sekulow
Page Two
4. Directorship. In addition, Sekulow shall serve as a Director of the
Company, during the Term, with no additional compensation or benefit.
5. Expenses. The Company shall reimburse Sekulow for all business travel
expenses reasonably and necessarily incurred by Sekulow in the performance of
his duties hereunder including business class airfare for all domestic travel
and foreign travel during day time hours and first class airfare for all foreign
travel in excess of eight hours or overnight, but only if and to the extent that
Sekulow supplies written documentation of such expense to the Company in such
form as the Company may reasonably request. Each first class travel must be
approved by the Company.
6. Relationship. In performing the services provided for hereunder,
Sekulow is acting as an independent contractor, Sekulow shall not be deemed by
virtue of this Agreement to be the servant, agent or employee of the Company for
any purpose whatsoever. It is understood that Sekulow shall not be entitled, as
a result of the services to be provided by Sekulow hereunder, to be a member of
any group benefit plans available to full-time employees of the Company.
7. Confidentiality. It is anticipated that during the term of this
Agreement, Sekulow will, from time to time, learn confidential, proprietary
and/or trade secret information (hereinafter referred to as "information") about
the business of the Company and its affiliated entities, including but not
limited to the information about the Company's financial, marketing and
operational plans and the results of services performed under this Agreement.
Sekulow agrees that he will not communicate or disclose any of the information
to any other person, firm or other entity or use the information for any
purposes other than to accomplish the objectives for which he has been retained,
without first obtaining written consent from the Company. The obligations set
forth in this paragraph shall not apply to information publicly disclosed by the
Company or to information independently developed by others and properly
acquired by Sekulow in the ordinary course of its business.
8. Disclosure. The Company and Sekulow agree not to disclose to, or
discuss with, any person any of the terms and conditions of this agreement. Any
information regarding Sekulow's relationship to the Company, except his
directorship, shall not be disclosed without the written consent of Sekulow.
9. Governing Law. This Agreement and the rights of the parties hereto
shall be deemed to have been made in, and shall be construed and determined in
accordance with the laws of, the State of New York.
<PAGE>
RSL Communications, Inc.
Eugene A. Sekulow
Page Two
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first set forth above.
RSL COMMUNICATIONS, INC.
By: /s/ Eugene A. Sekulow By: /s/ Itzhak Fisher
------------------------- -------------------------
Eugene A. Sekulow Itzhak Fisher
President & CEO
<PAGE>
CONSULTING AGREEMENT
AGREEMENT made as of this 15 day of September, 1995, by and between RSL
Communications, Inc. (the "Company"), a British Virgin Island corporation and
Eugene A. Sekulow ("Sekulow").
WITNESSETH:
WHEREAS, the Company is engaged in the business of international
telecommunications; and
WHEREAS, Sekulow has substantial experience in international
telecommunications;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties hereto agree as follows:
1. Services. Sekulow shall act as a consultant to the Company. Sekulow
shall perform general services relating primarily to providing strategic advice
to the management and in assisting the Company in (i) identifying investment
opportunities; (ii) obtaining operating agreements on behalf of the Company's
affiliates; (iii) identifying strategic partners as potential investors in the
Company's affiliates; and (iv) identifying key management personnel. During the
term of this Agreement, Sekulow shall report directly to Itzhak Fisher,
President and Chief Executive Officer of the RSL Communications, Inc.
2. Term. The term of this Agreement shall commence as of September 1,
1995, and shall continue through August 31, 1996 (the "Term"). The Company shall
have an option (the "Option") to renew this Agreement, with Sekulow's consent,
for an additional one (1) year term. The Option may be executed at any time
within ninety (90) days prior to the expiration of the Term by the Company
delivering written notice of such exercise to Sekulow. This agreement is
terminated immediately in the event of Sekulow's death or disability.
3. Compensation. In consideration of the Services, the Company shall pay
to Sekulow a consulting fee of $6,000 on the first day of each quarter during
the Term. Such fee shall serve as a retainer for 10 hours per month of services
(the "Service Hours") to be provided by Sekulow. Travel time, time during
weekends and holidays shall be included in the "Service Hours." Any additional
services above 10 hours must be approved by the Company in writing and the fee
for the additional services shall be $300 per hour. If Sekulow cannot meet his
commitment of the Service Hours due to his other commitments, the Service Hours
shall be adjusted by Sekulow with the consent of the Company. The Company shall
not unreasonably withhold its consent, provided that Sekulow will make his best
effort to complete his commitment over the Term. In addition, the Company shall
grant to Sekulow options to purchase 10,000 shares of the Company's common stock
at the end of the Term at a price of the most recent sale of equity prior to the
grant of such option.
<PAGE>
RSL Communications, Inc.
Eugene A. Sekulow
Page Two
4. Directorship. In addition, Sekulow shall serve as a Director of the
Company, during the Term, with no additional compensation or benefit.
5. Expenses. The Company shall reimburse Sekulow for all business travel
expenses reasonably and necessarily incurred by Sekulow in the performance of
his duties hereunder including business class airfare for all domestic travel
and foreign travel during day time hours and first class airfare for all foreign
travel in excess of eight hours or overnight, but only if and to the extent that
Sekulow supplies written documentation of such expense to the Company in such
form as the Company may reasonably request. Each first class travel must be
approved by the Company.
6. Relationship. In performing the services provided for hereunder,
Sekulow is acting as an independent contractor, Sekulow shall not be deemed by
virtue of this Agreement to be the servant, agent or employee of the Company for
any purpose whatsoever. It is understood that Sekulow shall not be entitled, as
a result of the services to be provided by Sekulow hereunder, to be a member of
any group benefit plans available to full-time employees of the Company.
7. Confidentialitv. It is anticipated that during the term of this
Agreement, Sekulow will, from time to time, learn confidential, proprietary
and/or trade secret information (hereinafter referred to as "information") about
the business of the Company and its affiliated entities, including but not
limited to the information about the Company's financial, marketing and
operational plans and the results of services performed under this Agreement.
Sekulow agrees that he will not communicate or disclose any of the information
to any other person, firm or other entity or use the information for any
purposes other than to accomplish the objectives for which he has been retained,
without first obtaining written consent from the Company. The obligations set
forth in this paragraph shall not apply to information publicly disclosed by the
Company or to information independently developed by others and properly
acquired by Sekulow in the ordinary course of its business.
8. Disclosure. The Company and Sekulow agree not to disclose to, or
discuss with, any person any of the terms and conditions of this agreement. Any
information regarding Sekulow's relationship to the Company, except his
directorship, shall not be disclosed without the written consent of Sekulow.
9. Governing Law. This Agreement and the rights of the parties hereto
shall be deemed to have been made in, and shall be construed and determined in
accordance with the laws of, the State of New York.
<PAGE>
RSL Communications, Inc.
Eugene A. Sekulow
Page Two
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
11. WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first set forth above.
RSL COMMUNICATIONS, INC.
By: /s/ Eugene A Sekulow By: /s/ Itzhak Fisher
------------------------- -------------------------
Eugene A Sekulow Itzhak Fisher
President & CEO
<PAGE>
Exhibit 10.9
DRAFT: AUGUST 8, 1996
August 8, 1996
Mr. Eugene Sekulow
Westchester Financial Center
50 Main Street, 10th Floor
White Plains, NY 10606
Dear Mr. Selculow:
Pursuant to Section 2 of the Consulting Agreement signed on September 15,
1995 between you and RSL Communications Ltd., (now a Bermuda company) the
Company hereby declares its intention to renew this Agreement for a period of
one year on the same terms and conditions as the original Agreement. Please
indicate your willingness to continue as a Consultant to us by signing below and
returning this letter to me.
Thank you.
Sincerely,
/s/ Itzhak Fisher
---------------------------------
Itzhak Fisher
ACCEPTED:
August 15, 1996
/s/ Eugene Sekulow /s/ Itzhak Fisher
- ----------------------------- ---------------------------------
Eugene Sekulow Itzhak Fisher
President & CEO
<PAGE>
Exhibit 10.10
- --------------------------------------------------------------------------------
RSL COMMUNICATIONS, LTD.
1995 AMENDED AND RESTATED STOCK OPTION PLAN
- --------------------------------------------------------------------------------
Originally Effective April 1, 1995,
Amended and Restated as of July 23, 1996
<PAGE>
RSL COMMUNICATIONS, LTD.
1995 AMENDED AND RESTATED STOCK OPTION PLAN
TABLE OF CONTENTS
1. PURPOSE .................................................................. 1
2. DEFINITIONS .............................................................. 1
3. ADMINISTRATION ........................................................... 2
4. TYPES OF AWARDS .......................................................... 2
5. STOCK SUBJECT TO THE PLAN ................................................ 3
6. COMPLIANCE WITH SECURITIES LAWS .......................................... 3
7. ELIGIBILITY .............................................................. 3
8. PAYMENT OF PURCHASE PRICE OF OPTIONS ..................................... 3
9. GRANT OF NON-STATUTORY STOCK OPTIONS ..................................... 4
10. GRANT OF INCENTIVE STOCK OPTIONS ........................................ 4
11. RELOAD OPTIONS .......................................................... 5
12. TERMINATION OF EMPLOYMENT AND VESTING ................................... 6
13. COMMITTEE AUTHORITY TO BUY OUT OPTIONS .................................. 6
14. RIGHTS OF A STOCKHOLDER ................................................. 6
15. NONTRANSFERABILITY ...................................................... 6
16. AGREEMENT WITH PARTICIPANTS ............................................. 7
17. DESIGNATION OF BENEFICIARY .............................................. 7
18. DILUTION AND OTHER ADJUSTMENTS .......................................... 7
19. TAX PAYMENTS ............................................................ 7
20. AMENDMENT OF THE PLAN ................................................... 8
21. EXCULPATION AND INDEMNIFICATION ......................................... 8
22. EFFECTIVE DATE OF PLAN .................................................. 8
23. TERMINATION OF THE PLAN ................................................. 8
24. APPLICABLE LAW .......................................................... 9
<PAGE>
- --------------------------------------------------------------------------------
RSL COMMUNICATIONS, LTD.
1995 AMENDED AND RESTATED STOCK OPTION PLAN
- --------------------------------------------------------------------------------
1. PURPOSE
The purpose of the RSL Communications, Ltd. 1995 Amended and Restated Stock
Option Plan (the "Plan") is to advance the interests of RSL Communications, Inc.
(the "Company") and its shareholders by providing those key employees of the
Company and its Affiliates, upon whose judgment; initiative and efforts the
successful conduct of the business of the Company and its Affiliates largely
depends, with additional incentive, evidenced by this plan, to perform in a
superior manner. A purpose of the Plan is also to attract people of experience
and ability to the service of the Company and its Affiliates.
2. DEFINITIONS
a. "Affiliate" means (i) a member of a controlled group of corporations of which
the Company is a member or (ii) an unincorporated trade or business which is
under common control with the Company as determined in accordance with Section
414(c) of the Internal Revenue Code of 1986, as amended, (the "Code") and the
regulations issued thereunder. For purposes hereof, a "controlled group of
corporations" shall mean a controlled group of corporations as defined in
Section 1563(a) of the Code determined without regard to Section 1563(a)(4) and
(e)(3)(C).
b. "Award" means a grant of Non-Statutory Stock Options or Incentive Stock
Options under the provisions of this Plan, including those granted on April 1,
1995, as set forth in the employment agreements between the Company and certain
Participants.
c. "Board of Directors" or "Board" means the board of directors of the Company.
d. "Committee" means a committee appointed by the Board of Directors. In the
absence of such appointment or if, due to resignation or other cause, no
appointed members remain, the Board of Directors shall be the Committee.
Following the Initial Public Offering, however, such committee or a fully
empowered and authorized subcommittee thereof shall consist only of
"non-employee directors" as such term is defined under Rule 16b-3 under the
Securities and Exchange Act, as amended, as promulgated by the Securities and
Exchange Commission.
e. "Common Stock" means the Class A Common Stock of the Company, par value $0.01
per share.
f. "Company" means RSL Communications, Inc.
g. "Date of Grant" means the date an Award granted by the Committee or the Board
is effective pursuant to the terms hereof.
h. "Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him. Additionally, the Committee may require that a medical doctor
selected or approved by the Board of Directors advise the Committee that it is
either not possible to determine when such Disability will terminate or that it
appears probable that such Disability will be permanent during the remainder of
said Participant's lifetime.
i. "Fair Market Value" means, as of any given date, unless otherwise determined
by the Committee, the mean between the highest and lowest quoted selling price,
regular way, of the Common Stock on a recognized national securities exchange
that regularly lists the Common Stock. If no such sale of Common Stock occurs
and is reported on that date or if no such securities exchange listing exists on
that date, the fair market value of the Common Stock shall be determined by the
Committee.
<PAGE>
- --------------------------------------------------------------------------------
RSL Communications, Ltd. 1995 Amended and Restated Stock Option Plan
- --------------------------------------------------------------------------------
j. "Incentive Stock Option" or ISO means an Option granted by the Committee or
the Board to a Participant under Section 10 of this Plan, which Option is
designated as an Incentive Stock Option meeting the requirements of Section 422
of the Code.
k. "Initial Public Offering" means the initial public offering of equity
securities of the Company.
1. "Joinder Agreement" means the agreement or agreements with Participants
referred to in Section 16.
m. "Non-statutory Stock Option" or NSO means an Option granted by the Committee
or the Board to a Participant, which Option is designated as a Non-statutory
Stock Option or is deemed to be a Non-statutory Stock Option pursuant to Section
10 below.
n. "Normal Retirement" means termination of employment or service which
constitutes retirement or early retirement by the referenced individual under
any tax-qualified plan maintained by the Company or any of its Affiliates. If
the Company maintains no such tax-qualified plan, then "Normal Retirement" shall
mean termination of employment or service, after the Participant has attained 65
years of age, for any reason other than Disability, death, or Termination for
Cause.
o. "Option" means an Award granted under Section 9, Section 10, or Section 11.
p. "Optionee" means a Participant who has been granted an Option under this
Plan.
q. "Participant" means any employee, consultant or non-employee director of the
Company or its Affiliates chosen by the Committee to participate in the Plan in
accordance with Section 7.
r. "Plan Year" means the period from April 1,1995 through December 31,1995, and
any calendar year commencing thereafter.
s. "Reload Option" means an Option granted under Section 11.
t. "Termination for Cause" means termination upon an intentional failure to
perform stated duties, breach of a fiduciary duty involving personal dishonesty
which results in material loss to the Company or one of its Affiliates, or
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses), or final cease-and-desist order which results in material
loss to the Company or one of its Affiliates.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it sees necessary for the proper administration of the Plan and to make
whatever determinations and interpretations in connection with the Plan it sees
as necessary or advisable. All determinations and interpretations made by the
Committee shall be binding and conclusive on all Participants in the Plan and on
their legal representatives and beneficiaries. The Committee shall select one of
its members as its chairman, and shall hold meetings at such time and place as
it may determine. Acts by a majority of the Committee, or acts reduced to or
approved by a majority of the members of the Committee, shall be the valid acts
of the Committee.
4. TYPES OF AWARDS
Awards under the Plan may be granted in any one or a combination of
Non-statutory Stock Options and Incentive Stock Options, as defined below in
Sections 9 and 10 of the Plan.
- --------------------------------------------------------------------------------
Page 2 of 9
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
RSL Communications, Ltd. 1995 Amended and Restated Stock Option Plan
- --------------------------------------------------------------------------------
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 18, the maximum number of shares
reserved for purchase pursuant to the exercise of Options granted under the Plan
is 1,000,000 shares of Class A Common Stock of the Company, par value $0.01 per
share. These shares of Common Stock may be either authorized but unissued shares
or shares previously issued and required by the Company. To the extent that
Options are granted under the Plan, the shares underlying such Options will be
unavailable for future grants under the Plan except that to the extent that
Options granted under the Plan terminate, expire or are canceled without having
been exercised, new Awards may be made with respect to these shares.
6. COMPLIANCE WITH SECURITIES LAWS
a. In general shares shall not be issued with respect to any Option granted
under this Plan unless the exercise of that Option and the issuance and delivery
of the shares pursuant thereto shall comply with all applicable provisions of
state and federal law, including, without limitation, the Securities Act of
1933, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. Further, each Optionee shall consent to the imposition of a
legend on the certificate representing the shares of Common Stock issued upon
the exercise of the Option restricting their transferability as required by law,
the Option, or this Plan.
b. Rule 16b Six Month Limitation. Following the Initial Public Offering, to the
extent required to comply with Section 16b of the Securities Exchange Act of
1934, no Option may be exercised for at least six months from its grant, except
in the case of death or Disability.
7. ELIGIBILITY
Officers, employees and consultants of the Company or its Affiliates, as shall
be selected by the Committee or the Board, shall be eligible to receive Awards
under the Plan, Non-employees of the Company or an Affiliate may receive only
Non-statutory Stock Options, Directors who are not officers or employees or of
the Company or its Affiliates shall be eligible for options awarded by the
Committee.
8. PAYMENT OF PURCHASE PRICE OF OPTIONS
a. Payment for the shares purchased pursuant to the exercise of an Option shall
be made by one or both of the following:
(1) With cash, or codified or bank check payable to the order of the
Company; or
(2) Through the surrender of shares of the Common Stock of the Company,
the value of which being the Fair Market Value as determined as of
the date of exercise of the Option. However, shares obtained upon
the exercise of any Incentive Stock Option may not be surrendered
under this provision until after the period prescribed by Code
Section 422(a)(l).
The Committee may permit or arrange for the Company, any of its Affiliates or
any third party to make loans to finance the exercise of any Option granted
pursuant to this Plan, as well as to finance the payment of the estimated or
actual amount of taxes payable by the Participant as a result of the exercise or
payment of any Option. This may include arrangements with brokers or other
parties that provide funds pending the delivery of Company shares (sometimes
known as cashless excise arrangements). The Committee may also prescribe, or may
empower the Company or any of its Affiliates to prescribe, the other terms and
conditions (including, but not limited to, the interest rate, maturity date, and
whether the loan will be secured or unsecured) of any such loan or arrangement.
The Committee shall strictly prohibit any such arrangement that would cause any
party to violate any state or federal law, including without limitation the
Securities Exchange Act of 1933.
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9. GRANT OF NON-STATUTORY STOCK OPTIONS
The Committee or the Board may, from time to time, grant Non-statutory Stock
Options to eligible employees and, upon such terms and conditions as the
Committee may determine, grant Non-statutory Stock Options in exchange for and
upon surrender of previously granted Awards under this Plan. Any Option granted
pursuant to the Plan shall be a Non-statutory Stock Option if it is identified
as such or is deemed to be a Non-statutory Stock Option pursuant to Section 10
below, Non-statutory Stock Options granted pursuant to this Plan are subject to
the following terms and conditions:
a. Price - The purchase price per share of Common Stock deliverable upon
the exercise of each Non-statutory Stock Option shall be determined by the
Committee or the Board as of the date the Option is granted. Such purchase price
shall not be less than 100% of the Fair Market Value of the Company's Common
Stock as of the date of Grant unless a lower price shall be specified in the
applicable Joinder Agreement. Shares may be purchased only upon full payment of
the purchase price.
b. Terms of Options - The term during which each Non-statutory Stock
Option may be exercised shall be determined by the Committee or the Board, but
in no event shall a Non-statutory Stock Option be exercisable in whole or in
part more than 10 years from the Date of Grant or less than six months from the
Date of Grant. The schedule and terms for the vesting of the right to exercise a
Non-Statutory Stock Option shall be set forth in a Joinder Agreement, which
agreement is hereby incorporated by reference. The Committee or the Board may
provide that a Non-statutory Stock Option shall become exercisable in
installments, and that the shares comprising each installment may be purchased
in whole or in part at any time after such installment becomes purchasable. The
Committee or the Board may, in its sole discretion, accelerate the time at which
any Non-statutory Stock Option may be exercised in whole or in part.
10. GRANT OF INCENTIVE STOCK OPTIONS
The Committee or the Board may, from time to time, grant Incentive Stock Options
to eligible employees. Any Incentive Stock Option granted pursuant to this Plan
shall be clearly identified as to its intended status as an Incentive Stock
Option. Incentive Stock Options granted pursuant to this Plan shall be subject
to the following terms and conditions:
a. Price - The purchase price per share of Common Stock deliverable upon
the exercise of each Incentive Stock Option shall be determined by the Committee
or the Board as of the date the Option is granted. Such purchase price shall be
not less than 100% of the Fair Market Value of the Company's Common Stock as of
the Date of Grant. However, if a Participant owns stock possessing more than 10%
of the total combined voting power of all classes of Common Stock of the
Company, the purchase price per share of Common Stock deliverable upon the
exercise of each Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Company's Common Stock as of the Date of Grant. Shares may
be purchased only upon payment of the full purchase price. Any Option granted
under this Section 10 with a purchase price that is less than the Fair Market
Value of the Company's Common Stock as of the Date of Grant shall be deemed a
Non-statutory Stock Option.
b. Amounts of Options - Incentive Stock Options may be granted to any
eligible employee in such amounts as determined by the Committee or the Board.
In the case of an Option intended to qualify as an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time the Option is granted) of
the Common Stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Participant's employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000. The provisions of this
Section l0(b) shall be construed and applied in accordance with Section 422(d)
of the Code and the regulations, if any, promulgated thereunder. To the extent
an Award under this Section 10 exceeds this $ 100,000 limit, the portion of the
award in excess of such limit shall be deemed a Non-statutory Stock Option.
c. Terms of Options - The term during which each Incentive Stock Option
may be exercised shall be determined by the Committee or the Board, but in no
event shall an Incentive Stock Option be exercisable in whole or in part more
than 10 years from the Date of Grant or less than six months from the Date
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of Grant. If at the time an Incentive Stock Option is granted to an employee,
the employee owns Common Stock representing more than 10% of the total combined
voting power of the Company (or, under Section 424(d) of the Code), is deemed to
own Common Stock representing more than 10% of the total combined voting power
of all such classes of Common Stock, by reason of the ownership of such classes
of Common Stock, directly or indirectly, by or for any brother, sister, spouse,
ancestor or lineal descendant of such employee, or by or for any corporation,
partnership, estate or trust of which such employee is an shareholder, partner
or beneficiary), the Incentive Stock Option granted to such employee shall not
be exercisable after the expiration of five years from the Date of Grant. No
Incentive Stock Option granted under this Plan is transferable except by will or
the laws of descent and distribution and is exercisable in his lifetime only by
the employee to whom it is granted.
The schedule and terms for the vesting of the right to exercise an Incentive
Stock Option shall be set forth in a Joinder Agreement, which agreement is
hereby incorporated by reference. The Committee or the Board may provide that
Incentive Stock Option shall become exercisable in installments, and that the
shares comprising each installment may be purchased in whole or in part at any
time after such installment becomes purchasable, provided that the amount able
to be first exercised in a given year is consistent with the terms of Section
422 of the Code. The Committee or the Board may, in its sole discretion,
accelerate the time at which any incentive Stock Option may be exercised in
whole or in part, provided that it is consistent with the terms of Section 422
of the Code.
d. Compliance with Code - The Options granted under this Section 10 of the
Plan are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Code, but the Company makes no warranty as to the
qualification of any Option as an incentive stock option within the meaning of
Section 422 of the Code. The exercise of any Option granted hereunder which is
designated as an Incentive Stock Option that fails to qualify under Section 422
of the Code shall be deemed to be an exercise of a Non-statutory Option.
11. RELOAD OPTIONS:
a. Authorization of Reload Options. Concurrently with the award of
Non-statutory Stock Options and/or the award of Incentive Stock Options to any
Participant in the Plan, the Committee or the Board may authorize reload options
("Reload Options") to purchase for cash or shares a number of shares of Common
Stock. The number of Reload Options shall equal
i) the number of shares of Common Stock used to exercise the
underlying Options and
ii) to the extent authorized by the Committee or the Board, the
number of shares of Common Stock used to satisfy any tax
withholding requirement incident to the exercise of the
underlying Options. The grant of a Reload Option will become
effective upon the exercise of underlying Options, through the
use of shares of Common Stock held by the Optionee for at least 6
months. Notwithstanding the fact that the underlying Option may
be an Incentive Stock Option, a Reload Option is not intended to
qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986 unless so stated in a Reload Option
Amendment.
b. Reload Option Amendment. If the Committee or the Board has authorized
Reload Options with respect to any Award hereunder, such authorization shall be
specified in the Joinder Agreement entered into in connection with such Award.
Upon the exercise of an Option with respect to which a Reload Option has been
authorized, the Reload Option will be evidenced by an amendment to the Joinder
Agreement (referred to as a Reload Option Amendment).
c. Reload Option Price. Except as otherwise provided in the Reload Option
Amendment, the option price per share of Common Stock deliverable upon the
exercise of a Reload Option shall be the Fair Market Value of a share of Common
Stock as of the date the grant of the Reload Option becomes effective.
d. Term and Exercise. Except as otherwise provided in the Reload Option
Amendment, each Reload Option shall be fully exercisable only after six months
from the effective date of the grant and the term of each Reload Option shall be
equal to the remaining option term of the underlying Option.
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e. Termination of Employment. No additional Reload Options shall be granted
to Optionees when Options are exercised pursuant to the terms of this Plan
following termination of the Optionee's employment.
f. Applicablity of Stock Option Sections. Except for terms prescribed in
this section or in the Reload Option Amendment, all provisions of this relating
to Options generally shall apply equally to Reload Options. Said Sections are
incorporated by reference in this section as though fully set forth herein.
12. TERMINATION OF EMPLOYMENT AND VESTING
Except as provided in the Joinder Agreement, any vested Options granted under
this Plan shall be exercisable upon the termination of a Participant's service
for any reason only as to those shares which were immediately purchasable by the
Participant at the date of termination as provided under Section 9(b) or 10(c).
Incentive Stock Options will be exercisable only for a period of three months
following termination. Non-statutory Options will be exercisable for the term
otherwise prescribed under the Plan. In the event of Termination for Cause, all
rights under the Participant's Options shall expire upon termination.
Except as provided in the Joinder Agreement, in the event of the Disability or
death of any Participant, all Options granted to the Participant, regardless of
whether then exercisable, shall vest and shall be exercisable by the Participant
or his legal representatives or beneficiaries for one year or such longer period
as determined by the Committee following the date of the Participant's death or
cessation of employment due to Disability. Upon Normal Retirement, all
unexercised vested options shall be exercisable for one year. If the Option in
question is intended to be an Incentive Stock Option, such Option shall not be
eligible for treatment as an Incentive Stock Option in the event such Option is
exercised more than three months following the date of the Participant's Normal
Retirement. In no event shall the period extend beyond the expiration of the
Option term.
The Joinder Agreement may provide additional or contrary terms for exercise upon
one or more circumstances of termination, in which case the terms of the Joinder
Agreement shall control.
13. COMMITTEE AUTHORITY TO BUY OUT OPTIONS
Notwithstanding any provision in this Plan to the contrary, the Committee and
the Board reserve the authority to buy out, at any time before its exercise, any
Option previously granted under this Plan in the event of a corporate
transaction where the Option shares, if issued, would be subject to immediate
cancellation. Should the Committee or the Board exercise such authority, the
Participant holding such Option shall surrender the Option in exchange for
payment by the Company, in cash or Common Stock, of an amount equal to the
difference between the Fair Market Value of the Common Stock as of the date of
the Committee's or the Board's election and the exercise price per share of the
Option as of the Date of Grant. Such payment shall be in lieu of the exercise of
the underlying Option, and such Option shall cease to be exercisable at the time
payment is made.
14. RIGHTS OF A STOCKHOLDER
No Participant shall have any rights as a stockholder with respect to any shares
covered by a Non-statutory or Incentive Stock Option until the date of issuance
of a stock certificate for such shares. Nothing in this Plan or in any Award
granted confers on any person any right to continue in the employ of the Company
or its Affiliates or to continue to perform services for the Company or its
Affiliates or interfere in any way with the right of the Company or its
Affiliates to terminate a Participant's services as an officer or other employee
at any time.
15. NONTRANSFERABILITY
No Award under the Plan shall be transferable by the Optionee other than by will
or the laws of descent and distribution and may only be exercised during his
lifetime by the Optionee, or by a guardian or legal representative.
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16. AGREEMENT WITH PARTICIPANTS
Each Award of Options will be evidenced by a written Joinder Agreement, executed
by the Participant and the Company or its Affiliates, which describes the
conditions for receiving the Awards, including the date of Award, the purchase
price, if any, of the Award or the shares to be purchased, applicable periods,
and any other terms and conditions as may be required by the Board of Directors
or applicable securities law; provided, however, that the Joinder Agreement
evidencing Options granted to any Participant hereunder effective April 1, 1995
shall be the employment agreement by and between the Company and such
Participant. Each Joinder Agreement is incorporated in this Plan by reference.
17. DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of the Participant's death, any Option to which
the Participant would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Company and may be revoked in writing. If a
Participant fails effectively to designate a beneficiary, then the Participant's
estate will be deemed to be the beneficiary.
18. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, the Committee shall
make adjustments to the number of shares reserved pursuant to Section 5 and to
previously granted Awards so as to prevent dilution or enlargement of the rights
of the Participant, including any or all of the following:
a. Adjustments in the aggregate number or kind of shares of Common Stock
which may be awarded under the Plan;
b. Adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan; or
c. Adjustments in the purchase price of outstanding Incentive or
Non-statutory Stock Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award.
19. TAX PAYMENTS
a. Withholding - No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal income tax
purposes with respect to any award under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any federal, state, or local taxes of any kind required by law or
the Company to be withheld with respect to such amount.
Unless otherwise determined by the Committee or the Board, withholding
obligations may be settled with Common Stock or exercisable Stock Options,
including Common Stock or Stock Options that are part of the Award that gives
rise to the withholding requirement. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements, and the Company and
its Affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant,
including but not limited to cash compensation for services rendered.
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20. AMENDMENT OF THE PLAN
The Board of Directors may at any time, and from time to time, modify or amend
the Plan in any respect; provided however, that Sections 9 and 10 governing
grants shall not be amended more than once every six months other than to comply
with the Code or the Employee Retirement Income Security Act of 1974, as
amended, if applicable, and provided further that shareholder approval of any
change shall be obtained if required to continue to qualify the Plan under the
Securities and Exchange Commission Rule 16b-3, or, as to Incentive Stock
Options, under the Code.
Failure to ratify or approve amendments or modifications specified in the last
proviso of the preceding sentence by stockholders shall be effective only as to
the specific amendment or modification requiring such ratification. Other
provisions, sections and subsections of this Plan will remain in full force and
effect.
No such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.
21. EXCULPATION AND INDEMNIFICATION
The Company shall indemnify and hold harmless the members of the Board of
Directors, and the members of the Committee duly appointed in accordance with
Section 2(d), from and against any and all liabilities, costs, and expenses
incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities, and
obligations under this Plan, other than such liabilities, costs, and expenses as
may result from the gross negligence, bad faith, willful misconduct, or criminal
acts of such persons.
22. EFFECTIVE DATE OF PLAN
The Plan shall become effective as of April 1, 1995. The Plan shall be presented
to stockholders of the Company for ratification for purposes of satisfying one
of the requirements of Section 422 of the Code governing the tax treatment for
Incentive Stock Options. The failure to obtain stockholder ratification will not
effect the validity of the Plan and the Options thereunder; provided, however,
that if the Plan is not ratified, the Plan shall remain in full force and
effect, and any Incentive Stock Options granted under the Plan shall be deemed
to be Non-statutory Stock Options.
23. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the earlier of ten
(10) years after the Effective Date of the Plan or the issuance of Common Stock
or the exercise of Options equivalent to the maximum number of shares reserved
under the Plan as set forth in Section 5. The Board of Directors has the right
to suspend or terminate the Plan at any time, provided that no such action will,
without the consent of a Participant, adversely affect his rights under a
previously granted Award.
24. APPLICABLE LAW
The Plan will be administered in accordance with the laws of Bermuda, except to
the extent preempted by Federal law.
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IN WITNESS WHEREOF, the Company and its shareholders have caused this Plan to
be executed as of the day and year set forth above.
By:
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Date Adopted by Board Chairman of the Board
By:
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Date Adopted by Shareholders Secretary
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<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of September, 1995, by and between
International Telecommunications Group, Ltd., a Delaware corporation (the
"Corporation") and Itzhak Fisher ("Fisher").
WITNESSETH:
WHEREAS, the Corporation wishes to employ Fisher, and Fisher wishes to be
employed by the Corporation, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions contained herein, the parties hereto agree as follows:
1. Position and Responsibilities.
1.1. The Corporation hereby employs Fisher to serve in an executive
capacity as Vice Chairman of the Board of the Corporation. Subject to the
direction and authorization of the Board of Directors of the Corporation, Fisher
shall perform such functions and undertake such responsibilities as are
customarily associated with such a position provided, however, that Fisher shall
only perform services under this Agreement within the United States. Except as
contemplated by the Employment Agreement dated as of September 15, 1995 between
Fisher and RSL Communications, Ltd., a Bermuda corporation (the "RSL Employment
Agreement"), Fisher shall hold, for no additional consideration, such
directorships and executive officerships in the Corporation and any subsidiary
or affiliate to which, from time to time, he may be elected or appointed during
the term of this Agreement.
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1.2. Fisher shall devote his full time and best efforts to the
business and affairs of the Corporation and to the promotion of its interests
provided, however, that nothing contained herein shall preclude Fisher from
fulfilling his obligations under the RSL Employment Agreement.
1.3. Fisher will do such travelling as may reasonably be required in
the performance of his duties hereunder, consistent with his level of travel
during the twelve months prior to the date hereof.
2. Term.
2.1. The term of this Agreement shall commence on the date hereof and
terminate on December 31, 1998, unless sooner terminated as provided in this
Agreement. The term shall automatically be extended for successive one-year
periods, on the same terms and conditions as herein provided, unless either
Fisher or the Corporation gives written notice to the contrary to the other
party by September 30 of the year of the then expiration date of this Agreement.
The term of this Agreement and any extension thereof is herein referred to as
the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to Fisher given by any
Director of the Corporation pursuant to a determination by a majority of the
Board of Directors of the Corporation, to terminate this Agreement for Cause (as
defined herein), such termination to be effective on the date on which notice is
given or as of such later date otherwise specified in the notice. The
Corporation shall give such notice only after
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opportunity has been afforded to Fisher to make a presentation to a meeting of
the Board regarding his conduct or actions.
2.3. For purposes of this Agreement, the term "Cause" shall mean fraud
or dishonesty or acts of gross negligence in the course of providing his
services herein which are injurious to the Corporation; willful
misrepresentation to shareholders or directors which is injurious to the
Corporation; a willful failure without reasonable justification to comply with a
reasonable written order of the Board of Directors; a willful and material
breach of this Agreement; or the conviction of a felony.
2.4. Fisher shall have the right, on 30 days prior written notice to
the Corporation, to terminate this Agreement for Good Reason, such termination
to be effective 30 days after the occurrence of a Good Reason event. For
purposes of this Agreement, the term "Good Reason" shall mean any of the
following:
(a) The assignment to Fisher by the Corporation of duties inconsistent
with, or a material reduction in the nature of, Fisher's responsibilities as
Vice Chairman of the Board of the Corporation;
(b) A failure by the Corporation to comply with any of the material
terms of this Agreement, which shall not have been cured within 30 days after
written notice thereof; or
(c) Fisher shall no longer be Vice Chairman of the Board of the
Corporation (except by reason of Sections 2.2, 4.1 or 4.2).
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2.5. If this Agreement shall be terminated by the Corporation other
than pursuant to Sections 2.2, 4.1 or 4.2 hereof or by Fisher pursuant to
Section 2.4 hereof, then the Corporation shall continue to pay to Fisher the
salary to which Fisher is entitled pursuant to this Agreement for the Term and
shall continue for such time to pay for the benefits (other than the use of an
automobile) provided in Section 3.2 of this Agreement.
3. Salary.
3.1. The Corporation shall pay to Fisher for the services to be
rendered by Fisher hereunder a salary at the rate of $210,000 per annum. The
salary shall be payable in equal monthly installments of $17,500 each. Such
salary will be reviewed at least annually and shall be increased (but not
decreased) by the Board of Directors of the Corporation in such amount as
determined in its sole discretion, but in no event shall such increase be less
than an amount equal to the product of the prior year's salary and the prior
year's U.S. Consumer Price Index increase. The Board of Directors in its sole
discretion may grant to Fisher an annual bonus from time to time.
3.2. Fisher shall be entitled to participate in, and receive benefits
from any employee benefit plans of the Corporation or any subsidiary which may
be in effect at any time during this Agreement. He shall be entitled to
participate in medical and long-term disability insurance programs (providing,
in his case, for monthly payments of at least 50% of the monthly salary payments
set forth in Section 3.1 above) which, if not in
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effect on the date of this Agreement, shall be promptly put in place by the
Corporation. In addition, the Corporation shall purchase $1,000,000 of term life
insurance on the life of Fisher, with the beneficiaries to be named by Fisher,
shall lease an automobile of Fisher's choice (with monthly lease, insurance and
parking charges to be borne by the Corporation of not in excess of $1,250) for
use by Fisher, and shall pay Fisher's reasonable legal expenses in connection
with the negotiation and preparation of this Agreement.
3.3. The Corporation agrees to reimburse Fisher for all reasonable and
necessary business expenses incurred by him on behalf of the Corporation in the
course of his duties hereunder upon the presentation by Fisher of appropriate
vouchers therefor.
4. Death: Incapacity.
4.1. If, during the Term, because of illness or other incapacity,
Fisher shall fail for a period of 180 consecutive days, or for shorter periods
aggregating more than 180 days during any twelve month period, to render the
services contemplated hereunder, then the Corporation, at its option, may
terminate this Agreement by notice from the Corporation to Fisher, effective on
the giving of such notice.
4.2. In the event of the death of Fisher during the Term, this
Agreement shall terminate on the date of such death.
4.3. In the event of termination pursuant to this Section 4, all
amounts accrued to the date of termination shall
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be promptly paid to Fisher or his legal representatives, as the case may be.
5. Other Activities During Agreement.
5.1. Fisher agrees to devote his full business time to performing
services under this Agreement; provided, however, that Fisher shall be entitled
to four weeks of paid vacation each year.
5.2. (a) Subject to the provisions of Section 5.2(b), for a one-year
period after the end of the Term, neither Fisher nor any entity in which he may
be interested as a partner, trustee, director, officer, employee, shareholder,
option holder, lender of money or guarantor (each, a "Fisher Affiliate"), shall
be engaged directly or indirectly in the business of international long distance
telecommunication services engaged in by the Corporation in any country where
the Corporation, or any subsidiary, conducts such business at any time during
the Term (a "Competitive Activity"); provided, however, that the foregoing shall
not be deemed to prevent Fisher from (i) investing in not more than 5% of the
outstanding securities of a public company or (ii) fulfilling his obligations
under the RSL Employment Agreement. It is understood and agreed that any
opportunity directly or indirectly related to any business engaged in by the
Corporation in any country where the Corporation conducts such business at any
time during the Term shall be deemed a corporate opportunity of the Corporation
and Fisher shall promptly make such opportunity available exclusively to the
Corporation.
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(b) If, during the period of one year after the Term, Fisher or a
Fisher Affiliate proposes to engage in what may be a Competitive Activity,
Fisher shall so notify the Corporation in a writing which shall fully set forth
and describe in detail the nature of the activity which may be a Competitive
Activity, the names of the companies or other entities with or for whom such
activity is proposed to be undertaken, and whether it is proposed to be engaged
in by Fisher or by a Fisher Affiliate (the "Section 5 Notice"). If, within 30
days after receipt by the Corporation of a Section 5 Notice, the Corporation
shall fail to notify Fisher that it deems the proposed activity to be a
Competitive Activity, then Fisher shall be free to engage in the activities
described in the Section 5 Notice without violation of this Section 5.2. If,
however, the Corporation, within such period, notifies Fisher that the proposed
activities constitute a Competitive Activity, then (i) Fisher shall not engage
in any Competitive Activity for a one-year period following the Term, and (ii)
the Corporation shall pay to Fisher, during such one-year period, in equal
monthly installments, an amount equal to his salary for the last year of the
Term pursuant to Section 3.1 of this Agreement.
5.3. Fisher shall not at any time during this Agreement or after the
termination hereof directly or indirectly divulge, furnish, use, publish or make
accessible to any person or entity any Confidential Information (as hereinafter
defined) other than in connection with the performance of his duties hereunder.
It is the specific intent of the Corporation and
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Fisher that each and all of the provisions set forth hereinabove shall be valid
and enforceable as specifically set forth hereinabove; and that Fisher
acknowledges that the Corporation's remedies at law are likely to be inadequate,
and Fisher consents to the application of the equitable remedies of specific
performance to enforce the Corporation's rights hereunder. Further, should any
person seek to legally compel Fisher (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demands or
otherwise) to disclose any Confidential Information, Fisher shall provide the
Corporation with prompt notice followed up in writing so that the Corporation
may seek a protective order or other appropriate remedy, failing which Fisher
shall be entitled to make such disclosure as is legally required. In any event
Fisher shall use his best efforts with the advice of counsel to furnish only
that portion of the Confidential Information which is legally required and, with
the cooperation of the Corporation, will exercise his best efforts to obtain
reliable assurance that confidential treatment will be accorded information so
disclosed. In the event of a breach or a threatened breach by Fisher of the
provisions of this Section 5.3, the Corporation may, in addition to any other
remedies it may have, obtain injunctive relief in any court of appropriate
jurisdiction to enforce this Section 5.3. The provisions of this Section 5.3
shall survive the expiration or termination, for any reason, of this Agreement
and shall be separately enforceable. Any records of Confidential Information
prepared by Fisher or which come into Fisher's
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possession during the Term are and remain the property of the Corporation
and upon termination of this Agreement all such records and copies thereof shall
be either left with or returned to the Corporation.
5.4. The term "Confidential Information" shall mean information
disclosed to Fisher or known, learned, created or observed by him as a
consequence of or through this Agreement, not generally known in the relevant
trade or industry or known to Fisher prior to his employment by the Corporation,
about the Corporation's business activities, services and processes, including
but not limited to information concerning advertising, sales promotion,
publicity, sales data, research, telecommunications technology, finances,
accounting, methods, processes, business plans (including prospective or pending
licensing applications or investments in license holders or applicants), client
or supplier lists and records, potential client or supplier lists, and client or
supplier billing.
6. Indemnification.
6.1. The Corporation will indemnify Fisher and pay on his behalf all
Expenses (as defined below) incurred by Fisher in any proceeding (as defined
below), whether the Proceeding which gave rise to the right of indemnification
pursuant to this Agreement occurred prior to or after the date of this
Agreement. This indemnification shall not apply if it is determined by a court
of competent jurisdiction in a Proceeding that any losses, claims, damages or
liabilities arose primarily out of the gross negligence, willful misconduct or
bad faith of Fisher.
9
<PAGE>
6.2. The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation, whether
brought in the name of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature, and any threatened, pending or
completed action, suit or proceeding or any inquiry or investigation that Fisher
in good faith believes might lead to the institution of any such action, suit or
proceeding or any such inquiry or investigation, in all cases by reason of the
fact that Fisher is or was a director, officer, employee, agent or fiduciary of
the Corporation, or by reason of the fact that he is or was serving at the
request of the Corporation as a director, officer, employee, trustee, fiduciary
or agent of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, whether or not he is serving in such capacity
at the time any liability or expense is incurred for which indemnification or
reimbursement can be provided under this Agreement.
6.3. The term "Expenses" shall include, without limitation thereto,
expenses (including, without limitation, attorneys' fees and expenses) of
investigations, judicial or administrative proceedings or appeals, damages,
judgments, fines, penalties or amounts paid in settlement by or on behalf of
Fisher and any Expenses of establishing a right to indemnification under this
Agreement.
6.4. The Expenses incurred by Fisher in any Proceeding shall be paid
by the Corporation as incurred and in advance of
10
<PAGE>
the final disposition of the Proceeding at the written request of Fisher. Fisher
hereby agrees and undertakes to repay such amounts if it shall ultimately be
decided in a Proceeding that he is not entitled to be indemnified by the
Corporation pursuant to this Agreement or otherwise.
6.5. The indemnification and advancement of Expenses provided by this
Agreement shall not be deemed exclusive of any other rights to which Fisher may
be entitled under the Corporation's Articles of Incorporation or Bye-Laws, any
agreement, any vote of stockholders or disinterested directors, the laws under
which the Corporation was formed, or otherwise, and may be exercised in any
order Fisher elects and prior to, concurrently with or following the exercise of
any other such rights to which Fisher may be entitled, including pursuant to
directors and officers insurance maintained by the Corporation, both as to
action in official capacity and as to action in another capacity while holding
such office, and the exercise of such rights shall not be deemed a waiver of any
of the provisions of this Agreement. The provisions of this Section 6 shall
survive the expiration or termination, for any reason, of this Agreement and
shall be separately enforceable.
7. Assignment. The Corporation shall require any successor or assign
to all or substantially all the assets of the Corporation, prior to consummation
of any transaction therewith, to expressly assume and agree to perform in
writing this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
11
<PAGE>
or assignment had taken place. This Agreement shall inure to the benefit of and
be binding upon the Corporation and its successors and assigns.
8. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Sections 4, 6 and 7 hereof.
9. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
10. Interpretation. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If, moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
extent compatible with the applicable law as it shall then appear.
11. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been given at the time when mailed by registered or
certified mail or when delivered by hand or recognized overnight courier
service, addressed to the
12
<PAGE>
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Corporation:
169 EAB Plaza - West Tower
8th Floor
Uniondale, New York 11556
Attn: Charles M. Piluso, President
With a copy to:
Robert l. Kohl, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
To Fisher:
767 Fifth Avenue
Suite 4200
New York, NY 10153
provided, however, that any notice of change of address shall be effective only
upon receipt.
12. Waivers. If any party should waive any breach of any provision of
this Agreement, it shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.
13. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, canceled or discharged except by written instrument
executed by the parties hereto.
14. Governing Law. This Agreement is to be governed by and construed
in accordance with the laws of New York, without giving effect to principles of
conflicts of law.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By: /s/ C. Piluso
----------------------------------------
AGREED AND ACCEPTED
/s/ Itzhak Fisher
- ---------------------------------
Itshak Fisher
14
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of September, 1995, by and between RSL
Communications Inc., a British Virgin Islands corporation (the "Corporation"),
and Itzhak Fisher ("Fisher").
WITNESSETH:
WHEREAS, the Corporation wishes to employ Fisher, and Fisher wishes to be
employed by the Corporation, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions contained herein, the parties hereto agree as follows:
1. Position and Responsibilities.
1.1. The Corporation hereby employs Fisher to serve in an executive
capacity as President and Chief Executive Officer of the Corporation. Subject to
the direction and authorization of the Board of Directors of the Corporation,
Fisher shall perform such functions and undertake such responsibilities as are
customarily associated with such a position provided, however, that Fisher shall
only perform services under this Agreement outside of the United States. Except
as contemplated by the Employment Agreement dated as of September 15, 1995
between Fisher and International Telecommunications Group, Ltd., a Delaware
corporation (the "ITG Employment Agreement"), Fisher shall hold, for no
additional consideration, such directorships and executive officerships in the
Corporation and any subsidiary
<PAGE>
or affiliate to which, from time to time, he may be elected or appointed during
the term of this Agreement.
1.2. Fisher shall devote his full time and best efforts to the
business and affairs of the Corporation and to the promotion of its interests
provided, however, that nothing contained herein shall preclude Fisher from
fulfilling his obligations under the ITG Employment Agreement
1.3. Fisher will do such travelling as may reasonably be required in
the performance of his duties hereunder, consistent with his level of travel
during the twelve months prior to the date hereof.
2. Term.
2.1. The term of this Agreement shall commence on the date hereof
and terminate on December 31, 1998, unless sooner terminated as provided in this
Agreement. The term shall automatically be extended for successive one-year
periods, on the same terms and conditions as herein provided, unless either
Fisher or the Corporation gives written notice to the contrary to the other
party by September 30 of the year of the then expiration date of this Agreement.
The term of this Agreement and any extension thereof is herein referred to as
the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to Fisher given by any
Director of the Corporation pursuant to a determination by a majority of the
Board of Directors of the Corporation, to terminate this Agreement for Cause (as
defined herein), such termination to be effective on the date on which
2
<PAGE>
notice is given or as of such later date otherwise specified in the notice. The
Corporation shall give such notice only after opportunity has been afforded to
Fisher to make a presentation to a meeting of the Board regarding his conduct or
actions.
2.3. For purposes of this Agreement, the term "Cause" shall mean
fraud or dishonesty or acts of gross negligence in the course of providing his
services herein which are injurious to the Corporation; willful
misrepresentation to shareholders or directors which is injurious to the
Corporation; a willful failure without reasonable justification to comply with a
reasonable written order of the Board of Directors; a willful and material
breach of this Agreement; or the conviction of a felony.
2.4. Fisher shall have the right, on 30 days prior written notice to
the Corporation, to terminate this Agreement for Good Reason, such termination
to be effective 30 days after the occurrence of a Good Reason event. For
purposes of this Agreement, the term "Good Reason" shall mean any of the
following:
(a) The assignment to Fisher by the Corporation of duties
inconsistent with, or a material reduction in the nature of, Fisher's
responsibilities as President and Chief Executive Officer of the Corporation;
(b) A failure by the Corporation to comply with any of the material
terms of this Agreement, which shall not have been cured within 30 days after
written notice thereof; or
3
<PAGE>
(c) Fisher shall no longer be President and Chief Executive Officer
of the Corporation (except by reason of Sections 2.2, 4.1 or 4.2).
Notwithstanding the provisions of this Section 2.4, if the Board of
Directors shall during the Term elect a person other than Fisher to be Chief
Executive Officer of the Corporation, such action shall not be deemed a Good
Reason event, and no breach of this Agreement shall be deemed to have occurred
by virtue of the Corporation's appointment of a new Chief Executive Officer or
Fisher's failure to perform the duties of a Chief Executive Officer hereunder,
provided, that the Corporation has agreed in writing to continue during the Term
to compensate Fisher at a rate no less than that then required by Section 3.1
below and to provide benefits no less than those set forth in Section 3.2 below,
and the Corporation otherwise has complied fully with all of the terms and
provisions of this Agreement.
2.5. If this Agreement shall be terminated by the Corporation other
than pursuant to Sections 2.2, 4.1 or 4.2 hereof or by Fisher pursuant to
Section 2.4 hereof, then the Corporation shall continue to pay to Fisher the
salary to which Fisher is entitled pursuant to this Agreement for the Term and
shall continue for such time to pay for the benefits provided in Section 3.2 of
this Agreement.
3. Salary.
3.1. The Corporation shall pay to Fisher for the services to be
rendered by Fisher hereunder a salary at the rate of $140,000 per annum. The
salary shall be payable in equal
4
<PAGE>
monthly installments of $11,666.67 each. Such salary will be reviewed at least
annually and shall be increased (but not decreased) by the Board of Directors of
the Corporation in such amount as determined in its sole discretion, but in no
event shall such increase be less than an amount equal to the product of the
prior year's salary and the prior year's U.S. Consumer Price Index increase. The
Board of Directors in its sole discretion may grant to Fisher an annual bonus
from time to time.
3.2. Fisher shall be entitled to participate in, and receive
benefits from any employee benefit plans of the Corporation or any subsidiary
which may be in effect at any time during this Agreement. He shall be entitled
to participate in medical and long-term disability insurance programs
(providing, in his case, for monthly payments of at least 50% of the monthly
salary payments set forth in Section 3.1 above) which, if not in effect on the
date of this Agreement, shall be promptly put in place by the Corporation. In
addition, the Corporation shall pay Fisher's reasonable legal expenses in
connection with the negotiation and preparation of this Agreement.
3.3. The Corporation agrees to reimburse Fisher for all reasonable
and necessary business expenses incurred by him on behalf of the Corporation in
the course of his duties hereunder upon the presentation by Fisher of
appropriate vouchers therefor.
4. Death; Incapacity.
4.1. If, during the Term, because of illness or other incapacity,
Fisher shall fail for a period of 180 consecutive days, or for shorter periods
aggregating more than 180 days
5
<PAGE>
during any twelve month period, to render the services contemplated hereunder,
then the Corporation, at its option, may terminate this Agreement by notice from
the Corporation to Fisher, effective on the giving of such notice.
4.2. In the event of the death of Fisher during the Term, this
Agreement shall terminate on the date of such death.
4.3. In the event of termination pursuant to this Section 4, all
amounts accrued to the date of termination shall be promptly paid to Fisher or
his legal representatives, as the case may be.
5. Other Activities During Agreement.
5.1. Fisher agrees to devote his full business time to performing
services under this Agreement; provided, however, that Fisher shall be entitled
to four weeks of paid vacation each year.
5.2. (a) Subject to the provisions of Section 5.2(b), for a one-year
period after the end of the Term, neither Fisher nor any entity in which he may
be interested as a partner, trustee, director, officer, employee, shareholder,
option holder, lender of money or guarantor (each, a "Fisher Affiliate"), shall
be engaged directly or indirectly in the business of international long distance
telecommunication services engaged in by the Corporation in any country where
the Corporation, or any subsidiary, conducts such business at any time during
the Term (a "Competitive Activity"); provided, however, that the foregoing shall
not be deemed to prevent Fisher from (i) investing in not
6
<PAGE>
more than 5% of the outstanding securities of a public company or (ii)
fulfilling his obligations under the ITG Employment Agreement. It is understood
and agreed that any opportunity directly or indirectly related to any business
engaged in by the Corporation in any country where the Corporation conducts such
business at any time during the Term shall be deemed a corporate opportunity of
the Corporation and Fisher shall promptly make such opportunity available
exclusively to the Corporation.
(b) If, during the period of one year after the Term, Fisher or a
Fisher Affiliate proposes to engage in what may be a Competitive Activity,
Fisher shall so notify the Corporation in a writing which shall fully set forth
and describe in detail the nature of the activity which may be a Competitive
Activity, the names of the companies or other entities with or for whom such
activity is proposed to be undertaken, and whether it is proposed to be engaged
in by Fisher or by a Fisher Affiliate (the "Section 5 Notice"). If, within 30
days after receipt by the Corporation of a Section 5 Notice, the Corporation
shall fail to notify Fisher that it deems the proposed activity to be a
Competitive Activity, then Fisher shall be free to engage in the activities
described in the Section 5 Notice without violation of this Section 5.2. If,
however, the Corporation, within such period, notifies Fisher that the proposed
activities constitute a Competitive Activity, then (i) Fisher shall not engage
in any Competitive Activity for a one-year period following the Term, and (ii)
the Corporation shall pay to Fisher, during such one-year period, in equal
monthly installments, an amount equal to
7
<PAGE>
his salary for the last year of the Term pursuant to Section 3.1 of this
Agreement.
5.3. Fisher shall not at any time during this Agreement or after the
termination hereof directly or indirectly divulge, furnish, use, publish or make
accessible to any person or entity any Confidential Information (as hereinafter
defined) other than in connection with the performance of his duties hereunder.
It is the specific intent of the Corporation and Fisher that each and all of the
provisions set forth hereinabove shall be valid and enforceable as specifically
set forth hereinabove; and that Fisher acknowledges that the Corporation's
remedies at law are likely to be inadequate, and Fisher consents to the
application of the equitable remedies of specific performance to enforce the
Corporation's rights hereunder. Further, should any person seek to legally
compel Fisher (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demands or otherwise) to disclose any
Confidential Information, Fisher shall provide the Corporation with prompt
notice followed up in writing so that the Corporation may seek a protective
order or other appropriate remedy, failing which Fisher shall be entitled to
make such disclosure as is legally required. In any event Fisher shall use his
best efforts with the advice of counsel to furnish only that portion of the
Confidential Information which is legally required and, with the cooperation of
the Corporation, will exercise his best efforts to obtain reliable assurance
that confidential treatment will be accorded information so disclosed. In the
8
<PAGE>
event of a breach or a threatened breach by Fisher of the provisions of this
Section 5.3, the Corporation may, in addition to any other remedies it may have,
obtain injunctive relief in any court of appropriate jurisdiction to enforce
this Section 5.3. The provisions of this Section 5.3 shall survive the
expiration or termination, for any reason, of this Agreement and shall be
separately enforceable. Any records of Confidential Information prepared by
Fisher or which come into Fisher's possession during the Term are and remain the
property of the Corporation and upon termination of this Agreement all such
records and copies thereof shall be either left with or returned to the
Corporation.
5.4. The term "Confidential Information" shall mean information
disclosed to Fisher or known, learned, created or observed by him as a
consequence of or through this Agreement, not generally known in the relevant
trade or industry or known to Fisher prior to his employment by the Corporation,
about the Corporation's business activities, services and processes, including
but not limited to information concerning advertising, sales promotion,
publicity, sales data, research, telecommunications technology, finances,
accounting, methods, processes, business plans (including prospective or pending
licensing applications or investments in license holders or applicants), client
or supplier lists and records, potential client or supplier lists, and client or
supplier billing.
9
<PAGE>
6. Indemnification.
6.1. The Corporation will indemnify Fisher and pay on his behalf all
Expenses (as defined below) incurred by Fisher in any Proceeding (as defined
below), whether the Proceeding which gave rise to the right of indemnification
pursuant to this Agreement occurred prior to or after the date of this
Agreement. This indemnification shall not apply if it is determined by a court
of competent jurisdiction in a Proceeding that any losses, claims, damages or
liabilities arose primarily out of the gross negligence, willful misconduct or
bad faith of Fisher.
6.2. The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation, whether
brought in the name of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature, and any threatened, pending or
completed action, suit or proceeding or any inquiry or investigation that Fisher
in good faith believes might lead to the institution of any such action, suit or
proceeding or any such inquiry or investigation, in all cases by reason of the
fact that Fisher is or was a director, officer, employee, agent or fiduciary of
the Corporation, or by reason of the fact that he is or was serving at the
request of the Corporation as a director, officer, employee, trustee, fiduciary
or agent of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, whether or not he is serving in such capacity
at the time any liability or expense is incurred for
10
<PAGE>
which indemnification or reimbursement can be provided under this Agreement
6.3. The term "Expenses" shall include, without limitation thereto,
expenses (including, without limitation, attorneys' fees and expenses) of
investigations, judicial or administrative proceedings or appeals, damages,
judgments, fines, penalties or amounts paid in settlement by or on behalf of
Fisher and any Expenses of establishing a right to indemnification under this
Agreement.
6.4. The Expenses incurred by Fisher in any Proceeding shall be paid
by the Corporation as incurred and in advance of the final disposition of the
Proceeding at the written request of Fisher. Fisher hereby agrees and undertakes
to repay such amounts if it shall ultimately be decided in a Proceeding that he
is not entitled to be indemnified by the Corporation pursuant to this Agreement
or otherwise.
6.5. The indemnification and advancement of Expenses provided by
this Agreement shall not be deemed exclusive of any other rights to which Fisher
may be entitled under the Corporation's Articles of Incorporation or Bye-Laws,
any agreement, any vote of stockholders or disinterested directors, the laws
under which the Corporation was formed, or otherwise, and may be exercised in
any order Fisher elects and prior to, concurrently with or following the
exercise of any other such rights to which Fisher may be entitled, including
pursuant to directors and officers insurance maintained by the Corporation, both
as to action in official capacity and as to action in
11
<PAGE>
another capacity while holding such office, and the exercise of such rights
shall not be deemed a waiver of any of the provisions of this Agreement. The
provisions of this Section 6 shall survive the expiration or termination, for
any reason, of this Agreement and shall be separately enforceable.
7. Assignment. The Corporation shall require any successor or assign
to all or substantially all the assets of the Corporation, prior to consummation
of any transaction therewith, to expressly assume and agree to perform in
writing this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession or assignment
had taken place. This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors and assigns.
8. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Sections 4, 6 and 7 hereof.
9. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
10. Interpretation. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision
12
<PAGE>
had never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
11. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when mailed by registered or
certified mail or when delivered by hand or recognized overnight courier
service, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Corporation:
767 Fifth Avenue
Suite 4200
New York, NY 10153
Attn: Ronald S. Lauder, Chairman
With a copy to:
Robert L. Kohl, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
To Fisher:
767 Fifth Avenue
Suite 4200
New York, NY 10153
provided, however, that any notice of change of address shall be effective only
upon receipt.
12. Waivers. If any party should waive any breach of any provision
of this Agreement, it shall not thereby be deemed
13
<PAGE>
to have waived any preceding or succeeding breach of the same or any other
provision of this Agreement.
13. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, canceled or discharged except by written instrument
executed by the parties hereto.
14. Governing Law. This Agreement is to be governed by and construed
in accordance with the laws of New York, without giving effect to principles of
conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
RSL COMMUNICATIONS INC.
By: /s/ Jacob Z. Schuster
-------------------------------------
Name: Jacob Z. Schuster
Title:
AGREED AND ACCEPTED:
/s/ Itzhak Fisher
- ----------------------------------
Itzhak Fisher
14
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of April, 1995, by and between
International Telecommunications Group, Ltd., a Delaware corporation (the
"Corporation") and Nir Tarlovsky ("Tarlovsky").
WITNESSETH:
WHEREAS, the Corporation wishes to employ Tarlovsky, and Tarlovsky wishes
to be employed by the Corporation, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions contained herein, the parties hereto agree as follows:
1. Position and Responsibilities.
1.1. The Corporation hereby employs Tarlovsky to serve in an
executive capacity as Vice President of the Corporation. Tarlovsky shall perform
such functions and undertake such responsibilities as may be assigned to him by
the President and Chief Executive Officer of the Corporation provided, however,
that Tarlovsky shall only perform services under this Agreement within the
United States. In such position, except as contemplated by the Employment
Agreement dated as of April 1, 1995 between Tarlovsky and RSL Communications,
Ltd., a Bermuda corporation (the "RSL Employment Agreement"), Tarlovsky shall
hold, for no additional consideration, such directorships and executive
officerships in the Corporation and any subsidiary or affiliate to which, from
time to time, he may be elected or appointed during the term of this Agreement.
<PAGE>
1.2. Tarlovsky shall devote his full time and best efforts to the
business and affairs of the Corporation and to the promotion of its interests
provided, however, that nothing contained herein shall preclude Tarlovsky from
fulfilling his obligations under the RSL Employment Agreement.
1.3. Tarlovsky will do such travelling in the performance of his
duties as may reasonably be required by the Corporation.
2. Term.
2.1. The term of this Agreement shall commence on the date hereof
and terminate on March 31, 1998, unless sooner terminated as provided in this
Agreement. The term of this Agreement and any extension thereof is herein
referred to as the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to Tarlovsky, to terminate
this Agreement for Cause (as defined herein), such termination to be on the date
on which notice is given or as of such later date otherwise specified in the
notice.
2.3. For purposes of this Agreement, the term "Cause" shall mean
fraud or dishonesty or acts of gross negligence in the course of providing his
services herein which are injurious to the Corporation; willful
misrepresentation to shareholders or directors which is injurious to the
Corporation; a willful failure without reasonable justification to comply with a
reasonable written order of the Board of Directors, which shall not be cured
within 10 days after written notice; a willful and
2
<PAGE>
material breach of this Agreement, which shall not be cured within 10 days after
written notice; or the commission of a felony.
2.4. If this Agreement shall be terminated by the Corporation other
than pursuant to Sections 2.2, 4.1 or 4.2 hereof, then the Corporation shall
continue to pay to Tarlovsky the salary to which Tarlovsky is entitled pursuant
to this Agreement for the Term and shall continue for such time to pay for the
benefits provided in Section 3.2 of this Agreement.
3. Salary.
3.1. The Corporation shall pay to Tarlovsky for the services to be
rendered by Tarlovsky hereunder a salary at the rate of $90,000 per annum. The
salary shall be payable in equal bi-monthly installments of $3,750 each. Such
salary will be reviewed at least annually and may be increased (but not
decreased) by the Board of Directors of the Corporation in such amount as
determined in its sole discretion. The Board of Directors in its sole discretion
may grant to Tarlovsky an annual bonus from time to time.
3.2. Tarlovsky shall be entitled to participate in, and receive
benefits from, any insurance, medical, disability, bonus, incentive
compensation, or other employee benefit plan of the Corporation or any
subsidiary which may be in effect at any time during this Agreement.
3.3. The Corporation agrees to reimburse Tarlovsky for all
reasonable and necessary business expenses incurred by him on behalf of the
Corporation in the course of his duties hereunder
3
<PAGE>
and for moving expenses from Israel to New York, in each case upon the
presentation by Tarlovsky of appropriate vouchers therefor.
4. Death; Incapacity.
4.1. If, during the Term, because of illness or other incapacity,
Tarlovsky shall fail for a period of 90 consecutive days, or for shorter periods
aggregating more than 90 days during any twelve month period, to render the
services contemplated hereunder, then the Corporation, at its option, may
terminate this Agreement by notice from the Corporation to Tarlovsky, effective
on the giving of such notice.
4.2. In the event of the death of Tarlovsky during the Term, this
Agreement shall terminate on the date of such death.
5. Other Activities During Agreement.
5.1. Tarlovsky agrees to devote his full business time to performing
services under this Agreement; provided, however, that Tarlovsky shall be
entitled to four weeks of paid vacation each year.
5.2. During the Term and for a period of one year thereafter,
neither Tarlovsky nor any entity in which he may be interested as a partner,
trustee, director, officer, employee, shareholder, option holder, lender of
money or guarantor (each, a "Tarlovsky Affiliate"), shall be engaged directly or
indirectly in a business in the telecommunications industry which has a global
strategy similar to that of the Corporation (a "Competitive Activity");
provided, however, that the foregoing shall not be deemed to prevent (i)
Tarlovsky and a Tarlovsky
4
<PAGE>
Affiliate from investing in not more than an aggregate of 5% of the outstanding
securities of a public company or (ii) Tarlovsky from fulfilling his obligations
under the RSL Employment Agreement. If, for a period of two years after the
Term, Tarlovsky or a Tarlovsky Affiliate proposes to engage in what may be a
Competitive Activity, Tarlovsky shall so notify the Corporation in a writing
which shall fully set forth and describe in detail the nature of the activity
which may be a Competitive Activity, the names of the companies or other
entities with or for whom such activity is proposed to be undertaken, and
whether it is proposed to be engaged in by Tarlovsky or by a Tarlovsky Affiliate
(the "Section 5 Notice"). If, within 30 days after receipt by the Corporation
of a Section 5 Notice, the Corporation shall fail to notify Tarlovsky that it
deems the proposed activity to be a Competitive Activity, then Tarlovsky shall
be free to engage in the activities described in the Section 5 Notice without
violation of this Section 5.2. It is understood and agreed that any opportunity
directly or indirectly related to any business engaged in by the Corporation or
any subsidiary in any country where the Corporation or any subsidiary conducts
such business at any time during the Term shall be deemed a corporate
opportunity of the Corporation and Tarlovsky shall promptly make such
opportunity available exclusively to the Corporation, at no cost to the
Corporation.
5.3. Tarlovsky shall not at any time during this Agreement or after
the termination hereof directly or indirectly divulge, furnish, use, publish or
make accessible to any person
5
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or entity any Confidential Information (as hereinafter defined) other than in
connection with the performance of his duties hereunder. It is the specific
intent of the Corporation and Tarlovsky that each and all of the provisions set
forth hereinabove shall be valid and enforceable as specifically set forth
hereinabove; and that Tarlovsky acknowledges that the Corporation's remedies at
law are likely to be inadequate, and Tarlovsky consents to the application of
the equitable remedies of specific performance to enforce the Corporation's
rights hereunder. Further, should any person seek to legally compel Tarlovsky
(by oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demands or otherwise) to disclose any Confidential
Information, Tarlovsky shall provide the Corporation with prompt notice followed
up in writing so that the Corporation may seek a protective order or other
appropriate remedy, failing which Tarlovsky shall be entitled to make such
disclosure as is legally required. In any event Tarlovsky shall use his best
efforts with the advice of counsel to furnish only that portion of the
Confidential Information which is legally required and, with the cooperation of
the Corporation, will exercise his best efforts to obtain reliable assurance
that confidential treatment will be accorded information so disclosed. In the
event of a breach or a threatened breach by Tarlovsky of the provisions of this
Section 5.3, the Corporation may, in addition to any other remedies it may have,
obtain injunctive relief in any court of appropriate jurisdiction to enforce
this Section 5.3. The
6
<PAGE>
provisions of this Section 5.3 shall survive the expiration or termination, for
any reason, of this Agreement and shall be separately enforceable. Any records
of Confidential Information prepared by Tarlovsky or which come into Tarlovsky's
possession during the Term are and remain the property of the Corporation and
upon termination of this Agreement all such records and copies thereof shall be
either left with or returned to the Corporation.
5.4. The term "Confidential Information" shall mean information
disclosed to Tarlovsky or known, learned, created or observed by him as a
consequence of or through this Agreement, not generally known in the relevant
trade or industry, about the Corporation's business activities, services and
processes, including but not limited to information concerning advertising,
sales promotion, publicity, sales data, research, telecommunications technology,
finances, accounting, methods, processes, business plans (including prospective
or pending licensing applications or investments in license holders or
applicants), client or supplier lists and records, potential client or supplier
lists, and client or supplier billing.
6. Indemnification.
6.1. The Corporation will indemnify Tarlovsky and pay on his behalf
all Expenses (as defined below) incurred by Tarlovsky in any Proceeding (as
defined below), whether the Proceeding which gave rise to the right of
indemnification pursuant to this Agreement occurred prior to or after the date
of this Agreement. This indemnification shall not apply if it is
7
<PAGE>
determined by a court of competent jurisdiction in a Proceeding that any losses,
claims, damages or liabilities arose primarily out of the gross negligence,
willful misconduct or bad faith of Tarlovsky, in which event Tarlovsky shall
indemnify the Corporation to the same extent as the corporate indemnity herein
provided.
6.2. The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation, whether
brought in the name of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature, and any threatened, pending or
completed action, suit or proceeding or any inquiry or investigation that
Tarlovsky in good faith believes might lead to the institution of any such
action, suit or proceeding or any such inquiry or investigation, in all cases by
reason of the fact that Tarlovsky is or was a director, officer, employee, agent
or fiduciary of the Corporation, or by reason of the fact that he is or was
serving at the request of the Corporation as a director, officer, employee,
trustee, fiduciary or agent of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, whether or not he is serving
in such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.
6.3. The term "Expenses" shall include, without limitation thereto,
expenses (including, without limitation, attorneys' fees and expenses) of
investigations, judicial or
8
<PAGE>
administrative proceedings or appeals, damages, judgments, fines, penalties or
amounts paid in settlement by or on behalf of Tarlovsky and any Expenses of
establishing a right to indemnification under this Agreement.
6.4. The Expenses incurred by Tarlovsky in any Proceeding shall be
paid by the Corporation as incurred and in advance of the final disposition of
the Proceeding at the written request of Tarlovsky. Tarlovsky hereby agrees and
undertakes to repay such amounts if it shall ultimately be decided in a
Proceeding that he is not entitled to be indemnified by the Corporation pursuant
to this Agreement or otherwise.
6.5. The indemnification and advancement of Expenses provided by
this Agreement shall not be deemed exclusive of any other rights to which
Tarlovsky may be entitled under the Corporation's Articles of Incorporation or
Bye-Laws, any agreement, any vote of stockholders or disinterested directors,
the laws under which the Corporation was formed, or otherwise, and may be
exercised in any order Tarlovsky elects and prior to, concurrently with or
following the exercise of any other such rights to which Tarlovsky may be
entitled, including pursuant to directors and officers insurance maintained by
the Corporation, both as to action in official capacity and as to action in
another capacity while holding such office, and the exercise of such rights
shall not be deemed a waiver of any of the provisions of this Agreement. The
provisions of this Section 6 shall survive the expiration or termination, for
any reason, of this Agreement and shall be separately enforceable.
9
<PAGE>
7. Intentionally left Blank.
8. Assignment. The Corporation shall require any successor or assign
to all or substantially all the assets of the Corporation, prior to consummation
of any transaction therewith, to expressly assume and agree to perform in
writing this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession or assignment
had taken place. This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors and assigns.
9. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Sections 6.1 and 8.
10. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
11. Interpretation. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If, moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by
10
<PAGE>
limiting and reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
12. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when mailed by registered or
certified mail or when delivered by hand or recognized overnight courier
service, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Corporation;
169 EAB Plaza - West Tower
8th Floor
Uniondale, New York 11556
Attn: Charles M. Piluso, President
With a copy to:
Robert L. Kohl, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
To Tarlovsky:
767 Fifth Avenue
Suite 4200
New York, MY 10153
provided, however, that any notice of change of address shall be effective only
upon receipt.
13. Waivers. If any party should waive any breach of any provision
of this Agreement, it shall not thereby be deemed to have waived any preceding
or succeeding breach of the same or any other provision of this Agreement.
14. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented canceled or
11
<PAGE>
discharged except by written instrument executed by the parties hereto.
15. Governing Law. This Agreement is to be governed by and construed
in accordance with the laws of New York, without giving effect to principles of
conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By: /s/ Charles M. Piluso
---------------------------------------
AGREED AND ACCEPTED:
/s/ Nir Tarlovsky
- ---------------------------------
Nir Tarlovsky
12
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of April, 1995, by and between RSL
Communications Inc., a Delaware corporation (the "Corporation"), and Nir
Tarlovsky ("Tarlovsky").
WITNESSETH:
WHEREAS, the Corporation wishes to employ Tarlovsky, and Tarlovsky wishes
to be employed by the Corporation, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions contained herein, the parties hereto agree as follows:
1. Position and Responsibilities.
1.1. The Corporation hereby employs Tarlovsky to serve in an
executive capacity as Vice President of Business Development of the Corporation.
Tarlovsky shall perform such functions and undertake such responsibilities as
may be assigned to him by the President and Chief Executive Officer of the
Corporation provided, however, that Tarlovsky shall only perform services under
this Agreement outside of the United States. In such position, except as
contemplated by the Employment Agreement dated as of April 1, 1995 between
Tarlovsky and International Telecommunications Group, Ltd., a Delaware
corporation (the "ITG Employment Agreement"), Tarlovsky shall hold, for no
additional consideration, such directorships and executive officerships in the
Corporation and any subsidiary or affiliate to which, from
2
<PAGE>
time to time, he may be elected or appointed during the term of this Agreement.
1.2. Tarlovsky shall devote his full time and best efforts to the
business and affairs of the Corporation and to the promotion of its interests
provided, however, that nothing contained herein shall preclude Tarlovsky from
fulfilling his obligations under the ITG Employment Agreement.
1.3. Tarlovsky will do such travelling in the performance of his
duties as may reasonably be required by the Corporation.
2. Term.
2.1. The term of this Agreement shall commence on the date hereof
and terminate on March 31, 1998, unless sooner terminated as provided in this
Agreement. The term of this Agreement and any extension thereof is herein
referred to as the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to Tarlovsky, to terminate
this Agreement for Cause (as defined herein), such termination to be on the date
on which notice is given or as of such later date otherwise specified in the
notice. In such case any option granted or to be granted pursuant to Section 7.1
and 7.2 shall immediately terminate to the extent not vested or not granted.
2.3. For purposes of this Agreement, the term "Cause" shall mean
fraud or dishonesty or acts of gross negligence in the course of providing his
services herein which are injurious to
2
<PAGE>
the Corporation; willful misrepresentation to shareholders or directors which is
injurious to the Corporation; a willful failure without reasonable justification
to comply with a reasonable written order of the Board of Directors, which shall
not be cured within 10 days after written notice; a willful and material breach
of this Agreement, which shall not be cured within 10 days after written notice;
or the commission of a felony.
2.4. If this Agreement shall be terminated by the Corporation other
than pursuant to Sections 2.2, 4.1 or 4.2 hereof, then the Corporation shall
continue to pay to Tarlovsky the salary to which Tarlovsky is entitled pursuant
to this Agreement for the Term, shall continue for such time to pay for the
benefits provided in Section 3.2 of this Agreement, the options granted pursuant
to Section 7.1 shall vest as therein provided and the option to be granted
pursuant to Section 7.2 shall be granted as therein provided.
3. Salary.
3.1. The Corporation shall pay to Tarlovsky for the services to be
rendered by Tarlovsky hereunder a salary at the rate of $60,000 per annum. The
salary shall be payable in equal bi-monthly installments of $2,500 each. Such
salary will be reviewed at least annually and may be increased (but not
decreased) by the Board of Directors of the Corporation in such amount as
determined in its sole discretion. The Board of Directors in its sole discretion
may grant to Tarlovsky an annual bonus from time to time.
3
<PAGE>
3.2. Tarlovsky shall be entitled to participate in, and receive
benefits from, any insurance, medical, disability, bonus, incentive
compensation, or other employee benefit plan of the Corporation or any
subsidiary which may be in effect at any time during this Agreement.
4. Death; Incapacity.
4.1. If, during the Term, because of illness or other incapacity,
Tarlovsky shall fail for a period of 90 consecutive days, or for shorter periods
aggregating more than 90 days during any twelve month period, to render the
services contemplated hereunder, then the Corporation, at its option, may
terminate this Agreement by notice from the Corporation to Tarlovsky, effective
on the giving of such notice.
4.2. In the event of the death of Tarlovsky during the Term, this
Agreement shall terminate on the date of such death.
5. Other Activities During Agreement.
5.1. Tarlovsky agrees to devote his full business time to performing
services under this Agreement; provided, however, that Tarlovsky shall be
entitled to four weeks of paid vacation each year.
5.2. During the Term and for a period of one year thereafter,
neither Tarlovsky nor any entity in which he may be interested as a partner,
trustee, director, officer, employee, shareholder, option holder, lender of
money or guarantor (each, a "Tarlovsky Affiliate"), shall be engaged directly or
indirectly in a business in the telecommunications industry which has a global
strategy similar to that of the Corporation (a
4
<PAGE>
"Competitive Activity"); provided, however, that the foregoing shall not be
deemed to prevent (i) Tarlovsky and a Tarlovsky Affiliate from investing in not
more than an aggregate of 5% of the outstanding securities of a public company
or (ii) Tarlovsky from fulfilling his obligations under the ITG Employment
Agreement. If, for a period of two years after the Term, Tarlovsky or a
Tarlovsky Affiliate proposes to engage in what may be a Competitive Activity,
Tarlovsky shall so notify the Corporation in a writing which shall fully set
forth and describe in detail the nature of the activity which may be a
Competitive Activity, the names of the companies or other entities with or for
whom such activity is proposed to be undertaken, and whether it is proposed to
be engaged in by Tarlovsky or by a Tarlovsky Affiliate (the "Section 5 Notice").
If, within 30 days after receipt by the Corporation of a Section 5 Notice, the
Corporation shall fail to notify Tarlovsky that it deems the proposed activity
to be a Competitive Activity, then Tarlovsky shall be free to engage in the
activities described in the Section 5 Notice without violation of this Section
5.2. It is understood and agreed that any opportunity directly or indirectly
related to any business engaged in by the Corporation or any subsidiary in any
country where the Corporation or any subsidiary conducts such business at any
time during the Term shall be deemed a corporate opportunity of the Corporation
and Tarlovsky shall promptly make such opportunity available exclusively to the
Corporation, at no cost to the Corporation.
5
<PAGE>
5.3. Tarlovsky shall not at any time during this Agreement or after
the termination hereof directly or indirectly divulge, furnish, use, publish or
make accessible to any person or entity any Confidential Information (as
hereinafter defined) other than in connection with the performance of his duties
hereunder. It is the specific intent of the Corporation and Tarlovsky that each
and all of the provisions set forth hereinabove shall be valid and enforceable
as specifically set forth hereinabove; and that Tarlovsky acknowledges that the
Corporation's remedies at law are likely to be inadequate, and Tarlovsky
consents to the application of the equitable remedies of specific performance to
enforce the Corporation's rights hereunder. Further, should any person seek to
legally compel Tarlovsky (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demands or otherwise) to
disclose any Confidential Information, Tarlovsky shall provide the Corporation
with prompt notice followed up in writing so that the Corporation may seek a
protective order or other appropriate remedy, failing which Tarlovsky shall be
entitled to make such disclosure as is legally required. In any event Tarlovsky
shall use his best efforts with the advice of counsel to furnish only that
portion of the Confidential Information which is legally required and, with the
cooperation of the Corporation, will exercise his best efforts to obtain
reliable assurance that confidential treatment will be accorded information so
disclosed. In the event of a breach or a threatened breach by Tarlovsky of the
provisions of this
6
<PAGE>
Section 5.3, the Corporation may, in addition to any other remedies it may have,
obtain injunctive relief in any court of appropriate jurisdiction to enforce
this Section 5.3. The provisions of this Section 5.3 shall survive the
expiration or termination, for any reason, of this Agreement and shall be
separately enforceable. Any records of Confidential Information prepared by
Tarlovsky or which come into Tarlovsky's possession during the Term are and
remain the property of the Corporation and upon termination of this Agreement
all such records and copies thereof shall be either left with or returned to the
Corporation.
5.4. The term "Confidential Information" shall mean information
disclosed to Tarlovsky or known, learned, created or observed by him as a
consequence of or through this Agreement, not generally known in the relevant
trade or industry, about the Corporation's business activities, services and
processes, including but not limited to information concerning advertising,
sales promotion, publicity, sales data, research, telecommunications technology,
finances, accounting, methods, processes, business plans (including prospective
or pending licensing applications or investments in license holders or
applicants), client or supplier lists and records, potential client or supplier
lists, and client or supplier billing.
6. Indemnification.
6.1. The Corporation will indemnify Tarlovsky and pay on his behalf
all Expenses (as defined below) incurred by Tarlovsky in any Proceeding (as
defined below), whether the
7
<PAGE>
Proceeding which gave rise to the right of indemnification pursuant to this
Agreement occurred prior to or after the date of this Agreement. This
indemnification shall not apply if it is determined by a court of competent
jurisdiction in a Proceeding that any losses, claims, damages or liabilities
arose primarily out of the gross negligence, willful misconduct or bad faith of
Tarlovsky, in which event Tarlovsky shall indemnify the Corporation to the same
extent as the corporate indemnity herein provided.
6.2. The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation, whether
brought in the name of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature, and any threatened, pending or
completed action, suit or proceeding or any inquiry or investigation that
Tarlovsky in good faith believes might lead to the institution of any such
action, suit or proceeding or any such inquiry or investigation, in all cases by
reason of the fact that Tarlovsky is or was a director, officer, employee, agent
or fiduciary of the Corporation, or by reason of the fact that he is or was
serving at the request of the Corporation as a director, officer, employee,
trustee, fiduciary or agent of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, whether or not he is serving
in such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.
8
<PAGE>
6.3. The term "Expenses" shall include, without limitation thereto,
expenses (including, without limitation, attorneys' fees and expenses) of
investigations, judicial or administrative proceedings or appeals, damages,
judgments, fines, penalties or amounts paid in settlement by or on behalf of
Tarlovsky and any Expenses of establishing a right to indemnification under this
Agreement.
6.4. The Expenses incurred by Tarlovsky in any Proceeding shall be
paid by the Corporation as incurred and in advance of the final disposition of
the Proceeding at the written request of Tarlovsky. Tarlovsky hereby agrees and
undertakes to repay such amounts if it shall ultimately be decided in a
Proceeding that he is not entitled to be indemnified by the Corporation pursuant
to this Agreement or otherwise.
6.5. The indemnification and advancement of Expenses provided by
this Agreement shall not be deemed exclusive of any other rights to which
Tarlovsky may be entitled under the Corporation's Articles of Incorporation or
Bye-Laws, any agreement, any vote of stockholders or disinterested directors,
the laws under which the Corporation was formed, or otherwise, and may be
exercised in any order Tarlovsky elects and prior to, concurrently with or
following the exercise of any other such rights to which Tarlovsky may be
entitled, including pursuant to directors and officers insurance maintained by
the Corporation, both as to action in official capacity and as to action in
another capacity while holding such office, and the exercise of such rights
shall not be deemed a waiver of any of the provisions
9
<PAGE>
of this Agreement. The provisions of this Section 6 shall survive the expiration
or termination, for any reason, of this Agreement and shall be separately
enforceable.
7. Stock Purchase Options.
7.1 On the effective date of this Agreement, the Corporation has
granted to Tarlovsky incentive stock options under its 1995 Stock Option Plan to
purchase 400 shares of Common Stock ("Common Stock") of the Corporation at an
exercise price of $1.00 per share, the fair market value of the Corporation's
Common Stock on April 1, 1995. Such options shall vest as follows: Options to
purchase a number of shares equal to (i) 1/3 of 1% of the number of shares of
the Corporation's capital stock outstanding on April 1, 1996 shall vest on that
date; (ii) 1/3 of 1% of the number of shares of the Corporation's capital stock
outstanding on April 1, 1997 shall vest on that date; (iii) 1/3 of 1% of the
number of shares of the Corporation's capital stock outstanding on April 1, 1998
shall vest on that date; and (iv) .9 of 1% of the number of shares of the
Corporation's capital stock outstanding on the earlier of April 1, 1997 or the
date of effectiveness of the Corporation's Initial Public Offering ("IPO") of
equity securities to the public shall vest on such earlier date. Any such
options which do not vest pursuant to the terms of the preceding sentence shall
expire and be forfeited.
7.2 In addition, immediately prior to the IPO, the Corporation shall
grant to Tarlovsky stock options under its 1995 Stock Option Plan to purchase a
number of shares of its Common Stock equal to 1/10 of 1% of the number of shares
of capital
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stock issued and outstanding at that time at an exercise price of $12,500 per
share. Such options shall be immediately exercisable.
8. Assignment. The Corporation shall require any successor or assign
to all or substantially all the assets of the Corporation, prior to consummation
of any transaction therewith, to expressly assume and agree to perform in
writing this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession or assignment
had taken place. This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors and assigns.
9. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Sections 6.1 and 8 or in any
option provided for under Section 7 hereof.
10. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
11. Interpretation. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If, moreover, any one or more
11
<PAGE>
of the provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
extent compatible with the applicable law as it shall then appear.
12. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when mailed by registered or
certified mail or when delivered by hand or recognized overnight courier
service, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Corporation:
767 Fifth Avenue
Suite 4200
New York, NY 10153
Attn: Itzhak Fisher, President.
With a copy to:
Robert L. Kohl, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
To Tarlovsky:
767 Fifth Avenue
Suite 4200
New York, NY 10153
provided, however, that any notice of change of address shall be effective only
upon receipt.
13. Waivers. If any party should waive any breach of any provision
of this Agreement, it shall not thereby be deemed to have waived any preceding
or succeeding breach of the same or any other provision of this Agreement.
12
<PAGE>
14. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, canceled or discharged except by written instrument
executed by the parties hereto.
15. Governing Law. This Agreement is to be governed by and construed
in accordance with the laws of New York, without giving effect to principles of
conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
RSL COMMUNICATIONS INC.
By: /s/ Jacob Z. Schuster
-------------------------------------
Name: Jacob Z. Schuster
Title:
AGREED AND ACCEPTED:
/s/ Nir Tarlovsky
- -----------------------------------
Nir Tarlovsky
13
<PAGE>
Exhibit 10.15
THIS AGREEMENT is made on the date mentioned in paragraph 1 of the Schedule
BETWEEN RSL COM EUROPE LIMITED (formerly RSL COM UK Limited) whose registered
office is at 190 Strand, London -WC2R, United Kingdom (hereinafter called "the
Company") of the one part and RICHARD EDWIN WILLIAMS of Surrey View, 280 London
Road, Burpham, Surrey GU4 7LF (hereinafter called "the Director") of the other
part
WITNESSETH AND IT IS HEREBY AGREED as follows:
1. THE COMPANY shall employ the Director and the Director shall serve the
Company from the date mentioned in paragraph 3 of the Schedule for the
period and upon the terms and conditions herein contained.
2. THE DIRECTOR'S title description and duties are mentioned in paragraph
4 of the Schedule and, consistent therewith, the Director shall perform
such duties in connection with the business of the Company in such
places as the Board may from time to time direct. The Director shall
obey all reasonable instructions and directions of the Board and the
Director shall use his best endeavours to promote the business of the
Company. The Director shall be responsible for the appointment and
dismissal of senior management with the prior approval of the Board
(save in the case of dismissal with Cause, as defined in paragraph 11
of the Schedule). The Director shall report as necessary to the Board.
3. THE DIRECTOR'S hours of work are mentioned in paragraph 5 of the
Schedule and the Director shall devote the whole of his time and
attention during such hours to the discharge of his duties hereunder.
Save as already disclosed to the Company, in writing, and save in
writing with the consent of the Board, the Director shall not during
his employment by the Company be engaged, concerned or (save as a
minority shareholder or debenture holder for the purpose of bona fide
investment only in a company quoted on any recognised stock exchange in
any part of the world) interested or involved in any other trade
business or occupation whatsoever which shall conflict with the
Director's duties to the Company.
4.1 BY way of remuneration for his services and other obligations
hereunder, the Company shall pay to the Director the salary at the rate
mentioned in paragraph 6 of the Schedule. The said salary to be paid by
monthly installments in arrears on the 21st day of each calendar month,
such salary to be inclusive of any sums receivable as director's fees
or other emolument from the group.
4.2 SO long as the Director is Chief Executive Officer of the Company, the
Director shall be entitled to receive a bonus related to performance as
agreed with the Company as described in paragraph 7 of the Schedule.
5.1 THE COMPANY shall reimburse the Director for all proper and reasonable
traveling hotel and other expenses incurred by him in the proper
performance of his duties hereunder, provided that the incurring of any
such expenses is duly approved and supported by vouchers.
5.2 THE COMPANY shall provide reasonable equipment to enable the Director
to perform his duties hereunder.
<PAGE>
6. THE COMPANY will provide the Director with a car allowance as provided
for in paragraph 8 of the Schedule. The Director may choose to use his
own car or have the Company provide a leased car or contract hire car.
In addition to the car allowance, the Company will also pay for
insurance together with personal and business petrol costs. The
Director shall be liable for any personal taxes levied for use of the
car, shall take good care of the car and will be responsible for
ensuring that it remains, at all times, in road-worthy condition.
7.1 IN addition to usual public holidays, the Director shall be entitled to
25 working days holiday in each calendar year.
7.2 UPON the termination of this Agreement for whatever reason, the
Director shall be entitled to holiday pay for each day that may remain
after deducting from accrued holiday entitlement the amount of holiday
already taken in the calendar year in which the employment ceases.
Accrued holiday entitlement shall be calculated by taking for each
complete calendar month of employment during the calendar year in which
the employment ceases 1/12th of the annual holiday to which the
Director would have been entitled for that year.
8.1 SUBJECT as herein mentioned either party is entitled to give notice of
termination of this Agreement as provided in paragraph 11 of the
Schedule.
8.2 NOTWITHSTANDING anything herein contained the Company may terminate the
employment of the Director hereunder forthwith without notice if:
a) The Director is prevented by illness or otherwise for a total
of four months in any period of twelve months from performing
his duties hereunder or
b) With Cause in accordance with paragraph 11 of the Schedule.
8.3 THE COMPANY reserves the right to make a payment in lieu of notice
should it so wish, or require the Director to remain away from work
during the notice period whichever it may deem appropriate. Any payment
in lieu of notice will have any appropriate PAYE tax and National
Insurance Contributions deducted at source.
9. THE DIRECTOR will belong to a suitable Personal Pension Scheme
nominated by the Director and approved by the Board of the Inland
Revenue under the Income and Corporation Taxes Act 1988. The Director's
pension entitlement shall be as provided for in paragraph 9 of the
Schedule and will be paid for by the Company and shall not take into
account any bonus or other benefits.
10. SUBJECT to the provisions of this clause, the Company will pay the
Director his normal salary whilst he is absent due to sickness or
accidental injury in accordance with the following:
Length of Service Maximum Duration of Sick Pay
----------------------------------------------------------
Less than 6 months 4 weeks
6 - 12 months 8 weeks
1 - 4 years 12 weeks
5 - 10 years 18 weeks
10 years and over 26 weeks
<PAGE>
11. THE COMPANY will provide the Director and his family with full private
medical cover with BUPA or other similar company, as provided for in
paragraph 10 of the Schedule, subject to acceptance by that company as
long as the Director is employed by the Company.
12. THE COMPANY will arrange and pay for life assurance for the Director in
the value of four times his base salary for the benefit of the
Director's family. The Company will arrange for life assurance to the
same amount for the benefit of the Company at the cost of the Company.
13. COMPLAINTS by the Director shall be raised with the Chairman of the
Company.
14.1 THE DIRECTOR shall both during and after the termination of his
employment with the Company observe strict secrecy regarding the
business affairs and dealings of the Company, and any Associated
Company. The Director shall not at any time during or after his
employment with the Company disclose directly or indirectly to any
person, firm or company whatsoever, or apply or use for the benefit of
himself or of any one, except the Company or any Associated Company of
the Company, any trade secret, confidential information, manufacturing
process or knowledge of the organization dealings customers or clients
of the Company or any Associated Company which may come to his
knowledge during his employment with the Company. The Director shall
not use or attempt to use any such knowledge or information in any
manner which may injure or cause loss directly or indirectly to the
Company or to any Associated Company.
14.2 THE DIRECTOR shall not at any time during the period of nine months
from the date on which his employment with the Company ceases
(hereinafter referred to as "the termination date") without the prior
written consent of the Company directly or indirectly either alone or
jointly with or as agent, director, manager, consultant or employee of
any other person, firm, company or organization, as follows:
14.2.1 be engaged or concerned in any business within facility-based
international telecommunications in Western Europe which
competes directly with the business or any of the businesses
carried on by the Company at the termination date or by any
Associated Company with whose business the Director had been
concerned in the course of his duties hereunder during the 12
months ending on the termination date; nor
14.2.2 in competition with the Company solicit the custom of any
person, firm, company or organization who or which at the
termination date or at any time within 12 months ending on
termination date was a customer or client of or did business
with the Company or any Associated Company with whose business
the Director had been concerned in the course of his duties
hereunder during the 12 months ending on the termination date;
nor
14.2.3 in competition with the Company solicit the services of any
person, firm, company or organization who or which at the
termination date or at any time within 12 months ending on the
termination date was a supplier, agent or distributor of or
did business for the Company or any associated company with
whose business the Director had been concerned in the course
of his duties hereunder during the 12 months ending on the
termination date; nor
<PAGE>
14.2.4 endeavour to entice away from the Company or any Associated
Company any person who was on the termination date a director
or employee of the Company or of any Associated Company;
14.3 REGARDING the restriction set out in clause 14.2, the Director shall
provide the name and the detailed description of the potential employer
to the Company. If the Company does not consent with the Director's
choice of the potential employer, the Company shall pay (pound)25,000
to the Director by way of compensation.
14.4 THE DIRECTOR having taken independent legal advice acknowledges and
agrees that the restrictions set out in clause 14 are fair and
reasonable in the circumstances and that if any one or more or any part
of such restrictions shall be rendered or judged invalid or
unenforceable such restriction or part shall be deemed to be severed
from this Agreement and such invalidity or unenforceability shall not
in any way affect the validity or enforceability of the remaining
restrictions.
14.5 THE DIRECTOR hereby acknowledges that the restrictions contained in
this Clause shall operate for the benefit of the business carried on by
the Company and such restrictions shall be enforceable against the
Director by the owner for the time being of such business as well as by
the Company.
15.1 THIS AGREEMENT shall continue unless or until determined by either
party giving to the other notice in accordance with clause 8 of this
Agreement or paragraph 11 of the Schedule.
15.2 UPON the termination of this Agreement for whatever reason the Director
shall: (a) if so requested by the Board resign without claim for
compensation (save pursuant to paragraph 11 of the schedule) from all
or any offices he may hold, as a Director of the Company or of any of
the Company's subsidiary or associated companies and in the event of
his failure to do so the Company is hereby irrevocably authorised to
appoint some person in his name and on his behalf to execute any
documents and to do all things necessary to give effect to such
resignation; and
(b) deliver up all documents and other property relating to the Company
and its Associated Companies in his possession or control and shall not
make any copy or duplicate thereof.
16. IF one or more of the terms of this Agreement shall be null or void the
validity of the remaining terms shall be unaffected thereby. In this
event the parties shall replace the null or void term with an effective
term as close as possible to the objective of the ineffective term.
17. THIS AGREEMENT is in substitution for and wholly replaces such other
contracts (whether written or oral or implied by law and any other form
of informed or ad hoc arrangements or understandings) which have
heretofore subsisted between the parties in relation to the business
operations or any other activities of the Company.
18. ANY notice given under this Agreement shall be deemed to be properly
served if addressed to the Company and sent by registered post or
recorded delivery mail addressed to the Company at its registered
office or if addressed to the Director it be served personally or be
sent by registered post or recorded delivery addressed to him at his
usual or last known place of residence in the United Kingdom and in the
care of service by post the data of service shall be two days following
the date of posting.
<PAGE>
19. THIS AGREEMENT shall be governed by and interpreted in accordance with
English Law.
20. IN this agreement the following expressions shall bear the following
meaning, except where the context otherwise requires:
"the Board" shall mean the board of directors for the time being of
the Company.
"the Group" shall mean the Company and its associated companies for
the time being.
"Associated" shall mean any Company which is for the time being the
Company's holding company (as defined in section 736 of
the Companies Act 1985) or a subsidiary (as defined in
the said section 736) of such holding company other than
the Company itself.
21. THE PROVISIONS of the Schedule hereto shall constitute a notice by the
Company to the Director pursuant to section 1 of the Employment
Protection (Consolidation) Act 1978.
IN WITNESS whereof the Agreement has been signed on behalf of the Company and
the Director the day and year first before mentioned.
<PAGE>
Note: This is the Schedule to the attached Agreement. The Agreement sets out
the Terms of Employment
RSL COM UK LTD
("the Company")
1. Date of Agreement: 9th of August 1995
2. Name and Address of Chief Executive Officer ("Director"):
Richard Edwin Williams of Surrey View, 280 London Road, Burpham, Surrey
GU4 7LF
3. Date of Commencement of Employment:
14th of August 1995
4. Job Title Description and Duties:
Chief Executive Officer of the Company. To administer the Company, its
operations and activities to maximum effect in the telecommunications
industry and to implement the European Franchise Program. To use all
reasonable endeavors to achieve targets of the Company business plan.
5. Hours of Work:
Such hours as are necessary to carry out the Director's duties to the
Company's satisfaction. The Director shall devote not less than the
equivalent of 5 full days out of each week to the business and affairs
of the Company.
6. Remuneration:
(pound)100,000 per annum base salary ("Base Salary") and such other
additional sums as may be agreed between the Director and the Board as
reviewed on an annual basis proportionally to rise in line with the
rise in the Retail Price Index at each anniversary over the figure at
the date of this Agreement.
7. Bonus:
(pound)25,000 per annum for 100% achievement of a mutually agreed
targets. If the Company achieves between 80% - 120% of mutually agreed
upon targets (the "Performance Percentage"), the Bonus will be
calculated by multiplying a mutually agreed amount by the Performance
Percentage.
The Bonus and the components of the Bonus will be mutually agreed upon
30 days before the start of each year in conjunction with the annual
budget ("Annual Budget"). Annual Budget shall be prepared and presented
by the Company and approved by the Board. The Director who presents the
Company and the Board must agree on an Annual Budget before the
beginning of each calendar year. The Board shall not unreasonably
withhold the approval of the Annual Budget.
<PAGE>
For the calendar year of 1995, the Director shall be entitled to a
bonus if the following targets are met by year end 1995:
(i) Open an office
(ii) Obtain an ISR license
(iii) Purchase a public exchange
(iv) British Telecom programming of its exchanges on access
(v) Hire/Identify key staff
If the Director achieves these targets, then the Company shall pay at
year end (pound)2,100 for each month that the Director has been
employed in 1995.
The Bonus shall be paid semi-annually based on actual vs. budget. The
Director shall be entitled to a special bonus of 50% of Base Salary for
achievements over 125%.
For the calendar year of 1996, the Bonus will be based upon 3 financial
targets:
1. revenue growth
2. operating profit
3. receivables aging
================================================================================
Mutually Agreed Base Bonus (80%-
Criteria (YR 1) Target 120%)
- --------------------------------------------------------------------------------
Revenue Growth as agreed per budget (pound)15,000 x (80%-120%)
- --------------------------------------------------------------------------------
Operating Profit as agreed per budget (pound)7,500 x (80%-120%)
- --------------------------------------------------------------------------------
Receivables Aging as agreed per budget (pound)2,500 x (80%- 120%)
================================================================================
Example:
================================================================================
Criteria Actual Calculation Actual Bonus
Performance
- --------------------------------------------------------------------------------
Revenue Growth 120% (pound)15,000 x 120% (pound)18,000
- --------------------------------------------------------------------------------
Operating Profit 95% (pound)7,500 x 95% (pound)7,125
- --------------------------------------------------------------------------------
Receivable Aging 105% (pound)2,500 x 105% (pound)2,625
================================================================================
Total Bonus: (pound)27,750
8. Car Allowance
(pound)10,000 per annum.
<PAGE>
9. Pension
12.5% of such part of the Director's basic salary as does not exceed
the allowable maximum as defined in section 640A (2) of the Income and
Corporation Taxes Act 1988.
10. Private Health Insurance
Family coverage
11. Term and Termination
This Agreement shall be for three years save that if the employment is
terminated by the Company with Cause then the Company will pay three
months salary by way of compensation. The term Cause shall mean:
a) The failure or refusal to comply with any reasonable direction
or request of the Board within 30 days of written notice by
the Board. The notice by the Board shall define the nature of
the failure or refusal and shall state the consequence if they
are not cured; or
b) Any willful misconduct which results in a monetary loss to the
Company or a conviction of any misdemeanour relating to
employment or conviction of a serious crime or any serious
misconduct which could materially harm the company's image of
employee relations; or
c) The Director becoming bankrupt or of unsound mind as certified
under the Mental Health Act; or
d) The Director being disqualified from acting as a Director; or
e) A substantial failure to meet the targets as set out 30 days
before the start of each year in conjunction with the Annual
Budget, provided that the Company would perform its funding or
other responsibilities outlined in the Annual Budget.
12. EQUITY:
The Company shall grant the Director options for 1% of the issued share
capital of the Company's shares (for the sake of clarity, this means 1%
of the fully diluted share capital at the date of exercising of these
options) at a rate of 1/3 of 1% at the end of each year over 3 years at
a price of (pound)0.10 per share or at the par price per share if lower
than (pound)0.10. In addition, at the end of 3 years the Company will
grant options, of an additional 1% of the Company's shares at a price
fixed to 1% of the investment capital of the Company. Such options to
be exercised within six years of the date of this Agreement, or if the
Director leaves the Company for whatever reason then such options shall
be exercisable within 30 days of the date of termination.
If the Director wishes to sell his shares following the exercise of the
options, the Company agrees to buy his shares based on the Company
being valued at fair market value ("Fair Market Value").
<PAGE>
If the Director leaves the Company for whatever reason, the Company has
the right to demand that the Director exercises all of his options and
subsequently sells shares to the Company at no earlier date than four
years from the date of this agreement. The valuation of the Director's
shares shall be based on the Company being valued at Fair Market Value.
Fair Market Value for the Company's shares shall be the greater of (a)
2.4 times of the Company's unaudited revenues which will include the
United Kingdom operations, the European Franchise Program and other
revenues for which Director is responsible for, minus all outstanding
liabilities for money borrowed plus cash balance, of the last twelve
months of the company or (b) the price per share of the last prior
private placement of the Company's Common Stock to a bona fide
independent third party. In the event that the Director disagrees with
the calculation of Fair Market Value, he shall so notify the Company
within 15 days following his receipt of the Company's calculation of
Fair Market Value, whereupon the matter shall be submitted to a
mutually agreed reputable accounting firm, whose determination of Fair
Market Value shall be final and binding on the parties.
Signed /s/ Richard Edwin Williams Signed /s/ Itzhak Fisher
--------------------------- -----------------------------
President
<PAGE>
If the Director leaves the Company for whatever reason, the Company has
the right to demand that the Director exercises all of his options and
subsequently sells shares to the Company at no earlier date than four
years from the date of this agreement. The valuation of the Director's
shares shall be based on the Company being valued at Fair Market Value.
Fair Market Value for the Company's shares shall be the greater of (a)
2.4 times of the Company's unaudited revenues which will include the
United Kingdom operations, the European Franchise Program and other
revenues for which Director is responsible for, minus all outstanding
liabilities for money borrowed plus cash balance, of the last twelve
months of the company or (b) the price per share of the last prior
private placement of the Company's Common Stock to a bona fide
independent third party. In the event that the Director disagrees with
the calculation of Fair Market Value, he shall so notify the Company
within 15 days following his receipt of the Company's calculation of
Fair Market Value, whereupon the matter shall be submitted to a
mutually agreed reputable accounting firm, whose determination of Fair
Market Value shall be final and binding on the parties.
Signed _________________________ Signed /s/ Itzhak Fisher
-------------------------
President
<PAGE>
Exhibit 10.16
[SEAL]
MEMORANDUM OF AGREEMENT
ITC CORPORATION AND CODETEL
As of July 30, 1996, this Memorandum of Agreement obligates ITC Corporation and
CODETEL to the following provisions:
1. ITC agrees to remain current on its International settlement payments for
traffic terminated by CODETEL in the Dominican Republic as of April 1996 and
beyond, as called for in the CODETEL-ITC Service Agreement subscribed on May 31,
1994 (hereafter "the Service Agreement").
2. ITC agrees to pay CODETEL's traffic invoice(s) for the Tropicard prepaid
product, within a period no longer than forty-five (45) days after the end of
each calendar month in which the traffic was terminated.
3. Late settlement payments made by ITC to CODETEL per the Service Agreement
will be subject to a Late Payment Charge as called for by item 7.4 of the
Service Agreement.
4. On July 2, 1996, ITC paid CODETEL US$3.1 millions, which represented payment
in full of all outstanding settlement invoices owed to CODETEL before April 1996
(excluding late payment interest charges) not related to traffic originated from
DC Corporation, a traffic aggregator operating in the United States of America.
Additionally in July 1996, ITC paid CODETEL US$300,000.00, representing the
first installment payment on traffic related to DC Corporation as outlined in
paragraph 5 below.
5. By March 5, 1997, ITC agrees to pay in full, all unpaid and outstanding
settlement invoices owed to CODETEL before April 1996 associated with traffic
originating from DC Corporation over this period, ITC agrees to pay this amount
in nine monthly installments on the fifth day of each month, the first payment
having already been made in July 1996 (see paragraph 4 above). ITC will pay to
CODETEL $300,000. a month for the first 8 months and conclude this obligation to
CODETEL with a balloon payment in the 9th month for the remaining balance.
However, in the event ITC is able to collect payments from DC Corporation, prior
to the above mentioned deadline of March 5, 1997, the associated settlements and
any applicable late payment interest penalties will be paid immediately to
CODETEL. The amount owed by ITC to CODETEL in this particular instance is US$4.8
million, plus the applicable late payment interest charges as specified in the
Service Agreement.
6. ITC acknowledges and understands that CODETEL has the right to immediately
terminate all or part of its new and existing international facilities and
service arrangements with ITC, if it fails to comply with this agreement,
provided that CODETEL shall not have the right to immediately terminate all or
part of its new and existing international facilities and service arrangements
with ITC, unless and until (i) CODETEL provides ITC with written notice of
proposed termination due to ITC's breach of this agreement, which breach shall
be specified in the notice of proposed termination, and (ii) CODETEL also
affords the opportunity for ITC to cure any failure to comply with this
agreement within 5 business days of receipt by ITC of such written notice from
CODETEL. In the event that ITC cures the failure on its part to comply with this
agreement within the above mentioned 5 day period, CODETEL no longer shall have
the right to terminate all or part of its new and existing international
facilities and service arrangements with ITC, unless and until there is another
failure by ITC to comply with this agreement and CODETEL fulfills the notice and
opportunity to cure terms of this paragraph 6 again.
<PAGE>
[Letterhead of ITC]
7. CODETEL will evaluate opportunities to make available to ITC additional
international facilities to accommodate increased traffic requirements that
cannot be handled by existing circuits between the two companies. In the event
that CODETEL does not agree to install additional international facilities with
ITC, CODETEL acknowledges and understands that ITC may pursue other alternatives
to terminate its international traffic to the Dominican Republic.
8. In regards to paragraph 5 above, ITC will offer to purchase on behalf of
CODETEL international facilities compression equipment. In the event that
CODETEL accepts this offer, ITC will also grant CODETEL the option of paying for
such equipment as a net of any settlement payments that ITC owed to CODETEL. ITC
will also allow CODETEL to perform this netting arrangement as late as March 5,
1997, in the event that ITC has not fulfilled its financial obligations to
CODETEL as outlined in this agreement by that time.
9. Whenever appropriate, CODETEL will make best efforts to assist ITC in
recovering payments from its accounts. This type of assistance, however, should
not be construed as CODETEL having any obligation to ITC regarding its ability
to collect its own receivable from such accounts.
10. This agreement will terminate once the financial obligation described in
paragraph 5, has been satisfied.
We the undersigned commit our respective companies to the preceding terms and
conditions.
/s/ Freddy Dominguez C. /s/ Lawrence J. Vierra
- -------------------------------- ----------------------------------
FREDDY DOMINGUEZ C. LAWRENCE J. VIERRA
Vice President of Marketing and Executive Vice President
International Operations Authorized Signatory for
Authorized Signatory for CODETEL ITC
[SEAL]
<PAGE>
Exhibit 10.17
GENERAL PURCHASE AGREEMENT
between
ERICSSON INC.
and
INTERNATIONAL TELECOMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
Page 1 of (5)
<PAGE>
1.0 GENERAL ...................................................... 1
1.1 Purchase of Material and/or Services ......................... 1
1.2 Term of Agreement ............................................ 1
1.3 Definitions .................................................. 1
2.0 STATEMENTS OF WORK; ORDERING MATERIAL & SERVICES ............. 7
2.1 Statement of Work ............................................ 7
2.2 Orders ....................................................... 7
2.3 Price Confirmation ........................................... 8
2.4 Price ........................................................ 8
2.5 Termination of Order ......................................... 8
2.6 Taxes ........................................................ 8
2.7 Engineering Planning and Estimating Tool (Class V Only) ...... 9
3.0 SHIPPING AND HANDLING OF MATERIALS ........................... 9
3.1 Shipping and Billing ......................................... 9
3.2 Shipping Interval ............................................ 9
3.3 Packaging .................................................... 10
3.4 Transportation ............................................... 10
3.5 Risk of Loss ................................................. 10
3.6 Title ........................................................ 10
3.7 Security Interest ............................................ 10
4.0 INSTALLATION AND ACCEPTANCE .................................. 11
4.1 Conditions Normally Provided by ITC .......................... 11
- --------------------------------------------------------------------------------
Page 2 of (5)
<PAGE>
4.2 Conditions Normally Provided by Ericsson ..................... 13
4.3 Installation/Cutover Assistance .............................. 14
4.4 Installation Quality Inspection .............................. 14
4.5 Inspection and Notification of Completion .................... 15
4.6 Work Hereunder ............................................... 15
4.7 Right of Access .............................................. 15
4.8 Identification Credentials ................................... 15
4.9 Plant Rules .................................................. 15
4.10 Acceptance ................................................... 16
5.0 INVOICING AND PAYMENT TERMS .................................. 16
5.1 Invoices ..................................................... 16
5.2 Payment ...................................................... 16
5.3 Disputed Invoices ............................................ 17
6.0 INTELLECTUAL PROPERTY ........................................ 17
6.1 Rights in Software ........................................... 17
6.2 Infringement ................................................. 19
6.3 Source Programs and Technical Documentation .................. 20
7.0 WARRANTIES AND REPRESENTATIONS; LIABILITY .................... 20
7.1 Warranty ..................................................... 20
7.2 Radio Frequency Energy Standards ............................. 24
7.3 Registration ................................................. 24
7.4 Liability, Insurance and Indemnity ........................... 24
- --------------------------------------------------------------------------------
Page 3 of (5)
<PAGE>
7.5 Limitation of Liability ...................................... 25
8.0 ERICSSON SUPPORT ............................................. 25
8.1 Customer Service ............................................. 25
8.3 Product Changes .............................................. 26
8.4 Replacements Out of Warranty ................................. 28
8.5 Continuing Availability ...................................... 28
8.6 Emergency Replacement Service ................................ 29
8.7 Extraordinary Support ........................................ 30
8.8 Training ..................................................... 30
8.9 Regulatory Affairs ........................................... 30
9.0 EXCHANGE OF INFORMATION ...................................... 30
9.1 Treatment of Proprietary Information ......................... 30
9.2 Compatibility Information .................................... 31
9.3 Interconnect Information ..................................... 31
10.0 MATERIAL MARKING ............................................. 31
10.1 Insignia ..................................................... 31
10.2 Marking ...................................................... 32
11.0 GENERAL TERMS AND CONDITIONS ................................. 32
11.1 Termination of Agreement ..................................... 32
11.2 Assignment by ITC ............................................ 32
11.3 Assignment by Ericsson ....................................... 33
11.4 Subcontracting ............................................... 33
- --------------------------------------------------------------------------------
Page 4 of (5)
<PAGE>
11.5 Force Majeure ................................................ 33
11.6 Choice of Law ................................................ 33
11.7 Arbitration .................................................. 34
11.8 Publicity .................................................... 34
11.9 Notices ...................................................... 34
11.10 Releases Void ................................................ 35
11.11 Severability ................................................. 35
11.12 Survival ..................................................... 36
11.13 Section Headings ............................................. 36
11.14 Non-Waiver ................................................... 36
11.15 Compliance with Laws ......................................... 36
11.16 Entire Agreement ............................................. 36
Attachment A - STATEMENT OF WORK
Attachment B - CUSTOMER SERVICES
- --------------------------------------------------------------------------------
Page 5 of (5)
<PAGE>
This General Purchase Agreement is entered into by International
Telecommunications Corporation, a Delaware corporation (hereinafter "ITC") with
principal offices located at 60 Hudson Street, New York, New York and Ericsson
Inc., a Delaware corporation, acting through its Network Systems division
(hereinafter "Ericsson") with principal offices located at 1010 E. Arapaho Rd.,
P.O. Box 833875, Richardson, Texas 75081.
1.0 GENERAL
1.1 Purchase of Material and/or Services
Material and/or Services set out in the SOW and Attachment B are hereby
offered for sale by Ericsson and may be purchased by ITC in accordance
with the terms and conditions stated herein.
1.2 Term of Agreement
The term of this Agreement shall commence as of September 14, 1995, and
unless terminated under the section entitled "TERMINATION OF AGREEMENT",
shall continue in effect until June 21,1998.
1.3 Definitions
1.3.1 Acceptance
"Acceptance" means, with respect to each System, that the System has
been installed and the conditions described in the section entitled
"ACCEPTANCE" have been successfully met.
1.3.2 Affiliated Party
"Affiliated Party" means a partner, subsidiary, parent, or sister
subsidiary either directly or indirectly controlling or controlled
by a Party hereto or directly or indirectly controlled by a common
parent of the affiliate and the Party.
1.3.3 Agreement
"Agreement" means this General Purchase Agreement, as amended from
time to time, the SOW, any Appendices and Exhibits expressly made a
part of this Agreement, and to the extent provided in the subsection
hereof entitled "Entire Agreement", any Orders.
- --------------------------------------------------------------------------------
Page 1 of (36)
<PAGE>
1.3.4 Application System
"Application System" means a collection of Hardware and Software
products designed to meet all of the requirements of a certain
market for a specific type of exchange.
1.3.5 Change Order
"Change Order" means any change to an original Order, including but
not limited to a change in Material or requested delivery or
completion date specified in an Order, which shall be detailed in a
writing referencing the original Order.
1.3.6 Competing Business
"Competing Business" means the business of developing, manufacturing
or selling central office switching hardware or software; cellular
switching hardware or software; wide area paging hardware or
software; PBX hardware or software; personal communications services
hardware or software; broadband hardware or software; advanced
intelligent network (AIN) hardware or software; and/or related
services.
1.3.7 Correction Notice Application (CN-A)
"Correction Notice Application (CN-A)" means a document that lists
modifications (either corrections or functional additions) to be
installed in a specific application product in an Application
System.
1.3.8 Customer Services
"Customer Services" means the Services described in Attachment B.
1.3.9 Derivative Work
"Derivative Work" means computer program instructions that
incorporate all or portions of Software directly or through linking
and locating.
1.3.10 Designated Equipment
"Designated Equipment" means the Ericsson's digital central office
switching equipment supplied to ITC under this Agreement.
- --------------------------------------------------------------------------------
Page 2 of (36)
<PAGE>
1.3.11 Documentation
"Documentation" means Ericsson's product documentation, technical
specifications and such other information which contains standard
descriptive operating, installation, engineering, maintenance,
training and repair information on Material.
1.3.12 E&F
"E&F" means "engineer and furnish"; Ericsson engineers and
furnishes (but does not install) Material.
1.3.13 EF&I
"EF&I" means "engineer, furnish and install"; Ericsson engineers,
furnishes, and installs Material.
1.3.14 Engineering Services
Engineering Services means Ericsson's preparation of installation
specifications, preparation and/or updating of office records
including drafting Services as required, preparation of a summary of
Material including miscellaneous Material not specifically itemized
in ITC's Order but necessary for the proper functioning of Material,
and other similar Services.
1.3.15 Ericsson
"Ericsson" means Ericsson Inc., Network Systems division, and its
successors or assigns
1.3.16 Expansion
"Expansion" means the modification of an existing site by adding
Hardware or upgrading Software.
1.3.17 F&I
"F&I" means "furnish and install"; Ericsson furnishes and installs
(but does not engineer) Material.
1.3.18 Furnish Only
"Furnish Only" means the providing of Material by Ericsson without
performance of Engineering Services or Installation Services.
- --------------------------------------------------------------------------------
Page 3 or (36)
<PAGE>
1.3.19 Generic Computer Program
"Generic Computer Program" means a software computer program
containing a set of computer instruction steps that are generic to
programs other than the specific version of the computer program
furnished under the License described in "Rights in Software". For
Software furnished under a given license, only the applicable
computer program steps necessary to provide the licensed feature are
enabled.
1.3.20 Hardware
"Hardware" means equipment manufactured by Ericsson or an Affiliated
Party of Ericsson and inherent "original equipment manufacture"
equipment integrated during manufacturing into a System provided to
ITC.
1.3.21 lmprovement/Enhancement
"lmprovement/Enhancement" means any improvement or enhancement to
the Software, and any improvement or enhancement to the composite
Hardware and Software design of the Designated Equipment that
includes an improvement or enhancement to the Software.
1.3.22 Improvement/Enhancements Grant-Back Rights
"lmprovement/Enhancements Grant-Back Rights" means royalty-free
worldwide, nonexclusive rights to make, have made, sell (including
disposition to an end-user) and use software, patents, copyrights,
firmware and semiconductor mask registration rights related to
Improvements/Enhancements, including the right to sublicense to
Affiliate Parties (such sublicense to survive any subsequent
termination of the affiliation).
1.3.23 Installation Services
"Installation Services" means Ericsson's installation of Material
performance verification testing, equipment removal, cable mining
and such other similar Services.
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1.3.24 ITC
"ITC" means International Telecommunications Corporation, its
successors and assigns.
1.3.25 Material
"Material" means Hardware and/or Software furnished by Ericsson
under this Agreement.
1.3.26 Order
"Order" means ITC's written form of purchase order for purchasing
Systems, Material and/or Services hereunder and all technical
documentation included therein.
1.3.27 Original Equipment Manufacturer (OEM)
"Original Equipment Manufacturer" (OEM) means hardware, equipment or
software not manufactured by Ericsson (or an Affiliated Party of
Ericsson) that is selected by ITC to be installed as part of a
System. OEM does not include "original equipment manufacturer"
equipment integrated during manufacturing into a System so as to
become Hardware.
1.3.28 Parties
"Parties" means ITC and Ericsson; "Party" means ITC or Ericsson.
1.3.29 Related Documentation
"Related Documentation" means materials useful in connection with
Software, such as, but not limited to, flow charts, logic diagrams,
program listings, program descriptions and Specifications of the
Software. Related Documentation does not include the source code for
Software.
1.3.30 Replacement Material
"Replacement Material" means an item of functionally equivalent
replacement Material that is exchanged for defective or destroyed
Material and provided as a Customer Service.
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1.3.31 RFA
"RFA" means Ready for Acceptance and is the date that Ericsson
notifies ITC that Material is ready for Acceptance testing.
1.3.32 Services
"services" means Customer Services, incidental services (such as
hauling and hoisting), and other work performed by Ericsson under
this Agreement.
1.3.33 Software
"Software" means the computer programs that are tailored for use in
the operation of the Designated Equipment, including the following
(1) a set of machine readable computer program instructions
recorded on magnetic disks or other storage media; and
(2) all releases, issues or short sequences of computer program
instruction modifications ("patches") furnished by Ericsson to
ITC as a replacement for or for the modification of previously
furnished Materials; and
(3) all Derivative Works or modifications made by ITC of any of
the foregoing; and
(4) all copies of any of the foregoing, in whole or in part by
whomever made.
1.3.34 SOW
"SOW" means a Statement of Work executed in accordance with the
subsection hereof entitled "Statement of Work".
1.3.35 Specifications
"Specifications" means Ericsson's technical specifications for the
Materials as existing on the date the Material was ordered, or any
specifications specified and mutually agreed upon by ITC and
Ericsson in an individual Order.
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1.3.36 System
"System" means all the elements of a central office switching system
or an Expansion thereof including Material, Documentation and
support items.
2.0 STATEMENTS OF WORK; ORDERING MATERIAL & SERVICES
2.1 Statement of Work
Ericsson and ITC shall agree to a detailed SOW in the form of Attachment
A. Upon execution, the SOW shall be incorporated into this Agreement as an
amendment. Unless otherwise stated in the SOW, the terms of the SOW shall,
with regard to the work described therein, prevail in the event of a
conflict between the terms of the SOW and this Agreement. If this
Agreement states that a price, charge, or fee shall be stated in the SOW,
and such price, charge, or fee is not so stated, the parties shall be
deemed to have agreed to apply Ericsson's standard price, charge, or fee.
2.2 Orders
To purchase Material and Services, ITC shall send Orders to Ericsson.
Unless otherwise specified in writing, the provisions of this Agreement
shall apply to all Orders placed by ITC for Material or Services specified
herein. ITC's failure to specifically identify this Agreement on any Order
shall not affect the applicability of these terms and conditions.
Orders for Material and/or Services entered by ITC against this Agreement
shall include: (a) requested delivery and/or completion date; (b) location
to which the Material is to be shipped and/or Services performed; (c)
location to which invoice shall be sent for payment; (d) ITC's Order
number; and (e) location to which Documentation shall be shipped. Ericsson
shall acknowledge receipt of each Order and shall indicate whether the
requested schedule of dates is acceptable. Any changes to an accepted
Order must be mutually agreed upon and delineated in a Change Order
referencing the original Order.
Ericsson shall accept Orders requiring delivery in less than standard
intervals at prices and intervals agreed to by ITC and Ericsson.
Orders placed for Material and/or Services for which Ericsson has received
prior notification of office-specific data shall be deemed accepted by
Ericsson unless Ericsson provides to ITC written notice to the contrary
within ten (10) working days of receipt of such Order and provided such
order is identical to the office-specific data agreed upon. All other
Orders shall be deemed accepted by Ericsson when Ericsson sends a price
confirmation letter to ITC.
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2.3 Price Confirmation
Ericsson shall provide a price confirmation letter for each Order entered
by ITC and accepted by Ericsson for Material and/or Services. This price
confirmation letter shall reflect all applicable discounts.
ITC shall acknowledge acceptance or rejection of the price confirmation
letter within thirty (30) days of the date of such letter. A price
confirmation letter shall be deemed accepted by ITC if notice of rejection
is not given to Ericsson within thirty (30) days of the date of such
letter. Upon acceptance, all provisions of the price confirmation letter
shall be binding unless mutually agreed upon and delineated in a Change
Order.
The only Material not governed by price confirmation letters or Order
acknowledgements is site specific Material for which ITC is unable to
determine quantity until job start, such as the number of
cross-connections. Ericsson shall acknowledge all such exclusions in the
price confirmation letter or Order acknowledgement and, if available,
shall include unit rates for all excluded items. Unless the SOW expressly
states otherwise, prices for Services stated in an SOW shall be based on
the level of staffing that Ericsson typically employs to render such
Services under similar circumstances in locations at which the staffing
level is unaffected by the rules or activities of unions, trade guilds,
or similar organizations. Accordingly, Customer shall reimburse Ericsson
for all costs related to any additional staffing that (i) may be required
by the applicable rules of such organizations or (ii), considering the
activities of such organizations in the area Ericsson considers reasonably
prudent to incur.
2.4 Price
Without prejudice to the last paragraph of the section entitled "Price
Confirmation". Prices for Material and Services provided in the United
States shall not exceed those in effect on the date an Order is placed,
according to the SOW (in the cases of Material and Services other than
Customer Services) and Attachment B (in the case of Customer Services).
2.5 Termination of Order
ITC may at any time prior to delivery of the Material cancel any Order(s)
placed hereunder in whole or in part by written notice to Ericsson. Upon
cancellation, ITC shall be liable to Ericsson for twenty percent (20%) of
the total price of the Order, if canceled more than thirty (30) days
before the scheduled delivery date, or forty percent (40%) of the total
price of the Order, if canceled thirty (30) days or less
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before the scheduled delivery date for the Order. ITC may not cancel an
Order after the Material has been delivered.
2.6 Taxes
ITC shall be liable for and shall reimburse Ericsson for the following tax
payments with respect to the transactions under this Agreement: federal
manufacturers' and retailers' excise taxes, value added taxes, state and
local sales taxes and use taxes, and similar taxes assessed upon the sale
of Material and Services hereunder (but not upon income therefrom). Taxes
payable by ITC shall be billed as separate items on Ericsson's invoices
and shall not be included in Ericsson's prices. ITC shall have the right
to have Ericsson contest with the imposing jurisdiction, at ITC's expense,
any such taxes that ITC deems are improperly levied.
2.7 Engineering Planning and Estimating Tool (Class V Only)
Upon request and at mutually agreed upon price, Ericsson shall provide to
ITC, and keep current, a tool for estimating the price of Ericsson's
Material and/or Services prior to Order placement. Such tool shall be
capable of estimating the actual purchase price for such Material and/or
Services within ten percent (10%). Whether manual or mechanized, the
output of such tools shall provide readily identifiable unit prices and
discrete totals for Material and/or Services.
3.0 SHIPPING AND HANDLING OF MATERIALS
3.1 Shipping
Unless instructed otherwise by ITC, Ericsson shall: (1) ship to the
destination designated in the Order in accordance with specific shipping
instructions; (2) see that all subordinate documents bear ITC's Order
number; (3) enclose a packing memorandum with each shipment and when more
than one package is shipped, identify the one containing the memorandum;
(4) mark ITC's Order number on all packages and shipping papers; and (5)
render invoices in duplicate or as otherwise specified showing Order
number.
3.2 Shipping Interval
The delivery schedule applicable to each Order, except Orders for
Replacement Material, will be agreed upon by Ericsson and ITC and set out
in the Order and Ericsson's acceptance of the Order. For ITC's planning
purposes, Ericsson has indicated that Material can usually be shipped
within the standard lead times set out in the SOW. In the event that the
time between the date that Ericsson receives ITC's Order and the requested
RFA date is less than the standard lead times, the
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expedite fees set out in the SOW shall apply. Ericsson agrees not to ship
Material prior to the agreed upon delivery schedule without ITC's prior
authorization.
3.3 Packaging
Ericsson shall, at no charge, package Material in suitable boxes, reels,
bundles, pieces, coils, etc. which will provide protection against damage
during shipment, handling and storage in reasonably dry, unheated
quarters.
3.4 Transportation
Material shall be shipped for destination, freight prepaid. Freight
charges shall be added as a separate item to Ericsson's invoice. Material
purchased under this Agreement shall be shipped to ITC subject to freight
charges applicable to such Materials under the National Motor Freight
classification, or any other applicable tariff. Any additional charges
incurred in moving the Material to its final resting place (including
without limitation hoisting, stair carries or long carries) shall be at
ITC's expense.
3.5 Risk of Loss
ITC shall assume the risk of loss and damage for all Furnish Only Material
Orders upon delivery to ITC of such Material at the location designated on
the Order. When Ericsson is providing Material and Installation Services,
Ericsson will retain the risk of loss and damage until Acceptance. ITC
shall notify Ericsson promptly of any claim and shall cooperate with
Ericsson in every reasonable way to facilitate the settlement of any such
claim.
3.6 Title
Unless otherwise specified herein, title to Material, except Software,
furnished by Ericsson shall vest in ITC when the Material has been paid
for in full by ITC.
3.7 Security Interest
Notwithstanding the section entitled "TITLE," ITC hereby grants to
Ericsson a lien on and a security interest (which, to the fullest extent
permitted by applicable law, shall be deemed to be a purchase money
security interest) in the Materials (and, to the fullest extent permitted
by applicable law, Ericsson hereby reserves and retains such lien and
security interest), and each of them, and in and to all accessions and
appurtenances thereto and any and all proceeds and products thereof to
secure the payment in full of the purchase price for the Materials payable
by ITC to Ericsson hereunder. If ITC defaults in the payment when due of
all or any portion of the purchase price or any other amount now or
hereafter owed to Ericsson hereunder, Ericsson shall have and may
exercise, in addition to all rights and remedies otherwise available to
Ericsson under applicable law, all of the
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rights and remedies of a "secured party" under the Uniform Commercial Code
as in effect in the State of New York. ITC agrees to execute, deliver,
file, and record any one or more financing statement or other document,
and to take such other action, as Ericsson may from time to time deem
appropriate to create, preserve, perfect, or validate the lien and
security interest granted hereby in any jurisdiction. Ericsson may at any
time file a photographic or other reproduction at this agreement as, and
the same shall be effective as, a financing statement with any filing
office in any jurisdiction.
4.0 INSTALLATION AND ACCEPTANCE
4.1 Conditions Normally Provided by ITC
The following items and conditions will normally be provided by ITC.
Should ITC fail to provide the following, Ericsson may invoice ITC for
such items, in addition to the established installation price.
Landlord Approvals - In the event that ITC does not own the location where
the Material is to be installed, ITC shall obtain the owner's written
approval at the installation.
General Building Conditions - ITC shall ensure that the premises meet the
requirements contained in the Specifications and/or Documentation, and are
in such condition as not to be injurious to the employees of the Ericsson
or the Material to be installed.
Repairs to Building - ITC shall make alterations and repairs necessary for
proper installation of Material, except for damage caused by Ericsson.
Openings in Buildings - No later than the Floor Plan Complete date,
Ericsson shall provide ITC with drawings and designs indicating the
necessary openings and ducts for cable and conductors in floors and walls.
ITC shall not make changes to the installation site after receiving such
drawings, other than to furnish such suitable openings and ducts prior to
the main ship date. No later than the Floor Plan Approval date, ITC shall
agree to specific locations for the necessary openings and ducts. The
Floor Plan Complete date and the Floor Plan Approval date shall be set in
accordance with the schedule set out in the SOW.
Ceiling Inserts - ITC shall provide ceiling inserts as deemed necessary
during site survey by Ericsson, or as otherwise mutually agreed upon prior
to installation start date.
Electric Current, Temperature Control and Light - By the installation
start date, ITC shall provide electric current for charging storage
batteries and for any other
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necessary purposes with suitable terminals in rooms where work is to be
performed; temperature and general illumination in rooms in which work is
to be performed or Material stored shall be equivalent to that ordinarily
furnished for similar purposes in a working central office.
Toilet Facilities - ITC shall provide Ericsson's employees access to
available toilet facilities, or Ericsson, at its option, may provide
facilities at ITC's cost
Access to Existing Facilities - ITC shall permit Ericsson reasonable use
of such portions of the existing building or equipment as agreed upon
prior to the start of installation, that are necessary for the storage and
assembly of Material and for performing necessary administrative duties
associated with the job.
Use of Available Testing Equipment - ITC shall allow Ericsson use of
installed equipment required for the performance of tests to ensure proper
functioning of the System. ITC and Ericsson shall mutually agree, prior to
the start of installation, on testing procedures and the availability of
test apparatus. Such use shall not unduly interfere with maintenance of
operating telephone equipment. ITC and Ericsson shall mutually determine
that such testing equipment is in proper adjustment.
Grounding - By the installation start date, ITC shall provide access to
suitable central office ground.
Requirements for ITC Circuits - ITC shall furnish information covering the
proper test and readjustment requirements for apparatus and requirements
for circuit performance associated with special circuits or standard
circuits modified by ITC drawings.
Trunks for Testing - By the installation start date, ITC shall furnish
sufficient trunk facilities for testing purposes.
Main Distribution Frame (MDF) Cross-Connections and Heat Coils - ITC shall
run MDF cross-connections and install heat coils unless otherwise noted in
the Order.
Designation Strips - ITC shall number all designation strips unless
otherwise noted in the Order.
Fire Protection Apparatus - ITC shall install permanent fire protection
apparatus.
Furniture and Fixtures - ITC shall provide and/or install all furniture
and fixtures unless otherwise noted in the Order.
Hazardous Materials - ITC shall notify Ericsson of the type of existing
switching equipment at the site, if any, and the presence of any known or
suspected
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hazardous materials at the site. ITC shall be responsible for arranging
for the removal and disposal of any hazardous materials from the site.
Customer Not Ready - In the event that installation and RFA will be
delayed due to ITC's inability to properly prepare site for installation
and through no fault of Ericsson, Ericsson shall notify ITC in writing
that a Customer Not Ready (hereinafter "CNR") condition threatens the RFA
date, and shall detail the specific items to be corrected. If installation
has not yet begun, ITC shall have ten (10) days after receipt of
notification from Ericsson to correct the CNR condition. If the CNR
condition has not been corrected within ten (10) days, beginning the
eleventh (11th) day, Ericsson shall be entitled to recover, from ITC,
Ericsson's additional, reasonable, and substantiated costs incurred during
the delay period resulting from ITC's failure to properly prepare the site
in accordance with the site preparation instructions furnished by
Ericsson. If the CNR condition is discovered after installation has begun,
Ericsson shall be entitled to recover such costs from ITC two (2) days
after notice of the CNR condition is given. ITC and Ericsson shall
mutually agree on an acceptable revised RFA schedule if it appears that
the RFA date cannot be achieved.
4.2 Conditions Normally Provided by Ericsson
The following items and conditions will normally be provided by Ericsson
(if required by the conditions of the specific installation) and are to be
included in the Installation Services price quote from Ericsson, where
applicable, unless otherwise agreed upon by ITC and Ericsson.
Receipt and Inspection of Material - Ericsson's installers shall receive
and inspect Material shipments, report shortages or damaged or defective
Material to Ericsson's or ITC's organization responsible for replacement,
and, when Ericsson is responsible for replacement and/or shortages,
provide a copy of all re-orders and/or shortage reports to ITC.
Protection of Material, Equipment or Buildings - Ericsson shall provide
reasonable protection for equipment or buildings. Ericsson shall make
necessary repairs of damage to equipment or buildings caused by Ericsson.
Removal of Disconnected Equipment - Ericsson's installer shall advise ITC
of all equipment removed or disconnected within five (5) working days of
performing such work. ITC shall be responsible for disposition of surplus
and removal of disconnected equipment.
Determination of Working Equipment - Ericsson's installer shall determine
that working equipment is in satisfactory condition prior to performing
additions, modifications and/or change work. All such equipment shall be
returned to ITC in an acceptable working condition.
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Engineering Errors - When Ericsson also provides the Engineering Services
for Material, Ericsson shall be responsible for correcting engineering
errors at no additional charge to ITC and for issuing of credit for any
excess Material and/or Services resulting from such engineering errors.
Hauling and Hoisting - Ericsson shall arrange all warehousing (except for
necessary storage of equipment shipped to site), hauling and hoisting
necessary to complete Installation Services. Warehousing, hauling and
hoisting shall be at ITC's expense.
Tools and Equipment - Ericsson shall provide for use in the installation
all labor, tools and equipment customarily furnished to its customers when
undertaking Installation of the Materials hereunder.
4.3 Installation/Cutover Assistance
For Furnish Only Orders, Ericsson agrees to make available at the
installation site Engineering and Installation Services to render
installation and cutover assistance, as ordered by ITC and accepted by
Ericsson and at the charges set out in Attachment B.
4.4 Installation Quality Inspection
Upon reasonable notice to Ericsson, ITC shall have the right to inspect
and test any Material on order, and to monitor Ericsson's testing thereof
at Ericsson's test facility prior to shipment. Such inspection and testing
shall be at ITC's own expense and shall not unreasonably interfere with
installation.
ITC may, at ITC's discretion, perform quality inspection(s) with
reasonable notice to Ericsson, on a non-interference basis, at any time
during installation prior to Acceptance. Such inspection shall be at ITC's
own expense.
Ericsson will maintain a current level of Documentation (Installation and
Engineering Handbook(s)) related to the documented installation process
and shall make these documents available to ITC upon request.
Any items found to be in non-conformance with the documented installation
requirements shall be immediately reported in writing by ITC to Ericsson.
Ericsson will provide corrective action for any non-conforming items prior
to RFA.
4.5 Inspection and Notification of Completion
ITC shall have the right to observe, on a non-interference basis, all
phases of Installation Services and shall be advised of job progress by
Ericsson. Such
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inspection shall be at ITC's own expense. Ericsson shall notify ITC in
writing of the completion of Ericsson's Installation Services, including
the performance of all applicable equipment tests. Ericsson shall provide
ITC with a copy of such applicable test results.
4.6 Work Hereunder
It is understood that visits by Ericsson's representatives or Ericsson's
suppliers' representatives for inspection, adjustment or other similar
purposes in connection with Material and/or Services purchased hereunder
shall for all purposes be deemed "WORK HEREUNDER" and shall be at no
charge to ITC unless otherwise provided in this Agreement or in another
writing signed or duly acknowledged by authorized representatives of both
Parties.
4.7 Right of Access
The Parties shall normally permit access to their respective facilities in
connection with work hereunder. No charge shall be made for such access.
It is agreed that prior notification will be given when access is
required.
4.8 Identification Credentials
Either Party may, at its discretion, require the other Party's employees,
representatives and agents to exhibit identification credentials issued by
the requiring Party, in order to gain the right of access in connection
with this Agreement.
4.9 Plant Rules
All persons furnished by Ericsson shall, while on ITC's premises, comply
with all ITC's rules and regulations provided such rules and regulations
were clearly stated and agreed upon prior to start of Services. Ericsson
shall acquaint itself with conditions governing the delivery, receipt and
storage of Materials at the work site so that Ericsson will not interfere
unduly with ITC's operations. Ericsson shall not unduly stop, delay or
interfere with ITC's work schedule without the prior approval of ITC's
representative. Ericsson shall provide and maintain sufficient covering to
protect ITC's stock and equipment from the action of Ericsson's work.
4.10 Acceptance
After receipt of Ericsson's notice that the System is RFA, ITC shall, at
its own expense, conduct appropriate acceptance tests agreed to by
Ericsson for the Material installed. If any Material and/or feature does
not successfully meet the requirements of the acceptance tests, ITC shall
so notify Ericsson in writing within thirty (30) days of the RFA date.
Ericsson shall, at no additional charge, promptly
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take the actions required to correct the deficiency and upon completion
shall again notify ITC that the System is RFA. After the corrective
action, ITC shall have thirty (30) days to repeat the appropriate
acceptance tests, at ITC's own expense.
If the Material and/or features successfully meet the requirements of the
acceptance tests, ITC shall indicate acceptance by signing a certificate
of acceptance and forwarding a copy thereof to Ericsson within thirty (30)
days of Ericsson's most recent RFA notice. Introduction of the System into
any type of beneficial use or ITC's failure to notify Ericsson of
non-conformities within thirty (30) days of Ericsson's most recent RFA
notice shall constitute ITC's Acceptance.
Acceptance of Installation Services does not constitute a waiver of
Ericsson's responsibility to correct installation defects or deficiencies
found after Acceptance.
5.0 INVOICING AND PAYMENT TERMS
5.1 Invoices
Invoicing and payment terms shall be governed by this section ("INVOICING
AND PAYMENT TERMS") unless otherwise agreed in an accepted Order or in
another writing signed by both Parties. Ericsson shall invoice ITC by
mailing or otherwise transmitting invoices, bills and notices to the
billing address specified in the Order and, for Furnish Only Orders, shall
render separate invoices for each shipment or Order.
5.2 Payment
In the absence of a financing or lease agreement acceptable to Ericsson,
ITC shall pay invoices in advance of any delivery of Engineering Services,
Installation Services, other Customer Services, Material or Software by
Ericsson. Payment for any Engineering Services, Installation Services,
other Customer Services, or Material, or Software, the purchase of which
is being financed, shall be due upon the delivery thereof. Otherwise,
payment terms are net thirty (30) days from receipt of invoice. Payment of
invoices shall be considered past due thirty (30) days after ITC's receipt
thereof. ITC shall pay Ericsson interest on all past due amounts at a rate
of one and one-half percent (1.5%) per month or the maximum amount
allowable by law, whichever is less.
5.3 Disputed Invoices
ITC may withhold payment for any item or amount on an invoice which is the
subject of a good faith dispute; provided, that ITC shall have given
Ericsson written notice of the details of such dispute. Ericsson shall
resolve such disputed amounts by providing sufficient proof and
documentation of the charges, adjusting
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the billing, or issuing credit. If the disputed amount is found to be
valid and the original due date has past, ITC shall make immediate payment
or be subject to interest on the past due amount. ITC shall not otherwise
be entitled to offset any amounts against invoices.
6.0 INTELLECTUAL PROPERTY
6.1 Rights in Software
Ericsson grants and ITC accepts, a perpetual, non-exclusive and
non-transferable (except as explicitly noted herein) license (the
"License") to use and possess the Software on the Designated Equipment,
and to use and possess the Related Documentation subject to the terms of
this section ("INTELLECTUAL PROPERTY").
ITC agrees:
(a) It shall use the Software and Related Documentation solely for the
operation of the applicable Designated Equipment and for no other
purpose; and
(b) It shall limit copying of the Software and the Related
Documentation, in whole or in part, to copies reasonably necessary
for the operation of the Designated Equipment and for the training
by ITC of its personnel, and shall make no other copies; and
(c) It shall reproduce all proprietary notices, including Ericsson's
copyright notices, which appear on or are encoded within the
Software upon all copies, Derivative Works or other modifications
made by ITC; and
(d) The Software (physical materials, including all copies by whomever
made) shall remain Ericsson's property; and
(e) ITC shall not merge any Software with other software computer
program materials to form a Derivative Work or otherwise modify or
alter Software in any manner whatsoever.
(f) It will not reverse engineer, decompile or otherwise make the
Software easier for human comprehension, and will not tamper with or
alter the internal components of the System; and
(g) ITC recognizes that the Software is a Generic Computer Program, and
shall not do, or cause to be done, anything to activate any of the
subsisting non-enabled computer instructions therein. Further,
Ericsson reserves to itself the exclusive right to cause the
subsisting non-enabled program instruction
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steps to be activated (by the issuance under this License of a
version of the Software having the applicable additional computer
instruction steps enabled).
ITC shall have the right to reuse the Software with the Designated
Equipment at another location within ITC's system.
Notwithstanding any other provision hereof, in the event Ericsson develops
Improvement/Enhancements that represent significant "value added" to the
Designated Equipment or which represents a significant improvement in the
performance of the Designated Equipment, Ericsson reserves the right to
market the Improvement/Enhancements as one or more separate products.
ITC hereby grants and agrees to grant to Ericsson, to the extent it
lawfully may, the Improvements/Enhancements Grant-Back Rights related to
any development whether made by Ericsson, ITC, or agents of ITC, of all or
any portion of any Software furnished hereunder pursuant to any request or
specifications by ITC for a design different from Ericsson's design, and
regardless of whether or not ITC has compensated Ericsson for such
development. Title to patents, copyrights, trade secrets and mask
registration developed by Ericsson pursuant to any request or
specifications by ITC and regardless of whether ITC has compensated
Ericsson for such development shall vest in Ericsson; however, Ericsson
shall grant Improvements/Enhancements Grant-Back Rights in such patents,
copyrights, trade secrets and mask registration to ITC.
ITC agrees that any communication or other disclosure of information it
makes to Ericsson related to a request or specification for an
improvement, enhancement, or modification to Ericsson's design of the
Software shall be made upon a nonconfidential basis without any
restriction on Ericsson in its use or dissemination of received
information.
ITC's rights hereunder are assignable to an Affiliated Party that is not
engaged in a Competing Business as part of a transaction in which
ownership of the Designated Equipment is also transferred. It is agreed
that as a condition to the exercise of ITC's right to assign this License,
ITC shall obtain for Ericsson a written assignment by which the assignee
agrees to undertake all of the obligations of assignor and which
identifies and incorporates by reference this License, and intermediate
assignments, prior to any physical transfer of the Software.
Ericsson shall have the right to terminate this License in the event of
any default by ITC of the terms of this Agreement that ITC fails to
correct within thirty (30) days after the receipt of notice from Ericsson.
The termination of the License shall not prejudice any of Ericsson's
rights arising prior thereto, or limit in any way the other remedies
available to Ericsson.
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6.2 Infringement
Ericsson agrees, at its expense, to defend and indemnify ITC in any suit,
claim or proceeding brought against ITC alleging that any Software
licensed hereunder directly infringes any United States patent, copyright,
or trademark; provided that Ericsson is (i) notified of the action within
five (5) business days after ITC knows or has reason to know of the
action, (ii) given all necessary assistance in defending the action, and
(iii) permitted to direct the defense of the action, including all
settlement decisions. Further, Ericsson agrees to pay any judgement based
on infringement rendered in such suit by the final judgement of a court of
last resort, but Ericsson shall have no liability for settlements or costs
incurred without its consent
Should the use of the Software by ITC be enjoined, or in the event that
Ericsson desires to minimize its potential liability hereunder, Ericsson
may fulfill its obligations hereunder by (i) substituting noninfringing,
functionally equivalent software; (ii) modifying the infringing Software
or portion thereof so that it no longer infringes but remains functionally
equivalent; (iii) obtain for ITC, at Ericsson's expense the right to
continue use of such Software; or (iv) if none of preceding is
commercially feasible, refund to ITC the purchase price for the infringing
Material, less depreciation as reflected in ITC's books. This section
("INFRINGEMENT") states Ericsson's entire liability for patent, copyright
or trademark infringement or for any breach of warranty of
noninfringement, express or implied. The foregoing indemnity shall not
apply to any suit, claim or proceedings based upon allegations that a
process or method claim of a patent is infringed, nor to infringements
arising from modification of the Software by anyone other than Ericsson,
nor to allegations of infringement based on the combination of the
Software with software or products supplied by ITC or others, nor to
infringements arising from Software made to the software design of ITC.
ITC agrees to indemnify Ericsson to the extent equivalent to that provided
to ITC hereunder in the event that any suit, claim, or proceedings is
brought against Ericsson based upon any of the foregoing infringement
circumstances caused by ITC.
6.3 Source Programs and Technical Documentation
In the event that Ericsson commits an act of bankruptcy or defaults in
performance of its obligation to furnish, maintain, modify or correct the
most current version of the Software provided to ITC under this Agreement,
Ericsson agrees to furnish to ITC all source programs, Related
Documentation and other information ("Software Source Materials") required
for maintenance, modification or correction of such Software. Should ITC's
use of the Software Source Materials require the use of any invention
covered by a United States patent held by Ericsson, Ericsson agrees not
to assert such patent against ITC for the use of the Software Source
Materials provided to ITC. ITC's use of the Software Source Materials
shall be limited to such use described in the section entitled "RIGHTS IN
SOFTWARE" and to
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Software previously purchased from Ericsson. ITC shall not license any of
the Software Source Materials to any third party. ITC agrees that the
Software Source Materials are Ericsson's Proprietary Information.
7.0 WARRANTIES AND REPRESENTATIONS; LIABILITY
7.1 Warranty
A. Ericsson warrants that Ericsson has good and valid title to the
Material in which ownership is transferred under this Agreement free
and clear of any liens or encumbrances, and with respect to any
Software license rights granted, Ericsson has the right and the
power to grant such rights hereunder.
B. Ericsson further warrants that:
(1) The Material will be free from defects in material and
workmanship, and will perform and be in conformity with the
Specifications.
(2) Subject to the section entitled "INFRINGEMENT", ITC shall have
quiet enjoyment and use of licensed Software as long as such
license(s) shall remain in effect.
(3) To the best of Ericsson's knowledge, the Software shall not
contain any program code, programming instruction or set of
instructions that is intentionally constructed with the
ability to damage, interfere with or otherwise adversely
affect computer programs, data files or hardware without the
consent of ITC.
(4) Services will be free and clear of all liens and encumbrances
and will be performed in a workmanlike manner and in
accordance with the requirements and standards specified
elsewhere in the Agreement and the accepted practices for the
telecommunications industry in the community in which the
Services are performed.
C. The warranties set out in B. immediately above shall apply only
during the periods of time listed below, or any such longer period
as the Parties may agree to in writing (the "Warranty Period"):
(1) For Material (including Software): 12 months
(2) For Engineering and Installation Services: 12 months
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(3) For All Replacement Material (including Software): as provided
above for the remainder of the original unexpired Warranty
Period beginning from the date the Replacement Materials are
received by ITC or for a period of three (3) months from the
date received by ITC, whichever is longer.
Provided, that in the case of defects discovered during the last
thirty (30) days of the Warranty Period, and solely for purposes of
ITC's giving notice of the defect as required by D. immediately
below, the Warranty Period shall extend for thirty (30) days after
the date on which the Warranty Period otherwise expired.
D. Ericsson shall replace or repair Material discovered to be defective
without any additional charge (including transportation), provided
ITC gives notice of such defect prior to expiration of the Warranty
Period. Replacement Materials shall be shipped within thirty (30)
days from Ericsson's receipt of the defective Material, unless ITC
agrees otherwise. Such repair or replacement includes Material,
labor, and Services, and shall be ITC's sole remedy and Ericsson's
sole obligation in the event these warranties are breached. Ericsson
shall, at ITC's request, provide expedited shipment of Replacement
Material at charges set out in Attachment B.
E. The Warranty Period commences as follows:
(1) For Material installed by Ericsson, on the date of ITC's
Acceptance;
(2) For Furnish Only Material, on the date of delivery by Ericsson
to ITC's destination;
(3) For Engineering and Installation Services performed in
connection with EF&I and F&I, on the date of ITC's Acceptance;
and
(4) For Engineering Services performed in connection with E&F
Orders, on the date of ITC's Acceptance of the Materials
engineered by Ericsson.
F. With respect to viruses in the Software, Ericsson makes no
warranties other than as set out in item B.(3) above. Services not
meeting the warranties set out in item B.(4) above shall, at ITC's
option, be reperformed by Ericsson at no cost to ITC.
G. During the Warranty Period:
(1) Ericsson shall, without charge to ITC, provide Software
updates and, upon ITC's request, correct or replace, at
Ericsson's sole discretion,
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any Software or portion thereof found to cause a measurable
deviation from the functionality specified in the Ericsson
Technical Documentation, according to turnaround times
specified in Attachment B.
(2) Ericsson shall implement and install such Software updates at
one ITC site without charge to ITC, and ITC shall be
responsible for the implementation and installation at the
rest of the sites unless ITC has purchased the Update Service
described in Attachment B.
(3) Documentation of corrected or replacement Software and
repaired or replacement Hardware will be furnished to ITC at
no additional charge.
(4) If Ericsson cannot correct a warranty-related problem via
telephone or remote dial-up, emergency support (including
emergency twenty-four (24) hour telephone coverage and on-site
emergency call-out) will be provided at no charge; provided,
that the initial determination of whether the service call is
warranty related is at Ericsson's sole discretion until such
time as the issue is finally determined pursuant to subsection
(M) below.
H. For inherent "original equipment manufacturer" Material not
integrated during manufacturing into the System so as to become
Hardware, Ericsson shall pass through the manufacturer's original
warranty to the extent it is authorized to do so.
I. All warranties shall survive inspection, Acceptance and payment.
J. The warranties set out in this section ("WARRANTIES AND
REPRESENTATIONS; LIABILITY") shall not apply to:
(1) the components of the Material, such as light bulbs and fuses,
which are normally consumed in operation or which have a
normal life inherently shorter than the applicable Warranty
Period.
(2) (i) defects caused by or attributable to modifications made to
the Materials without Ericsson's approval, (ii) combination of
the Materials with hardware or software provided by other
vendors without Ericsson's approval, (iii) misuse of the
Materials, (iv) ITC's failure to implement Software patches or
maintenance releases within thirty (30) days after receipt at
ITC's site, (v) ITC's failure to follow Ericsson's recommended
maintenance procedures, (vi) any unauthorized entry of
software, data and/or commands onto the Materials by any
person or machine either intentionally or unintentionally, or
(vii) any defect,
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non-conformity or deviation to which ITC refuses to give
Ericsson reasonable access and an opportunity to inspect and
remedy, and any further damage caused by such refusal.
(3) Material that has been wired, repaired, altered, stored or
maintained used in a manner not in accordance with
specifications or operating instructions, subject to misuse,
neglect, accident or abuse, or removed or relocated, unless
such actions were carried out by Ericsson or its authorized
subcontractors or the claimed defective condition was not the
result of such actions.
(4) Material that has had its serial numbers removed or altered.
K ITC shall bear all transportation costs and risk of in-transit loss
or damage in connection with all Materials returned to Ericsson;
Ericsson shall bear all transportation costs and risk of in-transit
loss or damage in connection with all material shipped to ITC under
this section ("WARRANTIES AND REPRESENTATIONS; LIABILITY").
L. ERICSSON MAKES NO OTHER WARRANTIES OF ANY KIND EXCEPT AS SET OUT
HEREIN. THESE WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES,
STATUTORY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
STATUTORY, EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
M. Ericsson and ITC shall jointly determine whether a Customer Service
Request ("CSR") is warranty related. If the parties cannot agree to
such determination, the CSR will be escalated to the next level of
management for resolution. In the event that a joint determination
cannot be made at that level, Ericsson shall make the determination
unilaterally.
7.2 Radio Frequency Energy Standards
Material furnished hereunder shall, at the time of shipment, comply, to
the extent applicable, with the requirements of Subpart J of Part 15 of
the Federal Communications Commission's Rules and Regulations, as they
appear at the time of installation, including those sections concerning
the labeling of such Material and the suppression of radio frequency and
electromagnetic radiation to specified levels.
7.3 Registration
When Material furnished hereunder is subject to Part 68 of the Federal
Communications Commission's Rules and Regulations, Ericsson warrants that
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such Material is registered under and complies with Part 68 of the Federal
Communications Commission's Rules and Regulations, including, but not
limited to, all labeling and customer instruction requirements.
7.4 Liability, Insurance and Indemnity
All persons furnished by Ericsson shall be considered solely Ericsson's
employees or agents. Ericsson shall be responsible for compliance with all
laws, rules, and regulations involving, but not limited to, employment of
labor, hours of labor, working conditions, payment of wages and payment of
taxes, such as unemployment, social security and other payroll taxes,
including applicable contributions from such persons when required by law.
Ericsson shall maintain and cause Ericsson's subcontractors to maintain
during the term of this Agreement (1) Worker's Compensation insurance as
prescribed by the law of the state in which Ericsson's obligations under
this Agreement are performed, (2) employer's liability insurance with
limits of at least $1,000,000 each occurrence, (3) comprehensive general
liability insurance and automobile liability insurance if the use of motor
vehicles is required, each with limits of at least $1,000,000 combined
single limit, and (4) specific contractual liability insurance to cover
Ericsson's indemnity obligations under this Agreement with limits as
specified in (3) above.
Upon request, Ericsson shall provide certificates of insurance attesting
to the coverages listed above. Ericsson shall also require its
subcontractors, if any, who may enter upon ITC's premises to maintain
similar insurance and to agree to furnish ITC, if requested, certificates
or adequate proof of such insurance. Certificates furnished by Ericsson or
its subcontractors shall contain a clause stating that ITC is to be
notified in writing at least thirty (30) days prior to cancellation of,
or any material change in, the policy.
Each Party (as "Indemnitor") agrees to indemnify and hold the other (the
"Indemnitee") harmless from and against all damage or injury (including
death) to property or person resulting from the intentional or negligent
acts or omissions of Indemnitor's officers, employees, agents,
contractors or subcontractors in connection with the performance of this
Agreement.
7.5 Limitation of Liability
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, ERICSSON SHALL
IN NO EVENT BE LIABLE FOR LOSS OF PRODUCTION, LOSS OF BUSINESS, LOSS OF
PROFIT, OR ANY OTHER INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
NATURE IN CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT SUCH DAMAGES WERE
FORESEEABLE OR WHETHER ERICSSON WAS ADVISED
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OF THE POSSIBILITY OF SUCH DAMAGES. THE PRICES GRANTED TO ITC UNDER THIS
AGREEMENT ARE BASED UPON AND ARE PARTIAL CONSIDERATION FOR THIS LIMITATION
OF LIABILITY.
8.0 ERICSSON SUPPORT
8.1 Customer Service
Ericsson's provision of Customer Service is also subject to the terms and
conditions stated in Attachment B.
8.2 Documentation
Ericsson agrees to furnish complete Documentation, as detailed in
Attachment B, ordered by ITC and accepted by Ericsson. Ericsson grants ITC
the right to make copies of the Documentation solely for its internal use
in connection with the operation of the System. ITC shall reproduce the
copyright notice and all proprietary markings on all copies of
Documentation.
8.3 Product Changes
Ericsson may make changes to Material, or modify drawings or manufacturing
specifications provided the changes or modifications do not have a
material impact on performance, reliability, form, fit or function.
Ericsson shall maintain written records of all such changes, and make
these records available for ITC's review upon request
For such changes or modifications that have a material impact on
performance, reliability, form, fit, or function, Ericsson shall identify
each such change or modification and shall submit one copy of a Product
Change Notice ("PCN") for each such change or modification to ITC at least
thirty (30) days prior to the proposed effective date of such change or
modification. ITC may reject any Material offered for sale by Ericsson
which has been changed or modified in a manner unacceptable to ITC. In the
event that any such change or modification is unacceptable to ITC, ITC
shall so advise Ericsson within thirty (30) days of receipt of Ericsson's
PCN.
If ITC has not notified Ericsson that the change or modification is
unacceptable within thirty (30) days following receipt of the PCN,
Ericsson shall, unless instructed to the contrary, forward within the next
thirty (30) day period to each of ITC's field maintenance engineering
organizations a copy of the PCN. Addresses for ITC's regional and field
maintenance engineering organizations will be provided by ITC.
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Product Changes can be issued to fix known problems or introduce new
features. Product Changes are changes that affect form, fit or function,
defined as follows:
Form - physical shape
Fit - mounting arrangement
Function - features and operational design of the circuit
The Parties' obligations upon a Product Change depend on the
classification of the change. The classification of a Product Change shall
be decided by Ericsson in its sole discretion. Product Changes may be
classified as follows:
"A/AC" Changes are required to correct a product deficiency. For
example:
- Safety or fire hazard.
- Electrically or mechanically inoperative.
- Operational or design defects that cause failure rates
that are higher than the Ericsson's advertised product
failure rates on a per-unit rate (i.e., failure in time
for a circuit pack, or a defect causing an adverse
ITC/subscriber reaction).
- Product does not operate as documented in Ericsson's
descriptive literature and/or product technical
Specifications.
"B" Changes made to incorporate improvements in design resulting
in better operation, improved testing and maintenance, longer
life, service improvements, cost reductions to ITC, and
addition of new features. Class B changes are applied to
products being manufactured and may be recommended for
application to existing equipment in the field. The decision
to purchase and apply Class B changes is the responsibility of
ITC.
"D" Changes that incorporate minor new features and design
improvements that do not affect the existing functionality, or
other minor service improvement and test capabilities not
sufficiently significant to require a Class B change.
Component changes which involve physical or electrical
Specification differences to the replaced component and
require a "product identification change" are considered Class
D.
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For Class A and AC Product Changes, Ericsson shall promptly
modify or replace, at no charge, all affected Material
hereunder and Documentation thereto. Ericsson shall supply
relevant Documentation to ITC for all Class A and AC changes
at no charge to ITC. ITC shall be responsible for the
installation of Class A and Class AC changes and Ericsson
shall reimburse ITC based on its established installation time
and standard labor rate unless mutually agreed otherwise.
In the event that ITC has not implemented the Class A or AC
change within three (3) months after Ericsson's notification
to ITC, then such change will be at ITC's expense, and
Ericsson shall be relieved of its responsibility described
herein. In addition, the cost of remedying any damage or
defect caused by ITC's failure to implement Class A or AC
changes shall not be covered by the warranty provisions of
this Agreement
8.4 Replacements Out of Warranty
With respect to Ericsson-manufactured Material ordered but no longer
covered under the section entitled "WARRANTY", Ericsson agrees to provide
Replacement Material for a period of ten (10) years from RFA (or for
Furnish Only Orders, from delivery of the Material). Material to be
replaced will be shipped by ITC to the location designated by Ericsson.
Charges, terms and conditions for out-of-warranty replacement of Material
are set out in Attachment B.
Replacement Material shall be warranted as provided in the section
entitled "WARRANTY".
All transportation costs and risk of in-transit loss or damage incurred
under this section ("ERICSSON SUPPORT") shall be borne by ITC when
shipping to Ericsson, and by Ericsson when shipping to ITC, except that it
shall be borne by ITC on Material shipped to Ericsson hereunder that is
thereafter returned to ITC at ITC's request
8.5 Continuing Availability
Ericsson agrees to offer for sale to ITC, for a period of ten (10) years
from RFA (or for Furnish Only Orders, from delivery of the Material),
functionally equivalent maintenance, replacement and repair parts. Such
parts shall be priced at the then-current agreement price, or if no such
agreement price exists, at a price agreed upon by Ericsson and ITC.
In addition, should Ericsson decide during the life of this Agreement, to
discontinue manufacturing Material, Ericsson shall give at least six (6)
months prior written notice to ITC of such manufacture discontinuance.
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In the event Ericsson fails to continue to supply Material and parts, and
Ericsson is unable to obtain another source of supply for ITC, then ITC
may require Ericsson, without obligation or charge to ITC, to provide ITC
with the technical information and licenses required for ITC to
manufacture, have manufactured or obtain such Material or parts from other
sources. Receiving such information shall be ITC's sole remedy hereunder
for Ericsson's failure to continue to supply Material.
The technical information includes, by example and not by way of
limitation: (a) manufacturing drawings and specifications of raw materials
and components comprising such parts; (b) manufacturing drawings and
specifications covering special tooling and the operation thereof; (c) a
detailed list of all commercially available parts and components purchased
by Ericsson on the open market disclosing the part number, name and
location of the supplier and price lists for the purchase thereof; and (d)
one complete copy of the then-current source code used in the preparation
of any Software licensed or otherwise acquired by ITC from Ericsson
hereunder.
ITC shall treat any technical information supplied hereunder as
proprietary and confidential, and shall limit any products manufactured
hereunder, solely for the use by ITC to maintain or operate Material and
Software previously purchased from Ericsson. In no event shall ITC use any
such technical information or manufacturing rights for any other purpose,
including but not limited to sale or licensing to third parties. ITC
agrees that such technical information shall be Ericsson's Proprietary
Information.
8.6 Emergency Replacement Service
In addition to the Material replacement provisions set out in the sections
entitled "WARRANTY" and "REPLACEMENTS OUT OF WARRANTY", Ericsson agrees,
in the event of an emergency out-of-service condition, to use its best
efforts to ship Replacement Material within twenty-four (24) hours after
notification by ITC for a period of ten (10) years after RFA (or for
Furnish Only Orders, from delivery of the Material). Such emergency
shipment shall be subject to Ericsson's then-current emergency handling
fees. For Material under warranty, there will be no charge for Replacement
Material, and transportation costs will be borne by Ericsson. For Material
not covered under warranty, charges for Replacement Material will be at
the then current agreement price, or if no such agreement exists, at
Ericsson's then-current selling price; transportation costs will be borne
by ITC.
In order to schedule shipment of Replacement Material, ITC may call a
telephone number furnished by Ericsson. This service will be available
twenty-four (24) hours a day and seven (7) days a week.
Defective Material under warranty is to be returned by ITC for credit
within thirty (30) days after ITC's receipt of Replacement Material
hereunder. If such Material
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is not returned, Ericsson shall have the right to invoice ITC at the then
current agreement price, or if no such agreement exists, at Ericsson's
then-current selling price for such Replacement Material.
8.7 Extraordinary Support
Ericsson agrees to provide extraordinary support (Material and/or
Services) to assist ITC in restoring service which has been disrupted due
to catastrophic conditions (fire, flood, etc.) at prices shown in the SOW.
Extraordinary Support is that level of effort required to provide support
in a time frame deemed necessary by ITC consistent with the resource and
manpower limitations of Ericsson. This clause shall not be construed to
require Ericsson to maintain any position or status of readiness to
perform in the future.
8.8 Training
Ericsson agrees to make all training classes offered by the Ericsson
training department available to ITC, according to charges set out in
Attachment B, as ordered by ITC and accepted by Ericsson.
8.9 Regulatory Affairs
If requested by ITC, Ericsson will at ITC's expense provide reasonable
information and assistance required in the planning, conduct and research
associated with regulatory matters in connection with the Material and/or
Services provided herein.
9.0 EXCHANGE OF INFORMATION
9.1 Treatment of Proprietary Information
Any information, whether or not protected by patent or copyright
including, but not limited to, Software, Related Documentation, programs,
files, Specifications, drawings, sketches, models, samples, tools,
business information, pricing information, technical information or other
data, written or otherwise, "which has been furnished or disclosed by
either Party to the other (hereinafter "Proprietary Information") shall be
treated in accordance with the following terms and conditions:
The receiving Party shall put in place and strictly enforce (using all of
its prerogatives, including dismissal of employees or termination of
contracts with its agents or contractors) procedures to ensure that its
employees, contractors or agents are aware of and fulfill the obligations
of this section ("EXCHANGE OF INFORMATION") to hold the disclosing Party's
Proprietary Information in confidence.
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Proprietary Information shall be held in confidence by the receiving Party
and shall be protected from misuse and disclosure with reasonable care,
which shall be at least as diligent as the receiving Party uses for its
own information. Proprietary Information shall not be disclosed to third
parties (which shall include any Affiliated Party of the receiving Party)
without the prior written consent of the disclosing Party. Proprietary
Information shall only be used in connection with this Agreement.
If the receiving Party receives any legal process requiring production of
any Proprietary Information, the receiving Party shall notify the
disclosing Party immediately and shall deliver copies of such process to
the disclosing Party immediately, and prior to compliance with the
process. The receiving Party agrees to cooperate if the disclosing Party
deems it necessary to seek protective arrangements.
9.2 Compatibility Information
Compatibility Information is the technical information, including Software
interfaces (but excluding source code), required to design equipment
and/or software that is functionally interconnectable with the Material
supplied by Ericsson hereunder. For a period of ten (10) years from RFA
(or for Furnish Only Orders, from delivery of the Material), Ericsson
shall supply reasonable Compatibility Information that is currently
available for such Material to ITC within sixty (60) days of a written
request from ITC.
9.3 Interconnect Information
Ericsson shall provide to ITC that information, if currently available,
which gives ITC the necessary technical information and interconnection
standards to interface with Material supplied hereunder. ITC agrees that
such information is Ericsson's Proprietary Information.
10.0 MATERIAL MARKING
10.1 Insignia
Upon ITC's written request, at mutually agreed charges, certain of ITC's
trademarks, trade names, insignia, symbols, decorative designs, or
evidences of ITC's inspection (hereafter "Insignia"), will be properly
affixed by Ericsson to the Material furnished, provided such insignia does
not adversely affect the operation of such Material. Such Insignia will
not be affixed, used or otherwise displayed on the Material furnished or
in connection therewith without ITC's written approval.
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10.2 Marking
Ericsson shall mark all Material furnished hereunder for identification
purposes as follows:
(a) Article/model/part number and serial number, if applicable;
(b) Ericsson tracks warranty by a serialization process and does not
mark Material with month and year of manufacture. Within sixty (60)
days from ITC's Acceptance, Ericsson will provide on personal
computer (P.C.) floppy diskette, on a one-time basis, all serial
numbers and the warranty dates in each applicable System.
(c) Other identification which might be requested by ITC and agreed to
by Ericsson, at mutually agreeable charges:
i) time specification for agreement and any charges involved,
ii) allowance for maintenance and repair,
iii) audit to verify time and expense for payment.
11.0 GENERAL TERMS AND CONDITIONS
11.1 Termination of Agreement
In the event either Party breaches or defaults on any of the terms or
conditions of this Agreement or any Orders hereunder, and such breach or
default continues for thirty (30) days after the aggrieved Party gives
written notice of the breach to the breaching Party, then the aggrieved
Party shall have the right to cancel this Agreement or any affected
Order(s) placed by ITC without any charge, obligation or liability
whatsoever, except as to the payment for Material already received and
accepted by ITC and/or Services completed.
In the event that ITC is sold (whether through a sale of substantially all
of ITC's assets or a sale of more than fifty percent of ITC's or ITC's
parent's stock), merged or otherwise transferred to an entity engaged in a
Competing Business, Ericsson shall have the right to terminate the
Agreement with thirty (30) days written notice to ITC.
11.2 Assignment by ITC
Subject to Ericsson's approval (which shall not be unreasonably withheld),
ITC may assign this Agreement, or the SOW (and corresponding Orders) under
this Agreement, in whole or in part to any of ITC's Affiliated Parties
that are not engaged in a Competing Business.
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11.3 Assignment by Ericsson
With thirty (30) days prior written notice to ITC, Ericsson may assign
this Agreement or the SOW (and corresponding Orders) under this Agreement,
in whole or in part to any of Ericsson's Affiliated Parties that are not
engaged in the business of providing local and/or interexchange
telecommunications services in North America.
11.4 Subcontracting
Ericsson shall have the right to subcontract any work under this
Agreement; provided that Ericsson remains wholly responsible for such
work.
11.5 Force Majeure
Neither Ericsson nor ITC shall be held responsible for any delay or
failure in performance of any part of this Agreement to the extent that
such delay or failure is caused by fire, flood, explosion, war, strike,
embargo, government requirement, civil or military authority, act of God,
or any other similar causes beyond Ericsson's or ITC's control
("Condition"). If any such Condition occurs, the party delayed or unable
to perform shall give immediate notice to the other party, and the party
affected by the other's delay or inability to perform after a ninety (90)
day delay period may elect to: (a) terminate this Agreement or part
thereof as to Material, Software, or Services not already received; (b)
suspend this Agreement for the duration of the Condition, buy or sell
elsewhere Material, Software or Services comparable to those to be
obtained under this Agreement, and deduct from any commitment the quantity
bought or for which commitments with other vendors have been made; or (c)
resume performance of this Agreement once the Condition ceases and permit
the affected party to extend the period of this Agreement up to the length
of time the Condition endured.
Unless written notice is given within thirty (30) days after the affected
party is notified of the Condition, (b) shall be deemed selected.
The foregoing constitutes the sole remedy in the event of a force majeure
Condition affecting either party.
11.6 Choice of Law
The construction, interpretation and performance of this Agreement shall
be governed by and construed in accordance with the laws of the State of
New York, excluding its rules on conflict of laws.
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11.7 Arbitration
All disputes arising out of or in connection with this Agreement or any
transaction hereunder shall be finally settled under the Commercial
Arbitration Rules of the International Chamber of Commerce then in effect,
by three arbitrators appointed in accordance with such rules. The
arbitrators' award shall be final and binding. The Parties shall be
entitled to document production and depositions upon oral examination in
accordance with the US Federal Rules of Civil Procedure, provided that
each Party shall be entitled only to a total of three examinations of not
more than one day in length. Judgment upon the award rendered may be
rendered in any court having jurisdiction over the Party against which the
award is rendered.
The arbitration shall take place in New York, New York, or such other
place as the Parties may agree. The arbitration award shall include (i) a
provision that the prevailing Party in such arbitration shall recover its
costs of the arbitration and reasonable attorneys' fees from the other
Party, and (ii) and amount of such costs and fees. Performance under this
Agreement shall continue during any arbitration proceeding, unless
otherwise provided for in this Agreement or by the arbitrator.
11.8 Publicity
Each Party agrees to submit to the other Party all advertising, sales
promotion, press releases and other publicity matters relating to the
Material furnished or the Services performed by the other Party under this
Agreement wherein each Party's names or marks are mentioned or language
from which the connection of said names or marks therewith may be inferred
or implied; and both Parties further agree not to publish or use such
advertising, sales promotion, press releases, or publicity matters without
the other Party's prior written approval. The foregoing shall not apply to
internal announcements, newsletters or information on electronic "bulletin
boards" intended solely for the dissemination of information to Ericsson's
employees.
11.9 Notices
Any notice or demand which under the terms of this Agreement or under any
statute must be given or made by Ericsson or ITC shall be in writing and
shall be given or made by telefax or similar communication or by certified
or registered mail or by a reputable express delivery service addressed to
the respective parties as follows:
To ITC: International Telecommunications Corporation
60 Hudson Street
New York, New York
Attn: _________________________
- --------------------------------------------------------------------------------
Page 33 of (36)
<PAGE>
To Ericsson: Ericsson Inc.,
Network Systems
1010 E. Arapaho Rd.
Post Office Box 833875
Richardson, Texas 75083-3875
Attn: ________________________
with copy to Legal Department
Such notice or demand shall be deemed to have been given or made upon
receipt when sent by telefax or other communication or five (5) days
following deposit postage prepaid in the U.S. mail. The above addresses
may be changed at any time by giving thirty (30) days prior written notice
as provided above.
11.10 Releases Void
Neither Party shall require waivers or releases of any personal rights
from representatives or customers of the other in connection with visits
to its premises and both Parties agree that no such releases or waivers
shall be pleaded by them or third persons in any action or proceeding.
11.11 Severability
In the event that any one or more of the provisions contained herein
shall, for any reason, be held to be unenforceable in any respect, such
unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall then be construed as if such unenforceable
provision or provisions never had been contained herein. However, in the
event any such provision is considered an essential element of this
Agreement, the Parties shall promptly attempt to negotiate a substitute
therefor.
11.12 Survival
All rights and obligations of either Party accrued under this Agreement
prior to the cancellation, termination, or expiration hereof or of any
Order placed hereunder, as well as all rights and obligations of the
Parties under section 6.1 (relating to Software) and section 9.1 (relating
to Proprietary Information) of this Agreement, shall survive such
cancellation, termination, or expiration.
- --------------------------------------------------------------------------------
Page 34 of (36)
<PAGE>
11.13 Section Headings
The headings of the sections herein are inserted for convenience only and
are not intended to affect the meaning or interpretation of this
Agreement.
11.14 Non-Waiver
Either Party's failure at any time to enforce any of the provisions of
this Agreement or any right or remedy available hereunder or at law or
equity, or to exercise any option herein provided, will in no way be
construed to be a waiver of such provisions, rights, remedies or options
or in any way to affect the validity of this Agreement. The exercise by
either Party of any rights, remedies or options provided hereunder or at
law or equity shall not preclude or prejudice the exercising thereafter of
the same or any other rights, remedies or options.
11.15 Compliance with Laws
Each party shall comply with all applicable federal, state, county and
local laws, ordinances, regulations and codes (including procurement of
required permits or certificates) in their performance hereunder.
11.16 Entire Agreement
This Agreement shall incorporate the typed or hand written provisions on
ITC's Orders and Change Orders. Printed provisions on the reverse side of ITC's
Orders and Change Orders shall be deemed deleted. This Agreement, and Orders and
Change Orders (as provided above) shall constitute the entire Agreement between
ITC and Ericsson and shall not be modified or rescinded except by a writing
signed by ITC and Ericsson. The provisions of this Agreement shall supersede all
prior oral and written
- --------------------------------------------------------------------------------
Page 35 of (36)
<PAGE>
quotations, communications, agreements and understandings between ITC and
Ericsson that have not been incorporated herein.
ERICSSON INC., INTERNATIONAL
Network Systems TELECOMMUNICATIONS
CORPORATION
By /s/ Johan R Westerberg By /s/ Charles M. Piluso
---------------------------- ---------------------------
Johan R Westerberg Charles M. Piluso
- ------------------------------ -----------------------------
Name Name
Director - Global Accounts President
- ------------------------------ -----------------------------
Title Title
May 24, 1996 June 11, 1996
- ----------------- --------------------
Date Date
- --------------------------------------------------------------------------------
Page 36 of (36)
<PAGE>
Attachment A
STATEMENT OF WORK NO.__
This Statement of Work No.__, which includes the annexes listed below, is hereby
made a part of the General Purchase Agreement between International
Telecommunications Corporation ("ITC") and Ericsson Inc. ("Ericsson"), dated
_________,______ 1996 (the "General Purchase Agreement").
This Statement of Work No. __ includes of the following annexes:
1. Scope of Work for _____________________________
2. Schedule
3. Prices, Fees, and Charges not Included in Attachment B
4. List of Materials
5. Statement of Compliance with ITC's Requirements and Specifications
6. Special Terms and Conditions
In the event of a conflict between the terms of this Statement of Work No. __
and the General Purchase Agreement, this Statement of Work No. __ will prevail
with respect to the matters covered by it
ERICSSON INC., INTERNATIONAL
Network Systems TELECOMMUNICATIONS
CORPORATION
By _______________________________ By _______________________________
__________________________________ __________________________________
Name Name
__________________________________ __________________________________
Title Title
__________________________________ __________________________________
Date Date
- --------------------------------------------------------------------------------
Attachment A - Page 1 of (1)
<PAGE>
Attachment B
CUSTOMER SERVICES
- --------------------------------------------------------------------------------
Attachment A - Page 1 of (1)
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 1 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
ATTACHMENT B
CUSTOMER SERVICES
1. GENERAL
This Attachment outlines the Customer Services offered to ITC.
1.1 PRICING
The prices within this Attachment are valid from January 1, 1995 until December
31, 1996. On January 1, 1997 there will be a 2% increase of all prices in this
Attachment, followed by a yearly increase of 2% during the length of this
Agreement. Coverage under this plan will be available until December 31, 2000.
Prices may, however, be renegotiated for coverage beyond December 31, 1997.
The prices detailed in this Attachment are valid for US sites only. Ericsson can
provide quotations for Customer Services to be performed in other countries upon
request from ITC.
2. SUPPORT
2.1 PRICE
Unlimited non-warranty support, covering emergency and technical support, is
provided 24 hours per day 7 days a week, at the following rates per year per
switch in ITC's network, depending upon the Application System release being
supported:
=============================================
Total Current or 2
Number of Previous Older Releases
Switches Releases
---------------------------------------------
1 $ 98,394 $196,788
---------------------------------------------
2-5 $ 78,715 $157,430
---------------------------------------------
6-10 $ 73,796 $147,592
---------------------------------------------
11-30 $ 68,876 $137,752
=============================================
Table 1
During any period in which an on-site coordinator is assigned, ITC will receive
a 7.5% discount per on-site coordinator per month per switch for any switch
which is the primary location for an on-site coordinator.
Prices include reasonable travel and living expenses, unlimited emergency
on-site support when deemed necessary at Ericsson's sole discretion, and three
(3) non-emergency site visits per year per switch. Additional on-site visits
will be charged at $ 175 per hour, plus reasonable travel and living expenses.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 2 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
2.2 COVERAGE
Support is available for all Ericsson Hardware, Software and Docware.
Support for TMCS systems and other Operations, Administration, Maintenance &
Provisioning ("OAM&P") systems is not included in this contract. If ITC wishes
to purchase OAM&P support, Ericsson can provide a quote for that service.
2.3 SCOPE
Support is provided as active support with Ericsson personnel in Ericsson's
Technical Assistance Center (TAC) offices during normal working hours, 8 a.m. to
5 p.m. (central zone) Monday through Friday (except holidays). Outside normal
working hours the support is available as on-call ("beeper") support.
Support for natural disasters, acts of God, etc. is not provided as part of
technical and emergency support but is covered under the Disaster Recovery
Service outlined in the section entitled "Disaster Recovery Service" of this
Attachment. If Disaster Recovery Service is not purchased, Ericsson will not
take on any specific responsibilities, such as stocking additional hardware or
having disaster recovery equipment and personnel ready, beyond normal technical
and emergency support.
2.4 GLOBAL SUPPORT
As an alternative to local support centers, Ericsson can offer ITC global
support centers based on the Ericsson HUB concept. Ericsson would make use of
regional HUBs in the USA, Europe and Australia/Asia, or other geographic
location based on ITC's global network strategies. Charges for global support
service will be negotiated with ITC upon request.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 3 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
2.5 CSR PROCESS
When ITC notifies Ericsson of any fault or deficiency in the System,
Documentation, Services or related processes, Ericsson shall record a Customer
Service Report (CSR). A priority will be assigned to this CSR. The priorities
and their usage are described in detail in document EUS/XS/S-95:074. Ericsson
will track the CSR to conclusion and present an answer to ITC. ITC is
responsible for closing the CSR if a satisfactory resolution is achieved.
Ericsson will continue working to resolve any CSR unit until such time that ITC
closes it by notice to Ericsson.
The CSR process is Ericsson's way of tracking and resolving problems in a timely
manner with high quality. All problems must be reported in this manner to be
acted upon by Ericsson. Ericsson shall conclude investigations into all CSRs
opened by ITC as outlined in this document. Ericsson shall not be required to
investigate or respond according to the response and resolution times set out in
the sections entitled "Response Time" and "Resolution Time" in this Attachment
for problems reported to Ericsson in any other way than by opening a CSR.
Response and resolution times for CSRs shall be as follows.
2.5.1 RESPONSE TIME
This is the time elapsed from ITC's call to the TAC until an engineer contacts
ITC to inform ITC that the engineer has started working on the problem.
-----------------------------------------------------------------------
CSR PRIORITY IF REPORTED DURING IF REPORTED DURING
8AM-5PM CST MONDAY- FRIDAY OTHER HOURS
(EXCEPT HOLIDAYS)
-----------------------------------------------------------------------
A 30 minutes 30 minutes
-----------------------------------------------------------------------
B 1 hour By 9am CST next working
day
-----------------------------------------------------------------------
C 1 hour By 9am CST next working
day
-----------------------------------------------------------------------
Table 2
2.5.2 RESOLUTION TIME
This is the time elapsed from ITC's call to the TAC until ITC has a solution
available for the problem.
A solution may be in the form of a temporary or permanent workaround, usage
instructions, a temporary or permanent fix/patch, recompiled code or a charge or
replacement of hardware.
----------------------------------
CSR priority Resolution time
----------------------------------
A 36 hours
----------------------------------
B 45 days
----------------------------------
C 180 days
----------------------------------
Table 3
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 4 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
3. MAINTENANCE SUPPORT
3.1 PRICE
The yearly Maintenance Support fee for the current Application System or the two
prior releases is 9.8% of the price of such Application System. For older
Application Systems the yearly charge is 19.6% of the price of such Application
System. For purposes of calculating the Maintenance Support fee, the price of an
Application System is the original one-time fee for the Application System, plus
the current applicable yearly RTU fees. Costs of travel are not included.
Software releases for TMOS systems and other OAM&P systems are not included in
this contract. If ITC wishes to purchase OAM&P maintenance releases, Ericsson
can provide a quote for that service.
3.2 COVERAGE
Maintenance Support Services cover fault corrections and fault preventive
updates to all Ericsson AXE Software and Docware. New features and functions not
included.
Modifications of the Software made by Ericsson which constitute Software
Enhancements or Software Features will be made available to ITC for license at
Ericsson's then-current price.
3.3 SCOPE
Ericsson will provide solutions to any faults found. The standard delivery
medium for software updates is floppy diskette, magnetic tape or optical disk.
If the Maintenance Support System ("MSS"), has been purchased delivery will be
electronic. In some cases it is not possible to implement corrections
electronically. In these cases corrections will be delivered on floppy diskette,
magnetic tape or optical disks.
Updates and corrections may be in the form of temporary fixes, permanent fixes
or recompiled code. For Docware corrections, the new Docware will be sent to ITC
Unless the Update Service has been purchased it is the responsibility of ITC to
implement corrections into the system.
Documentation updates are provided in accordance with changes in the system
(such as maintenance releases and growth and upgrade support). All updates are
provided in a timely manner and on the same media as the original documentation
library delivery, unless otherwise agreed upon.
4. MAINTENANCE SUPPORT SYSTEM
4.1 PRICE
This service is not being purchased by ITC at this time.
The yearly license fee includes support and updates. The prices do not include
PCs, workstations, servers or interconnections (LAN).
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 5 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
4.2 COVERAGE
A license will cover one terminal in one location for one year.
4.3 SCOPE
MSS is a software package designed to track fault reports and to handle
electronic software delivery. Initial setup is mandatory and is required only
once regardless of the number of licenses. Set-up assistance on-site is
optional. A license renewal fee will apply in addition to a yearly license fee,
but only if a license is allowed to expire for more than ninety (90) days
before it is reinstated.
5. TRAINING
5.1 PRICE
ITC will receive 90 student days of training credit for the initial purchase
hereunder at no additional charge. A student day is one (1) student in one (1)
class for one (1) day. Charges for training in addition to ITC's Training
Credits will be at the prices set forth below:
-------------------------------------------------------------------
TYPE OF COURSE PRICE
-------------------------------------------------------------------
Instructor Based Training $350 per trainee day
(not hands-on)
-------------------------------------------------------------------
Hands-on Training $420 per trainee day
-------------------------------------------------------------------
Computer Based Training Priced per package
-------------------------------------------------------------------
Customized Training Same as Instructor Based Training,
plus extra charge for customization
determined in each case
-------------------------------------------------------------------
Suitcased Training Same as Instructor Based Training,
plus costs of travel
-------------------------------------------------------------------
Table 4
Each training class includes related instructional Documentation.
Training Credits shall be used by ITC no later than one (1) year from the
issuance of said Training Credits. The Training Credits are limited to use in
standard training classes (those listed in Ericsson's current training catalog).
Ericsson shall provide, at ITC's option, instructors and instructional
Documentation suitable to train ITC's personnel at locations agreed upon by ITC
and Ericsson. If ITC elects to have training performed at a location of ITC's
choice and such training a suitable for suitcase delivery (i.e. on-site
delivery), ITC shall bear the cost of all expenses thereof, including but not
limited to, travel and living expenses for Ericsson's training personnel and any
costs associated with shipping training material.
When training is conducted at Ericsson's Richardson, Texas Training Facility,
ITC shall be responsible for its own expenses, (i.e., travel, lodging, salaries,
etc.).
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 6 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
Where training is conducted on-site utilizing ITC's switching Systems, Ericsson
shall not be responsible for damage to such Systems caused during training, or
for delays in placing Systems into service caused by training.
ITC shall not be charged for standard training courses canceled with two (2) or
more weeks' prior notice, or for custom/exclusive training classes canceled with
thirty (30) or more days prior notice. ITC shall be charged for standard
training courses canceled with less than two (2) weeks' prior notice. Training
Credit may be used to offset such charges in whole or in part. ITC shall
otherwise be responsible for training classes canceled by ITC, although in the
case of canceled custom/exclusive courses, charges shall be limited to the costs
expended by Ericsson in the preparation of such course.
Training classes for OEM equipment and OAM&P systems will be quoted when
requested, unless they are listed in the Ericsson training catalog.
5.2 COVERAGE
This service covers all training classes currently offered by the Ericsson
training department. Ericsson-provided training shall be made available to ITC
at reasonable intervals at locations mutually agreed upon between ITC and
Ericsson.
5.3 SCOPE
Training is described in the Ericsson's current training catalog.
6. DISASTER RECOVERY SERVICE
This service is not being purchased by ITC at this time.
The Disaster Recovery Service (Material and/or Services) provides assistance to
ITC in restoring service which has been disrupted due to catastrophic conditions
caused by natural disasters (fire, flood, etc.).
Such Disaster Recovery Service includes Ericsson providing extraordinary support
to a level of effort required to provide support in a time frame deemed
necessary by ITC consistent with the resource and manpower limitations of
Ericsson. This service will provide recovery services such as a mobile switch
and a disaster recovery team. Ericsson will however not subject its personnel to
danger of any kind in connections with Disaster Recovery and will not enter
buildings or locations that may cause a danger to Ericsson personnel. This
clause shall not be constructed to require Ericsson to maintain any position or
status of readiness to perform in the future.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 7 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
7. HARDWARE SERVICES
7.1 PRICE
Hardware Service is provided at the following rates per year per switch in ITC's
network, depending upon the Application System release being supported:
-----------------------------------------------------------
APPLICATION SYSTEM BASIC EXPEDITE
RELEASE SERVICE SERVICE
-----------------------------------------------------------
Current or two previous $3.15 per port $4.95 per port
-----------------------------------------------------------
Order $6.30 per port $9.90 per port
-----------------------------------------------------------
Table 5
Handling fees are included but shipping or costs of travel are not included.
7.2 COVERAGE
The Hardware Services covers normal working hours, 8 a.m. to 5 p.m. (central
zone) Monday through Friday (except holidays) for the AXE International Gateway
switching platforms. Ericsson can provide Hardware Services for other switching
platforms upon request. Hardware Service covers unlimited hardware replacements
and hardware service phone support.
Hardware services for TMOS systems and other OAM&P systems are not included in
this contract. If ITC wishes to purchase OAM&P hardware services, Ericsson can
provide a quote for that service.
7.3 SCOPE
Replacement and shipment of Hardware, if required, shall be completed as soon as
possible but in no event later than thirty (30) days after receipt by Ericsson,
unless ITC agrees otherwise. ITC must adhere to the procedures outlined in
document EXU/S/lS-93:258 ("CUSTOMER REPAIR AND RETURN POLICY").
7.4 OTHER TERMS AND CONDITIONS
7.4.1 TURN-AROUND TIMES
The normal turn-around times for hardware replacements are:
-----------------------------------------------------------
APPLICATION SYSTEM BASIC EXPEDITE
RELEASE SERVICE SERVICE
-----------------------------------------------------------
Current or two previous 30 days 24 hours or
counter to counter
(ASAP)
-----------------------------------------------------------
Older 90 days 72 hours
-----------------------------------------------------------
Table 6
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 8 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
7.4.2 EXPEDITE SERVICE AND FEES
A per-item expedite fee is charged for emergency turn-around shipments when
using the Basic Service option.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
APPLICATION SYSTEM NORMAL FEE PER EMERGENCY FEE PER ITEM
RELEASE TURNAROUND TIME ITEM TURNAROUND TIME
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current or two previous 30 days $0 24 hours or $240
counter to counter
(ASAP)
- ----------------------------------------------------------------------------------------------
Older 90 days $0 72 hours 50% of board list
price, minimum
$500.
- ----------------------------------------------------------------------------------------------
Table 7
</TABLE>
For the Expedite Service, ITC will be charged the board list price upon shipment
and credited the same price when the faulty board is received by Ericsson. The
Expedite Service also extends the phone coverage to 24 hours per day 7 days a
week.
7.4.3 SHIPPING AND HANDLING CHARGE
ITC pays for shipping, which will be billed at cost. Handling fees are included
in the Hardware Service price.
7.4.4 HARDWARE CHARGE
There is no additional charge for all Hardware covered by Hardware Services.
7.4.5 TRANSPORTATION
Terms and Conditions for Transportation are detailed in the section entitled
"Replacement Out of Warranty" in the Agreement.
8. SPECIALIZED EXPERTISE
8.1 PRICE
The following prices apply to the provision of specialized expertise:
------------------------------
SPECIALIZED MONTHLY
EXPERTISE FEE
------------------------------
NIT Manager $23,703
------------------------------
Site technician $ 7,450
------------------------------
Coordinator $21,042
------------------------------
Category 1 $12,336
------------------------------
Category 2 $13,961
------------------------------
Category 3 $17,772
------------------------------
Category 4 $21,703
------------------------------
Table B
The prices are per calendar month. Costs of travel to and from the site of
service and of any living expenses at the site are not included in the prices
indicated above. Travel cost and any related costs away from the site of service
during the assignment
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 9 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
period are not included and will be at ITC's expense. Any home trips are
covered. Discounted pricing can be negotiated for longer assignments and large
projects.
8.2 OTHER TERMS AND CONDITIONS
The minimum period for which specialized expertise can be ordered is one (1)
week (five [5] working days), except that the minimum period for Site Technician
("Site Tech") is twelve (12) months. The price for one week of service is
one-fourth (1/4) the one-month price.
If ITC terminates specialized expertise earlier than agreed upon at the time of
ordering the service, any discounts for longer assignment will not apply, and
ITC will be charged the full price for the actual time used.
If ITC requests to extend the provision of specialized expertise and Ericsson
can accommodate the request, charges for the extended time will be based on the
entire duration ordered (including the extension).
When an assignment is performed on site or in an office, ITC will provide
suitable office space, furniture and phone access. Ericsson's personnel (other
than site teams) will be equipped with portable PCs and normal tools to perform
their jobs. ITC will provide necessary tools to site techs.
8.3 COVERAGE
Specialized expertise covers the personnel categories listed in the section
entitled "Personnel Types" in this Attachment. (The categories only
approximately describe the individual who will render the services. It may occur
that a high performing person advances to a category before acquiring the years
of experience indicated. The tasks suggested in the categories are merely
examples.)
8.4 SCOPE
This service covers all types of specialized expertise, including
installation/cutover assistance.
8.4.1 PERSONNEL TYPES
8.4.1.1 PERSONNEL CATEGORY 1
Personnel with 1-2 years of telecom experience, and at least six (6) months of
AXE experience. Typical tasks for this personnel may be construction,
installation, cabling, operation and maintenance tasks, training and other
tasks.
8.4.1.2 PERSONNEL CATEGORY 2
Personnel with 2-4 years of telecom experience, and at least one (1) year of AXE
experience. Typical tasks for this personnel may be installation, testing,
cutover, audits, operation and maintenance tasks, training and other tasks.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 10 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
8.4.1.3 PERSONNEL CATEGORY 3
Personnel with 4-5 years of telecommunications experience, with at least three
(3) years of AXE experience and typically with a certain area of expertise,
(e.g., TMOS, SS7, DT, network operation, maintenance, etc.). Typical tasks for
this personnel may be supervision, installation, testing, cutover, audits,
operation and maintenance tasks, troubleshooting, network planning, training and
other tasks.
8.4.1.4 PERSONNEL CATEGORY 4
Personnel with 5-8 years of telecom experience, with at least three (3) years of
AXE experience and typically with several areas of expertise, e.g. TMOS, SS7,
DT, network operation, maintenance, etc. Typical tasks for this personnel may be
supervision, installation, testing, cutover, audits, operation and maintenance
tasks, troubleshooting, network planning, training and other tasks.
8.4.1.5 ON-SITE COORDINATOR
Personnel with special expertise in cutting over, bringing up and operating a
switch. It can also be called a 'Conversion Manager'. Personnel in this category
will have approximately five (5) years of experience in these areas. Typical
tasks for on-site coordinators are any and all tasks associated with starting up
operations of a new switch or bringing a switch from one generic level to the
next level, where major changes are needed.
8.4.1.6 SITE TECHNICIAN
The Site Tech is capable of handling the day-to-day routine operation of a
switch and have at least one year of experience with switch operations and
maintenance and the specific knowledge needed to handle Ericsson's equipment.
Typical tasks are site monitoring, hardware expansion, software upgrades, alarm
retirement, power maintenance, troubleshooting assistance, etc.
8.4.1.7 NIT MANAGER
The Network Integration Team Manager ("NIT Manager") is responsible for all the
network operation activities. This person will work in the management structure
of ITC and will be highly competent and knowledgeable about network operation.
The NIT Manager will also suggest ways to help reduce overall operating costs
and improve communications in the network. The NIT Manager can also act as a
Network Operations Manager.
8.4.2 CANDIDATE SELECTION
Ericsson will present to ITC the background and work history of each person that
Ericsson proposes to work with the on-site services or specialized expertise
services. Ericsson will also provide an opportunity for ITC to interview the
person prior to the commencement of the assignment, if desired by ITC. Ericsson
will attempt to accomodate reasonable requests for the assignment of a
particular or different person to perform an assignment.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 11 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
8.4.3 NOTIFICATION TIMES
While Ericsson understands that ITC requires maximum flexibility and will
attempt to accomodate any request ITC makes for service regardless of
notification time, the following time limits will apply for this Agreement.
For the on-site service and specialized service lasting three (3) months or
less, Ericsson will require an order for service at least forty-five (45) days
before the service is to start. If the service duration is more than three (3)
months, Ericsson will require an order for service at least sixty (60) days
before the service is to start. Failure to adhere to these time frames may
result in the lack of a suitable candidate for the job.
When ordering specialized service from Ericsson, ITC must define the expected
duration of the assignment. If ITC wishes to extend the assignment, Ericsson
requires notification as early as possible. For indefinite assignments (those
without a specific end date) and assignments originally scheduled to last six
(6) months or less, ITC is required to give Ericsson forty-five (45) days' prior
notice of termination. For assignments originally scheduled to last more than
six (6) months but not more than one (1) year, ITC is required to give Ericsson
ninety (90) days' prior notice of termination. For assignments originally
scheduled to last more than one (1) year, ITC is required to give Ericsson one
hundred twenty (120) days' prior notice of termination. However, if ITC
terminates service because of a reasonable conclusion that the candidate
assigned to perform the job was not suitable, prior notice is not required, and
Ericsson will attempt to find an immediate replacement for that person.
If ITC wishes to terminate an assignment prior to the originally requested end
date, Ericsson requires notification forty-five (45) days in advance for
assignments originally defined to last less than six (6) months, unless ITC
terminates service because of a reasonable conclusion that the candidate
assigned to perform the job was not suitable. In such a case, Ericsson will use
its best effort to immediately find a replacement for that person.
If ITC wishes to terminate an assignment prior to the originally requested end
date, and the assignment was scheduled to last more than six (6) months,
Ericsson requires notification at least ninety (90) days in advance. For
assignments scheduled to last more than one (1) year, Ericsson requires
notification at least 120 days in advance if ITC wishes to terminate the
assignment before the originally requested end date.
Should Ericsson wish to change a person during an assignment, ITC will be
provided the same notification times set forth in the previous paragraph unless
the change results from a termination, resignation or relocation of an Ericsson
employee. In such case the notification period is two (2) weeks.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 12 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
8.4.4 WORKING HOURS
Reasonable overtime, not to exceed 10% on average over the entire length of each
service, is permitted for work beyond normal working hours. To protect the
individual, exceptions must be discussed with and approved in writing by
Ericsson in advance.
8.4.5 MOVING EXPENSES
Should ITC wish to move personnel with specialized expertise from one location
to another during the assignment, ITC will pay any actual costs associated with
such a move in accordance with the then-current version of the applicable
Ericsson Human Resources Policies and Procedures. A relocation is defined as a
move of work location that increases the employee's one way commute fifty (50)
miles or more.
9. UPDATE SERVICE
9.1 PRICE
Charges for Update Service are, per year per site, $16,043 for the current
Application System or the two previous releases, and $32,086 for older releases.
The prices cover any reasonable travel and living expenses incurred if site
visits are required to implement a maintenance release.
Equipment needed on ITC's AXE sites to facilitate remote electronic delivery is
not included in the price. The remote patch delivery requires a high speed data
connection using X.25/MTP protocol.
9.2 COVERAGE
All AXE Software purchased under this Agreement.
Update Service for TMOS systems and other OAM&P systems are not included in this
contract. If ITC wishes to purchase OAM&P Update Service, Ericsson can provide a
quote for that service.
9.3 SCOPE
Ericsson will remotely implement AXE software maintenance releases to the AXE
offices in ITC's network. The Update Service covers implementation of:
- --> ECA (quick patching)
- --> ACA (normal patching)
- --> CNA (recompiled code)
In order for Ericsson to timely implement patches in each of the AXE offices,
update plans outlining measures to be taken must be agreed to with ITC no more
than two weeks after release of corrections to ITC.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 13 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
10. NETWORK INTEGRATION TEAM
10.1 PRICE
This service is not being purchased by ITC at this time.
10.2 COVERAGE
The NIT can address network integration issues at any ITC network site. ITC can
select the focus of the team from the areas suggested by Ericsson or identify
different areas.
The NIT service assumes that an operations support system, a business support
system and applicable OAM&P systems are in place upon the arrival of the NIT
unless mutually agreed upon between ITC and Ericsson, as progress may be delayed
by selection and implementation of such systems during the NIT service period.
10.3 SCOPE
The Network Integration Team will address switching operations functions related
the Network Management Center, the Operations Center, the Customer Care Center
and the Billing Center.
ITC and Ericsson will work to identify the operations tasks critical for ITC's
business and any additional tasks ITC wishes to have performed and/or integrated
with existing or new OAM&P solutions. The final decision as to tasks and
priorities rests with ITC. Processes will be put in place for chosen tasks.
ITC and Ericsson will work to clearly define milestones and create an NIT
project time-line for reaching them. Biweekly, Ericsson will formally review
with ITC the progress toward those milestones and take action on any deviation
from the plan. To allow for the necessary mutual transfer of knowledge and
expertise, the appropriate ITC personnel shall participate with the NIT on a
full-time basis.
ITC shall assign a contact for Ericsson's designated NIT Manager. The NIT
Manager will issue biweekly progress reports to the specified ITC contact. (The
reporting schedule can be changed by agreement between ITC and Ericsson.)
Priorities will be reviewed on a monthly basis with ITC management. If the
priorities are adjusted Ericsson will document the changes and present an
updated priority list.
In order to expedite actions and avoid consuming ITC time in obtaining approval,
ITC shall give members of the NIT the same authority as their counterparts in
ITC to perform "basic network integration tasks", which will be defined jointly
with ITC. Decisions viewed as affecting the ITC operations will be made by ITC.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 14 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
11. OAM&P SUPPORT SYSTEMS
This service is not being purchased by ITC at this time.
The details of an integrated solution for Operations, Administration,
Maintenance & Provisioning ("OAM&P") are being discussed with ITC.
12. ENGINEERING & INSTALLATION SERVICES
12.1 PRICE
Charges are $ 125 per hour. Discounts negotiated for larger projects or for
services rendered during installation of Ericsson switching equipment.
12.2 COVERAGE
Engineering services are available to ITC on a per-request basis. Examples of
these services include pre-installation planning, installation services,
installation engineering, and data translations support.
12.3 SCOPE
Negotiated per project between ITC and Ericsson.
13. DOCUMENTATION
13.1 PRICE
Ericsson agrees to furnish one (1) complete library set of Documentation, as
detailed in the SOW, for the initial purchase of each type of Application System
hereunder at no additional charge. Subsequent sets of Documentation will be at
the following charges:
Standard Documentation on CD ROM: $100 per CD ROM
Standard Documentation on paper: $50 per Binder
Non-standard Documentation on paper: $50 per Binder
Browser Software: $208 per Single-User License, UNIX SunOS
Browser Software: $142 per Single-User License, MS-DOS
Browser Software: $742 per Multi-User License, UNIX SunOS
Browser Software: $493 per Multi-User License, MS-DOS
Documentation may be in the form of CD ROM or paper, at Ericsson's option.
Equipment needed on ITC's AXE sites to facilitate use of Browser Software is
not included in the price. Support contract pricing is an additional $5000 per
year per platform for unlimited phone call support and software updates.
Additional development fees apply for custom documentation and will be
determined on a per project basis.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 15 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
13.2 COVERAGE
Complete new library set(s) of Documentation, enhancements, upgrades or
revisions to Documentation.
ITC shall provide a written distribution schedule for Documentation as soon as
possible after ordering. ITC shall establish and maintain a list of ITC's
personnel and organizations responsible for maintaining each complete set or
partial set of Documentation under this Agreement. All Documentation and any
subsequent updates or changes shall contain an Ericsson identification reference
number and date of issue to facilitate administration.
13.3 SCOPE
A complete set of Ericsson's Documentation is available for engineering,
planning, installation, acceptance testing, operations and maintenance of
Material and Software.
Documentation updates are covered under the section entitled "Maintenance
Support" of this Attachment, except that, pursuant to the Agreement, Ericsson
shall update Documentation during the Warranty Period at no charge.
14. MISCELLANEOUS
14.1 TRAVEL AND LIVING EXPENSES; TAXES
Expenses to be reimbursed by ITC shall be those that are (i) consistent with
Ericsson's then-current Employee Business Travel Policy, (ii) reasonable and
customary for travel and related living costs, and (iii) actually incurred in
the performance of Services hereunder. Except where the Service by its nature
includes travel, Ericsson shall obtain ITC's prior approval for travel.
Any applicable taxes and/or duties are not included in the prices stated above
and shall be borne by ITC.
14.2 WORKING HOURS; BILLING HOURS
Except as may be specifically described above or in the Agreement with regard to
a particular Service, all Ericsson personnel assigned or otherwise rendering
Services to ITC will work normal working hours. Normal working hours are 8 a.m.
to 5 p.m. (according to the time zone and locale in which the work is being
done), Monday through Friday (except holidays).
When on-site support is called for, hours are counted during the entire time
Ericsson works on ITC's requests, including wait time. Travel time is counted,
but non-working hours at the destination are not counted.
When support is called for, hours are counted during the entire time works on
ITC's requests.
<PAGE>
General Purchase Agreement Attachment B
International Telecommunications Corp. (ITC) Page 16 (16)
02/28/96 EUS/XM/B-95:496 Rev. B
- --------------------------------------------------------------------------------
A minimum charge of one-half (1/2) hour applies during normal working hours and
one (1) hour at all other times. Time for hourly billing will be calculated in
one-half (1/2) hour increments.
14.3 CONTACTING SUPPORT
In all cases, contact with the Ericsson support personnel (including for
warranty support) is made by calling the TAC 800-number [(800) 222 9293], 24
hours per day, 365 days per year.
14.4 QUARTERLY REPORTS
Ericsson will keep a log of all Customer Service activities and present this
information to ITC at the end of each calendar quarter. The log will also be
available to ITC at any other time upon request.
14.5 WARRANTY COVERAGE
The Customer Services covered under Warranty and provided to ITC at no
additional charge are detailed under the section entitled "WARRANTY" in the
Agreement.
<PAGE>
Exhibit 10.18
LEASE AGREEMENT
between
AB LM ERICSSON FINANS (publ)
and
INTERNATIONAL TELECOMMUNICATIONS CORPORATION (LESSEE)
relating to
AXE Switch and related equipment
- --------------------------------------------------------------------------------
Page 1(27)
<PAGE>
CONTENTS
1. DEFINITIONS ............................................................. 4
2. AGREEMENT FOR LEASE OF THE EQUIPMENT .................................... 4
3. DELIVERY ................................................................ 5
4. RENT AND OTHER PAYMENTS ................................................. 6
5. TAXES, DUTIES AND COSTS ................................................. 7
6. TITLE TO THE EQUIPMENT .................................................. 8
7. MAINTENANCE AND USE ..................................................... 8
8. REPLACEMENT, ALTERATIONS AND ADDITIONS .................................. 9
9. INSURANCE ............................................................... 10
10. RISK, EVENT OF LOSS AND CONDEMNATION .................................... 12
11. INDEMNITY ............................................................... 14
12. RETURN OF THE EQUIPMENT, RECORDS, REPOSSESSION .......................... 14
13. EVENTS OF DEFAULT AND REMEDIES .......................................... 15
14. GPA ASSIGNMENT AGREEMENT ................................................ 16
15. OPTIONS ................................................................. 17
16. REPRESENTATIONS AND WARRANTIES .......................................... 18
17. COVENANTS ............................................................... 21
18. OBLIGATIONS OF INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD .............. 23
19. MISCELLANEOUS ........................................................... 24
- --------------------------------------------------------------------------------
Page 2(27)
<PAGE>
EXHIBIT A - DEFINITIONS
EXHIBIT B - EQUIPMENT LIST
EXHIBIT C - CONSENT OF SELLER
EXHIBIT D - BUDGET FOR ITG's 1996 FISCAL YEAR
SCHEDULE 1 - RENT PAYMENTS
SCHEDULE 2 - CONFIRMATION OF DELIVERY
SCHEDULE 3 - PENDING LEGAL DISPUTES OF LESSEE
- --------------------------------------------------------------------------------
Page 3(27)
<PAGE>
This LEASE AGREEMENT ("Lease Agreement") dated as of September ____ 1995, is
made and entered between
AB LM ERICSSON FINANS (publ), S-126 25 Stockholm, Sweden, (reg No. 556008-8550),
a Swedish limited liability corporation ("Lessor") with its principle office in
Stockholm, Sweden; and
INTERNATIONAL TELECOMMUNICATIONS CORPORATION, 60 Hudson Street, Suite 307, New
York, New York, United States, a limited share company incorporated in Delaware,
United States ("Lessee") with its principal office in New York, New York, United
States.
WHEREAS:
Lessee has agreed to purchase certain Equipment (as defined herein) from
Ericsson Inc., Dallas, Texas, United States (the "Seller") under a supply
contract between Lessee and the Seller (hereinafter referred to as the "General
Purchase Agreement");
Lessee and Lessor have entered into a assignment agreement of even date herewith
(the "GPA Assignment Agreement") whereby Lessee has assigned all its rights,
title and interest to the Equipment pursuant to the General Purchase Agreement
to Lessor;
Lessor and Lessee have subject to the terms of this Agreement agreed that Lessee
shall lease the Equipment from Lessor.
NOW, THEREFORE, it is mutually agreed between the parties hereto as follows:
1. DEFINITIONS
Unless the context otherwise requires, the capitalized terms used
herein shall have the respective meanings assigned thereto in Exhibit A
(DEFINITIONS) for all purposes hereof.
2. AGREEMENT FOR LEASE OF THE EQUIPMENT
2.1 Lessor will lease the Equipment to Lessee and Lessee will take the
Equipment on lease from Lessor in accordance with the terms and
conditions of this Agreement in an "as is" condition and without
representations or warranties or conditions, express or implied, of any
kind or nature whatsoever, except as expressly provided herein and
except as provided for in the GPA Assignment Agreement.
2.2 Lessor's obligation to fulfill its part of this Agreement to Lessee
shall be subject to Lessor having acquired such rights and title to the
Equipment as is provided in the GPA Assignment Agreement not later than
on the Lease Commencement Date and the receipt of the following
documents on the day occurring ten (10) days after the day of signature
of this Agreement, all of which shall be satisfactory in form and
substance to Lessor:
- --------------------------------------------------------------------------------
Page 4(27)
<PAGE>
(a) evidence that Lessee is duly registered as an incorporated
stock company pursuant to the laws of the State of Delaware;
(b) evidence that an authorized person and/or persons has/have
signed and delivered this Agreement and any notices or other
documents to be given pursuant hereto and thereto on behalf of
Lessee (such as a copy of the approval of this Agreement by
the Board of Directors of Lessee and International
Telecommunications Group, Ltd. and a Power of Attorney);
(c) an original Certificate of Good Standing for Lessee dated no
later than the date of closing of this Lease Agreement;
(d) copies of written statements from Lessee's direct and indirect
shareholders, subsidiaries, and affiliates, including RSL
Communications, Inc., accepting that all debt of Lessee and
International Telecommunications Group, Ltd. ("ITG") to such
persons or entities is subordinated to this lease.
2.3 The conditions specified in Sub-article 2.2 are inserted for the sole
benefit of Lessor and may be waived or deferred in whole or in part,
with or without conditions, by Lessor.
3. DELIVERY
3.1 Subject to Sub-article 3.2, Lessor shall tender the Equipment for
delivery and Lessee shall take delivery of the Equipment at the
Delivery Location on the Delivery Date. In the event Lessee does not
fulfill the obligation to take delivery of the Equipment, Lessee shall
promptly, on demand, reimburse Lessor for all losses, costs and
expenses sustained by Lessor (including without limitation, taxes,
Lessor's actual funding costs, interest or payments made by Lessor to
Seller and cost of transportation, storage, insurance, presentation,
preparation and protection as a result of such failure).
3.2 Lessee acknowledges and agrees that Lessor's ability to perform its
obligations to deliver the Equipment under this Agreement is dependent
on the due and punctual performance by Seller of its obligations under
the General Purchase Agreement. Lessee further acknowledges and agrees
that Lessor shall not be responsible towards Lessee for any delay or
inability to perform any of its obligations under this Agreement to the
extent such delay or inability is due to circumstances for which Lessor
is not responsible.
3.3 Lessee shall, within fourteen (14) days from receipt of a copy of
Seller's invoice to Lessor, confirm that the Equipment or parts of the
Equipment (or the occurrence of any event) to which such invoice
relates is delivered (or has occurred), by returning the said copy
invoice to Lessor attaching a Confirmation of Delivery/Event Document
in the form and substance set out in Schedule 2.
- --------------------------------------------------------------------------------
Page 5(27)
<PAGE>
Lessee shall also assume Lessor's obligation to issue the Acceptance
Certificate to Seller in the time and manner stated in the General
Purchase Agreement and shall simultaneously send one copy of said
certificate to Lessor.
4. RENT AND OTHER PAYMENTS
4.1 Lessee covenants and agrees to pay Lessor in immediate availability
funds sixty-six (66) rent payments calculated in accordance with
Sub-article 4.3 hereof, the first rent payment to be made in the day
occurring nineteen (19) months after the Lease Commencement Date, and
thereafter sixty-five (65) monthly rent payments in arrears on the last
day of each month.
4.2 During the period up to and including the day occurring eighteen (18)
months after the Lease Commencement Date, and if no Termination Event
occurs, payments on this lease are deferred, but interest shall be
accrued and capitalized as follows: on the days occurring one (1) to
eighteen (18) months after the Lease Commencement Date, an interest
amount shall be capitalized and added to the Outstanding Balance. This
interest amount shall accrue at the Applicable Interest Rate on the
Outstanding Balance for the relevant period.
4.3 The rent payments due on each Rent Payment Date as referred to in
Sub-article 4.1 shall be calculated as follows.
(i) The rent payments due on the Rent Payment Dates occurring
nineteen (19) through twenty-four (24) months after the Lease
Commencement Date shall consist of an amount equal to the
interest that has accrued on the Outstanding Balance during
each period, calculated at the Applicable Interest Rate.
(ii) The rent payments due on the Rent Payment Dates occurring
twenty-five (25) through eighty-four (84) months after the
Lease Commencement Date shall consist of the sum of (A) a
depreciation amount and an (B) an interest amount, calculated
as follows. The depreciation amount (A) shall equal the
percentage of the Purchase Price as set forth opposite each
Rent Payment Date in Schedule 1 under the caption
"Depreciation. The interest amount (B) shall equal the
interest that has accrued on the Outstanding balance during
each period, calculated at the Applicable Interest Rate.
At each of these Rent Payment Dates, the depreciation amount
(A) shall be subtracted from the Outstanding Balance at the
respective Rent Payment Dates.
4.4 Lessor shall not later than two (2) Business days before the start of
each rent period in writing quote to Lessee the Applicable Interest
Rate and the rent payment or capitalized interest amounts for each
relevant rent period calculated in accordance with Sub-article 4.2 and
4.3 above.
- --------------------------------------------------------------------------------
Page 6(27)
<PAGE>
4.5 Unless the Lessee has raised any objections to the quotation not later
than five (5) Business Days after receipt of the quotation set out in
Sub-article 4.3 before each rent period it shall be deemed valid for
such rent period.
4.6 Lessee shall make any payment to be made to Lessor under this Agreement
(by telex advice) to Lessor's account with Skandinaviska Enskilda
Banken, Stockholm, Sweden, account no 5201-8286811, or to any other
bank account designated by Lessor from time to time.
4.7 In the event that any payment in accordance with this Agreement is not
paid when due, Lessee shall pay interest on any such amount from the
due date up to and including the day when the amount is actually paid
calculated at an annual rate of eight (8) per cent above prevailing
LIBOR.
4.8 Lessee's obligation to pay any amounts due under this Agreement shall
be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation (a) any withholding,
reduction, set-off, counterclaim or other right which Lessee may have
against Lessor or any other person, (b) any defect in the title,
condition or fitness for use of, or any damage to or loss or
destruction of, the Equipment or any interruption or cessation in the
use thereof by Lessee, including any governmental action, (c) any
insolvency, bankruptcy or similar proceedings by or against Lessee or
Lessor, or (d) any invalidity or unenforceability or lack of due
authorization of this Agreement or any failure of Lessor to perform any
obligation of Lessor to Lessee or any other person under this lease,
any present or future law or regulation to the contrary
notwithstanding, it being the express intention of Lessor and Lessee
that all rent payable to Lessor hereunder shall be, and continue to be,
payable in all such events unless the obligation to pay the same shall
be terminated pursuant to the express provisions of this Agreement.
4.9 Whenever any payment under this Agreement falls due on a day which is
not a Business Day the due date of such payment shall be the
immediately succeeding Business Day.
5. TAXES, DUTIES AND COSTS
5.1 Lessee agrees promptly to pay and indemnify and hold Lessor harmless
against all Taxes levied or imposed against or upon Lessor or Lessee
and relating to this Agreement.
5.2 If at any time any applicable law, regulation or any governmental
authority, monetary agency or central bank having jurisdiction requires
Lessee to make any deduction or withholding in respect of Taxes from
any payment due under this Agreement, the sum due from Lessee in
respect of such payment shall be increased to the extent necessary to
ensure that after the making of such deduction or withholding, Lessor
receives on the day such payment is due a net sum equal to the
- --------------------------------------------------------------------------------
Page 7(27)
<PAGE>
amount which it would have received had no such deduction or
withholding been required to be made.
5.3 Lessee's obligations under this Article 5 shall continue in full force
and effect notwithstanding the expiration or earlier termination of the
Agreement.
6. TITLE TO THE EQUIPMENT
6.1 Title to the Equipment or any part thereof shall at all times remain in
Lessor and Lessee shall have no right, title or interest in or to the
Equipment or any part thereof except as expressly provided by this
Agreement. Lessee may not sublease, sell, assign, pledge, move (from
the site where the Equipment is first placed) or otherwise dispose of
the Equipment without the written authorization of Lessor.
6.2 Lessee shall not, during the Lease Period, create or suffer to exist
any lien, mortgage or other encumbrance upon or against the Equipment,
or any of its rights under this Agreement, other than lien, mortgage or
other encumbrance arising from Lessor's own act or default, and the
Lessee shall indemnify and hold Lessor harmless from and against any
and all losses which Lessor may sustain arising therefrom. If at any
time a lien, mortgage, or other encumbrance shall be created or
suffered to exist by the Lessee, or be levied upon the Equipment or any
of its rights under this Agreement, other than lien, mortgage or other
encumbrance arising from Lessor's own act or default, the Lessee shall
forthwith notify the Lessor and cause the same forthwith to be
discharged by bond or otherwise. In the event Lessee shall fail to
discharge any such lien, mortgage or other encumbrance, Lessor shall be
entitled (but not bound) to discharge the same, in which event Lessee
shall pay to Lessor on demand the amount paid by Lessor together with
Lessor's costs and expenses, including reasonable legal fees and
expenses.
The Equipment or any part thereof shall be marked with a sign stating
that the Lessor is the legal owner of the Equipment.
7. MAINTENANCE AND USE
7.1 Lessee shall at its own cost and expense:
(i) maintain and service the Equipment and comply with its own
preventive maintenance program and with the Technical
Documents so that the Equipment will remain in as good
operating condition as when delivered to Lessee hereunder,
ordinary wear and tear excepted;
(ii) comply with and cause the Equipment to comply with all
applicable legal requirements, all restrictions and insurance
policies, now or hereafter in effect, and all agreements in
respect of the Equipment to which Lessee is a party or by
which it is bound, now or hereafter in effect, including,
without
- --------------------------------------------------------------------------------
Page 8(27)
<PAGE>
limitation, those which require the making of any unforeseen
or extraordinary changes, repairs, modifications or
alterations;
(iii) promptly furnish to Lessor upon Lessor's written request such
reasonable information as may be required to enable Lessor to
file any reports to be filed by Lessor with any Swedish
governmental authority because of Lessor's ownership of the
Equipment; and
(iv) procure that the Equipment will not be used for any purpose
for which it is not designed or reasonably suited, or outside
the tolerance and limitations for which the Equipment was
designed, and will be operated in accordance with the
Technical Documents.
7.2 All equipment shall remain at the proposed site in New York City, New
York, USA, unless an expressed written authorization has been received
by Lessor.
8. REPLACEMENT, ALTERATIONS AND ADDITIONS
8.1 Lessee shall, at its own cost and expense, promptly replace all parts
of the Equipment which are confiscated, worn out, damaged beyond repair
or permanently rendered unfit for use for any reason whatsoever.
Further, Lessee may, at its own cost and expense, remove in the
ordinary course of maintenance, service, repair, overhaul or testing,
any parts of the Equipment whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use, provided that Lessee shall at its own cost and
expense replace such part of the Equipment. All Replacement Parts
incorporated or installed in, or attached or added to, the Equipment
shall be free and clear of all liens (other than liens, mortgage or
other encumbrances arising from Lessor's own act or default) and shall
be in as good operating condition as, and shall have utility and value
of at least equal to, the parts replaced assuming such replaced parts
were in the conditions and repair required to be maintained by the
terms of this Agreement.
Any part of the Equipment, if at any time removed from the Equipment,
shall remain the property of Lessor no matter where located, until such
time as such part of the Equipment shall be replaced by a Replacement
Part which has been incorporated or installed in, or attached or added
to, the Equipment and which meet the requirements for Replacement Part
specified above. Immediately upon any such Replacement Part becoming
incorporated or installed in, or attached or added to, the Equipment as
above provided, or upon the shipment of the Replacement Part from the
manufacturer or Seller where such replaced part has been returned to
the manufacturer or Seller, without further act:
(i) title to the replaced part shall thereupon vest in Lessee,
free and clear of all rights of Lessor, and shall no longer be
deemed a part hereunder;
(ii) title to such Replacement Part shall thereupon vest in Lessor;
and
- --------------------------------------------------------------------------------
Page 9(27)
<PAGE>
(iii) such Replacement Part shall become subject to this lease and
be deemed part of the Equipment for all purposes hereof to the
same extent as the parts originally incorporated or installed
in, or attached or added to, the Equipment.
Lessee shall, at its own expense, repair, service, overhaul and test
any or all of the Equipment and update or add spare parts and make such
repairs, alterations and modifications to the Equipment which are
justified for the proper functioning in the ordinary course of
operating (as long as this does not cause the Equipment to lose its
identity), or to meet the requirements of any governmental authority
having jurisdiction.
9. INSURANCE
9.1 Lessee shall from the Delivery Date of each item until returned to
Lessor after expiration of the Lease Period (or until Lessee purchases
the Equipment if applicable) at its own expense keep each item of the
Equipment insured with an all-risk insurance policy covering all risks
normally covered by an insurance of equipment of the same kind as the
Equipment including but not limited to third party liability (and
specifically product liability when applicable) and all normally
insurable theft, loss and damage to the Equipment. If Lessee upon
Lessor's request cannot provide proof of such insurance coverage,
Lessor is entitled to contract such insurance at the sole expense of
Lessee.
Any such insurance shall be for an amount in USD not less than the
Outstanding Balance, for the relevant period of time.
9.2 All insurance carried in accordance with Sub-article 9.1 shall be
placed with an international insurer with recognized reputation and
responsibility satisfactory to Lessor, shall be in full force and
effect throughout the Lease Period. Any policies carried out in
accordance with Sub-article 9.1 covering the Equipment and any policies
taken out in substitution or replacement for any such policies;
(i) shall name Lessor as owner of the Equipment and as
additionally insured;
(ii) shall be made payable, in the case of policies covering loss
or damage to the Equipment, to Lessor pursuant to a loss
payable clause acceptable to Lessor;
(iii) shall provide that if such insurance is canceled or materially
changed for any reason whatever, or the same is allowed to
lapse for non-payment of premium, such cancellation, change or
lapse shall not be effective as to Lessor for thirty (30) days
after receipt by Lessor of written notice by such insurers of
such cancellation or lapse or of any material change in policy
terms and conditions; and
(iv) shall provide that in respect of the interests of Lessor in
such policies, the insurance shall not be invalidated by any
action of Lessee or any other person (other than Lessor) and
shall insure Lessor regardless of any breach or violation of
any warranties, declarations, or conditions contained in such
policies by Lessee or by any other person (other than by
Lessor).
- --------------------------------------------------------------------------------
Page 10(27)
<PAGE>
9.3 As between Lessor and Lessee, it is hereby agreed that all insurance
proceeds received under policies required hereby, as the result of the
occurrence of an Event of Loss with respect to the Equipment, will be
applied as follows:
(i) so much of such insurance proceeds as shall not exceed the
Outstanding Balance shall be applied in reduction of Lessee's
obligation to pay such Outstanding Balance, if not already
paid by Lessee or, if already paid by Lessee and no Event of
Default exists hereunder, shall be applied to reimburse Lessee
for its payment of such Outstanding Balance, and the balance,
if any, of such insurance proceeds remaining thereafter will
be paid to the order of Lessee; and
(ii) if such proceeds are received with respect to any part of the
Equipment then all such insurance proceeds shall be paid to
the order of Lessee, provided that Lessee shall have fully
performed the terms of Article 10 hereof with respect to the
Event of Loss for which such proceeds are paid.
Until settlement has been made with respect to this Article 9,
Lessee shall continue to pay Rent as it falls due.
9.4 Lessee shall furnish to Lessor:
(i) prior to the Lease Commencement Date and thereafter at
subsequent renewals by each of the renewal dates, executed
copies of endorsements evidencing the insurance required to be
maintained pursuant to this Article 9 and a letter addressed
to Lessor by a recognized firm of insurance brokers
satisfactory to Lessor confirming that this Article 9
adequately protects the interest of Lessor;
(ii) on request, evidence of any insurance required hereunder; and
(iii) on request, evidence of payment of premium or premium
installment due in respect of above insurance.
9.5 Lessee will not:
(i) make any modification to any insurance required hereunder
prejudicial to the interests of Lessor; or
(ii) do, or omit to do, or permit to be done, or left undone
anything whereby any required insurance would or might
reasonably be expected to be rendered, in whole or in part,
invalid or unenforceable and, without prejudice to the
foregoing, not use or keep or permit the Equipment or any part
thereof to be used or kept for any purpose, in any manner or
in any place not covered by the required insurance; or
(iii) take out or permit to be taken out any other insurance, the
existence of which would or might be prejudicial to the
interests of Lessor; or
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Page 11(27)
<PAGE>
(iv) cause or permit the Equipment to be employed in any place or
in any manner or for any purpose inconsistent with the terms
of or outside the cover provided by any required insurance.
9.6 Lessee shall bear any part of any loss or liability which is to be
borne under any required policy.
10. RISK, EVENT OF LOSS AND CONDEMNATION
10.1 RISK
Commencing at the time such risk passes to Lessor under the terms of
the GPA Assignment Agreement and continuing until the termination of
the Lease Period, Lessee assumes the entire risk of loss or damage to
the Equipment or any part thereof or of any Event of Loss or any
liability of Lessor as owner arising out of operation, maintenance,
use, storage, overhaul, repair, transport or possession, of the
Equipment and no such Event of Loss or liability shall relieve Lessee
of its obligations hereunder.
10.2 EVENT OF LOSS WITH RESPECT TO THE EQUIPMENT
Upon the occurrence of any Event of Loss with respect to the Equipment,
Lessee shall, on the 30th day following the date on which the Event of
Loss shall have been declared by Lessor, pay or cause to be paid in
immediately available funds:
(i) the Outstanding Balance in effect as of such date for the
Equipment; and
(ii) any other unpaid amounts due hereunder.
At such time as Lessor has received the sum of (i) and (ii) above, the
obligation of Lessee to pay rent hereunder shall terminate and Lessor
will transfer to Lessee, without recourse or warranty, all of Lessor's
right, title and interest, if any, in and to the Equipment (except
software which Lessee takes possession of but not title, as fully
described in Article 6.1 of the General Purchase Agreement).
10.3 DEPRIVATION NOT CONSTITUTING AN EVENT OF LOSS
In the event of damage to the Equipment or any part thereof not
constituting an Event of Loss, Lessee shall promptly notify Lessor in
writing of such damage and shall remain obligated to make all payments
of rent which may become due hereunder in the same manner as if such
damage had not occurred. Lessee shall repair and restore the Equipment
or any part thereof to the condition required by Article 7 hereof. So
long as no Event of Default shall have occurred and be continuing,
Lessee shall be entitled to receive the entire award, judgment,
settlement, insurance proceeds or payments and all installments thereof
with respect to such damage, to the extent received by Lessor and as
provided in Article 9 hereof.
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Page 12(27)
<PAGE>
10.4 EVENT OF LOSS WITH RESPECT TO ANY PART OF THE EQUIPMENT
Notwithstanding anything to the contrary contained in this Article 10,
upon the occurrence of an Event of Loss with respect to any part of the
Equipment under circumstances where there has not been an Event of Loss
with respect to the Equipment, Lessee shall, as promptly as is
reasonably possible, duly convey to Lessor, as replacement for any part
of the Equipment having suffered an Event of Loss, title to another
part of the Equipment of the same manufacturer and of the same or an
improved model suitable for installation and use on the Equipment as
the part of the Equipment having suffered an Event of Loss. Such
Replacement Part shall be free and clear of all liens, encumbrances or
rights of others whatsoever (other than a lien, mortgage or other
encumbrance arising from Lessor's own act or default) and have a value
and utility at least equal to, and be in as good operating condition
as, the part of the Equipment with respect to which an Event of Loss
has occurred if such part of the Equipment were in the condition and
repair as required by Article 7 hereof prior to such Event of Loss.
Lessee shall also at its expense promptly;
(i) if such replacement in any way alter the specification of the
Equipment as set out in Exhibit B cause Exhibit B hereto to be
amended accordingly, in form and substance satisfactory to
Lessor, subjecting such Replacement Part to the Equipment to
the terms of this Agreement, by being duly executed by Lessee
and recorded as may be necessary;
(ii) furnish Lessor with evidence of Lessee's title to such
Replacement Part to the Equipment as may be necessary or as
Lessor may reasonably request; and
(iii) take such other action as may be necessary or as Lessor may
reasonably request in order that such Replacement Part to the
Equipment be duly and properly titled in Lessor. Upon full
compliance by Lessee with the terms of this Sub-article 10.4,
Lessor will transfer to Lessee the title to any part of the
Equipment with respect to which such Event of Loss has
occurred.
10.5 APPLICATION OF PAYMENTS
Upon the occurrence of any Event of Loss, with respect to the Equipment
or any part of the Equipment, Lessor shall be entitled to and shall
receive the entire award, judgment, settlement, insurance proceeds or
payments and all installments thereof to the extent of Lessee's
obligations under Sub-article 10.2 hereof. Lessee hereby assigns to
Lessor any right or interest Lessee may have or may hereafter acquire
in any such award or payment; provided that unless an Event of Default
shall have occurred and be continuing, Lessee shall be entitled to
credit or reimbursement for the amount of such award, judgment,
settlement, insurance proceeds or payments actually received by Lessor
against Lessee's obligation to pay the Outstanding Balance.
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Page 13(27)
<PAGE>
11. INDEMNITY
11.1 Lessee hereby assumes liability for, and shall indemnify, protect, save
and keep harmless Lessor from and against any and all Liabilities.
11.2 The foregoing indemnity in Sub-article 11.1 shall not extend to any
loss:
(a) to the extent that such loss is caused by the willful
misconduct or gross negligence of Lessor or Seller;
(b) to the extent that such loss is a result of any failure on the
part of Lessor to comply with any of the terms of, or is a
result of any misrepresentation of Lessor contained in, this
Agreement or any agreement relating hereto; or
11.3 Upon commencement of any proceeding (including the written threat or
written claim of any proceeding) against Lessor involving any
Liability, Lessor shall promptly, upon receiving written notice
thereof, give notice of such commencement to Lessee. Lessee shall be
entitled to be consulted by Lessor with respect to proceedings subject
to the control of Lessor.
11.4 Lessor shall supply Lessee with such information requested by Lessee as
is material and relevant to Lessee's participation in any proceeding to
the extent permitted by this Article 11. Unless an Event of Default has
occurred and is continuing, Lessor shall not enter into a settlement or
other compromise with respect to any Liability without prior written
consent of Lessee, such consent not to be unreasonably withheld or
delayed.
11.5 If Lessor shall obtain a repayment in respect of any Liabilities paid
by Lessee pursuant to this Article 11, Lessor shall promptly pay to
Lessee the amount of such repayment, together with any interest (other
than interest for the period, if any, after such Liability was paid by
Lessor until such Liability was paid or reimbursed by Lessee) received
by Lessor on account of such repayment.
11.6 The provisions of this Article 11 shall survive the expiration or
termination of this Agreement.
12. RETURN OF THE EQUIPMENT, RECORDS, REPOSSESSION
12.1 RETURN OF THE EQUIPMENT
Upon the expiration of the Lease Period or any prolongation period
thereof in accordance with Sub-article 15.5 pursuant to the terms
hereof, Lessee shall, except when title to the Equipment is transferred
to the Lessee pursuant to the terms of this Agreement, return the
Equipment to Lessor, free and clear of all liens, free of all
advertising or insignia placed thereon by Lessee and in the same
operating order, repair, condition and appearance as when received, and
shall pay for any repairs and
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Page 14(27)
<PAGE>
refurbishing necessary to restore the Equipment to its original
condition, ordinary wear and tear excepted.
The Equipment shall be returned to Lessor, at Lessee's risk and
expense, at any location within Sweden designated by Lessor.
12.2 RETURN OF TECHNICAL DOCUMENTS
Upon return of the Equipment, Lessee shall tender to Lessor all data,
inspection records and related data (including but not limited to the
Technical Documents) pertaining to the Equipment.
12.3 STORAGE UPON RETURN
Upon written request by Lessor prior to expiration of the Lease Period
pursuant to this Agreement, Lessee will, except when title to the
Equipment is transferred to the Lessee pursuant to this Agreement,
provide Lessor with free storage facilities of the Equipment upon such
expiration or termination for a period not exceeding thirty (30) days.
During the period of any storage of the Equipment by Lessee pursuant to
this Sub-article 12.3, Lessee will:
(i) service, maintain and protect the Equipment to the extent
necessary to keep it in good condition and repair or as
otherwise directed by Lessor; and
(ii) maintain insurance with respect to the Equipment to the extent
requested by Lessor, provided that Lessor shall reimburse
Lessee for its reasonable costs and expenses in complying with
the provisions of this sentence.
13. EVENTS OF DEFAULT AND REMEDIES
13.1 Upon the occurrence of any Event of Default, Lessee shall, if demanded
by Lessor, following Lessor having given Lessee not less than five (5)
Business Days notice of its intention to make such demand, pay to
Lessor an amount equal to the Outstanding Balance upon which title to
the Equipment (except software which Lessee takes possession of but not
title, as fully described in Sections 3.6 and 6.1 of the General
Purchase Agreement) shall be transferred from Lessor to Lessee without
recourse or warranty and Lessee shall issue all other relevant
documents for such transfer. Lessee has no right to claim compensation
from Lessor with respect to the condition of the Equipment in
connection with such transfer and confirm that the condition of such
transfer of title shall be "as is where is".
13.2 If Lessee fails to duly and promptly perform any of its obligations
under this Agreement or materially fails to comply with any of the
covenants or agreements contained herein and continues to do so thirty
(30) days from receipt of written notice from Lessor, Lessor may itself
perform such obligations or comply with such covenants or agreements
for the account of Lessee without thereby waiving any default, and any
reasonable amount paid or expense (including, without limitation,
reasonable attorney's fees) incurred by Lessor in connection with such
performance or compliance shall be payable by Lessee to Lessor on
demand.
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Page 15(27)
<PAGE>
13.3 Whether or not the Equipment is delivered to Lessee pursuant to this
Agreement, Lessee shall pay to Lessor on demand, if an Event of Default
shall have occurred and be continuing and notice thereof shall have
been given to Lessee, all relevant reasonable expenses (including the
costs of preparation of documents) payable or incurred by Lessor in
contemplation of or otherwise in connection with the enforcement of or
preservation of any rights under this Agreement or otherwise in respect
of money owing under this Agreement or in respect of any breach of any
representation, warranty, covenant or undertaking herein contained, or
in respect of the repossession of the Equipment.
14. GPA ASSIGNMENT AGREEMENT
14.1 Pursuant to the terms of the Consent of Seller attached hereto as
Exhibit C, Lessor hereby assigns to Lessee any and all warranties to
and other rights regarding the Equipment (ownership excluded) which
have been assigned to Lessor pursuant to the GPA Assignment Agreement,
and Lessor agrees to use its best efforts to procure any and all
necessary consents to so assign and undertakes to forthwith assign any
additional such rights or right similar thereto or otherwise pertaining
to the Equipment or the operation, maintenance or service thereof,
which may arise during the Lease Period or otherwise are presently not
known or considered or covered by this Agreement. Any amounts received
by Lessee as payment under any such warranty shall be applied to
restore the Equipment to the condition required by Article 7 hereof and
may be applied as otherwise deemed necessary and desirable by Lessee to
repair or maintain the Equipment. To the extent that any rights of
Lessor in respect of the Equipment may not be assigned to Lessee, or
otherwise made available to Lessee, such right shall, however, in the
relation between Lessor and Lessee solely inure to the benefit of
Lessee and Lessor will use its best efforts, at Lessee's sole expense,
to enforce such rights against manufacturer or Seller for the benefit
of Lessee, or at Lessee's option, forthwith give to Lessee a power of
attorney to enforce such rights for the benefit of Lessee.
14.2 Lessor hereby also assigns, and Lessee accepts such assignment, all its
obligations under the General Purchase Agreement, except its obligation
to pay the Purchase Price.
14.3 Lessor shall have the right, without Lessee's approval but with prior
written notice, to make a Disposition to an Affiliate, the Swedish
Export Credit Guarantee Board, the European Bank for Research and
Development, or any other bank or financial institution. Furthermore
Lessor is entitled to, subject to Lessee's written consent, such
consent not to be unreasonably withheld or delayed, to make a
Disposition to any other person or entity.
14.4 Lessor hereby warrants and covenants that it will reasonably assist
Lessee in enforcing the warranties and other rights assigned under this
Agreement. Lessor hereby assumes liability for, and shall indemnify,
protect, save and keep Lessee harmless from and against any and all
liabilities, obligations, losses, damages, costs and expenses,
including legal fees and expenses, of whatsoever kind and nature
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Page 16(27)
<PAGE>
imposed on, incurred by and asserted against Lessee in any way relating
to or arising out of a material breach by Lessor of its obligations the
General Purchase Agreement and the GPA Assignment Agreement.
15. OPTIONS
15.1 Subject to the terms and conditions of this Agreement, Lessor hereby
grants to Lessee an Option to purchase all of the Equipment, (except
Software, which Lessee takes possession of but not title as described
in Article 6.1 of the General Purchase Agreement) by paying on the
Option Date the Option Price specified in Clause 15.2 below plus any
Taxes, provided that (i) Lessor shall have received in writing not
later than three (3) months prior to the Option Date notice of Lessee's
intention to exercise the Option, and (ii) Lessee has fulfilled all its
obligations under this Agreement up to and including the Option Date.
Notice of Lessee's intention to exercise its Option, once given, shall
be irrevocable.
15.2 The Option Price shall equal the Outstanding Balance at the specified
Option Date, plus all interest and rent that is due and has accrued by
the Option Date, plus all taxes, charges, or other fees for the
Lessee's account outstanding or due by the Option Date.
15.3 The Option shall be exercised no later than at the 82nd Rent Payment
Date, which fact implies that notice of Lessee's intention to exercise
the option shall be given no later than three months prior to the 82nd
Rent Payment Date.
15.4 If and when Lessor has received full payment under Clause 15.2 hereof
in respect of the Equipment, title to the Equipment (except Software as
provided above) shall be transferred from Lessor to Lessee and Lessor
shall at Lessee's expense issue all relevant documents necessary for
such transfer of title to the Equipment, subject, however to Lessee
indemnifying Lessor with respect to past and future operations and
obligations relating to the Equipment in accordance with Article 11 of
this Agreement. Lessee has no right to claim compensation from Lessor
with respect to the condition of the Equipment in connection with such
transfer of title and Lessee confirm that the condition of such
transfer shall be "as is, where is".
15.5 Lessor warrants to Lessee that, immediately prior to transferring title
of the Equipment to Lessee according to this Article 15, Lessor will
have good title to the Equipment and will have full power and lawful
authority to transfer that title to Lessee free from mortgages, charges
or other encumbrances created by Lessor other than such that have been
agreed to by Lessee. Save as aforesaid Lessor makes no warranties,
guarantees or representations of any kind, either express or implied,
statutory or otherwise, with regard to the Equipment and Lessee hereby
waives all remedies, warranties, representation, guarantees, express or
implied, arising by law or otherwise, including without limitation any
obligation of Lessor with respect to fitness for any purpose,
merchantability or consequential damages.
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Page 17(27)
<PAGE>
15.6 Lessee shall pay to Lessor on demand all expenses (including legal and
stamp duties and similar charges but excluding Lessor's internal
administrative expenses) incurred by Lessor in connection with any sale
of the Equipment under this Article 15.
16. REPRESENTATIONS AND WARRANTIES
16.1 The Equipment is leased in "as is, where is" conditions and except as
stated in this Agreement Lessor makes no warranties, guarantees or
representation, expressed or implied, arising by law or otherwise, with
respect to the Equipment leased hereunder, including but not limited
to:
1) any implied warranty as to the condition, design,
merchantability or fitness for use or operation;
2) any implied warranty arising from course of performance,
course of dealing or usage of trade;
3) any obligation, liability, right, claim or remedy in tort,
whether or not arising from Lessor's negligence, actual or
imputed; and
4) any obligation, liability, right, claim or remedy for loss of
or damage to the Equipment, for loss, use, revenue or profit
with respect to the Equipment, for any liability of Lessee to
any third party, or for any other direct, incidental or
consequential damages; and all such warranties, guarantees,
representations, obligations, liabilities, rights, claims or
remedies, express or implied, statutory or otherwise, are
expressly excluded.
16.2 The Lessee represents and warrants that:
(i) The Lessee is a share company duly incorporated in Delaware
and validly existing under the laws of the State of New York
and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations
under this Agreement and is the holder of all necessary
licenses issued by all governmental authorities having
jurisdiction to authorize or permit Lessee to carry on its
business as presently conducted and to operate the Equipment;
(ii) this Agreement has been duly authorized by all necessary
corporate action on the part of Lessee;
(iii) neither the execution and delivery hereof nor the consummation
of the transactions contemplated hereby nor compliance by
Lessee with any terms and provisions hereof will contravene
any law applicable to Lessee or result in any breach of, or
constitute any default under, or result in the creation of any
lien, charge or encumbrance upon any property of Lessee under
any indenture, mortgage, chattel mortgage, conditional sales
contract, bank loan or credit agreement, or other agreement or
instrument to which Lessee is a
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Page 18(27)
<PAGE>
party or by which Lessee or its properties or assets may be
bound or affected;
(iv) the execution, performance and delivery by Lessee of this
Agreement, and the other documents of which Lessee is a party,
and any of the transactions by Lessee contemplated hereby,
have been duly authorized by all necessary corporate action on
the part of Lessee, and Lessee has complied with, every
necessary consent, approval, order, or authorization of, or
registration with, or the giving of prior notice to, any
government entity having jurisdiction with respect to the
execution and delivery of this Agreement or the validity and
enforceability hereof or the satisfaction of all monetary and
other obligations hereunder;
(v) this Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding obligation
of Lessee enforceable in accordance with its terms except as
limited to (1) equitable principles and (2) bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally;
(vi) Lessee has taken all necessary and advisable action under the
laws of the State of New York in order to ensure the validity,
effectiveness and enforceability of this Agreement;
(vii) there are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against Lessee which, if
adversely determined, would have a material adverse affect
upon its financial condition or business or its ability to
perform its obligations hereunder, except as set forth in
Schedule 3 hereto;
(viii) the obligations of Lessee under this Agreement are or will,
upon execution hereof by Lessee, be direct, general and
unconditional obligations of Lessee and rank or, as the case
may be, will rank at least pari pasu with all other present
and future unsecured and unsubordinated external obligations
(including contingent obligations) of Lessee, with the
exception of such obligations as are mandatorily preferred by
law and not by reason of any encumbrance;
(ix) no Event of Default has occurred and is continuing;
(x) the business plan related to Lessee's business activities for
1995 to 1997, as reflected in Attachment I, have been prepared
in accordance with generally accepted accounting principles
and practices in the United States and present fairly and
correctly the financial position of Lessee as at the date
thereof and the results of the operations of Lessee,
respectively, for the period referred to in the business plan,
and as at date referred to in the business plan, Lessee had no
significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against, in the business plan;
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Page 19(27)
<PAGE>
(xi) there has been no material adverse change in the financial
position of Lessee from that set forth in the business plan
referred to in Sub-Article 16.2(x);
(xii) the information in the business plan referred to in
Sub-article 16.2(xi) and all other written information
furnished by Lessee to Lessor in connection with this
Agreement does not contain any untrue statement or omit to
state facts, the omission of which makes the statements
therein, in the light of the circumstances under which they
were made, misleading, nor omits to disclose any material
matter to Lessor and all expressions of expectation,
impression, belief and opinion contained therein were honestly
made on reasonable grounds after due and careful inquiry by
Lessee.
(xiii) no event has occurred which could have or may reasonably be
expected to have, a prejudicial effect on the rights of Lessor
under this Agreement or a material adverse effect on the
ability of Lessee to perform all or any of its obligations
under this Agreement.
(xiv) throughout the Lease Period, Lessee will not cease or threaten
to cease to carry on the whole or substantially the whole of
its business or dispose, or threaten to dispose, of a
substantial part of its assets.
(xv) Lessee's direct and indirect shareholders, subsidiaries, and
affiliates, including RSL Communications, Inc., prior to the
executing of this Agreement, in written statements have
accepted that Lessee's obligations pursuant to this Agreement
shall have priority over all Lessee's obligations to such
persons or entities, and that all debt owed by Lessee to such
persons or entities is subordinated to this lease.
(xvi) Lessee at time of the execution of this Agreement has a
positive net cash balance exceeding USD 250,000.00.
16.3 The representations and warranties in Sub-article 16.2 shall be deemed
to be repeated by Lessee on and as of the Delivery Date and each Rent
Payment Date as if made with reference to the facts and circumstances
existing on each such date.
16.4 Lessor represents and warrants that:
(i) Lessor is a corporation duly incorporated and validly existing
under the laws of Sweden as a limited liability corporation
and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations
under this Agreement;
(ii) the execution and delivery of this Agreement by Lessor have
been duly authorized by all necessary corporate action on the
part of Lessor, this Agreement has been duly entered into and
delivered by Lessor and, insofar as Swedish law is concerned,
constitute the valid, legal and binding obligation of Lessor,
enforceable in accordance with their respective terms (except
as limited to (1) equitable principles, and (2) bankruptcy,
insolvency,
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Page 20(27)
<PAGE>
reorganization, moratorium or similar laws affecting the
rights of creditors generally), and the provisions hereof will
not contravene any Swedish law applicable to Lessor or result
in any breach of, or constitute any default under or result in
the creation of any lien, charge or encumbrance upon any
property of Lessor under any indenture, mortgage, chattel
mortgage, conditional sales contract, bank loan or credit
agreement, or other agreement or instrument to which Lessor is
a party or by which Lessor or its properties or assets may be
bound or affected;
(iii) Lessor has complied with every necessary consent, approval,
order or authorization of, or registration with, or the giving
of prior notice to, any government entity in Sweden having
jurisdiction with respect to the execution and delivery of
this Agreement or the validity and other obligations
hereunder.
(iv) there are no suits or legal proceedings (including any
administrative proceeding) pending or threatened before any
court or administrative agency against the Lessor which, if
adversely determined, would have a material adverse effect
upon its financial condition or business or its ability to
perform its obligations hereunder;
(v) the obligations of Lessor under this Agreement are or will,
upon execution thereof by Lessor, be direct, general and
unconditional obligations of Lessor and rank or, as the case
may be, will rank at least pari passu with all other present
and future unsecured and unsubordinated obligations (including
contingent obligations of Lessor) with the exception of such
obligations as are mandatorily preferred by law and not by
reason of any encumbrance; and
17. COVENANTS
17.1 Covenants of Lessee
Lessee hereby covenants with Lessor that from the date of this
Agreement and until the end of the Lease Period it will:
(i) remain in and continue to operate substantially the same
business as presently engaged in, preserve its corporate
existence, conduct its business in an orderly and efficient
manner, satisfy its debts and obligations as they fall due and
keep and maintain all of its properties in good working order
and condition;
(ii) at its own expense from time to time do and perform such other
and further acts and execute and deliver all other further
instruments as may be required by law or reasonably requested
by Lessor to establish, maintain and protect the respective
rights and remedies of Lessor and to carry out and give effect
to the intents and purposes of this Agreement and the parties
thereto;
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<PAGE>
(iii) notify Lessor immediately of the occurrence of any Termination
Event or of any occurrence which might adversely affect
Lessee's ability to perform any of its obligations under this
Agreement;
(iv) obtain and maintain all necessary government and other
consents, licenses and permits and take all action which may
be necessary or desirable for the continued due performance of
Lessee's obligation under this Agreement and for the use and
operation of the Equipment;
(v) take all necessary steps to maintain and protect the interest
of Lessor as owner of the Equipment, including all necessary
registrations and filing with the relevant authority, and not
do or permit to be done anything which might jeopardize such
rights or the registration of the Equipment;
(vi) keep accurate and complete records of the Equipment and permit
Lessor and its authorized representatives to examine and take
copies of such records at any time upon giving reasonable
notice;
(vii) not do anything which may expose the Equipment or any part
thereof to penalty, forfeiture, seizure, arrest, impounding,
detention, confiscation, taking in execution, appropriation or
destruction nor abandon the Equipment or any part thereof;
(viii) not pledge the credit of Lessor for any maintenance,
overhauls, replacements, repairs or modifications to the
Equipment;
(ix) discharge all fees, charges and outgoing payable to any third
party in relation to the use or operation of the Equipment or
any premises where the Equipment is situated; and
(x) promptly notify Lessor in writing:
(a) of any material alterations in or material
modifications or additions to the Equipment;
(b) of any Lien arising on the Equipment and exercised
over the Equipment;
(c) of any event which will or may reasonably be
considered likely to become a casualty in respect of
the Equipment or any part of the Equipment or of any
other act done by, with, to, about or in connection
with or event occurring to or in relation to the
Equipment which will or may reasonably be considered
likely to involve Lessor or Lessee in any costs,
expense, loss or liability exceeding USD 200,000.00;
and
(d) of any (i) change of control (as defined in the
definition of Affiliate in Exhibit A) of Lessee or
(ii) purchase or sale of ten per cent (10%) or more
of Lessee's capital stock by any person.
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<PAGE>
(xi) furnish to Lessor its annual audited financial reports within
ninety (90) days of period end, quarterly unaudited financial
reports within sixty (60) days of period end, and any revised
business plan as well as any other relevant financial
information regarding Lessee as Lessor reasonably requests.
(xii) not enter into any credit or other obligation, without written
consent from new creditors that all new debt shall be
subordinated to Lessee's obligations under this Agreement.
(xiii) maintain a positive liquid assets balance of USD 250,000.00 at
all times during the lease pursuant to this Agreement.
(xiv) not, without Lessor's prior written consent, which consent
shall not be unreasonably withheld, create, assume, incur or
suffer to be created, assumed or incurred or permit to subsist
any mortgage, lien, pledge or other encumbrance of any kind
("Encumbrance") upon any of its present or future revenues or
assets, for the purpose of securing any indebtedness (or any
guarantee or other obligation in respect of any indebtedness)
now or hereafter existing. Lessee shall however be entitled to
make such Encumbrance, except any Encumbrance on the equipment
subject to this Agreement, without Lessor's prior consent, for
the purpose of securing medium and long term indebtedness with
an aggregate value not exceeding USD 1,000,000.
17.2 Covenants Of Lessor
Lessor hereby covenants with Lessee that from the date of this
Agreement and until the end of the Lease Period:
(i) Lessor agrees that it will not assign, transfer or dispose of
its interest in the Equipment, (save as provided in Article
14); and
(ii) if Lessee shall pay the rent and other amounts payable by
Lessee hereunder as and when the same become due and payable
and shall perform and comply with all of the other terms and
conditions hereof, Lessor will not interfere with or deprive
Lessee of the peaceful and quiet use and enjoyment of the
Equipment.
18. GUARANTEE OF INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
18.1 ITG hereby guarantees all obligations of Lessee hereunder. In the event
of any material breach or default not timely cured by Lessee, ITG shall
immediately and retroactively become liable hereunder for the
performance of Lessee's obligations, warranties and covenants, and
Lessee's representations herein shall apply to ITG prospectively
thereafter.
18.2 ITG hereby covenants with Lessor that it will
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Page 23(27)
<PAGE>
(i) from June 30, 1997 and until the end of the Lease Period,
maintain a debt to equity ratio of one to one (1:1) or lower.
(ii) not materially deviate from its 1996 annual budget, a copy of
which is attached hereto as Exhibit D, or from any other
annual budget during the term hereof, by more than
US$500,000.00 on a cumulative, consolidated basis, including
with regard to capital expenditures, dividends, management
fees, loans to affiliates and officers, unless an express,
written consent to such deviation has been made by Lessor.
Such a consent may not be withheld unduly.
18.3 For purposes of item (i) of section 18.2 above, ITG's (1) debt is
defined as any indebtedness to a third party and any indebtedness to
any affiliate of Lessee which is not subordinated to this Agreement,
including debt obligations under this Agreement; and (2) equity is
defined as the sum of ordinary share capital issued and fully paid,
together with any fully paid share premium, undistributable reserves,
and any indebtedness which is subordinated to the obligations under
this Agreement.
18.4 ITG shall submit its 1997 annual budget to Lessor for Lessor's approval
no later than 30 days prior to the end of its 1996 fiscal year, which
approval Lessor shall give unless such budget does not reasonably
reflect ITG's ability, in the event of a breach or default of Lessee,
to meet its obligations as guarantor hereunder. ITG's failure to gain
Lessor's approval for its 1997 budget shall constitute a default under
this Agreement subject to the same remedies against Lessee and ITG as a
default by Lessee.
If at the end of 1997, ITG has not performed substantially in
accordance with its 1996 or 1997 annual budget, the provisions of this
article applicable to the 1997 budget shall be extended for the full
term of the lease and applied to each annual budget.
18.5 With respect to its contingent obligations hereunder, ITG represents
and warrants that, prior to the execution of this Agreement, ITG's
direct and indirect shareholders, subsidiaries, and affiliates,
including RSL Communications, Inc., in written statements have accepted
that such obligations shall have priority over all ITG's obligations to
such persons or entities.
19. MISCELLANEOUS
19.1 The rights of Lessor under this Agreement are cumulative, may be
exercised as often as it considers appropriate and are in addition to
its rights under general law. The rights of Lessor against Lessee or in
relation to the Equipment (whether arising under this Agreement or the
general law) shall not be capable of being waived or varied, against or
in favor of Lessor, otherwise than in writing.
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<PAGE>
19.2 Notwithstanding anything in this Agreement to the contrary, if any
payment by Lessee under this Agreement or the obligation to make the
same or the receipt of the same or the performance by either of the
parties hereto of any other of their obligations hereunder is following
the execution of this Agreement rendered unlawful or illegal in whole
or in part by the act of any government entity so as to render it
impossible for the parties hereto to comply with their respective
obligations under this Agreement then:
(a) the parties hereto shall forthwith negotiate with each other
in good faith with a view to making arrangements whereby such
payment can be made or received or other obligations performed
in such manner, place, currency, and other circumstances as
shall be lawful and legal and so as to achieve substantially
the same result so far as concerns the Lessor and the Lessee
as would have been achieved had such payment, receipt or other
obligation not been rendered unlawful or illegal;
(b) if the parties hereto are unable to reach agreement under
Sub-article (a) above within one month after the date on which
the relevant payment was due to be made or received hereunder
or the other obligations were due to be performed either party
hereto shall be entitled, by notice in writing to the other,
to terminate the Lease Period on the latest date permitted by
the relevant act of any government entity.
On any termination of the Lease Period pursuant to this
Sub-article 18.2 the Lessee shall pay to the Lessor an amount
equivalent to the Outstanding Balance.
If and when Lessor has received full payment under this
Sub-article 18.2 in respect of the Equipment, title to the
Equipment (except Software, which Lessee takes possession of
but not title as described in Article 6.1 of the General
Purchase Agreement) shall be transferred from Lessor to Lessee
or its designee, and Lessor shall issue all other relevant
documents necessary for such transfer of title and change of
registration of the Equipment, subject, however, to Lessee
indemnifying Lessor with respect to past and future operations
and obligations relating to the Equipment in accordance with
Article 11 of this Agreement. Lessee has no right to claim
compensation from Lessor with respect to the condition of the
Equipment and confirm that the condition of the Equipment on
such transfer or title shall be "as is, where is".
19.3 Lessor may set-off or withhold from any amount due and payable to
Lessee under this Agreement, any amount due and payable from Lessee
under this Agreement or any other agreement between the parties hereto.
19.4 Save where expressly provided in this Agreement, any certificate or
determination by Lessor as to any rate of interest or as to any other
amount payable under this Agreement shall, in the absence of manifest
error, be conclusive and binding on Lessee.
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<PAGE>
19.5 If any sum paid or recovered in respect of the liabilities of Lessee
under this Agreement is less than the amount then due, Lessor may apply
such sum to rental, interest, fees or any other amount due under this
Agreement in such proportions and order and generally in such manner as
Lessor shall determine, and shall inform the Lessee subsequently.
19.6 The terms and conditions of this Agreement shall not be varied
otherwise than by an instrument in writing executed by or on behalf of
Lessor and Lessee.
19.7 If any of the provisions of this Agreement becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
Except as otherwise specifically provided herein, all notices and other
communications required or permitted under the terms and provisions
hereof shall be in writing and in English and any such notice or other
recommendation shall become effective when delivered by hand or
received by telex or telecopier or registered first-class mail, postage
prepaid, addressed as follows:
To the Lessor: AB LM Ericsson Finans (publ)
S-126 25 Stockholm, SWEDEN
Telephone: +46 8 719 46 68
Telex: 14910 eric s
Telecopier: +46 8 719 90 50
To the Lessee: International Telecommunications Corporation (Lessee)
60 Hudson Street
Suite 307
New York, New York, UNITED STATES
or to such other address, telex or telecopier number as shall have been
notified (in accordance with this Sub-article) to the other party
hereto.
19.8 This Agreement shall in all respects be governed by, and construed in
accordance with the laws of the State of New York, United States,
including without limitation, all matters of construction, validity and
performance.
19.9 Lessee and Lessor shall, from time to time, do and perform such other
and further acts and execute and deliver any and all other further
instruments as may be required by law or reasonably requested by either
party to establish, maintain and protect the respective rights and
remedies of the other party and to carry out and effect the intent and
purposes of this Agreement.
19.10 The terms and conditions of this Agreement are confidential and shall
neither in whole or in part be disclosed to any person nor published
without the prior written consent of the parties hereto, provided that
this Article shall not prevent disclosure as required by law or
ministerial or judicial or parliamentary authority or to the legal or
audit or taxation advisers or bankers of any party hereto.
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<PAGE>
19.11 All disputes in connection with this Agreement shall be finally settled
under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce, in New York, New York, United States, by three (3)
arbitrators appointed in accordance with the said Rules and the
proceedings shall be conducted in the English language.
19.12 Lessee hereby irrevocably waives any right of immunity which it or its
assets have or may acquire and Lessor may claim execution of any
judgment or order in any court or appropriate authority within United
States or any other country where Lessee has any assets.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year herein written.
AB LM ERICSSON FINANS (publ) INTERNATIONAL
("Lessor") TELECOMMUNICATIONS
CORPORATION
("Lessee")
By: /s/ Stephan Almqvist Gosta Stahlberg By: /s/ Charles M. Piluso
------------------------------------ -------------------------------
Name: Stephan Almqvist Gosta Stahlberg Name: Charles M. Piluso
--------------------------------- ----------------------------
Title: Director President Title: President
--------------------------------- ----------------------------
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
("Guarantor")
By: /s/ Charles M. Piluso
------------------------------------
Name: Charles M. Piluso
---------------------------------
Title: President
---------------------------------
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<PAGE>
Exhibit 10.19
Lease Agreement
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Lease agreement
between
RSL Com Europe Ltd
and
AB LM Ericsson Finans
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Commercial in confidence
<PAGE>
Lease Agreement
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Contents;
1. General Agreement
2. Tranche I Special Terms
3. General Terms
4. Exhibit 1 - Description of the equipment
5. Exhibit 2 - Option dates and option prices
6. Exhibit 3 - Termination value
7. Exhibit 5 - Form for supplier's consent
8. Exhibit 6 - Form for acceptance of delivery
9. Exhibit 7 - Rent payments
10. Exhibit 11 - Debenture
11. Exhibit 12 - Form for sub-lessee's consent
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Commercial in confidence
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General Agreement 1(12)
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AGREEMENT
between
AB L M ERICSSON FINANS
and
RSL COM EUROPE LIMITED
relating to
Lease of Tranche 1, Tranche 2, Tranche 3 and Trance 4 for
RSL's European Network Roll-Out
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Commercial in confidence
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General Agreement 2(12)
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This agreement ("Agreement") is made and entered into between
AB L M ERICSSON FINANS, a Swedish limited liability company.
and
RSL Com Europe Ltd., a UK limited liability company with its registered address
at 9 Old Queens Street Westminster London, SW1H 9JA England.
------------- 0 -------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in two counterparts on the last day below written.
AB L M ERICSSON RSL COM EUROPE LTD
FINANS
Date: Date: 10/4/96
By: /s/ AB L M ERICSSON FINANS By: /s/ R. Williams
--------------------------- ----------------------
Name: AB L M ERICSSON FINANS Name: R. Williams
------------------------- --------------------
Title:__________________ Title: President & CEO
---------------------
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General Agreement 3(12)
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AGREEMENT
This agreement outlines the Special Terms for the lease agreement under which
AB LM Ericsson Finans is prepared to undertake the commitment to provide a lease
facility to RSL Com Europe Ltd up to the equivalent of USD 10,000,000 (ten
million US dollars).
Each individual lease agreement (for tranche 1, tranche 2, tranche 3 and tranche
4) will consist of the following:
o Special Terms which will consist of clauses I to 18 below as modified to
reflect tranche specific circumstances. Where a clause is left blank in
the Special Terms the corresponding clause of the General Terms shall
apply.
o General Terms
o Exhibits: Exhibit 1 is tranche specific.
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General Agreement 4(12)
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1 DEFINITIONS
1.1 In each tranche specific lease agreement, the following terms and
conditions, which are not defined in the General Terms, shall have the
following meanings:
"Account" : tranche specific.
There is no collateral provided for the Lessee's obligations under the
Agreement and all references to "Collateral" shall be inoperative.
"Currency of Payment" : tranche specific
"Commitment" means the commitment of Lessor to provide a lease facility to
lessee up to the equivalent of USD 10,000,000 (ten million US dollars).
This Commitment can be drawn in no more than four tranches. Tranches shall
consist of equipment as follows;
o Tranche 1, all equipment in order Y3344 (contract December 7, 1995)
excluding Sweden and Finland SSP SW,
o Tranche 2, equipment in respect of which lessee shall have issued
acceptance certificates issued by Lessee for the Equipment in
accordance with Clause 4.3 of the General Terms, before July 1, 1996
o Tranche 3 equipment in respect of which lessee shall have issued
acceptance certificates issued by Lessee for the Equipment in
accordance with Clause 4.3, before January 1, 1997
o Tranche 4 equipment in respect of which lessee shall have issued
acceptance certificates issued by Lessee for the Equipment in
accordance with Clause 4.3, before July 1, 1997
"Expire Date" means the date occurring 72 months after the Lease
Commencement Date, or such later date as may follow from an agreement to
extend the lease pursuant to Clause 13.8.
"Final Availability Date" means
o for Tranche 1, June 30, 1996,
o for Tranche 2, July 2, 1996,
o for Tranche 3, January 2, 1997,
o for Tranche 4, July 2, 1997.
"Language" means the English language.
"Lease Commencement Date" means,
o for Tranche 1, in respect of the AXE 10 Switching Systems at any
location, the date when the acceptance certificate is issued by
Lessee for the Equipment at that Location in accordance with Clause
4.3 or such other date when the Equipment shall be deemed to be
accepted by the Lessee hereunder.
o for Tranche 2, 1 July 1996
o for Tranche 3, 1 January 1997
o for Tranche 4, 1 July 1997
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General Agreement 5(12)
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"Location": tranche specific.
"Margin" means four and one half (4.5) percentage points.
"Purchase Price" means the sum specified in exhibit 1 for each tranche.
"Security Documents" means the Debenture comprised in Exhibit 11.
There is no "Security Provider" under the Agreement and all references to
"Security Provider" shall be inoperative.
"Supplier": tranche specific and means the Ericsson company with whom a
supply agreement is concluded
"Supply Agreement" Tranche specific and means a Supply and Installation
Contract to be concluded between Lessee and Supplier.
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General Agreement 6(12)
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2 CONDITIONS PRECEDENT
2.1 The following additional documents shall be delivered pursuant to Clause
2.1:
A business plan reflecting the equity increase provided for in Clause 2.2.
Sub-lessee's consent, in the form attached hereto as Exhibit 12, signed
and delivered by Cyberlink Sweden AB, Sweden, and Cyberlink International
OY, Finland.
Clause 2.1(g) regarding legal opinion shall not be applicable.
2.2 The following additional condition(s) shall be met pursuant to Clause
2.2.:
Lessee shall increase the value of the equity of Lessee with USD four
million six hundred thousand (4,6OO,OOO) (such equity to be defined in
accordance with the International Accounting Standards of IASC) evidenced
by a balance sheet certified by the Lessee's auditors.
The Debenture (Exhibit 11) shall become effective.
3. ASSIGNMENT
Clause 3.1 shall read as follows:
3.1 The Lessee does hereby assign to the Lessor all of the Lessee's rights and
interest in respect of the Equipment under the Supply Agreement,
including, but not limited to, the right to acquire ownership to hardware
parts and license to use software parts of the Equipment and the benefit
of all warranties in respect of the Equipment contained in the Supply
Agreement. In the event that ownership rights of any hardware parts have
already been transferred from Supplier to Lessee under the Supply
Agreement, such ownership rights are hereby assigned to Lessor.
3.2 The Lessor hereby assumes the Lessee's obligation to pay the Purchase
Price and take delivery of the Equipment under the Supply Agreement. The
Lessor does not assume any of the Lessee's other obligations under the
Supply Agreement, and the Lessee shall in respect of such obligations at
all times remain liable to the Seller as if this Agreement had not been
executed.
3.3 When the Lessor exercises any of the rights under the Supply Agreement, or
makes any claim with respect to the Equipment, the terms and conditions of
the Supply Agreement shall apply to, and be binding upon, the Lessor.
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General Agreement 7(12)
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3.4 The Lessor shall procure that the Seller consents to the assignment and
assumption by the Lessor of certain rights and obligations under the
Supply Agreement in the form attached hereto as Exhibit 5. Except as
provided in Exhibit 5, the Supply Agreement shall not be modified by this
Agreement.
3.5 Neither party shall enter into any other agreement that would amend,
modify or supplement the Supply Agreement without the prior written
consent of the other party.
3.6 If the Lease Commencement Date has not occurred on or prior to the Final
Availability Date, the Lessor shall be entitled to terminate this
Agreement by giving written notice to the Lessee and the Supplier.
Following such notice of termination all rights assigned to the Lessee
pursuant to Clause 3.1 shall be reassigned to the Lessee, and the Lessor
shall be released from the obligations assumed pursuant to Clause 3.2,
which shall be reassumed by the Lessee. On receipt of the Lessor's
certificate evidencing the Lessor's costs incurred in connection with the
entering into and termination of this Agreement, the Lessee shall promptly
reimburse the Lessor for all such costs.
Clause 3 shall not apply to any services. Examples of services are
Interconnect support, On-site second line support, On-site services and
Support for maintenance.
4 SELECTION, DELIVERY AND INSPECTION
4.6 Equipment already in the possession of the lessee on the date of this
agreement shall be deemed to be delivered, and shall be accepted by the
lessee pursuant to this clause 4 unless otherwise agreed in writing by the
lessor.
5 LEASE
5.6 The following sentence shall be read in conjunction with clause 5.6 of the
General Terms;
For the avoidance of doubt, the Guarantees and Warrantees and other rights
refer to the rights of the lessee arising under the supply agreement and
any reference to rights in this clause 5.6 shall include Guarantees and
Warranties.
6 PAYMENTS
6.1 Clause 6.1 shall not be applicable.
6.2 For Tranche 2, Tranche 3 and Tranche 4 only, Initial Rent Payment shall be
Capitalised and added to the outstanding balance of the Purchase Price for
all purposes of this agreement.
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General Agreement 8(12)
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The initial Rent Payment shall be calculated as follows;
Accrued interest on the aggregate amounts paid by Lessor for the
applicable items of Equipment under the terms of Supply Agreement, up to
and including the Lease Commencement Date. This payment shall accrue at an
interest rate which shall be equal to one month LIBOR, as defined below,
plus four and one half (4.5) percentage points, as determined on the first
Business Day of each month. The interest shall be calculated on the basis
of actual days elapsed, but computed using a 360-day year, and shall be
compounded monthly.
One month LIBOR shall be determined as the arithmetic mean of the rates of
interest per annum for one month's deposits of US Dollars which are
offered to prime banks that participate in the London market
(i) as such rates appear on the page designated as page "LIBO" on the
Reuters Monitor Money Rates Service ("LIBO Page" as of 10.00 a.m.
(London time) on such date, if two or more quotations appear on the
LIBO Page for such date, or
(ii) by the principal London offices of Barclays Bank plc, Morgan
Guaranty Trust Company of New York, and National Westminster Bank
plc as of 10.00 a.m. (London time) on such date, if fewer than two
quotations appear on the LIBO Page for such date.
6.3 Lessee covenants and agrees to pay Lessor in immediately available funds
twenty (20) Rent Payments in arrears during the Lease Period. The first
Rent Payment shall become due on the day falling six (6) months after the
Lease Commencement Date which is for:
o Tranche 1, attributable to the date of the first AXE 10 Switching
system to be accepted,
o Tranche 2, July 1, 1996
o Tranche 3, January 1,1997
o Tranche 4, July 1,1997.
Thereafter, the following three (3) Rent Payments shall become due on the
last day of each following six (6) months period. Thereafter, the
following sixteen (16) Rent Payments shall become due on the last day of
each following three (3) months period, provided however, that the last
Rent Payment shall become due on the last day of the Lease Period.
6.12 For each amount of the Purchase Price to be paid by the Lessor to the
Supplier in currency different from GBP, the Lessor will determine the
Purchase Price in GBP by converting such amount into GBP at the rate of
exchange at which the Lessor is or would be able to purchase GBP in the
foreign exchange market for spot delivery at or around 11.00
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General Agreement 9(12)
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a.m. Stockholm time two (2) Business Days prior to the date of Lessor's
payment.
6.13 The Lessor shall notify the Lessee of the amount of any Rent Payment due
no later than 10 working days prior to the relevant Rent Payment date.
7 USE, MAINTENANCE AND ALTERATIONS
7.5 Subject as provided herein, the Lessee may not, without prior written
notice to the Lessor, permanently remove any part from, or alter or make
additions to, the equipment. Such written notice shall be without
responsibility on the part of the lessor for any interference with the
operations of the equipment or impairment of its value.
7.8 Lessee may sub-lease the Equipment to Cyberlink Sweden AB and Cyberlink
International OY, provided that (i) the sub-lease shall terminate one day
prior to the expiration or termination for whatever cause of this
Agreement, (ii) the sub-lessee shall undertake in writing to be bound by
the terms and conditions of this Agreement and accept Lessor as third
party beneficiary, (iii) Lessee shall remain responsible to Lessor in
accordance with the terms of this Agreement and shall be responsible to
Lessor for any acts or omissions of the sub-licensee as if such acts and
omissions were undertaken by Lessee, and (iv) the sub-lessees shall have
executed the sub-lessee's consent attached hereto as Exhibit 12.
8. INDEMNITIES
8.3 The Lessee shall be responsible for and reimburse the lessor against all
taxes, duties and other charges levied or imposed by any Government or
local authority against the Lessor or the Lessee and relating to this
agreement or the Equipment except for taxes on the Lessor's overall
income.
9 INSURANCES
[ ]
10 INFORMATION
10.1 (f) budget for the current year in the form of consolidated balance
sheet, consolidated cash flow and consolidated income statement, and
projections for the following year of consolidated balance sheet,
consolidated cash flow and consolidated income statement, and upon
request from lessor, detailed information to be reviewed at lessee's
premises.
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General Agreement 10(12)
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10.1 (h) site asset register
11 OWNERSHIP AND MARKING
11.1 [ ]
11.2 There shall be, displayed in a prominent position in the immediate
vicinity of the equipment which is subject to this lease a notice bearing
the inscription "Any and all equipment in this room bearing the Ericsson
name is owned by AB LM Ericsson Finans." This notice will be provided and
affixed by Ericsson.
The inscription provided for in Clause 11.2 shall be in English, Swedish
or Finnish as applicable.
12 EVENTS OF DEFAULT
12.1 (a) the lessee shall fail to pay any amount due under this agreement
within five (5) business days after notice thereof has been given to
the lessee;
12.1 (q) The debt/equity ratio of Lessee exceeds one to one (1:1).
For this purpose:
(i) debt is defined as any indebtedness to a third party any
indebtedness to any affiliate to Lessee which is not subordinated to
this Agreement, and including debt obligations under this Agreement
(ii) equity is defined as the sum of ordinary share capital issued and
fully paid together with any fully paid share premium, any
undistributable reserves, any retained earnings and any indebtedness
which is subordinated to the obligations under this Agreement.
12.2 (a) enter the premises of the lessee or any other place where the
equipment may be located and reposess the equipment, disconnecting
and separating all thereof from any other property any using all
reasonable means necessary to do so.;
13 PURCHASE OPTION
The Option Dates and the Option Prices are defined in Exhibit 2. The
Lessee shall pay to the Lessor 70% of all costs and expenses incurred by
Lessor in connection with the sale of the Equipment under this Clause 13,
where costs and expenses are defined as the actual administrative costs at
no more than (pound)19,000 (nineteen thousand) per purchase option
exercise event, where each event can encompass one or several tranches
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General Agreement 11(12)
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14 RETURN OF THE EQUIPMENT
14.1 The Equipment shall be returned to Stockholm, Sweden to the premises of
the Lessor, or as otherwise notified by Lessor.
15 REPRESENTATIONS AND WARRANTIES
15.1 The following additional representation and warranty is made by the
Lessee:
- the business plan related to Lessee's business activities provided for
in Clause 2.1 has been prepared in accordance with generally accepted
accounting principles and practices in the UK and present fairly and
correctly the financial position of Lessee as at the date thereof and the
results of the operations of Lessee, respectively, for the period referred
to in the business plan, and as at date referred to in the business plan,
Lessee had no significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against, in the business plan.
16 RIGHTS, REMEDIES AND WAIVERS
[ ]
17 MISCELLANEOUS
17.5 Lessor: AB L M ERICSSON FINANS
S-126 25 STOCKHOLM
Sweden
Telephone: +46 8 719 00 00
Telefax: +46 8 719 90 50
Telex: 14910 ERIC S
For the attention of: Finance department
Lessee: RSL COM EUROPE LTD
Victoria House
London Square
Cross Lanes
Guidford
Surrey
England
Telephone: +44 1483 457300
Telefax: +44 1483 457733
For the attention of: Mr. Richard Williams
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General Agreement 12(12)
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17.11 Clause 17.11 shall not apply.
17.12 With advance notice of five (5) Business days, the lessor (or its nominee)
shall at any time during working hour have the right to enter the premises
of the lessee or any other place where the equipment may be located for
the purpose of inspecting the same or observing its use.
17.13 Clause 17.13 shall not apply.
17.14 The following additional provisions shall apply.
The Lessee shall not, without Lessor's prior written consent, create,
assume, incur or suffer to be created, assumed or incurred or permit to
subsist any mortgage, lien, pledge or other encumbrance of any kind
("Encumbrance") upon any of its present or future revenues or assets, for
the purpose of securing any indebtedness (or any guarantee or other
obligation in respect of any indebtedness) now or hereafter existing.
Lessee shall however be entitled to make such Encumbrance, except any
Encumbrance on the equipment subject to this Agreement, without Lessor's
prior consent for securing medium and long term indebtedness with an
aggregate value not exceeding USD 2,000,000.
17.15 For tranche 1 only, in the event that the Swedish Export Credit Board
(EKN) would approve a guarantee of the lease payments within four (4)
months from the date of this agreement, either party may call for good
faith negotiations as to the amendment of relevant parts of this
agreement. Should the parties not be able to agree on such amendment
within two (2) months from the date of the EKN approval, this agreement
shall remain in full force without any changes.
18 APPLICABLE LAW AND JURISDICTION
[ ]
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Special Terms - Tranche 1 1(12)
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LEASE AGREEMENT
between
AB L M ERICSSON FINANS
and
RSL COM EUROPE LIMITED
relating to
Tranche 1:
four AXE 10 Switching Systems to be installed in England, Sweden and
Finland
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Commercial in confidence
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Special Terms - Tranche 1 2(12)
- --------------------------------------------------------------------------------
This lease agreement ("Agreement") is made and entered into between
AB L M ERICSSON FINANS, a Swedish limited liability company, hereinafter called
the "Lessor",
and
RSL Com Europe Ltd., a UK limited liability company with its registered address
at 9 Old Queens Street Westminster London, SW1H 9JA England, hereinafter called
the "Lessee".
This Agreement, consisting of this signature cover page, the general terms of
Agreement ("General Terms") and the special terms of Agreement ("Special Terms")
as well as the Exhibits (as defined below), sets out the terms on which the
Lessor agrees to lease the Equipment (as defined below) to the Lessee. The
General Terms set out the main terms of the Agreement. The Special Terms set out
the customer specific terms of the Agreement, as an amendment or complement to
the corresponding terms (with corresponding numbering) of the General Terms.
--------------- 0 ----------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in two counterparts on the last day below written.
AB L M ERICSSON RSL COM EUROPE LTD
FINANS
By: [ILLEGIBLE] By: R. Williams
------------------------ ------------------------
Name: _____________________ Name: R. Williams
---------------------------
Title: ____________________ Title: President & CEO
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Special Terms - Tranche 1 3(12)
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TABLE OF CONTENTS
SPECIAL TERMS/GENERAL TERMS
1 Definitions 4
2 Conditions precedent 5
3 Assignment 5
4 Selection, delivery and inspection 6
5 Lease 6
6 Payments 7
7 Use, maintenance and alterations 8
8 Indemnities 8
9 Insurances 8
10 Information 9
11 Ownership and marking 9
12 Events of default 9
13 Purchase option 10
14 Return of the equipment 10
15 Representations and warranties 10
16 Rights, remedies and waivers 10
17 Miscellaneous 11
18 Applicable law and jurisdiction 12
EXHIBITS
1 Description of the Equipment
2 Option Dates and Option Prices
3 Termination Value
4 (Not applicable)
5 Form for Supplier's consent
6 Form for acceptance of delivery
7 Rent Payments
8 (Not applicable)
9 (Not applicable)
10 (Not applicable)
11 Debenture
12 Form for sub-lessee's consent
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Special Terms - Tranche 1 4(12)
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Special Terms
1 DEFINITIONS
1.1 In this Agreement the following terms and conditions, which are not
defined in the General Terms, shall have the following meanings:
"Account" means, on the date hereof, Lessors account # 5554-822959 with
Skandinaviska Enskilda Banken, Stockholm, Sweden.
There is no collateral provided for the Lessee's obligations under the
Agreement and all references to "Collateral" shall be inoperative.
"Currency of Payment" means Pound Sterling (GBP).
"Expire Date" means the date occurring 72 months after the Lease
Commencement Date, or such later date as may follow from an agreement to
extend the lease pursuant to Clause 13.8.
"Final Availability Date" means June 30, 1996. In case any equipment is
not accepted within this time frame, it will become part of a subsequent
tranche.
"Language" means the English language.
"Lease Commencement Date" means in respect of the AXE 10 Switching Systems
at any location, the date when the acceptance certificate is issued by
Lessee for the Equipment at that Location in accordance with Clause 4.3 or
such other date when the Equipment shall be deemed to be accepted by the
Lessee hereunder.
"Location" means Churchill House, 142-146 Old Street, London EC1, England,
Hemvamsgatan 22,171 28 Solna, Sweden, and Merenneidonkuja 8, 02130 Espoo,
Finland.
"Margin" means four and one half (4.5) percentage points.
"Purchase Price" means the sum specified in exhibit 1 for tranche 1,
converted to GEP as per Clause 6.12
"Security Documents" means the Debenture comprised in Exhibit 11.
There is no "Security Provider" under the Agreement and all references to
"Security Provider" shall be inoperative.
"Supplier" means Ericsson Ltd, UK
"Supply Agreement" means the "Supply and Installation Contract" concluded
between Lessee and Supplier on December 7, 1995.
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Special Terms - Tranche 1 5(12)
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2 CONDITIONS PRECEDENT
2.1 The following additional documents shall be delivered pursuant to Clause
2.1:
A business plan reflecting the equity increase provided for in Clause 2.2.
Sub-lessee's consent, in the form attached hereto as Exhibit 12, signed
and delivered by Cyberlink Sweden AB, Sweden, and Cyberlink International
OY, Finland.
Clause 2.1(g) regarding legal opinion shall not be applicable.
2.2 Clause 2.2 (a) shall not be applicable.
The following additional condition(s) shall be met pursuant to Clause 2.2:
Lessee shall increase the value of the equity of Lessee with USD four
million six hundred thousand (4,600,000) (such equity to be defined in
accordance with the International Accounting Standards of IASC) evidenced
by a balance sheet certified by the Lessee's auditors.
The Debenture (Exhibit 11) shall become effective.
3. ASSIGNMENT
Clause 3.1 shall read as follows:
3.1 The Lessee does hereby assign to the Lessor all of the Lessee's rights and
interest in respect of the Equipment under the Supply Agreement,
including, but not limited to, the right to acquire ownership to hardware
parts and license to use software parts of the Equipment and the benefit
of all warranties in respect of the Equipment contained in the Supply
Agreement. In the event that ownership rights of any hardware parts have
already been transferred from Supplier to Lessee under the Supply
Agreement, such ownership rights are hereby assigned to Lessor.
3.2 The Lessor hereby assumes the Lessee's obligation to pay the Purchase
Price and take delivery of the Equipment under the Supply Agreement. The
Lessor does not assume any of the Lessee's other obligations under the
Supply Agreement, and the Lessee shall in respect of such obligations at
all times remain liable to the Seller as if this Agreement had not been
executed.
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Special Terms - Tranche 1 6(12)
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3.3 When the Lessor exercises any of the rights under the Supply Agreement, or
makes any claim with respect to the Equipment, the terms and conditions of
the Supply Agreement shall apply to, and be binding upon, the Lessor.
3.4 The Lessor shall procure that the Seller consents to the assignment and
assumption by the Lessor of certain rights and obligations under the
Supply Agreement in the form attached hereto as Exhibit 5. Except as
provided in Exhibit 5, the Supply Agreement shall not be modified by this
Agreement.
3.5 Neither party shall enter into any other agreement that would amend,
modify or supplement the Supply Agreement without the prior written
consent of the other party
3.6 If the Lease Commencement Date has not occurred on or prior to the Final
Availability Date, the Lessor shall be entitled to terminate this
Agreement by giving written notice to the Lessee and the Supplier.
Following such notice of termination all rights assigned to the Lessee
pursuant to Clause 3.1 shall be reassigned to the Lessee, and the Lessor
shall be released from the obligations assumed pursuant to Clause 3.2,
which shall be reassumed by the Lessee. On receipt of the Lessor's
certificate evidencing the Lessor's costs incurred in connection with the
entering into and termination of this Agreement, the Lessee shall promptly
reimburse the Lessor for all such costs.
Clause 3 shall not apply to the following services:
-Interconnect support, 2 weeks, GBP 12,000
-On-site second line support, GBP 40,000
-On-site services, SEK 600,000
-Support for maintenance, FIM 198,000.
4 SELECTION, DELIVERY AND INSPECTION
4.6 Equipment already in the possession of the lessee on the date of this
agreement shall be deemed to be delivered, and shall be accepted by the
lessee pursuant to this clause 4 unless otherwise agreed in writing by the
lessor.
5 LEASE
5.6 The following sentence shall be read in conjunction with clause 5.6 of the
General Terms;
For the avoidance of doubt, the Guarantees and Warrantees and other rights
refer to the rights of the lessee arising under the supply agreement and
any reference to rights in this clause 5.6 shall include Guarantees and
Warranties.
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Special Terms - Tranche 1 7(12)
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6 PAYMENTS
6.1 Clause 6.1 shall not be applicable.
6.2 For Tranche 2, Tranche 3 and Tranche 4 only, Initial Rent Payment shall be
capitalised and added to the outstanding balance of the Purchase Price for
all purposes of this agreement.
The initial Rent Payment shall be calculated as follows;
Accrued interest on the aggregate amounts paid by Lessor for the
applicable items of Equipment under the terms of Supply Agreement, up to
and including the Lease Commencement Date. This payment shall accrue at an
interest rate which shall be equal to one month LIBOR, as defined below,
plus four and one half (4.5) percentage points, as determined on the first
Business Day of each month. The interest shall be calculated on the basis
of actual days elapsed, but computed using a 360-day year, and shall be
compounded monthly
One month LIBOR shall be determined as the arithmetic mean of the rates of
interest per annum for one month's deposits of US Dollars which are
offered to prime banks that participate in the London market
(i) as such rates appear on the page designated as page "LIBO" on the
Reuters Monitor Money Rates Service ("LIBO Page") as of 10.00 a.m.
(London time) on such date, if two or more quotations appear on the
LIBO Page for such date, or
(ii) by the principal London offices of Barclays Bank plc, Morgan
Guaranty Trust Company of New York, and National Westminster Bank
plc as of 10.00 a.m. (London time) on such date, if fewer than two
quotations appear on the LIBO Page for such date.
Initial rent does not apply to tranche 1.
6.3 Lessee covenants and agrees to pay Lessor in immediately available funds
twenty (20) Rent Payments in arrears during the Lease Period. The first
Rent Payment shall become due on the day falling six (6) months after the
Lease Commencement Date which is attributable to the first AXE 10
switching system to be accepted. Thereafter, the following three (3) Rent
Payments shall become due on the last day of each following six (6) months
period. Thereafter, the following sixteen (16) Rent Payments shall become
due on the last day of each following three (3) months period, provided
however, that the last Rent Payment shall become due on the last day of
the Lease Period.
6.12 For each amount of the Purchase Price to be paid by the Lessor to the
Supplier in SEK and FIM, the Lessor will determine the Purchase Price in
GBP by converting such amount of SEK and FIM, respectively, into GBP at
the rate of exchange at which the Lessor is or would be able to
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Special Terms - Tranche 1 8(12)
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purchase GBP with SEK and FIM, respectively, in the foreign exchange
market for spot delivery at or around 11.00 a.m. Stockholm time two (2)
Business Days prior to the date of Lessor's payment.
6.13 The Lessor shall notify the Lessee of the amount of any Rent Payment due
no later than 10 working days prior to the relevant Rent Payment date.
7 USE, MAINTENANCE AND ALTERATIONS
7.5 Subject as provided herein, the Lessee may not, without prior written
notice to the Lessor, permanently remove any part from, or alter or make
additions to, the equipment. Such written notice shall be without
responsibility on the part of the lessor for any interference with the
operations of the equipment or impairment of its value
7.8 Lessee may sub-lease the Equipment to Cyberlink Sweden AB and Cyberlink
International OY, provided that (i) the sub-lease shall terminate one day
prior to the expiration or termination for whatever cause of this
Agreement, (ii) the sub-lessee shall undertake in writing to be bound by
the terms and conditions of this Agreement and accept Lessor as third
party beneficiary, (iii) Lessee shall remain responsible to Lessor in
accordance with the terms of this Agreement and shall be responsible to
Lessor for any acts or omissions of the sub-licensee as if such acts and
omissions were undertaken by Lessee, and (iv) the sub-lessees shall have
executed the sub-lessees consent attached hereto as Exhibit 12.
8 INDEMNITIES
8.3 The Lessee shall be responsible for and reimburse the lessor against all
taxes, duties and other charges levied or imposed by any Government or
local authority against the Lessor or the Lessee and relating to this
agreement or the Equipment except for taxes on the Lessor's overall
income..
9 INSURANCES
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Commercial in confidence
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Special Terms - Tranche 1 10(12)
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12.2 (a) enter the premises of the lessee or any other place where the
equipment may be located and reposess the equipment, disconnecting
and separating all thereof from any other property any using all
reasonable means necessary to do so.;
13 PURCHASE OPTION
The Option Dates and the Option Prices are defined in Exhibit 2. The
Lessee shall pay to the Lessor 70% of all costs and expenses incurred by
Lessor in connection with the sale of the Equipment under this Clause 13,
where costs and expenses are defined as the actual administrative costs at
no more than (pound) 19,000 (nineteen thousand) per purchase option
exercise event, where each event can encompass one or several tranches.
14 RETURN OF THE EQUIPMENT
14.1 The Equipment shall be returned to Stockholm, Sweden to the premises of
the Lessor, or as otherwise notified by Lessor.
15 REPRESENTATIONS AND WARRANTIES
15.1 The following additional representation and warranty is made by the
Lessee:
- the business plan related to Lessee's business activities provided for
in Clause 2.1 has been prepared in accordance with generally accepted
accounting principles and practices in the UK and present fairly and
correctly the financial position of Lessee as at the date thereof and the
results of the operations of Lessee, respectively, for the period referred
to in the business plan, and as at date referred to in the business plan,
Lessee had no significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against, in the business plan.
16 RIGHTS REMEDIES AND WAIVERS
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Commercial in confidence
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Special Terms - Tranche 1 11(12)
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17 MISCELLANEOUS
17.5 Lessor AB L M ERICSSON FlNANS
S-128 25 STOCKHOLM
Sweden
Telephone: +46 8 719 00 00
Telefax: +46 8719 90 50
Telex: 14910 ERIC S
For the attention of: Finance department
Lessee: RSL COM EUROPE LTD
Victoria House
London Square
Cross Lanes
Guidford
Surrey
England
Telephone: +44 1483 457300
Telefax: +44 1483 457733
For the attention of: Mr. Richard Williams
17.11 Clause 17.11 shall not apply.
17.12 With advance notice of five (5) Business days, the lessor (or
its nominee) shall at any time during working hour have the
right to enter the premises of the lessee or any other place
where the equipment may be located for the purpose of
inspecting the same or observing its use.
17.13 Clause 17.13 shall not apply.
17.14 The following additional provisions shall apply.
The Lessee shall not, without Lessor's prior written consent,
create, assume, incur or suffer to be created, assumed or
incurred or permit to subsist any mortgage, lien, pledge or
other encumbrance of any kind ("Encumbrance") upon any of its
present or future revenues or assets, for the purpose of
securing any indebtedness (or any guarantee or other
obligation in respect of any indebtedness) now or hereafter
existing. Lessee shall however be entitled to make such
Encumbrance, except any Encumbrance on the equipment subject
to this Agreement, without Lessor's prior consent for securing
medium and long term indebtedness with an aggregate value not
exceeding USD 2,000,000.
17.15 In the event that the Swedish Export Credit Board (EKN) would
approve a guarantee of the lease payments within four (4)
months from the date of this agreement, either party may call
for good faith negotiations as to the amendment of relevant
parts of this agreement
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Special Terms - Tranche 1 12(12)
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Should the parties not be able to agree on such amendment within two (2)
months from the date of the EKN approval, this agreement shall remain in
full force without any changes.
18 APPLICABLE LAW AND JURISDICTION
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Commercial in confidence
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1(19)
GENERAL TERMS
1. DEFINITIONS
1.1 In this Agreement the following terms and expressions shall have the
following meanings:
"Account" means the account specified in the Special Terms or any other
bank account designated by the Lessor from time to time.
"Agreement" means this Agreement consisting of two parts, Special Terms
and General Terms, and the Exhibits hereto, as hereafter amended from time
to time.
"Business Day" means a day on which banks are open for business in
Stockholm and, in respect of any payment to be made hereunder, also in the
principal financial center of the currency of such payment.
"Collateral" means any collateral provided as security for the Lessee's
obligations under this Agreement, as specified in the Special Terms.
"Currency Of Payment" means the currency of payment under the Agreement as
specified in the Special Terms.
"Default" means an event which with the giving of notice and/or the
passage of time and/or the making of any determination of materiality or
fulfilment of any other applicable condition (or any combination of the
foregoing) would constitute an Event of Default.
"Default Rate" means the interest rate calculated as two (2) per cent per
annum above the higher of the Interest Rate and the Lessor's cost of funds
from whatever sources it may select.
"Delivery Date" means the date on which the Equipment is actually
delivered to the Lessee by the Supplier.
"Events of Default" means any of the events of default specified in Clause
12 or a failure by the Lessee to meet a deferred condition precedent as
specified in Clause 2.3.
"Event of Loss" means any of the following events:
(i) the Equipment shall be lost, stolen, destroyed or irreparably
damaged;
(ii) insurance proceeds shall be received based upon an event of total or
constructive total loss with respect to the Equipment under an
insurance policy;
(iii) title to the Equipment shall be taken or requisitioned by any
governmental body by condemnation or otherwise;
(iv) the use of the Equipment shall be taken or requisitioned by any
governmental body by condemnation or otherwise for a period
<PAGE>
2(19)
longer than three (3) months (or the remaining term of the Lease
Period, if less); or
(v) as a result of any rule, regulation, order or other action by the
relevant authority, any governmental body having jurisdiction or
any court of competent jurisdiction, the normal operation or use of
the Equipment shall have been prohibited for a period of six months.
"Equipment" means the equipment described in Exhibit 1 and includes any
part thereof, and all replacements, renewals and additions made in or to
such equipment together with the Technical Documents and all handbooks,
manuals, data and drawings relating thereto.
"Expiry Date" means the date specified as such in the Special Terms or
such later date as may follow from an agreement to extend the lease
pursuant to Clause 13.8.
"Final Availability Date" has the meaning specified in the Special Terms.
"General Terms" means the second part of this Agreement.
"Initial Rent Payment" means the payment of the initial rent in the
Currency of Payment, calculated in accordance with Clause 6.2., Special
Terms.
"Initial Rent Payment Date" means each date on which an Initial Rent
Payment shall be made as set forth in Clause 6.2., Special Terms.
"Interest Rate" means, in respect of each Rent Payment, LIBOR (as quoted
on the fifth Business Day prior to the preceding Rent Payment Date, or, in
the case the first Rent Payment Date, the Lease Commencement Date) in each
case plus the Margin.
"Language" has the meaning specified in the Special Terms.
"Lease Commencement Date" means the last day of the month when an
acceptance certificate is issued by Lessee in accordance with Clause 4.4
or such other date when the Equipment shall be deemed to be accepted by
the Lessee hereunder.
"Lease Period" means the period commencing on the Lease Commencement Date
and ending on the earlier of (i) the Expiry Date, (ii) the day on which
this Agreement or the leasing of the Equipment is terminated pursuant to
the terms hereof, and (iii) the Rent Payment Date on which the Lessee has
exercised its option to purchase the Equipment pursuant to Clause 13.
"LIBOR" means the arithmetic mean (rounded to the next higher one hundred
thousandth of a percentage point) of the rates of interest per annum for
three months' deposits of US Dollars which are offered to prime banks in
the London interbank market (i) as such rates appear on the page
designated as page "LIBO" on the Reuters Monitor Money Rates Service
("LIBO Page") as of 10.00 a.m. (London time) on such date, if two or more
quotations appear on the LIBO Page for such date, or (ii) by the principal
London offices of Barclays Bank plc, Morgan Guaranty Trust Company of New
York, and National Westminster Bank plc as of 10.00 a.m. (London time) on
such date, if fewer than two quotations appear on the LIBO Page for such
date.
"Location" means the location specified in the Special Terms.
<PAGE>
3(19)
"Margin" has the meaning specified in the Special Terms.
"Management Fee Payment" means the payment of the management fee,
calculated in accordance with Clause 6.1., Special Terms
"Management Fee Payment Date" means the date on which the Management Fee
shall be made as set forth in Clause 6.1., Special Terms
"Option Price" means the price specified in Exhibit 2 for the relevant
Option Date.
"Option Date" means the date(s) on which Lessee is granted an option to
purchase the Equipment pursuant to Clause 13.1, Special Terms.
"Purchase Price" means the sum of the purchase price payable to the
Supplier under the Supply Agreement and all other costs and expenses of
whatever nature payable by the Lessor in respect of the acquisition of the
Equipment. The purchase price under the Supply Agreement is set out in the
Special Terms.
"Rent Payment" means the periodical payment for the lease of the Equipment
in the Currency of Payment, calculated in accordance with Clause 6.4.
"Rent Payment Date" means each date on which a Rent Payment shall be made
as set forth in Clause 6.3., Special Terms.
"Security Document" means any pledge agreement, guarantee or other
document providing security for the Lessee's obligations under this
Agreement, as specified in the Special Terms.
"Security Provider" means any party to a Security Document other than the
Lessor.
"Special Terms" means the first part of this Agreement.
"Supplier" has the meaning specified in the Special Terms.
"Supply Agreement" has the meaning specified in the Special Terms.
"Technical Documents" means all documentation in respect of the Equipment
delivered by the Supplier under the Supply Agreement.
"Termination Value" means the value specified in Exhibit 3.
1.2 The terms and conditions in the General Terms are complemented and amended
by the Special Terms and in case of any discrepancy, the Special Terms
shall prevail.
1.3 Any reference to a clause with a certain number shall, unless the context
otherwise requires, be construed as a reference to the clause with such
number in the General Terms, as amended or complemented by the
corresponding clause in the Special Terms. In case a clause with such
number does not exist in the General Terms, the reference shall be solely
to the clause with such number in the Special Terms.
2 CONDITIONS PRECEDENT
2.1 The obligations of the Lessor under this Agreement are subject to the
receipt of the following documents, in form and substance satisfactory to
the Lessor, on or
<PAGE>
4(19)
before the earlier of (i) the day falling thirty (30) Business Days after
the date hereof and (ii) the Lease Commencement Date:
(a) a certified copy of the constituent documents for the Lessee and
each Security Provider;
(b) evidence that the Lessee and each Security Provider is duly
registered at the relevant authority as a limited liability company
or other kind of business entity, as described in the recital to
this Agreement or the relevant Security Document;
(c) evidence that the Lessee has all necessary licenses and permits to
operate the Equipment and enter into this Agreement and the Supply
Agreement;
(d) evidence that the person(s) which has (have) signed this Agreement
and the Supply Agreement on behalf of the Lessee are duly authorized
to do so;
(e) evidence that the person(s) which has (have) signed the Security
Documents on behalf of each Security Provider are duly authorized to
do so;
(f) the latest available finance report of the Lessee and each Security
Provider;
(g) a legal opinion from independent counsel acceptable to Lessor,
substantially in the form of Exhibit 4 at the expense of Lessee; and
(h) other document(s) specified in the Special Terms.
2.2 The obligation of the Lessor to lease the Equipment to the Lessee is
subject to the following conditions having been met on or before the Lease
Commencement Date:
(a) the Initial Rent Payment shall have been received by the Lessor;
(b) the Lessor shall have acquired such rights and title to the
Equipment as is provided in the Supply Agreement:
(c) the Lessor shall have received a certified copy of an insurance
certificate evidencing that the Equipment is insured in accordance
with Clause 9;
(d) no Default shall have occurred or would occur as a result of the
commencement of the Lease Period; and
(e) other condition(s) specified in the Special Terms.
2.3 The conditions precedent set out in Clauses 2.1 and 2.2 are inserted for
the sole benefit of the Lessor and may be waived or deferred, with or
without conditions, by the Lessor. If the Lessor agrees to the
commencement of the Lease Period without all conditions having been met,
such conditions shall, unless otherwise is agreed, be deferred for ten
(10) Business Days from the Lease Commencement Date. If any condition is
not met on the date to which it has been deterred, it shall constitute an
Event of Default hereunder.
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5(19)
3 ASSIGNMENT
3.1 The Lessee does hereby assign to the Lessor all of the Lessee's rights and
interest in respect of the Equipment under the Supply Agreement,
including, but not limited to, the right to acquire ownership to hardware
parts and license to use software parts of the Equipment and the benefit
of all warranties in respect of the Equipment contained in the Supply
Agreement
3.2 The Lessor hereby assumes the Lessee's obligation to pay the Purchase
Price and take delivery of the Equipment under the Supply Agreement. The
Lessor does not assume any of the Lessee's other obligations under the
Supply Agreement, and the Lessee shall in respect of such obligations at
all times remain liable to the Seller as if this Agreement had not been
executed.
3.3 When the Lessor exercises any of the rights under the Supply Agreement, or
makes any claim with respect to the Equipment, the terms and conditions of
the Supply Agreement shall apply to, and be binding upon, the Lessor.
3.4 The Lessor shall procure that the Seller consents to the assignment and
assumption by the Lessor of certain rights and obligations under the
Supply Agreement in the form attached hereto as Exhibit 5. Except as
provided in Exhibit 5, the Supply Agreement shall not be modified by this
Agreement.
3.5 Neither party shall enter into any other agreement that would amend,
modify or supplement the Supply Agreement without the prior written
consent of the other party.
3.6 If the Lease Commencement Date has not occurred on or prior to the Final
Availability Date, the Lessor shall be entitled to terminate this
Agreement by giving written notice to the Lessee and the Supplier.
Following such notice of termination all rights assigned to the Lessee
pursuant to Clause 3.1 shall be reassigned to the Lessee, and the Lessor
shall be released from the obligations assumed pursuant to Clause 3.2,
which shall be reassumed by the Lessee. On receipt of the Lessor's
certificate evidencing the Lessor's costs incurred in connection with the
entering into and termination of this Agreement, the Lessee shall promptly
reimburse the Lessor for all such costs.
4 SELECTION, DELIVERY AND INSPECTION
4.1 The Lessee has been responsible for agreeing the design, capacity, quality
and specification of the Equipment with the Supplier. The Lessor is only
responsible for the financing of the Equipment and the Lessee accepts that
the Lessor shall have no responsibility whatsoever for the design,
capacity, quality and specification of the Equipment.
4.2 Unless otherwise instructed in writing by the Lessor, the Lessee shall be
responsible for and arrange to take delivery of the Equipment from the
Supplier at a place to be agreed between the Lessee and the Supplier and
notified by the Lessee to the Lessor. The Lessor shall not be liable for
any damage or loss arising directly or indirectly from any delay or
failure in delivery (or, where applicable, installation) of the Equipment
4.3 The Lessee shall on behalf of the Lessor issue the final acceptance
certificate to the Supplier under the Supply Agreement and any defect or
other objection relating to any part of the Equipment shall be dealt with
by the Lessee directly with the Supplier. Simultaneously with the issuance
of the acceptance certificate the Lessee shall send a copy of the said
certificate to Lessor. The Lessee's
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6(19)
acceptance of delivery from the Supplier on behalf of the Lessor shall
constitute conclusive acceptance also under this Agreement. If the Lessee
fails to give timely notice under the Supply Agreement of any defect or
other objection to the Supplier, the Equipment shall as between the Lessor
and the Lessee be considered to have been properly and timely delivered in
good condition and satisfactory working order.
4.4 The Lessee shall, within five (5) Business Days after the last of the
Delivery Dates, sign and deliver to the Lessor a certificate of delivery
in the form attached hereto as Exhibit 6. This certificate shall be in
addition to any certificates or acknowledgements that may be required by
the Supplier.
4.5 All risk of loss or damage to the Equipment shall as between the Lessor
and the Lessee pass to the Lessee when such risk passes from the Supplier
to the Lessor under the Supply Agreement.
4.6 Equipment already in the possession of the Lessee on the date of this
Agreement shall be deemed to be delivered to and accepted by the Lessee
pursuant to this Clause 4 unless otherwise agreed in writing by the
Lessor.
5 LEASE
5.1 The Lessor agrees to lease to the Lessee, and the Lessee agrees to lease
from the Lessor, the Equipment upon the terms set forth in this Agreement.
5.2 The term of this Agreement shall, unless earlier terminated pursuant to
the express provisions hereto, expire on the Expiry Date. The Lessee shall
have no right to request an extension of the Lease Period other than in
accordance with Clause 13.8.
5.3 The Lessee leases the Equipment "as is". The Lessor does not let or supply
the Equipment to the Lessee with or subject to any condition or warranty,
express or implied, whether statutory or otherwise, whether as to the
state of quality of the Equipment or as to description, repair or fitness
for any purpose or otherwise, and all such conditions and warranties are
hereby expressly excluded.
5.4 No third party (including any affiliate of the Lessor) has any authority
to bind the Lessor or make any representation or give any warranty or
guarantee on behalf of the Lessor.
5.5 The Lessor shall not be liable for any defects or deficiencies in the
Equipment or for any direct or consequential damages therefrom or for any
interruption in the Lessee's business occasioned by the Lessee's inability
to use the Equipment for any reason whatsoever. The Lessor shall under no
circumstances be liable to provide the Lessee with any replacement
equipment
5.6 The Lessor hereby assigns to the Lessee for the Lease Period any and all
guarantees, warranties and other rights (ownership excluded) which may
have been (or in the future are) given to the Lessor in respect of the
Equipment and which the Lessor has the right to assign. The Lessor shall
take all reasonable steps, at the cost and expense of the Lessee, to
obtain all necessary consents to so assign. To the extent that any rights
may not be assigned to the Lessee, such rights shall, as between the
Lessor and the Lessee, solely inure to the benefit of the Lessee, and the
Lessor shall, at the Lessee's sole expense and risk, enforce such rights
or give the Lessee a power of attorney to enforce in the Lessor's name.
<PAGE>
7(19)
6 PAYMENTS
6.1 The Lessee shall make the Management Fee Payment on the Management Fee
Payment Date, as set forth in the Special Terms.
6.2 The Lessee shall make the Initial Rent Payments on the Initial Rent
Payment Dates, as set form in the Special Terms.
6.3 The Lessee shall make the Rent Payments on the Rent Payment Dates, as set
forth in the Special Terms.
6.4 The Rent Payments due on each Rent Payment Date shall consist of the sum
of (i) an amount equivalent to the percentage of the Purchase Price set
forth opposite such Rent Payment Date in Exhibit 7 under the heading "Per
cent of the Purchase Price in each Rent Payment" and (ii) an amount equal
to the interest that would have accrued (calculated at the Interest Rate
on the actual number of days elapsed on a 360 day/year basis) on the
outstanding balance of the Purchase Price during the period commencing on
the preceding Rent Payment Date (or, in the case of the first Rent
Payment, the Lease Commencement Date) set fourth in Exhibit 7 under the
heading "Outstanding balance in per cent of the Purchase Price".
6.5 Lessor shall not later than two (2) Business Days before the commencement
of each rent period in writing quote to Lessee the Interest Rate and the
Rent Payment for the subsequent period. Unless Lessee has raised any
objections to the quotation no later than five (5) Business Days after the
receipt of the quotation, it shall be deemed valid for the relevant rent
period.
6.6 The Lessee shall make any payment to be made to the Lessor under this
Agreement (by telex advice) in immediately available funds to the Account.
6.7 In event that the Lessor does not receive on the due date any amount due
under this Agreement, the Lessee shall pay to the Lessor on demand
interest on such amount from and including the due date to the date of
actual payment at the Default Rate.
6.8 Whenever a payment is due on a day which is not a Business Day, such
payment shall be made on the next Business Day.
6.9 The Lessee undertakes an unconditional obligation to make the Initial Rent
Payment and the Rent Payments as specified in this Clause 6. The Lessee
shall not be released from the obligation to pay any sum due hereunder by
reason of any defect or deficiency in the Equipment, or the Equipment
becoming wholly or partially unserviceable for any reason, including
reasons beyond the Lessee's control. All payments hereunder shall be made
by the Lessee free and clear of any right of set-off or counterclaim.
6.10 The Lessee shall pay all taxes and other governmental charges on any
payment hereunder, and the Lessee shall pay to the Lessor together with
any payment hereunder, the applicable amount of value added tax (if any)
at the then applicable rate thereon. If value added tax or any other tax
or charge is assessed on a payment already made hereunder, the Lessee
shall at the request of the Lessor promptly reimburse the Lessor for such
tax or charge.
6.11 All payments hereunder shall be made free and clear of all deductions or
withholdings whatsoever. In the event that the Lessee is required by law
to make any deduction or withholding on account of tax or otherwise from
any such payments, or any new taxes or levies are imposed on such
payments, or there is
<PAGE>
8(19)
an increase in the existing taxes or levies on such payments, the sum due
from the Lessee shall be increased to the extent necessary to ensure that,
after such deduction or withholding is made, the Lessor receives a net sum
equal to the sum which the Lessor would have received had no deduction or
withholding been made.
7 USE, MAINTENANCE AND ALTERATIONS
7.1 The Lessee shall use the Equipment in a careful and proper manner and in
accordance with the Technical Documents and any insurance required
hereunder. The Lessee shall ensure that the Equipment is only used and
operated by properly skilled personnel. The Lessee shall not use or permit
the Equipment to be used in contravention of any law or regulation or for
any purpose for which the Equipment is not designed and suitable.
7.2 The Lessee shall not do or permit to be done anything which may expose any
part of the Equipment to penalty, forfeiture, impounding, detention or
destruction and not abandon any part of the Equipment.
7.3 The Lessee shall, at its own expense, keep the Equipment in good working
order and condition and make all necessary adjustments, repairs and
replacements. The Lessee shall procure that all parts of the Equipment are
properly serviced in accordance with recommendations of the manufacturer
thereof and the Technical Documents. The Lessee shall keep such records of
the maintenance and use of the Equipment as the Lessor from time to time
specifies.
7.4 The Lessee shall, at its own expense, obtain and keep in full force and
effect all permissions, licences and other authorizations which may at any
time be required in connection with the possession or use of the Equipment
and the due performance by the Lessee of its obligations under this
Agreement. The Lessee shall comply with all statutory and other official
obligations relating to the possession and use of the Equipment and shall
at its own expense add to or install with the Equipment any safety or
other equipment required by any applicable law or regulation to be so
added or installed for the lawful use or operation of the Equipment.
7.5 Subject as provided herein, the Lessee may not, without the prior written
approval of the Lessor, permanently remove any part from, or alter or make
additions to, the Equipment. Such written approval shall be without
responsibility on the part of the Lessor for any interference with the
operation of the Equipment or impairment of its value.
7.6 The Lessee shall solely bear the responsibility for theft of the
Equipment, and all damage to the Equipment, whether caused by criminal
actions or vandalism or otherwise arising. If the Equipment is lost or
damaged in whole or in part, the Lessee shall promptly replace or repair
the Equipment as appropriate. Any insurance proceeds received by the
Lessor in respect of any such loss or damage shall be paid to the Lessee
when the Lessor has received satisfactory evidence that the Equipment has,
or will be, replaced or repaired in accordance with this Agreement
7.7 All alterations and additions to the Equipment and all replacements of the
Equipment shall, unless otherwise agreed in writing by the Lessor,
immediately upon installation or replacement, as the case may be, become
the property of the Lessor.
<PAGE>
9(19)
7.8 The Lessee shall keep the Equipment at the Location and may not remove it
to a different location without the prior written approval of the Lessor.
The Lessee may not sublease or part with possession of the Equipment
without the prior written approval of the Lessor.
8 INDEMNITIES
8.1 The Lessee shall be liable for any personal injury or death or property
damage arising from or related to the possession, use or operation of the
Equipment.
8.2 The Lessee shall indemnify and hold the Lessor harmless from and against
any and all liabilities, claims, proceedings, costs and expenses
whatsoever arising out of or in any way connected with any breach of this
Agreement by the Lessee, or the possession, use or operation of the
Equipment or arising on the grounds that any part of the Equipment or the
use thereof constitutes an infringement of any patent, copyright design or
similar right.
8.3 The Lessee shall be responsible for and reimburse the Lessor against all
taxes, duties and other charges levied or imposed against the Lessor or
the Lessee and relating to this Agreement or the Equipment except for
taxes on the Lessor's overall income.
8.4 The indemnities contained in this Clause 8 shall not extend to any loss to
the extent that such loss is caused by the wilful misconduct or gross
negligence of the Lessor or the failure by the Lessor to comply with this
Agreement.
8.5 The indemnities contained in this Clause 8 shall continue in full force
and effect notwithstanding the expiry of the Lease Period or the
termination of this Agreement.
9 INSURANCES
9.1 From the Delivery Date until the Equipment has been returned to the Lessor
or purchased by the Lessee hereunder, the Lessee shall purchase and
maintain an all-risk insurance covering loss, damage or destruction of the
Equipment in an amount equal to or in excess of the Termination Value from
time to time, and all other risks normally covered by an insurance of
equipment of the same kind, including third party liability and product
liability. Should an Event of Loss occur, the procedure set forth in this
Article 9 below will apply.
9.2 All insurances shall be placed with an international insurer with
recognized reputation and responsibility satisfactory to Lessor.
Furthermore, the insurances shall name the Lessor as the owner of the
Equipment and shall be made payable, in the case of policies covering loss
or damage to the Equipment, to the Lessor.
9.3 The Lessee shall before each renewal date of an insurance furnish to the
Lessor evidence that the insurance required to be maintained hereunder
remains in full force and effect. On request, the Lessee shall provide the
Lessor with all other information about, or documents regarding, the
insurances maintained in respect of the Equipment.
9.4 If the Lessee does not provide evidence that the insurance coverage
complies with this Agreement, the Lessor shall be entitled to take out
such insurance, and all costs therefor shall be reimbursed by the Lessee
on demand.
<PAGE>
10(19)
9.5 The Lessee will not do, or omit to do, or permit to be done anything
whereby any required insurance would be rendered invalid or unenforceable
or the Equipment in any respect not covered by the required insurance.
9.6 As between Lessor and Lessee, it is hereby agreed that all insurance
proceeds received under policies required hereby, with respect to the
Equipment, will be applied as follows:
Upon the occurrence of any Event of Loss, with respect to the Equipment or
any part of the Equipment, Lessor shall be entitled to and shall receive
the entire award, judgement, settlement, insurance proceeds or payments
and all instalments thereof. Lessee hereby assigns to Lessor any right or
interest Lessee may have or may hereafter acquire in any such award or
payment; provided that unless an Event of Default shall have occurred and
be continuing, Lessee shall be entitled to reimbursement for the amount of
such award, judgement, settlement, insurance proceeds or payments actually
received by Lessor upon the fulfilment of Lessee's obligation to pay any
amount stipulated under Subarticle 9.7 hereof
9.7 Upon the occurrence of any Event of Loss with respect to the Equipment,
Lessee shall, on the 30th day following the date on which the Event of
Loss shall have been declared by Lessor, pay or cause to be paid in
immediately available funds:
(i) the Termination Value in effect as of such date for the Equipment;
and
(ii) any other unpaid amounts due hereunder.
At such time as Lessor has received the sum of (i) and (ii) above, with
any applicable reduction where insurance proceeds have been applied to pay
the sum of (i) and (ii) above, the obligation of Lessee to pay rent
hereunder shall terminate and Lessor will transfer to Lessee, without
recourse or warranty, all of Lessors right, title and interest, if any, in
and to the Equipment (except software which Lessee takes possession of but
not title, as fully described under the heading Software License of the
Supply Agreement). The balance, if any, of such insurance proceeds
remaining thereafter will be paid to the order of Lessee.
9.8 In the event of damage to the Equipment or any part thereof not
constituting an Event of Loss, Lessee shall promptly notify Lessor in
writing of such damage and shall remain obligated to make all payments of
rent which may become due hereunder in the same manner as if such damage
had not occurred. Lessee shall repair and restore the Equipment or any
part thereof to the condition required by Article 7 hereof. So long as no
Event of Default shall have occurred and be continuing, Lessee shall be
entitled to receive the entire award, judgement, settlement, insurance
proceeds or payments and all instalments thereof with respect to such
damage, to the extent received by Lessor and as provided in this Article
9.
9.9 Notwithstanding anything to the contrary contained in this Article 9, upon
the occurrence of an Event of Loss with respect to any part of the
Equipment under circumstances where there has not been an Event of Loss
with respect to the Equipment, Lessee shall, as promptly as is reasonably
possible, duly convey to Lessor, as replacement for any part of the
Equipment having suffered an Event of Loss, title to another part of the
Equipment of the same manufacturer and of the same or an improved model
suitable for installation and use on the Equipment as the part of the
Equipment having suffered an Event of Loss. Such replacement part shall be
free and clear of all liens, encumbrances or rights of others whatsoever
(other than a lien, mortgage or other encumbrance arising from Lessor's
own act or default) and have a value and utility at least equal to, and
be in as good operating condition as, the part of the Equipment with
respect to which an Event of Loss has occurred if
<PAGE>
11(19)
such part of the Equipment were in the condition and repair as required by
Article 7 hereof prior to such Event of Loss.
10 INFORMATION
10.1 At the request of the Lessor, the Lessee shall promptly furnish to the
Lessor.
(a) a detailed inventory of the Equipment, specifying the condition;
(b) all records of the maintenance and use of the Equipment;
(c) all other information in the Lessee's possession regarding the
Equipment, its use, location and condition;
(d) certified copies or other satisfactory evidence of certificates,
licences permits and authorizations necessary or desirable in
connection with the possession or use of the Equipment or the due
performance by the Lessee of its obligations under this Agreement;
(e) a written confirmation, signed by a duly authorized officer of the
Lessee, confirming that no Default is subsisting;
(f) budget and projections for the Lessee's operations during the
current calendar year; and
(g) other information specified in the Special Terms.
10.2 The Lessee shall send to the Lessor within thirty (30) days of the
completion of the preparation of, but in any event not later than six
months after the expiry of the financial year, the annual financial report
of the Lessee and each Security Provider for the preceding financial year.
The Lessee shall also send to the Lessor within thirty (30) days of the
completion of the preparation of the quarterly financial reports of
Lessee.
10.3 The Lessee shall forthwith notify the Lessor of the occurrence of a
Default and of any other event which might adversely affect the Lessee's
ability to perform any of its obligations under this Agreement, or the
ability of any Security Provider to perform any of its obligations under
the Security Document to which it is a party, (including in particular
fire, theft, logistical problems, strikes, breakdown of any item of the
Equipment), and provide the Lessor with full details of any steps which
the Lessee (or the relevant Security Provider) is taking, or is
considering taking, in order to remedy or mitigate the effect of the
Default or otherwise in connection with such events.
10.4 The Lessee shall promptly inform the Lessor of the expiry, or termination
of any licence, consent or authorization which the Lessee is obliged to
maintain under this Agreement and provide the Lessor with evidence of any
new or renewed licences, consents and authorizations, as they become
effective.
11 OWNERSHIP AND MARKING
11.1 The Equipment shall at all times be and remain the sole and exclusive
property of the Lessor. The Lessee shall at its own cost and expense
protect and defend the ownership of the Lessor against all claims, liens
and legal proceedings of creditors of the Lessee and other persons, and
keep the Equipment free and clear from all claims, liens and proceedings
except for liens and charges created by or through
<PAGE>
12(19)
the Lessor. The Lessee shall have no right, title or interest in or to the
Equipment, except as expressly set forth in this Agreement. The Lessee
shall not hold itself out as owner of the Equipment and the Lessee may not
in its accounts or in any other document treat, or account for, the
Equipment as assets of the Lessee.
11.2 On each part of Equipment there shall at all times be affixed, and shall
not be removed or covered up, a fireproof plate or another permanent
marking, specifically approved by the Lessor bearing the inscription in
the Language: "This equipment is owned by AB LM ERICSSON FINANS". The
Lessee shall ensure that such name plates are not, during the term of this
Agreement at any time obscured or removed.
12 EVENTS OF DEFAULT
12.1 The following events shall constitute Events of Default:
(a) the Lessee shall fail to pay any amount due under this Agreement
within three (3) Business Days after notice thereof has been given
to the Lessee;
(b) the Lessee shall fail to perform or observe any obligation, covenant
or agreement to be performed or observed by it hereunder (other than
the obligation to pay any amount due) and such failure shall, if
capable of being remedied, continue unremedied for a period of ten
(10) Business Days after notice of such breach has been given to the
Lessee;
(c) this Agreement for any reason shall become wholly or partially
unenforceable as against the Lessee;
(d) the Lessee or any Security Provider is or becomes insolvent or makes
a general assignment for the benefit of, or a composition with, its
creditors or any steps are taken or legal proceedings are started
for the bankruptcy or winding-up of the Lessee or any Security
Provider or for the appointment of a receiver, administrator or
similar officer of the Lessee or any Security Provider or all or any
of its assets;
(e) any officer of any court or any other person takes any step towards
attaching, sequestrating, requisitioning, seizing or levying
distress on any part of the Equipment, or any part of the Equipment
is in fact so attached, sequestrated, requisitioned, seized or
distrained upon;
(f) the Lessee shall do or permit any act or thing which may adversely
affect the ownership or the rights of the Lessor in the Equipment or
any part thereof;
(g) the Lessee or any Security Provider shall discontinue all or a
substantial part of its business operations or transfer or dispose
of all or a material part of its assets;
(h) any representation or warranty made or repeated by the Lessee herein
shall prove to be incorrect or misleading in any respect deemed
material by the Lessor;
(i) the Lessee or any Security Provider shall not pay any indebtedness
when due or any indebtedness of the Lessee or any Security
<PAGE>
13(19)
Provider shall become prematurely due or placed on demand as a result of
an event of default (howsoever described);
(j) the Equipment, the Lessee, any Security Provider, the business of
the Lessee or any Security Provider or any substantial part thereof
shall become nationalized;
(k) the Equipment shall become subject to a lien, charge or encumbrance
of any kind which is not created by or by or through the Lessor;
(l) any event or series of event shall occur which, in the reasonable
opinion of the Lessor, might have a materially adverse effect on the
business or financial condition of the Lessee or any Security
Provider, or on its ability to fully perform its obligations under
this Agreement or the Security Document to which it is a party, as
the case may be;
(m) any decision or agreement being made or entered into to merge or
consolidate the Lessee or any Security Provider, or its business
with any other company or business;
(n) any Security Document shall not constitute a legally valid and
enforceable security or guarantee, as the case may be;
(o) the realizable value of the Collateral shall be less than the
Termination Value; or
(p) other Event(s) of Default specified in the Special Terms.
12.2 Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, the Lessor may, at its option,
declare this Agreement to be in default and the Lessor may, in addition to
any other remedies provided herein or by applicable law, exercise one or
more of the following remedies, as the Lessor shall in its sole discretion
elect:
(a) enter the premises of the Lessee or any other place where the
Equipment may be located and repossess the Equipment, disconnecting
and separating all thereof from any other property and using all
means necessary to do so;
(b) terminate this Agreement, which termination shall be effective
immediately upon the Lessor having given notice of termination to
the Lessee, whereupon the Lessee's right to possess and use the
Equipment shall immediately cease;
(c) recover all Rent Payments and other payments due as of the date of
such default;
(d) request payment of the Termination Value for the Equipment, upon
payment of which the Lessor shall take all steps necessary for the
transfer of title to and ownership of the Equipment (except
software, which the Lessee takes possession of but not title to as
described in the Supply Agreement) "as is" and "where is" to the
Lessee;
(e) demand compensation against any loss, damage, cost, expense or
liability which the Lessor may sustain or incur as a consequence of
the occurrence of the Event of Default or in connection with the
<PAGE>
14(19)
enforcement or preservation of any rights under this Agreement or
any Security Document,
12.3 The Lessee hereby waives any right of action against the Lessor arising
from the removal, repossession or retention of the Equipment following an
Event of Default. The Lessee undertakes to provide the Lessor with all
necessary assistance to perform the repossession of the Equipment
following an Event of Default
12.4 If the Lessee fails to perform any of its obligations under this Agreement
and continues to do so thirty (30) days from receipt of notice from the
Lessor or when an Event of Default has occurred and is continuing, the
Lessor may itself perform such obligations for the account of the Lessee
without thereby waiving any rights hereunder, and any amount paid or
expense incurred in connection with such performance shall be reimbursed
by the Lessee on demand.
13 PURCHASE OPTION
13.1 The Lessor hereby grants to the Lessee an option to purchase the Equipment
(except software, which the Lessee takes possession of but not title as
described in the Supply Agreement) on the terms and conditions set out in
this Clause 13 and upon exercise of such option agrees to transfer to the
Lessee or its nominee title to and ownership of the Equipment
13.2 The Lessee can exercise its purchase option on each Option Date, by paying
on the relevant Option Date the relevant Option Price to the Lessor, as
set forth in the Exhibit 2.
13.3 The right of the Lessee to exercise its purchase option is subject to the
following conditions:
(a) the Lessor shall have received, not later then three (3) months
prior to the relevant Option Date written notice of the Lessee's
intention to exercise the option; and
(b) no Default shall have occurred and be continuing when notice is
given or occur prior to the relevant Option Date or as a result of
the Lessee exercising the purchase option.
13.4 Once given, notice of the Lessee's intention to exercise the purchase
option shall be irrevocable.
13.5 When the Lessor has received the Option Price and all other amounts due
hereunder on the relevant Option Date, title to the Equipment (except
software which the Lessee takes possession of but not title as described
in the Supply Agreement) shall vest in the Lessee.
13.6 The Equipment is sold "as is" and "where is". The Lessor warrants that,
immediately prior to transferring title to the Equipment, the Lessor will
have good title to the Equipment free from any liens, charges or
encumbrances created by or through the Lessor other than such that have
been agreed to by the Lessee. Except as aforesaid, the Lessor makes no
warranties, express or implied, whether statutory or otherwise, whether as
to the state of quality of the Equipment or as to description, repair or
fitness for any purpose or otherwise, and all such warranties are hereby
expressly excluded.
13.7 The Lessee shall pay to the Lessor on demand all costs and expenses
incurred by Lessor in connection with the sale of the Equipment under this
Clause 13.
<PAGE>
15(19)
13.8 Should the Lessee not exercise the purchase option, the Lessee may request
an extension of the Lease Period at market conditions to be agreed upon
between the parties. Such request shall be furnished to the Lessor in
writing six (6) months prior to the last day of the Lease Period. Should
the parties not have agreed on the conditions for the extension on the
last day of the Lease Period then the Equipment shall be returned in
accordance with Clause 14.
14 RETURN OF THE EQUIPMENT
14.1 On the last day of the Lease Period, the Lessee shall, unless the Lessee
has acquired title to the Equipment at its own risk and expense, forthwith
return the Equipment together with the Technical Documents unencumbered to
the location the Lessor designates. The Equipment shall be returned in
good repair, only ordinary wear and tear resulting from proper use in
compliance with this Agreement excepted. The Lessee shall have no right to
be reimbursed for any improvement of the Equipment.
14.2 The Lessee shall be responsible for the proper packing of the Equipment
and for shipment and delivery (including payment of freight and insurance)
of the Equipment to the place designated by the Lessor.
15 REPRESENTATIONS AND WARRANTIES
15.1 The Lessee represents and warrants to the Lessor that:
(a) it is duly organized and validly existing under the laws of the
relevant jurisdiction as a limited liability company or other kind
of business entity as described in the recital to this Agreement,
with full power, authority and legal right to carry on its business
as presently conducted, to own its property and to execute, and to
perform all of its obligations under, this Agreement, and all action
required to authorize such execution and performance has been duly
taken;
(b) its operations, and the execution and performance of this Agreement,
have not and will not violate any applicable law or regulation or
contravene any provision of its constituent documents;
(c) all governmental or other licences, consents and authorizations
necessary or desirable for the execution and performance of this
Agreement have been obtained and are in full force and effect;
(d) this Agreement constitutes legally valid and binding obligations of
the Lessee. enforceable in accordance with its terms;
(e) it is not in breach of or in default under any agreement to which it
is a party or by which it or any of its assets is bound, which
breach or default might have a materially adverse affect on the
business or financial condition of the Lessee;
(f) no litigation, arbitration or administrative proceedings are current
or pending or, to its knowledge threatened, which might, if
adversely determined, have a materially adverse effect on its
business or financial condition, or its ability to perform its
obligations under this Agreement;
<PAGE>
16(19)
(g) no Default is subsisting;
(h) the latest annual financial report of the Lessee has been prepared
in accordance with law and generally accepted accounting principles
in the relevant jurisdiction and represents fairly its financial
condition;
(i) all information provided to the Lessor in connection with this
Agreement is true, complete and accurate in all respects and the
Lessee is not aware of any fact or circumstance which has not been
disclosed to the Lessor and which might, if disclosed, be reasonably
expected to adversely affect the decision of a person considering
whether or not to enter into an agreement of this type with the
Lessee;
(j) there are no deductions or withholdings whatsoever, which have to be
made by the Lessee in respect of any payments hereunder;
(k) the copy of the Supply Agreement provided to the Lessor is true,
correct and complete;
(l) the Supply Agreement is in full force and effect and constitutes
legally valid and enforceable obligations of both parties thereto;
(m) it has fully complied with, and duly performed, its obligations
under the Supply Agreement;
(n) other representations and warranties specified in the Special Terms.
15.2 The representations and warranties set out in Clause 15.1 shall survive
the execution of this Agreement and shall be deemed to be repeated on the
Delivery Date, on the Initial Rent Payment Date, on the Lease Commencement
Date and on each Rent Payment Date, with reference to the facts and
circumstances then existing, as made at each such time.
16 RIGHTS, REMEDIES AND WAIVERS
16.1 The rights and remedies of the Lessor in relation to any misrepresentation
or breach of warranty on the part of the Lessee shall not be prejudiced by
any investigation by or on behalf of the Lessor or any of its affiliates
into the affairs of the Lessee, by the execution or the performance of
this Agreement or by any other act or thing which may be done by or on
behalf of the Lessor or any of its affiliates in connection with this
Agreement.
16.2 No course of dealing or waiver by the Lessor in connection with any
provision in this Agreement shall impair any right, power or remedy of the
Lessor with respect to any other provision, or be construed to be a waiver
thereof.
16.3 No course of dealing and no delay in exercising, or omission to exercise,
any right, power or remedy accruing to the Lessor upon any default under
this Agreement or any other agreement shall impair any such right power or
remedy or be construed to be a waiver thereof or an acquiescence therein.
Nor shall the action of the Lessor in respect of any such default, or any
acquiescence by it therein, affect or impair any right, power or remedy of
the Lessor in respect of any other default.
<PAGE>
17(19)
17 MISCELLANEOUS
17.1 The Lessor shall have the right to assign as security its rights under
this Agreement in whole or in part, and to pledge the Equipment as
security for any financing obtained by it. The Lessee undertakes to
respect and comply with any such assignment or pledge and to do all things
necessary or desirable to perfect and evidence any such assignment or
pledge.
17.2 Without prejudice to the Lessor's right to create a security over its
rights hereunder or over the Equipment, the Lessor may assign absolutely
its rights and obligations hereunder without the consent of the Lessee,
provided the Equipment is sold simultaneously to the assignee. The Lessee
shall at the request of the Lessor to take all action necessary or
desirable in connection with any such assignment and sale. The Lessee may
not without the prior written consent of the Lessor assign any rights or
obligations hereunder.
17.3 Each party shall appoint an authorized representative who shall be
entitled to deal with all makers arising under this Agreement and sign any
certificate hereunder or under the Supply Agreement Each authorized
representative may by notice in writing to the representative of other
party appoint a new authorized representative in his own place or as an
alternate for him.
17.4 All information, notices, communications, opinions and the like required
to be given by the Lessee or to be delivered to the Lessor hereunder, if
not in the English language, shall be accompanied by an English
translation. The English version of all such information, notices,
communications, opinions and other documents shall as between the parties
prevail in the event of any conflict with the non-English versions
thereof.
17.5 All notices and other communications under this Agreement shall be in
writing and either delivered by hand or sent by telex, telefax, registered
first-class mail or courier, in each case to the address, telex or telefax
number of the intended recipient as set out in the Special Terms or as
subsequently notified to the other party in accordance herewith. In case
of communication by telex or telefax, the original of the communication
shall be sent by first-class mail to the recipient. A notice delivered by
hand or sent by courier shall be effective when delivered at the address
specified for the recipient. A notice given by any other means shall be
effective when received by the recipient. A notice received on a
non-working day in the place of receipt or after office hours shall be
deemed to have been delivered on the following working day.
17.6 This Agreement supersedes all other agreements, oral or written, with
respect to the subject matter hereof, and contains the entire agreement
between the Lessor and the Lessee with respect to the transactions
contemplated hereunder.
17.7 The Lessee and the Lessor shall, from time to time, do and perform such
other and further acts and execute and deliver any and all other further
instruments as may be required by law or reasonably requested by either
party to establish, maintain and protect the respective rights and
remedies of the other party and to carry out and effect the intent and
purpose of this Agreement.
17.8 The terms and conditions of this Agreement are confidential and shall
neither in whole or in part be disclosed to any person nor published
without the prior written consent of the parties hereto, provided that
this Clause 17.8 shall not prevent disclosure as required by law or
ministerial or judicial or parliamentary authority or to the legal or
audit or taxation advisers or bankers of any party.
<PAGE>
18(19)
17.9 Notwithstanding anything in this Agreement to the contrary, if any payment
by Lessee under this Agreement or the obligation to make the same or the
receipt of the same or the performance by either of the parties hereto of
any other of their obligations hereunder is following the execution of
this Agreement rendered unlawful or illegal in whole or in part by the act
of any government entity so as to render it impossible for the parties
hereto to comply with their respective obligations under this Agreement
then:
(a) the parties hereto shall forthwith negotiate with each other in good
faith with a view to making arrangements whereby such payment can be
made or received or other obligations performed in such manner,
place, currency, and other circumstances as shall be lawful and
legal and so as to achieve substantially the same result so far as
concerns the Lessor and the Lessee as would have been achieved had
such payment, receipt or other obligation not been rendered unlawful
or illegal;
(b) if the parties hereto are unable to reach agreement under Subarticle
(a) above within one month after the date on which the relevant
payment was due to be made or received hereunder or the other
obligations were due to be performed either party hereto shall be
entitled, by notice in writing to the other, to terminate the Lease
Period on the latest date permitted by the relevant act of any
government entity.
On any termination of the Lease Period pursuant to this Subarticle 17.9
the Lessee shall pay to the Lessor an amount equivalent to the Termination
Value.
If and when Lessor has received full payment under this Subarticle 17.9 in
respect of the Equipment, title to the Equipment (except Software, which
Lessee takes possession of but not title as described the Supply
Agreement) shall be transferred from Lessor to Lessee or its designee, and
Lessor shall issue all other relevant documents necessary for such
transfer of title and change of registration of the Equipment subject,
however, to Lessee indemnifying Lessor with respect to past and future
operations and obligations relating to the Equipment in accordance with
Article 8 of this Agreement. Lessee has no right to claim compensation
from Lessor with respect to the condition of the Equipment and confirm
that the condition of the Equipment on such transfer or title shall be "as
is, where is".
17.10 Lessor may set-off or withhold from any amount due and payable to Lessee
under this Agreement, any amount due and payable from Lessee under this
Agreement or any other agreement between the parties hereto.
(The following additional provisions shall only apply to this Agreement to
the extent provided in the Special Terms.)
17.11 At the request of the Lessor, the Lessee shall promptly sign and deliver
to the Lessor the required number of bills of exchange in the Language. In
the bills of exchange the date and the amount shall be left open. The
bills of exchange shall be in the form attached hereto as Exhibit 8. If
any amount hereunder is not paid when due, the Lessor shall be authorized
to date one or several of such bills of exchange, fill in the amount of
the overdue payment and to use such bill(s) of exchange to recover the
overdue payment.
17.12 Without advance notice the Lessor (or its nominee) shall at any time
during working hours have the right to enter the premises of the Lessee or
any other place where the Equipment may be located for the purpose of
inspecting the same or observing its use. Upon the execution of this
Agreement the Lessee shall
<PAGE>
19(19)
provide the Lessor with an authorization to this effect in the Language,
substantially in the form of Exhibit 9.
17.13 Upon the execution of this Agreement the Lessee shall provide the Lessor
with an unconditional authorization for the Lessor (or its nominee) to
repossess the Equipment in the Language. Such authorization shall be
substantially in the form attached hereto as Exhibit 10.
18. APPLICABLE LAW AND JURISDICTION
18.1 This Agreement shall in all respects be governed by and construed in
accordance with Swedish law.
18.2 Any dispute, controversy or claim arising out of or in connection with
this Agreement, or the breach, termination or invalidity thereof, shall be
finally settled by arbitration in accordance with the Rules of the
Arbitration Institute of the Stockholm Chamber of Commerce. The arbitral
tribunal shall be composed of three arbitrators. The proceedings shall
take place in Stockholm and be conducted in the English language.
18.3 Notwithstanding Clause 18.2, the Lessor shall be entitled to institute
proceedings for the payment of any amount due hereunder, to enforce its
rights hereunder to inspect the Equipment, to repossess the Equipment and
to enforce bills of exchange in any competent court of law.
<PAGE>
Exhibit 1 Tranche 1 1(3)
1. UK AXE 1O AS36/43 node Unit Total
AXE10 core (inc AS36 & AS43 s/w) (pound) 618,811 2 618,811
BTC7 Interconnect trunk (pound) 2,805 52 145,860
ITUP/ISUP trunk with echo (pound) 11,944 20 238,880
ITUP/ISUP trunk without echo (pound) 2,805 30 84,150
BT C7 intermachine trunk (pound) 4,511 16 72,176
DASS2 trunk (pound) 4,400 16 70,400
DPNSS trunk (via sig con) (pound) 7,049 8 56,392
C7 signalling pairs (pound) 3,995 12 47,940
AXE 10 spares set (pound) 77,569 1 (pound) 77,569
AXE 10 documentation Included in core price
SMAS hardware (pound) 81,000 1 81,000
SMAS software (pound) 180,000 1 180,000
Access Screening Service (pound) 160,000 1 60,000
Billing interface processor (pound) 84,410 1 (pound) 84,410
Total (pound)1,917,588
6% discount (pound) 115,055
UK Grand total (pound)1,802,533
<PAGE>
Exhibit 1 Tranche 1 2(3)
2. Sweden AXE 10 12.3 node
Unit Total
AXE 10 core (inc 12.3 software &
spare parts kit) SEK 7,822,O00 1 7,822,000
Initial 4K group switch SEK 1,040,000 1 1,040,000
Transit application package SEK 2,200,000 1 2,200,000
2Mb/s trunk including Echo
cancellor SEK 114,000 16 1,824,000
2Mb/s trunk excluding Echo
cancellor SEK 26,600 39 1,037,400
Signalling routes SEK 34,000 16 544,000
ISDN 2Mb/s PRA SEK 3O,000 5 150,000
Documentation SEK 5OO,000 1 500,000
Remote subscriber Multiplexer (RSM) SEK 72,500 1 72,500
(X/FN-95;293)
Total SEK 15,189,900
6% discount SEK 911,394
Sweden Grand total SEK 14,278,506
<PAGE>
Exhibit 1 Tranche 1 3(3)
3. Finland Mini AXE10 12.3
Unit Total
AXE 10 core FIM 1,129,700 1 1,129,700
Remote subscriber stage (RSS) FIM 192,500 1 192,500
Basic AS33 software FIM 810,000 1 810,000
National ISUP signalling software FIM 125,000 1 125,000
International ISUP signalling software FIM 250,000 1 250,000
ISDN PRA software FIM 60,000 1 60,000
ISDN BRA software FIM 130,000 1 130,000
Creation of basic software and data FIM 68,000 1 68,000
Creation of Nat. and Intl. ISUP software
and data FIM 50,000 1 50,000
Creation of ISDN basic services,
software and data FIM 50,000 1 50,000
Power (main supply with back up) FIM 119,600 1 119,600
DC/AC convertors FIM 12,000 2 24,000
MDF and DDF FIM 18,350 1 18,350
AXE 10 documentation Included in core price
Total FIM 3,027,150
6% discount FIM 181,629
Finland Grand total FIM 2,845,521
<PAGE>
1(1)
EXHIBIT 2
OPTION DATES AND PRICES
Rent Payment Date Option Price in per cent of the
----------------- -------------------------------
Purchase Price
--------------
8 71,63
12 40
16 25,81
19 14,12
<PAGE>
1(1)
EXHIBIT 3
TERMINATION VALUE
Rent Payment Date Termination Value in
----------------- --------------------
percent of the
--------------
Purchase Price
--------------
1 100.00
2 100.00
3 100.00
4 100.00
5 93.19
6 86.20
7 79.01
8 71.63
9 64.04
10 56.24
11 48.23
12 40.00
13 36.60
14 33.10
15 29.51
16 25.81
17 20.02
18 18.12
19 14.12
20 10.00
If the Termination Value becomes due and payable on a Rent Payment Date,
it shall be the amount set out above. If the Termination Value becomes due
and payable on any other day, it shall be the amount set out above for the
preceding Rent Payment Date plus interest on such amount at the Interest
Rate from the preceding Rent Payment Date to the day when the Termination
Value becomes due and payable. If the Termination Value is not paid on the
due date, Default Interest will be payable on the Termination Value in
accordance with Clause 6.7.
<PAGE>
1(3)
EXHIBIT 5
CONSENT AND AGREEMENT
relating to
a supply agreement made between Ericsson Ltd., UK (the "supplier") and RSL
Com Europe Ltd., UK (the "Assignor") and dated, December 6, 1995 (the
"Supply Agreement")
and
a lease agreement made between AB L M Ericsson Finans (the "Assignee") as
lessor and the Assignor as lessee and dated April 10, 1996 (the "Lease
Agreement").
Terms defined in the Lease Agreement and not otherwise defined herein
shall bear the same meaning when used herein.
1. Pursuant to Clause 3.1 of the Lease Agreement, the Assignor has
assigned to the Assignee all of the Assignor's rights and interest
in respect of the Equipment under the Supply Agreement, including in
particular the right to acquire title to and ownership of the
Equipment Pursuant to Clause 3.2 of the Lease Agreement, the
Assignee has assumed certain of the Assignor's obligations under the
Supply Agreement, including in particular the obligation to pay the
Purchase Price. The Supplier hereby acknowledges notice of and
consents to the aforementioned assignment and assumption and to all
terms of Clause 3 of the Lease Agreement
2. If the Lease Commencement Date has not occurred on or prior to the
Final Availability Date, the Assignee shall under Clause 3.6 of the
Lease Agreement be entitled to terminate the Lease Agreement by
giving written notice to the Supplier and the Assignor. Following
such notice, the Supplier agrees that the Supply Agreement shall
apply between the Assignor and the Supplier as if this Consent and
Agreement had never been executed and the Assignee shall have no
rights or obligations under the Supply Agreement.
3. The Supplier hereby acknowledges and accepts that the Assignor shall
prior to the Lease Commencement Date, in accordance with the Lease
Agreement and the authorities and instructions from time given by
the Assignee, be entitled to exercise certain of the rights under
the Supply Agreement assigned to the Assignee.
<PAGE>
2(3)
4. The Supplier hereby acknowledges and accepts the assignment
contained in Clause 5.6 of the Lease Agreement, according to which
any and all guarantees, warranties and other rights (ownership
excluded) given in respect of the Equipment under the Supply
Agreement and assigned to the Assignee absolutely (as described in
paragraph 1 hereof) shall for the Lease Period be assigned to the
Assignor. Following written notice from the Assignee that the Lease
Period has expired or terminated otherwise than by the Assignor
purchasing the Equipment, the aforementioned assignment shall
immediately terminate.
5. Amendments to the Supply Agreement; [ ]
6. All notices and other communications under this consent and
Agreement shall be in writing and either delivered by hand or sent
by telex, telefax, registered first-class mail or courier, in case
of the Assignor or the signer to the address, telex or telefax
number set out in the Lease Agreement, and in case of the Supplier
to the address, telex or telefax number set out in the Supply
Agreement, or as subsequently notified by any party to the other
parties in accordance herewith. In case of communication by telex or
telefax, the original of the communication shall be sent by
first-class mail to the recipient. A notice delivered by hand or
sent by courier shall be effective when delivered at the address
specified for the recipient. A notice given by any other means shall
be effective when received by the recipient. A notice received on a
non-working day in the place of receipt or after office hours shall
be deemed to have been delivered on the following working day.
7. This Consent and Agreement shall in all respects be governed by and
construed in accordance with Swedish law.
8. Any dispute, controversy or claim arising out of or in connection
with this Consent and Agreement, or the breach, termination or
invalidity thereof, shall be finally settled by arbitration in
accordance with the Rules of the Arbitration Institute of the
Stockholm Chamber of Commerce (the "Institute"). The arbitral
tribunal shall be composed of three arbitrators. Unless the parties
agree otherwise all arbitrators shall be nominated by the Institute.
The proceedings shall take place in Stockholm and be conducted in
the English language.
9. The parties agree that in the event that there are, at the time any
party desires to initiate arbitration proceedings against any other
party hereunder, pending or contemplated proceedings under the Lease
Agreement or the Supply Agreement, all proceedings shall be
cumulated. If
<PAGE>
3(3)
proceedings are pending under the Lease Agreement or the Supply
Agreement, the proceedings hereunder shall be referred to the
arbitral tribunal for such pending proceedings, unless the tribunal
decides that a cumulation is not expedient. If no proceedings are
pending, one arbitral tribunal shall be nominated for all
proceedings. All arbitrators in such tribunal shall, unless the
parties agree otherwise, be nominated by the Institute.
Date: 24/4/96 Date: 10/4/96
ERICSSON LTD. RS CM EUROPE LTD.
/s/ /s/ RS CM Europe Ltd.
--------------------------- --------------------------
Date: 10 April -96
AB LM ERICSSON FINANS
/s/ AB LM Ericsson Finans
---------------------------
<PAGE>
EXHIBIT 6
CERTIFICATE OF DELIVERY/ACCEPTANCE*
LEASE AGREEMENT dated
We hereby confirm that the equipment is duly delivered to/accepted
by* us in accordance with and subject to the provisions of the
Supply Agreement, and that the conditions of such equipment in all
respects complies with the provisions of the Lease Agreement.
The equipment ______________________________________________________
was delivered to/Accepted by* us on ________________________________
in accordance with the invoice(s) No. ______________________________
_______________________ _______________________
(place) (Date)
RSL COM EUROPE LTD
_________________________
(Signature)
* Delete as appropriate.
<PAGE>
1(1)
EXHIBIT 7
RENT PAYMENTS
(Lease Commencement Date 0)
Percent of the
Purchase Price Outstanding balance in
Rent Payment Date in each Rent Payment percent of the Purchase Price
----------------- -------------------- -----------------------------
1 0 100
2 0 100
3 0 100
4 0 100
5 6,81 93,19
6 6,99 86,20
7 7,19 79,01
8 7,38 71,63
9 7,59 64,04
10 7,80 56,24
11 8,01 48,23
12 8,23 40,00
13 3,40 36,60
14 3,50 33,10
15 3,59 29,51
16 3,69 25,81
17 3,79 22,02
18 3,90 18,12
19 4,01 14,12
20 4,12 10,00
<PAGE>
EXHIBIT 11
DATED MAY 1996
RSL COM EUROPE LIMITED
to
AB LM ERICSSON FINANS
DEBENTURE
<PAGE>
THIS DEBENTURE is made the day of May 1996
BETWEEN:
(1) RSL COM EUROPE LIMITED (registration number 3040192) whose registered
office is at 9 Old Queen Street, Westminster, London SW1H 9JA, England ("the
Company");
and
(2) AB LM ERICSSON FINANS, a Swedish limited liability company ("the
Chargee").
NOW THIS DEED WITNESSETH as follows:
1. The Company hereby:
1.1 COVENANTS with the Chargee to pay and discharge as and when the same
fall due all its indebtedness and other obligations to the Chargee both present
and future and howsoever arising whether solely or jointly with any other
person and whether as principal or surety including interest thereon at such
rate as may be agreed in writing from time to time between the Company and the
Chargee and whether before or after the execution of this Debenture and together
also with all charges costs and expenses payable in connection therewith
(collectively "the Secured Liabilities"); and
1.2 with full title CHARGES in favour of the Chargee by way of floating
charge the whole of its undertaking and all its property assets and rights
(collectively "the Charged Property") as a continuing security for the payment
and discharge of the Secured Liabilities.
2. Power is hereby reserved to the Company to create or leave outstanding any
Debenture, fixed charge or other security of whatsoever kind over the whole or
any part of the Charged Property but not a floating charge, such Debenture,
charge or security but not a floating charge to rank in point of security in
priority to the floating charge hereby created and the Chargee agrees at the
cost of the Company to execute such documents as the Company may reasonably
request to give effect hereto.
<PAGE>
3. The moneys hereby secured shall become payable and all rights of the
Company to deal for any purpose whatever with the Charged Property or any part
thereof shall forthwith cease on the happening of any of the following events:-
3.1 if an order is made or an effective resolution passed for winding up
the Company
3.2 if a petition is presented or an order is made against the Company for
the appointment of an administrator
3.3 if the Company stops payment or ceases to carry on its business or
substantially the whole of its business or threatens to cease to carry on the
same or if the Company without the prior consent in writing of the Chargee shall
sell assign, charge, hire, lease or part with or share possession of or
otherwise dispose of the Charged Property or any part thereof or any interest of
the Company therein or purport so to do
3.4 if any encumbrancer takes possession or a receiver administrative
receiver or manager is appointed of all or any part of the property of the
Company;
3.5 if the Company makes any agreement or composition with its creditors
4. Further, the Chargee may under the hand of any of its officers or managers
or by deed appoint a Receiver or Receivers of the whole or any part of the
Charged Property only if at the time of such appointment a petition shall have
been presented applying for an administration order to be made in respect of the
Company.
A Receiver so appointed may (subject to statute) be removed in like
manner.
5. Every such Receiver shall:-
5.1 be the agent of the Company (which shall be solely responsible for his
acts defaults expenses and remuneration);
<PAGE>
5.2 be remunerated at such rate as the Chargee shall determine;
5.3 have (and if more than one may exercise severally or jointly) the
powers set out in Schedule 1 to the Insolvency Act 1986;
5.4 (subject to the discharge of liabilities having priority to the
Secured Liabilities and save insofar as otherwise directed by the Chargee) apply
all money received by him first in the payment and discharge of his borrowings,
expenses, other liabilities and remuneration secondly, in or towards discharge
of the Secured Liabilities in such order as the Chargee may require and thirdly
in payment of any surplus to the Company or other person entitled thereto.
6. 6.1 This Debenture shall be in addition to and shall be independent of
every other security which the Chargee may at any time hold for any of the
liabilities of the Company to the Chargee. No prior security held by the Chargee
over the whole or any part of the Charged Property shall merge in the security
hereby constituted.
6.2 This Debenture shall remain in shall force and effect as a continuing
security until discharge by the Chargee.
6.3 Noting contained in this Debenture is intended to, or shall operate so
as to, prejudice or affect any bill, note, guarantee, Debenture, pledge, charge
or other security of any kind whatsoever which the Chargee may have for the
liabilities of the Company or any of them or any right, remedy or privilege of
the Chargee thereunder.
7. The Chargee shall not nor shall any Receiver appointed as aforesaid by
reason of him or the Receiver entering into possession of the Charged Property
or any part thereof be liable to account as chargee in possession or be liable
for any loss on realization or for any default or omission for which a chargee
in possession might be liable but every Receiver duly appointed by the Chargee
under the powers in that behalf hereinbefore contained shall be deemed to be the
agent of the Company for all purposes and shall as sub-agent for all purposes be
deemed to be in the same position as a Receiver duly appointed by a chargee
under the Law of Property Act 1925 and every such Receiver and the Chargee shall
be
<PAGE>
entitled to all the rights powers privileges and immunities by the said Act
conferred on chargees and receivers when such receivers have been duly appointed
under the Act
8. No purchaser chargee or other person a company dealing with the Chargee
or the Receiver or their respective agents shall be concerned to enquire whether
the moneys hereby secured have become payable or whether the power which the
Receiver is purporting to exercise has become exercisable or whether any money
remains due on this Debenture or to see to the application of any money paid to
the Chargee or to such Receiver
9. The chargee and every Receiver attorney manager agent or other person
appointed by the Chargee hereunder shall be entitled to be indemnified out of
the Charged Property on a full indemnity basis in respect of all liabilities
and expenses incurred by him in the execution or purported execution of any of
the powers authorities or discretions vested in him pursuant to these conditions
and against all actions proceedings costs claims and demands in respect of any
matter or thing done or omitted in anywise relating to the Charged Property or
in connection with the perfection or enforcement or attempted enforcement of
the security hereby constituted or any other security held by the Chargee for
the liabilities of the Company to the Chargee or any guarantee to the Company in
respect thereof and the Chargee and any such Receiver may retain and pay all
sums in respect of the same out of any moneys received under the powers hereby
conferred
10. A notice may be served by leaving it at or by sending it through the post
to the registered office of the Company or to the Chargee at the address
hereinbefore set out (as the case may be) and any notice posted shall be deemed
to have been served at the expiration of seventy-two hours after it has been
posted and in proving service of such notice it shall be sufficient to prove
that the envelope containing the same was properly addressed stamped and posted
<PAGE>
11. This Debenture shall be governed by and construed in accordance with
English law, and the Company hereby irrevocably submits to the non-exclusive
jurisdiction of the English courts.
12. Each of the provision contained in this Debenture shall be severable and
distinct from one another and if at any time any one or more of such provisions
is or becomes invalid, illegal or unenforceable, the validity, the legality and
unenforceability of each of the remaining provision of this Debenture shall not
in any way be affected, prejudiced or impaired thereby.
13. The Chargee shall have a full and unfettered right to assign the whole or
any part of the benefit of this Debenture and the expression "the Chargee"
wherever used herein shall he deemed to include the assignees and other
successors, whether immediate or derivative, of the Chargee, who shall be
entitled to enforce arid proceed upon this Debenture in the same manner as if
named herein. The Chargee shall be entitled to impart any information concerning
the Company to any such assignee or other successor or any participant or
proposed assignee, successor or participant.
14. 14.1 Any reference herein to any statute or to any provision of any
statute shall be construed as a reference to any statutory modification or
re-enactment thereof and to any regulations or orders made thereunder and from
time to time in force.
14.2 The Clause headings shall not affect the construction hereof.
15. The Company hereby certifies that its creation by this Debenture in favour
of the Chargee does not contravene any of the provisions of its Memorandum and
Articles of Association
IN WITNESS whereof the Company and the Chargee have executed this deed the day
and year first above written.
<PAGE>
THE COMMON SEAL of )
RSL COM EUROPE LIMITED )
was hereunto affixed in )
the presence of: )
Director /s/ [ILLEGIBLE]
Secretary
SIGNED as a DEED by )
AB LM ERICSSON FINANS )
acting by )
)
Director /s/ [ILLEGIBLE]
Director /s/ [ILLEGIBLE]
<PAGE>
Exhibit 10.20
Lease Agreement
- --------------------------------------------------------------------------------
Lease agreement (Tranche 3)
between
RSL Com Europe Ltd
and
AB LM Ericsson Finans
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
Lease Agreement
- --------------------------------------------------------------------------------
Contents;
1. General Agreement
2. Tranche 3 Special Terms
3. General Terms
4. Exhibit 1 - Description of the equipment
5. Exhibit 2 - Option dates and option prices
6. Exhibit 3 - Termination value
7. Exhibit 5 - Form for supplier's consent
8. Exhibit 6 - Form for acceptance of delivery
9. Exhibit 7 - Rent payments
10. Exhibit 11 - Debenture
11. Exhibit 12 - Form for sub-lessee's consent
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
General Agreement 1(12)
- --------------------------------------------------------------------------------
AGREEMENT
between
AB L M ERICSSON FINANS
and
RSL COM EUROPE LIMITED
relating to
Lease of Tranche 1, Tranche 2, Tranche 3 and Tranche 4 for
RSL's European Network Roll-Out
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
General Agreement 2(12)
- --------------------------------------------------------------------------------
This agreement ("Agreement") is made and entered into between
AB L M ERICSSON FINANS, a Swedish limited liability company,
and
RSL Com Europe Ltd., a UK limited liability company with its
registered address at 9 Old Queens Street Westminster London, SW1H
9JA England.
-------------- o --------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed in two counterparts on the last day below written.
AB LM ERICSSON RSL COM EUROPE LTD
FINANS
Date: Date: 10/4/96
By: /s/ AB LM Ericsson Finans By: /s/ R. WILLIAMS
------------------------- -----------------------
Name: AB LM Ericsson Finans Name: R. WILLIAMS
-----------------------
Title: ______________________ Title: President & CEO
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
General Agreement 3(12)
- --------------------------------------------------------------------------------
AGREEMENT
This agreement outlines the Special Terms for the lease agreement
under which AB LM Ericsson Finans is prepared to undertake the
commitment to provide a lease facility to RSL Com Europe Ltd up to
the equivalent of USD 10,000,000 (ten million US dollars).
Each individual lease agreement (for tranche 1, tranche 2, tranche 3
and tranche 4) will consist of the following:
o Special Terms which will consist of clauses 1 to 18 below as
modified to reflect tranche specific circumstances. Where a
clause is left blank in the Special Terms the corresponding
clause of the General Terms shall apply.
o General Terms
o Exhibits: Exhibit 1 is tranche specific.
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
General Agreement 4(12)
- --------------------------------------------------------------------------------
1 DEFINITIONS
1.1 In each tranche specific lease agreement, the following terms and
conditions, which are not defined in the General Terms, shall have
the following meanings:
"Account": tranche specific.
There is no collateral provided for the Lessee's obligations under
the Agreement and all references to "Collateral" shall be
inoperative.
"Currency of Payment": tranche specific
"Commitment" means the commitment of Lessor to provide a lease
facility to lessee up to the equivalent of USD 10,000,000 (ten
million US dollars). This Commitment can be drawn in no more than
four tranches. Tranches shall consist of equipment as follows:
o Tranche 1, all equipment in order Y3344 (contract December 7,
1995) excluding Sweden and Finland SSP SW
o Tranche 2, equipment in respect of which lessee shall have issued
acceptance certificates issued by Lessee for the Equipment in
accordance with Clause 4.3 of the General Terms, before July 1,
1996
o Tranche 3, equipment in respect of which lessee shall have issued
acceptance certificates issued by Lessee for the Equipment in
accordance with Clause 4.3, before January 1, 1997
o Tranche 4, equipment in respect of which lessee shall have issued
acceptance certificates issued by Lessee for the Equipment in
accordance with Clause 4.3, before July 1, 1997
"Expire Date" means the date occurring 72 months after the Lease
Commencement Date, or such later date as may follow from an
agreement to extend the lease pursuant to Clause 13.8.
"Final Availability Date" means
o for Tranche 1, June 30, 1996,
o for Tranche 2, July 2, 1996,
o for Tranche 3, January 2, 1997,
o for Tranche 4, July 2, 1997.
"Language" means the English language.
"Lease Commencement Date" means,
o for Tranche 1, in respect of the AXE 10 Switching Systems at any
location, the date when the acceptance certificate is issued by
Lessee for the Equipment at that Location in accordance with
Clause 4.3 or such other date when the Equipment shall be deemed
to be accepted by the Lessee hereunder.
o for Tranche 2, 1 July 1996
o for Tranche 3, 1 January 1997
o for Tranche 4, 1 July 1997
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
General Agreement 5(12)
- --------------------------------------------------------------------------------
"LOCATION": tranche specific.
"MARGIN" means four and one half (4.5) percentage points.
"PURCHASE PRICE" means the sum specified in exhibit 1 for each
tranche.
"SECURITY DOCUMENTS" means the Debenture comprised in Exhibit 11.
There is no "SECURITY PROVIDER" under the Agreement and all
references to "SECURITY PROVIDER" shall be inoperative.
"SUPPLIER": tranche specific and means the Ericsson company with
whom a supply agreement is concluded.
"SUPPLY AGREEMENT" Tranche specific and means a Supply and
Installation Contract to be concluded between Lessee and Supplier.
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General Agreement 6(12)
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2 CONDITIONS PRECEDENT
2.1 The following additional documents shall be delivered pursuant to
Clause 2.1:
A business plan reflecting the equity increase provided for in
Clause 2.2.
Sub-lessee's consent, in the form attached hereto as Exhibit 12,
signed and delivered by Cyberlink Sweden AB, Sweden, and Cyberlink
International OY, Finland.
Clause 2.1(g) regarding legal opinion shall not be applicable.
2.2 The following additional condition(s) shall be met pursuant to
Clause 2.2:
Lessee shall increase the value of the equity of Lessee with USD
four million six hundred thousand (4,600,000) (such equity to be
defined in accordance with the International Accounting Standards of
IASC) evidenced by a balance sheet certified by the Lessee's
auditors.
The Debenture (Exhibit 11) shall become effective.
3 ASSIGNMENT
Clause 3.1 shall read as follows:
3.1 The Lessee does hereby assign to the Lessor all of the Lessee's
rights and interest in respect of the Equipment under the Supply
Agreement, including, but not limited to, the right to acquire
ownership to hardware parts and license to use software parts of the
Equipment and the benefit of all warranties in respect of the
Equipment contained in the Supply Agreement. In the event that
ownership rights of any hardware parts have already been transferred
from Supplier to Lessee under the Supply Agreement such ownership
rights are hereby assigned to Lessor.
3.2 The Lessor hereby assumes the Lessee's obligation to pay the
Purchase Price and take delivery of the Equipment under the Supply
Agreement. The Lessor does not assume any of the Lessee's other
obligations under the Supply Agreement, and the Lessee shall in
respect of such obligations at all times remain liable to the Seller
as if this Agreement had not been executed.
3.3 When the Lessor exercises any of the rights under the Supply
Agreement or makes any claim with respect to the Equipment, the
terms and conditions of the Supply Agreement shall apply to, and be
binding upon, the Lessor.
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General Agreement 7(12)
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3.4 The Lessor shall procure that the Seller consents to the assignment
and assumption by the Lessor of certain rights and obligations under
the Supply Agreement in the form attached hereto as Exhibit 5.
Except as provided in Exhibit 5, the Supply Agreement shall
not be modified by this Agreement.
3.5 Neither party shall enter into any other agreement that would amend,
modify or supplement the Supply Agreement without the prior written
consent of the other party.
3.6 If the Lease Commencement Date has not occurred on or prior to the
Final Availability Date, the Lessor shall be entitled to terminate
this Agreement by giving written notice to the Lessee and the
Supplier. Following such notice of termination all rights assigned
to the Lessee pursuant to Clause 3.1 shall be reassigned to the
Lessee, and the Lessor shall be released from the obligations
assumed pursuant to Clause 3.2, which shall be reassumed by the
Lessee. On receipt of the Lessor's certificate evidencing the
Lessor's costs incurred in connection with the entering into and
termination of this Agreement, the Lessee shall promptly reimburse
the Lessor for all such costs.
Clause 3 shall not apply to any services. Examples of services are
Interconnect support, On-site second line support, On-site services
and Support for maintenance.
4 SELECTION, DELIVERY AND INSPECTION
4.6 Equipment already in the possession of the lessee on the date of
this agreement shall be deemed to be delivered, and shall be
accepted by the lessee pursuant to this clause 4 unless otherwise
agreed in writing by the lessor.
5 LEASE
5.6 The following sentence shall be read in conjunction with clause 5.6
of the General Terms:
For the avoidance of doubt, the Guarantees and Warrantees and other
rights refer to the rights of the lessee arising under the supply
agreement and any reference to rights in this clause 5.6 shall
include Guarantees and Warranties.
6 PAYMENTS
6.1 Clause 6.1 shall not be applicable.
6.2 For Tranche 2, Tranche 3 and Tranche 4 only, Initial Rent Payment
shall be capitalised and added to the outstanding balance of the
Purchase Price for all purposes of this agreement.
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General Agreement 8(12)
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The initial Rent Payment shall be calculated as follows:
Accrued interest on the aggregate amounts paid by Lessor for the
applicable items of Equipment under the terms of Supply Agreement,
up to and including the Lease Commencement Date. This payment shall
accrue at an interest rate which shall be equal to one month LIBOR,
as defined below, plus four and one half (4.5) percentage points, as
determined on the first Business Day of each month. The interest
shall be calculated on the basis of actual days elapsed, but
computed using a 360-day year, and shall be compounded monthly.
One month LIBOR shall be determined as the arithmetic mean of the
rates of interest per annum for one month's deposits of US Dollars
which are offered to prime banks that participate in the London
market
(i) as such rates appear on the page designated as page "LIBO" on
the Reuters Monitor Money Rates Service ("LIBO Page") as of
10.00 a.m. (London time) on such date, if two or more
quotations appear on the LIBO Page for such date, or
(ii) by the principal London offices of Barclays Bank plc, Morgan
Guaranty Trust Company of New York, and National Westminster
Bank plc as of 10.00 a.m. (London time) on such date, if fewer
than two quotations appear on the LlBO Page for such date.
6.3 Lessee covenants and agrees to pay Lessor in immediately available
funds twenty (20) Rent Payments in arrears during the Lease Period.
The first Rent Payment shall become due on the day falling six (6)
months after the Lease Commencement Date which is for:
o Tranche 1, attributable to the date of the first AXE 10 Switching
System to be accepted.
o Tranche 2, July 1, 1996
o Tranche 3, January 1, 1997
o Tranche 4, July 1, 1997.
Thereafter, the following three (3) Rent Payments shall become due
on the last day of each following six (6) months period. Thereafter,
the following sixteen (16) Rent Payments shall become due on the
last day of each following three (3) months period, provided
however, that the last Rent Payment shall become due on the last day
of the Lease Period.
6.12 For each amount of the Purchase Price to be paid by the Lessor to
the Supplier in currency different from GBP, the Lessor will
determine the Purchase Price in GBP by converting such amount into
GBP at the rate of exchange at which the Lessor is or would be able
to purchase GBP in the foreign exchange market for spot delivery at
or around 11.00
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General Agreement 9(12)
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a.m. Stockholm time two (2) Business Days prior to the date of
Lessor's payment.
6.13 The Lessor shall notify the Lessee of the amount of any Rent Payment
due no later than 10 working days prior to the relevant Rent Payment
date.
7 USE, MAINTENANCE AND ALTERATIONS
7.5 Subject as provided herein, the Lessee may not, without prior
written notice to the Lessor, permanently remove any part from, or
alter or make additions to, the equipment. Such written notice shall
be without responsibility on the part of the lessor for any
interference with the operations of the equipment or impairment of
its value.
7.8 Lessee may sub-lease the Equipment to Cyberlink Sweden AB and
Cyberlink International OY, provided that (i) the sub-lease shall
terminate one day prior to the expiration or termination for
whatever cause of this Agreement, (ii) the sub-lessee shall
undertake in writing to be bound by the terms and conditions of this
Agreement and accept Lessor as third party beneficiary, (iii) Lessee
shall remain responsible to Lessor in accordance with the terms of
this Agreement and shall be responsible to Lessor for any acts or
omissions of the sub-licensee as if such acts and omissions were
undertaken by Lessee, and (iv) the sub-lessees shall have executed
the sub-lessee's consent attached hereto as Exhibit 12.
8 INDEMNITIES
8.3 The Lessee shall be responsible for and reimburse the lessor against
all taxes, duties and other charges levied or imposed by any
Government or local authority against the Lessor or the Lessee and
relating to this agreement or the Equipment except for taxes on the
Lessor's overall income.
9 INSURANCES
[ ]
10 INFORMATION
10.1 (f) budget for the current year in the form of consolidated
balance sheet, consolidated cash flow and consolidated income
statement, and projections for the following year of
consolidated balance sheet, consolidated cash flow and
consolidated income statement, and upon request from lessor,
detailed information to be reviewed at lessee's premises.
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General Agreement 10(12)
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10.1 (h) site asset register
11 OWNERSHIP AND MARKING
11.1 [ ]
11.2 There shall be, displayed in a prominent position in the immediate
vicinity of the equipment which is subject to this lease, a notice
bearing the inscription "Any and all equipment in this room bearing
the Ericsson name is owned by AB LM Ericsson Finans." This notice
will be provided and affixed by Ericsson.
The inscription provided for in Clause 11.2 shall be in English,
Swedish or Finnish as applicable.
12 EVENTS OF DEFAULT
12.1 (a) the lessee shall fail to pay any amount due under this
agreement within five (5) business days after notice thereof
has been given to the lessee;
12.1 (q) The debt/equity ratio of Lessee exceeds one to one (1:1).
For this purpose:
(i) debt is defined as any indebtedness to a third party, any
indebtedness to any affiliate to Lessee which is not
subordinated to this Agreement, and including debt
obligations under this Agreement
(ii) equity is defined as the sum of ordinary share capital issued
and fully paid together with any fully paid share premium, any
undistributable reserves, any retained earnings and any
indebtedness which is subordinated to the obligations under
this Agreement
12.2 (a) enter the premises of the lessee or any other place where the
equipment may be located and reposess the equipment,
disconnecting and separating all thereof from any other
property using all reasonable means necessary to do so.;
13 PURCHASE OPTION
The Option Dates and the Option Prices are defined in Exhibit 2. The
Lessee shall pay to the Lessor 70% of all costs and expenses
incurred by Lessor in connection with the sale of the Equipment
under this Clause 13, where costs and expenses are defined as the
actual administrative costs at no more than (pound)19,000 (nineteen
thousand) per purchase option exercise event, where each event can
encompass one or several tranches
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General Agreement 11(12)
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14 RETURN OF THE EQUIPMENT
14.1 The Equipment shall be returned to Stockholm, Sweden to the premises
of the Lessor, or as otherwise notified by Lessor
15 REPRESENTATIONS AND WARRANTIES
15.1 The following additional representation and warranty is made by the
Lessee:
- the business plan related to Lessee's business activities provided
for in Clause 2.1 has been prepared in accordance with generally
accepted accounting principles and practices in the UK and present
fairly and correctly the financial position of Lessee as at the date
thereof and the results of the operations of Lessee, respectively,
for the period referred to in the business plan, and as at date
referred to in the business plan, Lessee had no significant
liabilities (contingent or otherwise) which are not disclosed by, or
reserved against, in the business plan.
16 RIGHTS REMEDIES AND WAIVERS
[ ]
17 MISCELLANEOUS
17.5 Lessor AB L M ERICSSON FINANS
S-126 25 STOCKHOLM
Sweden
Telephone: +46 8 719 00 00
Telefax: +46 8 719 90 50
Telex: 14910 ERIC S
For the attention of: Finance department
Lessee: RSL COM EUROPE LTD
Victoria House
London Square
Cross Lanes
Guidford
Surrey
England
Telephone: +44 1483 457300
Telefax: +44 1483 457733
For the attention of: Mr. Richard Williams
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General Agreement 12(12)
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17.11 Clause 17.11 shall not apply.
17.12 With advance notice of five (5) Business days, the lessor (or its
nominee) shall at any time during working hour have the right to
enter the premises of the lessee or any other place where the
equipment may be located for the purpose of inspecting the same or
observing its use.
17.13 Clause 17.13 shall not apply.
17.14 The following additional provisions shall apply.
The Lessee shall not, without Lessors prior written consent, create,
assume, incur or suffer to be created, assumed or incurred or permit
to subsist any mortgage, lien, pledge or other encumbrance of any
kind ("Encumbrance") upon any of its present or future revenues or
assets, for the purpose of securing any indebtedness (or any
guarantee or other obligation in respect of any indebtedness) now or
hereafter existing. Lessee shall however be entitled to make such
Encumbrance, except any Encumbrance on the equipment subject to this
Agreement without Lessor's prior consent for securing medium and
long term indebtedness with an aggregate value not exceeding USD
2,000,000.
17.15 For tranche 1 only, in the event that the Swedish Export Credit
Board (EKN) would approve a guarantee of the lease payments within
four (4) months from the date of this agreement, either party may
call for good faith negotiations as to the amendment of relevant
parts of this agreement. Should the parties not be able to agree on
such amendment within two (2) months from the date of the EKN
approval, this agreement shall remain in full force without any
changes.
18 APPLICABLE LAW AND JURISDICTION
[ ]
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Special Terms - Tranche 3 1(11)
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LEASE AGREEMENT
between
AS L M ERICSSON FINANS
and
RSL COM EUROPE LIMITED
relating to
TRANCHE 3
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Special Terms - Tranche 3 2(11)
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This lease agreement ("Agreement") is made and entered into between
AB L M ERICSSON FINANS, a Swedish limited liability company,
hereinafter called the "Lessor",
and
RSL Com Europe Ltd., a UK limited liability company with its
registered address at 9 Old Queens Street Westminster London, SW1H
9JA England, hereinafter called the "Lessee".
This Agreement, consisting of this signature cover page, the general
terms of Agreement ("General Terms") and the special terms of
Agreement ("Special Terms") as well as the Exhibits (as defined
below), sets out the terms on which the Lessor agrees to lease the
Equipment (as defined below) to the Lessee. The General Terms set
out the main terms of the Agreement. The Special Terms set out the
customer specific terms of the Agreement, as an amendment or
complement to the corresponding terms (with corresponding numbering)
of the General Terms.
---------- o ------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed in two counterparts on the last day below written.
AB L M ERICSSON RSL COM EUROPE LTD
FINANS
Date: 30 December, 1996 Date: 24th December 1996
By: /s/ AB L M Ericsson Finans By: /s/ R. E. Williams
-------------------------- -----------------------
Name: /s/ AB L M Ericsson Finans Name: /s/ R. E. WILLIAMS
-------------------------- -----------------------
Title: ___________________ Title: President & CEO
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Special Terms - Tranche 3 3(11)
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TABLE OF CONTENTS
SPECIAL TERMS/GENERAL TERMS
1 Definitions 4
2 Conditions precedent 5
3 Assignment 5
4 Selection, delivery and inspection 6
5 Lease 6
6 Payments 7
7 Use, maintenance and alterations 8
8 Indemnities 8
9 Insurances 8
10 Information 8
11 Ownership and marking 9
12 Events of default 9
13 Purchase option 9
14 Return of the equipment 10
15 Representations and warranties 10
16 Rights, remedies and waivers 10
17 Miscellaneous 10
18 Applicable law and jurisdiction 11
EXHIBITS
1 Description of the Equipment
2 Option Dates and Option Prices
3 Termination Value
4 (Not applicable)
5 Form for Supplier's consent
6 Form for acceptance of delivery
7 Rent Payments
8 (Not applicable)
9 (Not applicable)
10 (Not applicable)
11 Debenture
12 Form for sub-lessee's consent
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Special Terms - Tranche 3 4(11)
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SPECIAL TERMS
1 DEFINITIONS
1.1 In this Agreement the following terms and conditions, which are not
defined in the General Terms, shall have the following meanings:
"ACCOUNT" means, on the date hereof, Lessors account #5554-822959
with Skandinaviska Enskilda Banken, Stockholm, Sweden.
There is no collateral provided for the Lessee's obligations under
the Agreement and all references to "COLLATERAL" shall be
inoperative.
"CONSENT AND AGREEMENT" means the document comprised in Exhibit 5
tranche 1, which shall be valid for tranche 3 also.
"CURRENCY OF PAYMENT" means Pound Sterling (GBP).
"EXPIRE DATE" means the date occurring 72 months after the Lease
Commencement Date, or such later date as may follow from an
agreement to extend the lease pursuant to Clause 13.8.
"FINAL AVAILABILITY DATE" means March 30, 1997.
"LANGUAGE" means the English language.
"LEASE COMMENCEMENT DATE" means January 1, 1997.
"LOCATION" means Chuchill House, 142-146 Old Street, London EC1,
England, Merenneidonkuja 8, 02130 Espoo, Finland, 164 bis, Avenue
Charles de Gaulle, 92526 Neuilly-sur-Seine, cedex, France, Lyoner
Strasse 36, D-60528 Frankfurt, Germany
"MARGIN" means four and one half (4.5) percentage points.
"PURCHASE PRICE" means the sum specified in Exhibit 1, converted to
GBP as per Clause 6.12
"SECURITY DOCUMENTS" means the Debenture comprised in Exhibit 11
tranche 1.
There is no "SECURITY PROVIDER" under the Agreement and all
references to "SECURITY PROVIDER" shall be inoperative.
"SUPPLIER" means Ericsson Ltd, UK
"SUPPLY AGREEMENT" means the "Supply and Installation Contract"
concluded between Lessee and Supplier on December 7, 1995 and to
include the following amendments;
Ericsson Offer Y3659 for Cisco routers ordered by RSL 26 July 1996
(PO number RSL 96/155).
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Special Terms - Tranche 3 5(11)
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Ericsson Offer Y3663 for IDNX equipment ordered by RSL 9 September
1996.
Ericsson offer Y3665 for PFA equipment ordered by RSL 9 September
1996.
Ericsson Offer Y3709 for AXE extension ordered by RSL 22 October
1996 (PO number RSL 96/306).
Ericsson Offer C/JN:96-102 for Echo Cancellors for Finland delivered
and installed during April 1996.
2 CONDITIONS PRECEDENT
2.1 The following additional documents shall be delivered pursuant to
Clause 2.1;
Sub-lessee's consent, in the form attached hereto as Exhibit 12,
signed and delivered by RSL Com OY, Finland, RSL Com France S.A. and
RSL Com Deutschland GmbH.
Clause 2.1(g) regarding legal opinion shall not be applicable.
2.2 Clause 2.2(a) shall not be applicable.
The following additional condition(s) shall be met pursuant to
Clause 2.2:
The Debenture (Exhibit 11) shall become effective.
3 ASSIGNMENT
Clause 3.1 shall read as follows:
3.1 The Lessee does hereby assign to the Lessor all of the Lessee's
rights and interest in respect of the Equipment under the Supply
Agreement, including, but not limited to, the right to acquire
ownership to hardware parts and license to use software parts of the
Equipment and the benefit of all warranties in respect of the
Equipment contained in the Supply Agreement. In the event that
ownership rights of any hardware parts have already been transferred
from Supplier to Lessee under the Supply Agreement, such ownership
rights are hereby assigned to Lessor.
The Lease shall only apply for Equipment and installation related
thereto, and shall not apply to services such as on-site services
and support for maintenance.
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Special Terms - Tranche 3 6(11)
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3.2 The Lessor hereby assumes the Lessee's obligation to pay the
Purchase Price and take delivery of the Equipment under the Supply
Agreement. The Lessor does not assume any of the Lessee's other
obligations under the Supply Agreement, and the Lessee shall in
respect of such obligations at all times remain liable to the Seller
as if this Agreement had not been executed.
3.3 When the Lessor exercises any of the rights under the Supply
Agreement, or makes any claim with respect to the Equipment, the
terms and conditions of the Supply Agreement shall apply to, and be
binding upon, the Lessor.
3.4 The Lessor shall procure that the Seller consents to the assignment
and assumption by the Lessor of certain rights and obligations under
the Supply Agreement in the form attached hereto as Exhibit 5.
Except as provided in Exhibit 5, the Supply Agreement shall not be
modified by this Agreement.
3.5 Neither party shall enter into any other agreement that would amend,
modify or supplement the Supply Agreement without the prior written
consent of the other party.
3.6 If the Lease Commencement Date has not occurred on or prior to the
Final Availability Date, the Lessor shall be entitled to terminate
this Agreement by giving written notice to the Lessee and the
Supplier. Following such notice of termination all rights assigned
to the Lessee pursuant to Clause 3.1 shall be reassigned to the
Lessee, and the Lessor shall be released from the obligations
assumed pursuant to Clause 3.2, which shall be reassumed by the
Lessee. On receipt of the Lessor's certificate evidencing the
Lessor's costs incurred in connection with the entering into and
termination of this Agreement, the Lessee shall promptly reimburse
the Lessor for all such costs.
4 SELECTION, DELIVERY AND INSPECTION
4.6 Equipment already in the possession of the Lessee on the date of
this agreement shall be deemed to be delivered, and shall be
accepted by the Lessee pursuant to this Clause 4 unless otherwise
agreed in writing by the Lessor.
5 LEASE
5.6 The following sentence shall be read in conjunction with Clause 5.6
of the General Terms;
For the avoidance of doubt, the Guarantees and Warrantees and other
rights refer to the rights of the Lessee arising under the supply
agreement and any reference to rights in this Clause 5.6 shall
include Guarantees and Warranties.
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Special Terms - Tranche 3 7(11)
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6 PAYMENTS
6.1 Clause 6.1 shall not be applicable.
6.2 Initial Rent Payment shall be capitalised and added to the
outstanding balance of the Purchase Price for all purposes of this
Agreement.
The initial Rent Payment shall be calculated as follows;
Accrued interest on the aggregate amounts paid by Lessor for the
applicable items of Equipment under the terms of Supply Agreement,
up to and including the Lease Commencement Date. This payment shall
accrue at an interest rate which shall be equal to one month LIBOR,
as defined below, plus four and one half (4.5) percentage points, as
determined on the first Business Day of each month. The interest
shall be calculated on the basis of actual days elapsed, but
computed using a 360-day year, and shall be compounded monthly.
One month LIBOR shall be determined as the arithmetic mean of the
rates of interest per annum for one month's deposits of US Dollars
which are offered to prime banks that participate in the London
market
(i) as such rates appear on the page designated as page "LIBO" on
the Reuters Monitor Money Rates Service ("LIBO Page"') as of
10.00 a.m. (London time) on such date, if two or more
quotations appear on the LIBO Page for such date, or
(ii) by the principal London offices of Barclays Bank plc, Morgan
Guaranty Trust Company of New York, and National Westminster
Bank plc as of 10.00 a.m. (London time) on such date, if fewer
than two quotations appear on the LIBO Page for such date.
6.3 Lessee covenants and agrees to pay Lessor in immediately available
funds twenty (20) Rent Payments in arrears during the Lease Period.
The first Rent Payment shall become due on the day falling six (6)
months after the Lease Commencement Date. Thereafter, the following
three (3) Rent Payments shall become due on the last day of each
following six (6) months period. Thereafter, the following sixteen
(16) Rent Payments shall become due on the last day of each
following three (3) months period, provided however, that the last
Rent Payment shall become due on the last day of the Lease Period.
6.12 For each amount of the Purchase Price to be paid by the Lessor to
the Supplier in FIM, the Lessor will determine the Purchase Price in
GBP by converting such amount of FIM, respectively, into GBP at the
rate of exchange at which the Lessor is or would be able to purchase
GBP with FIM, respectively, in the foreign exchange market for spot
delivery at or around 11.00 a.m. Stockholm time two (2) Business
Days prior to the date of Lessor's payment.
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Special Terms - Tranche 3 8(11)
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6.13 The Lessor shall notify the Lessee of the amount of any Rent Payment
due no later than 10 working days prior to the relevant Rent Payment
date.
7 USE, MAINTENANCE AND ALTERATIONS
7.5 Subject as provided herein, the Lessee may not, without prior
written notice to the Lessor, permanently remove any part from, or
alter or make additions to, the equipment. Such written notice shall
be without responsibility on the part of the lessor for any
interference with the operations of the equipment or impairment of
its value.
7.8 Lessee may sub-lease the Equipment to RSL Com Finland OY, RSL Com
France S.A. and RSL Com Deutschland GmbH, provided that (i) the
sub-lease shall terminate one day prior to the expiration or
termination for whatever cause of this Agreement, (ii) the
sub-lessee shall undertake in writing to be bound by the terms and
conditions of this Agreement and accept Lessor as third party
beneficiary, (iii) Lessee shall remain responsible to Lessor in
accordance with the terms of this Agreement and shall be responsible
to Lessor for any acts or omissions of the sub-licensee as if such
acts and omissions were undertaken by Lessee, and (iv) the
sub-lessees shall have executed the sub-lessee's consent attached
hereto as Exhibit 12.
8 INDEMNITIES
8.3 The Lessee shall be responsible for and reimburse the lessor against
all taxes, duties and other charges levied or imposed by any
Government or local authority against the Lessor or the Lessee and
relating to this agreement or the Equipment except for taxes on the
Lessor's overall income.
9 INSURANCES
[ ]
10 INFORMATION
10.1 (f) budget for the current year in the form of consolidated
balance sheet, consolidated cash flow and consolidated income
statement and projections for the following year of
consolidated balance sheet, consolidated cash flow and
consolidated income statement, and upon request from Lessor,
detailed information to be reviewed at Lessee's premises.
10.1 (h) site asset register
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Special Terms - Tranche 3 9(11)
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11 OWNERSHIP AND MARKING
11.1 [ ]
11.2 There shall be, displayed in a prominent position in the immediate
vicinity of the equipment which is subject to this lease, a notice
bearing the inscription "Any and all equipment in this room bearing
the Ericsson name is owned by AB LM Ericsson Finans." This notice
will be provided and affixed by Ericsson.
The inscription provided for in Clause 11.2 shall be in English, or
Finnish as applicable.
12 EVENTS OF DEFAULT
12.1 (a) the lessee shall fail to pay any amount due under this
agreement within five (5) business days after notice thereof
has been given to the Lessee;
12.1 (q) The debt/equity ratio of Lessee exceeds one to one (1:1).
For this purpose:
(i) debt is defined as any indebtedness to a third party, any
indebtedness to any affiliate to Lessee which is not
subordinated to this Agreement, and including debt obligations
under this Agreement
(ii) equity is defined as the sum of ordinary share capital issued
and fully paid together with any fully paid share premium, any
undistributable reserves, any retained earnings and any
indebtedness which is subordinated to the obligations under
this Agreement.
12.2 (a) enter the premises of the Lessee or any other place where the
equipment may be located and reposess the equipment,
disconnecting and separating all thereof from any other
property any using all reasonable means necessary to do so.;
13 PURCHASE OPTION
The Option Dates and the Option Prices are defined in Exhibit 2. The
Lessee shall pay to the Lessor 70% of all costs and expenses
incurred by Lessor in connection with the sale of the Equipment
under this Clause 13, where costs and expenses are defined as the
actual administrative costs at no more than (pound)19,000 (nineteen
thousand) per purchase option exercise event, where each event can
encompass one or several tranches.
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Special Terms - Tranche 3 10(11)
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14 RETURN OF THE EQUIPMENT
14.1 The Equipment shall be returned to Stockholm, Sweden to the premises
of the Lessor, or as otherwise notified by Lessor.
15 REPRESENTATIONS AND WARRANTIES
15.1 The following additional representation and warranty is made by the
Lessee:
- the business plan related to Lessee's business activities provided
for in Clause 2.1 has been prepared in accordance with generally
accepted accounting principles and practices in the UK and represent
fairly and correctly the financial position of Lessee as at the date
thereof and the results of the operations of Lessee, respectively,
for the period referred to in the business plan, and as at date
referred to in the business plan, Lessee had no significant
liabilities (contingent or otherwise) which are not disclosed by, or
reserved against, in the business plan.
16 RIGHTS, REMEDIES AND WAIVERS
[ ]
17 MISCELLANEOUS
17.5 Lessor: AB L M ERICSSON FINANS
S-126 25 STOCKHOLM
Sweden
Telephone: +46 8 719 00 00
Telefax: +48 8 719 90 50
Telex: 14910 ERIC S
For the attention of: Finance department
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
Special Terms - Tranche 3 11(11)
- --------------------------------------------------------------------------------
Lessee: RSL COM EUROPE LTD
Victoria House
London Square
Cross Lanes
Guidford
Surrey
England
Telephone: +44 1483 457300
Telefax: +44 1483 457733
For the attention of: Mr. Richard Williams and copy to
Mr Jim Betts
17.11 Clause 17.11 shall not apply.
17.12 With advance notice of five (5) Business days, the Lessor (or its
nominee) shall at any time during working hour have the right to
enter the premises of the Lessee or any other place where the
equipment may be located for the purpose of inspecting the same or
observing its use.
17.13 Clause 17.13 shall not apply.
17.14 The following additional provisions shall apply.
The Lessee shall not, without Lessor's prior written consent,
create, assume, incur or suffer to be created, assumed or incurred
or permit to subsist any mortgage, lien, pledge or other encumbrance
of any kind ("Encumbrance") upon any of its present or future
revenues or assets, for the purpose of securing any indebtedness (or
any guarantee or other obligation in respect of any indebtedness)
now or hereafter existing. Lessee shall however be entitled to make
such Encumbrance, except any Encumbrance on the equipment subject to
this Agreement, without Lessor's prior consent for securing medium
and long term indebtedness with an aggregate value not exceeding USD
2,000,000.
18 APPLICABLE LAW AND JURISDICTION
[ ]
- --------------------------------------------------------------------------------
Commercial in confidence
<PAGE>
1(19)
GENERAL TERMS
DEFINITIONS
1.1 In this Agreement the following terms and expressions shall have the
following meanings:
"ACCOUNT" means the account specified in the Special Terms or any
other bank account designated by the Lessor from time to time.
"AGREEMENT" means this Agreement consisting of two parts, Special
Terms and General Terms, and the Exhibits hereto, as hereafter
amended from time to time.
"BUSINESS DAY" means a day on which banks are open for business in
Stockholm and, in respect of any payment to be made hereunder, also
in the principal financial center of the currency of such payment.
"COLLATERAL" means any collateral provided as security for the
Lessee's obligations under this Agreement, as specified in the
Special Terms.
"CURRENCY OF PAYMENT" means the currency of payment under the
Agreement as specified in the Special Terms.
"DEFAULT" means an event which with the giving of notice and/or the
passage of time and/or the making of any determination of
materiality or fulfilment of any other applicable condition (or any
combination of the foregoing) would constitute an Event of Default.
"DEFAULT RATE" means the interest rate calculated as two (2) per
cent per annum above the higher of the Interest Rate and the
Lessor's cost of funds from whatever sources it may select.
"DELIVERY DATE" means the date on which the Equipment is actually
delivered to the Lessee by the Supplier.
"EVENTS OF DEFAULT" means any of the events of default specified in
Clause 12 or a failure by the Lessee to meet a deferred condition
precedent as specified in Clause 2.3.
"EVENT OF LOSS" means any of the following events:
(i) the Equipment shall be lost, stolen, destroyed or irreparably
damaged;
(ii) insurance proceeds shall be received based upon an event of
total or constructive total loss with respect to the Equipment
under an insurance policy;
(iii) title to the Equipment shall be taken or requisitioned by any
governmental body by condemnation or otherwise;
(iv) the use of the Equipment shall be taken or requisitioned by
any governmental body by condemnation or otherwise for a
period
<PAGE>
2(19)
longer than three (3) months (or the remaining term of the
Lease Period, if less); or
(v) as a result of any rule, regulation, order or other action by
the relevant authority, any governmental body having
jurisdiction or any court of competent jurisdiction, the
normal operation or use of the Equipment shall have been
prohibited for a period of six months.
"EQUIPMENT" means the equipment described in Exhibit 1 and includes
any part thereof, and all replacements, renewals and additions made
in or to such equipment together with the Technical Documents and
all handbooks, manuals, data and drawings relating thereto.
"EXPIRY DATE" means the date specified as such in the Special Terms
or such later date as may follow from an agreement to extend the
lease pursuant to Clause 13.8.
"FINAL AVAILABILITY DATE" has the meaning specified in the Special
Terms.
"GENERAL TERMS" means the second part of this Agreement.
"INITIAL RENT PAYMENT" means the payment of the initial rent in the
Currency of Payment calculated in accordance with Clause 6.2.,
Special Terms.
"INITIAL RENT PAYMENT DATE" means each date on which an Initial Rent
Payment shall be made as set forth in Clause 6.2, Special Terms.
"INTEREST RATE" means, in respect of each Rent Payment, LIBOR (as
quoted on the fifth Business Day prior to the preceding Rent Payment
Date, or, in the case the first Rent Payment Date, the Lease
Commencement Date) in each case plus the Margin.
"LANGUAGE" has the meaning specified in the Special Terms.
"LEASE COMMENCEMENT DATE" means the last day of the month when an
acceptance certificate is issued by Lessee in accordance with Clause
4.4 or such other date when the Equipment shall be deemed to be
accepted by the Lessee hereunder.
"LEASE PERIOD" means the period commencing on the Lease Commencement
Date and ending on the earlier of (i) the Expiry Date, (ii) the day
on which this Agreement or the leasing of the Equipment is
terminated pursuant to the terms hereof, and (iii) the Rent Payment
Date on which the Lessee has exercised its option to purchase the
Equipment pursuant to Clause 13.
"LIBOR" means the arithmetic mean (rounded to the next higher one
hundred thousandth of a percentage point) of the rates of interest
per annum for three months' deposits of US Dollars which are offered
to prime banks in the London interbank market (i) as such rates
appear on the page designated as page "LIBO" on the Reuters Monitor
Money Rates Service ("LIBO Page") as of 10.00 a.m. (London time) on
such date, if two or more quotations appear on the LIBO Page for
such date, or (ii) by the principal London offices of Barclays Bank
plc, Morgan Guaranty Trust Company of New York, and National
Westminster Bank plc as of 10.00 a.m. (London time) on such date, if
fewer than two quotations appear on the LIBO Page for such date.
"LOCATION" means the location specified in the Special Terms.
<PAGE>
3(19)
"MARGIN" has the meaning specified in the Special Terms.
"MANAGEMENT FEE PAYMENT" means the payment of the management fee,
calculated in accordance with Clause 6.1.. Special Terms
"MANAGEMENT FEE PAYMENT DATE" means the date on which the Management
Fee shall be made as set forth in Clause 6.1.. Special Terms
"OPTION PRICE" means the price specified in Exhibit 2 for the
relevant Option Date.
"OPTION DATE" means the date(s) on which Lessee is granted an option
to purchase the Equipment pursuant to Clause 13, Special Terms.
"PURCHASE PRICE" means the sum of the purchase price payable to the
Supplier under the Supply Agreement and all other costs and expenses
of whatever nature payable by the Lessor in respect of the
acquisition of the Equipment. The purchase price under the Supply
Agreement is set out in the Special Terms.
"RENT PAYMENT" means the periodical payment for the lease of the
Equipment in the Currency of Payment, calculated in accordance with
Clause 6.4.
"RENT PAYMENT DATE" means each date on which a Rent Payment shall be
made as set forth in Clause 6.3.. Special Terms.
"SECURITY DOCUMENT" means any pledge agreement, guarantee or other
document providing security for the Lessee's obligations under this
Agreement, as specified in the Special Terms.
"SECURITY PROVIDER" means any party to a Security Document other
than the Lessor.
"SPECIAL TERMS" means the first part of this Agreement.
"SUPPLIER" has the meaning specified in the Special Terms.
"SUPPLY AGREEMENT" has the meaning specified in the Special Terms.
"TECHNICAL DOCUMENTS" means all documentation in respect of the
Equipment delivered by the Supplier under the Supply Agreement.
"TERMINATION VALUE" means the value specified in Exhibit 3.
1.2 The terms and conditions in the General Terms are complemented and
amended by the Special Terms and in case of any discrepancy, the
Special Terms shall prevail.
1.3 Any reference to a clause with a certain number shall, unless the
context otherwise requires, be construed as a reference to the
clause with such number in the General Terms, as amended or
complemented by the corresponding clause in the Special Terms. In
case a clause with such number does not exist in the General Terms,
the reference shall be solely to the clause with such number in the
Special Terms.
2 CONDITIONS PRECEDENT
2.1 The obligations of the Lessor under this Agreement are subject to
the receipt of the following documents, in form and substance
satisfactory to the Lessor, on or
<PAGE>
4(19)
before the earlier of (i) the day falling thirty (30) Business Days
after the date hereof and (ii) the Lease Commencement Date:
(a) a certified copy of the constituent documents for the Lessee
and each Security Provider;
(b) evidence that the Lessee and each Security Provider is duly
registered at the relevant authority as a limited liability
company or other kind of business entity, as described in the
recital to this Agreement or the relevant Security Document;
(c) evidence that the Lessee has all necessary licenses and
permits to operate the Equipment and enter into this Agreement
and the Supply Agreement;
(d) evidence that the person(s) which has (have) signed this
Agreement and the Supply Agreement on behalf of the Lessee are
duly authorised to do so;
(e) evidence that the person(s) which has (have) signed the
Security Documents on behalf of each Security Provider are
duly authorised to do so;
(f) the latest available finance report of the Lessee and each
Security Provider;
(g) a legal opinion from independent counsel acceptable to Lessor,
substantially in the form of Exhibit 4 at the expense of
Lessee; and
(h) other document(s) specified in the Special Terms.
2.2 The obligation of the Lessor to lease the Equipment to the Lessee is
subject to the following conditions having been met on or before the
Lease Commencement Date:
(a) the Initial Rent Payment shall have been received by the
Lessor;
(b) the Lessor shall have acquired such rights and title to the
Equipment as is provided in the Supply Agreement;
(c) the Lessor shall have received a certified copy of an
insurance certificate evidencing that the Equipment is insured
in accordance with Clause 9;
(d) no Default shall have occurred or would occur as a result of
the commencement of the Lease Period; and
(e) other condition(s) specified in the Special Terms.
2.3 The conditions precedent set out in Clauses 2.1 and 2.2 are inserted
for the sole benefit of the Lessor and may be waived or deferred,
with or without conditions, by the Lessor. If the Lessor agrees to
the commencement of the Lease Period without all conditions having
been met, such conditions shall, unless otherwise is agreed, be
deferred for ten (10) Business Days from the Lease Commencement
Date. If any condition is not met on the date to which it has been
deferred, it shall constitute an Event of Default hereunder.
<PAGE>
5(19)
3 ASSIGNMENT
3.1 The Lessee does hereby assign to the Lessor all of the Lessee's
rights and interest in respect of the Equipment under the Supply
Agreement, including, but not limited to, the right to acquire
ownership to hardware parts and license to use software parts of the
Equipment and the benefit of all warranties in respect of the
Equipment contained in the Supply Agreement.
3.2 The Lessor hereby assumes the Lessee's obligation to pay the
Purchase Price and take delivery of the Equipment under the Supply
Agreement. The Lessor does not assume any of the Lessee's other
obligations under the Supply Agreement and the Lessee shall in
respect of such obligations at all times remain liable to the Seller
as if this Agreement had not been executed.
3.3 When the Lessor exercises any of the rights under the Supply
Agreement, or makes any claim with respect to the Equipment, the
terms and conditions of the Supply Agreement shall apply to, and be
binding upon, the Lessor.
3.4 The Lessor shall procure that the Seller consents to the assignment
and assumption by the Lessor of certain rights and obligations under
the Supply Agreement in the form attached hereto as Exhibit 5.
Except as provided in Exhibit 5, the Supply Agreement shall not be
modified by this Agreement.
3.5 Neither party shall enter into any other agreement that would amend,
modify or supplement the Supply Agreement without the prior written
consent of the other party.
3.6 If the Lease Commencement Date has not occurred on or prior to the
Final Availability Date, the Lessor shall be entitled to terminate
this Agreement by giving written notice to the Lessee and the
Supplier. Following such notice of termination all rights assigned
to the Lessee pursuant to Clause 3.1 shall be reassigned to the
Lessee, and the Lessor shall be released from the obligations
assumed pursuant to Clause 3.2, which shall be reassumed by the
Lessee. On receipt of the Lessor's certificate evidencing the
Lessors costs incurred in connection with the entering into and
termination of this Agreement the Lessee shall promptly reimburse
the Lessor for all such costs.
4 SELECTION, DELIVERY AND INSPECTION
4.1 The Lessee has been responsible for agreeing the design, capacity,
quality and specification of the Equipment with the Supplier. The
Lessor is only responsible for the financing of the Equipment and
the Lessee accepts that the Lessor shall have no responsibility
whatsoever for the design, capacity, quality and specification of
the Equipment.
4.2 Unless otherwise instructed in writing by the Lessor, the Lessee
shall be responsible for and arrange to take delivery of the
Equipment from the Supplier at a place to be agreed between the
Lessee and the Supplier and notified by the Lessee to the Lessor.
The Lessor shall not be liable for any damage or loss arising
directly or indirectly from any delay or failure in delivery (or,
where applicable, installation) of the Equipment.
4.3 The Lessee shall on behalf of the Lessor issue the final acceptance
certificate to the Supplier under the Supply Agreement and any
defect or other objection relating to any part of the Equipment
shall be dealt with by the Lessee directly with the Supplier.
Simultaneously with the issuance of the acceptance certificate the
Lessee shall send a copy of the said certificate to Lessor. The
Lessee's
<PAGE>
6(19)
acceptance of delivery from the Supplier on behalf of the Lessor
shall constitute conclusive acceptance also under this Agreement. If
the Lessee fails to give timely notice under the Supply Agreement of
any defect or other objection to the Supplier, the Equipment shall
as between the Lessor and the Lessee be considered to have been
property and timely delivered in good condition and satisfactory
working order.
4.4 The Lessee shall, within five (5) Business Days after the last of
the Delivery Dates, sign and deliver to the Lessor a certificate of
delivery in the form attached hereto as Exhibit 6. This certificate
shall be in addition to any certificates or acknowledgements that
may be required by the Supplier.
4.5 All risk of loss or damage to the Equipment shall as between the
Lessor and the Lessee pass to the Lessee when such risk passes from
the Supplier to the Lessor under the Supply Agreement.
4.6 Equipment already in the possession of the Lessee on the date of
this Agreement shall be deemed to be delivered to and accepted by
the Lessee pursuant to this Clause 4 unless otherwise agreed in
writing by the Lessor.
5 LEASE
5.1 The Lessor agrees to lease to the Lessee, and the Lessee agrees to
lease from the Lessor, the Equipment upon the terms set forth in
this Agreement.
5.2 The term of this Agreement shall, unless earlier terminated pursuant
to the express provisions hereof, expire on the Expiry Date. The
Lessee shall have no right to request an extension of the Lease
Period other than in accordance with Clause 13.8.
5.3 The Lessee leases the Equipment "as is". The Lessor does not let or
supply the Equipment to the Lessee with or subject to any condition
or warranty, express or implied, whether statutory or otherwise,
whether as to the state of quality of the Equipment or as to
description, repair or fitness for any purpose or otherwise, and all
such conditions and warranties are herein expressly excluded.
5.4 No third party (including any affiliate of the Lessor) has any
authority to bind the Lessor or make any representation or give any
warranty or guarantee on behalf the Lessor.
5.5 The Lessor shall not be liable for any defects or deficiencies in
the Equipment or for any direct or consequential damages therefrom
or for any interruption in the Lessee's business occasioned by the
Lessee's inability to use the Equipment for any reason whatsoever.
The Lessor shall under no circumstances be liable to provide the
Lessee with any replacement equipment.
5.6 The Lessor hereby assigns to the Lessee for the Lease Period any and
all guarantees, warranties and other rights (ownership excluded)
which may have been (or in the future are) given to the Lessor in
respect of the Equipment and which the Lessor has the right to
assign. The Lessor shall take all reasonable steps, at the cost and
expense of the Lessee, to obtain all necessary consents to so
assign. To the extent that any rights may not be assigned to the
Lessee, such rights shall, as between the Lessor and the Lessee,
solely inure to the benefit of the Lessee, and the Lessor shall, at
the Lessee's sole expense and risk, enforce such rights or give the
Lessee a power of attorney to enforce in the Lessor's name.
<PAGE>
7(19)
6 PAYMENTS
6.1 The Lessee shall make the Management Fee Payment on the Management Fee
Payment Date, as set forth in the Special Terms.
6.2 The Lessee shall make the Initial Rent Payments on the Initial Rent
Payment Dates, as set forth in the Special Terms.
6.3 The Lessee shall make the Rent Payments on the Rent Payment Dates, as set
forth in the Special Terms.
6.4 The Rent Payments due on each Rent Payment Date shall consist of the sum
of (i) an amount equivalent to the percentage of the Purchase Price set
forth opposite such Rent Payment Date in Exhibit 7 under the heading "Per
cent of the Purchase Price in each Rent Payment" and (ii) an amount equal
to the interest that would nave accrued (calculated at the Interest Rate
on the actual number of days elapsed on a 360 day/year basis) on the
outstanding balance of the Purchase Price during the period commencing on
the preceding Rent Payment Date (or, in the case of the first Rent
Payment, the Lease Commencement Date) set fourth in Exhibit 7 under the
heading "Outstanding balance in per cent of the Purchase Price".
6.5 Lessor shall not later than two (2) Business Days before the commencement
of each rent period in writing quote to Lessee the Interest Rate and the
Rent Payment for the subsequent period. Unless Lessee has raised any
objections to the quotation no later than five (5) Business Days after the
receipt of the quotation, it shall be deemed valid for the relevant rent
period.
6.6 The Lessee shall make any payment to be made to the Lessor under this
Agreement (by telex advice) in immediately available funds to the Account.
6.7 In event that the Lessor does not receive on the due date any amount due
under this Agreement, the Lessee shall pay to the Lessor on demand
interest on such amount from and including the due date to the date of
actual payment at the Default Rate.
6.8 Whenever a payment is due on a day which is not a Business Day, such
payment shall be made on the next Business Day.
6.9 The Lessee undertakes an unconditional obligation to make the Initial Rent
Payment and the Rent Payments as specified in this Clause 6. The Lessee
shall not be released from the obligation to pay any sum due hereunder by
reason of any defect or deficiency in the Equipment, or the Equipment
becoming wholly or partially unserviceable for any reason, including
reasons beyond the Lessee's control. All payments hereunder shall be made
by the Lessee free and clear of any right of set-off or counterclaim.
6.10 The Lessee shall pay all taxes and other governmental charges on any
payment hereunder, and the Lessee shall pay to the Lessor together with
any payment hereunder, the applicable amount of value added tax (if any)
at the then applicable rate thereon. If value added tax or any other tax
or charge is assessed on a payment already made hereunder, the Lessee
shall at the request of the Lessor promptly reimburse the Lessor for such
tax or charge.
6.11 All payments hereunder shall be made free and clear of all deductions or
withholdings whatsoever. In the event that the Lessee is required by law
to make any deduction or withholding on account of tax or otherwise from
any such payments, or any new taxes or levies are imposed on such
payments, or there is
<PAGE>
8(19)
an increase in the existing taxes or levies on such payments, the sum due
from the Lessee shall be increased to the extent necessary to ensure that,
after such deduction or withholding is made, the Lessor receives a net sum
equal to the sum which the Lessor would have received had no deduction or
withholding been made.
7 USE, MAINTENANCE AND ALTERATIONS
7.1 The Lessee shall use the Equipment in a careful and proper manner and in
accordance with the Technical Documents and any insurance required
hereunder. The Lessee shall ensure that the Equipment is only used and
operated by properly skilled personnel. The Lessee shall not use or permit
the Equipment to be used in contravention of any law or regulation or for
any purpose for which the Equipment is not designed and suitable.
7.2 The Lessee shall not do or permit to be done anything which may expose any
part of the Equipment to penalty, forfeiture, impounding, detention or
destruction and not abandon any part of the Equipment.
7.3 The Lessee shall, at its own expense, keep the Equipment in good working
order and condition and make all necessary adjustments, repairs and
replacements. The Lessee shall procure that all parts of the Equipment are
properly serviced in accordance with recommendations of the manufacturer
thereof and the Technical Documents. The lessee shall keep such records of
the maintenance and use of the Equipment as the Lessor from time to time
specifies.
7.4 The Lessee shall, at its own expense, obtain and keep in full force and
effect all permissions, licences and other authorisations which may at any
time be required in connection with the possession or use of the Equipment
and the due performance by the Lessee of its obligations under this
Agreement. The Lessee shall comply with all statutory and other official
obligations relating to the possession and use of the Equipment and shall
at its own expense add to or install with the Equipment any safety or
other equipment required by any applicable law or regulation to be so
added or installed for the lawful use or operation of the Equipment.
7.5 Subject as provided herein, the Lessee may not, without the prior written
approval of the Lessor, permanently remove any part from, or alter or make
additions to Equipment. Such written approval shall be without
responsibility on the part of the Lessor for any interference with the
operation of the Equipment or impairment of its value.
7.6 The Lessee shall solely bear the responsibility for theft of the
Equipment, and all damage to the Equipment, whether caused by criminal
actions or vandalism or otherwise arising. If the Equipment is lost or
damaged in whole or in part, the Lessee shall promptly replace or repair
the Equipment as appropriate. Any insurance proceeds received by the
Lessor in respect of any such loss or damage shall be paid to the Lessee
when the Lessor has received satisfactory evidence that the Equipment has,
or will be, replaced or repaired in accordance with this Agreement.
7.7 All alterations and additions to the Equipment and all replacements of the
Equipment shall, unless otherwise agreed in writing by the Lessor,
immediately upon installation or replacement, as the case may be, become
the property of the Lessor.
<PAGE>
9(19)
7.8 The Lessee shall keep the Equipment at the Location and may not remove it
to a different location without the prior written approval of the Lessor.
The Lessee may not sublease or part with possession of the Equipment
without the prior written approval of the Lessor.
8 INDEMNITIES
8.1 The Lessee shall be liable for any personal injury or death or property
damage arising from or related to the possession, use or operation of the
Equipment.
8.2 The Lessee shall indemnify and hold the Lessor harmless from and against
any and all liabilities, claims, proceedings, costs and expenses
whatsoever arising out of or in any way connected with any breach of this
Agreement by the Lessee, or the possession, use or operation of the
Equipment or arising on the grounds that any part of the Equipment or the
use thereof constitutes an infringement of any patent, copyright, design
or similar right.
8.3 The Lessee shall be responsible for and reimburse the Lessor against all
taxes, duties and other charges levied or imposed against the Lessor or
the Lessee and relating to this Agreement or the Equipment except for
taxes on the Lessor's overall income.
8.4 The indemnities contained in this Clause 8 shall not extend to any loss to
the extent that such loss is caused by the wilful misconduct or gross
negligence of the Lessor or the failure by the Lessor to comply with this
Agreement.
8.5 The indemnities contained in this Clause 8 shall continue in full force
and effect notwithstanding the expiry of the Lease Period or the
termination of this Agreement.
9 INSURANCES
9.1 From the Delivery Date until the Equipment has been returned to the Lessor
or purchased by the Lessee hereunder, the Lessee shall purchase and
maintain an all-risk insurance covering loss, damage or destruction of the
Equipment in an amount equal to or in excess of the Termination Value from
time to time, and all other risks normally covered by an insurance of
equipment of the same kind, including third party liability and product
liability. Should an Event of Loss occur, the procedure set forth in this
Article 9 below will apply.
9.2 All insurances shall be placed with an international insurer with
recognized reputation and responsibility satisfactory to Lessor.
Furthermore, the insurances shall name the Lessor as the owner of the
Equipment and shall be made payable, in the case of policies covering loss
or damage to the Equipment, to the Lessor.
9.3 The Lessee shall before each renewal date of an insurance furnish to the
Lessor evidence that the insurance required to be maintained hereunder
remains in full force and effect. On request, the Lessee shall provide the
Lessor with all other information about, or documents regarding, the
insurances maintained in respect of the Equipment.
9.4 If the Lessee does not provide evidence that the insurance coverage
complies with this Agreement, the Lessor shall be entitled to take out
such insurance, and all costs therefor shall be reimbursed by the Lessee
on demand.
<PAGE>
10(19)
9.5 The Lessee will not do, or omit to do, or permit to be done anything
whereby any required insurance would be rendered invalid or unenforceable
or the Equipment in any respect not covered by the required insurance.
9.6 As between Lessor and Lessee, it is hereby agreed that all insurance
proceeds received under policies required hereby, with respect to the
Equipment, will be applied as follows:
Upon the occurrence of any Event of Loss, with respect to the Equipment or
any part of the Equipment, Lessor shall be entitled to and shall receive
the entire award, judgement, settlement insurance proceeds or payments and
all instalments thereof. Lessee hereby assigns to Lessor any right or
interest Lessee may have or may hereafter acquire in any such award or
payment; provided that unless an Event of Default shall have occurred and
be continuing, Lessee shall be entitled to reimbursement for the amount of
such award, judgement, settlement, insurance proceeds or payments actually
received by Lessor upon the fulfilment of Lessee's obligation to pay any
amount stipulated under Subarticle 9.7 hereof
9.7 Upon the occurrence of any Event of Loss with respect to the Equipment,
Lessee shall, on the 30th day following the date on which the Event of
Loss shall have been declared by Lessor, pay or cause to be paid in
immediately available funds:
(i) the Termination Value in effect as of such date for the Equipment
and
(ii) any other unpaid amounts due hereunder.
At such time as Lessor has received the sum of (i) and (ii) above, with
any applicable reduction where insurance proceeds have been applied to pay
the sum of (i) and (ii) above, the obligation of Lessee to pay rent
hereunder shall terminate and Lessor will transfer to Lessee, without
recourse or warranty, all of Lessor's right, title and interest, if any,
in and to the Equipment (except software which Lessee takes possession of
but not title, as fully described under the heading Software License of
the Supply Agreement). The balance, if any, of such insurance proceeds
remaining thereafter will be paid to the order of Lessee.
9.8 In the event of damage to the Equipment or any part thereof not
constituting an Event of Loss, Lessee shall promptly notify Lessor in
writing of such damage and shall remain obligated to make all payments of
rent which may become due hereunder in the same manner as if such damage
had not occurred. Lessee shall repair and restore the Equipment or any
part thereof to the condition required by Article 7 hereof. So long as no
Event of Default shall have occurred and be continuing, Lessee shall be
entitled to receive the entire award, judgement, settlement, insurance
proceeds or payments and all instalments thereof with respect to such
damage, to the extent received by Lessor and as provided in this Article
9.
9.9 Notwithstanding anything to the contrary contained in this Article 9, upon
the occurrence of an Event of Loss with respect to any part of the
Equipment under circumstances where there has not been an Event of Loss
with respect to the Equipment, Lessee shall, as promptly as is reasonably
possible, duly convey to Lessor, as replacement for any part of the
Equipment having suffered an Event of Loss, title to another part of the
Equipment of the same manufacturer and of the same or an improved model
suitable for installation and use on the Equipment as the part of the
Equipment having suffered an Event of Loss. Such replacement part shall be
free and clear of all liens, encumbrances or rights of others whatsoever
(other than a lien, mortgage or other encumbrance arising from Lessor's
own act of default and have a value and utility at least equal to, and be
in as good operating condition as, the part of the Equipment with respect
to which an Event of Loss has occurred [illegible]
<PAGE>
11(19)
such part of the Equipment were in the condition and repair as required by
Article 7 hereof prior to such Event of Loss.
10 INFORMATION
10.1 At the request of the Lessor, the Lessee shall promptly furnish to the
Lessor:
(a) a detailed inventory of the Equipment, specifying the condition;
(b) all records of the maintenance and use of the Equipment;
(c) all other information in the Lessee's possession regarding the
Equipment, its use, location and condition;
(d) certified copies or other satisfactory evidence of certificates,
licences, permits and authorisations necessary or desirable in
connection with the possession or use of the Equipment or the due
performance by the Lessee of its obligations under this Agreement;
(e) a written confirmation, signed by a duly authorised officer of the
Lessee, confirming that no Default is subsisting;
(f) budget and projections for the Lessee's operations during the
current calendar year; and
(g) other information specified in the Special Terms.
10.2 The Lessee shall send to the Lessor within thirty (30) days of the
completion of the preparation of, but in any event not later than six
months after the expiry of the financial year, the annual financial report
of the Lessee and each Security Provider for the preceding financial year.
The Lessee shall also send to the Lessor within thirty (30) days of the
completion of the preparation of the quarterly financial reports of
Lessee.
10.3 The Lessee shall forthwith notify the Lessor of the occurrence of a
Default and of any other event which might adversely affect the Lessee's
ability to perform any of its obligations under this Agreement, or the
ability of any Security Provider to perform any of its obligations under
the Security Document to which it is a party, (including in particular
fire, theft, logistical problems, strikes, breakdown of any item of the
Equipment), and provide the Lessor with full details of any steps which
the Lessee (or the relevant Security Provider) is taking, or is
considering taking, in order to remedy or mitigate the effect of the
Default or otherwise in connection with such events.
10.4 The Lessee shall promptly inform the Lessor of the expiry, or termination
of any licence consent or authorisation which the Lessee is obliged to
maintain under this Agreement and provide the Lessor with evidence of any
new or renewed licences, consents and authorisations, as they become
effective.
11 OWNERSHIP AND MARKING
11.1 The Equipment shall at all times be and remain the sole and exclusive
property of the Lessor. The Lessee shall at its own cost and expense
protect and defend the ownership of the Lessor against all claims, liens
and legal proceedings of creditors of the Lessee and other persons, and
keep the Equipment free and clear from all claims, liens and proceedings
except for liens and charges created by or through
<PAGE>
12(19)
the Lessor. The Lessee shall have no right, title or interest in or to the
Equipment except as expressly set forth in this Agreement. The Lessee
shall not hold itself out as owner of the Equipment and the Lessee may not
in its accounts or in any other document treat, or account for, the
Equipment as assets of the Lessee.
11.2 On each part of Equipment there shall at all times be affixed, and shall
not be removed or covered up, a fireproof plate or another permanent
marking, specifically approved by the Lessor bearing the inscription in
the Language: "This equipment is owned by AB L M ERICSSON FINANS". The
Lessee shall ensure that such name plates are not, during the term of this
Agreement, at any time obscured or removed.
12 EVENTS OF DEFAULT
12.1 The following events shall constitute Events of Default:
(a) the Lessee shall fail to pay any amount due under this Agreement
within three (3) Business Days after notice thereof has been given
to the Lessee;
(b) the Lessee shall fail to perform or observe any obligation, covenant
or agreement to be performed or observed by it hereunder (other than
the obligation to pay any amount due) and such failure shall, if
capable of being remedied, continue unremedied for a period of ten
(10) Business Days after notice of such breach has been given to the
Lessee;
(c) this Agreement for any reason shall become wholly or partially
unenforceable as against the Lessee;
(d) the Lessee or any Security Provider is or becomes insolvent or makes
a general assignment for the benefit of, or a composition with, its
creditors or any steps are taken or legal proceedings are started
for the bankruptcy or winding-up of the Lessee or any Security
Provider or for the appointment of a receiver, administrator or
similar officer of the Lessee or any Security Provider or all of its
assets;
(e) any officer of any court or any other person takes any step towards
attaching, sequestrating, requisitioning, seizing or levying
distress on any part of the Equipment, or any part of the Equipment
is in fact so attached, sequestrated, requisitioned, seized or
distrained upon;
(f) the Lessee shall do or permit any act or thing which may adversely
affect the ownership or the rights of the Lessor in the Equipment or
any part thereof;
(g) the Lessee or any Security Provider shall discontinue all or a
substantial part of its business operations or transfer or dispose
of all or a material part of its assets;
(h) any representation or warranty made or repeated by the Lessee herein
shall prove to be incorrect or misleading in any respect deemed
material by the Lessor;
(i) the Lessee or any Security Provider shall not pay any indebtedness
when due or any indebtedness of the Lessee or any Security
<PAGE>
13(19)
Provider shall become prematurely due or placed on demand as a
result of an event of default (howsoever described);
(j) the Equipment, the Lessee, any Security Provider, the business of
the Lessee or any Security Provider or any substantial part thereof
shall become nationalized;
(k) the Equipment shall become subject to a lien, charge or encumbrance
of any kind which is not created by or through the Lessor;
(l) any event or series of events shall occur which, in the reasonable
opinion of the Lessor, might have a materially adverse effect on the
business or financial condition of the Lessee or any Security
Provider, or on its ability to fully perform its obligations under
this Agreement or the Security Document to which it is a party, as
the case may be;
(m) any decision or agreement being made or entered into to merge or
consolidate the Lessee or any Security Provider, or its business
with any other company or business;
(n) any Security Document shall not constitute a legally valid and
enforceable security or guarantee, as the case may be;
(o) the realisable value of the Collateral shall be less than the
Termination Value; or
(p) other Event(s) of Default specified in the Special Terms.
12.2 Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, the Lessor may, at its option,
declare this Agreement to be in default and the Lessor may, in addition to
any other remedies provided herein or by applicable law, exercise one or
more of the following remedies, as the Lessor shall in its sole discretion
elect:
(a) enter the premises of the Lessee or any other place where the
Equipment may be located and repossess the Equipment, disconnecting
and separating all thereof from any other property and using all
means necessary to do so;
(b) terminate this Agreement, which termination shall be effective
immediately upon the Lessor having given notice of termination to
the Lessee, whereupon the Lessee's right to possess and use the
Equipment shall immediately cease;
(c) recover all Rent Payments and other payments due as of the date of
such default;
(d) request payment of the Termination Value for the Equipment, upon
payment of which the Lessor shall take all steps necessary for the
transfer of title to and ownership of the Equipment (except
software, which the Lessee takes possession of but not title to as
described in the Supply Agreement) "as is" and "where is" to the
Lessee;
(e) demand compensation against any loss, damage, cost, expense or
liability which the Lessor may sustain or incur as a consequence of
the occurrence of the Event of Default or in connection with the
<PAGE>
14(19)
enforcement or preservation of any rights under this Agreement or
any Security Document.
12.3 The Lessee hereby waives any right of action against the Lessor arising
from the removal, repossession or retention of the Equipment following an
Event of Default. The Lessee undertakes to provide the Lessor with all
necessary assistance to perform the repossession of the Equipment
following an Event of Default.
12.4 If the Lessee fails to perform any of its obligations under this Agreement
and continues to do so thirty (30) days from receipt of notice from the
Lessor or when an Event of Default has occurred and is continuing, the
Lessor may itself perform such obligations for the account of the Lessee
without thereby waiving any rights hereunder, and any amount paid or
expense incurred in connection with such performance shall be reimbursed
by the Lessee on demand.
13 PURCHASE OPTION
13.1 The Lessor hereby grants to the Lessee an option to purchase the Equipment
(except software, which the Lessee takes possession of but not title as
described in the Supply Agreement) on the terms and conditions set out in
this Clause 13 and upon exercise of such option agrees to transfer to the
Lessee or its nominee title to and ownership of the Equipment.
13.2 The Lessee can exercise its purchase option on each Option Date, by paying
on the relevant Option Date the relevant Option Price to the Lessor, as
set forth in the Exhibit 2.
13.3 The right of the Lessee to exercise its purchase option is subject to the
following conditions:
(a) the Lessor shall have received, not later then three (3) months
prior to the relevant Option Date written notice of the Lessee's
intention to exercise the option; and
(b) no Default shall have occurred and be continuing when notice is
given or occur prior to the relevant Option Date or as a result of
the Lessee exercising the purchase option.
13.4 Once given, notice of the Lessee's intention to exercise the purchase
option shall be irrevocable.
13.5 When the Lessor has received the Option Price and all other amounts due
hereunder on the relevant Option Date, title to the Equipment (except
software, which the Lessee takes possession of but not title as described
in the Supply Agreement) shall vest in the Lessee.
13.6 The Equipment is sold "as is" and "where is". The Lessor warrants that,
immediately prior to transferring title to the Equipment, the Lessor will
have good title to the Equipment free from any liens, charges or
encumbrances created by or through the Lessor other than such that have
been agreed to by the Lessee. Except as aforesaid, the Lessor makes no
warranties, express or implied, whether statutory or otherwise, whether as
to the state of quality of the Equipment or as to description, repair or
fitness for any purpose or otherwise, and all such warranties are hereby
expressly excluded.
13.7 The Lessee shall pay to the Lessor on demand all costs and expenses
incurred. [illegible] Lessor in connection with the sale of the Equipment
under this Clause 13.
<PAGE>
15(19)
13.8 Should the Lessee not exercise the purchase option, the Lessee may request
an extension of the Lease Period at market conditions to be agreed upon
between the parties. Such request shall be furnished to the Lessor in
writing six (6) months prior to the last day of the Lease Period. Should
the parties not have agreed on the conditions for the extension on the
last day of the Lease Period then the Equipment shall be returned in
accordance with Clause 14.
14 RETURN OF THE EQUIPMENT
14.1 On the last day of the Lease Period, the Lessee shall, unless the Lessee
has acquired title to the Equipment, at its own risk and expense,
forthwith return the Equipment together with the Technical Documents
unencumbered to the location the Lessor designates. The Equipment shall be
returned in good repair, only ordinary wear and tear resulting from proper
use in compliance with this Agreement excepted. The Lessee shall have no
right to be reimbursed for any improvement of the Equipment.
14.2 The Lessee shall be responsible for the proper packing of the Equipment
and for shipment and delivery (including payment of freight and insurance)
of the Equipment to the place designated by the Lessor.
15 REPRESENTATIONS AND WARRANTIES
15.1 The Lessee represents and warrants to the Lessor that:
(a) it is duly organised and validly existing under the laws of the
relevant jurisdiction as a limited liability company or other kind
of business entity as described in the recital to this Agreement,
with full power, authority and legal right to carry on its business
as presently conducted, to own its property and to execute, and to
perform all of its obligations under, this Agreement, and all action
required to authorise such execution and performance has been duly
taken;
(b) its operations, and the execution and performance of this Agreement,
have not and will not violate any applicable law or regulation or
contravene any provision of its constituent documents;
(c) all governmental or other licences, consents and authorisations
necessary or desirable for the execution and performance of this
Agreement have been obtained and are in full force and effect;
(d) this Agreement constitutes legally valid and binding obligations of
the Lessee, enforceable in accordance with its terms;
(e) it is not in breach of or in default under any agreement to which it
is a party or by which it or any of its assets is bound, which
breach or default might have a materially adverse affect on the
business or financial condition of the Lessee;
(f) no litigation, arbitration or administrative proceedings are current
or pending or, to its knowledge threatened, which might, if
adversely determined, have a materially adverse effect on its
business or financial condition, or its ability to perform its
obligations under this Agreement;
<PAGE>
16(19)
(g) no Default is subsisting;
(h) the latest annual financial report of the Lessee has been prepared
in accordance with law and generally accepted accounting principles
in the relevant jurisdiction and represents fairly its financial
condition;
(i) all information provided to the Lessor in connection with this
Agreement is true, complete and accurate in all respects and the
Lessee is not aware of any fact or circumstance which has not been
disclosed to the Lessor and which might, if disclosed, be reasonably
expected to adversely affect the decision of a person considering
whether or not to enter into an agreement of this type with the
Lessee;
(j) there are no deductions or withholdings whatsoever, which have to be
made by the Lessee in respect of any payments hereunder;
(k) the copy of the Supply Agreement provided to the Lessor is true,
correct and complete;
(l) the Supply Agreement is in full force and effect and constitutes
legally valid and enforceable obligations of both parties thereto;
(m) it has fully complied with, and duly performed, its obligations
under the Supply Agreement;
(n) other representations and warranties specified in the Special Terms.
15.2 The representations and warranties set out in Clause 15.1 shall survive
the execution of this Agreement and shall be deemed to be repeated on the
Delivery Date, on the Initial Rent Payment Date, on the Lease Commencement
Date and on each Rent Payment Date, with reference to the facts and
circumstances then existing, as made at each such time.
16 RIGHTS, REMEDIES AND WAIVERS
16.1 The rights and remedies of the Lessor in relation to any misrepresentation
or breach of warranty on the part of the Lessee shall not be prejudiced by
any investigation by or on behalf of the Lessor or any of its affiliates
into the affairs of the Lessee, by the execution or the performance of
this Agreement or by any other act or thing which may be done by or on
behalf of the Lessor or any of its affiliates in connection with this
Agreement.
16.2 No course of dealing or waiver by the Lessor in connection with any
provision in this Agreement shall impair any right, power or remedy of the
Lessor with respect to any other provision, or be construed to be a waiver
thereof.
16.3 No course of dealing and no delay in exercising, or omission to exercise,
any right, power or remedy accruing to the Lessor upon any default under
this Agreement or any other agreement shall impair any such right, power
or remedy or be construed to be a waiver thereof or an acquiescence
therein. Nor shall the action of the Lessor in respect of any such
default, or any acquiescence by it therein, affect or impair any right,
power or remedy of the Lessor in respect of any other default.
<PAGE>
17(19)
17 MISCELLANEOUS
17.1 The Lessor shall have the right to assign as security its rights under
this Agreement in whole or in part, and to pledge the Equipment as
security for any financing obtained by it. The Lessee undertakes to
respect and comply with any such assignment or pledge and to do all things
necessary or desirable to perfect and evidence any such assignment or
pledge.
17.2 Without prejudice to the Lessor's right to create a security over its
rights hereunder or over the Equipment, the Lessor may assign absolutely
its rights and obligations hereunder without the consent of the Lessee,
provided the Equipment is sold simultaneously to the assignee. The Lessee
shall at the request of the Lessor take all action necessary or
desirable in connection with any such assignment and sale. The Lessee may
not without the prior written consent of the Lessor assign any rights or
obligations hereunder.
17.3 Each party shall appoint an authorised representative who shall be
entitled to deal with all matters arising under this Agreement and sign
any certificate hereunder or under the Supply Agreement. Each authorised
representative may by notice in writing to the representative of other
party appoint a new authorised representative in his own place or as an
alternate for him.
17.4 All information, notices, communications, opinions and the like required
to be given by the Lessee or to be delivered to the Lessor hereunder, if
not in the English language, shall be accompanied by an English
translation. The English version of all such information, notices,
communications, opinions and other documents shall as between the parties
prevail in the event of any conflict with the non-English versions
thereof.
17.5 All notices and other communications under this Agreement shall be in
writing and either delivered by hand or sent by telex, telefax, registered
first-class mail or courier, in each case to the address, telex or telefax
number of the intended recipient as set out in the Special Terms or as
subsequently notified to the other party in accordance herewith. In case
of communication by telex or telefax, the original of the communication
shall be sent by first-class mail to the recipient. A notice delivered by
hand or sent by courier shall be effective when delivered at the address
specified for the recipient. A notice given by any other means shall be
effective when received by the recipient. A notice received on a
non-working day in the place of receipt or after office hours shall be
deemed to have been delivered on the following working day.
17.6 This Agreement supersedes all other agreements, oral or written, with
respect to the subject matter hereof, and contains the entire agreement
between the Lessor and the Lessee with respect to the transactions
contemplated hereunder.
17.7 The Lessee and the Lessor shall, from time to time, do and perform such
other and further acts and execute and deliver any and all other further
instruments as may be required by law or reasonably requested by either
party to establish, maintain and protect the respective rights and
remedies of the other party and to carry out and effect the intent and
purpose of this Agreement.
17.8 The terms and conditions of this Agreement are confidential and shall
neither in whole or in part be disclosed to any person nor published
without the prior written consent of the parties hereto, provided that
this Clause 17.8 shall not prevent disclosure as required by law or
ministerial or judicial or parliamentary authority or to the legal or
audit or taxation advisers or bankers of any party.
<PAGE>
18(19)
17.9 Notwithstanding anything in this Agreement to the contrary, if any payment
by Lessee under this Agreement or the obligation to make the same or the
receipt of the same or the performance by either of the parties hereto of
any other of their obligations hereunder is following the execution of
this Agreement rendered unlawful or illegal in whole or in part by the act
of any government entity so as to render it impossible for the parties
hereto to comply with their respective obligations under this Agreement
then:
(a) the parties hereto shall forthwith negotiate with each other in good
faith with a view to making arrangements whereby such payment can be
made or received or other obligations performed in such manner,
place, currency, and other circumstances as shall be lawful and
legal and so as to achieve substantially the same result so far as
concerns the Lessor and the Lessee as would have been achieved had
such payment receipt or other obligation not been rendered unlawful
or illegal;
(b) if the parties hereto are unable to reach agreement under Subarticle
(a) above within one month after the date on which the relevant
payment was due to be made or received hereunder or the other
obligations were due to be performed either party hereto shall be
entitled, by notice in writing to the other, to terminate the Lease
Period on the latest date permitted by the relevant act of any
government entity.
On any termination of the Lease Period pursuant to this Subarticle 17.9
the Lessee shall pay to the Lessor an amount equivalent to the Termination
Value.
If and when Lessor has received full payment under this Subarticle 17.9 in
respect of the Equipment, title to the Equipment (except Software, which
Lessee takes possession of but not title as described the Supply
Agreement) shall be transferred from Lessor to Lessee or its designee, and
Lessor shall issue all other relevant documents necessary for such
transfer of title and change of registration of the Equipment, subject,
however, to Lessee indemnifying Lessor with respect to past and future
operations and obligations relating to the Equipment in accordance with
Article 8 of this Agreement. Lessee has no right to claim compensation
from Lessor with respect to the condition of the Equipment and confirm
that the condition of the Equipment on such transfer or title shall be
"as is, where is".
17.10 Lessor may set-off or withhold from any amount due and payable to Lessee
under this Agreement, any amount due and payable from Lessee under this
Agreement or any other agreement between the parties hereto.
(The following additional provisions shall only apply to this Agreement to
the extent provided in the Special Terms.)
17.11 At the request of the Lessor, the Lessee shall promptly sign and deliver
to the Lessor the required number of bills of exchange in the Language. In
the bills of exchange the date and the amount shall be left open. The
bills of exchange shall be in the form attached hereto as Exhibit 8. If
any amount hereunder is not paid when due, the Lessor shall be authorised
to date one or several of such bills of exchange, fill in the amount of
the overdue payment and to use such bill(s) of exchange to recover the
overdue payment.
17.12 Without advance notice the Lessor (or its nominee) shall at any time
during working hours have the right to enter the premises of the Lessee or
any other place where the Equipment may be located for the purpose of
inspecting the same or observing its use. Upon the execution of this
Agreement the Lessee shall
<PAGE>
19(19)
provide the Lessor with an authorisation to this effect in the
Language, substantially in the form of Exhibit 9.
17.13 Upon the execution of this Agreement the Lessee shall provide the Lessor
with an unconditional authorisation for the Lessor (or its nominee) to
repossess the Equipment in the Language. Such authorisation shall be
substantially in the form attached hereto as Exhibit 10.
18 APPLICABLE LAW AND JURISDICTION
18.1 This Agreement shall in all respects be governed by and construed in
accordance with Swedish law.
18.2 Any dispute, controversy or claim arising out of or in connection with
this Agreement, or the breach, termination or invalidity thereof shall be
finally settled by arbitration in accordance with the Rules of the
Arbitration Institute of the Stockholm Chamber of Commerce. The arbitral
tribunal shall be composed of three arbitrators. The proceedings shall
take place in Stockholm and be conducted in the English language.
18.3 Notwithstanding Clause 18.2, the Lessor shall be entitled to institute
proceedings for the payment of any amount due hereunder, to enforce its
rights hereunder to inspect the Equipment, to repossess the Equipment and
to enforce bills of exchange in any competent court of law.
<PAGE>
Exhibit 1 - Tranche 3
UK
Cisco* (pound) 21,425
IDNX* (pound) 36,606
PFA* (pound) 4,837
DASS2 (Part of Y3709 order) (pound) 70,400
--------------
Total (pound)133,268
--------------
FINLAND
Echo cancellors 61,600 FIM
* Note: Products marked with an asterix (*) include deliveries to RSL in France
and Germany.
<PAGE>
1(1)
EXHIBIT 2
OPTION DATES AND PRICES
Option Price in per cent of the
Rent Payment Date Purchase Price
- ----------------- -------------------------------
8 71,63
12 40
16 25,81
19 14,12
<PAGE>
1(1)
EXHIBIT 3
TERMINATION VALUE
Termination Value in
percent of the
Rent Payment Date Purchase Price
- ----------------- --------------------
1 100.00
2 100.00
3 100.00
4 100.00
5 93.19
6 86.20
7 79.01
8 71.63
9 64.04
10 56.24
11 48.23
12 40.00
13 36.60
14 33.10
15 29.51
16 25.81
17 20.02
18 18.12
19 14.12
20 10.00
If the Termination Value becomes due and payable on a Rent Payment Date, it
shall be the amount set out above. If the Termination Value becomes due and
payable on any other day, it shall be the amount set out above for the preceding
Rent Payment Date plus interest on such amount at the Interest Rate from the
preceding Rent Payment Date to the day when the Termination Value becomes due
and payable. If the Termination Value is not paid on the due date, Default
Interest will be payable on the Termination Value in accordance with Clause 6.7.
<PAGE>
1(3)
EXHIBIT 5
CONSENT AND AGREEMENT
relating to
a supply agreement made between Ericsson Ltd., UK (the "Supplier") and RSL Com
Europe Ltd., UK (the "Assignor") and dated December 6, 1995 (the "Supply
Agreement")
and
a lease agreement made between AB L M Ericsson Finans (the "Assignee") as lessor
and the Assignor as lessee and dated April 10, 1996 (the "Lease Agreement").
Terms defined in the Lease Agreement and not otherwise defined herein shall bear
the same meaning when used herein.
1. Pursuant to Clause 3.1 of the Lease Agreement, the Assignor has assigned
to the Assignee all of the Assignor's rights and interest in respect of
the Equipment under the Supply Agreement, including in particular the
right to acquire title to and ownership of the Equipment Pursuant to
Clause 3.2 of the Lease Agreement, the Assignee has assumed certain of the
Assignor's obligations under the Supply Agreement, including in particular
the obligation to pay the Purchase Price. The Supplier hereby acknowledges
notice of and consents to the aforementioned assignment and assumption and
to all terms of Clause 3 of the Lease Agreement.
2. If the Lease Commencement Date has not occurred on or prior to the Final
Availability Date, the Assignee shall under Clause 3.6 of the Lease
Agreement be entitled to terminate the Lease Agreement by giving written
notice to the Supplier and the Assignor. Following such notice, the
Supplier agrees that the Supply Agreement shall apply between the Assignor
and the Supplier as if this Consent and Agreement had never been executed
and the Assignee shall have no rights or obligations under the Supply
Agreement.
3. The Supplier hereby acknowledges and accepts that the Assignor shall prior
to the Lease Commencement Date, in accordance with the Lease Agreement and
the authorities and instructions from time given by the Assignee, be
entitled to exercise certain of the rights under the Supply Agreement
assigned to the Assignee.
<PAGE>
2(3)
4. The Supplier hereby acknowledges and accepts the assignment contained in
Clause 5.6 of the Lease Agreement, according to which any and all
guarantees, warranties and other rights (ownership excluded) given in
respect of the Equipment under the Supply Agreement and assigned to the
Assignee absolutely (as described in paragraph 1 hereof) shall for the
Lease Period be assigned to the Assignor. Following written notice from
the Assignee that the Lease Period has expired or terminated otherwise
than by the Assignor purchasing the Equipment, the aforementioned
assignment shall immediately terminate.
5. Amendments to the Supply Agreement:
[ ]
6. All notices and other communications under this consent an Agreement shall
be in writing and either delivered by hand sent by telex, telefax,
registered first class mail or courier in case of the Assignor or the
signer to the address, telex or telefax number set out in the Lease
Agreement, and in case of the Supplier to the address, telex or telefax
number set out in the Supply Agreement, or as subsequently notified by any
party to the other parties in accordance herewith. In case of
communication by telex or telefax, the original of the communication shall
be sent by first-class mail to the recipient. A notice delivered by hand
or sent by courier shall be effective when delivered at the address
specified for the recipient. A notice given by any other means shall be
effective when received by the recipient. A notice received on a
non-working day in the place of receipt or after office hours shall be
deemed to have been delivered on the following working day.
7. This Consent and Agreement shall in all respects be governed by and
construed in accordance with Swedish law.
8. Any dispute, controversy or claim arising out of or in connection with
this Consent and Agreement, or the breach, termination or invalidity
thereof, shall be finally settled by arbitration in accordance with the
Rules of the Arbitration Institute of the Stockholm Chamber of Commerce
(the "Institute"). The arbritral tribunal shall be composed of three
arbitrators. Unless the parties agree otherwise all arbitrators shall be
nominated by the Institute. The proceedings shall take place in Stockholm
and be conducted in the English language.
9. The parties agree that in the event that there are, at the time any party
desires to initiate arbitration proceedings against any other party
hereunder, pending or contemplated proceedings under the Lease Agreement
or the Supply Agreement, all proceedings shall be cumulated. If
<PAGE>
3(3)
proceedings are pending under the Lease Agreement or the Supply Agreement,
the proceedings hereunder shall be referred to the arbitral tribunal for
such pending proceedings, unless the tribunal decides that a cumulation is
not expedient. If no proceedings are pending, one arbitral tribunal shall
be nominated for all proceedings. All arbitrators in such tribunal shall,
unless the parties agree otherwise, be nominated by the Institute.
Date: [ILLEGIBLE] Date: 10/4/96
ERICSSON LTD. RSL COM EUROPE LTD.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- -------------------------------- -----------------------------------
Date: 10 APRIL - 96
AB L M ERICSSON FINANS
/s/ [ILLEGIBLE]
- --------------------------------
<PAGE>
EXHIBIT 6
CERTIFICATE OF DELIVERY/ACCEPTANCE*
LEASE AGREEMENT dated
We hereby confirm that the equipment is duly delivered to/accepted by* us in
accordance with and subject to the provisions of the Supply Agreement, and that
the conditions of such equipment in all respects complies with the provisions of
the Lease Agreement.
The equipment __________________________________________________________________
was delivered to/Accepted by* us on ____________________________________________
in accordance with the invoice(s) No.___________________________________________
_______________________________________ __________________________________
(place) (Date)
RSL COM EUROPE LTD
_______________________________
(Signature)
* Delete as appropriate.
<PAGE>
1(1)
EXHIBIT 7
RENT PAYMENTS
(Lease Commencement Date 0)
Percent of the Purchase Outstanding balance in
Rent Payment Date Price in each Rent Payment percent of the Purchase Price
- ----------------- -------------------------- -----------------------------
1 0 100
2 0 100
3 0 100
4 0 100
5 6,81 93,19
6 6,99 86,20
7 7,19 79,01
8 7,38 71,63
9 7,59 64,04
10 7,80 56,24
11 8,01 48,23
12 8,23 40,00
13 3,40 36,60
14 3,50 33,10
15 3,59 29,51
16 3,69 25,81
17 3,79 22,02
18 3,90 18,12
19 4,01 14,12
20 4,12 10,00
<PAGE>
EXHIBIT 11
DATED 10 APRIL 1996
RSL COM EUROPE LIMITED
to
AB LM ERICSSON FINANS
DEBENTURE
<PAGE>
THIS DEBENTURE is made the day of April 1996
BETWEEN:
(1) RSL COM EUROPE LIMITED (registration number 3040192) whose registered office
is at 9 Old Queen Street, Westminster, London SW1H 9JA, England ("the Company");
and
(2) AB LM ERICSSON FINANS, a Swedish limited liability company ("the Chargee").
NOW THIS DEED WITNESSETH as follows:
1. The Company hereby:
1.1 COVENANTS with the Chargee to pay and discharge as and when the same
fall due all its indebtedness and other obligations to the Chargee both present
and future and howsoever arising whether solely or jointly with any other person
and whether as principal or surety including interest thereon at such rate as
may be agreed in writing from time to time between the Company and the Chargee
and whether before or after the execution of this Debenture and together also
with all charges costs and expenses payable in connection therewith
(collectively "the Secured Liabilities"); and
1.2 with full title CHARGES in favour of the Chargee by way of floating
charge the whole of its undertaking and all its property assets and rights
(collectively "the Charged Property") as a continuing security for the payment
and discharge of the Secured Liabilities.
2. Power is hereby reserved to the Company to create or leave outstanding any
Debenture, fixed charge or other security of whatsoever kind over the whole or
any part of the Charged Property but not a floating charge, such Debenture,
charge or security but not a floating charge to rank in point of security in
priority to the floating charge hereby created and the Chargee agrees at the
cost of the Company to execute such documents as the Company may reasonably
request to give effect hereto.
<PAGE>
3. The moneys hereby secured shall become payable and all rights of the Company
to deal for any purpose whatever with the Charged Property or any part thereof
shall forthwith cease on the happening of any of the following events:-
3.1 if an order is made or an effective resolution passed for winding up
the Company
3.2 if a petition is presented or an order is made against the Company for
the appointment of an administrator
3.3 if the Company stops payment or ceases to carry on its business or
substantially the whole of its business or threatens to cease to carry on the
same or if the Company without the prior consent in writing of the Chargee shall
sell assign, charge, hire, lease or part with or share possession of or
otherwise dispose of the Charged Property or any part thereof or any interest of
the Company therein or purport to do so
3.4 if any encumbrancer takes possession or a receiver administrative
receiver or manager is appointed of all or any part of the property of the
Company;
3.5 if the Company makes any agreement or composition with its creditors
4. Further, the Chargee may under the hand of any of its officers or managers or
by deed appoint a Receiver or Receivers of the whole or any part of the Charged
Property only if at the time of such appointment a petition shall have been
presented applying for an administration order to be made in respect of the
Company.
A Receiver so appointed may (subject to statute) be removed in like
manner.
5. Every such Receiver shall:-
5.1 be the agent of the Company (which shall be solely responsible for his
acts defaults expenses and remuneration);
<PAGE>
5.2 be remunerated at such rate as the Chargee shall determine;
5.3 have (and if more than one may exercise severally or jointly) the
powers set out in Schedule 1 to the Insolvency Act 1986;
5.4 (subject to the discharge of liabilities having priority to the
Secured Liabilities and save insofar as otherwise directed by the Chargee) apply
all money received by him first in the payment and discharge of his borrowings,
expenses, other liabilities and remuneration secondly, in or towards discharge
of the Secured Liabilities in such order as the Chargee may require and thirdly
in payment of any surplus to the Company or other person entitled thereto.
6. 6.1 This Debenture shall be in addition to and shall be independent of
every other security which the Chargee may at any time hold for any of the
liabilities of the Company to the Chargee. No prior security held by the
Chargee over the whole or any part of the Charged Property shall merge in the
security hereby constituted.
6.2 This Debenture shall remain in full force and effect as a continuing
security until discharge by the Chargee.
6.3 Nothing contained in this Debenture is intended to, or shall operate
so as to, prejudice or affect any bill, note, guarantee, Debenture, pledge,
charge or other security of any kind whatsoever which the Chargee may have for
the liabilities of the Company or any of them or any right, remedy or privilege
of the Chargee thereunder.
7. The Chargee shall not nor shall any Receiver appointed as aforesaid by reason
of him or the Receiver entering into possession of the Charged Property or any
part thereof be liable to account as chargee in possession or be liable for any
loss on realisation or for any default or omission for which a chargee in
possession might be liable but every Receiver duly appointed by the Chargee
under the powers in that behalf hereinbefore contained shall be deemed to be the
agent of the Company for all purposes and shall as sub-agent for all purposes be
deemed to be in the same position as a Receiver duly appointed by a chargee
under the Law of Property Act 1925 and every such Receiver and the Chargee shall
be
<PAGE>
entitled to all the rights powers privileges and immunities by the said Act
conferred on chargees and receivers when such receivers have been duly appointed
under the Act
8. No purchaser chargee or other person or company dealing with the Chargee or
the Receiver or their respective agents shall be concerned to enquire whether
the moneys hereby secured have become payable or whether the power which the
Receiver is purporting to exercise has become exercisable or whether any money
remains due on this Debenture or to see to the application of any money paid to
the Chargee or to such Receiver
9. The Chargee and every Receiver attorney manager agent or other person
appointed by the Chargee hereunder shall be entitled to be indemnified out of
the Charged Property on a full indemnity basis in respect of all liabilities and
expenses incurred by him in the execution or purported execution of any of the
powers authorities or discretions vested in him pursuant to these conditions and
against all actions proceedings costs claims and demands in respect of any
matter or thing done or omitted in anyway relating to the Charged Property or
in connection with the perfection or enforcement or attempted enforcement of the
security hereby constituted or any other security held by the Chargee for the
liabilities of the Company to the Chargee or any guarantee to the Company in
respect thereof and the Chargee and any such Receiver may retain and pay all
sums in respect of the same out of any moneys received under the powers hereby
conferred
10. A notice may be served by leaving it at or by sending it through the post to
the registered office of the Company or to the Chargee at the address
hereinbefore set out (as the case may be) and any notice posted shall be deemed
to have been served at the expiration of seventy-two hours after it has been
posted and in proving service of such notice it shall be sufficient to prove
that the envelope containing the same was properly addressed stamped and posted
<PAGE>
11. This Debenture shall be governed by and construed in accordance with English
law, and the Company hereby irrevocably submits to the non-exclusive
jurisdiction of the English courts.
12. Each of the provision contained in this Debenture shall be severable and
distinct from one another and if at any time any one or more of such provisions
is or becomes invalid, illegal or unenforceable, the validity, the legality and
unenforceability of each of the remaining provision of this Debenture shall not
in any way be affected, prejudiced or impaired thereby.
l3. The Chargee shall have a full and unfettered right to assign the whole or
any part of the benefit of this Debenture and the expression "the Chargee"
wherever used herein shall be deemed to include the assignees and other
successors, whether immediate or derivative, of the Chargee, who shall be
entitled to enforce and proceed upon this Debenture in the same manner as if
named herein. The Chargee shall be entitled to impart any information concerning
the Company to any such assignee or other successor or any participant or
proposed assignee, successor or participant.
14. 14.1 Any reference herein to any statute or to any provision of any statute
shall be construed as a reference to any statutory modification or re-enactment
thereof and to any regulations or orders made thereunder and from time to time
in force.
14.2 The Clause headings shall not affect the construction hereof.
15. The Company hereby certifies that its creation by this Debenture in favour
of the Chargee does not contravene any of the provisions of its Memorandum and
Articles of Association
IN WITNESS whereof the Company and the Chargee have executed this deed the day
and year first above written.
<PAGE>
THE COMMON SEAL of )
RSL COM EUROPE LIMITED )
was hereunto affixed in )
the presence of: )
Director /s/ RSL Com Europe Limited
Secretary
SIGNED as a DEED by )
AB LM ERICSSON FINANS )
acting by )
)
Director /s/ AB LM Ericsson Finans
Director /s/ AB LM Ericsson Finans
<PAGE>
EXHIBIT 12
SUB-LESSEE'S CONSENT
relating to a lease agreement made between AB L M Ericsson Finans ("Ericsson")
as lessor and RSL Com Europe Ltd ("RSL") as lessee and dated
_____________________ (the "Lease Agreement").
Terms defined in the Lease Agreement and not otherwise defined herein shall bear
the same meaning when used herein.
1. Pursuant to Clause 7.8 of the Lease Agreement, Ericsson has accepted that
RSL may sublease the Equipment to RSL Com OY, Finland, RSL Com France S.A.
and RSL Com Deutschland GmbH, on terms and conditions set out therein.
2. We, the undersigned sub-lessee hereby acknowledge and agree that (i) the
sub-lease arrangement between us and RSL shall terminate one day prior to
the expiration or termination for whatever cause of the Lease Agreement,
(ii) we shall be bound by the terms and conditions of the Lease Agreement,
including but not limited to provisions regarding the use and ownership of
the Equipment, (iii) Ericsson shall be third party beneficiary to the
sub-lease arrangement between us and RSL, and (iv) we will not in any way
hinder or obstruct Ericsson from re-taking possession of the Equipment
under the Lease Agreement.
3. We, the undersigned sublessee, hereby acknowledge and agree that (i)
Ericsson shall not be responsible for any loss or damage to us or any
third parties caused by the Equipment or Ericsson's performance of the
Lease Agreement, including but not limited to direct or indirect damages
such as loss of profit and (ii) we shall defend, indemnify and hold
harmless Ericsson from all claims, losses, damages, expenses (including
attorneys' fees), and other liabilities arising out of our use or
possession of the Equipment, to the fullest extent permitted by law.
4. The Consent shall in all respects be governed by and construed in
accordance with Swedish law.
<PAGE>
5. Any dispute, controversy or claim arising out of or in connection with
this Consent or the breach, termination or invalidity thereof, shall be
finally settled by arbitration in accordance with the Rules of the
Arbitration Institute of the Stockholm Chamber of Commerce (the
"Institute"). The arbitral tribunal shall be composed of three
arbitrators. Unless the parties agree otherwise all arbitrators shall be
nominated by the Institute. The proceedings shall take place in Stockholm
and be conducted in the English language.
Date:
(SUB-LESSEE)
_______________________________
Date:
AB L M ERICSSON FINANS
_______________________________
<PAGE>
Exhibit 10.21
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Coast
Loan and Security Agreement
Borrower: CYBERLINK, INC.,
a California corporation
Address: 5855 Topanga Canyon Boulevard, Suite 520
Woodland Hills, California 91367
Date: September 8, 1995
THIS LOAN AND SECURITY AGREEMENT ("Loan Agreement"), dated the above date, is
entered into at Los Angeles, California, between COASTFED BUSINESS CREDIT
CORPORATION ("CoastFed"), a California corporation, with offices at 12121
Wilshire Boulevard, Suite 1111, Los Angeles, California 90025, and the borrower
named above ("Borrower"), whose chief executive office is located at the above
address ("Borrower's Address").
1. LOANS.
1.1 Loans, Collateral Agreements. Borrower has requested and may hereafter
request that CoastFed advance funds or otherwise extend credit to or for the
benefit of Borrower ("Loan(s)") in accordance with the terms and provisions of
this Loan Agreement and other written agreements ("Collateral Agreement(s)"),
including, but not limited to, any one or more of the following described
security agreements now or hereafter entered into between Borrower and CoastFed:
(a) Accounts Collateral Security Agreement; (b) Inventory Collateral Security
Agreement; (c) Equipment Collateral Security Agreement; and (d) any promissory
notes or guaranties. The amount and terms of payment of any Loans by CoastFed to
Borrower shall be determined in accordance with the terms and provisions of this
Loan Agreement and of any executed Collateral Agreements. Notwithstanding
anything herein or in any Collateral Agreement to the contrary, in no event
shall the Borrower permit the total balance of all Loans and all other
Obligations outstanding at any one time to exceed $7,000,000 ("Maximum Credit");
and, if for any reason they do, Borrower shall immediately pay the amount of
such excess to CoastFed in immediately available funds.
1.2 Interest. Unless specifically provided to the contrary in any
Collateral Agreement, all Loans shall bear interest at a rate equal to the
"Prime Rate" (as hereinafter defined), plus 2.25% per annum, calculated on the
basis of a 360-day year for the actual number of days elapsed. The interest rate
applicable to all Loans shall be adjusted monthly as of the first day of each
month, and the interest to be charged for that month shall be based on the
highest "Prime Rate" in effect during said month, but in no event shall the rate
of interest charged on any Loans in any month be less than 7.5% per annum. Prime
Rate" is defined as the actual "Reference Rate" or the substitute therefor of
the Bank of America NT & SA ("B of A") whether or not that rate is the lowest
interest rate charged by B of A. If the Prime Rate, as defined, is unavailable,
"Prime Rate" shall mean the highest of the prime rates published in the Wall
Street Journal on the first business day of the month, as the base rate on
corporate loans at large U.S. money center commercial banks.
1.3 Fees. Borrower shall pay to CoastFed a loan origination fee in the
amount of $52,500 concurrently with the initial funding of the Loans, and a
facility fee of $1,500 per quarter commencing with October 1, 1995 and
continuing on the first (1st) day of first (1st) month of each calendar quarter
thereafter during the term of this Loan Agreement. Said fees are in addition to
all other sums payable to CoastFed, are not refundable for any reason, and shall
bear interest from the date due to the date paid at the highest interest rate
applicable to any of the Obligations.
2. DEFINITIONS OF OBLIGATIONS AND COLLATERAL; GRANT OF SECURITY INTEREST
2.1 Obligations. The term "Obligations" as used in this Loan Agreement,
and any and all Collateral Agreements, shall mean and include each and all of
the following: the obligation to pay all Loans and all interest thereon when due
and to pay and perform when due all other indebtedness, liabilities,
obligations, guarantees, covenants, agreements, warranties and representations
of
-1-
<PAGE>
Coast Business Credit Loan and Security Agreement
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Borrower to CoastFed, whether heretofore, now or hereafter existing, owing or
arising; whether primary, secondary, direct, acquired from a third party,
absolute, contingent, fixed, secured or unsecured; joint or several, written or
oral, monetary or non-monetary; and whether created pursuant to, or caused by
Borrower's breach of, this Loan Agreement, a Collateral Agreement or any other
present or future agreement or instrument, or created by operation of law or
otherwise.
2.2 Collateral. As security and collateral for all Obligations, Borrower
hereby grants to CoastFed a continuing security interest in, and assigns to
CoastFed, all of Borrower's interest in the types of property described below,
whether now owned or hereafter acquired and wherever located, together with all
proceeds (including insurance proceeds), substitutions, accessions and products
thereof (collectively referred to as "Collateral"):
2.2(a) Accounts. All accounts, contract rights, chattel paper, and
instruments, and all other obligations now or hereafter owing to Borrower
(hereinafter sometimes collectively referred to as "Accounts"), including, but
not limited to, those described in any Accounts Collateral Security Agreement
executed by Borrower, and all right, title and interest of Borrower in, and all
of Borrower's rights and remedies with respect to, all goods, the sale or other
disposition of which gives rise to any Account, including, without limitation,
all returned, reclaimed and repossessed goods and all rights of stoppage in
transit, replevin, reclamation, and all rights as an unpaid vendor; and
2.2(b) Inventory. All inventory, goods, merchandise, materials, raw
materials, work in process, finished goods, advertising, packaging and shipping
materials, supplies, and all other tangible personal property which is held for
sale or lease or furnished under contracts of service or consumed in Borrower's
business, including, without limitation, any and all of the foregoing which are
returned, repossessed, reclaimed or stopped in transit, and including, but not
limited to, those described in any inventory Collateral Security Agreement
executed by Borrower, and all warehouse receipts and other documents or
instruments now or hereafter issued with respect to any of the foregoing; and
2.2(c) Equipment. All equipment, goods (other than inventory), machinery,
fixtures, trade fixtures, vehicles, furnishings, furniture, supplies, materials,
tools, machine tools, office equipment, appliances, apparatus, parts, dies,
jigs, and chattels, including, but not limited to, those described in any
Equipment Collateral Security Agreement executed by Borrower; and
2.2(d) Intangibles. All deposit accounts and general intangibles
(including, but not limited to, tax refunds, goodwill, name, drawings,
trademarks, blueprints, trade names, trade secrets, customer lists (except for
the customer list previously sold by Borrower to General Electric), patents,
patent applications, copyrights, security deposits, loan commitment fees,
royalties, licenses, processes, and all other rights, privileges and franchises
(including, licenses issued by the Federal Communications Commission ("FCC") and
all other licenses, approvals, permits and other authorizations issued by the
FCC to Borrower, including the proceeds of any sale or other disposition
thereof, in each case to the extent that a security interest therein is not
prohibited by law, provided that to the extent that a security interest therein
is now so prohibited and to the extent that such security interest at any time
hereafter shall no longer be so prohibited, then such security interest shall
automatically and without any further action attach and become fully effective
at that time (giving effect to any retroactive effect to any change in
applicable law or regulation)); and
All personal property of Borrower which comes into CoastFed's
possession, custody or control; and all tangible and intangible personal
property in which CoastFed now has or hereafter acquires a security interest to
secure any or all of the Obligations; and all substitutions, additions and
accessions to any or all of the foregoing items of Collateral; and all
guaranties of and security for any and all of the foregoing; and all books and
records relating to any and all of the foregoing and the equipment containing
said books and records. Payment and performance of the Obligations are
collateralized by the Collateral and by any security interest created in any
other agreement now or hereafter existing between CoastFed and Borrower unless
such other agreement is a deed of trust or other security instrument having real
property, or rents from real property as its subject matter and expressly
provides to the contrary.
2.3 Conditions Precedent. The effectiveness of this Agreement and the
obligation of CoastFed to make the Loans is subject to the satisfaction, in the
sole discretion of CoastFed, at or prior to the first advance of funds
hereunder, of each, every and all of the following conditions:
2.3(a) Status of Accounts. No Account shall be due and unpaid 120 days
past its due date; and
2.3(b) Lock Box Agreement. There shall be in place a completely executed
and delivered lock box agreement in form and substance and with a financial
institution acceptable to CoastFed, in its sole discretion; and
2.3(c) Agreement with Billing Service. There shall be in place a system of
verification and third party arrangement with Electronic Data Systems
(Borrower's billing service) in form and substance satisfactory to CoastFed, in
its sole discretion; and
-2-
<PAGE>
Coast Business Credit Loan and Security Agreement
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2.3(d) Subordination of Existing Indebtedness. There shall be in place a
complete subordination, in form and substance acceptable to CoastFed, in its
sole discretion, of all of the indebtedness owing from the Borrower to Richard
Leslie Lydiate, in the unpaid principal amount of $2,500,000.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR
To induce CoastFed to enter into this Loan Agreement and now and hereafter
to enter into any Collateral Agreement, Borrower represents and warrants that
subject to the Schedule of Exceptions, each of the following representations and
warranties now is and hereafter will continue to be true and correct in all
material respects and Borrower has and will timely perform each of the following
covenants:
3.1 Corporate Existence and Power. Borrower, if a corporation, is and will
continue to be, duly authorized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Except in those jurisdictions
where it is the process of obtaining qualification, licenses and authorizations
and the lack thereof does not materially impair Borrower's ability to lawfully
conduct its business, Borrower is and will continue to be qualified and licensed
to do business in all jurisdictions in which the nature of the business
transacted by it, or the ownership or leasing of its property, makes such
qualification or licensing necessary, and Borrower has and will continue to have
all requisite power and authority to carry on its business as it is now, or may
hereafter be, conducted.
3.2 Authority. Borrower is, and will continue to be, authorized to enter
into, to grant security interests in its property pursuant to, and to perform
its obligations under, this Loan Agreement, any Collateral Agreement and all
other instruments and transactions contemplated herein. The execution, delivery
and performance by Borrower of this Loan Agreement, any Collateral Agreement and
all other instruments and transactions contemplated herein have been validly
authorized, are enforceable against the Borrower in accordance with their terms,
and do not violate any law or any provision of, and are not grounds for
acceleration under, any agreement, indenture, note or instrument which is
binding upon Borrower, or any of its property, including, without limitation,
Borrower's Articles of Incorporation, By-Laws and any Shareholder Agreements.
3.3 Name; Trade Names and Styles. Borrower has set forth above its correct
name. Listed on the Schedule hereto are all prior names of Borrower and each
fictitious name, trade name and trade style by which Borrower has been, or is
now, known. Borrower shall provide CoastFed with fifteen (15) days' advance
written notice prior to doing business under any other name, fictitious name,
trade name or trade style. Borrower has complied, and will hereafter comply,
with all laws relating to the conduct of business under, the ownership of
property in, and the renewal or continuation of the right to use, a corporate,
fictitious or trade name or trade style.
3.4 Place of Business; Location of Collateral. Borrower's sole place of
business; or, if Borrower has more than one place of business, Borrower's chief
executive office; or, if Borrower is an individual and does not have a separate
place of business, Borrower's residence is, and will continue to be, located at
Borrower's Address and all of Borrower's books and records including, but not
limited to, the books and records relating to Borrower's Accounts, are and will
be maintained at Borrower's Address unless and until CoastFed shall otherwise
consent in writing. In addition to Borrower's Address, Borrower has places of
business and Collateral is located only at the locations shown on the Schedule
hereto. Borrower will provide CoastFed with at least fifteen (15) days advance
written notice if Borrower moves any of the Collateral, or obtains any
additional sites for the conduct of Borrower's business or the location of any
Collateral.
3.5 Title to Collateral; Liens. Borrower is now, and will at all times
hereafter be, the lawful and sole owner of all the Collateral. With the
exception of the security interest granted CoastFed, the Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims. Without limiting any of CoastFed's other rights
and remedies, if Borrower grants any third party a lien or encumbrance on or
security interest in any of the Collateral, CoastFed, in its sole discretion,
shall have the right to treat such action as a notice of termination by Borrower
to CoastFed under Paragraph 8(d) hereof, as of any date subsequent to such grant
selected by CoastFed, in its sole discretion, and to charge Borrower the
termination fee therein provided. CoastFed now has, and will have, a perfected
and enforceable first priority security interest in all of the Collateral, and
Borrower will at all times defend CoastFed and the Collateral against all claims
of others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to constitute a fixture thereto.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or
impair Borrower's right to remove any Collateral from the leased premises.
Whenever any Collateral is located upon premises in which any third party has an
interest (whether as owner, mortgagee, beneficiary under a deed of trust, lien
or otherwise), Borrower shall, whenever requested by CoastFed, use its best
efforts to cause such third party to execute and deliver to CoastFed, in form
acceptable to CoastFed, whatever waivers and
-3-
<PAGE>
Coast Business Credit Loan and Security Agreement
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subordinations that CoastFed specifies, so as to ensure that CoastFed's rights
in the Collateral are, and will continue to be, superior to the rights of any
such third party. Borrower will keep in full force and effect, and will comply
with all the terms of, any lease of real property where any of the Collateral
now or in the future may be located.
3.6 Maintenance of Collateral. Borrower has maintained and will maintain
the Collateral and all of its assets in good working condition, at Borrower's
expense. Borrower will not use the Collateral or any of its other properties for
any unlawful purpose and will not secrete or abandon the Collateral. Borrower
will immediately advise CoastFed in writing of any material loss or depreciation
of the Collateral.
3.7 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records comprising an
accounting system in accordance with generally accepted accounting principles.
Borrower has not and will not in the future enter into any agreement with any
accounting firm, service bureau or third party to prepare or store Borrower's
books and records at any location other than Borrower's Address, without first
obtaining CoastFed's written consent, which may be conditioned upon such
accounting firm, service bureau or other third party agreeing to give CoastFed
the same rights with respect to access to books and records and related rights
as CoastFed has under Paragraph 4.3 of this Loan Agreement.
3.8 Financial Condition and Statements. All financial statements now or
hereafter delivered to CoastFed have been, and will be, prepared in conformity
with generally accepted accounting principles and now and hereafter will
completely and accurately reflect the financial condition of Borrower, at the
times and for the periods therein stated. Since the last date covered by any
such statement, there has been no material adverse change in the financial
condition, operations or any other status of the Borrower. Borrower is now and
will continue to be solvent in both the "equity" and "bankruptcy" sense.
Borrower will deliver to CoastFed a copy of all financial statements prepared
with respect to Borrower no later than five (5) days after the preparation or
receipt thereof by Borrower. Borrower will cause to be prepared, and will
provide CoastFed (i) within thirty (30) days following the end of each month
internally prepared, complete quarterly financial statements, and (ii) within
ninety (90) days following the end of Borrower's fiscal year, complete annual
financial statements, reviewed by independent certified public accountants
acceptable to CoastFed.
3.9 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state or local law. Borrower has timely filed, and will timely file,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or hereafter owed by Borrower. Borrower may defer payment of
any contested taxes provided that Borrower (i) in good faith contests Borrower's
obligation to pay such taxes by appropriate proceedings promptly and diligently
instituted and conducted, (ii) notifies CoastFed in writing of the commencement
of and any material development in such proceedings, and (iii) posts bonds or
takes any other steps required to keep such contested taxes from becoming a lien
against or charge upon any of the Collateral or other properties of Borrower.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including, without limitation, any liability to
the Pension Benefit Guaranty Corporation or its successors or any other
governmental agency. When requested, Borrower will furnish CoastFed with proof
satisfactory to CoastFed of Borrower's making the payment or deposit of all such
taxes and contributions, such proof to be delivered within five (5) days after
the due date established by law for each such payment or deposit. If Borrower
fails or is unable to pay or deposit such taxes or contributions, CoastFed may,
but is not obligated to, pay the same and treat all such advances as additional
Obligations of Borrower. Such advances shall bear interest at the highest
interest rate applicable to any of the Obligations.
3.10 Compliance with Law. Borrower has complied, and will comply, with all
provisions of all foreign, federal, state and local laws and regulations
relating to Borrower, including, but not limited to, those relating to
Borrower's ownership of real or personal property, conduct and licensing of
Borrower's business and employment of Borrower's personnel.
3.11 Litigation. There is no claim, suit, litigation, proceeding or
investigation pending or threatened by or against or affecting Borrower in any
court or before any regulatory commission, board or other governmental agency
(or any basis therefor known to Borrower) which might result, either separately
or in the aggregate, in any adverse change in the business or condition of
Borrower, or in any impairment in the ability of Borrower to carry on its
business in substantially the same manner as it is now
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being conducted. Borrower will immediately inform CoastFed in writing of any
claim, proceeding, litigation or investigation hereafter threatened or
instituted by or against Borrower.
3.12 Use of Proceeds. The proceeds of the Loans shall be used to repay the
Borrower's prior lender and to provide additional working capital. Borrower is
not purchasing or carrying any "margin stock" (as defined in Regulation G of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any Loan will be used to purchase or carry any "margin stock" or to extend
credit to others for the purpose of purchasing or carrying any "margin stock."
All proceeds of all Loans shall be used solely for lawful business purposes.
3.13 Continuing Effect. All representations, warranties and covenants of
Borrower contained in this Loan Agreement and any Collateral Agreement and any
other agreement with CoastFed shall be true and correct at the time of the
effective date of each such agreement and shall be deemed continuing and shall
remain true, correct and in full force and effect until payment and satisfaction
in full of all of the Obligations, and Borrower acknowledges that Coast Fed is
and will be expressly relying on such representations, warranties and covenants
in making Loans to Borrower.
4. ADDITIONAL DUTIES OF DEBTOR
4.1 Insurance. Borrower shall, at all times, at Borrower's expense, insure
all of the Collateral and carry such other business insurance as is customarily
carried by businesses in Borrower's industry with insurers acceptable to
CoastFed, in such form and amounts as CoastFed may require. All such insurance
policies shall name CoastFed an additional loss payee, shall provide that
proceeds payable thereunder be payable directly to CoastFed unless written
authority to the contrary is obtained, and shall also provide that no act or
default of Borrower or any other person shall affect the right of CoastFed to
recover thereunder and shall contain a lenders loss payee endorsement in form
acceptable to CoastFed. Upon receipt of the proceeds of any such insurance,
CoastFed shall apply such proceeds in reduction of the Obligations as CoastFed
shall determine in its sole and absolute discretion. If Borrower fails to
provide or pay for any such insurance, CoastFed may, but is not obligated to,
procure the same at Borrower's expense. Borrower agrees to deliver to CoastFed,
promptly as rendered, copies of all reports made to all insurance companies.
4.2 Reports. At its expense, Borrower shall report, in form reasonably
satisfactory to CoastFed, such information as CoastFed may from time to time
specify regarding Borrower or the Collateral; such reports shall be rendered
with such frequency as CoastFed may specify. All reports furnished CoastFed
shall be complete and accurate in all respects.
4.3 Access to Collateral Books and Records. At any time CoastFed, or its
agents, shall have immediate access to the Collateral and any other property of
Borrower, wherever located. CoastFed shall have the right, up to four (4) times
annually, to audit and copy Borrower's books and records and accounts including
accountants' reports wherever located (hereinafter collectively the "Records").
Borrower hereby irrevocably authorizes and directs any of the officers, agents,
accountants and attorneys having possession or control of any of the Records
(including computer records) to physically deliver or make same available to
CoastFed upon CoastFed's request. Borrower waives the benefit of any accountant-
client privilege or other evidentiary privilege precluding or limiting the
disclosure, divulgence or delivery of any of the Records. CoastFed shall have
the right to possession of, or to move to the premises of CoastFed or any agent
of CoastFed, for so long as CoastFed may desire, all or any part of the Records.
4.4 Prohibited Transactions. Borrower shall not without CoastFed's prior
written consent: merge, consolidate, dissolve, acquire any other corporation;
enter into any transaction not in its usual course of business; guarantee or
otherwise become in any way liable with respect to the obligations of another
party or entity (except by endorsements of instruments or items of payment for
deposit to the general account of Borrower or which are transmitted or turned
over to CoastFed on account of the Obligations); pay or declare any dividends
upon Borrower's stock; redeem, retire, purchase or otherwise acquire, directly
or indirectly, any of Borrower's stock; make any change in Borrower's name,
identity, corporate or capital structure; sell or transfer any Collateral,
except for the sale of finished inventory in the ordinary course of Borrower's
business; lend or distribute any of Borrower's property or assets, or incur any
debts, outside of the ordinary course of Borrower's business.
4.5 Notification of Changes. Borrower will promptly notify CoastFed in
writing of any change of its officers, directors, or key employees, the death of
any partner or joint venturer, any purchase out of the regular course of
Borrower's business and any adverse or material change in the business or
financial affairs of Borrower.
4.6 Charges. Borrower shall pay all charges assessed by CoastFed, in
accordance with CoastFed's schedule of charges in effect from time to time, and
such charges shall be part of the Obligations and shall be payable on demand.
4.7 Litigation Cooperation. Should any suit or proceeding be instituted by
or against CoastFed with
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respect to any Collateral or for the collection or enforcement of any Account,
or in any manner relating to Borrower, Borrower shall, without expense to
CoastFed, and wherever and whenever designated by CoastFed, make available
Borrower and its officers, employees and agents and Borrower's Records to the
extent that CoastFed may deem reasonably necessary in order to prosecute or
defend any such suit or proceeding.
4.8 Remittance of Proceeds. All proceeds arising from the disposition of
the Collateral shall be delivered, in kind, by Borrower to CoastFed in the
original form in which received by Borrower not later than the following
business day after receipt by Borrower. Borrower agrees that it will not
commingle proceeds of Collateral with any of Borrower's other funds or property,
but will hold such proceeds separate and apart from such other funds and
property and in an express trust for CoastFed. CoastFed may from time to time
verify directly with the respective account debtors the validity, amount and any
other matters relating to the Accounts by means of mail, telephone or otherwise,
either in the name of Borrower or CoastFed or such other name as CoastFed may
choose.
4.9 Execute Additional Documentation. Borrower agrees, at its expense, on
demand by CoastFed, to execute all documents in form satisfactory to CoastFed,
as CoastFed, in its sole discretion, may deem necessary or useful in order to
perfect and maintain CoastFed's perfected first-priority or any other security
interest in the Collateral, and in order to fully consummate all of the
transactions contemplated under this Loan Agreement and under any Collateral
Agreement.
5. APPLICATION OF PAYMENTS.
All forms of payments delivered to CoastFed on account of the Obligations
constitute conditional payment only until such items are actually paid in cash
to CoastFed; solely for the purpose of computing interest earned by CoastFed,
credit therefor and for bank wire transfers shall be given as of the second
(2nd) business day after receipt by CoastFed in order to allow for clearance,
bookkeeping and computer entries. All payments made by Borrower may be applied,
and in CoastFed's sole discretion reversed and re-applied, in whole or in part
to any of the Obligations, in such order and manner as CoastFed shall determine
in its sole discretion.
6. EVENTS OF DEFAULT AND REMEDIES
6.1 Events of Default. If any of the following events shall occur, such an
occurrence shall constitute an "Event of Default" and Borrower shall provide
CoastFed with immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to CoastFed
by Borrower or any of Borrower's officers, employees or agents now or hereafter
shall be incorrect, false, untrue or misleading in any material respect; or (b)
Borrower shall fail to repay when due part or all of any Loan or to pay any
interest thereon when due; or (c) Borrower shall fail to perform when due (and
such failure shall continue for ten (10) days or more) any term or condition
contained in this Loan Agreement or in any Collateral Agreement, or any other
agreement between CoastFed and Borrower; or (d) Borrower shall fail to pay or
perform any other Obligation when due and such failure shall continue for ten
(10) days or more after the same was due; or (e) Any loss, theft, or substantial
damage to, or destruction of, any or all of the Collateral (unless within ten
(10) days after the occurrence of any such event, Borrower furnishes CoastFed
with evidence reasonably satisfactory to CoastFed that the amount of any such
loss, theft, damage to or destruction of the Collateral is fully insured under
policies designating CoastFed as the exclusive additional named insured); or (f)
A material impairment of the prospect of payment or performance of the
Obligations or a material impairment of the value of the Collateral or any
impairment in the priority of CoastFed's security interest; or (g) Any event
shall arise which may result or actually results in the acceleration of the
maturity of the indebtedness of Borrower to others under any loan or other
agreement or undertaking; or (h) Any levy, assessment, attachment, seizure, lien
or encumbrance for any cause or reason whatsoever, upon all or any part of the
Collateral or any other asset of Borrower (unless discharged by payment, release
or fully bonded against not more than fifteen (15) days after such event has
occurred); or (i) Dissolution, termination of existence, insolvency or business
failure of Borrower; or appointment of a receiver, trustee or custodian, for all
or any part of the property of, assignment for the benefit of creditors by, or
the commencement of any proceeding by or against, Borrower under any
reorganization, bankruptcy, insolvency (provided, however, in the case of an
involuntary bankruptcy the filing of the same against Borrower shall not
constitute an Event of Default unless such proceeding is not dismissed within
thirty (30) days), arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, now or hereafter in effect; or entry of a
court or governmental order which enjoins, restrains or in any way prevents
Borrower from conducting all or any part of its business; or failure to pay any
foreign, federal, state or local tax or other debt of Borrower unless, with
respect to any such tax, Borrower complies with the provisions of Paragraphs 3.9
(i), (ii), and (iii); or (j) A notice of lien, levy or assessment is filed of
record with respect to any of Borrower's assets by the United States or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, or if any taxes or debts now or
hereafter owing to any one or more of them becomes a lien upon all or any of the
Collateral or any other assets of Borrower (other than a lien for real property
taxes which are not yet due and payable)
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and any such liens are not released or bonded against within fifteen (15) days;
or (k) Death, insolvency or incompetency of any guarantor of the Obligations;
appointment of a conservator or guardian of the person of any such guarantor;
appointment of a conservator, guardian, trustee, custodian or receiver of all or
any part of the assets, property or estate of, any such guarantor; revocation or
termination of, or limitation of liability upon, any guaranty of the
Obligations; or commencement of proceedings by or against any guarantor or
surety for Borrower under any bankruptcy or insolvency law; or (1) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations or if any person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (m) Borrower shall generally not pay its debts as they become due
or shall enter into any agreement (whether written or oral), or offer to enter
into any such agreement, with all or a significant number of its creditors
regarding any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management or control of the business of Borrower; or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law, or shall make any transfer of its property to or for the benefit of any
creditor at a time when other creditors similarly situated have not been paid;
or (n) CoastFed at any time, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of (i) the occurrence of an
event prior to the effective date hereof of which CoastFed had no knowledge on
the effective date or (ii) the occurrence of an event on or subsequent to the
effective date.
6.2 Remedies. Upon the occurrence of any Event of Default, and at any time
thereafter, CoastFed, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease advancing money or extending credit to or for the
benefit of Borrower under this Loan Agreement, any Collateral Agreement, and any
other document or agreement; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes
CoastFed without judicial process to enter onto any of the Borrower's premises
without hindrance to search for, take possession of, keep, store, or remove any
of the Collateral and remain on such premises or cause a custodian to remain
thereon in exclusive control thereof without charge for so long as CoastFed
deems necessary in order to complete the enforcement of its rights under this
Loan Agreement or any Collateral Agreement, or any other agreement; provided,
however, that should CoastFed seek to take possession of any or all of the
Collateral by Court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court rule
or otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that CoastFed retain possession of and not dispose of
any such Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to CoastFed at a
place or places to be designated by CoastFed which are reasonably convenient to
CoastFed and Borrower, and to remove the Collateral to such locations as
CoastFed may deem advisable; (e) Complete processing, manufacturing or repair of
all or any portion of the Collateral prior to a disposition thereof and, for
such purpose and for the purpose of removal, CoastFed shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge. Without limiting any security interest granted
CoastFed in other provisions of this Loan Agreement or in any Collateral
Agreement or other agreement, for the purpose of completing manufacturing,
processing or repair of Collateral and the disposition thereof, CoastFed is
hereby granted a security interest in, and CoastFed and any purchaser from
CoastFed may use without charge, all of the Borrower's plant, machinery,
equipment, labels, licenses, processes, patents, patent applications,
copyrights, names, trade names, trademarks, trade secrets, logos, advertising
material and all other assets, and may also utilize all of Borrower's rights
under any license or franchise agreement; (f) Sell, ship, reclaim, lease or
otherwise dispose of all or any portion of the Collateral in its condition at
the time CoastFed obtains possession or after further manufacturing, processing
or repair, at any one or more public and/or private sales (including execution
sales), in lots or in bulk, for cash, exchange or other property or on credit
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. CoastFed shall have the right to
conduct such disposition on Borrower's premises without charge for such time or
times as CoastFed deems fit, or on CoastFed's premises, or elsewhere and the
Collateral need not be located at the place of disposition. CoastFed may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and general intangibles
comprising part or all of the Collateral and, in connection therewith, Borrower
irrevocably
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authorizes CoastFed to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in CoastFed's sole discretion,
to grant extensions of time to pay, compromise claims and settle Accounts and
the like for less than face value; (h) Demand and receive possession of any of
Borrower's federal and state income tax returns and the Records utilized in the
preparation thereof or referring thereto. Notwithstanding anything to the
contrary in this Section 6.2, CoastFed shall provide ten (10) days written
notice to Borrower and the FCC before any Equipment will be repossessed or
foreclosed upon. All attorneys' fees, expenses, costs, liabilities and
obligations incurred by CoastFed with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of CoastFed's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional five percent per annum.
6.3 Standards for Determining Commercial Reasonableness. Borrower and
CoastFed agree that the following conduct by CoastFed with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by CoastFed, including, but not limited to, CoastFed's use in
its sole discretion of other or different times, places and manners of noticing
and conducting any disposition of Collateral shall not be deemed unreasonable):
Any public or private disposition as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be
conducted, at any place designated by CoastFed, with or without the Collateral
being present, and which commences at any time between 8:00 a.m. and 5:00 p.m.
Without limiting the generality of the foregoing, Borrower expressly agrees
that, with respect to any disposition of Accounts, instruments and general
intangibles (collectively "Receivables"), it shall be commercially reasonable
for CoastFed to direct any prospective acquirer thereof to ascertain directly
from Borrower any and all information (and CoastFed shall not be required to
maintain records of, or answer any inquiries) concerning the Receivables offered
for disposition, including, but not limited to, the terms of payment, aging and
delinquency, if any, of the Receivables, the financial condition of any obligor
or account debtor thereon or guarantor thereof, any collateral therefor and the
condition and location of the goods, if any, that are the subject of any of the
Receivables.
6.4 Application of Proceeds. All proceeds realized as the result of any
disposition of the Collateral shall be applied by CoastFed first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by CoastFed in
the exercise of its rights under this Loan Agreement and any Collateral
Agreement, second to the interest due upon any of the Obligations and third to
the principal of the Obligations in any order determined by CoastFed in its sole
discretion. The surplus, if any, shall be paid to Borrower; if any deficiency
shall arise, Borrower shall remain liable to CoastFed therefor. If, as a result
of the disposition of any of the Collateral, CoastFed directly or indirectly
enters into a credit transaction with any third party, CoastFed shall have the
option, exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of such credit transaction or deferring the
reduction thereof until the actual receipt by CoastFed of cash therefor from
such third party.
6.5 Remedies Cumulative. In addition to the rights and remedies set forth
in this Loan Agreement and any Collateral Agreement, CoastFed shall have all the
other rights and remedies accorded a secured party under the California Uniform
Commercial Code and under any and all other applicable laws and in any other
instrument or agreement now or hereafter entered into between CoastFed and
Borrower and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by CoastFed of one or more of its rights
or remedies shall not be deemed an election, nor bar CoastFed from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of CoastFed to exercise any rights or remedies shall not operate as a
waiver thereof, but all rights and remedies shall continue in full force and
effect until all of the Obligations have been fully paid and performed.
7. POWER OF ATTORNEY
Borrower grants to CoastFed an irrevocable power of attorney coupled with
an interest, authorizing and permitting CoastFed (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (a) Execute on
behalf of Borrower any documents that CoastFed may, in its sole and absolute
discretion, deem advisable in order to perfect, maintain or improve CoastFed's
security interest in the Collateral or other real or personal property intended
to constitute Collateral, or in order to exercise a right of Borrower or
CoastFed, or in order to fully consummate all the transactions contemplated
under this Loan Agreement, any Collateral Agreement and all other present and
future
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agreements; (b) At any time after the occurrence of an Event of Default, to
execute on behalf of Borrower any document exercising, transferring or assigning
any option to purchase, sell or otherwise dispose of or to lease (as lessor or
lessee) any real or personal property which is part of CoastFed's Collateral or
in which CoastFed has an interest; (c) Execute on behalf of Borrower, any
invoices relating to any Account, any draft against any Account debtor and any
notice to any Account debtor, any proof of claim in bankruptcy, any Notice of
Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien; (d) Take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into CoastFed's possession; (e) Upon the
occurrence of any Event of Default, to receive and open all mail addressed to
Borrower; and to notify the Post Office authorities to change the address for
the delivery of mail addressed to Borrower to such other address as CoastFed may
designate, including, but not limited to, CoastFed's own address; CoastFed shall
turn over to Borrower all of such mail not relating to the Collateral; (f)
Endorse all checks and other forms of remittances received by CoastFed "Pay to
the Order of CoastFed Business Credit Corporation," or in such other manner as
CoastFed may designate; (g) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (h) Grant extensions of time to pay, compromise claims and
settle Accounts and the like for less than face value and execute all releases
and other documents in connection therewith; (i) Pay any sums required on
account of Borrower's taxes or to secure the release of any liens therefor, or
both; (j) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (k) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give CoastFed the same rights of access and other
rights with respect thereto as CoastFed has under Paragraph 4.3 of this Loan
Agreement; and (l) Take any action or pay any sum required of Borrower pursuant
to this Loan Agreement, any Collateral Agreement and any other present or future
agreements. Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by CoastFed with respect to the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall CoastFed's rights under
the foregoing power of attorney or any of CoastFed's other rights under this
Loan Agreement or any Collateral Agreement be deemed to indicate that CoastFed
is in control of the business, management or properties of Borrower.
8. TERMINATION.
This Loan Agreement and all Collateral Agreement(s) shall continue in
effect until August 31, 1998 (the "initial renewal date") and shall thereafter
automatically and continuously renew for up to two successive additional terms
of one year(s) each unless terminated as to future transactions as hereinafter
provided. Upon and concurrent with any renewal a renewal fee in an amount equal
to one quarter percent (.25%) of the Maximum Credit shall be paid. (The initial
renewal date and each subsequent date on which the terms of this Loan Agreement
and the Collateral Agreement(s) automatically renew are hereinafter referred to
as "renewal dates.") This Loan Agreement and any Collateral Agreement may be
terminated, as to future transactions only, as follows: (a) By written notice
from either CoastFed or Borrower to the other, not less than sixty (60) days
prior to the next renewal date, in which event termination shall be effective on
the next renewal date; or (b) By CoastFed at any time after the occurrence of an
Event of Default, without notice, in which event termination shall be effective
immediately; or (c) By sixty (60) days' prior written notice from Borrower to
CoastFed, in which event, termination shall be effective on the sixtieth day
after such notice is given; or (d) By the grant by Borrower to any third party
of a lien or encumbrance on, or security interest in, any of the Collateral, as
provided in Paragraph 3.5, in which event termination shall be effective on the
date selected by CoastFed pursuant to Paragraph 3.5. On the effective date of
termination, Borrower shall pay and perform in full all Obligations, whether
evidenced by installment notes or otherwise, and whether or not all or any part
of such Obligations are otherwise then due and payable. If Borrower attempts to
terminate this Loan Agreement under subparagraph (a) or (c) above, but does not
pay and perform all Obligations in full on the effective date of termination,
then CoastFed may elect, by written notice to Borrower, to continue this Loan
Agreement and all Collateral Agreement(s) in full force and effect until the
next renewal date and in that event this Loan Agreement and all Collateral
Agreement(s) shall automatically renew thereafter as provided above. If
termination occurs under subparagraph (b), (c) or (d) above, Borrower shall pay
to CoastFed a termination fee, if termination occurs during the first (1st) year
of the initial term in an amount equal to three percent (3%) of the Maximum
Credit; or, if termination occurs in the second (2nd) year of the initial term
in an amount equal to two percent (2%) of the Maximum Credit; or, if termination
occurs in the third (3rd) year of the initial term in an amount equal to one
percent (1%) of the Maximum Credit. Said termination fee shall be included in
the Obligations, shall be payable on the effective date of termination, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations. Notwithstanding any termination of this Loan Agreement
or any Collateral Agreement, all of CoastFed's security interest in all of the
Collateral and all
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of the terms and provisions of this Loan Agreement and all Collateral
Agreement(s) shall continue in full force and effect until all Obligations have
been paid and performed in full, and no termination shall in any way affect or
impair any right or remedy of CoastFed, nor shall any such termination relieve
Borrower of any Obligation to CoastFed until all of the Obligations have been
paid and performed in full. Without limiting the fact that all Loans are
discretionary on the part of CoastFed, CoastFed may, in its sole discretion,
refuse to make any further Loans after termination. Upon payment and performance
in full of all the Obligations, CoastFed shall promptly deliver to Borrower
termination statements, request for reconveyance and such other documents as may
be required to fully terminate any of CoastFed's security interests.
9. NOTICES.
All notices to be given hereunder shall be in writing and shall be served
either personally or by depositing the same in the United States mail, postage
prepaid, by regular first class mail, or by certified mail, return receipt
requested, addressed to CoastFed or Borrower at the addresses shown above, or at
any other address as shall be designated by one party in a written notice to the
other party. Any such notice shall be deemed to have been given upon delivery in
the case of notices personally delivered to Borrower or to an officer of
CoastFed, or at the expiration of three (3) business days following the deposit
thereof in the United States mail, with postage prepaid (except that any notice
of disposition referred to in Paragraph 6.3 hereof that is mailed shall be
deemed given at the time of deposit thereof in the United States mail, with
postage prepaid). If there is more than one Borrower, notice to any Borrower
shall constitute notice to all; if Borrower is a corporation, the service upon
any member of the Board of Directors, officer, employee or agent shall
constitute service upon the corporation.
10. GENERAL WAIVER
The failure of CoastFed at any time or times hereafter to require Borrower
to strictly comply with any of the provisions of this Loan Agreement or any
Collateral Agreement or any other present or future agreement between Borrower
and CoastFed shall not waive or diminish any right of CoastFed thereafter to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent thereto. None
of the provisions of this Loan Agreement or any Collateral Agreement or other
agreement now or hereafter executed by Borrower and delivered to CoastFed shall
be deemed to have been waived by any act or knowledge of CoastFed or its agents
or employees, but only by a specific written waiver signed by an officer of
CoastFed and delivered to Borrower. Borrower waives the benefit of all
statute(s) of limitations in any action or proceeding based upon or arising out
of this Loan Agreement or any Collateral Agreement or any other present or
future instrument or agreement between CoastFed and Borrower. Borrower waives
any and all notices or demands which Borrower might be entitled to receive with
respect to this Loan Agreement, any Collateral Agreement, or any other agreement
by virtue of any applicable law. Borrower hereby waives demand, protest, notice
of protest and notice of default or dishonor, notice of payment and nonpayment,
release, compromise, settlement, extension or renewal of any commercial paper,
instrument, Account, general intangible, document or guaranty at any time held
by CoastFed on which Borrower is or may in any way be liable, and notice of any
action taken by CoastFed unless expressly required by this Loan Agreement or any
Collateral Agreement. Borrower hereby ratifies and confirms whatever CoastFed
may do pursuant to this Loan Agreement and any Collateral Agreement and agrees
that CoastFed shall not be liable for (a) the safekeeping of the Collateral or
any loss or damage thereto, or diminution in value thereof, from any cause
whatsoever, or (b) any act or omission of any carrier, warehouseman, bailee,
forwarding agent or other person, or (c) any act of commission or any omission
by CoastFed or its officers, employees, agents, or attorneys, or any of its or
their errors of judgment or mistakes of fact or law.
11. ATTACHMENT WAIVERS.
To the extent that CoastFed, in its sole and absolute discretion,
determines, prior to the disposition of all of the Collateral, that the amount
to be realized by CoastFed from the disposition of all of the Collateral may be
less than the amount of the Obligations, and to the full extent of any such
anticipated deficiency, Borrower waives the benefit of Section 483.010 (b) of
the California Code of Civil Procedure and of any and all other statutes
requiring CoastFed to first resort to and exhaust all of the Collateral before
seeking or obtaining any attachment remedy against Borrower, and Borrower
expressly agrees that, to the extent of such anticipated deficiency, CoastFed
shall have all of the rights of an unsecured creditor, including, but not
limited to, the right of CoastFed, prior to the disposition of all of the
Collateral, to obtain a temporary protective order and writ of attachment or
other available remedy. CoastFed shall have no liability to Borrower if the
actual deficiency realized by CoastFed is less than the anticipated deficiency
on the basis of which CoastFed obtained a temporary protective order or writ of
attachment. In the event CoastFed should seek a temporary protective order, or
writ of attachment, or both, Borrower hereby irrevocably waives any bond and any
surety or security relating thereto required by any statute, court rule or
otherwise as an incident or condition precedent to the issuance of any temporary
protective order or writ of attachment.
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<PAGE>
12. ATTORNEYS' FEES AND COSTS
Borrower shall forthwith pay to CoastFed the amount of all attorneys' fees
and all filing, recording, publication, search and other costs incurred by
CoastFed pursuant to this Loan Agreement, any Collateral Agreement or any other
present or future agreement or in connection with any transaction contemplated
hereby, or with respect to the Collateral or the defense or enforcement of its
interests (whether or not CoastFed files a lawsuit against Borrower). Without
limiting the generality of the foregoing, Borrower shall, with respect to each
and all of the foregoing, pay all attorneys' fees and costs CoastFed incurs in
order to: obtain legal advice (after the occurrence of an Event of Default);
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account debtors; commence, intervene in, respond to, or
defend any action or proceeding; initiate any complaint to be relieved of the
effect of the automatic stay in bankruptcy in order to commence or continue any
foreclosure or other disposition of the Collateral or to commence, defend or
continue any action or other proceeding in or out of bankruptcy against Borrower
or relating to the Collateral; file or prosecute a claim or right in any action
or proceeding, including, but not limited to, any probate claim, bankruptcy
claim, third-party claim, secured creditor claim or reclamation complaint;
examine, audit count, test, copy, or otherwise inspect any of the Collateral or
any of Borrower's books and records; or protect, obtain possession of, lease,
dispose of, or otherwise enforce any security interest in or lien on, the
Collateral or represent CoastFed in any litigation with respect to Borrower's
affairs. Without limiting the generality of the foregoing, Borrower shall
reimburse CoastFed for its out of pocket costs in connection with CoastFed's
regular quarterly audits of Borrower and Borrower shall pay CoastFed an audit
fee of $550 per day for each auditor utilized in each such quarterly audit. If
either CoastFed or Borrower files any lawsuit against the other predicated on a
breach of this Loan Agreement or any Collateral Agreement, the prevailing party
in such action shall be entitled to recover its costs and attorneys' fees,
including, but not limited to, attorneys' fees and costs incurred in the
enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which CoastFed may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
13. DESTRUCTION OF DEBTOR'S DOCUMENTS; LIMITATION OF ACTIONS.
Any documents, schedules, invoices or other papers delivered to CoastFed
may be destroyed or otherwise disposed of by CoastFed six (6) months after they
are delivered to CoastFed unless Borrower makes written request therefor and
pays all expenses attendant to their return, in which event, CoastFed shall
return same when CoastFed's actual or anticipated need therefor has terminated.
Borrower agrees that any claim or cause of action by Borrower against CoastFed,
its directors, officers, employees, agents, accountants or attorneys, based
upon, arising from, or relating to this Loan Agreement, or any Collateral
Agreement, or any other present or future agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by CoastFed, its directors, officers, employees, agents, accountants or
attorneys, relating in any way to Borrower, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within six (6) months after the first
act, occurrence or omission upon which such claim or cause of action, or any
part thereof is based, and the service of a summons and complaint on an officer
of CoastFed, or on any other person authorized to accept service on behalf of
CoastFed, within thirty (30) days thereafter. Borrower agrees that such
six-month period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The six-month period
provided herein shall not be waived, tolled, or extended except by the written
consent of CoastFed in its sole and absolute discretion. This provision shall
survive any termination, however arising, of this Loan Agreement, any Collateral
Agreement, and any other present or future agreement.
14. GENERAL PROVISIONS
14.1 Severability. Should any provision, clause or condition of this Loan
Agreement or any Collateral Agreement be held by any court of competent
jurisdiction to be void or unenforceable, such defect shall not affect the
remainder of this Loan Agreement or any Collateral Agreement.
14.2 Integration. This Loan Agreement and any Collateral Agreements and
such other agreements, documents and instruments as may be executed in
connection herewith shall be construed as the entire and complete agreement
between Borrower and CoastFed and shall supersede all prior negotiations, all of
which are merged and integrated herein.
14.3 Amendment. The terms and provisions of this Loan Agreement and any
Collateral Agreement may not be waived or amended except in a writing executed
by Borrower and a duly authorized officer of CoastFed.
14.4 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Loan Agreement and any
Collateral Agreement.
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Coast Business Credit Loan and Security Agreement
---------------------------------------------------------------------------
14.5 Mutual Waiver of Jury Trial. Borrower and CoastFed each hereby waive
the right to trial by jury in any action or proceeding based upon, arising out
of, or in any way relating to, this Loan Agreement or any Collateral Agreement
or any other present or future instrument or agreement between CoastFed and
Borrower, or any conduct, acts or omissions of CoastFed or Borrower any of their
directors, officers, employees, agents, attorneys or any other persons
affiliated with CoastFed or Borrower.
14.6 Benefit of Agreement. The provisions of this Loan Agreement and any
Collateral Agreement shall be binding upon and inure to the benefit of the
respective successors, assigns, heirs, beneficiaries and representatives of the
parties hereto; provided, however, that Borrower may not assign or transfer any
of its rights under this Loan Agreement or any Collateral Agreement without the
prior written consent of CoastFed, and any prohibited assignment shall be void.
No consent by CoastFed to any assignment shall relieve Borrower or any guarantor
from its liability for the Obligations.
14.7 Joint and Several Liability. The liability of each Borrower shall be
joint and several and the compromise of any claim with, or the release of, any
Borrower shall not constitute a compromise with, or a release of, any other
Borrower.
14.8 Paragraph Headings; Construction. Paragraph headings are used herein
for convenience only. Borrower acknowledges that the same may not describe
completely the subject matter of the applicable paragraph, and the same shall
not be used in any manner to construe, limit, define or interpret any term or
provision hereof. This Loan Agreement and the Collateral Agreements have been
fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Loan Agreement or any Collateral
Agreement shall be construed strictly against CoastFed or Borrower under any
rule of construction or otherwise.
14.9 Governing Law; Jurisdiction; Venue. This Loan Agreement and any
Collateral Agreement and all acts and transactions hereunder and all rights and
obligations of CoastFed and Borrower shall be governed by and in accordance with
the laws of the State of California. Any undefined term used in this Loan
Agreement or in any Collateral Agreement that is defined in the California
Uniform Commercial Code shall have the meaning therein assigned to that term. As
a material part of the consideration to CoastFed to enter into this Agreement,
Borrower (i) agrees that all actions and proceedings relating directly or
indirectly hereto shall, at CoastFed's option, be litigated in courts located
within California, and that the exclusive venue therefor shall be Los Angeles
County; (ii) consents to the jurisdiction and venue of any such court and
consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Borrower may have to object to the jurisdiction of any such court, or to
transfer or change the venue of any such action or proceeding.
14.10 Execution by CoastFed. This Loan Agreement and any Collateral
Agreement which has been executed and delivered by Borrower to CoastFed shall
not become effective unless and until executed by a duly authorized officer of
CoastFed.
14.11 Federal Communications Commission. Notwithstanding anything to the
contrary contained in this Agreement, any other Collateral Agreement or in any
other agreement, instrument or document executed by Borrower and delivered to
CoastFed, CoastFed will not take any action pursuant to this Agreement, any
other Collateral Agreement or any other document referred to above which would
constitute or result in any assignment of any FCC license or any change of
control of Borrower or any subsidiary of Borrower if such assignment of any FCC
license or change of control would require, under then existing law, the prior
approval of the FCC without first obtaining such prior approval of the FCC.
Borrower waives, to the extent permitted by law, any right it may have to
oppose, and agrees to take any action which CoastFed may request in order to
obtain from the FCC, such approval as may be necessary to enable CoastFed to
exercise and enjoy the full rights and benefits granted CoastFed by this
Agreement and the other documents referred to above, including specifically, at
the cost and expense of Borrower, the use of commercially reasonable efforts to
assist in obtaining approval of the FCC for any action or transaction
contemplated by this Agreement for which such approval is or shall be required
by law, and specifically, without limitation, upon request, to prepare, sign and
file with the FCC the assignor's or transferor's portion of any application or
applications for consent to the assignment of license or transfer of control
necessary or appropriate under the FCC's rules and regulations for approval of
(a) any sale or other disposition of the Collateral by or on behalf of CoastFed,
or (b) any assumption by CoastFed of voting rights in the Borrower or any
subsidiary of Borrower effected in accordance with the terms of this Agreement
or any Collateral Agreement. It is understood and agreed that all
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<PAGE>
Coast Business Credit Loan and Security Agreement
---------------------------------------------------------------------------
foreclosures and related actions will be made in accordance
with the rules and regulations of the FCC.
Borrower:
CYBERLINK, INC.,
a California corporation
By /s/ Richard Leslie Lydiate
-----------------------------------
Richard Leslie Lydiate,
President
By /s/ Ron McVicar
-----------------------------------
Ron McVicar,
Chief Financial Officer
CoastFed:
COASTFED BUSINESS CREDIT
CORPORATION
By /s/ Barbara Nitkin
-----------------------------------
Title Vice President
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<PAGE>
foreclosures and related actions will be made in accordance
with the rules and regulations of the FCC.
Borrower:
CYBERLINK, INC.,
a California corporation
By /s/ Richard Leslie Lydiate
-----------------------------------
Richard Leslie Lydiate,
President
By /s/ Ron McVicar
-----------------------------------
Ron McVicar,
Chief Financial Officer
CoastFed:
COASTFED BUSINESS CREDIT
CORPORATION
By /s/ Barbara Nitkin
-----------------------------------
Title Vice President
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<PAGE>
Schedule 1
SCHEDULE OF EXCEPTIONS
TO
LOAN AND SECURITY AGREEMENT, DATED AS OF SEPTEMBER 8, 1995, BY AND BETWEEN
CYBERLINK, INC. AND COASTFED BUSINESS CREDIT CORPORATION AND THE ANCILLARY
AGREEMENTS THERETO
The undersigned acknowledges that attached hereto is a Schedule of
Exceptions to that certain Loan and Security Agreement, dated as of September 8,
1995, by and between Cyberlink, Inc. and CoastFed Business Credit Corporation
(and the ancillary agreements thereto), which schedule is in a format
satisfactory to the undersigned.
COASTFED BUSINESS CREDIT CORPORATION
/s/ Barbara Nitkin
-----------------------------------------
By: Barbara Nitkin
Its: Vice President
1
<PAGE>
SET FORTH BELOW ARE SCHEDULES OR EXCEPTIONS, AS APPROPRIATE, TO THE
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CYBERLINK, INC. (THE "BORROWER"),
CYBERLINK-CALIFORNIA, INC., CYBERLINK-NEVADA, INC., CYBERLINK-NEW YORK, INC.
AND RICHARD LESLIE LYDIATE ("GUARANTOR") IN THE FOLLOWING DOCUMENTS:
I. the Loan and Security Agreement dated as of September 8, 1995 (the "Loan
Agreement") between the Borrower and CoastFed Business Credit Corporation
(the "Lender");
II. the Accounts Collateral Security Agreement dated as of September 8, 1995
between the Borrower and the Lender (the "Accounts Agreement");
III. the Equipment Collateral Agreement dated as of September 8, 1995 between
the Borrower and the Lender (the "Equipment Agreement");
IV. the Secured Promissory Note in the principal amount of $1,500,000 from the
Borrower to the lender (the "Note");
V. the Secured Promissory Note in the principal amount of $500,000 from the
Borrower to the Lender (the "Additional Note");
VI. the Security Agreement - Stock Pledge dated as of September 8, 1995
between the Borrower and the Lender;
VII. the Continuing Guaranty dated as of September 8, 1995 (the "Lydiate
Guaranty") between the Guarantor and the Lender;
VIII. the Subordination Agreement dated September 8, 1995 between the Guarantor
and the Lender (the "Subordination Agreement");
IX. the Security Agreement dated as of September 8, 1995 between
Cyberlink-California, Inc., a California corporation
("Cyberlink-California"), and the Lender;
X. the Security Agreement dated as of September 8, 1995 between
Cyberlink-Nevada, Inc., a Nevada corporation ("Cyberlink-Nevada"), and the
Lender;
XI. the Security Agreement dated as of September 8, 1995 between Cyberlink-New
York, Inc., a Delaware corporation ("Cyberlink-New York"), and the Lender;
XII. the Continuing Guaranty dated as of September 8, 1995 (the
"Cyberlink-California Guaranty") between Cyberlink-California and the
Lender;
2
<PAGE>
XIII. the Continuing Guaranty dated as of September 8, 1995 (the
"Cyberlink-Nevada Guaranty") between Cyberlink-Nevada and the Lender; and
XIV. the Continuing Guaranty dated as of September 8, 1995 (the "Cyberlink-New
York Guaranty") between Cyberlink-New York and the Lender.
3
<PAGE>
NAME, TRADE NAMES AND STYLES
Registered Patents
None
Registered Trademarks
Cyberlink is a trademark in the United State of America.
Tradenames
a. Cyberlink, Inc. was originally incorporated under the name Lesco
Enterprises, Inc.
b. Cyberlink, Inc. has the following fictitious names:
Cyberlink Telecommunications in Massachusetts
Cyberlink - New York in New York
c. Cyberlink-California, Inc. has the following fictitious names:
Cyberlink and Cyberlink, Inc.
Service Marks
None
Additional Disclosures
The trademark of Cyberlink, Inc. was originally obtained (only in the
United States) for voice messaging. To preserve this trademark, Cyberlink must
file an affidavit of continued use (and certain other documents) with the
Trademark Office before July 1996.
A corporation known as Audiotext has filed an application for Cyberlink as
a tradename. The Company has filed a subsequent application and protested the
application filed by Audiotext. Cyberlink's counsel for this matter is Norman
Roth, Mr. Roth's telephone number is (213) 688-1143.
4
<PAGE>
PLACE OF BUSINESS; LOCATION OF COLLATERAL
The Company or its affiliates lease all of the real property set forth
below.
Business Addresses - United States
Headquarters 5855 Topanga Canyon Boulevard
Woodland Hills, CA 91367
Roseville Office 735 Sunrise Avenue, Suite 200
Roseville, CA 95661
Colton Office 1012 Cooley Drive, Suites A & B
Colton, CA 92324
One Wilshire Building 624 S. Grand Avenue
Switch Site Los Angeles, CA 90017
(includes generator
lease)
New York Office 708 Third Avenue, 21st Floor
New York, NY 10017
Employee Residences - United States
Apartment Lease 14014 Northwest Passage, No. 344
Marina Del Rey, CA
This apartment is leased by the company for a manager with Cyberlink Oy in
Finland.
Apartment Lease 5510 Owensmouth Avenue
Woodland Hills, CA 91367
This apartment is leased by the company for a consultant to the Company.
Business Addresses - International
Finnish Office Cyberlink International Oy
Sapinlahdenkatu 3A9
00180 Helsinki
FINLAND
5
<PAGE>
German Office Cyberlink GMBH
Fritz-Kotz Strasse 14
D51674 Wiehl-Borning Industriechiet
GERMANY
Swedish Office Cyberlink Sweden AB
Soderbyvagen 3C
S-195 61 Arlandstad
SWEDEN
6
<PAGE>
TITLE TO COLLATERAL; LIENS
Borrower is subject to the following liens and security interests:
a. Factoring Agreement and Amendments thereto with Chasin of Long Beach, dba
Colbie Pacific (includes, among other things, accounts receivables,
customer lists and switch) - Cyberlink, Inc., Cyberlink-California, Inc.
and Cyberlink-Nevada, Inc. are debtors (to be terminated in connection
with consummation of CoastFed Agreement).
b. Purchase Agreement with GE Capital Communication Services Corporation
granting a security interest on segment of customer base related directly
to purchase.
c. Various equipment - Secured Party - McGrath RenTelco.
d. Personal Computer Network - Secured Party - Tricon Capital, a unit of
Greyhound Financial Corporation.
e. Various equipment - Secured Party - JLA Credit Corporation.
f. One DataCard Model U-800 Ultra Graphix Printer - Secured Party Bankers
Leasing Association.
g. One Konica Copier - Lease No. 2-116573 (in New York) - Secured Party -
Tokai Financial Services, Inc.
h. Various furniture - New York - Secured Party - Technilease Corporation.
i. Various furniture - New York - Secured Party Tokai Financial Services,
Inc.
j. Various datacard/computer equipment leases - California and Massachusetts
- Secured Party - Eaton Financial Corp.
k. Telephone system lease - Michigan - Secured Party - Graybar Financial
Services.
l. Compression equipment lease - Connecticut - Secured Party - Newbridge
Leasing
m. Network computer equipment leases - Oregon - Secured Party - Colonial
Pacific Leasing
7
<PAGE>
n. Debtor - Cyberlink, Les Lydiate and Monte Stern Secured Party - Imperial
Thrift & Loan
(Although this UCC is still on file, Cyberlink believes that the security
interest should be released. Cyberlink intends to file the appropriate
document to do so.)
SEE ALSO ATTACHMENT "A" HERETO.
8
<PAGE>
BOOKS AND RECORDS
CoastFed has reviewed Borrowers' accounting books and records through
September 6, 1995, and is aware that such records have not been audited and
certified as being in accordance with generally accepted accounting principles.
9
<PAGE>
LITIGATION
Borrower is subject to the following litigation or claims:
I. LITIGATION
1. Cyberlink, Inc. (Plaintiff) v. LDDS Communications, Inc.; Complaint for
Damages and Injunctive Relief for Breach of Contract and Unfair Business
Practices; filed on December 9, 1994; Counterclaim filed by LDDS; amount
at issue $2,000,000; settlement discussions in progress.
2. Telco (Plaintiff) v. Cyberlink; Complaint for Breach of Written Agreement
and Promissory Fraud; filed on April 14, 1995; amount at issue
approximately $200,000.
3. Cyberlink (Plaintiff) v. International Long Distance Telephone Company,
Inc.; Action brought for amounts due to Cyberlink for long-distance
services, in the amount of $337,982.05 plus interest; filed on February
22, 1995.
II. OTHER CLAIMS OR POTENTIAL ACTIONS
Dan McDuffie and Chris Lowery
Each of these former employees was promised an equity interest in
Cyberlink of approximately 2 percent, to vest if the employee remained in
Cyberlink's employ until Cyberlink was sold to a third-party buyer. Before such
a sale of Cyberlink could occur, Mr. McDuffie quit Cyberlink and Mr. Lowery was
terminated for cause. Both McDuffie and Lowery have sent letters to Cyberlink
alleging that they are entitled to a 2 percent equity interest in the Company.
Universal Telecom
In 1994, Cyberlink entered into an agreement with Universal Telecom,
pursuant to which Universal Telecom was to act as Cyberlink's agent in Eastern
Africa under the fictitious business name of "Cyberlink Africa, Inc." On January
18, 1995, attorneys for Universal Telecom sent a letter to Cyberlink alleging
that Cyberlink owed Universal Telecom reimbursement in the amount of
approximately $140,000 for expenses incurred in setting up offices in Tanzania.
In Spring 1995, Cyberlink had discussions with Universal Telecom's attorneys
concerning the validity of this claim and the circumstances under which the
business relationship between the
11
<PAGE>
parties might be continued, but Universal Telecom's attorneys have not followed
up on those discussions.
12
<PAGE>
DEPOSIT ACCOUNTS
SEE ATTACHMENT "B" HERETO.
13
<PAGE>
LEASED EQUIPMENT
1. Equipment Lease Agreement, dated May 2, 1994, between Cyberlink and MCI
Global Access Corporation.
2. Master Lease Agreement, dated as of June 29, 1995 between Cyberlink and
Newbridge Leasing, relating to certain equipment.
Incorporation by reference into this schedule of leased equipment are all
equipment leases set forth under "Title to Collateral; Liens" above.
14
<PAGE>
ATTACHMENT A
<PAGE>
CALIFORNIA
199434360526
UCC1 - FINANCING STATEMENT
FILE DATE: 11/21/1994
STATUS: ACTIVE
EXPIRATION DATE: 11/22/1999
TERMINATION DATE:
DEBTOR: CYBERLINK-NEVADA, INC. (A NEVADA CORPORATION)
2330 PASEO DEL PRADO #C-208, PLAZA OFFICE PK
LAS VEGAS, NV 89102
ADD'L DEBTOR: CYBLERLINK
2330 PASEO DEL PRADO #C-208, PLAZA OFFICE PK
LAS VEGAS, NV 89102
ADD'L DEBTOR: CYBLERLINK, INC.
2330 PASEO DEL PRADO #C-208, PLAZA OFFICE PK
LAS VEGAS, NV 89102
ADD'L DEBTOR: CYBLERLINK TELECOMMUNICATIONS
2330 PASEO DEL PRADO #C-208, PLAZA OFFICE PK
LAS VEGAS, NV 89102
SECURED: CHASIN OF LONG BEACH, INC. DBA COLBIE PACIFIC CAPITAL
3660 WILSHIRE BLVD #1008
LOS ANGELES, CA 90010
1990282909
UCC1 - FINANCING STATEMENT
FILE DATE: 11/19/1990
STATUS: ACTIVE
EXPIRATION DATE: 11/19/1995
TERMINATION DATE:
DEBTOR: CYBERLINK
1902 ORANGE TREE LN STE 100
REDLANDS, CA
SECURED: BURTRONICS BUSINESS SYSTEMS
216 S. ARROWHEAD AVE
SAN BERNARDINO, CA
ASSIGNEE: LANIER
2300 PARKLAKE DR N/E
ATLANTA, GA
1
<PAGE>
CALIFORNIA (CONT'D)
1991205505
UCC1 - FINANCING STATEMENT
FILE DATE: 09/20/1991
STATUS: ACTIVE
EXPIRATION DATE: 09/20/1996
TERMINATION DATE:
DEBTOR: CYBERLINK
11835 W OLYMPIC E TOWER STE 735
W LOS ANGELES, CA
SECURED: EATON FINANCIAL CORP
4464 B WILLOW RD
PLEASANTON, CA
2
<PAGE>
CALIFORNIA (CONT'D)
199434360538
UCC1 - FINANCING STATEMENT
FILE DATE: 11/21/1994
STATUS: ACTIVE
EXPIRATION DATE: 11/22/1999
TERMINATION DATE:
DEBTOR: CYBERLINK-CALIFORNIA, INC.
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
ADD'L DEBTOR: CYBERLINK
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
ADD'L DEBTOR: CYBERLINK, INC.
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
ADD'L DEBTOR: CYBERLINK TELECOMMUNICATIONS
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
SECURED: CHASIN OF LONG BEACH, INC. DBA COLBIE PACIFIC CAPITAL
3660 WILSHIRE BLVD #1008
LOS ANGELES, CA 90010
3
<PAGE>
CALIFORNIA (CONT'D)
FILING NUMBER: 1995192C0714
DOCUMENT ID: UCC2 - CHANGE TO A FINANCING STATEMENT
FILE DATE:D: 07/03/1995
ACTION TYPE: OTHER AMENDMENT
199517060065
UCC1 - FINANCING STATEMENT
FILE DATE: 06/15/1995
STATUS: ACTIVE
EXPIRATION DATE: 06/15/2000
TERMINATION DATE:
DEBTOR: CYBERLINK
5855 TOPANGA CANYON BLVD. STE 520
WOODLAND HILLS, CA 91367
SECURED: MCGRATH RENTELCO
1901 N. GLENVILLE DR STE 401A
RICHARDSON, TX 75081
4
<PAGE>
CALIFORNIA (CONT'D)
199434360551
UCC1 - FINANCING STATEMENT
FILE DATE: 11/21/1994
STATUS: ACTIVE
EXPIRATION DATE: 11/22/1999
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
ADD'L DEBTOR: CYBERLINK
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
ADD'L DEBTOR: CYBERLINK-CALIFORNIA
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
ADD'L DEBTOR: CYBERLINK TELECOMMUNICATIONS
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA 91367
SECURED: CHASIN OF LONG BEACH, INC. DBA COLBIE PACIFIC CAPITAL
3660 WILSHIRE BLVD #1008
LOS ANGELES, CA 90010
DOCUMENT #: 1995192C0714
DOCUMENT ID: UCC2 - CHANGE TO A FINANCING STATEMENT
FILE DATED:D: 07/03/1995
FILE TIME:D: 08:00
ACTION TYPE: OTHER AMENDMENT
5
<PAGE>
CALIFORNIA (CONT'D)
199521960873
UCC1 - FINANCING STATEMENT
FILE DATE: 08/03/1995
STATUS: ACTIVE
EXPIRATION DATE: 08/03/2000
TERMINATION DATE:
DEBTOR: CYBERLINK-CALIFORNIA, INC.
5855 TOPANGA CANYON BLVD STE 520
WOODLAND HILLS, CA 91367
SECURED: COASTFED BUSINESS CREDIT CORPORATION
12121 WILSHIRE BLVD STE 1111
LOS ANGELES, CA 90025
SSN or FTN: 953822101
6
<PAGE>
CALIFORNIA (CONT'D)
1991046242
UCC1 - FINANCING STATEMENT
FILE DATE: 03/04/1991
STATUS: ACTIVE
EXPIRATION DATE: 03/04/1996
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
4219 VALLEY MEADOW
ENCINO, CA
ADD'L DEBTOR: MONTE STERN
4219 VALLEY MEADOW
ENCINO, CA
ADD'L DEBTOR: LES LYDIATE
366 NUEVE CT
CAMARILLO, CA
SECURED: IMPERIAL THRIFT & LOAN
2560 W SHAW #104
FRESNO, CA
1989083998
UCC1 - FINANCING STATEMENT
FILE DATE: 04/03/1989
STATUS: EXPIRED
EXPIRATION DATE: 04/03/1994
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
700 S FLOWER STE 609
LOS ANGELES, CA
SECURED: INDUSTRIAL BK
5805 SEPULVEDA BLVD
VAN NUYS, CA
DOCUMENT #: 1989083998A0
DOCUMENT ID: UCC2 - CHANGE TO A FINANCING STATEMENT
FILE DATE:D: 10/09/1990
ACTION TYPE: RELEASE
7
<PAGE>
CALIFORNIA (CONT'D)
1991016730
UCC1 - FINANCING STATEMENT
FILE DATE: 01/28/1991
STATUS: ACTIVE
EXPIRATION DATE: 01/28/1996
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
11835 W OLYMPIC BLVD
LOS ANGELES, CA
SECURED: COLONIAL PACIFIC LEASING
P O BOX 1100
TUALATIN, OR
1992014110
UCC1 - FINANCING STATEMENT
FILE DATE: 01/22/1992
STATUS: ACTIVE
EXPIRATION DATE: 01/22/1997
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
21052 OXNARD ST
WOODLAND HILLS, CA
SECURED: EATON FINANCIAL CORP.
P O BOX 4225
ANAHEIM, CA
1993204563
UCC1 - FINANCING STATEMENT
FILE DATE: 10/07/1993
STATUS: ACTIVE
EXPIRATION DATE: 10/07/1998
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA CANYON BLVD #520
WOODLAND HILLS, CA
SECURED: BANKERS LEASING ASSOC INC.
4201 LAKE COOK RD
NORTHBROOK, IL
8
<PAGE>
CALIFORNIA (CONT'D)
1993219794
UCC1 - FINANCING STATEMENT
FILE DATE: 10/29/1993
STATUS: ACTIVE
EXPIRATION DATE: 10/29/1998
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA CANYON BLVD #52
WOODLAND HILLS, CA
SECURED: EATON FINANCIAL CORP.
550 COCHITUATE RD BOX 9104
FRAMINGHAM, MA
1993224816
UCC1 - FINANCING STATEMENT
FILE DATE: 11/05/1993
STATUS: ACTIVE
EXPIRATION DATE: 11/05/1998
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA CANYON BLVD #52
WOODLAND HILLS, CA
SECURED: JLA CREDIT CORP.
21535 HAWTHORNE BLVD #350
TORRANCE, CA
1994026111
UCC1 - FINANCING STATEMENT
FILE DATE: 02/09/1994
STATUS: ACTIVE
EXPIRATION DATE: 02/09/1999
TERMINATION DATE:
DEBTOR: CYBERLINK INC.
5855 TOPANGA CYN #520
WOODLAND HILLS, CA
SECURED: JLA CREDIT CORP.
21535 HAWTHORNE BLVD #350
TORRANCE, CA
9
<PAGE>
CALIFORNIA (CONT'D)
199431360357
UCC1 - FINANCING STATEMENT
FILE DATE: 10/18/1994
STATUS: ACTIVE
EXPIRATION DATE: 10/18/1999
TERMINATION DATE:
DEBTOR: CYBERLINK INC.
5855 TOPANGA CANYON BLVD. #520
WOODLAND HILLS, CA 91367
SECURED: JLA CREDIT CORP.
21535 HAWTHORNE BLVD. #350
TORRANCE, CA 90503
SSN or FTN: 133295831
10
<PAGE>
CALIFORNIA (CONT'D)
DOCUMENT #: 1995192C0714
DOCUMENT ID: UCC2 - CHANGE TO A FINANCING STATEMENT
FILE DATE:D: 07/03/1995
ACTION TYPE: OTHER AMENDMENT
199504860379
UCC1 - FINANCING STATEMENT
FILE DATE: 02/10/1995
STATUS: ACTIVE
EXPIRATION DATE: 02/10/2000
TERMINATION DATE:
DEBTOR: CYBERLINK INC.
5855 TOPANGA CANYON BLVD. #520
WOODLAND HILLS, CA 91367
SECURED: GRAYBAR FINANCIAL SERVICES
201 W BIG BEAVER RD
TROY, MI 48084
11
<PAGE>
CALIFORNIA (CONT'D)
199516760192
UCC1 - FINANCING STATEMENT
FILE DATE: 06/14/1995
STATUS: ACTIVE
EXPIRATION DATE: 06/14/2000
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA BLVD., STE 520
WOODLAND HILLS, CA 91367
SECURED: TRICON CAPITAL, A UNIT OF GREYHOUND FINANCIAL
CORPORATION
95 N. RTE 17 S
PARAMUS, NJ 07662
199518160513
UCC1 - FINANCING STATEMENT
FILE DATE: 06/28/1995
STATUS: ACTIVE
EXPIRATION DATE: 06/28/2000
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA BLVD., STE 520
WOODLAND HILLS, CA 91367
SECURED: NEWBRIDGE LEASING
55 FEDERAL RD
DANBURY, CT 06801
199521961185
UCC1 - FINANCING STATEMENT
FILE DATE: 08/03/1995
STATUS: ACTIVE
EXPIRATION DATE: 08/03/2000
TERMINATION DATE:
DEBTOR: CYBERLINK, INC.
5855 TOPANGA CANYON BLVD., STE 520
WOODLAND HILLS, CA 91367
SECURED: COASTFED BUSINESS CREDIT CORPORATION
12121 WILSHIRE BLVD., STE 1111
LOS ANGELES, CA 90025
SSN or FTN: 953822101
12
<PAGE>
CALIFORNIA (CONT'D)
DOCUMENT #: 1995192C0714
DOCUMENT ID: UCC2 - CHANGE TO A FINANCING STATEMENT
FILE DATE:D: 07/03/1995
FILE TIME:D: 08:00
ACTION TYPE: OTHER AMENDMENT
13
<PAGE>
CALIFORNIA (CONT'D)
199504560508
JL1 - JUDGMENT LIEN
FILE DATE: 02/06/1995
STATUS: ACTIVE
EXPIRATION DATE: 02/07/2000
TERMINATION DATE:
DEBTOR: RAYBORN JOHNSON, INC.
2598 S. ARCHIBALD AVE, #H-303
ONTARIO, CA 91761
SECURED: CYBERLINK, INC. A CALIFORNIA CORPORATION
24012 CALLE DE LA PLATA, STE 230
LAGUNA HILLS, CA 92653
199516760219
JL1 - JUDGMENT LIEN
FILE DATE: 06/14/1995
STATUS: ACTIVE
EXPIRATION DATE: 06/14/2000
TERMINATION DATE:
DEBTOR: JAG ISHWAR SINGH GREWAL AKA JAGVIR GREWAL IND. & DBA
NEW HORIZONS INTERNATIONAL
19981 FELCLIFF LN
HUNTINGTON BEACH, CA 92646
SECURED: CYBERLINK, INC., A CALIFORNIA CORPORATION
24012 CALLE DE LA PLATA, % STE 230
LAGUNA HILLS, CA 92653
14
<PAGE>
NEW YORK
086774
UCC1 - FINANCING STATEMENT
FILE DATE/TIME: 05/01/1995
DEBTOR: CYBERLINK
708 3RD AVENUE
NEW YORK, NY 10017
SECURED PARTY: SANWA LEASING CORP.
PO BOX 7023
TROY, MI 48007
COLLATERAL: LEASES
SPECIFIC EQUIPMENT
116101
UCC1 - FINANCING STATEMENT
FILE DATE/TIME: 06/08/1995 09:00
DEBTOR: CYBERLINK
708 THIRD AVENUE 21ST FLOOR
NEW YORK, NY 10017
SECURED PARTY: TECHNILEASE CORP.
43 FULTON STREET
NEWARK, NJ 07102
COLLATERAL: SPECIFIC EQUIPMENT
MICROFILM: 5087
103464
UCC1 - FINANCING STATEMENT
FILE DATE/TIME: 05/22/1995
DEBTOR: CYBERLINK INC.
708 THIRD AVENUE
NEW YORK, NY 10017
SECURED PARTY: TOKAI FINANCIAL SERVICES, INC.
1055 WESTLAKES DRIVE
BERWYN, PA 19312
COLLATERAL: PRODUCTS
: PROCEEDS
: SPECIFIC EQUIPMENT
15
<PAGE>
NEW YORK (CONT'D)
230023
UCC1 - FINANCING STATEMENT
FILE DATE/TIME: 10/09/1984
DEBTOR: CYBERLINK SYSTEMS, INC.
411 FURNACE DOCK RD.
PEEKSKILL, NY 10566
SECURED PARTY: MIDLANTICCOMMERCIAL LEASING CORP.
225 WEST 34 ST.
NEW YORK, NY 10122
COLLATERAL: SPECIFIC EQUIPMENT
16
<PAGE>
ATTACHMENT B
FAX TRANSMISSION
From: Michalel S. Trookey Cyberlink, Inc.
Questions? Call
Fax
To: Ron McVicar
Company: Coast Business Credit 213/896-0400
Address:
Date: September 8, 1995
Time: 4:03 PM Pages: (including this one)
- --------------------------------------------------------------------------------
Ron: All bank accounts are at Union Bank - 5855 Topanga Cyn Blvd, Woodland Hills
General - #1290011317
P/R #1290011496
Int'l #1290011341
<PAGE>
Exhibit 10.22
---------------------------------------------------------------------------
Coast
Accounts Collateral Security
Agreement
Borrower: CYBERLINK, INC.,
Address: a California corporation
5855 Topanga Canyon Boulevard, Suite 520
Woodland Hills, California 91367
Date: September 8, 1995
THIS ACCOUNTS COLLATERAL SECURITY AGREEMENT ("Accounts Agreement"), dated the
above date, is entered into between COASTFED BUSINESS CREDIT CORPORATION
("CoastFed") and the borrower named above ("Borrower"), and is one of the
Collateral Agreements referred to in that certain Loan and Security Agreement
("Loan Agreement") between CoastFed and Borrower dated the above date. This
Accounts Agreement is an integral part of the Loan Agreement, and all of the
terms and provisions of the Loan Agreement are incorporated herein by this
reference.
1. Grant of Security Interest. As collateral and security for the payment and
performance of all Obligations (as defined in the Loan Agreement), Borrower
hereby grants CoastFed an immediately effective, continuing security interest
in, and assigns to CoastFed, all of Borrower's interest in the following types
of property, whether now owned or held or hereafter acquired and wherever
located: all accounts, contract rights, instruments, chattel paper and all other
obligations now or hereafter owing to Borrower (collectively "Accounts"); and
all right, title and interest of Borrower in, and all of Borrower's rights and
remedies with respect to, all goods, the sale or other disposition of which
gives rise to any Account, including, without limitation, all returned,
rejected, rerouted, reclaimed and repossessed goods and all rights of stoppage
in transit, replevin, reclamation, and all rights as an unpaid vendor; and all
collections and proceeds of any of the foregoing; and all guarantees of,
security for, and insurance proceeds attributable to any of the foregoing; and
all books and records relating to any of the foregoing; and all equipment
containing said books and records. The term "Collateral" as used in the Loan
Agreement shall for all purposes be deemed to include, without limitation, the
Accounts and the other property described above. The term "Account Debtor" as
used in this Accounts Agreement shall mean each account debtor, obligor,
guarantor and other person in any way liable or obligated on or in connection
with any Account.
2. Loans.
2.1 Amount of Loans. Provided no Event of Default has occurred, CoastFed
agrees to make Loans to Borrower, repayable on demand, in amounts up to the
lesser of (a) 75% of the Net Amount of each Account, which CoastFed in its sole
and absolute discretion deems eligible for borrowing; provided, however, if,
based on the results of a quarterly audit conducted by CoastFed, Borrower's
Account dilution rate is five (5%) percent or less then, CoastFed will advance,
until the results of the next quarterly audit conducted by CoastFed, Loans to
Borrower hereunder in amounts of up to 80% of the Net Amount of each Account,
which CoastFed in its sole discretion deems eligible for borrowing; or (b) three
(3) times the amount of Borrower's collections on its Accounts during the prior
calendar month. The term "Net Amount" of an Account, as used herein, shall mean
the gross amount of the Account, minus all deductions and expenses customarily
deducted from payments on Accounts pursuant to billing and related services
agreements between Borrower and third parties, applicable sales, use, excise and
other similar taxes and minus all discounts, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed.
-1-
<PAGE>
2.2 Borrower's Accounts Loan Balance. The aggregate amount of Borrower's
outstanding indebtedness to CoastFed on account of Loans made pursuant to
Paragraph 2.1 of this Accounts Agreement shall be referred to herein as
"Borrower's Accounts Loan Balance." If Borrower's Accounts Loan Balance shall at
any time exceed the percentage set forth in Paragraph 2.1, CoastFed, in its sole
and absolute discretion, may require Borrower to repay such excess to CoastFed
upon demand, or require Borrower to immediately deliver such additional security
to CoastFed as may be satisfactory to CoastFed.
2.3 Interest. Until Borrower's Accounts Loan Balance is paid in full,
Borrower shall pay interest thereon monthly at the rate provided in Paragraph
1.2 of the Loan Agreement, provided that, regardless of the amount of Borrower's
Accounts Loan Balance, if any, that may be outstanding from time to time,
Borrower shall pay minimum interest during the term of this Accounts Agreement
of $5,000 per month. The amount of interest payable hereunder shall be computed
as of the close of business on the last day of each calendar month, and shall be
added to Borrower's Accounts Loan Balance, and shall thereafter bear like
interest as the Loans.
2.4 Statement of Account. Each month, CoastFed shall send Borrower an
extract or statement of Borrower's Accounts Loan Balance prepared from
CoastFed's records, which will conclusively be deemed to be correct and accepted
by Borrower unless Borrower delivers to CoastFed a written statement of
exceptions within thirty (30) days after delivery of such extract or statement.
3. Schedules. Borrower shall deliver to CoastFed schedules and assignments of
all Accounts on CoastFed's standard form; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit CoastFed's
security interest and other rights in all of Borrower's Accounts, nor shall
CoastFed's failure to advance or lend against a specific Account affect or limit
CoastFed's security interest and other rights therein. Together with each such
schedule and assignment, or later if requested by CoastFed, Borrower shall
furnish CoastFed with copies (or, at CoastFed's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to CoastFed an aged accounts receivable trial
balance in such form and as often as CoastFed requests, and Borrower agrees that
CoastFed may from time to time verify directly with the respective Account
Debtors the validity, amount and any other matters relating to the Accounts by
means of mail, telephone or otherwise, either in the name of Borrower or
CoastFed or such other name as CoastFed may choose. In addition, Borrower shall
deliver to CoastFed the originals of all instruments, chattel paper, security
agreement, guarantees and other documents and property evidencing or securing
any Accounts, immediately upon receipt thereof and in the same form as received,
with all necessary indorsements all of which shall be with recourse.
4. Collection of Accounts. Borrower shall have the privilege of collecting the
Accounts in trust for CoastFed, at Borrower's sole cost and expense, which
privilege may be revoked by CoastFed at any time. All monies, checks, notes,
drafts, money orders, acceptances and other things of value and items of
payment, together with any and all related vouchers, identifications,
communications and other data, documents and instruments, collected or received
by Borrower (or by any receiver, trustee, custodian or successor in interest of
Borrower, or by any person acting on behalf of Borrower) in payment of, or in
reference to, the Accounts shall belong to CoastFed, and, not later than one (1)
day after receipt thereof by Borrower, Borrower shall deliver the same to
CoastFed, at CoastFed's office (or, if so directed by CoastFed, Borrower shall
deposit the same in CoastFed's account in a bank designated by CoastFed) in the
original form in which the same are received, together with any necessary
endorsements, including, without limitation, the indorsement of Borrower, all of
which indorsements shall be with recourse. Borrower shall have no right, and
agrees not to commingle any of the proceeds of any of the collections of the
Accounts with Borrower's own funds and Borrower agrees not to use, divert or
withhold any such proceeds. Borrower hereby divests itself of all dominion over
the Accounts and the proceeds thereof and collections received thereon. Borrower
shall make entries on its books and records in form satisfactory to CoastFed
disclosing the absolute and unconditional assignment of all Accounts to CoastFed
and CoastFed's security interest therein and shall keep a separate account on
its record books of all collections received thereon. Borrower agrees that it
will, upon request after an uncured Event of Default by CoastFed and in such
form and at such times as CoastFed shall request, give notice to the Account
Debtors of the assignment of and the grant of a security interest in the
Accounts to CoastFed and that in the event of an uncured Event of Default
CoastFed may itself give such notice at any time and from time to time in
CoastFed's or Borrower's name, without notice to Borrower, requiring such
Account Debtors to pay the Accounts directly to CoastFed, and in any such event,
Borrower's privilege of collecting the Accounts shall automatically be revoked.
CoastFed may also revoke Borrower's privilege of collecting the Accounts at any
time by giving notice thereof to Borrower (orally or in writing). CoastFed may
charge to Borrower's account all costs and expenses incurred by CoastFed in
collecting Accounts, including, without limitation, postage, telephone and
telegraph charges,
-2-
<PAGE>
reasonable and applicable salaries of CoastFed personnel, and attorneys' fees.
5. Intentionally Left Blank.
6. Disputed Accounts. Borrower shall promptly notify CoastFed of all material
disputes and claims with respect to the Accounts. Borrower shall not, except on
Accounts where: (i) the unpaid balance is $2,000 or more, and Borrower desires
to grant the Account Debtor a discount of twenty-five (25%) percent or more of
the face amount of a billed invoice, and (ii) where the aggregate amount of all
adjustments and discounts which Borrower wishes to make may, in the opinion of
CoastFed, materially impair the aggregate value and quality of Borrower's
Accounts without CoastFed's prior written consent, compromise, adjust, or grant
any discount, credit, allowance, or extension of time for payment to any Account
Debtor. CoastFed shall have the right, in its sole and absolute discretion, to
settle, accept reduced amounts and adjust disputes and claims directly with, and
give releases on behalf of Borrower to Account Debtors for cash, credit or
otherwise, upon terms which CoastFed, in its Sole and absolute discretion,
considers advisable, and in such case, CoastFed will credit Borrower's account
with only the net amounts of cash received by CoastFed in payment of the
Accounts, less all costs and expenses (including, without limitation, attorneys'
fees) incurred by CoastFed in connection with the settlement or adjustment of
such disputes and the collection of such Accounts.
7. Representations, Warranties and Covenants of Borrower. Borrower represents,
warrants and covenants that subject to the Schedule of Exceptions, now and
throughout the term of this Accounts Agreement:
7.1 Status of Accounts. Each and every Account with respect to which Loans
are made shall, on the date each Loan is made and thereafter, comply with all of
the following representations, warranties and covenants: each Account represents
an undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business; the Account Debtor on
each Account has not and will not offset, counterclaim, or cancellation, or
other right or claim; each Account will be paid in full at maturity; no petition
in bankruptcy or other application for relief under the Bankruptcy Code or any
other insolvency law has been or will be filed by or against the Account Debtor
on any Account, and no Account Debtor has made or will make an assignment for
the benefit of creditors, become insolvent, fail or go out of business, nor does
Borrower have notice that any of the foregoing is threatened, or is or may be
about to occur; no Account is or will be impaired or reduced in value; no
Account Debtor on any Account is a shareholder, director, partner or agent of
Borrower, or is a person or entity controlling, controlled by or under common
control with Borrower; no Account is owed by an Account Debtor to whom Borrower
is or may become liable in connection with goods sold or services rendered by
the Account Debtor to Borrower or any other transaction or dealing between the
Account Debtor and Borrower. Immediately upon discovery by Borrower that any of
the foregoing representations, warranties, or covenants are or have become
untrue with respect to any Account, Borrower shall immediately give written
notice thereof to CoastFed.
7.2 Documents Genuine; Legal Compliance. All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all material respects what they purport to be and all
signatories and indorsers have full capacity to contract. All sales and other
transactions underlying or giving rise to each Account shall fully comply with
all applicable laws and governmental rules and regulations. All signatures and
indorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
7.3 Disposition of Accounts. Borrower has not, and shall not hereafter
sell, assign, pledge, encumber, forgive (completely or partially), settle for
less than payment in full, or transfer or dispose of any Account, or agree to do
any of the foregoing.
8. No Liability. CoastFed shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or material loss or
destruction of, any goods, the sale or other disposition of which gives rise to
an Account, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any Account
(including, without limitation, any of the same which result in the material
loss of rights against others), or for settling any Account for less than the
full amount thereof, nor shall CoastFed be deemed by any provision herein or any
act, omission, or event to be responsible for or to have assumed any of
Borrower's obligations under any contract or agreement giving rise to an
Account.
9. Relationship to Loan Agreement. CoastFed's remedies under this Accounts
Agreement and the Loan Agreement are cumulative. If any provision of this
Accounts Agreement modifies or conflicts with any provision of the Loan
Agreement, that provision in either agreement that gives greater rights and
remedies to CoastFed shall control. All capitalized terms used herein,
-3-
<PAGE>
which are not defined herein, shall have the meanings ascribed to them in the
Loan Agreement.
10. Effective Date. This Accounts Agreement, when executed by Borrower and
accepted by a duly authorized officer of CoastFed, shall be effective on the
date first above written.
Borrower:
CYBERLINK, INC.,
a California corporation
By /s/ Richard Leslie Lydiate
---------------------------------
Richard Leslie Lydiate,
President
By _________________________________
Ron McVicar,
Chief Financial Officer
CoastFed:
Accepted at Los Angles, California:
COASTFED BUSINESS CREDIT
CORPORATION
By__________________________________
Title_______________________________
-4-
<PAGE>
which are not defined herein, shall have the meanings ascribed to them in the
Loan Agreement.
10. Effective Date. This Accounts Agreement, when executed by Borrower and
accepted by a duly authorized officer of CoastFed, shall be effective on the
date first above written.
Borrower:
CYBERLINK, INC.,
a California corporation
By ________________________________________
Richard Leslie Lydiate,
President
By /s/ Ron McVicar
----------------------------------------
Ron McVicar,
Chief Financial Officer
CoastFed:
Accepted at Los Angles, California:
COASTFED BUSINESS CREDIT
CORPORATION
By /s/ CoastFed Business Credit Corporation
----------------------------------------
Title Vice President
-4-
<PAGE>
Exhibit 10.23
---------------------------------------------------------------------------
Coast
Equipment Collateral Security
Agreement
Borrower: CYBERLINK, INC.,
a California corporation
Address: 5855 Topanga Canyon Boulevard, Suite 520
Woodland Hills, California 91367
Date: September 8, 1995
THIS EQUIPMENT COLLATERAL SECURITY AGREEMENT ("Equipment Agreement"), dated the
above date, is entered into between COASTFED BUSINESS CREDIT CORPORATION
("CoastFed") and the borrower named above ("Borrower"), and is one of the
Collateral Agreements referred to in that certain Loan and Security Agreement
("Loan Agreement") between CoastFed and Borrower, dated the above date. This
Equipment Agreement is an integral part of the Loan Agreement, and all of the
terms and provisions of the Loan Agreement are incorporated herein by this
reference.
1. Grant of Security Interest. As collateral and security for the payment
and performance of all Obligations (as defined in the Loan Agreement), Borrower
hereby grants CoastFed an immediately effective, continuing security interest
in, and assigns to CoastFed, all of Borrower's interest in the following types
of property, whether now owned or held or hereafter acquired and wherever
located: all equipment, goods (other than inventory), machinery, fixtures, trade
fixtures, vehicles, furnishings, furniture, supplies, materials, tools, machine
tools, office equipment, appliances, apparatus, parts, dies, jigs, and chattels,
together with all attachments, replacements, substitutions, accessions,
additions and improvements to any of the foregoing (collectively "Equipment"),
whether or not the same be in the constructive or actual possession or custody
of Borrower, CoastFed or any third party; and all products, proceeds and
insurance proceeds thereof including, without limitation, all accounts,
instruments, documents and chattel paper which may arise from the sale or
disposition of the Equipment; and all books and records pertaining to any or all
of the foregoing. The term "Collateral" as used in the Loan Agreement shall for
all purposes be deemed to include, without limitation, the Equipment and all of
the other property described above. The Equipment includes, without limitation,
all Equipment identified in any one or more Schedules of Equipment which may be
attached hereto, but no failure to attach any Schedule of Equipment shall affect
or limit CoastFed's security interest in all of the Equipment and all of the
other property described above. Borrower has no authority or right to, and shall
not, exchange, trade in, sell, lease or otherwise dispose of any Equipment
without CoastFed's prior written consent.
2. Loans. CoastFed has made, is concurrently making, or is agreeing to
make, to Borrower, Loans, in an amount of up to $2,000,000, but in no event
shall said Loans exceed 80% of the appraised liquidation value of presently
owned Equipment, or 80% of the cost of new Equipment purchased by Borrower, or
80% of the liquidation value of used equipment purchased by Borrower, which
Loans are evidenced by those certain promissory notes made by Borrower to the
order of CoastFed dated of even date herewith. If at any time, CoastFed, in its
sole discretion, determines that the Equipment then owned by Borrower is worth
less than its value as represented by Borrower, or that any Loan pursuant to
this Paragraph 2 is not adequately secured by Borrower's Equipment (without
regard to any other Collateral that may be held by CoastFed), Borrower will
promptly upon demand repay to CoastFed such portion of the Loan as will, in
CoastFed's sole judgment, place CoastFed in an adequately secured position.
3. Representations, Warranties and Covenants of Borrower. Borrower
represents, warrants, and covenants
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<PAGE>
that subject to the Schedule of Exceptions, now and throughout the term of this
Equipment Agreement:
3.1 Condition of Equipment. The Equipment is, and will continue to
be, at Borrower's sole expense, in good and operational condition, free from
latent and patent defects, and not obsolete.
3.2 Use of Equipment. Borrower shall not permit or cause the
Equipment to be misused, used for any purpose other than for which it was
designed, altered or utilized in any illegal or negligent manner. Borrower shall
use the Equipment only in the ordinary course of its business as heretofore
conducted, in a legal manner, and in a manner not inconsistent with the terms of
any insurance policy relating thereto.
3.3 Records and Schedules. Borrower has kept, and shall hereafter
keep accurate and complete records regarding the Equipment, including, without
limitation, records describing in full the dates of acquisition, acquisition
costs, and serial numbers thereof, all of which records shall be continuously
available to CoastFed for inspection and copying. Borrower shall, from time to
time, upon request by CoastFed, provide CoastFed with updated and complete
schedules identifying each item of Equipment, and setting forth the serial
numbers thereof and all such other information as CoastFed shall specify, and
Borrower shall immediately give CoastFed written notice of all Equipment which
it hereafter purchases, leases, or otherwise acquires; provided that no failure
to provide such schedules or give such notice shall affect or limit CoastFed's
security interest in all of the Equipment.
3.4 Certificates of Title. Upon request by CoastFed, Borrower shall
immediately deliver to CoastFed the originals of all certificates of title,
certificates of ownership, evidences of ownership, and applications therefor,
and all other similar documents and instruments, relating to any or all of the
Equipment.
4. Statement of Account. If CoastFed shall send Borrower an extract or
statement prepared from CoastFed's records regarding any Loan made pursuant to
Paragraph 2, the same shall conclusively be deemed correct and accepted by
Borrower unless Borrower delivers to CoastFed a written statement of exceptions
within thirty (30) days after delivery of such extract or statement.
5. Relationship to Loan Agreement. CoastFed's remedies under this
Equipment Agreement and the Loan Agreement are cumulative. If any provision of
this Equipment Agreement modifies or conflicts with any provision of the Loan
Agreement, those provisions in either agreement that give greater rights and
remedies to CoastFed shall govern. All capitalized terms used herein, which are
not defined herein, shall have the meanings ascribed to them in the Loan
Agreement.
6. Effective Date. This Equipment Agreement, when executed by Borrower and
accepted by a duly authorized officer of CoastFed, shall be effective on the
date first above written.
Borrower:
CYBERLINK, INC.,
a California corporation
By /s/ Richard Leslie Lydiate
--------------------------------------
Richard Leslie Lydiate, President
By ______________________________________
Ron McVicar, Chief Financial Officer
CoastFed:
Accepted at Los Angeles, California:
COASTFED BUSINESS CREDIT
CORPORATION
By_______________________________________
Title____________________________________
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<PAGE>
that subject to the Schedule of Exceptions, now and throughout the term of this
Equipment Agreement:
3.1 Condition of Equipment. The Equipment is, and will continue to
be, at Borrower's sole expense, in good and operational condition, free from
latent and patent defects, and not obsolete.
3.2 Use of Equipment. Borrower shall not permit or cause the
Equipment to be misused, used for any purpose other than for which it was
designed, altered or utilized in any illegal or negligent manner. Borrower shall
use the Equipment only in the ordinary course of its business as heretofore
conducted, in a legal manner, and in a manner not inconsistent with the terms of
any insurance policy relating thereto.
3.3 Records and Schedules. Borrower has kept, and shall hereafter
keep accurate and complete records regarding the Equipment, including, without
limitation, records describing in full the dates of acquisition, acquisition
costs, and serial numbers thereof, all of which records shall be continuously
available to CoastFed for inspection and copying. Borrower shall, from time to
time, upon request by CoastFed, provide CoastFed with updated and complete
schedules identifying each item of Equipment, and setting forth the serial
numbers thereof and all such other information as CoastFed shall specify, and
Borrower shall immediately give CoastFed written notice of all Equipment which
it hereafter purchases, leases, or otherwise acquires; provided that no failure
to provide such schedules or give such notice shall affect or limit CoastFed's
security interest in all of the Equipment.
3.4 Certificates of Title. Upon request by CoastFed, Borrower shall
immediately deliver to CoastFed the originals of all certificates of title,
certificates of ownership, evidences of ownership, and applications therefor,
and all other similar documents and instruments, relating to any or all of the
Equipment.
4. Statement of Account. If CoastFed shall send Borrower an extract or
statement prepared from CoastFed's records regarding any Loan made pursuant to
Paragraph 2, the same shall conclusively be deemed correct and accepted by
Borrower unless Borrower delivers to CoastFed a written statement of exceptions
within thirty (30) days after delivery of such extract or statement.
5. Relationship to Loan Agreement. CoastFed's remedies under this
Equipment Agreement and the Loan Agreement are cumulative. If any provision of
this Equipment Agreement modifies or conflicts with any provision of the Loan
Agreement, those provisions in either agreement that give greater rights and
remedies to CoastFed shall govern. All capitalized terms used herein, which are
not defined herein, shall have the meanings ascribed to them in the Loan
Agreement.
6. Effective Date. This Equipment Agreement, when executed by Borrower and
accepted by a duly authorized officer of CoastFed, shall be effective on the
date first above written.
Borrower:
CYBERLINK, INC.,
a California corporation
By
-----------------------------------------
Richard Leslie Lydiate, President
By /s/ Ron McVicar
-----------------------------------------
Ron McVicar, Chief Financial Officer
CoastFed:
Accepted at Los Angeles, California:
COASTFED BUSINESS CREDIT
CORPORATION
By /s/ Coastfed Business Credit Corporation
-----------------------------------------
Title Vice President
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<PAGE>
Exhibit 10.24
SECURITY AGREEMENT - STOCK PLEDGE
This SECURITY AGREEMENT - STOCK PLEDGE (this "Agreement"), dated as of
September 8, 1995, is entered into by and between CYBERLINK, INC., a California
corporation ("Pledgor"), and COASTFED BUSINESS CREDIT CORPORATION, a California
corporation ("Pledgee"), in light of the following facts:
RECITALS
WHEREAS, Pledgor and Pledgee are contemporaneously herewith entering
into that certain Loan and Security Agreement, dated as of even date herewith
(as the same may be amended, restated, modified or supplemented from time to
time in accordance with its terms, the "Loan Agreement").
WHEREAS, Pledgor has agreed to provide additional security for its
obligations under the Loan Agreement by pledging to Pledgee all of Pledgor's
right, title and interest in and to all of the capital stock of Pledgor's
subsidiaries owned by Pledgor.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth and for other
good and valuable consideration, the parties hereto mutually agree as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in this Agreement,
have the following meanings:
"Code" means the California Uniform Commercial Code, as
amended and supplemented from time to time, and any successor statute; provided,
however, with respect to any Collateral consisting of "uncertificated
securities" (as defined in Division 8 of the Code), "Code" shall mean the
Uniform Commercial Code as adopted in the state of organization of the Company
which issued such uncertificated securities, as amended and supplemented from
time to time, and any successor statute.
"Collateral" means all of the following:
(i) (x) One Thousand (1,000) shares of the outstanding
Common Stock of Cyberlink-California which shares constitute one hundred percent
(100%) of the capital stock of Cyberlink-California, and all of the
hereafter-acquired shares of Common Stock of Cyberlink-California in which
Pledgor has an interest at any time while this Agreement is in effect; (y) One
Thousand (1,000) shares of the outstanding Common Stock of Cyberlink-Nevada
which shares constitute one hundred percent (100%) of the capital stock of
Cyberlink-Nevada, and all of the hereafter-acquired shares of Common Stock of
Cyberlink-
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Nevada in which Pledgor has an interest at any time while this Agreement is in
effect; and (z) One Hundred (100) shares of the outstanding Common Stock of
Cyberlink-New York which shares constitute one hundred percent (100%) of the
capital stock of Cyberlink-New York, and all of the hereafter-acquired shares
of Common Stock of Cyberlink-New York in which Pledgor has an interest at any
time while this Agreement is in effect (all shares referred to in this clause
(i) are collectively referred to herein as the "Shares");
(ii) All of Pledgor's presently existing and hereafter
arising stock subscription warrants, stock options, or other rights to purchase
any Company's capital stock and all rights represented thereby (the "Options");
and
(iii) The proceeds of each of the foregoing, including any
and all dividends, cash, stock, instruments, and other property from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for any of the Shares or Options (the "Proceeds").
"Company" or "Companies" means, individually or
collectively, as the context requires, Cyberlink-California, Cyberlink-Nevada
and Cyberlink-New York.
"Cyberlink-California" means Cyberlink-California, Inc., a
California corporation.
"Cyberlink-Nevada" means Cyberlink-Nevada, Inc., a Nevada
corporation.
"Cyberlink-New York" means Cyberlink-New York, Inc., a
Delaware corporation.
"Event of Default" has the meaning given to such term in
Section 10.
"Secured Obligations" means Obligations (as defined in the
Loan Agreement) and the obligations of Pledgor hereunder.
(b) Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Any reference herein to any document includes any and all
alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Pledgee or Pledgor,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by Pledgor, Pledgee, and their respective counsel,
and shall be construed and interpreted according to the ordinary meaning of
the words used so as to fairly accomplish the purposes and intentions of Pledgee
and Pledgor.
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<PAGE>
2. Pledge. As security for the prompt and complete payment and
performance of the Secured Obligations, Pledgor hereby delivers, pledges, and
grants to Pledgee a continuing security interest in all of Pledgor's now-owned
or hereafter-acquired right, title, and interest in and to the Collateral. All
certificates or instruments representing or evidencing the Collateral shall be
delivered promptly to and held by Pledgee pursuant hereto and shall be in
suitable form for transfer or assignment in blank, all in form and substance
satisfactory to Pledgee. In the event that the securities that comprise the
Collateral are uncertificated or in book entry form, then Pledgor shall take
such actions as may be required to cause each Company to register or enter, as
the case may be, such Collateral in the name of Pledgee, and otherwise take such
actions as Pledgee may require for Pledgee's security interest therein to be
perfected in accordance with Section 8313 and 8321 of the Code. In addition,
Pledgor shall provide Pledgee with an opinion of counsel satisfactory to
Pledgee, to the effect that Pledgee has a perfected security interest in the
Collateral and such other opinions as Pledgee may require, in form and substance
satisfactory to Pledgee.
3. Further Assurances. Pledgor agrees that it shall cooperate with
Pledgee and shall execute and deliver, or cause to be executed and delivered, to
Pledgee all stock powers, proxies, assignments, financial statements,
instruments, and other documents, and shall take all further action, at the
expense of Pledgor, from time to time requested by Pledgee, in order to maintain
a continuing, first-priority, perfected security interest in the Collateral in
favor of Pledgee, and to enable Pledgee to exercise and enforce its rights and
remedies hereunder with respect to the Collateral, and Pledgor agrees that it
shall execute and deliver to Pledgee at Pledgee's request any further
applications, agreements, documents and instruments, and shall perform any and
all acts deemed necessary by Pledgee to carry into effect the terms, conditions,
and provisions of this Agreement and the transactions connected herewith. Should
Pledgor fail to execute or deliver any such applications, agreements, documents,
financing statements and instruments, or to perform any such acts, Pledgor
acknowledges that Pledgee may execute and deliver the same and perform such acts
in the name of Pledgor and on its behalf as its attorney-in-fact in accordance
with Section 12.
4. Pledgee's Duties. Pledgee shall not have any duties with respect to
the Collateral other than the duty to use reasonable care if the Collateral is
in its possession. In accordance with Section 9207 of the Code, Pledgee shall be
deemed to have used reasonable care if it observes substantially the same
standard of care with respect to the custody or preservation of the Collateral
as it observes with respect to similar assets owned by Pledgee. Without limiting
the generality of the foregoing, Pledgee shall be under no obligation to take
any steps necessary to preserve rights in the Collateral against any other
parties, to sell the same if it threatens to decline in value, or to exercise
any rights represented thereby (including rights with respect to calls,
conversions, exchanges, maturities, or tenders); provided, however, that Pledgee
may, at its option, do so, and any and all expenses incurred in connection
therewith shall be added to the Secured Obligations.
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<PAGE>
5. Voting Rights; Dividends; Etc.
5.1 During the term of this Agreement, and as long as no Event of
Default is continuing:
(a) Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Shares or any part thereof;
provided, however, no vote shall be cast or any consent, waiver or ratification
given or any action taken which would violate or be inconsistent with the terms
of this Agreement, the Loan Agreement or any other instrument or agreement
referred to therein or herein, or which could have the effect of impairing the
value of the Collateral or any part thereof or the position or interest of
Pledgee therein.
(b) Pledgor shall be entitled to receive and retain any and
all dividends and distributions paid in respect of the Shares; provided,
however, that any and all:
(i) dividends and distributions paid or payable other
than in cash in respect of, and any and all additional Shares or instruments or
other property received, receivable, or otherwise distributed in respect of, or
in exchange for, any Shares;
(ii) dividends and distributions paid or payable in
cash in respect of any Shares in connection with a partial or total liquidation
or dissolution, merger, consolidation of any Company, or any exchange of stock,
conveyance of assets, or similar corporate reorganization; and
(iii) cash paid with respect to, payable, or otherwise
distributed on redemption of, or in exchange for, any Shares,
shall be forthwith delivered to Pledgee to hold as Collateral and shall, if
received by Pledgor, be received in trust for the benefit of Pledgee, be
segregated from the other property or funds of Pledgor, and be forthwith
delivered to Pledgee as Collateral in the same form as so received (with any
necessary endorsement), and, if deemed appropriate by Pledgee, Pledgor shall
take such actions, including the actions described in Section 3, as Pledgee may
require.
5.2 If an Event of Default shall be continuing or any amounts
shall be due and payable (whether by acceleration, maturity, or otherwise) under
any of the Secured Obligations, all rights of Pledgor to exercise the voting and
other consensual rights that it would otherwise be entitled to exercise pursuant
to Section 5.1(a) and to receive the dividends and distributions that it would
otherwise be authorized to receive and retain pursuant to Section 5.1(b) shall,
at Pledgee's option, cease, and all such rights shall, at Pledgee's option,
thereupon become vested in Pledgee, and Pledgee shall, at its option, thereupon
have the sole right to exercise such voting and other consensual rights and to
receive and hold as Collateral such dividends and interest payments. Any
payments received by Pledgor contrary to the provisions of this Section 5.2
shall be held in trust by Pledgor for the benefit of Pledgee, shall be
segregated from other funds of Pledgor, and shall be promptly paid over to
Pledgee, with any necessary endorsement.
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<PAGE>
6. Representations, Warranties, and Covenants. Subject to the Schedule
of Exceptions, Pledgor warrants, represents, and covenants that:
6.1 There are no restrictions upon the transfer of any of the
Collateral to or by Pledgee and Pledgor is the sole beneficial owner of the
Collateral and has the right to pledge and grant a security interest in or
otherwise transfer such Collateral free of any encumbrances or rights of third
parties.
6.2 All of the Collateral is and shall remain free from all
liens, claims, encumbrances, and purchase-money or other security interests
except as created hereby. Pledgor shall not, without Pledgee's prior written
consent, sell or otherwise dispose of any of the Collateral.
6.3 The execution and delivery of this Agreement, and the
delivery to Pledgee of the Shares creates a valid, perfected, and first-priority
security interest in the Collateral in favor of Pledgee, and all actions
necessary or desirable to such perfection have been duly taken.
6.4 No authorization or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either:
(a) for the grant by Pledgor of the security interest granted hereby or for the
execution, delivery, or performance of this Agreement by Pledgor; (b)) for the
perfection of or exercise by Pledgee of its rights and remedies hereunder
(except as may have been taken by or at the direction of Pledgor or as may be
required in connection with a disposition of the Collateral by laws affecting
the offering and sale of securities generally); or (c) for the exercise by
Pledgee of the voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement (except as may
be required in connection with a disposition of the Collateral by laws affecting
the offering and sale of securities generally).
6.5 The pledge of the Collateral pursuant to this Agreement, and
the making of the loans in accordance with the terms of the Loan Agreement, does
not violate Regulations G, T, U, or X of the Board of Governors of the Federal
Reserve System.
6.6 (a) Cyberlink-California presently has issued and outstanding
One Thousand (1,000) shares of Common Stock of which one hundred percent (100%)
is owned by Pledgor and they constitute, respectively, all of the capital stock
of Cyberlink-California.
(b) Cyberlink-Nevada presently has issued and outstanding
One Thousand (1,000) shares of Common Stock of which one hundred percent (100%)
is owned by Pledgor and they constitute, respectively, all of the capital stock
of Cyberlink-Nevada.
(c)Cyberlink-New York presently has issued and outstanding
One Hundred (100) shares of Common Stock of which one hundred percent (100%) is
owned by Pledgor and they constitute, respectively, all of the capital stock of
Cyberlink-New York.
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<PAGE>
6.7 There are no presently existing Options.
6.8 All of the outstanding Shares have been duly and validly
issued by each Company, respectively, and they are fully paid and nonassessable.
6.9 Pledgor has made its own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, but not
limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers, and voting rights), and
Pledgor agrees that Pledgee shall not have any responsibility or liability for
informing Pledgor of any such changes or potential changes or for taking any
action or omitting to take any action with respect thereto.
7. Share Adjustments. In the event that during the term of this
Agreement any reclassification, readjustment, or other change is declared or
made in the capital structure of any Company, or any Option is exercised, all
new substituted and additional shares, options, or other securities, issued or
issuable to Pledgor by reason of any such change or exercise shall be delivered
to and held by Pledgee under the terms of this Agreement in the same manner as
the Collateral originally pledged hereunder.
8. Options. In the event that during the term of this Agreement
Options shall be issued or exercised in connection with the Collateral, such
Options acquired by Pledgor shall be immediately assigned by Pledgor to Pledgee
and all new shares or other securities so acquired by Pledgor shall also be
immediately assigned to Pledgee to be held under the terms of this Agreement in
the same manner as the Collateral originally pledged hereunder.
9. Consent. Pledgor hereby consents that, from time to time, before or
after the occurrence or existence of any Event of Default with or without notice
to or assent from Pledgor, any other security at any time held by or available
to Pledgee for any of the Secured Obligations or any other security at any time
held by or available to Pledgee of any other person, firm, or corporation
secondarily or otherwise liable for any of the Secured Obligations, may be
exchanged, surrendered, or released and any of the Secured Obligations may be
changed, altered, renewed, extended, continued, surrendered, compromised,
waived, or released, in whole or in part, as Pledgee may see fit. Pledgor shall
remain bound under this Agreement notwithstanding any such exchange, surrender,
release, alteration, renewal, extension, continuance, compromise, waiver, or
inaction, or extension of further credit.
10. Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Agreement:
10.1 The occurrence of an Event of Default under the Loan
Agreement;
10.2 Pledgor shall breach, or be in default of, any of its
agreements, covenants and obligations hereunder; or
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10.3 Any representation or warranty made by Pledgor hereunder
shall prove to have been untrue in any material respect when made.
11. Remedies Upon Default.
11.1 Upon the occurrence of an Event of Default, Pledgee shall
have, in addition to any other rights given by law or in this Agreement, in the
Loan Agreement, or in any other agreement between Pledgee and Pledgor, all of
the rights and remedies with respect to the Collateral of a secured party under
the Code, and also shall have, without limitation, the following rights, which
Pledgor hereby agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the
Collateral to Pledgor under Section 5.1(b) hereof;
(b) to transfer all or any part of the Collateral into the
Pledgee's name or the name of its nominee or nominees;
(c) to vote all or any part of the Shares (whether or not
transferred into the name of the Pledgee) in accordance with Section 5.2 hereof,
and give all consents, waivers and ratifications in respect of the Collateral
and otherwise act with respect thereto as though it were the outright owner
thereof; PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS PLEDGEE THE PROXY
AND ATTORNEY-IN-FACT OF PLEDGOR, COUPLED WITH AN INTEREST, WITH FULL POWER OF
SUBSTITUTION FOR ANY AND ALL OF SUCH PURPOSES; WHICH PROXY AND POWER OF ATTORNEY
SHALL CONTINUE IN FULL FORCE AND EFFECT AND TERMINATE UPON THE EARLIER TO OCCUR
OF (a) UPON THE INDEFEASIBLE PAYMENT IN FULL OF THE SECURED OBLIGATIONS AND (b)
SEVEN (7) YEARS FROM THE DATE HEREOF; THE FOREGOING PROXY IS GIVEN PURSUANT TO
SECTION 705(a) OF THE CALIFORNIA CORPORATIONS CODE WITH RESPECT TO
CYBERLINK-CALIFORNIA, SECTION 78.355 OF THE NEVADA REVISED STATUTES WITH RESPECT
TO CYBERLINK-NEVADA, AND SECTION 609 OF THE NEW YORK BUSINESS CORPORATIONS LAW
WITH RESPECT TO CYBERLINK-NEW YORK;
(d) at any time or from time to time, to sell, assign and
deliver, or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of performance,
advertisement or notice of intention to sell or of the time or place of sale or
adjournment thereof or to redeem or otherwise (all of which are hereby waived by
Pledgor), for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or prices and
on such terms as the Pledgee in its absolute discretion may determine; provided,
that at least five (5) days notice of the time and place of any such sale shall
be given to Pledgor. Pledgee shall not be obligated to make any such sale of
Collateral regardless of whether any such notice of sale has therefore been
given. Pledgor hereby waives any other requirement of notice, demand, or
advertisement for sale, to the extent permitted by law. Pledgor hereby waives
and releases to the fullest extent permitted by law any right or equity
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of redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the Collateral and any other
security for the Secured Obligations or otherwise. At any such sale, unless
prohibited by applicable law, Pledgee may bid for and purchase all or any part
of the Collateral so sold free from any such right or equity of redemption.
Pledgee shall not be liable for failure to collect or realize upon any or all of
the Collateral or for any delay in so doing nor shall Pledgee be under any
obligation to take any action whatsoever with regard thereto;
(e) to buy the Collateral, in its own name, or in the name
of a designee or nominee. Pledgee shall have the right to execute any document
or form, in its name or in the name of the Pledgor, that may be necessary or
desirable in connection with such sale of the Collateral.
(f) to sell all or any part of the Collateral by a private
placement, restricting bidders and prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for
distribution. In so doing, Pledgee may solicit offers to buy the Collateral, or
any part of it for cash, from a limited number of investors deemed by Pledgee,
in its reasonable judgment, to be responsible parties who might be interested in
purchasing the Collateral. If Pledgee shall solicit such offers from not less
than four (4) such investors, then the acceptance by Pledgee of the highest
offer obtained therefore shall be deemed to be a commercial reasonable method of
disposition of such Collateral, even though the sales price established and/or
obtained may be substantially less than the price that would be obtained
pursuant to a public offering.
12. Pledgee as Pledgor's Attorney-in Fact. Pledgor hereby irrevocably
appoints Pledgee as its attorney-in-fact to arrange for the transfer, at any
time after the occurrence and during the continuance of an Event of Default, of
the Collateral on the books of each Company to the name of Pledgee or to the
name of Pledgee's nominee. Pledgor further authorizes Pledgee to perform any and
all acts which Pledgee deems necessary for the protection and preservation of
the Collateral or of the value of Pledgee's security interest therein,
including but not limited to receiving income thereon as additional security
hereunder, all at Pledgor's expense, and Pledgor agrees to repay Pledgee
promptly upon demand any amounts expended hereunder by Pledgee, together with
interest thereon. Pledgor further grants to Pledgee a power of attorney coupled
with an interest to execute all agreements, forms, applications, documents and
instruments and to take all actions and do all things as could be executed,
taken, or done by Pledgor in connection with the protection and preservation of
the Collateral or this Agreement. This power of attorney is irrevocable and
authorizes Pledgee to act for Pledgor in connection with the matters described
herein without notice to or demand upon Pledgor.
13. General Provisions.
13.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of Pledgee's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Pledgee may have under the
Loan Agreement, the Collateral Agreements,
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<PAGE>
the Code, or other applicable law. Pledgee shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the exercise
of any others, all of which shall be cumulative.
13.2 No Implied Waivers. No act, failure, or delay by Pledgee
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by Pledgee of any provision of this Agreement, or of a breach or
default hereunder, or of any right or remedy which the Pledgee may have, shall
operate as a waiver of any other provision, breach, default, right, or remedy or
of the same provision, breach, default, right, or remedy on a future occasion.
No waiver by Pledgee shall affect its rights to require strict performance of
this Agreement.
13.3 Notices. All notices or demands by any party hereto to the
other party and relating to this Agreement shall be sent in accordance with the
terms of Section 9.1 of the Loan Agreement.
13.4 Severability. Should any provision, clause or condition of
this Agreement be held by any court of competent jurisdiction to be void or
unenforceable, such defect shall not affect the remainder of this Agreement.
13.5 Integration. This Agreement and such other agreements,
documents and instruments as may be executed in connection herewith shall be
construed as the entire and complete agreement between Pledgor and Pledgee and
shall supersede all prior negotiations, all of which are merged and integrated
herein.
13.6 Amendment. The terms and provisions of this Agreement may
not be waived or amended except in a writing executed by Pledgor and a duly
authorized officer of Pledgee.
13.7 Time of Essence. Time is of the essence in the performance
by Pledgor of each and every obligation under this Agreement.
13.8 Mutual Waiver of Jury Trial. Pledgor and Pledgee each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to, this Agreement, or any conduct, acts or
omissions of Pledgor or Pledgee any of their directors, officers, employees,
agents, attorneys or any other persons affiliated with Pledgor or Pledgee.
13.9 Benefit of Agreement. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of the parties hereto; provided,
however, that Pledgor may not assign or transfer any of its rights under this
Agreement without the prior written consent of Pledgee, and any prohibited
assignment shall be void. No consent by Pledgee to any assignment shall relieve
Pledgor or any guarantor from its liability hereunder.
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13.10 Paragraph Headings; Construction. Paragraph headings are
used herein for convenience only. Pledgor acknowledges that the same may not
describe completely the subject matter of the applicable paragraph, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof. This Agreement has been fully reviewed and negotiated
between the parties and no uncertainty or ambiguity in any term or provision of
this Agreement shall be construed strictly against Pledgor or Pledgee under any
rule of construction or otherwise.
13.11 Governing Law; Jurisdiction; Venue. This Agreement and all
acts and transactions hereunder and all rights and obligations of Pledgor and
Pledgee shall be governed by and in accordance with the laws of the State of
California; provided, however, the respective rights of the parties hereto in
the Collateral, including voting, transfer and proxy rights, shall be governed
by the laws of the state of organization of each of the Companies, respectively,
to the extent such laws are applicable to such rights. Any undefined term used
in this Agreement that is defined in the California Uniform Commercial Code
shall have the meaning therein assigned to that term. As a material part of the
consideration to Pledgee to enter into the Loan Agreement, Pledgor (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall,
at Pledgee's option, be litigated in courts located within California, and that
the exclusive venue therefor shall be Los Angeles County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Pledgor may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
Pledgor:
CYBERLINK, INC., a California corporation
By /s/ Richard Leslie Lydiate
-----------------------------------------
Richard Leslie Lydiate, President
By_________________________________________
Ron McVicar, Chief Financial Officer
Pledgee:
COASTFED BUSINESS CREDIT CORPORATION
By_________________________________________
Title______________________________________
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13.10 Paragraph Headings; Construction. Paragraph headings are
used herein for convenience only. Pledgor acknowledges that the same may not
describe completely the subject matter of the applicable paragraph, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof. This Agreement has been fully reviewed and negotiated
between the parties and no uncertainty or ambiguity in any term or provision of
this Agreement shall be construed strictly against Pledgor or Pledgee under any
rule of construction or otherwise.
13.11 Governing Law; Jurisdiction; Venue. This Agreement and all
acts and transactions hereunder and all rights and obligations of Pledgor and
Pledgee shall be governed by and in accordance with the laws of the State of
California; provided, however, the respective rights of the parties hereto in
the Collateral, including voting, transfer and proxy rights, shall be governed
by the laws of the state of organization of each of the Companies, respectively,
to the extent such laws are applicable to such rights. Any undefined term used
in this Agreement that is defined in the California Uniform Commercial Code
shall have the meaning therein assigned to that term. As a material part of the
consideration to Pledgee to enter into the Loan Agreement, Pledgor (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall,
at Pledgee's option, be litigated in courts located within California, and that
the exclusive venue therefor shall be Los Angeles County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Pledgor may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
Pledgor:
CYBERLINK, INC., a California corporation
By_________________________________________
Richard Leslie Lydiate, President
By /s/ Ron McVicar
-----------------------------------------
Ron McVicar, Chief Financial Officer
Pledgee:
COASTFED BUSINESS CREDIT CORPORATION
By /s/ CoastFed Business Credit Corporation
-----------------------------------------
Title Vice President
--------------------------------------
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Exhibit 10.25
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of September 8, 1995, is entered
into between Debtor and CoastFed, with reference to the following facts:
RECITALS
A. Debtor is contemporaneously herewith executing the Guaranty in
favor of CoastFed in order to guaranty the indebtedness owing by Borrower to
CoastFed; and
B. Debtor has agreed to enter into this Security Agreement in order to
grant to CoastFed a first priority security interest in the Collateral to secure
the Guaranty.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth, and for other
good and valuable consideration, the parties hereto agree as follows:
1. Definitions. All initially capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Guaranty. In addition, as
used herein, the following terms shall have the following meanings:
"Account Debtor" means any Person who is or who may become
obligated with respect to, or on account of, an Account.
"Accounts" means any and all of Debtor's presently existing and
hereafter arising accounts and rights to payment, except those evidenced by
Negotiable Collateral, arising out of the sale or lease of goods or the
rendition of services by Debtor, irrespective of whether earned by performance.
"Borrower" means Cyberlink, Inc., a California corporation.
"Chattel Paper" means all writings of whatever sort which
evidence a monetary obligation and a security interest in or lease of specific
goods, whether now existing or hereafter arising.
"CoastFed Expenses" means any and all costs or expenses required
to be paid by Debtor under this Security Agreement which are paid or advanced by
CoastFed; all costs and expenses of CoastFed, including its attorneys' fees and
expenses (including attorneys' fees incurred pursuant to 11 U.S.C.), incurred or
expended to correct any default or enforce any provision of this Security
Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or
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advertising to sell the Collateral, irrespective of whether a sale is
consummated; and all costs and expenses of suit incurred or expended by
CoastFed, including its attorneys' fees and expenses (including attorneys' fees
incurred pursuant to 11 U.S.C.) in enforcing or defending this Security
Agreement, irrespective of whether suit is brought.
"CoastFed" means CoastFed Business Credit Corporation, a
California banking corporation.
"Code" means the California Uniform Commercial Code except, to
the extent applicable, the Uniform Commercial Code as adopted by the
jurisdiction in which any of the Collateral is located. Any and all terms used
in this Security Agreement which are defined in the Code shall be construed and
defined in accordance with the meaning and definition ascribed to such terms
under the Code, unless otherwise defined herein.
"Collateral" means the following, collectively: any and all of
the Accounts, Deposit Accounts, Equipment, Inventory, General Intangibles,
Negotiable Collateral, and Debtor's Books, in each case whether now existing or
hereafter acquired or created, and any Proceeds or products of any of the
foregoing, or any portion thereof, and any and all Accounts, Deposit Accounts,
Equipment, Inventory, General Intangibles, Negotiable Collateral, money, or
other tangible or intangible property, resulting from the sale or other
disposition of the Accounts, Deposit Accounts, Equipment, Inventory, General
Intangibles, or Negotiable Collateral, or any portion thereof or interest
therein, and the substitutions, replacements, additions, accessions, products
and Proceeds thereof.
"Communications Act" means the Communications Act of 1934, as
amended (47 U.S.C. ss.ss. 151 et seq.) or any successor statute governing the
subject matter thereof, and all rules, regulations and policies promulgated
thereunder by the FCC.
"Debtor" means Cyberlink-California, Inc., a California
corporation.
"Debtor's Books" means any and all presently existing and
hereafter acquired or created books and records of Debtor, including all records
(including maintenance and warranty records), ledgers, computer programs, disc
or tape files, printouts, runs, and other computer prepared information
indicating, summarizing, or evidencing the Accounts, Deposit Accounts,
Equipment, Inventory, General Intangibles and Negotiable Collateral and also
including all FCC logs, public files, engineering records and other records that
relate to the operation of Debtor's business.
"Deposit Account" means any demand, time, savings, passbook or
like account now or hereafter maintained by or for the benefit of Debtor with a
bank, savings and loan association, credit union or like organization, and all
funds and amounts therein, whether or not restricted or designated for a
particular purpose.
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"Documents" means any and all documents of title, bills of
lading, dock warrants, dock receipts, warehouse receipts and other documents of
Debtor, whether or not negotiable, and includes all other documents which
purport to be issued by a bailee or agent and purport to cover goods in any
bailee's or agent's possession which are either identified or are fungible
portions of an identified mass, including such documents of title made available
to Debtor for the purpose of ultimate sale or exchange of goods or for the
purpose of loading, unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with goods in a manner preliminary to their sale
or exchange, in each case whether now existing or hereafter acquired.
"Equipment" means any and all of Debtor's presently existing and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures,
computer and other electronic data processing equipment and other office
equipment and supplies, computer programs and related data processing software,
spare parts, tools, motors, automobiles, trucks, tractors and other motor
vehicles, rolling stock, jigs, and other goods (other than Inventory, farm
products, and consumer goods), of every kind and description, wherever located,
together with any and all parts, improvements, additions, attachments,
replacements, accessories, and substitutions thereto or therefor, and all other
rights of Debtor relating thereto, whether in the possession and control of
Debtor, or in the possession and control of a third party for the account of
Debtor.
"FCC" means the Federal Communications Commission or any
governmental authority succeeding to any of its functions.
"General Intangibles" means any and all of Debtor's presently
existing and hereafter acquired or arising general intangibles and other
intangible personal property of every kind and description, including rights
under licensing and distribution agreements, uncertificated securities,
interests in any joint ventures or partnerships, contract rights, noncompetition
covenants, goodwill, choses in action and causes of action (whether legal or
equitable, whether in contract or tort or otherwise, and however arising),
licenses, approvals, permits or any other authorizations issued by any
Government Authority (including, the Telecommunications Licenses and all other
licenses, approvals, permits and other authorizations issued by the FCC or any
state public utility commission to Debtor, including the proceeds of any sale or
other disposition thereof, in each case to the extent that a security interest
therein is not prohibited by law, provided that to the extent that a security
interest therein is now so prohibited and to the extent that such security
interest at any time hereafter shall no longer be so prohibited, then such
security interest shall automatically and without any further action attach and
become fully effective at that time (giving effect to any retroactive effect to
any change in applicable law or regulation)), all Intellectual Property
Collateral, rights of stoppage in transit, replevin and reclamation, rebates or
credits of every kind and nature to which Debtor may be entitled, purchase
orders, customer lists, subscriber lists, monies due or recoverable from pension
funds, computer software, magnetic media, electronic data processing files,
systems and programs, deposit accounts, uncertificated certificates of deposit,
refunds and claims for tax or other
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refunds against any Governmental Authority, indemnity agreements, guaranties,
insurance policies, contracts, franchise agreements, lease agreements, and other
contractual, equitable and legal rights of whatever kind and nature.
"Governmental Authority" means any federal, state, local or other
governmental department, commission (including the FCC and any state public
utility commission), board, bureau, agency, central bank, court, tribunal or
other instrumentality or authority or subdivision thereof, domestic or foreign,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" means that certain Continuing Guaranty, executed by
Debtor in favor of CoastFed, dated as of even date herewith, as amended from
time to time in accordance with its terms.
"Instruments" means any and all negotiable instruments,
certificated securities and every other writing which evidences a right to the
payment of money, in each case whether now existing or hereafter acquired.
"Intellectual Property Collateral" means the following Assets
owned or held by Debtor or in which Debtor otherwise has any interest, now
existing or hereafter acquired or arising:
(a) all patents and patent applications, domestic or
foreign, all licenses relating to any of the foregoing and all income and
royalties with respect to any licenses, all rights to sue for past, present or
future infringement thereof, all rights arising therefrom and pertaining thereto
and all reissues, divisions, continuations, renewals, extensions and
continuations in-part thereof;
(b) all copyrights and applications for copyright, domestic
or foreign, together with the underlying works of authorship (including titles),
whether or not the underlying works of authorship have been published and
whether said copyrights are statutory or arise under the common law, and all
other rights and works of authorship, all rights, claims and demands in any way
relating to any such copyrights or works, including royalties and rights to sue
for past, present or future infringement, and all rights of renewal and
extension of copyright;
(c) all state (including common law), federal and foreign
trademarks, service marks and trade names (including all call letters, logos,
jingles, slogans, logotypes, programs and elements of whatever form or nature
used in connection with the operation of Debtor's business, whether completed or
in production), and applications for registration of such trademarks, service
marks and trade names, all licenses relating to any of the foregoing and all
income and royalties with respect to any licenses, whether registered or
unregistered and wherever registered, all rights to sue for past,
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present or future infringement or unconsented use thereof, all rights arising
therefrom and pertaining thereto and all reissues, extensions and renewals
thereof;
(d) all trade secrets, confidential information, customer
lists, license rights, advertising materials, operating manuals, methods,
processes, know-how, sales literature, sales and operating plans, drawings,
specifications, blue prints, descriptions, inventions, name plates and catalogs;
and
(e) the entire goodwill of or associated with the businesses
now or hereafter conducted by Debtor connected with and symbolized by any of the
aforementioned properties and assets.
"Inventory" means any and all of Debtor's presently existing and
hereafter acquired goods of every kind and description (including goods in
transit) which are held for sale or lease, or to be furnished under a contract
of service or which have been so leased or furnished, or other disposition,
wherever located, including those held for display or demonstration or out on
lease or consignment or are raw materials, work in process, finished materials,
or materials used or consumed, or to be used or consumed, in Debtor's business,
and the resulting product or mass, and all repossessed, returned, rejected,
reclaimed and replevied goods, together with all materials, parts, supplies,
packing and shipping materials used or usable in connection with the
manufacture, packing, shipping, advertising, selling or furnishing of such
goods; and all other items hereafter acquired by Debtor by way of substitution,
replacement, return, repossession or otherwise, and all additions and accessions
thereto, and any Document representing or relating to any of the foregoing at
any time.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement or other preferential
arrangement, charge or encumbrance (including, any conditional sale or other
title retention agreement, or finance lease) of any kind.
"Negotiable Collateral" means any and all of Debtor's presently
existing and hereafter acquired or arising letters of credit, advises of credit,
certificates of deposit, notes, drafts, Instruments, Documents and Chattel
paper.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other organizations, irrespective of
whether they are legal entities, and governments and agencies and political
subdivisions thereof.
"Proceeds" means whatever is receivable or received from or upon
the sale, lease, license, collection, use, exchange or other disposition,
whether voluntary or involuntary, of any Collateral or other assets of Debtor,
including "proceeds"
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as defined in Section 9306 of the Code, any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to or for the account of Debtor from
time to time with respect to any of the Collateral, any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral or for or on account of any damage or injury to or conversion of any
Collateral by any Person, any and all other tangible or intangible property
received upon the sale or disposition of Collateral, and all proceeds of
proceeds.
"Rights to Payment" means all Accounts and any and all rights and
claims to the payment or receipt of money or other forms of consideration of any
kind in, to and under all General Intangibles, Negotiable Collateral and
Proceeds thereof.
"Secured Obligations" shall have the meaning of "Obligations"
under the Guaranty and shall also mean any and all debts, liabilities,
obligations, or undertakings owing by Debtor to CoastFed arising under, advanced
pursuant to, or evidenced by this Security Agreement, whether direct or
indirect, absolute or contingent, matured or unmatured, due or to become due,
voluntary or involuntary, whether now existing or hereafter arising, and
including all interest not paid when due and all CoastFed Expenses which Debtor
is required to pay or reimburse pursuant to this Security Agreement, the
Guaranty or by law.
"Security Agreement" shall mean this Security Agreement, any
concurrent or subsequent riders, exhibits or schedules to this Security
Agreement, and any extensions, supplements, amendments, or modifications to or
in connection with this Security Agreement, or to any such riders, exhibits or
schedules.
"Telecommunications Licenses" means those licenses issued to
Debtor by the FCC or any state public utility commission.
2. Construction. Unless the context of this Security Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the part includes the whole, "including" is not
limiting, and "or" has the inclusive meaning represented by the phrase "and/or."
References in this Security Agreement to "determination" by CoastFed include
reasonable estimates (absent manifest error) by CoastFed, as applicable (in the
case of quantitative determinations) and reasonable beliefs (absent manifest
error) by CoastFed, as applicable (in the case of qualitative determinations).
The words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Security Agreement refer to this Security Agreement as a whole and not to any
particular provision of this Security Agreement. Article, section, subsection,
exhibit, and schedule references are to this Security Agreement unless otherwise
specified.
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3. Creation of Security Interest. Debtor hereby grants to CoastFed a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure the prompt payment and performance of all
of the Secured Obligations. Debtor acknowledges and affirms that such security
interest in the Collateral has attached to all Collateral without further act on
the part of CoastFed or Debtor.
4 Further Assurances.
4.1 Debtor shall execute and deliver to CoastFed concurrently
with Debtor's execution of this Security Agreement, and from time to time at the
request of CoastFed, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages,
assignments, and all other documents that CoastFed may request, in form
satisfactory to CoastFed, to perfect and maintain perfected CoastFed's security
interests in the Collateral and in order to consummate fully all of the
transactions contemplated by this Security Agreement and the Guaranty. Debtor
hereby irrevocably makes, constitutes, and appoints CoastFed (and CoastFed's
officers, employees, or agents) as Debtor's true and lawful attorney with power
to sign the name of Debtor on any of the above-described documents or on any
other similar documents which need to be executed, recorded, or filed, and to do
any and all things necessary in the name and on behalf of Debtor in order to
perfect, or continue the perfection of, CoastFed's security interests in the
Collateral. Debtor agrees that neither CoastFed, nor any of its designees or
attorneys-in-fact, will be liable for any act of commission or omission, or for
any error of judgment or mistake of fact or law with respect to the exercise of
the power of attorney granted under this Section 4.1, other than as a result of
its or their gross negligence or wilful misconduct. THE POWER OF ATTORNEY
GRANTED UNDER THIS SECTION 4.1 IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE UNTIL ALL OF THE SECURED OBLIGATIONS HAVE BEEN INDEFEASIBLY PAID IN
FULL, THE GUARANTY TERMINATED, AND ALL DEBTOR'S DUTIES HEREUNDER AND THEREUNDER
HAVE BEEN DISCHARGED IN FULL.
4.2 Without limiting the generality of the foregoing Section 4.1
or any of the provisions of the Guaranty, Debtor will: (i) at the request of
CoastFed, mark conspicuously all of its records pertaining to the Collateral
with a legend, in form and substance satisfactory to CoastFed, indicating that
the Collateral is subject to the security interest granted hereby; (ii) at the
request of CoastFed, appear in and defend any action or proceeding which may
affect Debtor's title to, or the security interest of CoastFed in, any of the
Collateral; and (iii) upon demand of CoastFed, allow inspection of Collateral by
CoastFed or Persons designated by CoastFed at any time during normal business
hours.
4.3 With respect to the Negotiable Collateral (other than drafts
received in the ordinary course of business so long as no Event of Default is
continuing), Debtor shall, immediately upon request by CoastFed, endorse (where
appropriate) and assign the Negotiable Collateral over to CoastFed, and deliver
to CoastFed actual physical possession of the Negotiable Collateral to CoastFed
together with any instruments of transfer
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or assignment, all in form and substance satisfactory to CoastFed, in order to
fully perfect the security interest therein of CoastFed.
4.4 Whenever the FCC will permit the granting of a security
interest in, or the collateral assignment of, any Telecommunications License or
any other license granted by the FCC to Debtor, or in any event during the
continuance of an Event of Default, pursuant to Section 9.4, Debtor shall take
all actions and do all things requested by CoastFed in connection with
CoastFed's application to the FCC for the grant, assignment, or transfer to
CoastFed, or any purchaser at a foreclosure sale, of the Telecommunications
Licenses or any other license from the FCC, including any assignment of a lawful
security interest in any Telecommunications License previously granted to
Debtor. Without limiting the generality of the foregoing, Debtor agrees to
execute and deliver to CoastFed, or any Person designated by CoastFed, any
documents, instruments, or agreements requested by CoastFed in connection with
any such grant, license, assignment, or transfer sought by CoastFed from the
FCC.
5. Representations and Warranties. In order to induce CoastFed to make
loans to Borrower, in addition to the representations and warranties of Debtor
set forth in the Guaranty which are incorporated herein by this reference,
Debtor represents and warrants to CoastFed that subject to the Schedule of
Exceptions, on the date hereof and on each and every day that CoastFed makes a
loan to Borrower:
5.1 Location of Chief Executive office and Collateral. Debtor's
chief executive office is located at the address set forth in Schedule 1, and
all other locations where Debtor conducts business or Collateral is kept are set
forth in Schedule 1.
5.2 Locations of Debtor's Books. All locations where Debtor's
Books are kept, including all equipment necessary for accessing Debtor's Books
and the names and addresses of all service bureaus, computer or data processing
companies and other Persons keeping Debtor's Books or collecting Rights to
Payment for Debtor, are set forth in Schedule 1.
5.3 Trade Names and Trade Styles. All trade names and trade
styles under which Debtor presently conducts its business operations are set
forth in Schedule 1, and, except as set forth in Schedule 1, Debtor has not, at
any time during the preceding five years: (i) been known as or used any other
corporate, trade or fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or consolidation; or (iv)
acquired through asset purchase or otherwise any business of any Person.
5.4 Ownership of Collateral. Debtor is and shall continue to be
the sole and complete owner of the Collateral, free from any Lien other than in
favor of CoastFed.
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5.5 Enforceability: Priority of Security Interest. This Agreement
(i) creates a security interest which is enforceable against the Collateral in
which Debtor now has rights and will create a security interest which is
enforceable against the Collateral in which Debtor hereafter acquires rights at
the time Debtor acquires any such rights, and (ii) CoastFed has a perfected
security interest (to the fullest extent perfection can be obtained by filing,
notification to third parties or possession) and a first priority security
interest in the Collateral in which Debtor now has rights, and will have a
perfected and first priority security interest in the Collateral in which Debtor
hereafter acquires rights at the time Debtor acquires any such rights, in each
case securing the payment and performance of the Secured Obligations.
5.6 Other Financing Statements. Other than financing statements
in favor of CoastFed, no effective financing statement naming Debtor as debtor,
assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Collateral is on file in any filing or recording office in any
jurisdiction.
5.7 Rights to Payment.
(a) the Rights to Payment represent valid, binding and
enforceable obligations of the Account Debtors or other Persons obligated
thereon, representing undisputed, bona fide transactions completed in accordance
with the terms and provisions contained in any documents related thereto, and
are and will be genuine, free from Liens, adverse claims, counterclaims,
setoffs, defaults, disputes, defenses, retainages, holdbacks and conditions
precedent of any kind or character, except to the extent reflected by Debtor's
reserves for uncollectible Rights to Payment;
(b) to the best of Debtor's knowledge and belief all Account
Debtors and other obligors on the Rights to Payment are solvent and generally
paying their debts as they come due;
(c) all Rights to Payment comply with all applicable laws
concerning form, content and manner of preparation and execution, including
where applicable any federal and state consumer credit laws;
(d) Debtor has not assigned any of its rights under the
Rights to Payment;
(e) all statements made, all unpaid balances and all other
information in Debtor's Books and other documentation relating to the Rights to
Payment are true and correct and in all respects what they purport to be; and
(f) Debtor has no knowledge of any fact or circumstance
which would impair the validity or collectibility of any of the Rights to
Payment.
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5.8 Inventory. No Inventory is stored with any bailee,
warehouseman or similar Person or on any premises leased to Debtor, nor has any
Inventory been consigned to Debtor or consigned by Debtor to any Person or is
held by Debtor for any Person under any "bill and hold" or other arrangement.
5.9 Intellectual Property.
(a) except as set forth in Schedule 1, Debtor (directly or
through any subsidiary) does not own, possess or use under any licensing
arrangement any patents, copyrights, trademarks, service marks or trade names,
nor is there currently pending before any Governmental Authority any application
for registration of any patent, copyright, trademark, service mark or trade
name;
(b) all patents, copyrights, trademarks, service marks and
trade names are subsisting and have not been adjudged invalid or unenforceable
in whole or in part;
(c) all maintenance fees required to be paid on account of
any patents have been timely paid for maintaining such patents in force, and, to
the best of Debtor's knowledge, each of the patents is valid and enforceable and
Debtor has notified CoastFed in writing of all prior art (including public uses
and sales) of which it is aware;
(d) to the best of Debtor's knowledge after due inquiry, no
material infringement or unauthorized use presently is being made of any
Intellectual Property Collateral by any Person;
(e) Debtor is the sole and exclusive owner of the
Intellectual Property Collateral and the past, present and contemplated future
use of such Intellectual Property Collateral by Debtor has not, does not and
will not infringe or violate any right, privilege or license agreement of or
with any other Person; and
(f) Debtor owns, has material rights under, is a party to,
or an assignee of a party to all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade names and all other intellectual property Collateral necessary to continue
to conduct its business as heretofore conducted.
5.10 Equipment.
(a) none of the Equipment or other Collateral is affixed to
real property, except Collateral with respect to which Debtor has supplied
CoastFed with all information and documentation necessary to make all fixture
filings required to perfect and protect the priority of CoastFed's security
interest in all such Collateral which may be fixtures as against all Persons
having an interest in the premises to which such property may be affixed; and
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(b) none of the Equipment is leased from or to any Person,
except as set forth in Schedule 1.
5.11 Deposit Accounts. The names and addresses of all financial
institutions at which Debtor maintains its Deposit Accounts, and the account
numbers and account names of such Deposit Accounts, are set forth in Schedule 1.
6. Covenants. In addition to the covenants of Debtor set forth in the
Guaranty which are incorporated herein by this reference, Debtor agrees that
from the Closing Date and thereafter until the indefeasible payment, performance
and satisfaction in full of the Secured Obligations, and all of CoastFed's
obligations under the Guaranty to Debtor have been terminated:
6.1 Defense of Collateral. Debtor shall appear in and defend any
action, suit or proceeding which may affect to a material extent its title to or
right or interest in, or CoastFed's right or interest in, the Collateral.
6.2 Preservation of Collateral. Debtor shall do and perform all
reasonable acts that may be necessary and appropriate to maintain, preserve and
protect the Collateral.
6.3 Compliance with Laws, Etc. Debtor shall comply with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.
6.4 Location of Debtor's Books and Chief Executive Office. Debtor
shall: (i) keep all Debtor's Books at the locations set forth in Schedule 1; and
(ii) the location of Debtor's chief executive office or principal place of
business at the location set forth in Schedule 1.
6.5 Location of Collateral. Debtor shall: (i) keep the Collateral
at the locations set forth in Schedule 1; and (ii) give CoastFed at least 30
days' prior written notice of any change in the locations set forth in Schedule
1 by delivering to CoastFed an amended Schedule 1.
6.6 Change in Name, Trade Name or Trade Style. Debtor shall give
at least 30 days' prior written notice of any changes in its name, or of any
changes in, additions to or other modifications of its trade names and trade
styles set forth in Schedule 1 by delivering to CoastFed an amended Schedule 1.
6.7 Maintenance of Records. Debtor shall keep separate, accurate
and complete Debtor's Books, disclosing CoastFed's security interest hereunder.
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6.8 Invoicing of Sales. Debtor shall invoice all of its sales
upon forms customary in the industry and to maintain proof of delivery and
customer acceptance of goods.
6.9 Disposition of Collateral. Debtor shall not surrender or lose
possession of (other than to CoastFed), sell, lease, rent, or otherwise dispose
of or transfer any of the Collateral or any right or interest therein, except to
the extent permitted by the Guaranty.
6.10 Liens. Debtor shall keep the Collateral free of all Liens
except in favor of CoastFed.
6.11 Expenses. Debtor shall pay all expenses of protecting,
storing, warehousing, insuring, handling and shipping the Collateral.
6.12 Leased Premises. At CoastFed's request, Debtor shall obtain
from each Person from whom Debtor leases any premises at which any Collateral is
at any time present, such subordination, waiver, consent and estoppel agreements
as CoastFed may require, in form and substance satisfactory to CoastFed.
6.13 Rights to Payment. Debtor shall:
(a) perform and observe all terms and provisions of the
Rights to Payment and all obligations to be performed or observed by it in
connection therewith and maintain the Rights to Payment in full force and
effect;
(b) enforce all Rights to Payment strictly in accordance
with their terms, and take all such action to such end as may be from time to
time reasonably requested by CoastFed;
(c) if, to the knowledge of Debtor, any dispute, setoff,
claim, counterclaim or defense shall exist or shall be asserted or threatened
with respect to a Right to Payment (whether with or against Debtor or
otherwise), disclose such fact fully to CoastFed in Debtor's Books relating to
such Account or other Right to Payment and in connection with any report
furnished by Debtor to CoastFed relating to such Right to Payment;
(d) furnish to CoastFed such information and reports
regarding the Rights to Payment as CoastFed may request, and upon request of
CoastFed make such demands and requests for information and reports as Debtor is
entitled to make in respect of the Rights to Payment; and
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(e) during the continuance of any Event of Default,
establish such lockbox or similar arrangements for the payment of the Rights to
Payment as CoastFed shall require.
6.14 Inventory. Debtor shall:
(a) at such times as CoastFed shall request, prepare and
deliver to CoastFed periodic reports pertaining to the Inventory, in form and
substance satisfactory to CoastFed;
(b) upon the request of CoastFed, take a physical listing of
the Inventory and promptly deliver a copy of such physical listing to CoastFed;
and
(c) not store any Inventory with a bailee, warehouseman or
similar Person or on premises leased to Debtor, nor dispose of any Inventory on
a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment
or similar basis, nor acquire any Inventory from any Person on any such basis,
without in each case giving CoastFed prior written notice thereof.
6.15 Equipment. Debtor shall, upon CoastFed's request, deliver to
CoastFed a report of each item of Equipment, in form and substance satisfactory
to CoastFed.
6.16 Intellectual Property Collateral. Debtor shall:
(a) not enter into any agreement (including any license or
royalty agreement) pertaining to any Intellectual Property Collateral without in
each case giving CoastFed prior notice thereof;
(b) not allow or suffer any Intellectual Property Collateral
to become abandoned, nor any registration thereof to be terminated, forfeited,
expired or dedicated to the public;
(c) promptly give CoastFed notice of any rights Debtor may
obtain to any new patentable inventions, copyrightable works or other new
Intellectual Property Collateral, prior to the filing of any application for
registration thereof; and
(d) diligently prosecute all applications for patents,
copyrights and trademarks, and file and prosecute any and all continuations,
continuations-in-part, applications for reissue, applications for certificate of
correction and like matters as shall be reasonable and appropriate in accordance
with prudent business practice, and promptly and timely pay any and all
maintenance, license, registration and other fees, taxes and expenses incurred
in connection with any Intellectual Property Collateral.
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7. Collection of Rights to Payment. Debtor or its agents shall
endeavor in the first instance to collect all amounts due or to become due on or
with respect to the Rights to Payment. At the request of CoastFed during the
continuance of an Event of Default, all remittances received by Debtor shall be
held in trust for CoastFed, and, in accordance with CoastFed's instructions,
remitted to CoastFed or deposited to an account with CoastFed in the form
received (with any necessary endorsements or instruments of assignment or
transfer).
8. Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Security
Agreement:
8.1 The occurrence of an Event of Default under the Guaranty;
8.2 Debtor shall breach, or be in default of, any of its
agreements, covenants and obligations hereunder; or
8.3 Any representation or warranty made by Debtor hereunder shall
have been untrue in any material respect when made.
9. Rights and Remedies.
9.1 During the continuance of an Event of Default, CoastFed,
without notice or demand, may do any one or more of the following, all of which
are authorized by Debtor:
(a) Make such payments and do such acts as it considers
necessary or reasonable to protect CoastFed's security interest in the
Collateral. Debtor agrees to assemble and make available any or all of the
Collateral if CoastFed so requires. Debtor authorizes CoastFed to enter the
premises where the Collateral is located, take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which, in the opinion of the CoastFed, appears to
be prior or superior to CoastFed's security interest, and to pay all costs and
expenses incurred in connection therewith;
(b) CoastFed is hereby granted a license or other right to
use, without charge, Debtor's trade names, trademarks, service marks, customer
lists, and advertising matter, or any other property of a similar nature, in
advertising for sale or selling any Collateral and Debtor's rights under all
licenses shall inure to the benefit of CoastFed, subject to the then applicable
rules and regulations of the FCC;
(c) Ship, reclaim, recover, store, finish, maintain, repair,
advertise and prepare for sale of the Collateral;
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(d) Sell the Collateral, at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Debtor's premises) as is
commercially reasonable, and apply any proceeds of any sale or other disposition
of the Collateral in the order provided in Section 9504 of the Code, including
the payment of CoastFed Expenses. It is not necessary that the Collateral be
present at any such sale;
(e) Without constituting a retention of collateral in
satisfaction of indebtedness as provided for in Section 9505 of the Code, notify
account debtors and other obligors of Debtor of CoastFed's security interests in
the Collateral, and proceed to collect the same and apply the net cash proceeds
therefrom to the Secured Obligations;
(f) CoastFed shall give notice of any disposition of the
Collateral as follows:
(i) CoastFed shall give Debtor and each holder of a
security interest in the Collateral who has filed with CoastFed a written
request for notice, a written notice stating the time and place of a public
sale, or, if the disposition is to be either a private sale or some other
disposition that is not a public sale, the time on or after which the private
sale or other disposition is to be made;
(ii) The notice described in the immediately preceding
paragraph shall be delivered to Debtor as provided in Section 9.1 of the
Guaranty at least five (5) calendar days before the date fixed for a sale.
Notice to Persons other than Debtor claiming an interest in the Collateral shall
be sent to such addresses as such Persons have furnished to CoastFed prior to
the date of such notice;
(iii) If the disposition is to be a public sale,
CoastFed shall also give notice of the time and place of said sale by publishing
a notice at least five (5) calendar days before the date of the sale in a
newspaper of general circulation, if one exists, in the county in which the sale
is to be held;
(iv) Notwithstanding anything to the contrary in
clauses (ii) and (iii) of this Section 9.1(f), CoastFed shall provide ten (10)
days written notice to Debtor and the FCC before any Equipment will be
repossessed or foreclosed upon;
(g) CoastFed may, in its own name, or in the name of a
designee or nominee, credit bid and purchase at any public sale;
(h) Debtor shall pay all CoastFed Expenses; and
(i) Any portion of the Secured Obligations which remains
unpaid after disposition of the Collateral as provided above shall be paid
immediately by
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Debtor. Any excess which exists after disposition of the Collateral and payment
in full of the Secured Obligations shall be returned promptly, without interest
and subject to the rights of third parties, to Debtor by CoastFed.
9.2 Upon the exercise by CoastFed of any power, right, privilege,
or remedy pursuant to this Security Agreement which requires any consent,
approval, registration, qualification, or authorization of any Governmental
Authority, Debtor agrees to execute and deliver, or will cause the execution and
delivery of, all applications, certificates, instruments, assignments, and other
documents and papers that CoastFed or any purchaser of the Collateral may be
required to obtain for such governmental consent, approval, registration,
qualification, or authorization.
9.3 The rights and remedies of CoastFed under this Security
Agreement, the Guaranty, and all other agreements contemplated hereby and
thereby shall be cumulative. CoastFed shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by CoastFed of any one right or remedy shall be deemed an election of
remedies, and no waiver by CoastFed of any default on Debtor's part shall be
deemed a continuing waiver of any further defaults. No delay by CoastFed shall
constitute a waiver, election or acquiescence with respect to any right or
remedy.
9.4 Notwithstanding anything to the contrary contained in this
Security Agreement or in any other agreement, instrument or document executed by
Debtor and delivered to CoastFed, CoastFed will not take any action pursuant to
this Security Agreement or any other document referred to above which would
constitute or result in any assignment of any Telecommunications License or any
change of control of Debtor or any Subsidiary of Debtor if such assignment of
any Telecommunications License or change of control would require, under then
existing law, the prior approval of the FCC without first obtaining such prior
approval of the FCC. Debtor waives, to the extent permitted by law, any right it
may have to oppose, and agrees to take any action which CoastFed may request in
order to obtain from the FCC, such approval as may be necessary to enable
CoastFed to exercise and enjoy the full rights and benefits granted CoastFed by
this Security Agreement and the other documents referred to above, including
specifically, at the cost and expense of Debtor, the use of commercially
reasonable efforts to assist in obtaining approval of the FCC for any action or
transaction contemplated by this Security Agreement for which such approval is
or shall be required by law, and specifically, without limitation, upon request,
to prepare, sign and file with the FCC the assignor's or transferor's portion of
any application or applications for consent to the assignment of license or
transfer of control necessary or appropriate under the FCC's rules and
regulations for approval of (a) any sale or other disposition of the Collateral
by or on behalf of the CoastFed, or (b) any assumption by the CoastFed of voting
rights in the Collateral effected in accordance with the terms of this Security
Agreement. It is understood and agreed that all foreclosures and related actions
will be made in accordance with Section 310 of the Communications Act.
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10. CoastFed Not Liable. So long as CoastFed complies with the
obligations, if any, imposed by Section 9207 of the Code, CoastFed shall not
otherwise be liable or responsible in any way or manner for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion or from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person whomsoever.
11. Indefeasible Payment. The Secured Obligations shall not be
considered indefeasibly paid for purposes of this Security Agreement unless and
until all payments to CoastFed are no longer subject to any right on the part of
any Person, including Debtor, Debtor as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Debtor or Debtor's
Assets to invalidate or set aside such payments or to seek to recoup the amount
of such payments or any portion thereof, or to declare same to be fraudulent or
preferential. In the event that, for any reason, any portion of such payments to
CoastFed is set aside or restored, whether voluntarily or involuntarily, after
the making thereof, then the obligation intended to be satisfied thereby shall
be revived and continued in full force and effect as if said payment or payments
had not been made.
12. GENERAL PROVISIONS
12.1 Cumulative Remedies: No Prior Recourse to Collateral. The
enumeration herein of CoastFed's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the CoastFed may have under the
Guaranty, the Code, or other applicable law. CoastFed shall have the right, in
its sole discretion, to determine which rights and remedies are to be exercised
and in which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative.
12.2 No Implied Waivers. No act, failure, or delay by CoastFed
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by CoastFed of any provision of this Security Agreement, or of a
breach or default hereunder, or of any right or remedy which CoastFed may have,
shall operate as a waiver of any other provision, breach, default, right, or
remedy or of the same provision, breach, default, right, or remedy on a future
occasion. No waiver by CoastFed shall affect its rights to require strict
performance of this Security Agreement.
12.3 Notices. All notices or demands by any party hereto to the
other party and relating to this Security Agreement shall be sent in accordance
with the terms of Section 22 of the Guaranty.
12.4 Severability. Should any provision, clause or condition of
this Security Agreement be held by any court of competent jurisdiction to be
void or unenforceable, such defect shall not affect the remainder of this
Security Agreement.
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12.5 Integration. This Security Agreement and such other
agreements, documents and instruments as may be executed in connection herewith
shall be construed as the entire and complete agreement between Debtor and
CoastFed and shall supersede all prior negotiations, all of which are merged and
integrated herein.
12.6 Amendment. The terms and provisions of this Security
Agreement may not be waived or amended except in a writing executed by Debtor
and a duly authorized officer of CoastFed.
12.7 Time of Essence. Time is of the essence in the performance
by Debtor of each and every obligation under this Security Agreement.
12.8 Mutual Waiver of Jury Trial. Debtor and CoastFed each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to, this Security Agreement, or any conduct, acts
or omissions of Debtor or CoastFed, any of their directors, officers, employees,
agents, attorneys or any other persons affiliated with Debtor or CoastFed.
12.9 Benefit of Agreement. The provisions of this Security
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of the parties
hereto; provided, however, that Debtor may not assign or transfer any of its
rights under this Security Agreement without the prior written consent of
CoastFed, and any prohibited assignment shall be void. No consent by CoastFed to
any assignment shall relieve Debtor or any guarantor from its liability
hereunder.
12.10 Paragraph Headings; Construction. Paragraph headings are
used herein for convenience only. Debtor acknowledges that the same may not
describe completely the subject matter of the applicable paragraph, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof. This Security Agreement has been fully reviewed and
negotiated between the parties and no uncertainty or ambiguity in any term or
provision of this Agreement shall be construed strictly against Debtor or
CoastFed under any rule of construction or otherwise.
12.11 Governing Law; Jurisdiction; Venue. This Security Agreement
and all acts and transactions hereunder and all rights and obligations of Debtor
and CoastFed shall be governed by and in accordance with the laws of the State
of California. Any undefined term used in this Security Agreement that is
defined in the California Uniform Commercial Code shall have the meaning therein
assigned to that term. As a material part of the consideration to CoastFed to
enter into the Loan Agreement, Debtor (i) agrees that all actions and
proceedings relating directly or indirectly hereto shall, at CoastFed's option,
be litigated in courts located within California, and that the exclusive venue
therefor shall be Los Angeles County; (ii) consents to the jurisdiction and
venue of any such court and consents to service of process in any such action or
proceeding by
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personal delivery or any other method permitted by law; and (iii) waives any and
all rights Debtor may have to object to the jurisdiction of any such court, or
to transfer or change the venue of any such action or proceeding.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as of the date first set forth above.
CYBERLINK-CALIFORNIA, INC.
a California corporation
By /s/ Richard Leslie Lydiate
-----------------------------------------
Richard Leslie Lydiate, President
By_________________________________________
Ron McVicar, Chief Financial Officer
COASTFED BUSINESS CREDIT CORPORATION
a California corporation
By /s/ CoastFed Business Credit Corporation
-----------------------------------------
Title: Vice President
------------------------------------
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personal delivery or any other method permitted by law; and (iii) waives any and
all rights Debtor may have to object to the jurisdiction of any such court, or
to transfer or change the venue of any such action or proceeding.
IN WITNESS WHEREOF, the parties have executed this Security
Agreement as of the date first set forth above.
CYBERLINK-CALIFORNIA, INC.
a California corporation
By /s/ Richard Leslie Lydiate
-----------------------------------------
Richard Leslie Lydiate, President
By /s/ Ron McVicar
-----------------------------------------
Ron McVicar, Chief Financial Officer
COASTFED BUSINESS CREDIT CORPORATION
By /s/ CoastFed Business Credit Corporation
-----------------------------------------
Title: Vice President
------------------------------------
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Schedule 1
Section 5.1 Location of Chief Executive Office and Collateral
Section 5.2 Locations of Debtor's Books
Section 5.3 Trade Names or Trade Styles
Section 5.9 Intellectual Property
Section 5.10 Equipment Leases
Section 5.11 Deposit Accounts
See Schedule of exceptions
<PAGE>
Exhibit 10.26
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of September 8, 1995, is entered
into between Debtor and CoastFed, with reference to the following facts:
RECITALS
A. Debtor is contemporaneously herewith executing the Guaranty in
favor of CoastFed in order to guaranty the indebtedness owing by Borrower to
CoastFed; and
B. Debtor has agreed to enter into this Security Agreement in order to
grant to CoastFed a first priority security interest in the Collateral to secure
the Guaranty.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth, and for other
good and valuable consideration, the parties hereto agree as follows:
1. Definitions. All initially capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Guaranty. In addition, as
used herein, the following terms shall have the following meanings:
"Account Debtor" means any Person who is or who may become
obligated with respect to, or on account of, an Account.
"Accounts" means any and all of Debtor's presently existing and
hereafter arising accounts and rights to payment, except those evidenced by
Negotiable Collateral, arising out of the sale or lease of goods or the
rendition of services by Debtor, irrespective of whether earned by performance.
"Borrower" means Cyberlink, Inc., a California corporation.
"Chattel Paper" means all writings of whatever sort which
evidence a monetary obligation and a security interest in or lease of specific
goods, whether now existing or hereafter arising.
"CoastFed Expenses" means any and all costs or expenses required
to be paid by Debtor under this Security Agreement which are paid or advanced by
CoastFed; all costs and expenses of CoastFed, including its attorneys' fees and
expenses (including attorneys' fees incurred pursuant to 11 U.S.C.), incurred or
expended to correct any default or enforce any provision of this Security
Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or
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advertising to sell the Collateral, irrespective of whether a sale is
consummated; and all costs and expenses of suit incurred or expended by
CoastFed, including its attorneys' fees and expenses (including attorneys' fees
incurred pursuant to 11 U.S.C.) in enforcing or defending this Security
Agreement, irrespective of whether suit is brought.
"CoastFed" means CoastFed Business Credit Corporation, a
California banking corporation.
"Code" means the California Uniform Commercial Code except, to
the extent applicable, the Uniform Commercial Code as adopted by the
jurisdiction in which any of the Collateral is located. Any and all terms used
in this Security Agreement which are defined in the Code shall be construed and
defined in accordance with the meaning and definition ascribed to such terms
under the Code, unless otherwise defined herein.
"Collateral" means the following, collectively: any and all of
the Accounts, Deposit Accounts, Equipment, Inventory, General Intangibles,
Negotiable Collateral, and Debtor's Books, in each case whether now existing or
hereafter acquired or created, and any Proceeds or products of any of the
foregoing, or any portion thereof, and any and all Accounts, Deposit Accounts,
Equipment, Inventory, General Intangibles, Negotiable Collateral, money, or
other tangible or intangible property, resulting from the sale or other
disposition of the Accounts, Deposit Accounts, Equipment, Inventory, General
Intangibles, or Negotiable Collateral, or any portion thereof or interest
therein, and the substitutions, replacements, additions, accessions, products
and Proceeds thereof.
"Communications Act" means the Communications Act of 1934, as
amended (47 U.S.C. ss.ss. 151 et seq.) or any successor statute governing the
subject matter thereof, and all rules, regulations and policies promulgated
thereunder by the FCC.
"Debtor" means Cyberlink-Nevada, Inc., a Nevada corporation.
"Debtor's Books" means any and all presently existing and
hereafter acquired or created books and records of Debtor, including all records
(including maintenance and warranty records), ledgers, computer programs, disc
or tape files, printouts, runs, and other computer prepared information
indicating, summarizing, or evidencing the Accounts, Deposit Accounts,
Equipment, Inventory, General Intangibles and Negotiable Collateral and also
including all FCC logs, public files, engineering records and other records that
relate to the operation of Debtor's business.
"Deposit Account" means any demand, time, savings, passbook or
like account now or hereafter maintained by or for the benefit of Debtor with a
bank, savings and loan association, credit union or like organization, and all
funds and amounts therein, whether or not restricted or designated for a
particular purpose.
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"Documents" means any and all documents of title, bills of
lading, dock warrants, dock receipts, warehouse receipts and other documents of
Debtor, whether or not negotiable, and includes all other documents which
purport to be issued by a bailee or agent and purport to cover goods in any
bailee's or agent's possession which are either identified or are fungible
portions of an identified mass, including such documents of title made available
to Debtor for the purpose of ultimate sale or exchange of goods or for the
purpose of loading, unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with goods in a manner preliminary to their sale
or exchange, in each case whether now existing or hereafter acquired.
"Equipment" means any and all of Debtor's presently existing and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures,
computer and other electronic data processing equipment and other office
equipment and supplies, computer programs and related data processing software,
spare parts, tools, motors, automobiles, trucks, tractors and other motor
vehicles, rolling stock, jigs, and other goods (other than Inventory, farm
products, and consumer goods), of every kind and description, wherever located,
together with any and all parts, improvements, additions, attachments,
replacements, accessories, and substitutions thereto or therefor, and all other
rights of Debtor relating thereto, whether in the possession and control of
Debtor, or in the possession and control of a third party for the account of
Debtor.
"FCC" means the Federal Communications Commission or any
governmental authority succeeding to any of its functions.
"General Intangibles" means any and all of Debtor's presently
existing and hereafter acquired or arising general intangibles and other
intangible personal property of every kind and description, including rights
under licensing and distribution agreements, uncertificated securities,
interests in any joint ventures or partnerships, contract rights, noncompetition
covenants, goodwill, choses in action and causes of action (whether legal or
equitable, whether in contract or tort or otherwise, and however arising),
licenses, approvals, permits or any other authorizations issued by any
Government Authority (including, the Telecommunications Licenses and all other
licenses, approvals, permits and other authorizations issued by the FCC or any
state public utility commission to Debtor, including the proceeds of any sale or
other disposition thereof, in each case to the extent that a security interest
therein is not prohibited by law, provided that to the extent that a security
interest therein is now so prohibited and to the extent that such security
interest at any time hereafter shall no longer be so prohibited, then such
security interest shall automatically and without any further action attach and
become fully effective at that time (giving effect to any retroactive effect to
any change in applicable law or regulation)), all Intellectual Property
Collateral, rights of stoppage in transit, replevin and reclamation, rebates or
credits of every kind and nature to which Debtor may be entitled, purchase
orders, customer lists, subscriber lists, monies due or recoverable from pension
funds, computer software, magnetic media, electronic data processing files,
systems and programs, deposit accounts, uncertificated certificates of deposit,
refunds and claims for tax or other
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refunds against any Governmental Authority, indemnity agreements, guaranties,
insurance policies, contracts, franchise agreements, lease agreements, and other
contractual, equitable and legal rights of whatever kind and nature.
"Governmental Authority" means any federal, state, local or other
governmental department, commission (including the FCC and any state public
utility commission), board, bureau, agency, central bank, court, tribunal or
other instrumentality or authority or subdivision thereof, domestic or foreign,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" means that certain Continuing Guaranty, executed by
Debtor in favor of CoastFed, dated as of even date herewith, as amended from
time to time in accordance with its terms.
"Instruments" means any and all negotiable instruments,
certificated securities and every other writing which evidences a right to the
payment of money, in each case whether now existing or hereafter acquired.
"Intellectual Property Collateral" means the following Assets
owned or held by Debtor or in which Debtor otherwise has any interest, now
existing or hereafter acquired or arising:
(a) all patents and patent applications, domestic or
foreign, all licenses relating to any of the foregoing and all income and
royalties with respect to any licenses, all rights to sue for past, present or
future infringement thereof, all rights arising therefrom and pertaining thereto
and all reissues, divisions, continuations, renewals, extensions and
continuations in-part thereof;
(b) all copyrights and applications for copyright, domestic
or foreign, together with the underlying works of authorship (including titles),
whether or not the underlying works of authorship have been published and
whether said copyrights are statutory or arise under the common law, and all
other rights and works of authorship, all rights, claims and demands in any way
relating to any such copyrights or works, including royalties and rights to sue
for past, present or future infringement, and all rights of renewal and
extension of copyright;
(c) all state (including common law), federal and foreign
trademarks, service marks and trade names (including all call letters, logos,
jingles, slogans, logotypes, programs and elements of whatever form or nature
used in connection with the operation of Debtor's business, whether completed or
in production), and applications for registration of such trademarks, service
marks and trade names, all licenses relating to any of the foregoing and all
income and royalties with respect to any licenses, whether registered or
unregistered and wherever registered, all rights to sue for past,
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present or future infringement or unconsented use thereof, all rights arising
therefrom and pertaining thereto and all reissues, extensions and renewals
thereof;
(d) all trade secrets, confidential information, customer
lists, license rights, advertising materials, operating manuals, methods,
processes, know-how, sales literature, sales and operating plans, drawings,
specifications, blue prints, descriptions, inventions, name plates and catalogs;
and
(e) the entire goodwill of or associated with the businesses
now or hereafter conducted by Debtor connected with and symbolized by any of the
aforementioned properties and assets.
"Inventory" means any and all of Debtor's presently existing and
hereafter acquired goods of every kind and description (including goods in
transit) which are held for sale or lease, or to be furnished under a contract
of service or which have been so leased or furnished, or other disposition,
wherever located, including those held for display or demonstration or out on
lease or consignment or are raw materials, work in process, finished materials,
or materials used or consumed, or to be used or consumed, in Debtor's business,
and the resulting product or mass, and all repossessed, returned, rejected,
reclaimed and replevied goods, together with all materials, parts, supplies,
packing and shipping materials used or usable in connection with the
manufacture, packing, shipping, advertising, selling or furnishing of such
goods; and all other items hereafter acquired by Debtor by way of substitution,
replacement, return, repossession or otherwise, and all additions and accessions
thereto, and any Document representing or relating to any of the foregoing at
any time.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement or other preferential
arrangement, charge or encumbrance (including, any conditional sale or other
title retention agreement, or finance lease) of any kind.
"Negotiable Collateral" means any and all of Debtor's presently
existing and hereafter acquired or arising letters of credit, advises of credit,
certificates of deposit, notes, drafts, Instruments, Documents and Chattel
paper.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other organizations, irrespective of
whether they are legal entities, and governments and agencies and political
subdivisions thereof.
"Proceeds" means whatever is receivable or received from or upon
the sale, lease, license, collection, use, exchange or other disposition,
whether voluntary or involuntary, of any Collateral or other assets of Debtor,
including "proceeds"
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as defined in Section 9306 of the Code, any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to or for the account of Debtor from
time to time with respect to any of the Collateral, any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral or for or on account of any damage or injury to or conversion of any
Collateral by any Person, any and all other tangible or intangible property
received upon the sale or disposition of Collateral, and all proceeds of
proceeds.
"Rights to Payment" means all Accounts and any and all rights and
claims to the payment or receipt of money or other forms of consideration of any
kind in, to and under all General Intangibles, Negotiable Collateral and
Proceeds thereof.
"Secured Obligations" shall have the meaning of "Obligations"
under the Guaranty and shall also mean any and all debts, liabilities,
obligations, or undertakings owing by Debtor to CoastFed arising under, advanced
pursuant to, or evidenced by this Security Agreement, whether direct or
indirect, absolute or contingent, matured or unmatured, due or to become due,
voluntary or involuntary, whether now existing or hereafter arising, and
including all interest not paid when due and all CoastFed Expenses which Debtor
is required to pay or reimburse pursuant to this Security Agreement, the
Guaranty or by law.
"Security Agreement" shall mean this Security Agreement, any
concurrent or subsequent riders, exhibits or schedules to this Security
Agreement, and any extensions, supplements, amendments, or modifications to or
in connection with this Security Agreement, or to any such riders, exhibits or
schedules.
"Telecommunications Licenses" means those licenses issued to
Debtor by the FCC or any state public utility commission.
2. Construction. Unless the context of this Security Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the part includes the whole, "including" is not
limiting, and "or" has the inclusive meaning represented by the phrase "and/or."
References in this Security Agreement to "determination" by CoastFed include
reasonable estimates (absent manifest error) by CoastFed, as applicable (in the
case of quantitative determinations) and reasonable beliefs (absent manifest
error) by CoastFed, as applicable (in the case of qualitative determinations).
The words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Security Agreement refer to this Security Agreement as a whole and not to any
particular provision of this Security Agreement. Article, section, subsection,
exhibit, and schedule references are to this Security Agreement unless otherwise
specified.
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3. Creation of Security Interest. Debtor hereby grants to CoastFed a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure the prompt payment and performance of all
of the Secured Obligations. Debtor acknowledges and affirms that such security
interest in the Collateral has attached to all Collateral without further act on
the part of CoastFed or Debtor.
4. Further Assurances.
4.1 Debtor shall execute and deliver to CoastFed concurrently
with Debtor's execution of this Security Agreement, and from time to time at the
request of CoastFed, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages,
assignments, and all other documents that CoastFed may request, in form
satisfactory to CoastFed, to perfect and maintain perfected CoastFed's security
interests in the Collateral and in order to consummate fully all of the
transactions contemplated by this Security Agreement and the Guaranty. Debtor
hereby irrevocably makes, constitutes, and appoints CoastFed (and CoastFed's
officers, employees, or agents) as Debtor's true and lawful attorney with power
to sign the name of Debtor on any of the above-described documents or on any
other similar documents which need to be executed, recorded, or filed, and to do
any and all things necessary in the name and on behalf of Debtor in order to
perfect, or continue the perfection of, CoastFed's security interests in the
Collateral. Debtor agrees that neither CoastFed, nor any of its designees or
attorneys-in-fact, will be liable for any act of commission or omission, or for
any error of judgment or mistake of fact or law with respect to the exercise of
the power of attorney granted under this Section 4.1, other than as a result of
its or their gross negligence or wilful misconduct. THE POWER OF ATTORNEY
GRANTED UNDER THIS SECTION 4.1 IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE UNTIL ALL OF THE SECURED OBLIGATlONS HAVE BEEN INDEFEASIBLY PAID IN
FULL, THE GUARANTY TERMINATED, AND ALL DEBTOR'S DUTIES HEREUNDER AND THEREUNDER
HAVE BEEN DISCHARGED IN FULL.
4.2 Without limiting the generality of the foregoing Section 4.1
or any of the provisions of the Guaranty, Debtor will: (i) at the request of
CoastFed, mark conspicuously all of its records pertaining to the Collateral
with a legend, in form and substance satisfactory to CoastFed, indicating that
the Collateral is subject to the security interest granted hereby; (ii) at the
request of CoastFed, appear in and defend any action or proceeding which may
affect Debtor's title to, or the security interest of CoastFed in, any of the
Collateral; and (iii) upon demand of CoastFed, allow inspection of Collateral by
CoastFed or Persons designated by CoastFed at any time during normal business
hours.
4.3 With respect to the Negotiable Collateral (other than drafts
received in the ordinary course of business so long as no Event of Default is
continuing), Debtor shall, immediately upon request by CoastFed, endorse (where
appropriate) and assign the Negotiable Collateral over to CoastFed, and deliver
to CoastFed actual physical possession of the Negotiable Collateral to CoastFed
together with any instruments of transfer
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or assignment, all in form and substance satisfactory to CoastFed, in order to
fully perfect the security interest therein of CoastFed.
4.4 Whenever the FCC will permit the granting of a security
interest in, or the collateral assignment of, any Telecommunications License or
any other license granted by the FCC to Debtor, or in any event during the
continuance of an Event of Default, pursuant to Section 9.4, Debtor shall take
all actions and do all things requested by CoastFed in connection with
CoastFed's application to the FCC for the grant, assignment, or transfer to
CoastFed, or any purchaser at a foreclosure sale, of the Telecommunications
Licenses or any other license from the FCC, including any assignment of a lawful
security interest in any Telecommunications License previously granted to
Debtor. Without limiting the generality of the foregoing, Debtor agrees to
execute and deliver to CoastFed, or any Person designated by CoastFed, any
documents, instruments, or agreements requested by CoastFed in connection with
any such grant, license, assignment, or transfer sought by CoastFed from the
FCC.
5. Representations and Warranties. In order to induce CoastFed to make
loans to Borrower, in addition to the representations and warranties of Debtor
set forth in the Guaranty which are incorporated herein by this reference,
Debtor represents and warrants to CoastFed that subject to the Schedule of
Exceptions, on the date hereof and on each and every day that CoastFed makes a
loan to Borrower:
5.1 Location of Chief Executive office and Collateral. Debtor's
chief executive office is located at the address set forth in Schedule 1, and
all other locations where Debtor conducts business or Collateral is kept are set
forth in Schedule 1.
5.2 Locations of Debtor's Books. All locations where Debtor's
Books are kept, including all equipment necessary for accessing Debtor's Books
and the names and addresses of all service bureaus, computer or data processing
companies and other Persons keeping Debtor's Books or collecting Rights to
Payment for Debtor, are set forth in Schedule 1.
5.3 Trade Names and Trade Styles. All trade names and trade
styles under which Debtor presently conducts its business operations are set
forth in Schedule 1, and, except as set forth in Schedule 1, Debtor has not, at
any time during the preceding five years: (i) been known as or used any other
corporate, trade or fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or consolidation; or (iv)
acquired through asset purchase or otherwise any business of any Person.
5.4 Ownership of Collateral. Debtor is and shall continue to be
the sole and complete owner of the Collateral, free from any Lien other than in
favor of CoastFed.
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5.5 Enforceability Priority of Security Interest. This Agreement
(i) creates a security interest which is enforceable against the Collateral in
which Debtor now has rights and will create a security interest which is
enforceable against the Collateral in which Debtor hereafter acquires rights at
the time Debtor acquires any such rights, and (ii) CoastFed has a perfected
security interest (to the fullest extent perfection can be obtained by filing,
notification to third parties or possession) and a first priority security
interest in the Collateral in which Debtor now has rights, and will have a
perfected and first priority security interest in the Collateral in which Debtor
hereafter acquires rights at the time Debtor acquires any such rights, in each
case securing the payment and performance of the Secured Obligations.
5.6 Other Financial Statements. Other than financing statements
in favor of CoastFed, no effective financing statement naming Debtor as debtor,
assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Collateral is on file in any filing or recording office in any
jurisdiction.
5.7 Rights to Payment.
(a) the Rights to Payment represent valid, binding and
enforceable obligations of the Account Debtors or other Persons obligated
thereon, representing undisputed, bona fide transactions completed in accordance
with the terms and provisions contained in any documents related thereto, and
are and will be genuine, free from Liens, adverse claims, counterclaims,
setoffs, defaults, disputes, defenses, retainages, holdbacks and conditions
precedent of any kind of character, except to the extent reflected by Debtor's
reserves for uncollectible Rights to Payment;
(b) to the best of Debtor's knowledge and belief, all
Account Debtors and other obligors on the Rights to Payment are solvent and
generally paying their debts as they come due;
(c) all Rights to Payment comply with all applicable laws
concerning form, content and manner of preparation and execution, including
where applicable any federal and state consumer credit laws;
(d) Debtor has not assigned any of its rights under the
Rights to Payment;
(e) all statements made, all unpaid balances and all other
information in Debtor's Books and other documentation relating to the Rights to
Payment are true and correct and in all respects what they purport to be; and
(f) Debtor has no knowledge of any fact or circumstance
which would impair the validity or collectibility of any of the Rights to
Payment.
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5.8 Inventory. No Inventory is stored with any bailee,
warehouseman or similar Person or on any premises leased to Debtor, nor has any
Inventory been consigned to Debtor or consigned by Debtor to any Person or is
held by Debtor for any Person under any "bill and hold" or other arrangement.
5.9 Intellectual Property.
(a) except as set forth in Schedule 1, Debtor (directly or
through any subsidiary) does not own, possess or use under any licensing
arrangement any patents, copyrights, trademarks, service marks or trade names,
nor is there currently pending before any Governmental Authority any application
for registration of any patent, copyright, trademark, service mark or trade
name;
(b) all patents, copyrights, trademarks, service marks and
trade names are subsisting and have not been adjudged invalid or unenforceable
in whole or in part;
(c) all maintenance fees required to be paid on account of
any patents have been timely paid for maintaining such patents in force, and, to
the best of Debtor's knowledge, each of the patents is valid and enforceable and
Debtor has notified CoastFed in writing of all prior art (including public uses
and sales) of which it is aware;
(d) to the best of Debtor's knowledge after due inquiry, no
material infringement or unauthorized use presently is being made of any
Intellectual Property Collateral by any Person;
(e) Debtor is the sole and exclusive owner of the
Intellectual Property Collateral and the past, present and contemplated future
use of such Intellectual Property Collateral by Debtor has not, does not and
will not infringe or violate any right, privilege or license agreement of or
with any other Person; and
(f) Debtor owns, has material rights under, is a party to,
or an assignee of a party to all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade names and all other intellectual property Collateral necessary to continue
to conduct its business as heretofore conducted.
5.10 Equipment.
(a) none of the Equipment or other Collateral is affixed to
real property, except Collateral with respect to which Debtor has supplied
CoastFed with all information and documentation necessary to make all fixture
filings required to perfect and protect the priority of CoastFed's security
interest in all such Collateral which may be fixtures as against all Persons
having an interest in the premises to which such property may be affixed; and
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(b) none of the Equipment is leased from or to any Person,
except as set forth in Schedule 1.
5.11 Deposit Accounts. The names and addresses of all financial
institutions at which Debtor maintains its Deposit Accounts, and the account
numbers and account names of such Deposit Accounts, are, set forth in Schedule
1.
6. Covenants. In addition to the covenants of Debtor set forth in the
Guaranty which are incorporated herein by this reference, Debtor agrees that
from the Closing Date and thereafter until the indefeasible payment, performance
and satisfaction in full of the Secured Obligations, and all of CoastFed's
obligations under the Guaranty to Debtor have been terminated:
6.1 Defense of Collateral. Debtor shall appear in and defend any
action, suit or proceeding which may affect to a material extent its title to or
right or interest in, or CoastFed's right or interest in, the Collateral.
6.2 Preservation of Collateral. Debtor shall do and perform all
reasonable acts that may be necessary and appropriate to maintain, preserve and
protect the Collateral.
6.3 Compliance with Laws, Etc. Debtor shall comply with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.
6.4 Location of Debtor's Books and Chief Executive Office. Debtor
shall: (i) keep all Debtor's Books at the locations set forth in Schedule 1; and
(ii) the location of Debtor's chief executive office or principal place of
business at the location set forth in Schedule 1.
6.5 Location of Collateral. Debtor shall: (i) keep the Collateral
at the locations set forth in Schedule 1; and (ii) give CoastFed at least 30
days' prior written notice of any change in the locations set forth in Schedule
1 by delivering to CoastFed an amended Schedule 1.
6.6 Change in Name, Trade Name or Trade Style. Debtor
shall give at least 30 days' prior written notice of any changes in the its
name, or of any changes in, additions to or other modifications of its trade
names and trade styles set forth in Schedule 1 by delivering to CoastFed an
amended Schedule 1.
6.7 Maintenance of Records. Debtor shall keep separate, accurate
and complete Debtor's Books, disclosing CoastFed's security interest hereunder.
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6.8 Invoicing of Sales. Debtor shall invoice all of its sales
upon forms customary in the industry and to maintain proof of delivery and
customer acceptance of goods.
6.9 Disposition of Collateral. Debtor shall not surrender or lose
possession of (other than to CoastFed), sell, lease, rent, or otherwise dispose
of or transfer any of the Collateral or any fight or interest therein, except to
the extent permitted by the Guaranty.
6.10 Liens. Debtor shall keep the Collateral free of all Liens
except in favor of CoastFed.
6.11 Expenses. Debtor shall pay all expenses of protecting,
storing, warehousing, insuring, handling and shipping the Collateral.
6.12 Leased Premises. At CoastFed's request, Debtor shall obtain
from each Person from whom Debtor leases any premises at which any Collateral is
at any time present, such subordination, waiver, consent and estoppel agreements
as CoastFed may require, in form and substance satisfactory to CoastFed.
6.13 Rights to Payment. Debtor shall:
(a) perform and observe all terms and provisions of the
Rights to Payment and all obligations to be performed or observed by it in
connection therewith and maintain the Rights to Payment in full force and
effect;
(b) enforce all Rights to Payment strictly in accordance
with their terms, and take all such action to such end as may be from time to
time reasonably requested by CoastFed;
(c) if, to the knowledge of Debtor, any dispute, setoff,
claim, counterclaim or defense shall exist or shall be asserted or threatened
with respect to a Right to Payment (whether with or against Debtor or
otherwise), disclose such fact fully to CoastFed in Debtor's Books relating to
such Account or other Right to Payment and in connection with any report
furnished by Debtor to CoastFed relating to such Right to Payment;
(d) furnish to CoastFed such information and reports
regarding the Rights to Payment as CoastFed may request, and upon request of
CoastFed make such demands and requests for information and reports as Debtor is
entitled to make in respect of the Rights to Payment; and
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(e) during the continuance of any Event of Default,
establish such lockbox or similar arrangements for the payment of the Rights to
Payment as CoastFed shall require.
6.14 Inventory. Debtor shall:
(a) at such times as CoastFed shall request, prepare and
deliver to CoastFed periodic reports pertaining to the Inventory, in form and
substance satisfactory to CoastFed;
(b) upon the request of CoastFed, take a physical listing of
the Inventory and promptly deliver a copy of such physical listing to CoastFed;
and
(c) not store any Inventory with a bailee, warehouseman or
similar Person or on premises leased to Debtor, nor dispose of any Inventory on
a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment
or similar basis, nor acquire any Inventory from any Person on any such basis,
without in each case CoastFed prior written notice thereof.
6.15 Equipment. Debtor shall, upon CoastFed's request, deliver to
CoastFed a report of each item of Equipment, in form and substance satisfactory
to CoastFed.
6.16 Intellectual Property Collateral. Debtor shall:
(a) not enter into any agreement (including any license or
royalty agreement) pertaining to any Intellectual Property Collateral without in
each case giving CoastFed prior notice thereof;
(b) not allow or suffer any Intellectual Property Collateral
to become abandoned, nor any registration thereof to be terminated, forfeited,
expired or dedicated to the public;
(c) promptly give CoastFed notice of any rights Debtor may
obtain to any new patentable inventions, copyrightable works or other new
Intellectual Property Collateral, prior to the filing of any application for
registration thereof; and
(d) diligently prosecute all applications for patents,
copyrights and trademarks, and file and prosecute any and all continuations,
continuations-in-part, applications for reissue, applications for certificate of
correction and like matters as shall be reasonable and appropriate in accordance
with prudent business practice, and promptly and timely pay any and all
maintenance, license, registration and other fees, taxes and expenses incurred
in connection with any Intellectual Property Collateral.
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7. Collection of Rights to Payment. Debtor or its agents shall
endeavor in the first instance to collect all amounts due or to become due on or
with respect to the Rights to Payment. At the request of CoastFed during the
continuance of an Event of Default, all remittances received by Debtor shall be
held in trust for CoastFed, and, in accordance with CoastFed's instructions,
remitted to CoastFed or deposited to an account with CoastFed in the form
received (with any necessary endorsements or instruments of assignment or
transfer).
8. Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Security
Agreement:
8.1 The occurrence of an Event of Default under the Guaranty;
8.2 Debtor shall breach, or be in default of, any of its
agreements, covenants and obligations hereunder; or
8.3 Any representation or warranty made by Debtor hereunder shall
have been untrue in any material respect when made.
9. Rights and Remedies.
9.1 During the continuance of an Event of Default, CoastFed,
without notice or demand, may do any one or more of the following, all of which
are authorized by Debtor:
(a) Make such payments and do such acts as it considers
necessary or reasonable to protect CoastFed's security interest in the
Collateral. Debtor agrees to assemble and make available any or all of the
Collateral if CoastFed so requires. Debtor authorizes CoastFed to enter the
premises where the Collateral is located, take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which, in the opinion of the CoastFed, appears to
be prior or superior to CoastFed's security interest, and to pay all costs and
expenses incurred in connection therewith;
(b) CoastFed is hereby granted a license or other right to
use, without charge, Debtor's trade names, trademarks, service marks, customer
lists, and advertising matter, or any other property of a similar nature, in
advertising for sale or selling any Collateral and Debtor's rights under all
licenses shall inure to the benefit of CoastFed, subject to the then applicable
rules and regulations of the FCC;
(c) Ship, reclaim, recover, store, finish, maintain, repair,
advertise and prepare for sale the Collateral;
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(d) Sell the Collateral, at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Debtor's premises) as is
commercially reasonable, and apply any proceeds of any sale or other disposition
of the Collateral in the order provided in Section 9504 of the Code, including
the payment of CoastFed Expenses. It is not necessary that the Collateral be
present at any such sale;
(e) Without constituting a retention of collateral in
satisfaction of indebtedness as provided for in Section 9505 of the Code, notify
account debtors and other obligors of Debtor of CoastFed's security interests in
the Collateral, and proceed to collect the same and apply the net cash proceeds
therefrom to the Secured Obligations;
(f) CoastFed shall give notice of any disposition of the
Collateral as follows:
(i) CoastFed shall give Debtor and each holder of a
security interest in the Collateral who has filed with CoastFed a written
request for notice, a written notice stating the time and place of a public
sale, or, if the disposition is to be either a private sale or some other
disposition that is not a public sale, the time on or after which the private
sale or other disposition is to be made;
(ii) The notice described in the immediately preceding
paragraph shall be delivered to Debtor as provided in Section 9.1 of the
Guaranty at least five (5) calendar days before the date fixed for a sale.
Notice to Persons other than Debtor claiming an interest in the Collateral shall
be sent to such addresses as such Persons have furnished to CoastFed prior to
the date of such notice;
(iii) If the disposition is to be a public sale,
CoastFed shall also give notice of the time and place of said sale by publishing
a notice at least five (5) calendar days before the date of the sale in a
newspaper of general circulation, if one exists, in the county in which the sale
is to be held;
(iv) Notwithstanding anything to the contrary in
clauses (ii) and (iii) of this Section 9.1(f), CoastFed shall provide ten (10)
days written notice to Debtor and the FCC before any Equipment will be
repossessed or foreclosed upon;
(g) CoastFed may, in its own name, or in the name of a
designee or nominee, credit bid and purchase at any public sale;
(h) Debtor shall pay all CoastFed Expenses; and
(i) Any portion of the Secured Obligations which remains
unpaid after disposition of the Collateral as provided above shall be paid
immediately by
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Debtor. Any excess which exists after disposition of the Collateral and payment
in full of the Secured Obligations shall be returned promptly, without interest
and subject to the rights of third parties, to Debtor by CoastFed.
9.2 Upon the exercise by CoastFed of any power, right, privilege,
or remedy pursuant to this Security Agreement which requires any consent,
approval, registration, qualification, or authorization of any Governmental
Authority, Debtor agrees to execute and deliver, or will cause the execution and
delivery of, all applications, certificates, instruments, assignments, and other
documents and papers that CoastFed or any purchaser of the Collateral may be
required to obtain for such governmental consent, approval, registration,
qualification, or authorization.
9.3 The rights and remedies of CoastFed under this Security
Agreement, the Guaranty, and all other agreements contemplated hereby and
thereby shall be cumulative. CoastFed shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by CoastFed of any one right or remedy shall be deemed an election of
remedies, and no waiver by CoastFed of any default on Debtor's part shall be
deemed a continuing waiver of any further defaults. No delay by CoastFed shall
constitute a waiver, election or acquiescence with respect to any right or
remedy.
9.4 Notwithstanding anything to the contrary contained in this
Security Agreement or in any other agreement, instrument or document executed by
Debtor and delivered to CoastFed, CoastFed will not take any action pursuant to
this Security Agreement or any other document referred to above which would
constitute or result in any assignment of any Telecommunications License or any
change of control of Debtor or any Subsidiary of Debtor if such assignment of
any Telecommunications License or change of control would require, under then
existing law, the prior approval of the FCC without first obtaining such prior
approval of the FCC. Debtor waives, to the extent permitted by law, any right it
may have to oppose, and agrees to take any action which CoastFed may request in
order to obtain from the FCC, such approval as may be necessary to enable
CoastFed to exercise and enjoy the full rights and benefits granted CoastFed by
this Security Agreement and the other documents referred to above, including
specifically, at the cost and expense of Debtor, the use of commercially
reasonable efforts to assist in obtaining approval of the FCC for any action or
transaction contemplated by this Security Agreement for which such approval is
or shall be required by law, and specifically, without limitation, upon request,
to prepare, sign and file with the FCC the assignor's or transferor's portion of
any application or applications for consent to the assignment of license or
transfer of control necessary or appropriate under the FCC's rules and
regulations for approval of (a) any sale or other disposition of the Collateral
by or on behalf of the CoastFed, or (b) any assumption by the CoastFed of voting
rights in the Collateral effected in accordance with the terms of this Security
Agreement. It is understood and agreed that all foreclosures and related actions
will be made in accordance with Section 310 of the Communications Act.
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10. CoastFed Not Liable. So long as CoastFed complies with the
obligations, if any, imposed by Section 9207 of the Code, CoastFed shall not
otherwise be liable or responsible in any way or manner for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion or from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person whomsoever.
11. Indefeasible Payment. The Secured Obligations shall not be
considered indefeasibly paid for purposes of this Security Agreement unless and
until all payments to CoastFed are no longer subject to any right on the part of
any Person, including Debtor, Debtor as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of Debtor or Debtor's
Assets to invalidate or set aside such payments or to seek to recoup the amount
of such payments or any portion thereof, or to declare same to be fraudulent or
preferential. In the event that, for any reason, any portion of such payments to
CoastFed is set aside or restored, whether voluntarily or involuntarily, after
the making thereof, then the obligation intended to be satisfied thereby shall
be revived and continued in full force and effect as if said payment or payments
had not been made.
12. GENERAL PROVISIONS
12.1 Cumulative Remedies: No Prior Recourse to Collateral. The
enumeration herein of CoastFed's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the CoastFed may have under the
Guaranty, the Code, or other applicable law. CoastFed shall have the right, in
its sole discretion, to determine which rights and remedies are to be exercised
and in which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative.
12.2 No Implied Waivers. No act, failure, or delay by CoastFed
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by CoastFed of any provision of this Security Agreement, or of a
breach or default hereunder, or of any right or remedy which the CoastFed may
have, shall operate as a waiver of any other provision, breach, default, right,
or remedy or of the same provision, breach, default, right, or remedy on a
future occasion. No waiver by CoastFed shall affect its rights to require strict
performance of this Security Agreement.
12.3 Notices. All notices or demands by any party hereto to the
other party and relating to this Security Agreement shall be sent in accordance
with the terms of Section 22 of the Guaranty.
12.4 Severability. Should any provision, clause or condition of
this Security Agreement be held by any court of competent jurisdiction to be
void or unenforceable, such defect shall not affect the remainder of this
Security Agreement.
17
<PAGE>
12.5 Integration. This Security Agreement and such other
agreements, documents and instruments as may be executed in connection herewith
shall be construed as the entire and complete agreement between Debtor and
CoastFed and shall supersede all prior negotiations, all of which are merged and
integrated herein.
12.6 Amendment. The terms and provisions of this Security
Agreement may not be waived or amended except in a writing executed by Debtor
and a duly authorized officer of CoastFed.
12.7 Time of Essence. Time is of the essence in the performance
by Debtor of each and every obligation under this Security Agreement.
12.8 Mutual Waiver of Jury Trial. Debtor and CoastFed each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to, this Security Agreement, or any conduct, acts
or omissions of Debtor or CoastFed any of their directors, officers, employees,
agents, attorneys or any other persons affiliated with Debtor or CoastFed.
12.9 Benefit of Agreement. The provisions of this Security
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of the parties
hereto; provided, however, that Debtor may not assign or transfer any of its
rights under this Security Agreement without the prior written consent of
CoastFed, and any prohibited assignment shall be void. No consent by CoastFed to
any assignment shall relieve Debtor or any guarantor from its liability
hereunder.
12.10 Paragraph Headings: Construction. Paragraph headings are
used herein for convenience only. Debtor acknowledges that the same may not
describe completely the subject matter of the applicable paragraph, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof. This Security Agreement has been fully reviewed and
negotiated between the parties and no uncertainty or ambiguity in any term or
provision of this Agreement shall be construed strictly against Debtor or
CoastFed under any rule of construction or otherwise.
12.11 Governing Law: Jurisdiction: Venue. This Security Agreement
and all acts and transactions hereunder and all rights and obligations of Debtor
and CoastFed shall be governed by and in accordance with the laws of the State
of California. Any undefined term used in this Security Agreement that is
defined in the California Uniform Commercial Code shall have the meaning therein
assigned to that term. As a material part of the consideration to CoastFed to
enter into the Loan Agreement, Debtor (i) agrees that all actions and
proceedings relating directly or indirectly hereto shall, at CoastFed's option,
be litigated in courts located within California, and that the exclusive venue
therefor shall be Los Angeles County; (ii) consents to the jurisdiction and
venue of any such court and consents to service of process in any such action or
proceeding by
18
<PAGE>
personal delivery or any other method permitted by law; and (iii) waives any and
all rights Debtor may have to object to the jurisdiction of any such court, or
to transfer or change the venue of any such action or proceeding.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as of the date first set forth above.
Cyberlink-Nevada, Inc.
a Nevada corporation
By /s/ Richard Leslie Lydiate
-----------------------------------------
Richard Leslie Lydiate, President
By_________________________________________
Ron McVicar, Chief Financial Officer
COASTFED BUSINESS CREDIT CORPORATION
a California corporation
By_________________________________________
Title:_____________________________________
<PAGE>
personal delivery or any other method permitted by law; and (iii) waives any and
all rights Debtor may have to object to the jurisdiction of any such court, or
to transfer or change the venue of any such action or proceeding.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as of the date first set forth above.
Cyberlink-Nevada, Inc.
a Nevada corporation
By /s/ Richard Leslie Lydiate
-----------------------------------------
Richard Leslie Lydiate, President
By /s/ Ron McVicar
-----------------------------------------
Ron McVicar, Chief Financial Officer
COASTFED BUSINESS CREDIT CORPORATION
a California corporation
By /s/ Coastfed Business Credit Corporation
-----------------------------------------
Title: Vice President
--------------------------------------
19
<PAGE>
Schedule I
Section 5.1 Location of Chief Executive Office and Collateral
Section 5.2 Locations of Debtor's Books
Section 5.3 Trade Names or Trade Styles
Section 5.9 Intellectual Property
Section 5.10 Equipment Leases
Section 5.11 Deposit Accounts
See Schedule of exceptions
<PAGE>
Exhibit 10.27
Exhibit 10.27 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED
and RSL Communications, Ltd. BY "[*]" AND FILED
SEPARATELY WITH THE
COMMISSION PURSUANT TO
A REQUEST FOR
CONFIDENTIAL TREATMENT
UNDER RULE 406 OF THE
SECURITIES ACT OF 1933
ASSET PURCHASE AGREEMENT
by and between
RSL COM FRANCE S.A.
and
SPRINT TELECOMMUNICATIONS FRANCE INC.
As of May 8, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. ASSET PURCHASE AND SALE ......................................... 1
Section 1.1. Agreement to Sell ....................................... 1
Section 1.2. Included Assets ......................................... 2
Section 1.3. Excluded Assets ......................................... 2
Section 1.4. Agreement to Purchase ................................... 3
Section 1.5. The Purchase Price ...................................... 3
Section 1.6. Assumption of Assumed Obligations ....................... 4
Section 1.7. Excluded Liabilities .................................... 4
Section 1.8. Prorations .............................................. 5
ARTICLE 2. ITEMS DELIVERED; FURTHER ASSURANCES ............................. 6
Section 2.1. Items Delivered ......................................... 6
Section 2.2. Further Assurances ...................................... 7
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLER ........................ 7
Section 3.1. Corporate Organization; Good Standing; Etc .............. 7
Section 3.2. Authorization, Etc ...................................... 7
Section 3.3. Absence of Restrictions and Conflicts ................... 7
Section 3.4. Ownership of Assets and Related Matters ................. 8
Section 3.5. Financial Statements .................................... 8
Section 3.6. Litigation; Compliance With Law ......................... 9
Section 3.7. Brokers, Finders, etc ................................... 9
Section 3.8. Consents ................................................ 9
Section 3.9. Contracts ............................................... 9
Section 3.10. Intellectual Property ................................... 9
Section 3.11. Environmental Matters ................................... 10
Section 3.12. Permits and Approvals ................................... 10
Section 3.13. Sufficiency of Assets ................................... 10
Section 3.14. Customer Contracts ...................................... 10
Section 3.15. Disclosure .............................................. 10
Section 3.16. Declarations of Seller Pursuant to Article 12
of the French Law of June 29,1935 ....................... 10
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER ..................... 11
Section 4.1. Organization ............................................ 11
Section 4.2. Authorization ........................................... 11
Section 4.3. Absence of Restrictions and Conflicts ................... 11
Section 4.4. Brokers, Finders, Etc ................................... 12
Section 4.5. Consents ................................................ 12
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Page
----
Section 4.6. Disclosure .............................................. 12
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS ................................ 12
Section 5.1. Public Announcements .................................... 12
Section 5.2. Registration Duties ..................................... 13
Section 5.3. Sale of Assets and IDDD Business ........................ 13
Section 5.4. Customer Contracts ...................................... 14
Section 5.5. Accounts Receivable ..................................... 14
Section 5.6. Access to Records ....................................... 15
Section 5.7. Domestic Access Lines ................................... 16
Section 5.8. Miscellaneous Agreements ................................ 16
Section 5.9. Telephone Numbers ....................................... 16
ARTICLE 6. INDEMNIFICATION ................................................. 17
Section 6.1. Indemnification Obligations of Seller ................... 17
Section 6.2. Indemnification Obligations of Purchaser ................ 17
Section 6.3. Indemnification Procedure ............................... 18
Section 6.4. Claims Period ........................................... 19
Section 6.5. Maximum Liability ....................................... 20
Section 6.6. Threshold Liability ..................................... 20
Section 6.7. Jurisdiction and Forum .................................. 20
Section 6.8. Compliance with Bulk Sales Laws ......................... 22
ARTICLE 7. MISCELLANEOUS PROVISIONS ........................................ 22
Section 7.1. Notices ................................................. 22
Section 7.2. Computation of Time ..................................... 23
Section 7.3. Assignment; Successors in Interest ...................... 23
Section 7.4. Investigations; Representations and Warranties .......... 24
Section 7.5. Number; Gender .......................................... 24
Section 7.6. Captions ................................................ 24
Section 7.7. Controlling Law; Integration; Amendment ................. 24
Section 7.8. Severability ............................................ 24
Section 7.9. Counterparts ............................................ 25
Section 7.10. Remedies ................................................ 25
Section 7.11. Enforcement of Certain Rights ........................... 25
Section 7.12. Waiver .................................................. 25
Section 7.13. Fees and Expenses ....................................... 25
Section 7.14. French Translation ...................................... 25
Section 7.15. Accounting Books of the IDDD Business ................... 25
Section 7.16. Acknowledgment .......................................... 26
Section 7.17. Discharge ............................................... 26
Section 7.18. Formalities ............................................. 26
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<PAGE>
SCHEDULES
Schedule Number
- -------- ------
Machinery and Equipment 1.2(a)
Contracts, Agreements and Other Instruments l.2(b)
Customer Contracts 1.2(c)
Business Licenses and Permits 1.2(d)
Software 1.2(f)
Encumbrances or Imperfections in Title 3.4
Litigation 3.6
Consents 3.8
Enforceability of Agreements 3.9
Sufficiency of Assets 3.13
Customer Contract Terminations 3.14
Consents 4.5
Miscellaneous Agreements 5.8
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of May 8, 1996 (the "Agreement"), between RSL
Com France S.A., a French corporation ("Purchaser") with a capital of FF
250,000 divided into 25,000 shares of a par value of FF 10 each, having its
registered office at 164, bis, Avenue Charles de Gaulle at Neulily-sur-Seine
(92522) and registered at the Registry of Commerce and Companies of Nanterre
under the provisional number 96B03 125, represented by Mr. Itzhak Fisher
empowered pursuant to a power of attorney dated May 5, 1996, from Mr. Richard
Williams, acting as President of Purchaser, and Sprint Telecommunications France
Inc., a company incorporated under the laws of the State of Delaware, U.S.A.
("Seller"), with a French branch located at 164, bis, Avenue Charles de Gaulle
at Neulily-sur-Seine (92522), and registered at the Registry of Commerce and
Companies of Nanterre under the number B 393 367 495, represented by Mr. Dennis
Piper empowered pursuant to a power of attorney dated April 8, 1996, from Donald
S. Parker, acting as Vice President, Secretary and Director of Seller.
WITNESSETH:
WHEREAS, Seller operates an international direct distance dialing business
in France (the "IDDD Business");
WHEREAS, Seller and Purchaser desire to enter into this Agreement pursuant
to which Seller proposes to sell to Purchaser, and Purchaser proposes to
purchase from Seller, certain assets related to the IDDD Business and Purchaser
proposes to assume certain of the liabilities of Seller related to the IDDD
Business;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
ASSET PURCHASE AND SALE
Section 1.1. Agreement to Sell. Except as otherwise specifically provided
in this Article I, Seller hereby grants, sells, conveys, assigns, transfers and
delivers to Purchaser, upon and subject to the terms and conditions of this
Agreement, all right, title and interest of Seller in and to the Assets (as
hereinafter defined) as of the date hereof, free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature
<PAGE>
whatsoever except Permitted Liens (as hereinafter defined) and Assumed
Obligations (as hereinafter defined).
Section 1.2. Included Assets. The assets (the "Assets") shall include the
following assets, properties and rights of Seller as of the date hereof:
(a) All machinery, equipment, business machines, vehicles,
furniture, fixtures, leasehold and building improvements and other
tangible property of Seller used in connection with the IDDD Business and
listed on Schedule 1.2(a) hereto.
(b) All right, title and interest of Seller in the contracts,
agreements and other instruments relating to the IDDD Business and listed
on Schedule l.2(b) hereto;
(c) All right, title and interest of Seller in the customer
contracts related to the IDDD Business, including, without limitation,
those listed on Schedule 1.2(c) hereto;
(d) All business licenses and permits of Seller relating to the IDDD
Business, which licenses and permits are listed on Schedule 1.2(d)
hereto, except as otherwise provided in Section 1.3(g) hereof;
(e) All customer lists, customer credit information, sales records,
database information, invoice files and correspondence files of Seller
used in or relating to the IDDD Business;
(f) All right, title and interest of Seller in the software
dedicated to or used in connection with the IDDD Business and listed on
Schedule 1.2(f) hereto; and
(g) All prepaid expenses of Seller related to the IDDD Business.
Section 1.3. Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is agreed that Seller is not selling and Purchaser is not
buying the following assets of Seller (hereinafter collectively referred to as
"Excluded Assets"):
(a) Cash, cash equivalents and marketable securities of Seller as of
the date hereof;
(b) All accounts receivable of Seller as of the date hereof and all
accounts receivable of Seller which arise after the date hereof to the
extent that such accounts receivable relate to the provision by Seller of
products or services prior to the date hereof, it being understood that
the account receivables will be collected in the manner described in
Section 5.5;
(c) All notes receivable, deposits and advances of Seller as of the
date hereof, except as otherwise provided in Section 1.2(g);
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<PAGE>
(d) All tradenames, trademarks and other intellectual property
rights of Sprint Corporation and its affiliates used by Seller in
connection with the IDDD Business, other than the software listed on
Schedule 1.2(f) hereto;
(e) All assets of Seller used in Seller's data, messaging services
and card businesses (collectively, the "Data Business");
(f) The stock record books and minute books of Seller; and
(g) Any business licenses, permits or other intangibles (including
federal and state tax and employment identification numbers) of Seller
which by their nature are nonassignable.
Section 1.4. Agreement to Purchase. Purchaser hereby purchases the Assets
from Seller, upon and subject to the terms and conditions of this Agreement and
in reliance on the representations, warranties and covenants of Seller contained
herein, in exchange for the Purchase Price (as hereinafter defined) and the
assumption by Purchaser of the Assumed Obligations as provided in Section 1.6
hereof.
Section 1.5. The Purchase Price. The present sale of the IDDD Business
is consented to and accepted for a price of [*] excluding Taxes (the
"Purchase Price"), receipt of which is hereby acknowledged. The Purchase
Price is divided between:
- the intangible assets, which amount to: [*]
- the tangible assets (material) which amount to: [*]
- the Assumed Obligations, which amount to: US $0 Pour Memoire
TOTAL [*]
The division of the Purchase Price established above is rendered solely
for the purposes of satisfying the provisions of the French Law of March 17,
1909, and may not be invoked by any person whatsoever notwithstanding the
evaluations that could be made by any expert evaluations whatsoever.
The sale of non-real estate investment goods (bien mobiliers
d'investissement) described in this Agreement constitutes a "universalite
partielle de biens" under the meaning of Administrative Order 31-6-90 of
February 22, 1990, ss. 3.1, Purchaser undertakes, in order that the Tax waiver
apply:
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
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<PAGE>
(a) to complete at a later date, should it be necessary, the
regularisations provided for in Articles 210 and 215 of Annex 88 of the
General Tax Code and which Seller would have had to complete if it had
continued to use the goods; and
(b) to submit to VAT later sales of non-real estate investment
goods.
Consequently, Seller shall be dispensed with completing the regularisation
provided for Article 210 of Annex II of the General Tax Code.
Furthermore, Purchaser undertakes to file with the competent Tax authority
two (2) versions of the undertaking on which the Tax waiver is conditioned, in
conformance with the above-mentioned Instruction at ss. 3.2.
Section 1.6. Assumption of Assumed Obligations. Purchaser hereby assumes
and agrees to pay, perform and discharge all unperformed and unfulfilled
obligations of Seller as of the date hereof which are required to be performed
and fulfilled subsequent to the date hereof under the contracts, agreements,
licenses, permits and other instruments assigned to Purchaser pursuant to
subsections (b), (c) and (d) of Section 1.2 hereof (hereinafter collectively
referred to as the "Assumed Obligations"), it being acknowledged and agreed by
the parties hereto that Purchaser is not assuming any monetary liability of
Seller and is only agreeing to perform Seller's obligations under such
instruments arising after the date hereof.
Section 1.7. Excluded Liabilities. Notwithstanding anything to the
contrary set forth herein, other than the Assumed Obligations, Purchaser has not
assumed, agreed to pay, discharge or perform or incurred any liability or
obligation under this Agreement or otherwise become responsible in respect of
any liability or obligation of Seller, including, without limitation, any
liability or obligation of Seller to Sprint Corporation or any of its affiliates
(the "Excluded Liabilities"). Without limiting the generality of the foregoing
and notwithstanding anything in Section 1.6 to the contrary, Purchaser has not
assumed and shall not be liable for any of the following liabilities or
obligations of Seller:
(a) Any federal, state, local or foreign income, capital gains,
profits, gross receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment, disability, real property,
personal property, stamp, excise, occupation, sales, use, transfer,
mining, value-added, investment credit recapture, alternative or add-on
minimum, environmental, estimated or other taxes, duties or assessments of
any kind, including any interest, penalty and additions imposed with
respect to such amounts (collectively, "Taxes") levied by any foreign,
federal, state or local taxing authority, except to the extent otherwise
provided pursuant to Section 1.8 hereof;
(b) Any liabilities or obligations of Seller for severance or
similar payments to employees which arise as a result of consummation of
the transactions contemplated hereby and, except as otherwise provided
pursuant to Section 6.2, any other liabilities or obligations of Seller
which arise out of or are incurred with respect to this Agreement and
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<PAGE>
the transactions contemplated hereby (including, without limitation,
Seller's legal and accounting fees);
(c) Any liabilities or obligations of Seller which are not directly
incident to or arising out of or incurred with respect to the Assets;
(d) Any liabilities or obligations of Seller arising under any
governmental statute, code, rule, regulation, ordinance, decree, order or
other requirement or law relating to (i) the protection of human health
and safety or the environment (collectively, "Environmental Laws") or (ii)
labor or employment with respect to the conduct of the IDDD Business or
conditions in connection with the IDDD Business prior to the date hereof;
(e) Any accounts payable or trade payables of Seller;
(f) Any liabilities or obligations of Seller to Sprint Corporation
or any affiliate of Seller or Sprint Corporation;
(g) Any liabilities or obligations of Seller to the extent related
to the Excluded Assets;
(h) Any liabilities or obligations of Seller accruing prior to the
date hereof to the extent that Seller or any of its affiliates is actually
reimbursed therefor under its insurance policies; and
(i) Any liabilities or obligations of Seller relating to the Data
Business.
Section 1.8. Prorations. All property and ad valorem taxes, business
licenses, permits, utilities and other customarily proratable expenses of Seller
relating to the Assets payable subsequent to the date hereof and relating to the
period of time both prior to and subsequent to the date hereof will be prorated
between Purchaser and Seller within thirty (30) days after the date hereof,
based on the number of days in such period, with Seller being responsible for a
proportionate share of such expenses based on the number of days in the period
prior to the date hereof and Purchaser being responsible for a proportionate
share of such expenses based on the sum of the date hereof and the number of
days in such period subsequent to the date hereof.
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<PAGE>
ARTICLE 2.
ITEMS DELIVERED: FURTHER ASSURANCES
Section 2.1 Items Delivered. Contemporaneously with the execution and
delivery of this Agreement, the following documents have been executed and
delivered in connection with the transactions contemplated hereby:
(a) the Transition Services Agreement among Purchaser, Seller and
Sprint International France S.A.;
(b) the Transition Services Agreement between Purchaser and Sprint
Communications Company L.P.;
(c) the Transition Services Agreement between Purchaser and Global
One Communications World Operations, Limited;
(d) the Bill of Sale from Seller in favor of Purchaser;
(e) the Assignment and Assumption Agreement between Purchaser and
Seller;
(f) the Provisional Sub-lease between Purchaser and Sprint
International France S.A.;
(g) Reseller Agreement between Purchaser and Global One
Communications World Operations, Limited;
(h) the Side Letter Agreement between Purchaser and Seller regarding
special customers;
(i) the Side Letter Agreement by and among Purchaser, Seller and
Sprint International France S.A.;
(j) Side Letter Agreement by and between Purchaser and Seller
relating to regulatory matters;
(k) Side Letter Agreement by and between Sprint Communications
Company L.P. and Purchaser;
(1) Side Letter Agreement by and between Purchaser and Seller
relating to specified customers; and
(m) the legal opinions delivered by counsel to Purchaser and counsel
to Seller.
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<PAGE>
Section 2.2. Further Assurances. Seller from time to time after the date
hereof, at Purchaser's request, will execute, acknowledge and deliver to
Purchaser such other instruments of conveyance and transfer and will take such
other actions and execute and deliver such other documents, certifications and
further assurances as Purchaser may reasonably request in order to vest more
effectively in Purchaser, or to put Purchaser more filly in possession of, any
of the Assets, or to better enable Purchaser to complete, perform or discharge
any of the Assumed Obligations. Each of the parties hereto will cooperate with
the other and execute and deliver to the other such other instruments and
documents and take such other actions as may be reasonably requested from time
to time by any party hereto as necessary to carry out, evidence and confirm the
intended purposes of this Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 3.1. Corporate Organization: Good Standing; Etc. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware, and has the corporate power to enter into this Agreement and to
carry out the transactions contemplated hereby. Seller has the corporate power
and authority to conduct the IDDD Business and to own or lease all of the assets
owned or leased by it and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the properties
owned or leased or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the Assets or the IDDD
Business.
Section 3.2. Authorization. Etc. The execution and delivery of this
Agreement and each of the Seller Ancillary Documents (as hereinafter defined) by
Seller and the due consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Seller. This Agreement and each of the Seller Ancillary Documents have been
duly executed and delivered by Seller. Each of this Agreement and the Seller
Ancillary Documents constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and each of the Seller Ancillary
Documents, the consummation of the transactions contemplated hereby and thereby,
and the fulfillment of and compliance with the terms and conditions of this
Agreement and each of the Seller Ancillary Documents do not and will not, with
the passing of time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of any material
benefit under, or permit
-7-
<PAGE>
the acceleration of any obligation under, (i) any term or provision of the
Certificate of Incorporation or Bylaws or other governing instrument of Seller,
(ii) except as disclosed in Schedule 3.8, any contract, agreement, commitment or
understanding to which Seller is a party or to which Seller or any of Seller's
properties is subject, (iii) any judgment, decree or order of any court or any
U.S. or non-U.S. supranational, national, state or local governmental authority
or agency or public or regulatory unit, agency, body or authority (collectively,
a "Governmental Authority") to which Seller is a party or by which Seller or any
of Seller's properties is bound, or (iv) any statute, law, regulation or rule
applicable to Seller, which, in the case of subsections (ii) through (iv) above,
will or is reasonably likely to have a material adverse effect on the Assets or
the IDDD Business.
Section 3.4. Ownership of Assets and Related Matters. Seller does not own
any real property. Seller has transferred to Purchaser as of the date hereof
good and valid title to all of the Assets, free and clear of all liens, pledges,
security interests, charges, claims, restrictions and encumbrances of any nature
whatsoever, other than such encumbrances or imperfections of title as are set
forth in Schedule 3.4. The liens, encumbrances and restrictions described in
Schedule 3.4 hereto are hereinafter collectively referred to as "Permitted
Liens." All of the Assets that constitute tangible property are in good
operating condition and repair subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable laws, ordinances, codes, rules and regulations applicable thereto,
except such failures to conform which in the aggregate would not have a material
adverse effect upon the Assets or the IDDD Business.
Section 3.5. Financial Statements. Seller has delivered to Purchaser the
unaudited financial statements of Seller (including balance sheets, statements
of income, and statements of cash flows) as of December 31, 1995 and for the
year then ended, which financial statements fairly present the financial
position, results of operations and cash flows of Seller as of December 31,1995
and for the year then ended (subject to normal year-end adjustments which would
not be material in effect or amount) and have been prepared in accordance with
generally accepted accounting principles in the United States and in a manner
consistent with the past accounting practices of Seller. Seller does not have
any liabilities required to be reflected on the balance sheet included in said
financial statements which are not reflected thereon, except liabilities arising
in the ordinary course of business since December 31, 1995. Since December 31,
1995, the IDDD Business has been conducted in the ordinary course, consistent
with past practice, and, except for changes arising in the ordinary course and
as a result of the formation of the Global One Communications, a joint venture
formed by Sprint Corporation, Deutsche Telekom and France Telecom (the various
entities which comprise such joint venture and are controlled directly or
indirectly by Sprint Corporation, Deutsche Telekom and France Telecom are
collectively referred to herein as "Global One Communications"), there has not
occurred (a) any change in the IDDD Business or the Assets, (b) any material
change in or the financial condition or results of operations of Seller, or (c)
any damage, destruction or loss with respect to the IDDD Business, whether or
not covered by insurance.
-8-
<PAGE>
Section 3.6. Litigation: Compliance With Law. Except as set forth in
Schedule 3.6 hereto (a) Seller is not engaged in or a party to, and is not
threatened with, any legal action or other proceeding, before any court,
arbitrator or administrative agency which would have a material adverse effect
on the Assets or the IDDD Business; and (b) Seller is not a party to or subject
to any judgment, decree or order entered in any lawsuit or proceeding brought by
any Governmental Authority or by any other person against Seller which would
have a material adverse effect on the Assets or the IDDD Business or its ability
to enter into or perform its obligations under this Agreement or any of the
Seller Ancillary Documents or to consummate the transactions contemplated hereby
or thereby. Seller is not in conflict with, or default or violation of, any law,
rule, regulation, order, judgment or decree applicable to Seller or by which any
of the Assets is bound or affected which would have a material adverse effect on
the Assets or the IDDD Business or its ability to enter into or perform its
obligations under this Agreement or any of the Seller Ancillary Documents or to
consummate the transactions contemplated hereby or thereby.
Section 3.7. Brokers, Finders. etc. Except for arrangements with Dillon,
Read & Co. Inc. which have been previously disclosed to Purchaser, Seller has
not incurred any liability to any broker, finder or agent for any brokerage
fees, finders' fees or other like commissions with respect to the transactions
contemplated by this Agreement.
Section 3.8. Consents. Except for the consents described in Schedule 3.8
hereto, no waiver, permit, license, approval, authorization, qualification,
order or consent of or filing with any court or Governmental Authority or any
other third party, including, without limitation, any filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is required to
be obtained or made by Seller in connection with the execution, delivery or
performance of this Agreement or any of the Seller Ancillary Documents or the
consummation of the transactions contemplated hereby or thereby.
Section 3.9. Contracts. Except as disclosed in Schedule 3.9 hereto, each
contract to be assumed by Purchaser is in full force and effect and is valid and
enforceable in all material respects. Seller has performed in all material
respects all obligations required to be performed by it under each contract to
be assumed by Purchaser, there are no outstanding material disputes thereunder,
and Seller is not in breach of any material provision therefor nor is either of
them aware of any breach thereunder by any other party thereto.
Section 3.10. Intellectual Property. Seller has the right to use the
software listed on Schedule l.2(g) hereto in the IDDD Business, and no claims
have been asserted in writing by any individual, corporation, partnership, joint
venture or other entity against Seller for the use of such software nor to
Seller's knowledge is there a basis for such a claim.
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Section 3.11. Environmental Matters. To Seller's knowledge, the activities
and operations of the IDDD Business have been in material compliance with all
Environmental Laws.
Section 3.12. Permits and Approvals. Seller has all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Authorities required for the conduct of the IDDD Business as presently conducted
by Seller. Within the past eighteen (18) months, Seller has not received a
written notice alleging a violation or probable violation or notice of
revocation or other written communication from or on behalf of any Governmental
Authority which violation has not been corrected or otherwise settled, alleging
(i) any violation of any material license, permit, consent, approval,
authorization, qualification or order, or (ii) that Seller requires any material
license, permit, consent, approval, authorization, qualification or order not
currently held by it.
Section 3.13. Sufficiency of Assets. Except as disclosed on Schedule 3.13,
the Assets comprise all of the assets necessary for Purchaser to conduct the
IDDD Business as currently conducted by Seller.
Section 3.14. Customer Contracts. Except as disclosed on Schedule 3.14, to
Seller's knowledge, none of the customers of the IDDD Business intend to
terminate or refuse to renew their customer contracts referred to in Section
1.2(c) or otherwise modify said contracts or take any adverse action against
Purchaser or any action which would otherwise adversely affect Purchaser as a
result of the consummation of the transactions contemplated by this Agreement or
otherwise. For purposes of the foregoing, Seller will be deemed to have
"knowledge" of a particular fact or other matter if Ray O'Brien, Francois
Gulliot, Francois Jean Giraudo, Guy Nicolas, Debora Harvey or Michael Trudnak is
actually aware of such fact or other matter. Seller has received written
representations from each such person with respect to the matter set forth in
this Section 3.14.
Section 3.15. Disclosure. To Seller's knowledge, no representations or
warranties made by Seller in this Agreement or in any of the Seller Ancillary
Documents and no statement contained in any document (including, without
limitation, the Schedules hereto), certificate or other writing furnished or to
be furnished by Seller to Purchaser pursuant to the provisions hereof or the
transactions contemplated hereby, contains any untrue statement of material
fact, or omits to state any material fact necessary in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
Section 3.16. Declarations of Seller Pursuant to Article 12 of the French
Law of June 29, 1935. In order to satisfy the provisions of Article 12 of the
French law of June 29, 1935, Seller declare that:
- the sales, excluding taxes, of the IDDD Business realized by Seller over
the past three (3) years of operations and during the current year is as
follows:
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From January 1, 1993 to December 31, 1993 0 FRF
From January 1, 1994 to December 31, 1994 l1,108,686 FRF
From January 1, 1995 to December 31, 1995 38,727,495 FRF
From January 1, 1996 to March 31, 1996 13,133,468 FRF
- the profits (losses) of Seller during each of the three previous years
of operations and during the current year are as follows:
From January 1, 1993 to December 31, 1993 (3,195,591) FRF
From January 1, 1994 to December 31, 1994 (8,820,412) FRF
From January 1, 1995 to December 31, 1995 (6,261,183) FRF
From January 1, 1996 to March 31, 1996 840,964 FRF
- The IDDD Business sold hereby is owned by Seller, which has created it.
- The elements of the IDDD Business are not subject to any pledge or lien.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of France and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted.
Section 4.2. Authorization. Purchaser has full corporate power and
authority to execute and deliver this Agreement and each of the Purchaser
Ancillary Documents (as hereinafter defined) and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and each of the
Purchaser Ancillary Documents by Purchaser, the performance by Purchaser of its
obligations hereunder and thereunder and the consummation of the transactions
provided for herein and therein have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. Each of this Agreement and
the Purchaser Ancillary Documents has been duly executed and delivered by
Purchaser and constitutes a valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and each of the Purchaser Ancillary
Documents, the consummation of the transactions contemplated hereby and thereby,
and the fulfillment of and
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compliance with the terms and conditions hereof and thereof do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Articles of Association of Purchaser, (ii) except
as disclosed Schedule 4.5, any contract, agreement, commitment or understanding
to which Purchaser is a party or to which Purchaser or any of Purchaser's
properties is subject, (iii) any judgment, decree or order of any court or
Governmental Authority to which Purchaser is a party or by which Purchaser or
any of Purchaser's properties is bound, or (iv) except as disclosed in Schedule
4.5, any statute, law, regulation or rule applicable to Purchaser, which, in the
case of subsections (ii) through (iv) above, will or is reasonably likely to
have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of Purchaser and its
subsidiaries taken as a whole.
Section 4.4. Brokers. Finders. Etc. Purchaser has not incurred any
liability to any broker, finder or agent for any brokerage fees, finders' fees
or other like commissions with respect to the transactions contemplated by this
Agreement.
Section 4.5. Consents. Except for the consents described in Schedule 4.5
hereto, no waiver, permit, license, approval, authorization, qualification,
order or consent of any court or Governmental Authority or any other third party
is required to be obtained by Purchaser in connection with the execution,
delivery or performance of this Agreement or any of the Purchaser Ancillary
Documents or the consummation of the transactions contemplated hereby or
thereby.
Section 4.6. Disclosure. To Purchase's knowledge, no representations or
warranties made by it in this Agreement or any of the Purchaser Ancillary
Documents and no statement contained in any document (including, without
limitation, the Schedules hereto), certificate, or other writing furnished or to
be furnished by Purchaser to Seller pursuant to the provisions hereof or the
transactions contemplated hereby, contains any untrue statement of material
fact, or omits to state any material fact necessary in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE 5.
Section 5.1. Public Announcements. Neither party hereto will issue any
press release or make any other public announcement relating to the transactions
contemplated by this Agreement without the prior consent of the other party
hereto, which consent shall not be unreasonably withheld or delayed, except that
either party may make any disclosure required to be made under applicable law or
stock exchange rule if such party determines in good faith that it is necessary
to do so and gives prior notice to the other party. Either party shall be deemed
to
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have given its consent to a press release of the other party if it does not
respond to a request for consent within three (3) business days of its receipt
of the draft press release.
Section 5.2. Registration Duties. Promptly after the date hereof and no
later than thirty (30) days after the date hereof, Purchaser shall (i) file a
copy of a French translation, prepared by a French translator registered with
the French Appeals Court who has been retained by Seller, of this Agreement with
the appropriate French taxing authorities, (ii) pay all registration duties
payable by Purchaser in connection with the consummation of the transactions
hereby to the appropriate French taxing authorities, and (iii) indemnify, pay
and reimburse Seller for any liability that results from Purchaser's failure to
file such translation and pay such registration duties, without regard to the
limitation set forth in Section 6.6 hereof. In this regard, all powers are given
to Purchaser to effectuate the registration formalities. Seller shall cause the
translator to file a copy of such French translation of this Agreement as
required herein within eight (8) days after the date hereof, and Seller shall be
responsible for all costs and penalties incurred as a result of a late filing of
such translation which resulted because such translation was initially delivered
in a form which was inaccurate or incomplete.
Section 5.3. Sale of Assets and IDDD Business. For a period of eighteen
(18) months after the date hereof, Purchaser shall not, without the prior
written consent of Seller, Transfer the Assets or Transfer control of the IDDD
Business to any Major Competitor of Sprint Corporation. For purposes of this
Section 5.3, a "Transfer of control of the IDDD Business to a Major Competitor
of Sprint" shall be deemed to have occurred whenever any one or more Major
Competitors of Sprint Corporation or their respective affiliates control the
IDDD Business For purposes of this Section 5.3, "Transfer" shall mean any act
pursuant to which, directly or indirectly, the ownership of all or substantially
all of the Assets or control of the IDDD Business in question is sold,
transferred, conveyed or otherwise disposed of, and "Major Competitor of Sprint
Corporation" shall mean the following entities and the controlled affiliates of
such entities: American Telephone & Telegraph Co.; PTT Netherlands; PTT
Switzerland; Telia AB; Telefonica de Espana, S.A.; British Telecommunications
plc; and MCI Communications Corporation. For purposes of this Agreement,
"affiliate" shall mean with respect to any person, (i) any person directly or
indirectly controlling, controlled by or under common control with such person,
(ii) any officer, director, general partner or trustee of, or a person serving
in a similar capacity with respect to, such person, or (iii) any person who is
an officer, director, general partner, or trustee of any person described in
clause (i) or (ii) of this sentence. For purposes of this Agreement, the term
"control," "controlling," "controlled by," or "under common control with" shall
mean (i) the ownership, direct or indirect, of more than fifty percent (50%) of
the voting power of a person, or (ii) the possession, direct or indirect, of the
power (a) to elect a majority of the board of directors of a person or (b) to
direct or cause the direction of the management and policies of a person,
whether through the ownership of securities, by contract or otherwise.
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Section 5.4. Customer Contracts. Schedule 3.8 of this Agreement describes
certain consents and approvals required to be obtained by Seller in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated by this Agreement, including
consents and approvals which may be required from customers of the IDDD Business
under the customer contracts described in Schedule 1.2(c) hereto. Seller and
Purchaser have agreed that, in light of the desire of Seller and Purchaser to
conclude the transactions contemplated by this Agreement as promptly as
practicable and the existing termination rights of customers under such consumer
contracts, Seller and Purchaser have consummated the transactions contemplated
by this Agreement on the date hereof without obtaining such customer consents.
Seller and Purchaser agree to develop a mutually agreeable plan for disclosing
the consummation of the transactions contemplated hereby to such customers and
agree to approach each such customer in accordance with such plan as promptly as
practical after the date hereof; provided, however, that if the parties do not
agree to such a plan by May 21, 1996, Seller shall be able to approach such
customers wherever located and to disclose to them such information regarding
the transactions consummated hereunder as Seller reasonably determines to be
necessary and, if Seller and Purchaser shall have agreed on the nature of the
disclosure to any such customer, as shall be reasonably consistent with such
agreed upon disclosure. Seller and Purchaser further agree that except as
otherwise specifically agreed by Seller and Purchaser on the date hereof,
neither Seller nor any of its affiliates shall be responsible or liable to
Purchaser or any of its affiliates, whether pursuant to Article 6 hereof or
otherwise, for any claims, liabilities, obligations, losses, costs, expenses,
penalties, fines or other judgments (at law or in equity) or damages of
Purchaser arising out of or related to (a) the termination of any customer
contract described in Schedule 1.2(c) hereto on or after the date hereof or (b)
any action brought or levy made as a result thereof, and Seller and Purchaser
further agree that, except as otherwise specifically agreed by Seller and
Purchaser on the date hereof, no such termination of a customer contract shall
be deemed to be a breach by Seller of any representation, warranty, covenant,
agreement or undertaking made by Seller in this Agreement or any Seller
Ancillary Document (as hereinafter defined) or give rise to any adjustment of
the Purchase Price paid by Purchaser pursuant to Section 1.5 hereof.
Section 5.5. Accounts Receivable.
(a) For a period commencing on the date hereof and ending on
December 31, 1996 (the "Collection Period"), Purchaser shall use all
commercially reasonable efforts to collect on behalf of Sellers the
accounts receivable of Sellers relating to the IDDD Business in existence
on the date hereof as well as the accounts receivable created after the
date hereof with respect to the conduct of the IDDD Business by Sellers
prior to the date hereof (collectively, the "Pre-Closing Receivables").
For purposes of this Section 5.5, all amounts collected from any customer
of the IDDD Business shall be applied to the oldest outstanding receivable
from such customer unless such customer shall dispute a specific
receivable in writing or designate a specific invoice or receivable for
payment.
(b) The parties acknowledge that for a period of time after the date
hereof, customers of the IDDD Business will make payments on invoices to a
bank account of
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Seller and that at a date to be agreed to by the parties invoices of the
IDDD Business will be amended to provide that customers should make
payments to a bank account of Purchaser.
(c) The parties agree to establish reasonable procedures for
verifying the amounts paid by customers into bank accounts of Seller or
Purchaser and for the disbursement of such amounts to Seller or Purchaser
as appropriate. In any event, the parties agree that the party that
receives any payment in its bank account which is due to the other party
shall pay such amount to the other party within five (5) business days
after the funds so paid become available to the party in whose bank
account the payment is deposited. In addition, each party that receives
any such payment in its bank account shall provide a written report to the
other party on all such collections not less than once every month.
(d) Notwithstanding Purchaser's obligation to use all commercially
reasonable efforts to collect the Pre-Closing Receivables, Seller
acknowledges and agrees that Purchaser is under no obligation to initiate
legal proceedings of any sort with respect to the Pre-Closing
Receivables, and Purchaser agrees not to initiate legal proceedings of any
sort against any customer with respect to Pre-Closing Receivables without
the prior written consent of Seller. With respect to the collection of
accounts receivable other than Pre-Closing Receivables that are due and
payable by existing customers of the IDDD Business under their existing
contracts, Purchaser further agrees not to initiate legal proceedings of
any sort against such customers without providing Seller with at least ten
(10) days prior written notice of Purchase's intention t6 initiate such
legal proceeding.
(e) Upon the expiration of the Collection Period, Purchaser shall
deliver to Seller copies of all invoices and records, if any, relating to
the Pre-C losing Receivables which have not been collected and Purchaser
shall have no further obligation to collect the same. At such time, Seller
and its successors in interest may pursue in a commercially reasonable
manner and consistent with past practice the collection of outstanding
Pre-Closing Receivables on their own behalf and at their own expense. The
parties hereto acknowledge and agree that Purchaser shall have no duties
or obligations with respect to the Pre-Closing Receivables except as
specifically set forth in this Section 5.5.
Section 5.6. Access to Records. Purchaser and Seller shall provide each
other and their respective employees, counsel, accountants and other
representatives, upon reasonable prior notice, for a reasonable basis and during
normal business hours, with such access to their respective books and records
with respect to periods prior to the date hereof as shall be reasonably
necessary for Purchaser or Seller to prepare any Tax returns relating to the
IDDD Business or the sale thereof to Purchaser and the right to make copies and
extracts therefrom (at the cost of the party requesting access) for such
purpose. Purchaser and Seller shall cooperate
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with each other and their respective employees, counsel, accountants and other
representatives in these matters.
Section 5.7. Domestic Access Lines. Seller is the lessee of certain access
lines of France Telecom ("FT") which are (a) dedicated to the IDDD Business (the
"Dedicated IDDD Lines"), (b) shared by the IDDD Business and the Data Business
(the "Shared Lines"), and (c) dedicated to the Data Business. On the date hereof
Seller has advised FT that it no longer desires to lease the Dedicated IDDD
Lines or the Shared Lines and Purchaser has entered into a lease arrangement
with FT to lease the Dedicated IDDD Lines and the Shared Lines. Seller shall pay
to FT on behalf of Purchaser any installation fee which FT may charge Purchaser
for initiating such lease arrangements. During the period of time (the
"Transition Period") commencing on the date hereof and ending on the earlier of
(i) December 31, 1996, and (ii) provided that Seller shall have given Purchaser
at least thirty (30) days advance written notice of the closing date of the sale
of the Data Business, ninety (90) days after the closing of the sale of the Data
Business, Purchaser agrees to make available to Seller capacity on the Shared
Lines comparable to the capacity used by Seller prior to the date hereof in
connection with the services provided on the date hereof by the Data Business to
two (2) of its customers, and Seller agrees to pay for such capacity on a
pass-through cost basis. At the expiration of the Transition Period, Seller's
right to use capacity on the Shared Lines in connection with the Data Business
shall terminate.
Section 5.8. Miscellaneous Agreements. The parties acknowledge that the
agreements, contracts and instruments described in Schedule 5.8 hereto (the
"Miscellaneous Agreements") relate to the assets which are used by Seller in the
IDDD Business and the Data Business. Promptly as practicable after the date
hereof, Seller shall enter into negotiations with the vendors named in the
Miscellaneous Agreements for Seller to enter into agreements for the use of
assets used in connection with the IDDD Business and for Purchaser to enter into
agreements for the use of assets in connection with the Data Business. Seller
shall pay to such vendors all termination charges of such vendors related to the
restructuring of the Miscellaneous Agreements as provided in this Section 5.8
and shall pay to such vendors all customary installation or activation charges
of such vendors may charge to establish new accounts for Purchaser to use the
assets for the IDDD Business on the same terms on which Seller used such assets
prior to the date hereof. Until the restructuring of the Miscellaneous
Agreements is completed, Seller and Purchaser shall share the costs incurred by
Seller under the Miscellaneous Agreements, with each party being responsible for
that portion of such costs which the parties reasonably determine to be related
to the use of the assets in connection with their respective businesses.
Section 5.9. Telephone Numbers. The parties acknowledge that Seller has
one set of telephone numbers and telefax numbers for the IDDD Business and the
Data Business. Until the expiration of the Transition Period, Seller and
Purchaser shall share such telephone numbers and telefax numbers for the purpose
of conducting the IDDD Business and the Data Business on such terms as the
parties shall reasonably determine to be appropriate. At the expiration of the
Transition Period, Purchaser shall discontinue its use of such numbers.
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ARTICLE 6.
INDEMNIFICATION
Section 6.1. Indemnification Obligations of Seller. From and after the
date hereof, Seller shall indemnify and hold harmless Purchaser and its
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, "Purchaser
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) The Excluded Liabilities;
(b) Any breach of any representation, warranty, covenant, agreement
or undertaking made by Seller in this Agreement or in any certificate,
agreement, exhibit, schedule or other writing delivered by Seller to
Purchaser pursuant to the provisions hereof (collectively, the "Seller
Ancillary Documents") or in the performance of its obligations hereunder
or thereunder; or
(c) Any fraud, willful misconduct, bad faith or any intentional
breach of any representation, warranty, covenant, agreement or undertaking
made by Seller in this Agreement or Seller Ancillary Documents or in the
performance of its obligations hereunder or thereunder.
Notwithstanding the foregoing, Seller's indemnification obligation with respect
to any of the foregoing matters shall be governed by the terms of any Seller
Ancillary Document which expressly provides for indemnification by Seller of a
specific matter which is different from that provided in this Article 6. The
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
damages of Purchaser Indemnified Parties described in this Section 6.1 as to
which Purchaser Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Purchaser Losses."
Section 6.2. Indemnification Obligations of Purchaser. From and after the
date hereof, Purchaser shall indemnify and hold harmless Seller and its
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, "Seller
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever
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arising or incurred (including, without limitation, amounts paid in settlement,
costs of investigation and reasonable attorneys' fees and expenses) arising out
of or relating to:
(a) The Assumed Obligations;
(b) Any breach of any representation, warranty, covenant, agreement
or undertaking made by Purchaser in this Agreement or in any certificate,
agreement, exhibit, schedule or other writing delivered by Purchaser to
Seller pursuant to the provisions hereof (the "Purchaser Ancillary
Documents") or in the performance of its obligations hereunder or
thereunder; or
(c) Any fraud, willful misconduct, bad faith or any intentional
breach of any representation, warranty, covenant, agreement or undertaking
made by Purchaser in this Agreement or Purchaser Ancillary Documents or in
the performance of its obligations hereunder or thereunder.
Notwithstanding the foregoing, Purchaser's indemnification obligation with
respect to any of the foregoing matters shall be governed by the terms of any
Purchaser Ancillary Document which expressly provides for indemnification by
Purchaser for a specific matter which is different from that provided in this
Article 6. The claims, liabilities obligations, losses, costs, expenses,
penalties, fines and damages of Seller Indemnified Parties described in this
Section 6.2 as to which Seller Indemnified Parties are entitled to
indemnification are hereinafter collectively referred to as "Seller Losses."
Section 6.3. Indemnification Procedure.
(a) Promptly after receipt by a Purchaser Indemnified Party or a
Seller Indemnified Party (hereinafter collectively referred to as an
"Indemnified Party") of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such Indemnified Party shall
notify Purchaser or Seller, whichever is the appropriate indemnifying
party hereunder (the "Indemnifying Party"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying Party
shall relieve the Indemnifying Party from liability which the Indemnifying
Party may have hereunder with respect to such claim if, but only if, and
only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim.
The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party, to assume the defense of such action or proceeding,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of the fees and disbursements of such
counsel. In the event, however, that the Indemnifying Party declines or
fails to assume the defense of the
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action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Indemnifying Party shall pay the reasonable
fees and disbursements of such counsel as incurred; provided, however,
that the Indemnifying Party shall not be required to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
jurisdiction in any single action or proceeding. In any action or
proceeding with respect to which indemnification is being sought
hereunder, the Indemnified Party or the Indemnifying Party, whichever is
not assuming the defense of such action, shall have the right to
participate in such litigation and to retain its own counsel at such
party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the defense
of which they are maintaining and to cooperate in good faith with each
other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification
is being sought hereunder without the prior written consent of the
Indemnifying Party, unless such settlement, compromise or consent includes
an unconditional release of the Indemnifying Party from all liability
arising out of such claim. An Indemnifying Party may not, without the
prior written consent of the Indemnified Party, settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder unless such settlement,
compromise or consent includes an unconditional release of the Indemnified
Party from all liability arising out of such claim and does not contain
any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any
of the Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written
notice of such claim to the appropriate Indemnifying Party. Such notice
shall specify the basis for such claim. As promptly as possible after the
Indemnified Party has given such notice, such Indemnified Party and the
appropriate Indemnifying Party shall establish the merits and amount of
such claim (by mutual agreement, litigation, arbitration or otherwise)
and, within five (5) business days of the final determination of the
merits and amount of such claim, the Indemnifying Party shall deliver to
the Indemnified Party immediately available funds in an amount equal to
such claim as determined hereunder.
Section 6.4. Claims Period. Except as provided in this Section 6.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the
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date hereof and shall terminate (a) with respect to the representations and
warranties set forth in Sections 3.l, 3.3, 3.5, 3.6, 3.7, 3.8, 3.9, 3.12, 4.1,
4.3, 4.4 and 4.5 hereof and the covenants and agreements set forth in Section
5.1 hereof, eighteen (18) months after the date hereof, (b) with respect to the
representations and warranties set forth in Sections 3.2, 3.4, 3.11, 3.14, 3.15,
3.16, 4.2 and 4.6 hereof and the covenants and agreements set forth in Sections
5.2 and 5.3 hereof, the applicable statute of limitations therefor, and (c) with
respect to all other representations and warranties and covenants and agreements
of the parties hereunder, two (2) years after the date hereof. No Indemnified
Party shall be entitled to make any claim for indemnification hereunder after
the appropriate Claims Period; provided, however, that if prior to the close of
business on the last day of the Claims Period, an Indemnifying Party shall have
been properly notified of a claim for indemnity hereunder and such claim shall
not have been finally resolved or disposed of at such date, the basis of such
claim shall continue to survive with respect to such claim and shall remain a
basis for indemnity hereunder with respect to such claim until such claim is
finally resolved or disposed of in accordance with the terms hereof.
Section 6.5. Maximum Liability. Notwithstanding anything in this
Agreement to the contrary, the maximum aggregate liability of Seller for
Purchaser Losses and of Purchaser for Seller Losses shall be [*] except as
otherwise provided in Sections 6.6 and 6.8.
Section 6.6. Threshold Liability. No party shall make any claim for
indemnification under this Agreement with respect to any matter set forth in
Section 6.1 or 6.2 unless and until (i) the aggregate amount of all Purchaser
Losses or Seller Losses incurred by the Purchaser Indemnified Parties or the
Seller Indemnified Parties, as the case may be, exceeds [*] in which event
such party may claim indemnification for the amount of such losses in excess
of [*] or (ii) the aggregate amount of all Purchaser Losses or Seller Losses
incurred by the Purchaser Indemnified Parties or the Seller Indemnified
Parties, as the case may be, exceeds [*] in which event such party may claim
indemnification for the entire amount of such losses; provided, however, that
if a party makes a claim pursuant to clause (i) of this Section 6.6, such
party forfeits its right to make a claim pursuant to clause (ii) of this
Section 6.6; provided, further, that this Section 6.6 shall not apply to (x)
the payment obligations of either party hereto under Section 5.2 or 5.5
hereof or (y) the payment obligations of Seller under the letter agreement
referred to in Section 2.1 (k).
Section 6.7. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each
Indemnifying Party irrevocably designates and appoints each of the parties
set forth under its name below as its authorized agent upon which process
may be served in any suit or proceeding arising out of or relating to this
Agreement that may be instituted in any state or federal court in New
York, New York:
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
-20-
<PAGE>
Seller:
Sprint Telecommunications France Inc.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
Purchaser:
RSL Corn France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each party agrees that service of process upon the
above-designated individuals shall be deemed in every respect effective
service of process upon such Indemnifying Party in any such suit or
proceeding. Each such Indemnifying Party further agrees to take any and
all action reasonably requested by an Indemnified Party, including the
execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of the
above-designated individuals in full force and effect so long as this
Agreement shall be in effect. The foregoing shall not limit the rights of
any party to serve process in any other matter permitted by law.
(b) To the extent that any Indemnifying Party has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to
itself or its property, each Indemnifying Party hereby irrevocably waives
such immunity in respect of its obligations with respect to this
Agreement;
(c) The parties hereto hereby agree that the appropriate forum and
venue for any disputes between any of the parties hereto arising out of
this Agreement shall be any state or federal court in New York, New York
and each of the parties hereto hereby submits to the personal jurisdiction
of any such court. The foregoing shall not limit the rights of any party
to obtain execution of judgment in any other jurisdiction. The parties
further agree, to the extent permitted by law, that a final and
unappealable judgment
-21-
<PAGE>
against any of them in any action or proceeding contemplated above shall
be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and
amount of such judgment; and
(d) The parties recognize that pursuant to the French law of March
17, 1909 relating to the sale and pledge of a business, any claim made by
a creditor shall be under the jurisdiction of the Commercial Court of
Nanterre (France).
Section 6.8. Compliance with Bulk Sales Laws. Purchaser and Seller hereby
waive compliance by Purchaser and Seller with the bulk sales law and any other
similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement. Seller shall indemnify Purchaser pursuant to and
in accordance with this Article 6 from, and hold Purchaser harmless against, any
liabilities, damages, costs and expense resulting from or arising out of (a) the
parties failure to comply with any such laws in respect of the transactions
contemplated by this Agreement and (b) any action brought or levy made as a
result thereof, without regard to the limitation set forth in Section 6.5
hereof.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
Section 7.1. Notices. All notices, communications and deliveries hereunder
shall be made in writing signed by the party making the same, shall specify the
Section hereunder pursuant to which it is given or being made, and shall be
deemed given or made on the date delivered if delivered in person, on the date
initially received if delivered by telecopy transmission followed by registered
or certified mail confirmation, on the date delivered if delivered by a
nationally recognized overnight courier service or on the third business day
after it is mailed if mailed by registered or certified mail (return receipt
requested) (with postage and other fees prepaid) as follows:
To Purchaser:
RSL Corn France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
Telecopy No.: (212) 572-3825
-22-
<PAGE>
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn: Robert L. Kohl, Esq.
Telecopy No.: (212) 940-8776
To Seller:
Sprint Telecommunications France Inc.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
Telecopy No.: (913) 624-8426
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No.: (404) 572-5145
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 7.2. Computation of Time. Whenever the last day for the exercise
of any privilege or the discharge of any duty hereunder shall fall upon a
Saturday, Sunday, or any date on which banks in New York, New York are closed,
the party having such privilege or duty may exercise such privilege or discharge
such duty on the next succeeding day which is a regular business day.
Section 7.3. Assignment: Successors in Interest. No assignment or transfer
by Purchaser or Seller of their respective rights and obligations hereunder
after to the date hereof shall be made except with the prior written consent of
the other parties hereto. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their permitted
-23-
<PAGE>
successors and assigns, and any reference to a party hereto shall also be a
reference to a permitted successor or assign.
Section 7.4. Investigations: Representations and Warranties. The
respective representations and warranties of Purchaser and Seller contained
herein or in any certificate, or other document delivered by any party prior to
date hereof shall not be deemed waived or otherwise affected by any
investigation made by a party hereto.
Section 7.5. Number: Gender. Whenever the context so requires, the
singular number include the plural and the plural shall include the singular,
and the gender of any pronoun include the other genders.
Section 7.6. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement and all references to Exhibits are
references to Exhibits to this Agreement.
Section 7.7. Controlling Law: Integration: Amendment.
(a) This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York without
reference to New York's choice of law rules. This Agreement supersedes all
negotiations, agreements and understandings among the parties and their
affiliates and constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof; provided, however, that nothing
herein shall affect (i) the validity of the Confidentiality Agreement
dated January 9, 1996, and the Non-Solicitation Agreement dated January
17, 1996, by and between Purchaser and Seller, (ii) the agreements
specified in Section 2.1, or (iii) any other written agreements or
understandings entered into by the parties or their affiliates
contemporaneously with the execution and delivery of this Agreement, all
of which shall remain in full force and effect.
(b) This Agreement may be amended by the parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended,
modified or supplemented except by written agreement executed by each of
the parties hereto.
Section 7.8. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
-24-
<PAGE>
Section 7.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
Section 7.10. Remedies. Each party hereto agrees that the remedies
provided in Article VI shall constitute the sole and exclusive remedies of a
party against another party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other party in this Agreement or any
Purchaser Ancillary Document or Seller Ancillary Document. Nothing in this
Section 7.10 shall prevent a party hereto from seeking and obtaining equitable
relief, including, but not limited to, injunctive relief and specific
performance in respect of such breach.
Section 7.11. Enforcement of Certain Rights. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto, and their successors
or assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, or result in such person, firm or corporation being deemed a
third party beneficiary of this Agreement.
Section 7.12. Waiver. A waiver by one party of the performance of any
covenant, agreement, obligation, condition, representation or warranty shall not
be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by any party of the performance
of any act shall not constitute a waiver of the performance of any other act or
an identical act required to be performed at a later time.
Section 7.13. Fees and Expenses. Seller will bear all costs and expenses
(including, without limitation, any investment banker's, broker's or finder's
fees and any attorney's and accountant's fees) incurred by Seller in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby on the date hereof and Purchaser will bear all
such costs and expenses incurred by Purchaser in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby on the date hereof.
Section 7.14. French Translation. A French translation of this Agreement
will be prepared for the purpose of a filing required with the French Tax
authorities. To the extent that there shall be any conflict between this
Agreement and such French translation, this Agreement shall be controlling in
each such case.
Section 7.15. Accounting Books of the IDDD Business. Pursuant to the
provisions of Article 15 of the French Law of June 29, 1935, the parties shall
initial the accounting books related to the activity of the IDDD Business for
the three (3) years preceding the date hereof.
-25-
<PAGE>
Section 7.16. Acknowledgment. The parties acknowledge, under the sanctions
listed in Article 1837 of the French General Tax Code, that this Agreement
contains the entire sales price of the IDDD Business.
Section 7.17. Discharge. The parties acknowledge and declare to have
established the price and conditions of the sale which is the subject hereof
exclusively between themselves, and entirely and definitively discharge from
liability the drafters hereof, recognizing that this Agreement has been drawn up
pursuant to the declarations of Seller, notably those made pursuant to the
application of the French Law of June 29, 1935.
Section 7.18. Formalities.
(a) Third Party Oppositions. For the receipt of third party
oppositions, election of domicile is made at the French branch of Sprint
Telecommunications France Inc., as such is listed at the beginning of this
Agreement; and
(b) Publication. The present sale shall be published pursuant to
the French Law of March 17, 1909. In this regard, Purchaser undertakes the
following:
- within fifteen (15) days of the date hereof, to have this sale
published in the form of a summary in a journal of legal announcements at
the place of the IDDD Business; and
- in the three (3) days following the publication of this summary,
to send this Agreement in the form of an extract Monsieur le Greffier,
Clerk of the Commercial Court of Nanterre (France) who shall ensure its
publications in the Bulletin of Official Civil and Commercial
Announcements (Bulletin Officiel des Annonces Civiles et Commerciales
(BODACC)).
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written, in three (3) original
versions (of which one shall be for the registration authority in France).
RSL COM FRANCE S.A.
By: /s/ Richard Williams
-------------------------------------
Richard Williams, President
By: /s/ Itzhak Fisher
-------------------------------------
Itzhak Fisher, Attorney-in-Fact
SPRINT TELECOMMUNICATIONS FRANCE INC.
By: /s/ Donald S. Parker
-------------------------------------
Donald S. Parker, Vice President
By: /s/ Dennis Piper
-------------------------------------
Dennis Piper, Attorney-in-Fact
-27-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 8th day of May, 1996, before me the undersigned, a Notary Public,
personally appeared Mr. Itzhak Fisher, known to me to be the individual who
executed the foregoing instrument for Mr. Richard Williams as attorney-in-fact
pursuant to a power of attorney dated May 5, 1996, from Mr. Richard Williams
acting as President of RSL Com France S.A., the corporation which executed the
foregoing instrument, and acknowledged that he executed the same pursuant to
such power.
WITNESS MY HAND AND OFFICIAL SEAL.
/s/ JEFFREY A. GERSH
-----------------------------------------
Notary Public
JEFFREY A. GERSH
NOTARY PUBLIC, State of New York
No. 4999892
Qualified in Suffolk County,
Commission Expires August 3, 1996
-28-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 8th day of May, 1996, before me the undersigned, a Notary Public,
personally appeared Mr. Dennis Piper, known to me to be the individual who
executed the foregoing instrument for Mr. Donald S. Parker as attorney-in-fact
pursuant to a power of attorney dated April 8 1996, from Mr. Donald S. Parker
acting as Vice President, Secretary and Director of Sprint Telecommunications
France Inc., the corporation which executed the foregoing instrument, and
acknowledged that he executed the same pursuant to such power.
WITNESS MY HAND AND OFFICIAL SEAL.
/s/ JEFFREY A. GERSH
-----------------------------------------
Notary Public
JEFFREY A. GERSH
NOTARY PUBLIC, State of New York
No. 4999892
Qualified in Suffolk County,
Commission Expires August 3, 1996
-29-
<PAGE>
Schedule 1.2(a) - Machinery and Equipment
See the attached list entitled "France Assets."
<PAGE>
France Assets
Schedule 1.2(a)
France Assets:
<TABLE>
<CAPTION>
Item Description Quantity Location Notes:
- ---- ----------- -------- -------- ------
<S> <C> <C> <C> <C>
1 Desk 1 O'Brien
2 Chairs and 1 Table 7 O'Brien
3 Filing Cabinet & Cupboard 1 O'Brien
4 Toshiba, T4500C 1 O'Brien
5 Desk 1 Carton
6 Chairs 3 Carton
7 Filing Cabinet 1 Carton
8 Compaq, LTE Eline 4/25E 1 Carton
9 Desk 1 Morin
10 Chairs 3 Morin
11 Filing Cabinet 1 Morin
12 Toshiba, T2400CS 1 Morin
13 Desk 1 Lefebvre
14 Chairs 3 Lefebvre
15 Filing Cabinet 1 Lefebvre
16 Toshiba, T2400CS 1 Lefebvre
17 Desk 1 Blondeau
18 Chairs 3 Blondeau
19 Filing Cabinet 1 Blondeau
20 Compaq, Prolinea 4/33 1 Blondeau
21 Compaq, Contura 3/20 1 Blondeau
22 Desk 1 Brugere
23 Chairs 3 Brugere
24 Filing Cabinet 1 Brugere
25 Toshiba, T4500C 1 Brugere
26 Desk 1 Guillot
27 Chairs 3 Guillot
28 Filing Cabinet 2 Guillot
29 Compaq, LTE Elite 4/40CX 1 Guillot
30 Desk 1 Giraudo
31 Chairs 3 Giraudo
</TABLE>
Note: Leasehole and Building improvements convey.
5/1/96 Page 1
<PAGE>
France Assets
Schedule 1.2(a)
France Assets:
<TABLE>
<CAPTION>
Item Description Quantity Location Notes:
- ---- ----------- -------- -------- ------
<S> <C> <C> <C> <C>
32 Filing Cabinet 1 Giraudo
33 Toshiba, T4500C 1 Giraudo
34 Desk 1 Durleux
35 Chairs 3 Durleux
36 Filing Cabinet 1 Durleux
37 Compaq, Prolinea 4/33 1 Durleux
38 Desk 1 Dumas
39 Chairs 3 Dumas
40 Filing Cabinet 1 Dumas
41 Compaq, Prolinea 4/25S 1 Dumas
42 Desk 1 Giraud
43 Chairs 3 Giraud
44 Filing Cabinet 1 Giraud
45 HP, Vectra 486/25N 1 Giraud
46 Desk 1 Cotteaux
47 Chairs & 1 table 3 Cotteaux
48 Filing Cabinet 1 Cotteaux
49 Desk 1 Open Office
50 Chairs 3 Open Office
51 File 1 Open Office
52 HP, Vectra 486/25N 1 Open Office
53 Compaq, Prolinea 4/33S 1 Sales Support Open Office
54 Compaq, LTE Lite 4/25E 1 Mathurin
55 Apple, PowerMac 6100 16/350CD 1 Operations
56 Conference Room Furniture (18 chairs and 2 tables) 2 Conference Room
57 Compaq, 4/331 1 Reception
58 HP, Imprimante PJ XL300 1 Office
59 HP, Imprimante LJ 4ML 1 Office
60 HP, Imprimante LJ 4SI 1 Office
61 Compaq, Deskpro 4/50XE 1 Sales Operation
62 Compaq, Prolinea MT4/67 1 PC de Taxation
</TABLE>
Note: Leasehole and Building improvements convey.
5/1/96 Page 2
<PAGE>
France Assets
Schedule 1.2(a)
France Assets:
<TABLE>
<CAPTION>
Item Description Quantity Location Notes:
- ---- ----------- -------- -------- ------
<S> <C> <C> <C> <C>
63 Compaq. Prolinea 4/33 1 Gateway ISIS
64 HP, Scanjet, HCL 1 Scanner
65 Ricoh 1 Photocopier
66 Ricoh, Fax 300 BLF 1 Fax Machine
67 Meridian, 940700, ISDN Cards SO 1 Computer Room
68 Meridian, 940912, DTI Cards 1 Computer Room
69 Meridian, 9410002, New Meridian Columns 1 Computer Room
70 Meridian, 9409010, DTI Cards 1 Computer Room
71 Meridian, 9409011, DTI Cards 1 Computer Room
72 Meridian, 9502032, PRI Cards 1 Computer Room
73 Meridian, 9503028, DTI Cards 1 Computer Room
74 Meridian, 9508008, 3 DTI Cards and 1 PR1 Card 1 Computer Room
75 Meridian, 9509009, DTI Card 1 Computer Room
76 Meridian, 9512009, New Meridian Extension 1 Computer Room
77 Meridian, 9409013, Meridian DTI and Cables 1 Computer Room
78 NET, 9408006, fmcp module, NET 2 x TMCP Cards 1 Computer Room
79 NET, 0784/94, IDNX Cabinet and PSU 1 Computer Room
80 NET, 9403117, import freight for NET Cabinet 1 Computer Room
81 NET, 9408005, import freight for NET Cabinet 1 Computer Room
82 NET, 9410888, power supply and shelf 1 Computer Room
83 NET, 8504002, import freight charge for NET 1 Computer Room
84 NET, import freight charge for NET 1 Computer Room
85 NET, TMCP, QASD, Dual AM1, QUAD 1 Computer Room
86 NET, 9505036, import freight charge for IDNX/90 Shelf 1 Computer Room
87 NET, 9505037, import freight charge for IDNX/90 Chassis 1 Computer Room
88 NET, IDNX/90 chassis 1 Computer Room
89 NET, IDNX/90 Shelf and Cards 1 Computer Room
90 NET, 9608003, freight import charge for NET Shelf and Cards 1 Computer Room
91 NET, 9808004, Freight Import charge for NET 1 Computer Room
92 NET, 9808005, Freight Import charge for NET 1 Computer Room
93 NET, 9608006, Freight Import charge for NET 1 Computer Room
</TABLE>
Note: Leasehole and Building Improvements convey.
5/1/96 Page 3
<PAGE>
France Assets
Schedule 1.2(a)
France Assets:
<TABLE>
<CAPTION>
Item Description Quantity Location Notes:
- ---- ----------- -------- -------- ------
<S> <C> <C> <C> <C>
94 NET, NET ISDN Cards 1 Computer Room
95 NET, ISDN Card 1 Computer Room
96 NET, New NET CPU 1 Computer Room
97 NET, 2 x TMCP Cards 1 Computer Room
98 NET, 2 x TMCP Cards 1 Computer Room
99 NET, 9612014, freight import charge for NET 1 Computer Room
100 DCME, 1273, 2 x DCME DTX 240F & Redundant Term 1 Computer Room
101 DCME, 1275, DTX 240F spare kit 1 Computer Room
102 DCME, 94032f, freight import charge for DCME 1 Computer Room
103 CPE, 9409016, chassis, cables and cards, UMUX Channel Bank 1 Computer Room
104 CPE, 9409015, chassis, cables and cards, UMUX Channel Bank 1 Computer Room
105 CPE, 9409017, chassis, cables and cards, UMUX CPE Pinault 1 Computer Room
106 CPE, 9418010, chassis, cables and cards, UMUX CPE UNEP 1 Computer Room
107 CPE, 3713, Extension Channel Bank 1 Computer Room
108 CPE, 9411004, chassis, cards, tray and fuse holder, UMUX CPE IFP 1 Computer Room
109 CPE, 9411014, cards, connectors, UMUX CPE IFP 1 Computer Room
110 CPE, 9413004, cards, UMUX CPE Opera POP 1 Computer Room
111 CPE, 9502006, card, UMUX Cards Securite Future 1 Computer Room
112 CPE, 9502008, installation, UMUX CPE Securite Future 1 Computer Room
113 CPE, 9502031, cables, UMUX CPE LEVY 1 Computer Room
114 CPE, 9503032, Charger SLAT, 48Volts Batteries POP Opera 1 Computer Room
115 CPE, 9504004, fuse panel and top cover, UMUX CPE LEVY 1 Computer Room
116 CPE, 9509008, chassis, cards and supplies, UMUX CPE Civeco 1 Computer Room
117 CPE, 9510009, chassis card and cable, UMUX CPE Boole & Babadge 1 Computer Room
118 CPE, 9510012, Resicom, HDSL equipment 1 Computer Room
119 CPE, 3176, mother card, Prescom Equipment 1 Computer Room
120 CPE, 3281, mother card, Prescom Equipment 1 Computer Room
121 CPE, 3439, mother card, Prescom Equipment 1 Computer Room
122 CPE, 9512204, UMUX Channel Bank 1 Computer Room
123 CPE, 9512206, PABX Card at Customer Louis Dreyfus 1 Computer Room
124 DTMF/MF Converter, 1381/94 trunk signaling conv. 1 Computer Room
</TABLE>
Note: Leasehole and Building improvements convey.
5/1/96 Page 4
<PAGE>
France Assets
Schedule 1.2(a)
France Assets:
<TABLE>
<CAPTION>
Item Description Quantity Location Notes:
- ---- ----------- -------- -------- ------
<S> <C> <C> <C> <C>
125 DTMF/MF Converter, 940602, freight import charge 1 Computer Room
126 Monitoring, 0823/94, system test voice, Digilog Alarms monitoring equip. 1 Computer Room
127 Monitoring, 940320, import freight charge for Digilog 1 Computer Room
128 Monitoring, 815985390, telecom. test kits 1 Computer Room
129 Monitoring, 940418 Import Freight Charge for Test Kits 1 Computer Room
130 Monitoring, 9410017, Import Freight charge NEW NET Shelf and PSU 1 Computer Room
131 Monitoring, 2508/94 trunk signaling module, spare DTMF/MF Converter 1 Computer Room
132 Monitoring, 9411007, import freight charge for spare DTMF/MF Converter 1 Computer Room
133 Monitoring, import freight charge for monitoring equipment 1 Computer Room
134 Monitoring, Call Analyzer 1 Computer Room
135 Monitoring, Digilog power supply, (Spare) 1 Computer Room
136 Monitoring, 9511013, import freight charge Digilog PSU 1 Computer Room
137 Channel Bank, 9408011, chassis, cable, card, and user guide 1 Computer Room
138 Channel Bank, 9408003, chassis 17 slots by 19" 1 Computer Room
139 Channel Bank, 9409014, Extension channel bank 1 Computer Room
140 Channel Bank, 9510010, UMUX Channel Bank CO 1 Computer Room
141 Channel Bank, 3285 BAC, Prescom Equipment CO 1 Computer Room
142 Channel Bank, 3436, Mother Card, Prescom Equipment CO 1 Computer Room
143 Channel Bank, 3719 Interventions, Installation Prescom Equip. 1 Computer Room
144 Timeplex, 0698/94 QVM.3, Timeplex Voice Card 1 Computer Room
145 Timeplex, 0697/94 QSP.4 1 Computer Room
146 Timeplex, 940328 import freight charge for Timeplex 1 Computer Room
147 Timeplex, 4560 cables 1 Computer Room
148 Billing, 0792/94 pbx data recorder, Pollcat Billing System 1 Computer Room
149 Billing, 9403116, import freight charge for Pollcat Billing System 1 Computer Room
150 Billing, CDR Manager 1 Computer Room
151 Echo Cancellors 6 Computer Room
152 Echo Cancellors 2 Computer Room
153 Echo Cancellors 2 Computer Room
154 Echo Cancellors 4 Computer Room
155 ISDN Groomer, Aculab, ISDN Groomer AculabCDR 1 Computer Room
</TABLE>
Note: Leasehole and Building improvements convey.
5/1/96 Page 5
<PAGE>
France Assets
Schedule 1.2(a)
France Assets:
<TABLE>
<CAPTION>
Item Description Quantity Location Notes:
- ---- ----------- -------- -------- ------
<S> <C> <C> <C> <C>
158 Meridian Software Upgrade, OSIG Euro ISDN 1 Computer Room
157 Meridian Base Opt 71 1 Computer Room
158 Monitoring, Test Equipment, Firebird, Breakout Box and Interceptor 1 Computer Room
159 Monitoring, Test Equipment, GNELM1 ETPP 71 Test Equipment 1 Computer Room
</TABLE>
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5/1/96 Page 6
<PAGE>
Schedule 1.2(b) - Contracts, Agreements and Other Instruments
1. Car leases and related car insurance policies with Logeroute for the
following users:
Authorized User Model Entry Date Termination Date
--------------- ----- ---------- ----------------
Ray O'Brien Re Safrane 27/7/93 26/7/96
Francois Guillot Ro Rover 800 10/9/93 9/9/96
Francois Giraudo Re Laguna 16/5/95 15/5/98
Jean-Yves Mathurin Re Laguna 17/5/95 16/5/98
Alain Carton Citroen Evasion 30/1/96 29/1/97
Pool Car Peugeot 306 27/5/94 26/5/97
2. The following agreements will be split between Seller and Purchaser;
computer maintenance agreement with Ista; health insurance agreement with
Gan Assurances; life insurance policy with Gan Assurances; and Sun Alliance
liability insurance.
<PAGE>
Schedule 1.2(c) - Customer Contracts
See the attached list.
<PAGE>
Circuit Customer Name
number
** Arthur Andersen (SAMMI)
000MK378 Bankers Trust & Co
000KJ424 Banque Worms
000SR404 Barry
000FF112 Barry Rogiano and Salles
000TE058 Boole & Babbage
000UP495 Canal +
000PG510-4 Charles Oberthur Fiduciaire
000RU626 Civeco
000UP992 Campagnie Generale de Geophysique
447A230G* Computervision
000JK639-42 Credit Industriel et Commercial
000HO789 Credit Lyonnais
000FF406 Dupont Denand
000HB063-4 Elf
000QC517 Esso Port-Jerome
000SF952 Esso Rueuil
000MQ183 Esso Rueuil
000GS834 Forasot
000QG297 Gamma
000MY485 Georges et Paul Levy-Soufflet
000ND144 Givaudan Roure
000JN368-72 Griffith Laboratories
000HA702 Heldrick & Struggles
000OH108-12 Hotel Mont-Thabor
000TY811 IFA Banque
000KE206 Institut Francais du Petrols
000HC630 Kodak Marne
000HC618 Kodak Paris
000OJ405 Louis Dreyfus
000PK003-5 Mitsukoshi
000HS005 OECD
000HT248 OECD
462A765G* Oracle
000QG370 Paribas
000GA799 Pinault
000PF089 Pourtier
452A734C* Ralph Lauren-Polocco
452A947J* Reuters
000QA170 Rothschild
000LA598 Securite Future
000MK430 Securite Future
000NF382-7 Sersia
000HA406 Siris
000YG658 Siris
000SA279 Sita
000RH366/377 Sita
000QS190-4 Soleil Nutritionel (Slim Fast)
457A369T* Sommer Albert
453A425L* Tekelec
000HA922-7 Thomson
000JS422 UAP Gesa Assistance
000E959 UNEP
000NF165 UNESCO
000LP173 Union Europeenne de CIC
000MW078-84 UTA Voyages
*Technical number
**LOI: Access Line ordered by Customer
<PAGE>
Schedule 1.2(d) - Business Licenses and Permits
None.
<PAGE>
Schedule 1.2(f) - Software
None.
<PAGE>
Schedule 3.4 - Encumbrances or Imperfections in Title
None.
<PAGE>
Schedule 3.6 - Litigation
None.
<PAGE>
Schedule 3.8 - Consents
1. Approval for the transfer of the customer contracts listed on Schedule
1.2(c).
2. Approval by FT for the arrangements described in Section 5.7 hereof.
3. Approval of the transfer of the automobile lease agreements and related
insurance policies by Logeroute.
4. Approval by Tertius (the lessor) of (i) the sublease and wall erection at
the Neuilly offices and (ii) the sharing of the equipment space at the
Neuilly offices.
5. Approval of the "splitting" of the contracts listed on Schedule 1.2(b),
item 2.
6. Publication of notice to creditors of Seller after Closing.
<PAGE>
Schedule 3.9 - Enforceability of Agreements
1. Consents have not been obtained for the assignment of any of the agreements
listed in items 1, 3 and 5 of Schedule 3.8.
<PAGE>
Schedule 3.13 - Sufficiency of Assets
1. The Global One Joint Venture, Sprint Corporation and/or their affiliates
provide the following support services to the IDDD Business: order entry,
provisioning, CDR collection/transport, invoice generation, corporate
security, GCSC, accounting and engineering services. None of the assets
associated with providing these services will be transferred to Purchaser.
2. None of the international half circuits or domestic access lines, or
national access lines which are used in connection with the IDDD Business
will be transferred to Purchaser, nor are Seller, Global One
Communications, Sprint Corporation and/or their affiliates transferring any
assets associated with terminating traffic on a global network.
3. None of the assets listed on the attached list, entitled "France Shared
Assets," are being transferred to Purchaser as of the date hereof. The
"France Shared Assets" may be transferred to Purchaser after the date
hereof in accordance with the terms and conditions set forth in the
Transition Services between Purchaser, Seller and Sprint International
France S.A. dated as of the date hereof.
4. The leasehold interest in the real property used to conduct the IDDD
Business is not being transferred to Purchaser as of the date hereof.
5. Seller is not transferring its interests in the following agreements which
relate to the IDDD Business: mobile telephone agreement with GSM, alarm
system agreement with Delta Protection (LOCAM), the nodes agreement with
NET, cleaning agreement with Genie Service, technical inspection agreement
with MES, power agreement with Verger & Delporte, inspection agreement with
CEAC, line security agreement with France Telecom, UPS agreement with
Merlin Gerin, air conditioning agreement with Spie Trindel, generator
agreement with A2EN, net maintenance agreement with NET, franking machine
agreement with SMH Neopost, and Forte and Microsoft software license
agreements.
6. None of the administrative and technical services currently provided to
Seller under a Services Agreement with Sprint International France S.A.
will be transferred to Purchaser.
7. The Sprint worldwide E-mail system will not be transferred to Purchaser.
8. The telephone, telefax and telex numbers used in connection with the IDDD
Business will not be transferred to Purchaser.
<PAGE>
9. None of the software used to operate the computer equipment listed on
Schedule 1.2(a) will be transferred to Purchaser.
<PAGE>
France Shared Assets
France Shared Assets:
Item Description Quantity Location Notes:
1 PABX 1 Office
1.a Analog Phones 25 Office
1.b Digital Phones 25 Office
2 Telephone Number: 1 Office
3 12P3COM, Linkbuilder 1 Office Server
3.a SMC, Hub Tiger 6P 1 Office Server
3.b HP, Sauvegarde 1 Office Server
3.c HP, Vectra 1 Office Server
3.d IBM, PS2 Model 30/286 1 Office Server
4 Distribution Frame 1 Computer Room
5 Power Distribution 1 Computer Room
6 Battery Back-up 1 Computer Room
7 Generator 1 Computer Room
8 Air Conditioning 1 Computer Room
General Definitions:
1 PABX: This piece of equipment is utilized by office personnel for voice
communications.
2 Telephone Number: Main access line for incoming calls.
3 Server: This piece of equipment is utilized to support the local
interconnection of all the personal computers and with the Global network
for accounting, billing and file sharing.
4 Distribution Frame: This piece of equipment is utilized to terminate PTT
connections and cross-connect to voice and data equipment.
5 Power Distribution: This piece of equipment is utilized to dispense the
correct power to the appropriate piece of voice and data equipment.
6 Battery Back-up: This piece of equipment is utilized to filter all power to
voice and data equipment as well as provide continue power if commercial
power is loss until the generator is engaged.
7 Generator: This piece of equipment is utilized to provide emergency power
to the voice and data equipment in case of extended commercial power
outages.
8 Air Conditioning: This piece of equipment is utilized to provide climate
control air to voice and data equipment.
Page 1
<PAGE>
France Shared Assets
France Shared Assets:
Current Net Book Value as of 3/31/96: (000 US$)
1 PABX: 22.8 Without Telephones
2 Telephone Number: N/A
3 Server: 0.5
4 Distribution Frame: See Note Items 4-8 are combined on Sprint Books at $528
5 Power Distribution: See Note Items 4-8 are combined on Sprint Books at $528
6 Battery Back-up: See Note Items 4-8 are combined on Sprint Books at $528
7 Generator: See Note Items 4-8 are combined on Sprint Books at $528
8 Air Conditioning: See Note Items 4-8 are combined on Sprint Books at $528
Page 2
<PAGE>
Amended and Restated Schedule 3.14 - Customer Contract Terminations
1. OECD have stated that they intend to re-evaluate the market.
2. SIRIS are in the process of re-evaluation.
3. UAP GESA are in the process of re-evaluation.
<PAGE>
Schedule 3.14 - Customer Contract Terminations
None.
<PAGE>
Schedule 4.5 - Consents
1. Purchaser is required to file a certified French translation of this
Agreement with the French Tax authorities.
<PAGE>
Schedule 5.8 - Miscellaneous Agreements
The contracts described in items 1.2 of Schedule 1.2(b) shall be considered
"Miscellaneous Agreements" for purposes of this Agreement.
<PAGE>
Exhibit 10.28
Exhibit 10.28 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED
and RSL Communications, Ltd. BY "[*]" AND FILED
SEPARATELY WITH THE
COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 406
OF THE SECURITIES ACT OF
1933
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into this
8th day of May, 1996, by and among SPRINT TELECOMMUNICATIONS FRANCE INC. and
SPRINT INTERNATIONAL FRANCE S.A. (collectively, "Sprint") and RSL COM FRANCE
S.A., a French corporation ("RSL") (collectively, the "Parties").
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of the date
hereof (the "Purchase Agreement"), by and between Sprint Telecommunications
France Inc. ("STF") and RSL, RSL has purchased from STF, and STF has sold to
RSL, certain assets related to the international direct distance dialing
business of STF in France (the "IDDD Business"); and
WHEREAS, in connection with the purchase and sale of the IDDD Business, STF
and certain of its affiliates, including Sprint International France S.A.
("SIF"), have agreed to provide to RSL certain transitional services, including
the services to be provided to RSL hereunder.
NOW, THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
CONSTRUCTION
Section 1.1. Gender, Headings, Etc. The definitions of terms defined herein
shall apply equally to both the singular and plural forms of the defined terms.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
All references herein to Articles, Sections and Exhibits shall be deemed to be
references to Articles and Sections of and Exhibits to this Agreement unless the
context shall otherwise require, and all references herein to "this Agreement"
shall refer to this Agreement and the Exhibits hereto. The headings of the
Articles and Sections are included for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. Unless the context shall otherwise require, any reference to any
agreement or other instrument or statute or regulation is to such agreement,
instrument, statute or regulation as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor provision). Any
reference in this Agreement to a "day" or a number of "days" (without the
explicit qualification of "business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by a particular calendar day, and such calendar day is not a
business day, then such action or notice shall be deferred until, or may be
taken or given, on the next business day.
<PAGE>
ARTICLE II
SHARED EMPLOYEES
Section 2.1. Sharing of Employees' Time. For a period of time (the
"Transition Period") commencing on the date hereof and ending on the earlier of
(i) December 31, 1996 and (ii) provided that Sprint shall have given all RSL at
least thirty (30) days advance written notice of the date of sale of the Data
Business (as hereinafter defined), ninety (90) days after the closing date of
sale of the Data Business. RSL and Sprint acknowledge that it will be necessary
for (i) certain employees of RSL to devote some reasonable portion of their time
to the management of Sprint's data, messaging services and card business
(collectively, the "Data Business"), and (ii) certain employees of Sprint to
devote some reasonable portion of their time to the management of the IDDD
Business (in either case, "Shared Employees"). RSL and Sprint agree that Shared
Employees shall only be made available for the functions listed on Exhibit A
hereto, which shall include training other employees to perform the functions
listed in such exhibit (collectively, the "Specified Functions"). RSL and Sprint
agree to make their respective Shared Employees available to perform the
Specified Functions, provided that each Party has the right to transfer and
replace any Shared Employee with their qualified personnel. Shared Employees
shall perform the Specified Functions only at the offices of the IDDD Business
or the Data Business located at 164 bis Avenue Charles de Gaulle, Neuilly,
France. During the Transition Period, RSL and Sprint agree to use their
commercially reasonable efforts to establish reasonable procedures for sharing
the time of Shared Employees. For the first two months of the Transition Period,
no Party shall charge the other for any costs associated with the Shared
Employees. Thereafter until the end of the Transition Period, each Shared
Employee shall be required to record the amount of time, in increments of
one-half hour, that he spends working for the other Party. Within ten (10) days
after the end of each calendar quarter during the Transition Period, commencing
ten (10) days after the calendar quarter ending June 30, 1996, and within ten
(10) days after the end of the Transition Period, the RSL Country Manager for
the IDDD Business and the Sprint Country Manager for the Data Business shall
approve the time records of all Shared Employees for the prior calendar quarter
(or portion thereof) and shall calculate (i) the value of all time devoted by
Shared Employees of RSL to the Data Business during such period at the hourly
rates for such Shared Employees set forth on Exhibit A hereto (the "RSL Time"),
and (ii) the value of all time devoted by the Shared Employees of Sprint to the
IDDD Business during such period at the rates for such Shared Employees set
forth on Exhibit A hereto (the "Sprint Time"), and shall promptly notify RSL and
Sprint of the RSL Time and the Sprint Time for such period. If the RSL Time
exceeds the Sprint Time for any such period, RSL shall promptly invoice Sprint
for such difference, and if the Sprint Time exceeds the RSL Time for any such
period, Sprint shall promptly invoice RSL for such difference, and each such
invoice shall be paid within thirty (30) days of the receipt thereof. At the end
of the Transition Period, neither RSL nor Sprint is required to make available
the time of its Shared Employees or any other employees to the other Party and
all obligations and rights described in this Section 2.1 shall terminate.
2
<PAGE>
ARTICLE III
LEASED SPACE
Section 3.1. Office Space. Pursuant to a Provisional Sub-Lease, dated as of
the date hereof (the "Provisional Sub-Lease"), between RSL and SIF, RSL has
agreed to sublease from SIF a portion of the office space used in connection
with the IDDD Business and the Data Business at the offices of Sprint located on
the 1st floor of the building located at 164 bis Avenue Charles de Gaulle,
Neuilly, France (the "Office Space"). As soon as practical after the dates
hereof, Sprint shall separate and pay for the reasonable out-of-pocket costs to
separate the office space used by the IDDD Business from the office space used
by the Data Business on the 1st floor of the building at such address. Such
separation shall consist of the construction of a wall separating the office
space used by the IDDD Business from the office space used by the Data Business.
Such wall shall be located at a place agreed to by the Parties (which, unless
the Parties otherwise agree, shall be located so that each of the IDDD Business
and the Data Business shall have the use of approximately fifty percent (50%) of
the usable office space now under lease by Sprint on the 1st floor of the
building at such address), shall be of substantially the same quality as the
existing walls within such office space and shall enable both the IDDD Business
and the Data Business to have reasonable access to all of the utilities and
other services now available to such office space as a whole, and shall
otherwise conform in all material respects to applicable building codes, the
requirements of the landlord and such other requirements as the Parties may
reasonably determine to be appropriate. Prior to the separation of such office
space, RSL and Sprint agree to share such office space in accordance with such
reasonable procedures for sharing such office space as the Parties shall
establish. Upon the expiration of the Provisional Sub-Lease, Sprint shall,
unless otherwise requested in writing by RSL at least thirty (30) days prior to
the expiration of the Provisional Sub-Lease, promptly remove and pay the
reasonable, out-of-pocket costs to remove the wall which was constructed to
separate the office space of the IDDD Business from the office space of Data
Business and to restore the affected area to its condition as of the date
hereof.
Section 3.2. Equipment Space. RSL and Sprint acknowledge that certain
equipment used in connection with both the IDDD Business and the Data Business
is currently housed in space leased to Sprint on the ground floor of the
building located at 164 bis Avenue Charles de Gaulle, Neuilly, France (the
"Equipment Space"). Until the expiration of the Transition Period, Sprint agrees
to give RSL access to the Equipment Space for the purpose of conducting the IDDD
Business, and Sprint and RSL agree to share the Equipment Space during such
period in accordance with such reasonable procedures for sharing the Equipment
Space as the Parties shall establish. As promptly as practical after the date
hereof, Sprint shall remove from the Equipment Space four (4) cabinets located
adjacent to the switches for the IDDD Business.
3
<PAGE>
Section 3.3 Ascension to Space. (a) The Parties acknowledge and agree that
(i) it is their intention that as soon as practicable following the date hereof,
RSL is to ascend to SIF's leasehold interest in the Office Space and the
Equipment Space in such manner and upon such terms as RSL may agree upon with
the landlord and (ii) RSL desires to occupy all of the space currently leased by
SIF at 164 bis Avenue Charles de Gaulle, Neuilly, France for the purpose of
operating the IDDD Business no later than the end of the Transition Period.
Sprint hereby agrees to cooperate with RSL and the landlord and use all
commercially reasonable efforts to effect the foregoing. In recognition of the
foregoing, Sprint covenants and agrees not to offer any direct or indirect
interest in the Office Space or the Equipment Space to the buyer or any
potential buyer of the Data Business.
(b) The Parties acknowledge and agree that if prior to the end of the
Transition Period RSL enters into an agreement with the landlord to lease from
it directly all of the space at 164 bis Avenue Charles de Gaulle, Neuilly,
France currently leased by SIF, (i) the Provisional Sub-Lease and the provisions
of Sections 3.1 and 3.2 hereof shall terminate and be of no further force and
effect and (ii) the Parties shall make such arrangements and enter into such
documentation as is necessary to provide Sprint and any buyer of the Data
Business use of and access to the Office Space and the Equipment Space for the
remainder of the Transition Period for the purpose of operating the Data
Business, such access and usage to be on the same basis that RSL is afforded the
same hereunder and under the Provisional Sub-Lease.
(c) In the event that RSL is unable to secure from the landlord a direct
leasehold interest in the Office Space and the Equipment Space on commercially
reasonable terms, Sprint agrees to negotiate in good faith with RSL and the
landlord to make commercially reasonable alternate arrangements which will allow
RSL to continue to occupy and use the Office Space and the Equipment Space on
the same basis as contemplated under Section 3.3(a), including by means of an
extension of the Provisional Sub-Lease beyond the Transition Period.
(d) At the time that the Data Business is sold, Sprint shall execute such
instruments and other documents as are reasonably necessary to vest in RSL all
of Sprint's right, title and interest in and to all leasehold improvements and
other similar assets attendant to the Office Space and the Equipment Space and,
at the time that the Data Business vacates the Office Space and the Equipment
Space, Sprint shall cause such assets to remain undisturbed at such location.
Section 3.4. Prorations. Sprint and RSL shall prorate the expenses set
forth in Exhibit B hereto in an equitable and reasonable manner that reflects
each Party's proportionate use of the goods and services that give rise to such
expenses.
4
<PAGE>
ARTICLE IV
SHARED EQUIPMENT
Section 4.1. Shared Equipment. RSL and Sprint acknowledge that the
equipment listed on Exhibit C hereto (the "Shared Equipment") is currently used
in connection with both the IDDD Business and the Data Business and has not been
transferred to RSL under the terms of the Purchase Agreement. Until the
expiration of the Transition Period, Sprint agrees to give RSL access to the
Shared Equipment for the purpose of conducting the IDDD Business, and Sprint and
RSL agree to share the Shared Equipment during such period in accordance with
such reasonable procedures for sharing the Shared Equipment as the Parties shall
establish. At the expiration of the Transition Period, Sprint shall have the
option (i) to remove all or any items of the Shared Equipment from the premises
at its cost and to replace at its cost any such removed Shared Equipment with
other equipment which shall have the same purpose and function in the IDDD
Business and shall be of substantially the same quality as the Shared Equipment
removed by Sprint and shall meet such other specifications as RSL and Sprint
shall reasonably agree upon on or before the date of sale of the Data Business,
and/or (ii) to transfer to RSL all right, title and interest of Sprint in all or
any items of the Shared Equipment which is on the premises and has not been
removed by Sprint and all items of replacement equipment, provided that at the
end of the Transition Period, RSL shall be vested with good and valid title,
free and clear of all liens, charges and other encumbrances, in and to the
Shared Equipment or replacement equipment, which together with any Shared
Equipment transferred to RSL, is substantially equivalent in function, purpose
and quality to the Shared Equipment. Sprint shall exercise such option in
writing not later than the date of sale of the Data Business. Any removal and
replacement of Shared Equipment shall be completed by Sprint prior to the
expiration of the Transition Period and shall be completed in such a manner that
RSL will be able to provide IDDD services to its customers without interruption.
ARTICLE V
CONFIDENTIALITY
Section 5.1. Confidentiality. Except as otherwise provided herein, Sprint
and RSL each agree that all information communicated to it by the other, whether
before or after the date hereof in connection with the matters provided herein
(the "Confidential Information"), shall be and was received in strict confidence
and shall be used only for purposes of this Agreement, and that no such
Confidential Information, including without limitation, the provisions of this
Agreement, shall be disclosed by the recipient Party, its agents, contractors or
employees without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed, except as may be necessary by
reason of legal, accounting or regulatory requirements beyond the reasonable
control of the recipient Party and except for such disclosures by the Parties as
may be necessary in order for any Party to perform its obligations hereunder.
Either Party may disclose Confidential Information to its agents, contractors,
financing sources,
5
<PAGE>
investors or employees who have a need to know such information, but in such
circumstances the disclosing Party shall be completely liable for the acts of
its agents, contractors, financing sources, investors and employees and, prior
to giving any such agent, contractor, financing source, investor or employee
access to Confidential Information, the recipient Party shall advise such agent,
contractor, financing source, investor or employee of its obligation to preserve
the confidentiality of the Confidential Information. Notwithstanding the
foregoing, the restrictions and obligations of this Section 5.1 shall not apply
to any information which the recipient Party can establish to have (i) become
publicly available without breach of this Agreement, (ii) been independently
developed by the recipient Party outside the scope of this Agreement without
reference to Confidential Information received hereunder, or (iii) been
rightfully obtained by the recipient Party from third parties which are not
obligated to protect its confidentiality. The provisions of this Section 5.1
shall survive the expiration or termination of this Agreement for any reason.
ARTICLE VI
TERM AND TERMINATION
Section 6.1. Term of Agreement. This Agreement shall commence on the date
hereof and terminate (i) on December 31, 1996, (ii) upon a termination of this
Agreement pursuant to Section 6.2, 6.3 or 9.12, or (iii) upon the written
agreement of the Parties.
Section 6.2. Termination of Cause. In the event that any Party hereto
materially breaches any of its duties or obligations hereunder or is the
breaching Party under the Purchase Agreement, any Purchaser Ancillary Document
or Seller Ancillary Document (as each such term is defined in the Purchase
Agreement) or any other instrument or agreement executed and delivered by it in
connection with the transactions contemplated by the Purchase Agreement, as
applicable, which breach shall not be substantially cured within ten (10) days
after written notice is given to the breaching party specifying the breach, then
(a) Sprint, in the event that RSL is the breaching party, or (b) RSL, in the
event that Sprint, Sprint Communications Company L.P. or Global One
Communications (as defined in the Purchase Agreement) (each a "Sprint Party") is
the breaching party, may, by giving written notice thereof to the other,
terminate this Agreement as of a date specified in such notice of termination,
which date shall be not earlier than ten (10) days after the date of such
notice.
Section 6.3. Termination for Bankruptcy. In the event that either RSL or a
Sprint Party (a) is unable to pay its debts generally as they become due or is
declared bankrupt or insolvent, (b) is the subject of any proceedings relating
to its liquidation, insolvency or for the appointment of a receiver or similar
officer for it which results in the entry of an order for relief or such
adjudication or appointment is not dismissed, discharged or bonded within a
reasonable period of time thereafter, (c) makes an assignment for the benefit of
all or substantially all of its creditors, or (d) enters into an agreement for
the composition, extension or readjustment of all or
6
<PAGE>
substantially all of its obligations, then (i) Sprint, in the case of any such
event affecting RSL, and (ii) RSL, in the case of any such event affecting a
Sprint Party, may, by giving written notice thereof to the other, terminate this
Agreement as of a date specified in the notice of termination, which date shall
be no earlier than ten (10) days after the date of such notice.
Section 6.4. Effect of Termination. Except as otherwise provided herein, in
the event of termination of this Agreement, all rights and obligations of the
Parties hereunder shall terminate as of the effective date of such termination,
except that (i) such termination shall not constitute a waiver of any rights
that a Party may have by reason of a breach of this Agreement and (ii) the
provisions of Articles V and VIII and this Section 6.4 shall continue in full
force and effect.
ARTICLE VII
DISCLAIMER
Section 7.1. DISCLAIMER. EXCEPT AS OTHERWISE PROVIDED IN THE PURCHASE
AGREEMENT OR THE LETTER AGREEMENT, DATED AS OF EVEN DATE HEREOF, AMONG THE
PARTIES, SPRINT MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
CONCERNING THE SERVICES OR FACILITIES PROVIDED HEREUNDER, INCLUDING ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnification Obligations of Sprint. From and after the date
hereof, Sprint shall indemnify and hold harmless RSL and its subsidiaries and
affiliates, each of their respective officers, directors, employees, agents and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "RSL Indemnified Parties") from, against and
in respect of any and all claims, liabilities, obligations, losses, costs,
expenses, penalties, fines and other judgments (at equity or at law) and damages
whenever arising or incurred (including, without limitation, amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
arising out of or relating to:
(a) Any breach of any covenant, agreement or undertaking made by Sprint in
this Agreement or in the performance of its obligations hereunder; or
7
<PAGE>
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by Sprint
in this Agreement or in the performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the RSL Indemnified Parties described in this Section 8.1 as to
which the RSL Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "RSL Losses."
Section 8.2. Indemnification Obligations of Purchaser. From and after the
date hereof, RSL shall indemnify and hold harmless Sprint and its subsidiaries
and affiliates, each of their respective officers, directors, employees, agents
and representatives and each of the heirs, executors, successors and assigns of
any of the foregoing (collectively, the "Sprint Indemnified Parties") from,
against and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys' fees and
expenses) arising out of or relating to:
(a) Any breach of any covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any covenant, agreement or undertaking made by RSL in this Agreement or in the
performance of its obligations hereunder.
The claims, liabilities obligations, losses, costs, expenses, penalties, fines
and damages of the Sprint Indemnified Parties described in this Section 8.2 as
to which the Sprint Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Sprint Losses."
Section 8.3. Indemnification Procedure.
(a) Promptly after receipt by an RSL Indemnified Party or a Sprint
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being or may be
sought hereunder, such Indemnified Party shall notify RSL or Sprint, whichever
is the appropriate indemnifying Party hereunder (the "Indemnifying Party"), of
such complaint or of the commencement of such action or proceeding; provided,
however, that the failure to so notify the Indemnifying Party shall not relieve
the Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying Party shall
relieve the Indemnifying Party from liability which the Indemnifying Party may
have hereunder with respect to such claim if, but only if, and only to the
extent that, such failure to notify the Indemnifying Party results in the
forfeiture by the Indemnifying Party of rights and defenses otherwise available
to the Indemnifying Party with respect to such claim. The Indemnifying Party
shall have the right, upon written notice to the
8
<PAGE>
Indemnified Party, to assume the defense of such action or proceeding, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of the fees and disbursements of such counsel. In the event,
however, that the Indemnifying Party declines or fails to assume the defense of
the action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such Indemnified
Party may employ counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the reasonable fees and
disbursements of more than one counsel for all Indemnified Parties in any
jurisdiction in any single action or proceeding. In any action or proceeding
with respect to which indemnification is being sought hereunder, the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to retain its
own counsel at such Party's own expense. The Indemnifying Party or the
Indemnified Party, as the case may be, shall at all times use reasonable efforts
to keep the Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the defense of
which they are maintaining and to cooperate in good faith with each other with
respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
such settlement, compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not, without the prior written consent of the Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
Section 8.4. Claims Period. Except as provided in this Section 8.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the date hereof and shall terminate two (2)
years after the date hereof. No Indemnified Party shall be
9
<PAGE>
entitled to make any claim for indemnification hereunder after the appropriate
Claims Period; provided, however, that if prior to the close of business on the
last day of the Claims Period, an Indemnifying Party shall have been properly
notified of a claim for indemnity hereunder and such claim shall not have been
finally resolved or disposed of at such date, the basis of such claim shall
continue to survive with respect to such claim and shall remain a basis for
indemnity hereunder with respect to such claim until such claim is finally
resolved or disposed of in accordance with the terms hereof.
Section 8.5. Maximum Liability. Notwithstanding anything in this Agreement
to the contrary, the maximum aggregate liability of Sprint for RSL Losses and of
RSL for Sprint Losses shall not exceed [*].
Section 8.6. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Party irrevocably
designates and appoints each of the parties set forth under its name below as
its authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement that may be instituted in any state
or federal court in New York, New York.
Sprint:
Sprint Telecommunications France Inc.
Sprint International France S.A.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205 U.S.A.
Attn.: J. Richard Devlin, Esq.
RSL:
RSL Com France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each Party agrees that service of process upon the
above-designated individuals shall be deemed in every respect effective service
of process upon such Party in any such suit or proceeding. Each Party further
agrees to take any and all action reasonably requested by a Party, including the
execution and filing of any and all such documents and
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
10
<PAGE>
instruments, as may be necessary to continue such designation and appointment of
the above-designated individuals in full force and effect so long as this
Agreement shall be in effect. The foregoing shall not limit the rights of any
Party to serve process in any other matter permitted by law.
(b) To the extent that any Party has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each Party
hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The Parties hereto hereby agree that the appropriate forum and venue
for any disputes between any of the parties hereto arising out of this Agreement
shall be any state or federal court in New York, New York and each of the
Parties hereto hereby submits to the personal jurisdiction of any such court.
The foregoing shall not limit the rights of any Party to obtain execution of
judgment in any other jurisdiction. The Parties further agree, to the extent
permitted by law, that a final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. All notices, requests, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be given in the manner provided in the Purchase Agreement
and to the addresses provided in Exhibit D hereto.
Section 9.2. Assignment; Subcontracting. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of the other
Party; provided that Sprint may subcontract or assign to any affiliate its
obligations and rights hereunder provided in each case that Sprint shall remain
responsible for assuring that the subcontractor's or assignee's performance
conforms to the requirements hereof.
Section 9.3. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be deemed
restated to reflect the original intention of the Parties as nearly as possible
in accordance with applicable law, and, if capable of substantial performance,
the
11
<PAGE>
remaining provisions of this Agreement shall be enforced as if this Agreement
was entered into without the invalid provision.
Section 9.4. Attorneys' Fees. In the event attorneys' fees or other
out-of-pocket costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
out-of-pocket costs incurred therein.
Section 9.5. Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
Section 9.6. Relationship of Parties. Sprint, in furnishing services to RSL
hereunder, is acting only as an independent contractor. Nothing set forth in
this Agreement shall be construed to create the relationship of principal and
agent between Sprint and RSL. Sprint shall have no authority, express or
implied, to enter into contracts on behalf of RSL. Neither Party shall act or
attempt to act to represent itself, directly or by implication, as an agent of
another Party or in any manner assume or create, or attempt to assume or create,
an obligation of or in the name of, the other Party.
Section 9.7. Approvals and Similar Actions. Where agreement, approval,
acceptance, consent or similar action by either Party hereto is required by any
provision of this Agreement, such action shall not be unreasonably delayed or
withheld.
Section 9.8. Modification: Waiver. This Agreement may be modified only by a
written instrument duly executed by or on behalf of each Party hereto. No delay
or omission by either Party hereto to exercise any right or power hereunder
shall impair such right or power or be construed to be a waiver thereof. A
waiver by either of the Parties hereto of any of the obligations to be performed
by the other or any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other obligation herein contained.
Section 9.9. Remedies. Each Party agrees that the remedies provided in
Articles VI and VIII shall constitute the sole and exclusive remedies of a Party
against another Party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other Party in this Agreement.
Nothing in this Section 9.9 shall prevent a Party hereto from seeking and
obtaining equitable relief, including but not limited to, injunctive relief and
specific performance.
Section 9.10. No Third Party Beneficiaries. The Parties agree that this
Agreement is for the sole benefit of the Parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee of
either Party hereto, and that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement.
12
<PAGE>
Section 9.11 Governing Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without
reference to New York's choice of law rules. This Agreement supersedes all
negotiations, agreements and understandings among the Parties or any of
their affiliates and constitutes the entire agreement among the Parties
hereto with respect to the subject matter hereof; provided, however, that
nothing herein shall affect any other written agreements or understandings
entered into by the Parties or any of their affiliates contemporaneously
with the execution and delivery of this Agreement, all of which shall
remain in full force and effect.
(b) This Agreement may be amended by the Parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended, modified
or supplemented except by written agreement executed by each of the Parties
hereto.
Section 9.12 Force Majeure. If either Party to this Agreement shall be
prevented, hindered or delayed in the performance or observance of any of its
obligations hereunder by reason by any circumstances beyond its reasonable
control, and such delay could not have been prevented by reasonable precautions
and cannot reasonably be circumvented by the Party through the use of alternate
sources, work-around plans, or other means (a "Force Majeure"), then such Party
shall be excused from any other further performance or observance of the
obligations so affected for so long as such circumstances prevail and such Party
continues to use its best efforts to recommence performance or observance
whenever and to whatever extent possible without delay. Any Party so delayed in
its performance shall immediately notify the other and shall describe at a
reasonable level of detail the circumstances causing such delay. Notwithstanding
the foregoing, should a Party be unable to perform any of its obligations
hereunder for a period of more than thirty (30) consecutive days by reason of a
Force Majeure, the other Party, at its option, shall have the right to terminate
this Agreement in whole or solely with respect to the section hereof under which
the non-performing Party has been unable to perform its obligations, in which
case the provision so terminated shall have no further force or effect and this
Agreement shall remain in effect as to all other provisions.
13
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective officers.
SPRINT TELECOMMUNICATIONS FRANCE INC.
By: /s/ Donald S. Parker
-------------------------------
Donald S. Parker, Vice President
By: /s/ Dennis Piper
-------------------------------
Dennis Piper, Attorney-in-Fact
SPRINT INTERNATIONAL FRANCE S.A.
By: /s/ Ray O'Brien
-------------------------------
Ray O'Brien, President
By: /s/ Dennis Piper
-------------------------------
Dennis Piper, Attorney-in-Fact
RSL COM FRANCE S.A.
By: /s/ Richard Williams
-------------------------------
Richard Williams, President
By: /s/ Itzhak Fisher
-------------------------------
Itzhak Fisher, Attorney-in-Fact
14
<PAGE>
EXHIBIT A
SPECIFIED FUNCTIONS
Either RSL or Sprint may utilize Shared Employees for the following
functions at the following hourly rates:
Function Hourly Rate (U.S. $)
- -------- --------------------
Executive management (country manager) [*]
Finance (country controller) [*]
Customer service [*]
Senior technical operations management (operations manager) [*]
Technical operations support (on-site and field engineering) [*]
Program management [*]
Sales representative [*]
Administrative assistance [*]
Receptionist [*]
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
A-1
<PAGE>
EXHIBIT B
See the attached list entitled "France Prorations."
<PAGE>
France Prorations
EXHIBIT B
<TABLE>
<CAPTION>
Item (000FF) Monthly Fee Sprint RSL
Monthly Fee Monthly Fee
<S> <C> <C> <C> <C>
1 Office Lease (1st Floor) [*] [*] [*]
2 Electricity [*] [*] [*]
3 Cleaning [*] [*] [*]
4 Alarm [*] [*] [*]
5 Personal Computer Maintenance [*] [*] [*]
6 France Telecom Telephone Service [*] [*] [*]
7 Flowers [*] [*] [*]
8 Water [*] [*] [*]
Total [*] [*] [*]
</TABLE>
Item 1 Sprint and RSL will divide the monthly lease amount in half.*
Item 2 This is an estimation based upon historical data. Sprint and RSL will
equally divide the monthly utility invoice.
Item 3 Sprint and RSL will divide the monthly cleaning fee in half.
Item 4 Sprint and RSL will divide the monthly alarm fee in half.
Item 5 Sprint and RSL will divide the monthly personal computer maintenance fee
in half.
Item 6 Sprint and RSL will pay the monthly fee in half and reconcile the usage
fee based upon personnel extension data.
Item 7 Sprint and RSL will divide the monthly flower fee in half.
Item 8 Sprint and RSL will divide the monthly water fee in half.
* RSL will pay its share of the monthly lease payments pursuant to the terms
of the Provisional Sub-Lease between RSL and SIF.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
5/7/96 Page 1
<PAGE>
EXHIBIT C
See the attached list of Shared Equipment.
C-1
<PAGE>
France Shared Assets
France Shared Assets:
Item Description Quantity Location Notes:
1 PABX 1 Office
1.a Analog Phones 25 Office
1.b Digital Phones 25 Office
2 Telephone Number: 1 Office
3 3COM, Linkbuilder 12P 1 Office Server
3.a SMC, Hub Tiger 6P 1 Office Server
3.b HP, Sauvegarde 1 Office Server
3.c HP, Vectra 1 Office Server
3.d IBM, PS2 Model 3/286 1 Office Server
4 Distribution Frame 1 Computer Room
5 Power Distribution 1 Computer Room
6 Battery Back-up 1 Computer Room
7 Generator 1 Computer Room
8 Air Conditioning 1 Computer Room
General Definitions:
1 PABX: This piece of equipment is utilized by office personnel for voice
communications.
2 Telephone Number: Main access line for incoming calls.
3 Server: This piece of equipment is utilized to support the local
interconnection of all the personal computers and with the Global network
for accounting, billing and file sharing.
4 Distribution Frame: This piece of equipment is utilized to terminate PTT
connections and cross-connect to voice and data equipment.
5 Power Distribution: This piece of equipment is utilized to dispense the
correct power to the appropriate piece of voice and data equipment.
6 Battery Back-up: This piece of equipment is utilized to filter all power to
voice and data equipment as well as provide continue power if commercial
power is loss until the generator is engaged.
7 Generator: This piece of equipment is utilized to provide emergency power
to the voice and data equipment in case of extended commercial power
outages.
8 Air Conditioning: This piece of equipment is utilized to provide climate
control air to voice and data equipment.
Page 1
<PAGE>
France Shared Assets
France Shared Assets:
Current Percent of Utilization of voice versus data:
Voice Data
1 PABX: 30% 70%
2 Telephone Number: 30% 70%
3 Server: 50% 60%
4 Distribution Frame: 5% 95%
5 Power Distribution: 10% 90%
6 Battery Back-up: 4% 96%
7 Generator: 10% 90%
8 Air Conditioning: 25% 75%
Current Net Book Value as of 3/31/96: (000 (US$)
1 PABX: 22.8 Without Telephones
2 Telephone Number: N/A
3 Server: 0.5
4 Distribution Frame: See Note Items 4-7 are combined on Sprint Books at $528
5 Power Distribution: See Note Items 4-7 are combined on Sprint Books at $528
6 Battery Back-up See Note Items 4-7 are combined on Sprint Books at $528
7 Generator: See Note Items 4-7 are combined on Sprint Books at $528
8 Air Conditioning: See Note Items 4-7 are combined on Sprint Books at $528
Page 2
<PAGE>
EXHIBIT D
ADDRESSES FOR NOTICES
To RSL:
RSL Com France S.A.
c/o RSL Communications Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
Telecopy No.: (212) 572-3825
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohl, Esq.
Telecopy No.: (212) 940-8776
To Sprint:
Sprint Telecommunications France Inc.
Sprint International France S.A.
c/o Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Telecopy No.: (913) 624-8426
Attn.: J. Richard Devlin, Esq.
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No.: (404) 572-5145
D-1
<PAGE>
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing.
D-2
<PAGE>
Exhibit 10.29
Exhibit 10.29 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED BY
and RSL Communications, Ltd. "[*]" AND FILED SEPARATELY
WITH THE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT
UNDER RULE 406 OF THE
SECURITIES ACT OF 1933
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into this
8th day of May, 1996, by and between SPRINT COMMUNICATIONS COMPANY L.P., a
Delaware limited partnership ("Sprint LP"), and RSL COM FRANCE S.A., a French
corporation ("RSL") (collectively, the "Parties").
WHEREAS, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement"), dated as of the date hereof, by and between Sprint
Telecommunications France Inc. {"Seller") and RSL, RSL has purchased from
Seller, and Seller has sold to RSL, certain assets related to the international
direct distance dialing business of Seller in France (the "IDDD Business");
WHEREAS, in connection with the purchase and sale of said assets of the
IDDD Business, Seller and certain of its affiliates, including Sprint LP, have
agreed to provide to RSL certain transitional services pursuant to transition
services agreements (the "Transition Services Agreements"), including this
Agreement;
WHEREAS, in accordance with the foregoing, Sprint LP has agreed to
terminate long distance voice telephone traffic which originates from the IDDD
Business through the Sprint network or the network of Global One Communications,
a joint venture formed by Sprint Corporation, Deutsche Telekom and France
Telecom (the various entities that comprise such joint venture and are
controlled directly or indirectly by Sprint Corporation, Deutsche Telekom and
France Telecom shall collectively be referred to herein as "Global One
Communications") and to provide RSL with the right to use a trademark of Sprint
Corporation under certain limited circumstances; and
WHEREAS, Sprint LP is an affiliate of Sprint Corporation, the sole
shareholder of Seller;
NOW, THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:
"Taxes" shall mean all federal, state, local or foreign income, capital
gains, profits, gross receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment, disability, real property, personal
property, stamp, excise, occupation, sales, use,
<PAGE>
transfer, mining, value-added, investment credit recapture alternative or add-on
minimum, environmental, estimated or other taxes, duties or assessments of any
kind, including any interest, penalty and additions imposed with respect to such
amounts levied by any foreign, federal, state or local taxing authority.
Additional Definitions:
Defined Term Defined In
------------ ----------
"Agreement" Recitals
"Confidential Information" Section 5.1
"Credited Amount" Section 8.5
"IDDD Business" Recitals
"Purchase Agreement" Recitals
"RSL" Recitals
"Services" Section 2.1
"Services Supplement" Section 2.2
"Sprint LP" Recitals
"Sprint Party" Section 6.2
Section 1.2 Interpretation. The definitions in Sections 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." All references
herein to Articles, Sections and Exhibits shall be deemed to be references to
Articles and Sections of and Exhibits to this Agreement unless the context shall
otherwise require, and all references herein to "this Agreement" shall refer to
this Agreement and the Exhibits hereto. The headings of the Articles and
Sections are included for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement. Unless
the context shall otherwise require, any reference to any agreement or other
instrument or statute or regulation is to such agreement, instrument, statute or
regulation as amended and supplemented from time to time (and, in the case of a
statute or regulation, to any successor provision). Any reference in this
Agreement to a "day" or a number of "days" (without the explicit qualification
of "business") shall be interpreted as a reference to a calendar day or number
of calendar days. If any action or notice is to be taken or given on or by a
particular calendar day, and such calendar day is not a business day, then such
action or notice shall be deferred until, or may be taken or given, on the next
business day.
2
<PAGE>
ARTICLE II
SERVICES
Section 2.1 Services. During the term of this Agreement, Sprint LP shall
terminate or provide for the termination of long distance voice telephone
traffic which originates from the IDDD Business through the Sprint network or
the network of Global One Communications in the countries listed on Exhibit A
hereto (the "Services") in accordance with and subject to the terms and
conditions of this Agreement. Sprint LP shall not be obligated to transit or hub
any traffic through the switch that services the IDDD Business other than
traffic originated in France.
Section 2.2 Services Supplement. Sprint LP and RSL may enter into a
services supplement (the "Services Supplement") with respect to the Services to
be provided by Sprint LP hereunder. Any such Services Supplement may further
define and describe the Services to be provided by Sprint LP hereunder, the
performance or quality standards in accordance with which Sprint LP shall
provide such Services, the compensation that Sprint LP shall receive in
accordance with Section 4.1 for providing such Services, the expiration dates
for providing such Services and any additional information with respect to such
Services as the Parties may agree. Unless otherwise stated in a related
Services Supplement, the rates charged by Sprint LP for the Services shall
remain fixed during the term of this Agreement.
Section 2.3 Employees. Sprint LP shall have complete operational,
management, administrative, legal and financial responsibility for the Sprint LP
personnel used to provide the Services hereunder.
Section 2.4 Access. During the term hereof, Sprint LP shall have, at no
cost to Sprint LP, such access to and use of the space and related facilities
and equipment at the IDDD Business as shall be reasonably necessary for Sprint
LP to provide the Services to RSL hereunder.
ARTICLE III
SPRINT TRADEMARK
Section 3.1 Use of Sprint Trademark. In order to assist in the orderly
transition of control of the IDDD Business from Seller to RSL and in the
collection by RSL of accounts receivable in existence on the date hereof as well
as the accounts receivable created after the date hereof with respect to the
conduct of the IDDD Business by Seller prior to the date hereof, which shall be
collected by RSL for Seller under the terms of the Purchase Agreement, Sprint LP
hereby grants RSL the limited right to use the Sprint trademark on invoices sent
to existing customers of the IDDD Business under their existing contracts until
December 31, 1996, provided that if RSL prepares invoices using a billing system
other than the one used by Seller as
3
<PAGE>
of the date hereof, Sprint LP shall have the right to approve the use of the
Sprint trademark in connection with the new billing system, such approval not to
be unreasonably withheld. All such invoices shall be identical in all material
respects to either the existing form of invoice or the form of invoice attached
hereto as Exhibit B, except for such variances as may be required by French law.
Such form of invoice shall be amended to provide that payments by customers
shall be made to a bank account of RSL by no later than June 30, l996. Sprint LP
also hereby grants RSL the limited right to use the Sprint trademark in a letter
to such existing customers to be sent after the date hereof. Sprint LP shall
have the right to approve the form of such letter; provided that (i) Sprint LP
shall not unreasonably withhold such approval and (ii) Sprint LP shall be deemed
to have given its approval in the event that Sprint LP does not respond to RSL
within three (3) business days of the submission by RSL of the form of such
letter to Sprint LP. RSL shall, in addition to complying with the terms and
conditions set forth herein, adhere to Sprint LP's policies and procedures
relating to the use and duplication of the Sprint trademark, as may be
reasonably promulgated from time to time by Sprint LP. In addition, so long as
RSL is using the Sprint trademark as contemplated hereby, RSL shall notify
Sprint LP within three (3) business days of any complaints actually known by it
to have been made by any of the existing customers of the IDDD Business under
their existing contracts. If, in Sprint LP's reasonable determination, Sprint LP
believes that such complaints may impair or otherwise put at risk the goodwill
associated with the Sprint trademark as to the complaining customer or as to the
customers of the IDDD Business generally, Sprint LP shall have the right to
demand that RSL immediately terminate its use of the Sprint trademark as to such
complaining customer or all of the customers of the IDDD Business, as the case
may be. RSL shall not take any action which could reasonably be expected to
compromise the Sprint trademark. The Sprint trademark is proprietary and nothing
herein constitutes a general license authorizing its use. RSL may not: (a)
promote or advertise Sprint's name or capabilities to customers of the IDDD
Business or prospective customers of the IDDD Business; (b) attempt to sell its
service using Sprint's name; or (c) represent to customers of the IDDD Business
or prospective customers of the IDDD Business that they would be Sprint
customers or that they may obtain Sprint service from RSL, except as expressly
provided herein or in other authorized agreements. RSL shall not use, and shall
return to Sprint LP promptly after the date hereof, materials relating to the
IDDD Business which bear the Sprint trademark, including any unused stationery,
other than the invoices and cover letters specifically approved for RSL's use in
this Section 3.1.
ARTICLE IV
PAYMENTS
Section 4.1 Components of Sprint LP's Charges. Sprint LP's charges to RSL
for the provision of the Services hereunder shall consist of the following
components: (i) Service Charges, (ii) Taxes, and (iii) other amounts expressly
payable to Sprint LP pursuant to this Agreement.
4
<PAGE>
Section 4.2 Service Charges. RSL shall pay to Sprint LP, for each calendar
month during the term of this Agreement, the aggregate amount of all charges for
the Services provided by Sprint LP to RSL pursuant to Section 2.1 during each
such month (the "Service Charges"). The Service Charges shall be calculated in
accordance with the schedule of rates shown on Exhibit A hereto. Such rates
include costs of all international half circuits used by Sprint LP to perform
the Services contemplated by Section 2.1.
Section 4.3 Reimbursable Expenses. RSL shall reimburse Sprint LP for the
reasonable out-of-pocket expenses which are incurred by Sprint LP on behalf of
RSL in connection with the provision of the Services hereunder (other than costs
which are included within the Service Charges) which are approved in advance by
RSL, upon the presentation of reasonably satisfactory documentation evidencing
such costs and Sprint LP's payment thereof.
Section 4.4 Taxes. There shall be added to any charges under this
Agreement, and RSL shall pay to Sprint LP, amounts equal to any Taxes, however
designated or levied, based upon such charges, the Services or this Agreement,
and any amounts in lieu thereof paid or payable by Sprint LP in respect of the
foregoing, which Sprint LP and its affiliates or Global One Communications
customarily charge customers in connection with the provision of the type of
services contemplated by Section 2.1, and shall not include any income taxes
payable by Sprint LP and other Taxes for which RSL would not be liable if such
Taxes were not paid or withheld by Sprint LP. The Parties shall cooperate with
each other in minimizing any applicable Taxes and, in connection therewith,
shall provide the other Party with any information reasonably requested by such
Party in connection with any such Taxes.
Section 4.5 Proration. All periodic charges hereunder shall be computed on
a calendar month basis and shall be prorated for any partial month.
Section 4.6 Payments Due; Late Payment Charges. Unless otherwise stated in
the Services Supplement, amounts due hereunder shall be paid within thirty (30)
days of receipt of the invoice therefor. Unless otherwise stated in the Services
Supplement, any undisputed amount due hereunder not paid within thirty (30) days
of receipt of the invoice therefor shall accrue interest from the date such
amount was due at the rate of ten percent (10%) per annum, compounded daily.
Section 4.7 Disputed Payments. If a dispute arises with respect to any
amount due hereunder, RSL shall pay when due the undisputed portion of such
amount, if any, and, if the dispute is resolved in Sprint LP's favor, promptly
pay the disputed portion (or applicable part thereof) when the dispute is
resolved without the applicable late payment charge, if such dispute arises in
good faith.
Section 4.8 Currency. All payments hereunder shall be made in U.S.
Dollars.
5
<PAGE>
Section 4.9 Invoices. Sprint LP shall provide RSL written invoices
covering all charges payable by RSL hereunder, which invoices shall describe in
reasonable detail the Services provided during the periods covered by such
invoices and the Taxes payable with respect thereto.
ARTICLE V
CONFIDENTIALITY
Section 5.1 Confidentiality. Except as otherwise provided herein, Sprint
LP and RSL each agree that all information communicated to it by the other,
whether before or after the date hereof in connection with the Services to be
provided hereunder to the IDDD Business (the "Confidential Information"), shall
be and was received in strict confidence and shall be used only for purposes of
this Agreement, and that no such Confidential Information, including without
limitation, the provisions of this Agreement, shall be disclosed by the
recipient Party, its agents, contractors or employees without the prior written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed, except as may be necessary by reason of legal, accounting or regulatory
requirements beyond the reasonable control of the recipient Party and except for
such disclosures by Sprint LP to Global One Communications or other carriers as
may be necessary in order for Sprint LP to perform its obligations hereunder.
Either Party may disclose Confidential Information to its agents, contractors,
financing sources, investors or employees who have a need to know such
information, but in such circumstances the disclosing Party shall be completely
liable for the acts of its agents, contractors, financing sources, investors and
employees and, prior to giving any such agent, contractor, financing source,
investor or employee access to Confidential Information, the recipient Party
shall advise such agent, contractor, financing source, investor or employee of
its obligation to preserve the confidentiality of the Confidential Information.
Notwithstanding the foregoing, the restrictions and obligations of this Section
5.1 shall not apply to any information which the recipient Party can establish
to have (i) become publicly available without breach of this Agreement, (ii)
been independently developed by the recipient Party outside the scope of this
Agreement without reference to Confidential Information received hereunder, or
(iii) been rightfully obtained by the recipient Party from third parties which
are not obligated to protect its confidentiality. The provisions of this Section
5.1 shall survive the expiration or termination of this Agreement for any
reason.
6
<PAGE>
ARTICLE VI
TERM AND TERMINATION
Section 6.1 Term of Agreement. This Agreement shall commence on the date
hereof and terminate (i) on December 31, 1996, (ii) upon a termination of this
Agreement pursuant to Section 6.2, 6.3 or 9.12, or (iii) upon the written
agreement of the Parties.
Section 6.2 Termination for Cause. In the event that (i) either Party
hereto materially breaches any of its duties or obligations hereunder or (ii) a
party to the Purchase Agreement, any Purchaser Ancillary Document or Seller
Ancillary Document (as each such term is defined in the Purchase Agreement) or
any Transition Services Agreement or other instrument or agreement entered into
in connection with the transactions contemplated by the Purchase Agreement, as
applicable, materially breaches any of its duties or obligations under the
Purchase Agreement or any such Purchaser Ancillary Document or Seller Ancillary
Document, which breach shall not be substantially cured within ten (10) days
after written notice is given to the breaching party specifying the breach, then
(a) Sprint LP, in the event that RSL is the breaching party or (b) RSL, in the
event that Seller, Sprint International France S.A., Sprint LP or Global One
Communications (each, a "Sprint Party") is the breaching party, may, by giving
written notice thereof to the other, terminate this Agreement as of a date
specified in such notice of termination, which date shall be no earlier than ten
(10) days after the date of such notice.
Section 6.3 Termination for Bankruptcy. In the event that RSL or a Sprint
Party (a) is unable to pay its debts generally as they become due or is declared
bankrupt or insolvent,(b) is the subject of any proceedings relating to its
liquidation or insolvency or for the appointment of a receiver or similar
officer for it which results in the entry of an order for relief or such
adjudication or appointment is not dismissed, discharged or bonded within a
reasonable period of time thereafter, (c) makes an assignment for the benefit of
all or substantially all of its creditors, or (d) enters into an agreement for
the composition, extension or readjustment of all or substantially all of its
obligations, then (i) Sprint LP, in the case of any such event affecting RSL,
and (ii) RSL, in the case of any such event affecting a Sprint Party, may, by
giving written notice thereof to the other, terminate this Agreement as of a
date specified in the notice of termination, which date shall be no earlier than
ten (10) days after the date of such notice.
Section 6.4 Effect of Termination. Except as otherwise provided herein, in
the event of termination of this Agreement, all rights and obligations of the
Parties hereunder shall terminate as of the effective date of such termination,
except that (i) such termination shall not constitute a waiver of any rights
that a Party may have by reason of a breach of this Agreement and (ii) the
provisions of Section 3.1 and this Section 6.4 and of Articles V and VIII shall
continue in full force and effect. Notwithstanding the foregoing, if RSL has the
right under Section 6.2 hereof to terminate this Agreement, RSL may, in lieu of
terminating the entire agreement, terminate the provisions of Articles II or
III, in which case the provisions so
7
<PAGE>
terminated shall have no further force or effect and this Agreement will remain
in effect as to all other provisions.
ARTICLE VII
LIMITED WARRANTY
Section 7.1 DISCLAIMER OF GENERAL WARRANTY. EXCEPT AS SET FORTH IN SECTION
7.2 OR ANY SERVICES SUPPLEMENT, SPRINT LP MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, CONCERNING THE SERVICES PROVIDED HEREUNDER, INCLUDING ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR
OTHERWISE.
Section 7.2. Limited Warranty. Sprint LP represents and warrants that (i)
it has the power, right and authority to provide or cause Global One
Communications to provide the Services and that Sprint LP or its affiliates or
Global One Communications are in the business of providing services in the
nature of the Services, (ii) each Service provided to RSL hereunder shall be of
at least the same quality as the same service that Sprint LP provides to its
best customers within one hundred and eighty (180) days prior to the provision
of the Service in question, (iii) it has the power, right and authority to
permit RSL to use the Sprint trademark as contemplated under this Agreement and
(iv) this Agreement is a valid and binding agreement of Sprint LP, enforceable
against it in accordance with its terms.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnification Obligations of Sprint LP. From and after the
date hereof, Sprint LP shall indemnify and hold harmless RSL and its
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "RSL
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) Any breach of any representation, warranty, covenant, agreement or
undertaking made by Sprint LP in this Agreement or in the performance of its
obligations hereunder; or
8
<PAGE>
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by Sprint
LP in this Agreement or in the performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the RSL Indemnified Parties described in this Section 8.1 as to
which the RSL Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "RSL Losses."
Section 8.2. Indemnification Obligations of RSL. From and after the date
hereof, RSL shall indemnify and hold harmless Sprint LP and its subsidiaries and
affiliates, each of their respective officers, directors, employees, agents and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "Sprint LP Indemnified Parties") from,
against and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys' fees and
expenses) arising out of or relating to:
(a) Any breach of any covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder.
The claims, liabilities obligations, losses, costs, expenses, penalties, fines
and damages of the Sprint LP Indemnified Parties described in this Section 8.2
as to which the Sprint LP Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "Sprint LP Losses."
Section 8.3. Indemnification Procedure.
(a) Promptly after receipt by an RSL Indemnified Party or a Sprint LP
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being or may be
sought hereunder, such Indemnified Party shall notify RSL or Sprint LP,
whichever is the appropriate indemnifying Party hereunder (the "Indemnifying
Party"), of such complaint or of the commencement of such action or proceeding;
provided, however, that the failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party from liability for such claim arising
otherwise than under this Agreement and such failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party from liability which the
Indemnifying Party may have hereunder with respect to such claim if, but only
if, and only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with
9
<PAGE>
respect to such claim. The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party, to assume the defense of such action or
proceeding, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of the reasonable fees and disbursements of
such counsel. In the event, however, that the Indemnifying Party declines or
fails to assume the defense of the action or proceeding or to employ counsel
reasonably satisfactory to the Indemnified Party,in either case in a timely
manner, then such Indemnified Party may employ counsel to represent or defend it
in any such action or proceeding and the Indemnifying Party shall pay the
reasonable fees and disbursements of such counsel as incurred; provided,
however, that the Indemnifying Party shall not be required to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
jurisdiction in any single action or proceeding. In any action or proceeding
with respect to which indemnification is being sought hereunder, the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to retain its
own counsel at such Party's own expense. The Indemnifying Party or the
Indemnified Party, as the case may be, shall at all times use reasonable efforts
to keep the Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the defense of
which they are maintaining and to cooperate in good faith with each other with
respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
such settlement, compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not, without the prior written consent of the Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
Section 8.4. Claims Period. Except as provided in this Section 8.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the
10
<PAGE>
date hereof and shall terminate two (2) years after the date hereof. No
Indemnified Party shall be entitled to make any claim for indemnification
hereunder after the appropriate Claims Period; provided, however, that if prior
to the close of business on the last day of the Claims Period, an Indemnifying
Party shall have been properly notified of a claim for indemnity hereunder and
such claim shall not have been finally resolved or disposed of at such date, the
basis of such claim shall continue to survive with respect to such claim and
shall remain a basis for indemnity hereunder with respect to such claim until
such claim is finally resolved or disposed of in accordance with the terms
hereof.
Section 8.5. Maximum Liability. Notwithstanding anything in this Agreement
to the contrary, the maximum aggregate liability of Sprint LP for RSL Losses and
of RSL for Sprint LP Losses shall not exceed the following amounts (as
applicable):
(a) in the case of a claim made pursuant to Section 8.1 or 8.2 hereof in
respect of a breach by either Party of its obligations under Section 3.1. an
amount equal to [*];
(b) in the case of a claim made pursuant to Section 8.2(a) in respect
of a breach by Sprint LP of its obligations under Section 2.1, (i) an amount
equal to [*] if such breach occurs during the period commencing on the date
hereof and ending 120 days after the date hereof and (ii) an amount equal to
the "Credited Amount" (as hereinafter defined) payable as provided in this
Section 8.5 if such breach occurs after 120 days after the date hereof;
(c) in the case of a claim made pursuant to Section 8.1(b) in respect of a
breach by Sprint LP of its obligations under Section 2.1, an amount equal to
[*]; and
(d) in the case of a claim for indemnification pursuant to Section 8.1 or
8.2 in respect of a breach by Sprint LP or RSL of any obligation hereunder which
is not described in clause (a), (b) or (c) above, an amount equal [*]
For purposes of this Agreement, the "Credited Amount" shall be equal to
the aggregate Service Charges which were paid or payable by RSL to Sprint LP in
respect of the Services hereunder during the period during which Sprint LP
failed to provide the Services as required hereunder, which amount shall be
credited by Sprint LP against future Service Charges payable by RSL to Sprint LP
hereunder commencing with the invoice for the billing period following such
breach and continuing until the Credited Amount has been credited by Sprint LP
in full against the Service Charges or reimbursed to RSL in accordance with
customary practice.
Section 8.6. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Party
irrevocably designates and appoints each of the parties set forth under its name
below as its authorized agent upon which process may be served in any suit or
proceeding arising out of or relating to this Agreement that may be instituted
in any state or federal court in New York, New York.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
11
<PAGE>
Sprint LP:
Sprint Communications Company L.P.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
RSL:
RSL Com France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each Party agrees that service of process upon the above-designated
individuals shall be deemed in every respect effective service of process upon
such Party in any such suit or proceeding. Each Party further agrees to take any
and all action reasonably requested by a Party, including the execution and
filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of the above-designated individuals in
full force and effect so long as this Agreement shall be in effect. The
foregoing shall not limit the rights of any Party to serve process in any other
matter permitted by law.
(b) To the extent that any Party has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each Party
hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The Parties hereto hereby agree that the appropriate forum and venue
for any disputes between any of the Parties hereto arising out of this Agreement
shall be any state or federal court in New York, New York and each of the
Parties hereto hereby submits to the personal jurisdiction of any such court.
The foregoing shall not limit the rights of any Party to obtain execution of
judgment in any other jurisdiction. The Parties further agree, to the extent
permitted by law, that a final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
12
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be given in the manner provided in the Purchase Agreement
and to the addresses provided in Exhibit C hereto.
Section 9.2 Assignment; Subcontracting. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of the other
Party; provided that Sprint LP may subcontract or assign to any affiliate and,
with respect to the provision of the Services only, to any third party its
obligations and rights hereunder provided in each case that Sprint LP shall
remain responsible for assuring that the subcontractor's or assignee's
performance conforms to the requirements hereof.
Section 9.3 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be deemed
restated to reflect the original intention of the Parties as nearly as possible
in accordance with applicable law, and, if capable of substantial performance,
the remaining provisions of this Agreement shall be enforced as if this
Agreement was entered into without the invalid provision.
Section 9.4 Attorneys' Fees. In the event attorneys' fees or other
out-of-pocket costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
out-of-pocket costs incurred therein;
Section 9.5 Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
Section 9.6 Relationship of Parties. Sprint LP, in furnishing the Services
to RSL hereunder, is acting only as an independent contractor. Nothing set forth
in this Agreement shall be construed to create the relationship of principal and
agent between Sprint LP and RSL. Sprint LP shall have no authority, express or
implied, to enter into contracts on behalf of RSL. Neither Party shall act or
attempt to act to represent itself, directly or by implication, as an agent of
the other Party or in any manner assume or create, or attempt to assume or
create, an obligation of or in the name of, the other Party.
13
<PAGE>
Section 9.7 Approvals and Similar Actions. Where agreement, approval,
acceptance, consent or similar action by either Party hereto is required by any
provision of this Agreement, such action shall not be unreasonably delayed or
withheld.
Section 9.8 Modification; Waiver. This Agreement may be modified only
by a written instrument duly executed by or on behalf of each Party hereto. No
delay or omission by either Party hereto to exercise any right or power
hereunder shall impair such right or power or be construed to be a waiver
thereof. A waiver by either of the Parties hereto of any of the obligations to
be performed by the other or any breach thereof shall not be construed to be a
waiver of any succeeding breach thereof or of any other obligation herein
contained.
Section 9.9 Remedies. Each Party agrees that the remedies provided in
Articles VI and VIII shall constitute the sole and exclusive remedies of a Party
against another Party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other Party in this Agreement.
Nothing in this Section 9.9 shall prevent a Party hereto from seeking and
obtaining equitable relief, including, but not limited to, injunctive relief and
specific performance in respect of any such breach.
Section 9.10 No Third Party Beneficiaries. The Parties agree that this
Agreement is for the sole benefit of the Parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee of
either Party hereto, and that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement.
Section 9.11 Governing Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York without
reference to New York's choice of law rules. This Agreement supersedes all
negotiations, agreements and understandings among the Parties or any of
their affiliates and constitutes the entire agreement among the Parties
hereto with respect to the subject matter hereof; provided, however, that
nothing herein shall affect any other written agreements or understandings
entered into by the Parties or any of their affiliates contemporaneously
with the execution and delivery of this Agreement, all of which shall
remain in full force and effect.
(b) This Agreement may be amended by the Parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended,
modified or supplemented except by written agreement executed by each of
the Parties hereto.
Section 9.12 Force Majeure. If either Party to this Agreement shall be
prevented, hindered or delayed in the performance or observance of any of its
obligations hereunder by reason of any circumstances beyond its reasonable
control, and such delay could not have been prevented by reasonable precautions
and cannot reasonably be circumvented by the Party through the use of alternate
sources, work-around plans, or other means (a "Force Majeure"),
14
<PAGE>
then such Party shall be excused from any other further performance or
observance of the obligations so affected for so long as such circumstances
prevail and such Party continues to use its best efforts to recommence
performance or observance whenever and to whatever extent possible without
delay. Any Party so delayed in its performance shall immediately notify the
other and shall describe at a reasonable level of detail the circumstances
causing such delay. Notwithstanding the foregoing, should a Party be unable to
perform any of its obligations hereunder for a period of more than seven
consecutive days by reason of a Force Majeure, the other party, at its option,
shall have the right to terminate this Agreement in whole or solely with respect
to the section hereof under which the non-performing Party has been unable to
perform its obligations, in which case the provision so terminated shall have no
further force or effect and this Agreement shall remain in effect as to all
other provisions.
15
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective officers.
SPRINT COMMUNICATIONS COMPANY L.P.
By: US TELECOM, INC.,
as General Partner
By: /s/ Don A. Jensen
-----------------------------------
Don A Jensen, Vice President-Law
By: /s/ Dennis Piper
-----------------------------------
Dennis Piper, Attorney-in-Fact
RSL COM FRANCE S.A.
By: /s/ Richard Williams
-----------------------------------
Richard Williams, President
By: /s/ Itzhak Fisher
-----------------------------------
Itzhak Fisher, Attorney-in-Fact
16
<PAGE>
EXHIBIT A
DESCRIPTION OF COUNTRIES AND RATES
See the attached list of rates by country.
A-1
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Afghanistan N/A
- --------------------------------------------------------------------------------
Alaska [*]
- --------------------------------------------------------------------------------
Albania [*]
- --------------------------------------------------------------------------------
Algeria [*]
- --------------------------------------------------------------------------------
Andorra [*]
- --------------------------------------------------------------------------------
Angola [*]
- --------------------------------------------------------------------------------
Anguilla [*]
- --------------------------------------------------------------------------------
Antarctic Territories N/A
- --------------------------------------------------------------------------------
Antigua [*]
- --------------------------------------------------------------------------------
Antilles (Netherlands) [*]
- --------------------------------------------------------------------------------
Argentina [*]
- --------------------------------------------------------------------------------
Armenia [*]
- --------------------------------------------------------------------------------
Aruba [*]
- --------------------------------------------------------------------------------
Ascension Island [*]
- --------------------------------------------------------------------------------
Astelit N/A
- --------------------------------------------------------------------------------
Australia [*]
- --------------------------------------------------------------------------------
Austria [*]
- --------------------------------------------------------------------------------
Azerbaijan [*]
- --------------------------------------------------------------------------------
Azores [*]
- --------------------------------------------------------------------------------
Bahamas [*]
- --------------------------------------------------------------------------------
Bahrain [*]
- --------------------------------------------------------------------------------
Balearics N/A
- --------------------------------------------------------------------------------
Bangladesh [*]
- --------------------------------------------------------------------------------
Barbados [*]
- --------------------------------------------------------------------------------
BCLM N/A
- --------------------------------------------------------------------------------
Belarus [*]
- --------------------------------------------------------------------------------
Belgium [*]
- --------------------------------------------------------------------------------
Belize [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 1
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benin [*]
- --------------------------------------------------------------------------------
Bermuda [*]
- --------------------------------------------------------------------------------
Bhutan [*]
- --------------------------------------------------------------------------------
Bolivia [*]
- --------------------------------------------------------------------------------
Bosnia-Herzegovina [*]
- --------------------------------------------------------------------------------
Botswana [*]
- --------------------------------------------------------------------------------
Brazil [*]
- --------------------------------------------------------------------------------
British Virgin Islands [*]
- --------------------------------------------------------------------------------
Brunei Darussalam [*]
- --------------------------------------------------------------------------------
Bulgaria [*]
- --------------------------------------------------------------------------------
Burkina Faso [*]
- --------------------------------------------------------------------------------
Burundi [*]
- --------------------------------------------------------------------------------
Cambodia [*]
- --------------------------------------------------------------------------------
Cameroon [*]
- --------------------------------------------------------------------------------
Canada [*]
- --------------------------------------------------------------------------------
Canary Islands [*]
- --------------------------------------------------------------------------------
Cape Verde Islands [*]
- --------------------------------------------------------------------------------
Caribbean N/A
- --------------------------------------------------------------------------------
Cayman Islands [*]
- --------------------------------------------------------------------------------
Central African Republic [*]
- --------------------------------------------------------------------------------
Chad [*]
- --------------------------------------------------------------------------------
Chatham Islands [*]
- --------------------------------------------------------------------------------
Chile [*]
- --------------------------------------------------------------------------------
China [*]
- --------------------------------------------------------------------------------
Christmas Island (I.O.) [*]
- --------------------------------------------------------------------------------
Cocos Island [*]
- --------------------------------------------------------------------------------
Colombia [*]
- --------------------------------------------------------------------------------
Combellga N/A
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 2
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cominica [*]
- --------------------------------------------------------------------------------
Comoro Islands/ Mayotte [*]
- --------------------------------------------------------------------------------
Comstar N/A
- --------------------------------------------------------------------------------
Congo [*]
- --------------------------------------------------------------------------------
Cook Island [*]
- --------------------------------------------------------------------------------
Costa Rica [*]
- --------------------------------------------------------------------------------
Croatia Republic [*]
- --------------------------------------------------------------------------------
Cuba [*]
- --------------------------------------------------------------------------------
Cyprus [*]
- --------------------------------------------------------------------------------
Czech. Republic [*]
- --------------------------------------------------------------------------------
Denmark [*]
- --------------------------------------------------------------------------------
Diego Garcia [*]
- --------------------------------------------------------------------------------
Djibouti [*]
- --------------------------------------------------------------------------------
Dominican Republic [*]
- --------------------------------------------------------------------------------
Ecudor [*]
- --------------------------------------------------------------------------------
Egypt [*]
- --------------------------------------------------------------------------------
El Salvador [*]
- --------------------------------------------------------------------------------
Equatorial Guinea [*]
- --------------------------------------------------------------------------------
Eritrea [*]
- --------------------------------------------------------------------------------
Estonia [*]
- --------------------------------------------------------------------------------
Ethioppia [*]
- --------------------------------------------------------------------------------
Falkland Islands [*]
- --------------------------------------------------------------------------------
Faroes (via Denmark) [*]
- --------------------------------------------------------------------------------
Fiji [*]
- --------------------------------------------------------------------------------
Finland [*]
- --------------------------------------------------------------------------------
France/Germany [*]
- --------------------------------------------------------------------------------
French Antilles [*]
- --------------------------------------------------------------------------------
French Guiana [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 3
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
French Polynesia [*]
- --------------------------------------------------------------------------------
Gabon [*]
- --------------------------------------------------------------------------------
Gambia [*]
- --------------------------------------------------------------------------------
Georgia [*]
- --------------------------------------------------------------------------------
Ghana [*]
- --------------------------------------------------------------------------------
Gibraltar [*]
- --------------------------------------------------------------------------------
Greece [*]
- --------------------------------------------------------------------------------
Greenland [*]
- --------------------------------------------------------------------------------
Greneda (Carracou) [*]
- --------------------------------------------------------------------------------
Guadeloupe [*]
- --------------------------------------------------------------------------------
Guam [*]
- --------------------------------------------------------------------------------
Guantanamo [*]
- --------------------------------------------------------------------------------
Guatemala [*]
- --------------------------------------------------------------------------------
Guinea [*]
- --------------------------------------------------------------------------------
Guinea Bissau [*]
- --------------------------------------------------------------------------------
Guyana [*]
- --------------------------------------------------------------------------------
Haiti [*]
- --------------------------------------------------------------------------------
Hawaii [*]
- --------------------------------------------------------------------------------
Hondoras [*]
- --------------------------------------------------------------------------------
Hong Kong [*]
- --------------------------------------------------------------------------------
Hungary [*]
- --------------------------------------------------------------------------------
Iceland [*]
- --------------------------------------------------------------------------------
India [*]
- --------------------------------------------------------------------------------
Indonesia [*]
- --------------------------------------------------------------------------------
Iran [*]
- --------------------------------------------------------------------------------
Iraq [*]
- --------------------------------------------------------------------------------
Ireland [*]
- --------------------------------------------------------------------------------
Israel [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 4
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Italy [*]
- --------------------------------------------------------------------------------
Ivory Coast [*]
- --------------------------------------------------------------------------------
Jamica [*]
- --------------------------------------------------------------------------------
Japan [*]
- --------------------------------------------------------------------------------
Jordan [*]
- --------------------------------------------------------------------------------
Kampuchea [*]
- --------------------------------------------------------------------------------
Kazakhstan [*]
- --------------------------------------------------------------------------------
Kenya [*]
- --------------------------------------------------------------------------------
Kirghizia N/A
- --------------------------------------------------------------------------------
Kiribati [*]
- --------------------------------------------------------------------------------
Kuwait [*]
- --------------------------------------------------------------------------------
Kyrgyzstan [*]
- --------------------------------------------------------------------------------
Laos [*]
- --------------------------------------------------------------------------------
Latvia [*]
- --------------------------------------------------------------------------------
Lebanon [*]
- --------------------------------------------------------------------------------
Lechtenstein [*]
- --------------------------------------------------------------------------------
Lesotho [*]
- --------------------------------------------------------------------------------
Liberia [*]
- --------------------------------------------------------------------------------
Libya [*]
- --------------------------------------------------------------------------------
Lithuania [*]
- --------------------------------------------------------------------------------
Luxembourg [*]
- --------------------------------------------------------------------------------
Macao [*]
- --------------------------------------------------------------------------------
Macedonia [*]
- --------------------------------------------------------------------------------
Madagascar [*]
- --------------------------------------------------------------------------------
Madeira [*]
- --------------------------------------------------------------------------------
Malawi [*]
- --------------------------------------------------------------------------------
Malaysia [*]
- --------------------------------------------------------------------------------
Maldive Islands [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 5
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mali [*]
- --------------------------------------------------------------------------------
Malta [*]
- --------------------------------------------------------------------------------
Marshall Island [*]
- --------------------------------------------------------------------------------
Martinique [*]
- --------------------------------------------------------------------------------
Mauritania [*]
- --------------------------------------------------------------------------------
Mauritius/Rodriguez Island [*]
- --------------------------------------------------------------------------------
Mayotte Island [*]
- --------------------------------------------------------------------------------
Mexico [*]
- --------------------------------------------------------------------------------
Micronesia [*]
- --------------------------------------------------------------------------------
Midway Islands N/A
- --------------------------------------------------------------------------------
Moldavia [*]
- --------------------------------------------------------------------------------
Monaco [*]
- --------------------------------------------------------------------------------
Mongolia [*]
- --------------------------------------------------------------------------------
Monserrat [*]
- --------------------------------------------------------------------------------
Morocco [*]
- --------------------------------------------------------------------------------
Mozambique [*]
- --------------------------------------------------------------------------------
Mustique [*]
- --------------------------------------------------------------------------------
Myanmar (Burma) [*]
- --------------------------------------------------------------------------------
Nakhodka N/A
- --------------------------------------------------------------------------------
Namibia [*]
- --------------------------------------------------------------------------------
Nauru [*]
- --------------------------------------------------------------------------------
Nepal [*]
- --------------------------------------------------------------------------------
Netherlands [*]
- --------------------------------------------------------------------------------
Nevis [*]
- --------------------------------------------------------------------------------
New Caledonia [*]
- --------------------------------------------------------------------------------
New Zealand [*]
- --------------------------------------------------------------------------------
Nicaragua [*]
- --------------------------------------------------------------------------------
Niger [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 6
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nigeria [*]
- --------------------------------------------------------------------------------
Niue Island [*]
- --------------------------------------------------------------------------------
Norfold Island [*]
- --------------------------------------------------------------------------------
North Korea [*]
- --------------------------------------------------------------------------------
North Mariana Island [*]
- --------------------------------------------------------------------------------
Norway [*]
- --------------------------------------------------------------------------------
Oman [*]
- --------------------------------------------------------------------------------
Pakistan [*]
- --------------------------------------------------------------------------------
Palau [*]
- --------------------------------------------------------------------------------
Panama [*]
- --------------------------------------------------------------------------------
Papua New Guinea [*]
- --------------------------------------------------------------------------------
Paraguay [*]
- --------------------------------------------------------------------------------
Peru [*]
- --------------------------------------------------------------------------------
Philippines [*]
- --------------------------------------------------------------------------------
Picairn Islands N/A
- --------------------------------------------------------------------------------
Poland [*]
- --------------------------------------------------------------------------------
Portugal [*]
- --------------------------------------------------------------------------------
PPalm Island [*]
- --------------------------------------------------------------------------------
Puerto Rico [*]
- --------------------------------------------------------------------------------
Qatar [*]
- --------------------------------------------------------------------------------
Radius N/A
- --------------------------------------------------------------------------------
Reunion Island [*]
- --------------------------------------------------------------------------------
Rodrigues Islands [*]
- --------------------------------------------------------------------------------
Romania [*]
- --------------------------------------------------------------------------------
Russia [*]
- --------------------------------------------------------------------------------
Rwanda [*]
- --------------------------------------------------------------------------------
Saint Helena [*]
- --------------------------------------------------------------------------------
Saint Kitts [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 7
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Saint Lucia [*]
- --------------------------------------------------------------------------------
Saint Pierre & Miquelon [*]
- --------------------------------------------------------------------------------
Saint Vincent [*]
- --------------------------------------------------------------------------------
Saipan [*]
- --------------------------------------------------------------------------------
Sakhalin N/A
- --------------------------------------------------------------------------------
Samoa (U.S.) [*]
- --------------------------------------------------------------------------------
Samoa (Western) [*]
- --------------------------------------------------------------------------------
San Marino [*]
- --------------------------------------------------------------------------------
Sao Tome Et Principe [*]
- --------------------------------------------------------------------------------
Saudi Arabia [*]
- --------------------------------------------------------------------------------
Senegal [*]
- --------------------------------------------------------------------------------
Serbia [*]
- --------------------------------------------------------------------------------
Seychelles [*]
- --------------------------------------------------------------------------------
Sierra Leone [*]
- --------------------------------------------------------------------------------
Singapore [*]
- --------------------------------------------------------------------------------
Slovakia [*]
- --------------------------------------------------------------------------------
Slovenia [*]
- --------------------------------------------------------------------------------
Slovenia Republic N/A
- --------------------------------------------------------------------------------
Soloman Island [*]
- --------------------------------------------------------------------------------
Somalia [*]
- --------------------------------------------------------------------------------
South Africa [*]
- --------------------------------------------------------------------------------
South Korea [*]
- --------------------------------------------------------------------------------
Spain [*]
- --------------------------------------------------------------------------------
Sri Lanka [*]
- --------------------------------------------------------------------------------
Sudan [*]
- --------------------------------------------------------------------------------
Surinam [*]
- --------------------------------------------------------------------------------
Swaziland [*]
- --------------------------------------------------------------------------------
Sweden [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 8
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Switzerland [*]
- --------------------------------------------------------------------------------
Syria [*]
- --------------------------------------------------------------------------------
Taiwan [*]
- --------------------------------------------------------------------------------
Tajikistan [*]
- --------------------------------------------------------------------------------
Tanzania [*]
- --------------------------------------------------------------------------------
Thailand [*]
- --------------------------------------------------------------------------------
Togo [*]
- --------------------------------------------------------------------------------
Tokelau N/A
- --------------------------------------------------------------------------------
Tonga [*]
- --------------------------------------------------------------------------------
Trinidad [*]
- --------------------------------------------------------------------------------
Tristan da Cunha [*]
- --------------------------------------------------------------------------------
Tunisia [*]
- --------------------------------------------------------------------------------
Turkey [*]
- --------------------------------------------------------------------------------
Turkmenistan [*]
- --------------------------------------------------------------------------------
Turks and Caicos [*]
- --------------------------------------------------------------------------------
Tuvalu [*]
- --------------------------------------------------------------------------------
Uganda [*]
- --------------------------------------------------------------------------------
UK [*]
- --------------------------------------------------------------------------------
Ukraine [*]
- --------------------------------------------------------------------------------
Union Island [*]
- --------------------------------------------------------------------------------
United Arab Emirates [*]
- --------------------------------------------------------------------------------
Uruguay [*]
- --------------------------------------------------------------------------------
USA [*]
- --------------------------------------------------------------------------------
Uzbekistan [*]
- --------------------------------------------------------------------------------
Vanuatu [*]
- --------------------------------------------------------------------------------
Vatican City [*]
- --------------------------------------------------------------------------------
Venezuela [*]
- --------------------------------------------------------------------------------
Viet Nam [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 9
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Virgin Islands (U.S.) [*]
- --------------------------------------------------------------------------------
Wake Islands N/A
- --------------------------------------------------------------------------------
Wallis Islands [*]
- --------------------------------------------------------------------------------
Yemen (Republic of) [*]
- --------------------------------------------------------------------------------
Yugoslavia [*]
- --------------------------------------------------------------------------------
Zaire [*]
- --------------------------------------------------------------------------------
Zambia [*]
- --------------------------------------------------------------------------------
Zimbabwe [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 10
<PAGE>
EXHIBIT B
See the attached form of invoice.
B-1
<PAGE>
[LETTERHEAD OF SPRINT]
SPRINT TELECOMMUNICATIONS FRANCE INC.
[ILLEGIBLE] Avenue Charles de Gaulle
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE]
FACTURE DE
SERVICES DE
TELECOMMUNICATIONS
[ILLEGIBLE]
[LOGO] Sprint
[ILLEGIBLE]
[ILLEGIBLE]
<PAGE>
EXHIBIT C
ADDRESSES FOR NOTICES
TO RSL:
RSL Com France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
Telecopy No.: (212) 572-3825
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohl, Esq.
Telecopy No.: (212) 940-8776
To Sprint LP:
Sprint Communications Company L.P
c/o Sprint Corporation
2330 Shawnee Mission Parkway, East Wing
Westwood, KA 66205
Attn.: J. Richard Devlin, Esq.
Telecopy: (913) 624-6000
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, GA 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No.: (404) 572-5145
C-1
<PAGE>
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing.
C-2
<PAGE>
Exhibit 10.30
Exhibit 10.30 to Registration Statement CONFIDENTIAL INFORMATION OMITTED
on Form S-4 of RSL Communications PLC WHERE INDICATED BY "[*]" AND FILED
and RSL Communications, Ltd. SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER
RULE 406 OF THE SECURITIES ACT
OF 1933
AMENDMENT NO. 1
TO THE TRANSITION SERVICES AGREEMENT
THIS AMENDMENT NO. 1 TO THE TRANSITION SERVICES AGREEMENT among Sprint
Communications Company L.P., a Delaware limited partnership ("Sprint LP"), RSL
Com France S.A., a French corporation ("RSL"), and Sprint International France
S.A., a French corporation ("SIF") takes effect as of May 8, 1996.
WHEREAS Sprint LP and RSL have entered into a Transition Services Agreement
("the Agreement") as of May 8, 1996, in connection with the purchase of the IDDD
Business (as defined in the Agreement) by RSL; and
WHEREAS Sprint LP, SIF and RSL acknowledge and agree that the provision of
the international half circuits used in connection with the IDDD Business to RSL
should be provided by SIF;
NOW THEREFORE, it is agreed as follows:
1. Additional Party to the Agreement. SIF is hereby made a party to the
Agreement. Except with respect to Section 3.1 of the Agreement, wherever the
term "Sprint LP" appears such term shall refer to both Sprint LP and SIF.
2. Section 2.1. Section 2.1 of the Agreement is deleted in its entirety and
the following is substituted therefor:
During the term of this Agreement and in accordance with its terms and
conditions, (i) Sprint LP shall terminate or provide for the termination of
long distance voice telephone traffic which originates from the IDDD
Business through the Sprint network or the network of Global One
Communications in the countries listed on Exhibit A hereto and (ii) Sprint
International France S.A. shall provide to RSL the use of international
half circuits for long distance voice telephone traffic which originates
from the IDDD Business through the Sprint network or the network of Global
One Communications (collectively, the "Services"). Neither Sprint LP nor
Sprint International France S.A. shall be obligated to transit or hub any
traffic through the switch that services the IDDD Business other than
traffic originated in France.
<PAGE>
3. Section 4.2. Section 4.2 of the Agreement is deleted in its entirety and
the following is substituted therefor:
RSL shall pay (i) to Sprint LP the amount due under paragraph (1) of
Exhibit A for each calendar month during the term of this Agreement for the
provision of the Services provided by Sprint LP pursuant to Section 2.1 and
(ii) to Sprint International France S.A. the amount due under paragraph (2)
of Exhibit A for each calendar month during the term of this Agreement for
the provision of the Services provided by Sprint International France S.A.
pursuant to Section 2.1 (collectively, the "Service Charges").
4. Effect of Amendment No. 1. Notwithstanding anything contained herein, in
no event shall the aggregate amount of Service Charges calculated under the
Agreement as amended by this Amendment No. 1 for any given period of time exceed
the aggregate amount of Services Charges calculated under the Agreement prior to
the execution of this Amendment No. 1 for the same period of time.
5. Exhibit A. Exhibit A is deleted in its entirety and the Amended and
Restated Exhibit A attached hereto is substituted therefor.
Except as amended herein, the provisions of the Agreement shall remain in
full force and effect.
[Signatures on next page]
-2-
<PAGE>
IN WITNESS WHEREOF, each of SIF, Sprint LP and SRL has caused its duly
authorized representative to execute this Amendment No. 1 as of May 8, 1996.
SPRINT COMMUNICATIONS COMPANY L.P.
By: US Telecom, Inc., as General Partner
By: /s/ Don A. Jensen
---------------------------------------
Name: Don A. Jensen
Title: Vice President-Law
By: /s/ Dennis Piper
---------------------------------------
Name: Dennis Piper
Title: Attorney in Fact
SPRINT INTERNATIONAL FRANCE S.A.
By: /s/ Sprint International France S.A.
---------------------------------------
Name: ___________________________
Title: ___________________________
RSL COM FRANCE S.A.
By: /s/ RSL Com France S.A.
---------------------------------------
Name: ___________________________
Title: ___________________________
-3-
<PAGE>
AMENDED AND RESTATED EXHIBIT A
1. Service Charges due to Sprint LP:
Service Charges due to Sprint LP are calculated in accordance with the
attached list of termination rates and then reduced by the amount of Service
Charges invoiced to RSL by Sprint International France S.A. for use of the
international half circuits.
2. Service Charges due to Sprint International France S.A.:
Service Charges due to Sprint International France S.A. for use of the
international half circuits shall be determined by reference to the volume of
the traffic but shall not exceed a value of [*] for any given month.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Afghanistan N/A
- --------------------------------------------------------------------------------
Alaska [*]
- --------------------------------------------------------------------------------
Albania [*]
- --------------------------------------------------------------------------------
Algeria [*]
- --------------------------------------------------------------------------------
Andorra [*]
- --------------------------------------------------------------------------------
Angola [*]
- --------------------------------------------------------------------------------
Anguilla [*]
- --------------------------------------------------------------------------------
Antarctic Territories N/A
- --------------------------------------------------------------------------------
Antigua [*]
- --------------------------------------------------------------------------------
Antilles (Netherlands) [*]
- --------------------------------------------------------------------------------
Argentina [*]
- --------------------------------------------------------------------------------
Armenia [*]
- --------------------------------------------------------------------------------
Aruba [*]
- --------------------------------------------------------------------------------
Ascension Island [*]
- --------------------------------------------------------------------------------
Astelit N/A
- --------------------------------------------------------------------------------
Australia [*]
- --------------------------------------------------------------------------------
Austria [*]
- --------------------------------------------------------------------------------
Azerbaijan [*]
- --------------------------------------------------------------------------------
Azores [*]
- --------------------------------------------------------------------------------
Bahamas [*]
- --------------------------------------------------------------------------------
Bahrain [*]
- --------------------------------------------------------------------------------
Balearics N/A
- --------------------------------------------------------------------------------
Bangladesh [*]
- --------------------------------------------------------------------------------
Barbados [*]
- --------------------------------------------------------------------------------
BCLM N/A
- --------------------------------------------------------------------------------
Belarus [*]
- --------------------------------------------------------------------------------
Belgium [*]
- --------------------------------------------------------------------------------
Belize [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 1
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benin [*]
- --------------------------------------------------------------------------------
Bermuda [*]
- --------------------------------------------------------------------------------
Bhutan [*]
- --------------------------------------------------------------------------------
Bolivia [*]
- --------------------------------------------------------------------------------
Bosnia-Herzegovina [*]
- --------------------------------------------------------------------------------
Botswana [*]
- --------------------------------------------------------------------------------
Brazil [*]
- --------------------------------------------------------------------------------
British Virgin Islands [*]
- --------------------------------------------------------------------------------
Brunei Darussalam [*]
- --------------------------------------------------------------------------------
Bulgaria [*]
- --------------------------------------------------------------------------------
Burkina Faso [*]
- --------------------------------------------------------------------------------
Burundi [*]
- --------------------------------------------------------------------------------
Cambodia [*]
- --------------------------------------------------------------------------------
Cameroon [*]
- --------------------------------------------------------------------------------
Canada [*]
- --------------------------------------------------------------------------------
Canary Islands [*]
- --------------------------------------------------------------------------------
Cape Verde Islands [*]
- --------------------------------------------------------------------------------
Caribbean N/A
- --------------------------------------------------------------------------------
Cayman Islands [*]
- --------------------------------------------------------------------------------
Central African Republic [*]
- --------------------------------------------------------------------------------
Chad [*]
- --------------------------------------------------------------------------------
Chatham Islands [*]
- --------------------------------------------------------------------------------
Chile [*]
- --------------------------------------------------------------------------------
China [*]
- --------------------------------------------------------------------------------
Christmas Island (I.O.) [*]
- --------------------------------------------------------------------------------
Cocos Island [*]
- --------------------------------------------------------------------------------
Colombia [*]
- --------------------------------------------------------------------------------
Combellga N/A
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 2
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cominica [*]
- --------------------------------------------------------------------------------
Comoro Islands/Mayotte [*]
- --------------------------------------------------------------------------------
Comstar N/A
- --------------------------------------------------------------------------------
Congo [*]
- --------------------------------------------------------------------------------
Cook Island [*]
- --------------------------------------------------------------------------------
Costa Rica [*]
- --------------------------------------------------------------------------------
Croatia Republic [*]
- --------------------------------------------------------------------------------
Cuba [*]
- --------------------------------------------------------------------------------
Cyprus [*]
- --------------------------------------------------------------------------------
Czech. Republic [*]
- --------------------------------------------------------------------------------
Denmark [*]
- --------------------------------------------------------------------------------
Diego Garcia [*]
- --------------------------------------------------------------------------------
Djibouti [*]
- --------------------------------------------------------------------------------
Dominican Republic [*]
- --------------------------------------------------------------------------------
Ecudor [*]
- --------------------------------------------------------------------------------
Egypt [*]
- --------------------------------------------------------------------------------
El Salvador [*]
- --------------------------------------------------------------------------------
Equatorial Guinea [*]
- --------------------------------------------------------------------------------
Eritrea [*]
- --------------------------------------------------------------------------------
Estonia [*]
- --------------------------------------------------------------------------------
Ethioppia [*]
- --------------------------------------------------------------------------------
Falkland Islands [*]
- --------------------------------------------------------------------------------
Faroes (via Denmark) [*]
- --------------------------------------------------------------------------------
Fiji [*]
- --------------------------------------------------------------------------------
Finland [*]
- --------------------------------------------------------------------------------
France/Germany [*]
- --------------------------------------------------------------------------------
French Antilles [*]
- --------------------------------------------------------------------------------
French Guiana [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 3
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
French Polynesia [*]
- --------------------------------------------------------------------------------
Gabon [*]
- --------------------------------------------------------------------------------
Gambia [*]
- --------------------------------------------------------------------------------
Georgia [*]
- --------------------------------------------------------------------------------
Ghana [*]
- --------------------------------------------------------------------------------
Gibraltar [*]
- --------------------------------------------------------------------------------
Greece [*]
- --------------------------------------------------------------------------------
Greenland [*]
- --------------------------------------------------------------------------------
Greneda (Carracou) [*]
- --------------------------------------------------------------------------------
Guadeloupe [*]
- --------------------------------------------------------------------------------
Guam [*]
- --------------------------------------------------------------------------------
Guantanamo [*]
- --------------------------------------------------------------------------------
Guatemala [*]
- --------------------------------------------------------------------------------
Guinea [*]
- --------------------------------------------------------------------------------
Guinea Bissau [*]
- --------------------------------------------------------------------------------
Guyana [*]
- --------------------------------------------------------------------------------
Haiti [*]
- --------------------------------------------------------------------------------
Hawaii [*]
- --------------------------------------------------------------------------------
Hondoras [*]
- --------------------------------------------------------------------------------
Hong Kong [*]
- --------------------------------------------------------------------------------
Hungary [*]
- --------------------------------------------------------------------------------
Iceland [*]
- --------------------------------------------------------------------------------
India [*]
- --------------------------------------------------------------------------------
Indonesia [*]
- --------------------------------------------------------------------------------
Iran [*]
- --------------------------------------------------------------------------------
Iraq [*]
- --------------------------------------------------------------------------------
Ireland [*]
- --------------------------------------------------------------------------------
Israel [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 4
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Italy [*]
- --------------------------------------------------------------------------------
Ivory Coast [*]
- --------------------------------------------------------------------------------
Jamica [*]
- --------------------------------------------------------------------------------
Japan [*]
- --------------------------------------------------------------------------------
Jordan [*]
- --------------------------------------------------------------------------------
Kampuchea [*]
- --------------------------------------------------------------------------------
Kazakhstan [*]
- --------------------------------------------------------------------------------
Kenya [*]
- --------------------------------------------------------------------------------
Kirghizia N/A
- --------------------------------------------------------------------------------
Kiribati [*]
- --------------------------------------------------------------------------------
Kuwait [*]
- --------------------------------------------------------------------------------
Kyrgyzstan [*]
- --------------------------------------------------------------------------------
Laos [*]
- --------------------------------------------------------------------------------
Latvia [*]
- --------------------------------------------------------------------------------
Lebanon [*]
- --------------------------------------------------------------------------------
Lechtenstein [*]
- --------------------------------------------------------------------------------
Lesotho [*]
- --------------------------------------------------------------------------------
Liberia [*]
- --------------------------------------------------------------------------------
Libya [*]
- --------------------------------------------------------------------------------
Lithuania [*]
- --------------------------------------------------------------------------------
Luxembourg [*]
- --------------------------------------------------------------------------------
Macao [*]
- --------------------------------------------------------------------------------
Macedonia [*]
- --------------------------------------------------------------------------------
Madagascar [*]
- --------------------------------------------------------------------------------
Madeira [*]
- --------------------------------------------------------------------------------
Malawi [*]
- --------------------------------------------------------------------------------
Malaysia [*]
- --------------------------------------------------------------------------------
Maldive Islands [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 5
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mali [*]
- --------------------------------------------------------------------------------
Malta [*]
- --------------------------------------------------------------------------------
Marshall Island [*]
- --------------------------------------------------------------------------------
Martinique [*]
- --------------------------------------------------------------------------------
Mauritania [*]
- --------------------------------------------------------------------------------
Mauritius/Rodriguez Island [*]
- --------------------------------------------------------------------------------
Mayotte Island [*]
- --------------------------------------------------------------------------------
Mexico [*]
- --------------------------------------------------------------------------------
Micronesia [*]
- --------------------------------------------------------------------------------
Midway Islands N/A
- --------------------------------------------------------------------------------
Moldovia [*]
- --------------------------------------------------------------------------------
Monaco [*]
- --------------------------------------------------------------------------------
Mongolia [*]
- --------------------------------------------------------------------------------
Monserrat [*]
- --------------------------------------------------------------------------------
Morocco [*]
- --------------------------------------------------------------------------------
Mozambique [*]
- --------------------------------------------------------------------------------
Mustique [*]
- --------------------------------------------------------------------------------
Myanmar (Burma) [*]
- --------------------------------------------------------------------------------
Nakhodka N/A
- --------------------------------------------------------------------------------
Namibia [*]
- --------------------------------------------------------------------------------
Nauru [*]
- --------------------------------------------------------------------------------
Nepal [*]
- --------------------------------------------------------------------------------
Netherlands [*]
- --------------------------------------------------------------------------------
Nevis [*]
- --------------------------------------------------------------------------------
New Caledonia [*]
- --------------------------------------------------------------------------------
New Zealand [*]
- --------------------------------------------------------------------------------
Nicaragua [*]
- --------------------------------------------------------------------------------
Niger [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 6
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nigeria [*]
- --------------------------------------------------------------------------------
Niue Island [*]
- --------------------------------------------------------------------------------
Norfold Island [*]
- --------------------------------------------------------------------------------
North Korea [*]
- --------------------------------------------------------------------------------
North Mariana Island [*]
- --------------------------------------------------------------------------------
Norway [*]
- --------------------------------------------------------------------------------
Oman [*]
- --------------------------------------------------------------------------------
Pakistan [*]
- --------------------------------------------------------------------------------
Palau [*]
- --------------------------------------------------------------------------------
Panama [*]
- --------------------------------------------------------------------------------
Papua New Guinea [*]
- --------------------------------------------------------------------------------
Paraguay [*]
- --------------------------------------------------------------------------------
Peru [*]
- --------------------------------------------------------------------------------
Philippines [*]
- --------------------------------------------------------------------------------
Picairn Islands N/A
- --------------------------------------------------------------------------------
Poland [*]
- --------------------------------------------------------------------------------
Portugal [*]
- --------------------------------------------------------------------------------
PPalm Island [*]
- --------------------------------------------------------------------------------
Puerto Rico [*]
- --------------------------------------------------------------------------------
Qatar [*]
- --------------------------------------------------------------------------------
Radius N/A
- --------------------------------------------------------------------------------
Reunion Island [*]
- --------------------------------------------------------------------------------
Rodrigues Islands [*]
- --------------------------------------------------------------------------------
Romania [*]
- --------------------------------------------------------------------------------
Russia [*]
- --------------------------------------------------------------------------------
Rwanda [*]
- --------------------------------------------------------------------------------
Saint Helena [*]
- --------------------------------------------------------------------------------
Saint Kitts [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 7
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Saint Lucia [*]
- --------------------------------------------------------------------------------
Saint Pierre & Miquelon [*]
- --------------------------------------------------------------------------------
Saint Vincent [*]
- --------------------------------------------------------------------------------
Saipan [*]
- --------------------------------------------------------------------------------
Sakhalin N/A
- --------------------------------------------------------------------------------
Samoa (U.S.) [*]
- --------------------------------------------------------------------------------
Samoa (Western) [*]
- --------------------------------------------------------------------------------
San Marino [*]
- --------------------------------------------------------------------------------
Sao Tome Et Principe [*]
- --------------------------------------------------------------------------------
Saudi Arabia [*]
- --------------------------------------------------------------------------------
Senegal [*]
- --------------------------------------------------------------------------------
Serbia [*]
- --------------------------------------------------------------------------------
Seychelles [*]
- --------------------------------------------------------------------------------
Sierra Leone [*]
- --------------------------------------------------------------------------------
Singapore [*]
- --------------------------------------------------------------------------------
Slovakia [*]
- --------------------------------------------------------------------------------
Slovenia [*]
- --------------------------------------------------------------------------------
Slovenia Republic N/A
- --------------------------------------------------------------------------------
Soloman Island [*]
- --------------------------------------------------------------------------------
Somalia [*]
- --------------------------------------------------------------------------------
South Africa [*]
- --------------------------------------------------------------------------------
South Korea [*]
- --------------------------------------------------------------------------------
Spain [*]
- --------------------------------------------------------------------------------
Sri Lanka [*]
- --------------------------------------------------------------------------------
Sudan [*]
- --------------------------------------------------------------------------------
Surinam [*]
- --------------------------------------------------------------------------------
Swaziland [*]
- --------------------------------------------------------------------------------
Sweden [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 8
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Switzerland [*]
- --------------------------------------------------------------------------------
Syria [*]
- --------------------------------------------------------------------------------
Taiwan [*]
- --------------------------------------------------------------------------------
Tajikistan [*]
- --------------------------------------------------------------------------------
Tanzania [*]
- --------------------------------------------------------------------------------
Thailand [*]
- --------------------------------------------------------------------------------
Togo [*]
- --------------------------------------------------------------------------------
Tokelau N/A
- --------------------------------------------------------------------------------
Tonga [*]
- --------------------------------------------------------------------------------
Trinidad [*]
- --------------------------------------------------------------------------------
Tristan da Cunha [*]
- --------------------------------------------------------------------------------
Tunisia [*]
- --------------------------------------------------------------------------------
Turkey [*]
- --------------------------------------------------------------------------------
Turkmenistan [*]
- --------------------------------------------------------------------------------
Turks and Caicos [*]
- --------------------------------------------------------------------------------
Tuvalu [*]
- --------------------------------------------------------------------------------
Uganda [*]
- --------------------------------------------------------------------------------
UK [*]
- --------------------------------------------------------------------------------
Ukraine [*]
- --------------------------------------------------------------------------------
Union Island [*]
- --------------------------------------------------------------------------------
United Arab Emirates [*]
- --------------------------------------------------------------------------------
Uruguay [*]
- --------------------------------------------------------------------------------
USA [*]
- --------------------------------------------------------------------------------
Uzbekistan [*]
- --------------------------------------------------------------------------------
Vanuatu [*]
- --------------------------------------------------------------------------------
Vatican City [*]
- --------------------------------------------------------------------------------
Venezuela [*]
- --------------------------------------------------------------------------------
Viet Nam [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 9
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Virgin Islands (U.S.) [*]
- --------------------------------------------------------------------------------
Wake Islands N/A
- --------------------------------------------------------------------------------
Wallis Islands [*]
- --------------------------------------------------------------------------------
Yemen (Republic of) [*]
- --------------------------------------------------------------------------------
Yugoslavia [*]
- --------------------------------------------------------------------------------
Zaire [*]
- --------------------------------------------------------------------------------
Zambia [*]
- --------------------------------------------------------------------------------
Zimbabwe [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 10
<PAGE>
Exhibit 10.31
Exhibit 10.31 to Registration CONFIDENTIAL INFORMATION OMITTED
Statement on Form S-4 of RSL WHERE INDICATED BY "[*]" AND FILED
Communications PLC and RSL SEPARATELY WITH THE COMMISSION
Communications, Ltd. PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATEMENT UNDER
RULE 406 OF THE SECURITIES ACT
OF 1933
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into this
8th day of May, 1996, by and between GLOBAL ONE COMMUNICATIONS WORLD OPERATIONS,
LIMITED, an Irish company ("Global One") and RSL COM FRANCE S.A., a French
corporation ("RSL") (collectively, the "Parties").
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of date hereof
(the "Purchase Agreement"), by and between Sprint Telecommunications France Inc.
("Seller") and RSL, RSL has purchased from Seller, and Seller has sold to RSL,
certain assets related to the international direct distance dialing business of
Seller in France (the "IDDD Business");
WHEREAS, Global One is an affiliate of Sprint Corporation, the ultimate
beneficial owner of all the outstanding capital stock of Seller;
WHEREAS, in connection with the purchase and sale of said assets of the
IDDD Business, Seller and certain of its affiliates have agreed to provide to
RSL certain transitional services pursuant to transitional services agreements
(the "Transitional Services Agreements"), including this Agreement;
WHEREAS, in accordance with the foregoing, Global One has agreed to provide
under this Agreement, certain services related to the IDDD Business; and
WHEREAS, RSL has agreed to provide to Global One traffic termination
services previously provided by Seller;
NOW, THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:
"Billing Services" shall mean the billing services to be provided hereunder
as such services are described in Exhibit A hereto.
<PAGE>
"Customer Support Services" shall mean the customer support services to be
provided hereunder as such services are described in Exhibit A hereto.
"Engineering Services" shall mean the engineering services provided
hereunder as such services are described in Exhibit A hereto.
"Monthly Fees" shall mean, with respect to the Services (as hereinafter
defined) to be provided by Global One to RSL hereunder, the monthly fees with
respect to the Services described in Exhibit B hereto.
"Services" shall mean the Billing Services, the Customer Support Services
and the Engineering Services.
"Taxes" shall mean all federal, state, local or foreign income, capital
gains, profits, gross receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment. disability, real property, personal
property, stamp, excise, occupation, sales, use, transfer, mining, value-added,
investment credit recapture alterative or add-on minimum, environmental,
estimated or other taxes, duties or assessments of any kind, including any
interest, penalty and additions imposed with respect to such amounts levied by
any foreign, federal, state or local taxing authority.
"Traffic Termination" shall mean the provision of termination of long
distance voice telephone traffic in France which originates from the network of
Global One Communications, a joint venture formed by Sprint Corporation,
Deutsche Telekom and France Telecom (the various entities that comprise such
joint venture and are controlled, directly or indirectly, by Sprint Corporation,
Deutsche Telekom and France Telecom shall collectively be referred to herein as
"Global One Communications") in such volume as has been customarily terminated
by Seller on behalf of Global One Communications or its predecessors in the six
(6) months prior to the date hereof.
Additional Definitions:
Defined Term Defined In
- ------------ ----------
"Agreement" Recitals
"Confidential Information" Section 5.1
"Global One" Recitals
"IDDD Business" Recitals
"RSL" Recitals
"Services Supplement" Section 2.2
"Sprint Party" Section 6.2
2
<PAGE>
Section 1.2 Interpretation. The definitions in Sections 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." All references
herein to Articles, Sections and Exhibits shall be deemed to be references to
Articles and Sections of and Exhibits to this Agreement unless the context shall
otherwise require, and all references herein to "this Agreement" shall refer to
this Agreement and the Exhibits hereto. The headings of the Articles and
Sections are included for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement. Unless
the context shall otherwise require, any reference to any agreement or other
instrument or statute or regulation is to such agreement, instrument, statute or
regulation as amended and supplemented from time to time (and, in the case of a
statute or regulation, to any successor provision). Any reference in this
Agreement to a "day" or a number of "days" (without the explicit qualification
of "business") shall be interpreted as a reference to a calendar day or number
of calendar days. If any action or notice is to be taken or given on or by a
particular day, and such day is not a business day, then such action or notice
shall be deferred until, or may be taken or given, on the next business day.
ARTICLE II
SERVICES
Section 2.1 Services. During the term of this Agreement, Global One shall
provide to RSL, and RSL shall procure from Global One, the Services in
accordance with and subject to the terms and conditions of this Agreement.
Section 2.2 Service Supplements. Global One and RSL may enter into a
service supplement (the "Services Supplement") with respect to any Service to be
provided by Global One hereunder. Any such Services Supplement may further
define and describe the Service to be provided by Global One hereunder, the
performance or quality standards in accordance with which Global One shall
provide such Service, the compensation that Global One shall receive in
accordance with Section 4.1 for providing such Service, the expiration dates for
providing such Service and any additional information with respect to such
Service as the Parties may agree. Unless otherwise stated in a related Service
Supplement, the rates charged by Global One for any particular Service shall
remain fixed during the term of this Agreement.
Section 2.3 Requests for Engineering Services. RSL shall make requests for
Engineering Services in such form and in accordance with such procedures as the
Parties may from time to time establish. All other types of Services shall be
provided automatically and without any action on the part of RSL.
3
<PAGE>
Section 2.4 Facilities. During the term hereof, Global One shall have, at
no cost to Global One, such access to and use of the space and related
facilities and equipment at the premises of RSL as shall be reasonably necessary
for Global One to provide the Services hereunder.
Section 2.5 Employees. Global One shall have complete operational,
management, administrative, legal and financial responsibility for the Global
One personnel used to provide the Services hereunder. For a period of two (2)
years after the date hereof, Global One shall not, and shall cause each of its
affiliates not to, directly or indirectly, (i) persuade or attempt to persuade
any person providing goods or services to the IDDD Business not to do business
with the IDDD Business or to reduce the amount of business it does with the IDDD
Business, (ii) persuade or attempt to persuade any person who is or during such
period becomes a director, officer or employee of RSL and who devotes all or
substantially all of his time to the IDDD Business of Purchaser (each an "RSL
IDDD Person") to terminate his relationship with RSL, (iii) dissuade or attempt
to dissuade any person from becoming an RSL IDDD Person, or (iv) degrade,
denigrate, deride or otherwise disparage the competence, service, condition
(financial or otherwise), integrity or prospects of RSL, the IDDD Business or
any RSL IDDD Person in an effort to solicit customers for a competing business
or otherwise.
ARTICLE III
TRAFFIC TERMINATION
Section 3.1 Traffic Termination. During the term of this Agreement, RSL
shall provide to Global One, and Global One shall procure from RSL, Traffic
Termination in accordance with and subject to the terms and conditions of this
Agreement and on a cost pass-through basis. The provisions of Sections 4.3, 4.4,
4.5, 4.6, 4.7, 4.8 and 4.9 shall be applicable to Traffic Termination pursuant
to this Section 3.1 with such appropriate adjustments to indicate that RSL is
the provider of such service to Global One.
ARTICLE IV
PAYMENTS
Section 4.1 Components of Global One's Charges. Global One's charges to RSL
for the provision of the Services hereunder shall consist of the following
components: (i) Monthly Fees, (ii) Taxes, and (iii) other amounts expressly
payable to Global One pursuant to this Agreement.
<PAGE>
Section 4.2 Monthly Fees. RSL shall pay to Global One, for each calendar
month during the term of this Agreement, the applicable Monthly Fees for each
Service provided during such calendar month.
Section 4.3 Reimbursable Expenses. RSL shall reimburse Global One for the
reasonable out-of-pocket expenses which are incurred by Global One on behalf of
RSL in connection with the provision of the Services hereunder (other than costs
which are included within the Monthly Fees) which are approved in advance by
RSL, upon the presentation of reasonably satisfactory documentation evidencing
such costs and Global One's payment thereof.
Section 4.4 Taxes. There shall be added to any charges under this
Agreement, and RSL shall pay to Global One, amounts equal to any Taxes, however
designated or levied, based upon such charges, the Services or this Agreement,
and any amounts in lieu thereof paid or payable by Global One in respect of the
foregoing, which Global One customarily charges customers in connection with the
provision of the type of services contemplated by Section 2.1, and shall not
include any income taxes payable by Global One and other Taxes for which RSL
would not be liable if such Taxes were not paid or withheld by Global One. The
Parties shall cooperate with each other in minimizing any applicable Taxes and,
in connection therewith, shall provide the other Party with any information
reasonably requested by such Party in connection with any such Taxes.
Section 4.5 Proration. All periodic charges hereunder shall be computed on
a calendar month basis and shall be prorated for any partial month.
Section 4.6 Payments Due; Late Payment Charges. Unless otherwise stated in
the Service Supplements, amounts due hereunder shall be paid within thirty (30)
days of receipt of the invoice therefor. Unless otherwise stated in the Service
Supplements, any undisputed amount due hereunder not paid within thirty (30)
days of receipt of the invoice therefor shall accrue interest from the date such
amount was due at the rate of ten percent (10%) per annum, compounded daily.
Section 4.7 Disputed Payments. If a dispute arises with respect to any
amount due hereunder, the RSL shall pay when due the undisputed portion of such
amount, if any, and, if the dispute is resolved in Global One's favor promptly
pay the disputed portion (or applicable part thereof) when the dispute is
resolved without the applicable late payment charge, if such dispute arises in
good faith.
Section 4.8 Currency. All payments hereunder shall be made in U.S. Dollars.
Section 4.9 Invoices. Global One shall provide RSL written invoices
covering all charges payable by RSL hereunder, which invoices shall describe in
reasonable detail the Services during the periods covered by such invoices and
the Taxes payable with respect thereto.
5
<PAGE>
ARTICLE V
CONFIDENTIALITY
Section 5.1 Confidentialitv. Except as otherwse provided herein, Global One
and RSL each agree that all information communicated to it by the other, whether
before or after the date hereof in connection with the Services to be provided
to the IDDD Business (the "Confidential Information"), shall be and was received
in strict confidence and shall be used only for purposes of this Agreement, and
that no such Confidential Information, including without limitation, the
provisions of this Agreement, shall be disclosed by the recipient Party, its
agents, contractors or employees without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed, except as
may be necessary by reason of legal, accounting or regulatory requirements
beyond the reasonable control of the recipient Party and except for such
disclosures by Global One as may be necessary in order for Global One to perform
its obligations hereunder. Either Party may disclose Confidential Information to
its agents, contractors, financing sources, investors or employees who have a
need to know such information, but in such circumstances the disclosing Party
shall be completely liable for the acts of its agents, contractors, financing
sources, investors and employees and, prior to giving any such agent,
contractor, financing source, investor or employee access to Confidential
Information, the recipient Party shall advise such agent, contractor, financing
source, investor or employee of its obligation to preserve the confidentiality
of the Confidential Information. Notwithstanding the foregoing, the restrictions
and obligations of this Section 5.1 shall not apply to any information which the
recipient Party can establish to have (i) become publicly available without
breach of this Agreement, (ii) been independently developed by the recipient
Party outside the scope of this Agreement without reference to Confidential
Information received hereunder, or (iii) been rightfully obtained by the
recipient Party from third parties which are not obligated to protect its
confidentiality. The provisions of this Section 5.l shall survive the
expiration or termination of this Agreement for any reason.
ARTICLE VI
TERM AND TERMINATION
Section 6.1 Term of Agreement. This Agreement shall commence on the date
hereof and terminate (i) on December 31, 1996, (ii) upon a termination of this
Agreement pursuant to Section 6.2, 6.3 or 9.12, or (iii) upon the written
agreement of the Parties.
Section 6.2 Termination for Cause. In the event that (i) either Party
hereto materially breaches any of its duties or obligations hereunder or (ii) a
party to the Purchase Agreement, any Purchaser Ancillary Document or Seller
Ancillary Document (as each such term is defined in the Purchase Agreement) or
any Transition Services Agreement or other instrument or agreement entered into
in connection with the transactions contemplated by the Purchase
6
<PAGE>
Agreement, as applicable, materially breaches any of its obligations under the
Purchase Agreement or any such Purchase Ancillary Document or Seller Ancillary
Document, which breach shall not be substantially cured within ten (10) days
after written notice is given to the breaching party specifying the breach, then
(a) Global One, in the event that RSL is the breaching party or (b) RSL, in the
event Seller, Sprint International France S.A., Global One or Sprint
Communications Company L.P. (collectively, a "Sprint Party") is the breaching
party, may, by giving written notice thereof to the other, terminate this
Agreement as of a date specified in such notice of termination, which date shall
be no earlier than ten (10) days after the date of such notice.
Section 6.3 Termination for Bankruptcy. In the event that RSL or a Sprint
Party (a) is unable to pay its debts generally as they become due or is declared
bankrupt or insolvent, (b) is the subject of any proceedings relating to its
liquidation, insolvency or for the appointment of a receiver or similar officer
for it which results in the entry of an order for relief or such adjudication or
appointment is not dismissed, discharged or bonded within a reasonable period of
time thereafter, (c) makes an assignment for the benefit of all or substantially
all of its creditors, or (d) enters into an agreement for the composition,
extension or readjustment of all or substantially all of its obligations, then
(i) Global One, in the case of any such event affecting RSL, and (ii) RSL, in
the case of any such event affecting a Sprint Party, may giving written notice
thereof to the other, terminate this Agreement as of a date specified in the
notice of termination, which date shall be no earlier than ten (10) days after
the date of such notice.
Section 6.4 Effect of Termination. Except as otherwise provided herein, in
the event of termination of this Agreement, all rights and obligations of the
Parties hereunder shall terminate as of the effective date of such termination,
except that (i) such termination shall not constitute a waiver of any rights
that a Party may have by reason of a breach of this Agreement and (ii) the
provisions of Articles V and VIII and Section 2.5 (other than the first sentence
thereof) and this Section 6.4 shall continue in full force and effect.
Notwithstanding anything herein to the contrary, Global One has the right to
terminate Article III hereof upon no less than ten (10) days notice, in which
case Article III shall have no further force or effect and this Agreement will
remain in effect as to all other provisions.
ARTICLE VII
LIMITED WARRANTY
Section 7.1 DISCLAIMER OF GENERAL WARRANTY. EXCEPT AS SET FORTH IN SECTION
7.2 OR THE SERVICES SUPPLEMENTS, GLOBAL ONE MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, CONCERNING THE SERVICES PROVIDED HEREUNDER, INCLUDING ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR
OTHERWISE.
7
<PAGE>
Section 7.2 Limited Warranty. Global One represents and warrants that (i)
it has the power, right and authority to provide the Services and that Global
One is in the business of providing services in the nature of the Services, (ii)
each Service provided to RSL hereunder shall be of at least the same quality as
the same service that Global One provides to its best customers within one
hundred and eighty (180) days prior to the provision of the Service in question
and (iii) this Agreement is a valid and binding agreement of Global One,
enforceable against it in accordance with its terms.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification, Obligations of Global One. From and after the
date hereof, Global One shall indemnify and hold harmless RSL and its
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "RSL
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) Any breach of any representation, warranty, covenant, agreement or
undertaking made by Global One in this Agreement or in the performance of its
obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by Global
One in this Agreement or in the performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the RSL Indemnified Parties described in this Section 8.1 as to
which the RSL Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "RSL Losses."
Section 8.2 Indemnification Obligations of RSL. From and after the date
hereof, RSL shall indemnify and hold harmless Global One and its subsidiaries
and affiliates, each of their respective officers, directors, employees, agents
and representatives and each of the heirs, executors, successors and assigns of
any of the foregoing (collectively, the "Global One Indemnified Parties") from,
against and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys' fees and
expenses) arising out of or relating to:
8
<PAGE>
(a) Any breach of any covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any covenant, agreement or undertaking made by RSL in this Agreement or in the
performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the Global One Indemnified Parties described in this Section 8.2
as to which the Global One Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "Global One Losses."
Section 8.3 Indemnification Procedure.
(a) Promptly after receipt by a RSL Indemnified Party or a Global One
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being or may be
sought hereunder, such Indemnified Party shall notify RSL or Global One,
whichever is the appropriate indemnifying Party hereunder (the "Indemnifying
Party"), of such complaint or of the commencement of such action or proceeding;
provided, however, that the failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party from liability for such claim arising
otherwise than under this Agreement and such failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party from liability which the
Indemnifying Party may have hereunder with respect to such claim if, but only
if, and only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of the reasonable fees and disbursements of such counsel. In the event,
however, that the Indemnifying Party declines or fails to assume the defense of
the action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such Indemnified
Party may employ counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such litigation and to retain its own counsel
at such Party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of
9
<PAGE>
any action the defense of which they are maintaining and to cooperate in good
faith with each other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
such settlement, compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not, without the prior written consent of the Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five (5) business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
Section 8.4 Claims Period. Except as provided in this Section 8.4, no claim
for indemnification under this Agreement may be asserted by an Indemnified Party
after the expiration of the appropriate claims period (the "Claims Period")
which shall commence on the date hereof and shall terminate two (2) years after
the date hereof. No Indemnified Party shall be entitled to make any claim for
indemnification hereunder after the appropriate Claims Period; provided,
however, that if prior to the close of business on the last day of the Claims
Period, an Indemnifying Party shall have been properly notified of a claim for
indemnity hereunder and such claim shall not have been finally resolved or
disposed of at such date, the basis of such claim shall continue to survive with
respect to such claim and shall remain a basis for indemnity hereunder with
respect to such claim until such claim is finally resolved or disposed of in
accordance with the terms hereof.
Section 8.5 Maximum Liability. Notwithstanding anything in this Agreement
to the contrary, the maximum aggregate liability of Global One for RSL Losses or
of RSL for Global One Losses shall not exceed [*].
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
10
<PAGE>
Section 8.6 Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Party irrevocably
designates and appoints each of the parties set forth under its name below as
its authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement that may be instituted in any state
or federal court in New York, New York.
Global One:
Global One Communications World Operations, Limited
12490 Sunrise Valley Drive
Reston, VA 22096
Attn.: Donald S. Parker, Esq.
RSL:
RSL Com France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each Party agrees that service of process upon the
above-designated individuals shall be deemed in every respect effective service
of process upon such Party in any such suit or proceeding. Each Party further
agrees to take any and all action reasonably requested by a Party, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of the above-designated
individuals in full force and effect so long as this Agreement shall be in
effect. The foregoing shall not limit the rights of any Party to serve process
in any other matter permitted by law.
(b) To the extent that any Party has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each Party
hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The Parties hereto hereby agree that the appropriate forum and venue
for any disputes between any of the Parties hereto arising out of this Agreement
shall be any state or federal court in New York, New York and each of the
Parties hereto hereby submits to the personal jurisdiction of any such court.
The foregoing shall not limit the rights of any Party to obtain execution of
judgment in any other jurisdiction. The Parties further agree, to the extent
11
<PAGE>
permitted by law, that a final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be given in the manner provided in the Purchase Agreement
and to the addresses provided in Exhibit C hereto.
Section 9.2 Assignment; Subcontracting. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of the other
Party; provided that Global One may subcontract or assign to any affiliate and,
with respect to Billing Services, to any third party its obligations and rights
hereunder provided in each case that Global One shall remain responsible for
assuring that the subcontractor's or assignee's performance conforms to the
requirements hereof.
Section 9.3 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be deemed
restated to reflect the original intention of the Parties as nearly as possible
in accordance with applicable law, and, if capable of substantial performance,
the remaining provisions of this Agreement shall be enforced as if this
Agreement was entered into without the invalid provision.
Section 9.4 Attorneys' Fees. In the event attorneys' fees or other
out-of-pocket costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
out-of-pocket costs incurred therein.
Section 9.5 Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
Section 9.6 Relationship of Parties. Global One, in furnishing Services to
RSL hereunder, is acting only as an independent contractor. Nothing set forth in
this Agreement shall be construed to create the relationship of principal and
agent between Global One and RSL.
12
<PAGE>
Global One shall have no authority, express or implied, to enter into contracts
on behalf of RSL. Neither Party shall act or attempt to act to represent itself,
directly or by implication, as an agent of another Party or in any manner assume
or create, or attempt to assume or create, an obligation of or in the name of,
the other Party.
Section 9.7 Approvals and Similar Actions. Where agreement, approval,
acceptance, consent or similar action by either Party hereto is required by any
provision of this Agreement, such action shall not be unreasonably delayed or
withheld.
Section 9.8 Modification; Waiver. This Agreement may be modified only by a
written instrument duly executed by or on behalf of each Party hereto. No delay
or omission by either Party hereto to exercise any right or power hereunder
shall impair such right or power or be construed to be a waiver thereof. A
waiver by either of the Parties hereto of any of the obligations to be performed
by the other or any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other obligation herein contained.
Section 9.9 Remedies. Each Party agrees that the remedies provided in
Articles VI and VIII shall constitute the sole and exclusive remedies of a Party
against another Party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other Party in this Agreement.
Nothing in this Section 9.9 shall prevent a Party hereto from seeking and
obtaining equitable relief, including, but not limited to, injunctive relief and
specific performance in respect of any such breach.
Section 9.10 No Third Party Beneficiaries. The Parties agree that this
Agreement is for the sole benefit of the Parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee of
either Party hereto, and that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement.
Section 9.11 Governing Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without reference to
New York's choice of law rules. This Agreement supersedes all negotiations,
agreements and understandings among the Parties or any of their affiliates and
constitutes the entire agreement among the Parties hereto with respect to the
subject matter hereof; provided, however, that nothing herein shall affect any
other written agreements or understandings entered into by the Parties or any of
their affiliates contemporaneously with the execution and delivery of this
Agreement, all of which shall remain in full force and effect.
(b) This Agreement may be amended by the Parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended, modified or
supplemented except by written agreement executed by each of the Parties hereto.
13
<PAGE>
Section 9.12 Force Majeure. If either Party to this Agreement shall be
prevented, hindered or delayed in the performance or observance of any of its
obligations hereunder by reason by any circumstances beyond its reasonable
control, and such delay could not have been prevented by reasonable precautions
and cannot reasonably be circumvented by the Party through the use of alternate
sources, work-around plans, or other means (a "Force Majeure"), then such Party
shall be excused from any other further performance or observance of the
obligations so affected for so long as such circumstances prevail and such Party
continues to use its best efforts to recommence performance or observance
whenever and to whatever extent possible without delay. Any Party so delayed in
its performance shall immediately notify the other and shall describe at a
reasonable level of detail the circumstances causing such delay. Notwithstanding
the foregoing, should a Party be unable to perform any of its obligations
hereunder for a period of more than thirty (30) consecutive days by reason of a
Force Majeure, the other Party, at its option, shall have the right to terminate
this Agreement in whole or solely with respect to the section hereof under which
the non-performing Party has been unable to perform its obligations, in which
case the provision so terminated shall have no further force or effect and this
Agreement shall remain in effect as to all other provisions. The existence of a
Force Majeure which causes Global One to be unable to render any or all of the
Services shall excuse RSL from the payment under Section 3.2 of the Monthly Fees
with respect to the Services not provided for the period during which the same
are not provided.
14
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective officers.
GLOBAL ONE COMMUNICATIONS WORLD OPERATIONS,
LIMITED
By /s/ Charles S. Marantz
---------------------------------
Name:
Title: DIRECTOR
MERGERS AND ACQUISITIONS
RSL COM FRANCE S.A.
By /s/ Itzhak Fisher
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
DESCRIPTION OF SERVICES
A. Billing Services
Global One shall maintain the systems that are in place as of the date
hereof for the collection, verification, rating, invoicing and reporting
of billing data for the IDDD Business in France. The Parties acknowledge
that the Billing Services to be provided by Global One hereunder shall
initially include CDR transport and storage. RSL has advised Global One
that RSL intends to acquire its own CDR transport and storage capabilities.
RSL shall promptly inform Global One in writing when RSL obtains such CDR
transport and storage capabilities, and after receipt of such notice by
Global One, RSL agrees that the Billing Services to be provided hereunder
shall not include CDR transport and storage.
B. Customer Support Services
Global One shall provide customer service to RSL's customers in France,
using existing Global One facilities and personnel. A customer service
representative will be available to RSL's customers in France twenty-four
(24) hours a day, seven (7) days a week. The customer service
representative will record service-related complaints from customers and
communicate within three days the appropriate information to RSL's
operations groups in France.
C. Engineering Services
Global One shall provide engineering services in response to specific
customer requirements. Such engineering services shall be substantially
similar to the engineering services being provided as of the date hereof.
These services may include installation specification, procurement
preparation, implementation, testing and acceptance.
A-1
<PAGE>
EXHIBIT B
MONTHLY FEES
(in U.S. Dollars)
Customer Engineering
Monthly Period Billing Services Support Services Services Total
- -------------- ---------------- ---------------- -------- -----
May, 1996 [*] [*] [*] [*]
June, 1996 [*] [*] [*] [*]
July, 1996 [*] [*] [*] [*]
August, 1996 [*] [*] [*] [*]
September, 1996 [*] [*] [*] [*]
October, 1996 [*] [*] [*] [*]
November, 1996 [*] [*] [*] [*]
December, 1996 [*] [*] [*] [*]
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
B-1
<PAGE>
EXHIBIT C
ADDRESSES FOR NOTICES
TO RSL:
RSL Com France S.A.
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn: Itzhak Fisher
Telecopy No. (212) 572-3825
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohl, Esq.
Telecopy No: (212) 940-8776
To Global One:
Global One Communications World Operations, Limited
12490 Sunrise Valley Drive
Reston, Virginia 22096
U.S.A.
Attn.: Donald S. Parker
Telecopy No: (703) 689-5321
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No: (404) 572-5145
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other parties in writing.
C-1
<PAGE>
Exhibit 10.32
Exhibit 10.32 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED
and RSL Communications, Ltd. BY "[*]" AND FILED
SEPARATELY WITH THE
COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 406
OF THE SECURITIES ACT
OF 1933
ASSET PURCHASE AGREEMENT
by and among
SIENA VERMOGENSVERWALTUNGS-GMBH,
SPRINT TELECOMMUNICATION SERVICES GMBH
and
SPRINT FON INC.
As of May 8, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1. ASSET PURCHASE AND SALE..........................................................1
Section 1.1. Agreement to Sell ..................................................1
Section 1.2. Included Assets.....................................................1
Section 1.3. Excluded Assets.....................................................2
Section 1.4. Agreement to Purchase...............................................3
Section 1.5. The Purchase Price..................................................3
Section 1.6. Assumption of Assumed Liabilities...................................3
Section 1.7. Excluded Liabilities................................................3
Section 1.8. Prorations..........................................................4
ARTICLE 2. ITEMS DELIVERED; FURTHER ASSURANCES..............................................5
Section 2.1. Items Delivered.....................................................5
Section 2.2. Further Assurances .................................................5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS........................................6
Section 3 1. Corporate Organization; Good Standing; Etc..........................6
Section 3.2. Authorization, Etc..................................................6
Section 3.3. Absence of Restrictions and Conflicts...............................6
Section 3.4. Ownership of Assets and Related Matters.............................7
Section 3.5. Financial Statements................................................7
Section 3.6. Litigation; Compliance With Law.....................................7
Section 3.7. Brokers, Finders, etc...............................................8
Section 3.8. Consents............................................................8
Section 3.9. Contracts...........................................................8
Section 3.10. Intellectual Property...............................................8
Section 3.11. Employees...........................................................8
Section 3.12. Environmental Matters...............................................9
Section 3.13. Taxes...............................................................9
Section 3.14. Permits and Approvals...............................................9
Section 3.15. Affiliate Transactions..............................................9
Section 3.16. Subsidiaries.......................................................10
Section 3.17. Sufficiency of Assets..............................................10
Section 3.18. Customer Contracts.................................................10
Section 3.19. Disclosure.........................................................10
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................................10
Section 4.1. Organization.......................................................10
Section 4.2. Authorization......................................................10
Section 4.3. Absence of Restrictions and Conflicts..............................11
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Section 4.4. Brokers, Finders, Etc.............................................11
Section 4.5. Consents..........................................................11
Section 4.6. Disclosure........................................................11
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS................................................12
Section 5.1. Public Announcements..............................................12
Section 5.2. No Solicitation of Employees; Non-Interference....................12
Section 5.3. VAT Taxes.........................................................13
Section 5.4. Sale of Assets and IDDD Business..................................14
Section 5.5 Customer Contracts................................................15
Section 5.6. Accounts Receivable...............................................16
Section 5.7. Employees.........................................................17
Section 5.8. Access to Records.................................................17
Section 5.9. Domestic Access Lines.............................................17
Section 5.10. Miscellaneous Agreements..........................................18
Section 5.11. Telephone Numbers.................................................18
ARTICLE 6. INDEMNIFICATION ................................................................18
Section 6.1. Indemnification Obligations of Sellers............................18
Section 6.2. Indemnification Obligations of Purchaser..........................19
Section 6.3. Indemnification Procedure.........................................20
Section 6.4. Claims Period.....................................................21
Section 6.5. Maximum Liability.................................................22
Section 6.6. Threshold Liability...............................................22
Section 6.7. Jurisdiction and Forum............................................22
Section 6.8. Compliance with Bulk Sales Laws...................................23
ARTICLE 7. MISCELLANEOUS PROVISIONS .......................................................24
Section 7.1. Notices...........................................................24
Section 7.2. Computation of Time...............................................25
Section 7.3. Assignment; Successors in Interest ...............................25
Section 7.4. Investigations; Representations and Warranties....................25
Section 7.5. Number; Gender....................................................25
Section 7.6. Captions..........................................................25
Section 7.7. Controlling Law; Integration; Amendment...........................26
Section 7.8. Severability......................................................26
Section 7.9. Counterparts......................................................26
Section 7.10. Remedies..........................................................26
Section 7.11. Enforcement of Certain Rights.....................................26
Section 7.12. Waiver............................................................26
Section 7.13. Fees and Expenses.................................................27
</TABLE>
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<PAGE>
SCHEDULES
Schedule Number
- -------- ------
Machinery and Equipment 1.2(a)
Contracts, Agreements and Other Instruments 1.2(b)
Customer Contracts 1.2(c)
Business Licenses and Permits 1.2(d)
Software 1.2(f)
Special Employee Arrangements 1.7(i)
Encumbrances or Imperfections in Title 3.4
Litigation 3.6
Consents 3.8
Enforceability of Agreements 3.9
Employee Matters 3.11
Taxes 3.13
Affiliate Transactions 3.15
Sufficiency of Assets 3.17
Customer Contract Terminations 3.18
Consents 4.5
Employees 5.7
Miscellaneous Agreements 5.10
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of May 8, 1996 (the "Agreement"), by and among
SIENA Vermogensverwaltungs-GmbH (to be renamed RSL COM Deutschland GmbH), a
German limited liability company ("Purchaser"), and Sprint Telecommunication
Services GmbH ("STS"), a German limited liability company, and Sprint Fon Inc.
("SFI"), a Delaware corporation (collectively, "Sellers");
W I T N E S S E T H:
WHEREAS, Sellers operate an international direct distance dialing
business in Germany (the "IDDD Business");
WHEREAS, Sellers and Purchaser desire to enter into this Agreement
pursuant to which Sellers propose to sell to Purchaser, and Purchaser proposes
to purchase from Sellers, certain assets related to the IDDD Business and
Purchaser proposes to assume certain of the liabilities of the Sellers related
to the IDDD Business;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
ASSET PURCHASE AND SALE
Section 1.1. Agreement to Sell. Except as otherwise specifically
provided in this Article 1, Sellers hereby grant, sell, convey, assign, transfer
and deliver to Purchaser, upon and subject to the terms and conditions of this
Agreement, all right, title and interest of Sellers in and to the Assets (as
hereinafter defined) as of the date hereof, free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever except Permitted Liens (as hereinafter
defined) and Assumed Liabilities (as hereinafter defined).
Section 1.2. Included Assets. The assets (the "Assets") shall include
the following assets, properties and rights of Sellers as of the date hereof:
<PAGE>
(a) All machinery, equipment, business machines, vehicles,
furniture, fixtures, leasehold and building improvements and other
tangible property of Sellers used in connection with the IDDD Business
and listed on Schedule 1.2(a) hereto;
(b) All right, title and interest of Sellers in the contracts,
agreements and other instruments relating to the IDDD Business and
listed on Schedule 1.2(b) hereto;
(c) All right, title and interest of Sellers in the customer
contracts related to the IDDD Business, including, without limitation,
those listed on Schedule 1.2(c) hereto;
(d) All business licenses and permits of Sellers relating to
the IDDD Business which licenses and permits are listed on Schedule 1.2
(d) hereto, except as otherwise provided in Section 1.3(g) hereof;
(e) All customer lists, customer credit information, sales
records, database information, invoice files and correspondence files
of Sellers used in or relating to the IDDD Business;
(f) All right, title and interest of Sellers in the software
dedicated to or used in connection with the IDDD Business and listed on
Schedule 1.2(f) hereto; and
(g) All prepaid expenses of Sellers related to the IDDD
Business.
Section 1.3. Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is agreed that Sellers are not selling and Purchaser is not
buying the following assets of Sellers (hereinafter collectively referred to as
"Excluded Assets"):
(a) Cash, cash equivalents and marketable securities of
Sellers as of the date hereof;
(b) All accounts receivable of Sellers as of the date hereof
and all accounts receivable of Sellers which arise after the date
hereof to the extent that such accounts receivable relate to the
provision by Sellers of products or services prior to the date hereof;
(c) All notes receivable, deposits and advances of Sellers as
of the date hereof, except as otherwise provided in Section 1.2(g);
(d) All tradenames, trademarks and other intellectual property
rights of Sprint Corporation and its affiliates used by Sellers in
connection with the IDDD Business, other than the software listed on
Schedule 1.2(f) hereto;
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<PAGE>
(e) All assets of Sellers used in Sellers' data, messaging
services and card businesses (collectively, the "Data Business");
(f) The stock record books and minute books of Sellers; and
(g) Any business licenses, permits or other intangibles
(including federal and state tax and employment identification numbers)
of Sellers which by their nature are nonassignable.
Section 1.4. Agreement to Purchase. Purchaser hereby purchases the
Assets from Sellers, upon and subject to the terms and conditions of this
Agreement and in reliance on the representations, warranties and covenants of
Sellers contained herein, in exchange for the Purchase Price (as hereinafter
defined) and the assumption by Purchaser of the Assumed Liabilities as provided
in Section 1.6 hereof.
Section 1.5. The Purchase Price. The aggregate purchase price (the
"Purchase Price") for the Assets is [*] of which (a) [*] has been paid by
Purchaser to Sellers contemporaneously with the execution and delivery of
this Agreement by certified or official bank check or wire transfer, and (b)
[*] will be paid by Purchaser to pay the Tax described in Section 5.3 in the
manner described in Section 5.3.
Section 1.6. Assumption of Assumed Liabilities. Purchaser hereby
assumes and agrees to pay, perform and discharge all unperformed and unfulfilled
obligations of Sellers as of the date hereof which are required to be performed
and fulfilled subsequent to the date hereof under the contracts, agreements,
licenses, permits and other instruments assigned to Purchaser pursuant to
subsections (b), (c) and (d) of Section 1.2 hereof (hereinafter collectively
referred to as the "Assumed Liabilities").
Section 1.7. Excluded Liabilities. Notwithstanding anything to the
contrary set forth herein, other than the Assumed Liabilities, Purchaser has not
assumed, agreed to pay, discharge or perform or incurred any liability or
obligation under this Agreement or otherwise become responsible in respect of
any liability or obligation of Sellers including, without limitation, any
liability or obligation of Sellers to Sprint Corporation or any of its
affiliates (the "Excluded Liabilities"). Without limiting the generality of the
foregoing and notwithstanding anything in Section 1.6 to the contrary, Purchaser
has not assumed and shall not be liable for any of the following liabilities or
obligations of Sellers:
(a) Any federal, state, local or foreign income, capital
gains, profits, gross receipts, payroll, capital stock, franchise,
employment, withholding, social security, unemployment, disability,
real property, personal property, stamp, excise, occupation, sales,
use, transfer, mining, value-added, investment credit recapture,
alternative or add-
- ----------
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
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<PAGE>
on minimum, environmental, estimated or other taxes, duties or
assessments of any kind, including any interest, penalty and additions
imposed with respect to such amounts (collectively, "Taxes") levied by
any foreign, federal, state or local taxing authority, except to the
extent otherwise provided pursuant to Section 1.8 hereof;
(b) Any liabilities or obligations of either Seller for
severance or similar payments to employees which arise as a result of
consummation of the transactions contemplated hereby and, except as
otherwise provided pursuant to Section 6.2, any other liabilities or
obligations of either Seller which arise out of or are incurred with
respect to this Agreement and the transactions contemplated hereby
(including, without limitation, Sellers' legal and accounting fees);
(c) Any liabilities or obligations of either Seller which are
not directly incident to or arising out of or incurred with respect to
the Assets;
(d) Any liabilities or obligations of either Seller arising
under any governmental statute, code, rule, regulation, ordinance,
decree, order or other requirement or law relating to (i) the
protection of human health and safety or the environment (collectively,
"Environmental Laws") or (ii) labor or employment with respect to the
conduct of the IDDD Business or conditions in connection with the IDDD
Business prior to the date hereof;
(e) Any accounts payable or trade payables of either Seller;
(f) Any liabilities or obligations of either Seller to Sprint
Corporation or any affiliate of a Seller or Sprint Corporation;
(g) Any liabilities or obligations of either Seller to the
extent related to the Excluded Assets;
(h) Any liabilities or obligations of either Seller accruing
prior to the date hereof to the extent that such Seller or any of its
affiliates is actually reimbursed therefor under its insurance
policies;
(i) Any liabilities or obligations of either Seller relating
to the special employee arrangements described in Schedule 1.7(i)
hereto; and
(j) Any liabilities or obligations of either Seller relating
to the Data Business.
Section 1.8. Prorations. All property and ad valorem taxes, business
licenses, permits, utilities and other customarily proratable expenses of
Sellers relating to the Assets payable subsequent to the date hereof and
relating to the period of time both prior to and subsequent to the date hereof
will be prorated between Purchaser and Sellers as of the date hereof based on
the
-4-
<PAGE>
number of days in such period, with Sellers being responsible for a
proportionate share of such expenses based on the number of days in the period
prior to the date hereof and Purchaser being responsible for a proportionate
share of such expenses based on the sum of the date hereof and the number of
days in such period subsequent to the date hereof.
ARTICLE 2.
ITEMS DELIVERED; FURTHER ASSURANCES
Section 2.1. Items Delivered. Contemporaneously with the execution and
delivery of this Agreement. the following documents have been executed and
delivered in connection with the transactions contemplated hereby:
(a) the Transition Services Agreement between Purchaser and
Sellers;
(b) the Transition Services Agreement between Purchaser and
Sprint Communications Company L.P.;
(c) the Transition Services Agreement between Purchaser and
Global One Communications World Operations, Limited;
(d) the Bill of Sale from Sellers in favor of Purchaser;
(e) the Assignment and Assumption Agreement between Purchaser
and Sellers;
(f) the Sublease Agreement between Purchaser and Sprint
Telecommunication Services GmbH;
(g) the Side Letter Agreement by and among Sellers and
Purchaser relating to specified customers; and
(h) the legal opinions delivered by counsel to Purchaser and
counsel to Sellers.
Section 2.2. Further Assurances. Sellers from time to time after the
date hereof, at Purchaser's request, will execute, acknowledge and deliver to
Purchaser such other instruments of conveyance and transfer and will take such
other actions and execute and deliver such other documents, certifications and
further assurances as Purchaser may reasonably request in order to vest more
effectively in Purchaser, or to put Purchaser more fully in possession of, any
of the
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<PAGE>
Assets, or to better enable Purchaser to complete, perform or discharge any of
the Assumed Liabilities. Each of the parties hereto will cooperate with the
other and execute and deliver to the other such other instruments and documents
and take such other actions as may be reasonably requested from time to time by
any party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby jointly and severally represents and warrants to
Purchaser as follows:
Section 3.1. Corporate Organization; Good Standing; Etc. Sprint Fon
Inc. is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has the corporate power to enter into this
Agreement and to carry out the transactions contemplated hereby. Sprint
Telecommunications Services GmbH is a limited liability company duly organized
and validly existing under the laws of Germany and has the power to enter into
this Agreement and to carry out the transactions contemplated hereby. Each
Seller has the power and authority to conduct the IDDD Business and to own or
lease all of the assets owned or leased by it and is duly qualified to do
business and, to the extent available under applicable law, is in good standing
as a foreign corporation in each jurisdiction in which the properties owned or
leased or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a material adverse effect on the Assets or the IDDD Business.
Section 3.2. Authorization, Etc. The execution and delivery of this
Agreement and each of the Seller Ancillary Documents (as hereinafter defined) by
Sellers and the due consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of each Seller. Each of this Agreement and the Seller Ancillary Documents has
been duly executed and delivered by each Seller. Each of this Agreement and the
Seller Ancillary Documents constitutes a legal, valid and binding obligation of
each Seller, enforceable against each Seller in accordance with its terms.
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and each of the Seller Ancillary
Documents, the consummation of the transactions contemplated hereby and thereby,
and the fulfillment of and compliance with the terms and conditions of this
Agreement and each of the Seller Ancillary Documents do not and will not, with
the passing of time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of any material
benefit under, or permit the acceleration of any obligation under, (i) any term
or provision of the Articles or Certificate of Incorporation or Bylaws or other
governing instrument of either Seller, (ii) except as disclosed in Schedule 3.8,
any contract, agreement, commitment or understanding to which either Seller is a
-6-
<PAGE>
party or to which either Seller or any of either Seller's properties is subject,
(iii) any judgment, decree or order of any court or any U.S. or non-U.S.
supranational, national, state or local governmental authority or agency or
public or regulatory unit, agency, body or authority (collectively, a
"Governmental Authority") to which either Seller is a party or by which either
Seller or any of either Seller's properties is bound, or (iv) any statute, law,
regulation or rule applicable to either Seller, which, in the case of
subsections (ii) through (iv) above, will or is reasonably likely to have a
material adverse effect on the Assets or the IDDD Business.
Section 3.4. Ownership of Assets and Related Matters. Sellers do not
own any real property. Sellers have transferred to Purchaser as of the date
hereof good and valid title to all of the Assets, free and clear of all liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature whatsoever, other than such encumbrances or imperfections of title as
are Set forth in Schedule 3.4 hereto. The liens, encumbrances and restrictions
described in Schedule 3.4 hereto are hereinafter collectively referred to as
"Permitted Liens." All of the Assets that constitute tangible property are in
good operating condition and repair subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable laws, ordinances, codes, rules and regulations applicable thereto,
except such failures to conform which in the aggregate would not have a material
adverse effect upon the Assets or the IDDD Business.
Section 3.5. Financial Statements. Sellers have delivered to Purchaser
the unaudited financial statements of Sellers (including balance sheets,
statements of income, and statements of cash flows) as of December 31, 1995 and
for the year then ended, which financial statements fairly present the financial
position, results of operations and cash flows of Sellers as of December 31,
1995 and for the year then ended (subject to normal year-end adjustments which
would not be material in effect or amount) and have been prepared in accordance
with generally accepted accounting principles in the United States and in a
manner consistent with the past accounting practices of Sellers. Sellers do not
have any liabilities required to be reflected on the balance sheet included in
said financial statements which are not reflected thereon, except liabilities
arising in the ordinary course of business since December 31, 1995. Since
December 31, 1995, the IDDD Business has been conducted in the ordinary course,
consistent with past practice, and, except for changes arising in the ordinary
course and as a result of the formation of Global One Communications, a joint
venture formed by Sprint Corporation, Deutsche Telekom and France Telecom (the
various entities which comprise such joint venture and are controlled directly
or indirectly by Sprint Corporation, Deutsche Telekom ("DT") and France Telecom
are collectively referred to herein as "Global One Communications"), there has
not occurred (a) any change in the IDDD Business or the Assets, (b) any material
change in or the financial condition or results of operations of either Seller,
or (c) any damage, destruction or loss with respect to the IDDD Business,
whether or not covered by insurance.
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<PAGE>
Section 3.6. Litigation: Compliance With Law. Except as set forth in
Schedule 3.6 hereto, (a) neither Seller is engaged in or a party to, and is not
threatened with, any legal action or other proceeding, before any court,
arbitrator or administrative agency which would have a material adverse effect
on the Assets or the IDDD Business; and (b) neither Seller is a party to or
subject to any judgment, decree or order entered in any lawsuit or proceeding
brought by any Governmental Authority or by any other person against such
Sellers which would have a material adverse effect on the Assets or the IDDD
Business or its ability to enter into or perform its obligations under this
Agreement or any of the Seller Ancillary Documents or to consummate the
transactions contemplated hereby or thereby. Neither Seller is in conflict with,
or in default or violation of, any law, rule, regulation, order, judgment or
decree applicable to such Seller or by which any of the Assets is bound or
affected which would have a material adverse effect on the Assets or the IDDD
Business or its ability to enter into or perform its obligations under this
Agreement or any of the Seller Ancillary Documents or to consummate the
transactions contemplated hereby or thereby.
Section 3.7. Brokers, Finders, etc. Except for arrangements with
Dillon, Read & Co. Inc. which have been previously disclosed to Purchaser,
neither Seller has incurred any liability to any broker, finder or agent for any
brokerage fees, finders' fees or other like commissions with respect to the
transactions contemplated by this Agreement.
Section 3.8. Consents. Except for the consents described in Schedule
3.8 hereto, no waiver, permit, license, approval, authorization, qualification,
order or consent of or filing with any court or Governmental Authority or any
other third party, including, without limitation, any filing required under the
Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended, is required
to be obtained or made by Sellers in connection with the execution, delivery or
performance of this Agreement or any of the Seller Ancillary Documents or the
consummation of the transactions contemplated hereby or thereby.
Section 3.9. Contracts. Except as disclosed in Schedule 3.9 each
contract to be assumed by Purchaser is in full force and effect and is valid and
enforceable in all material respects. Each Seller has performed in all material
respects all obligations required to be performed by it under each contract to
be assumed by Purchaser, there are no outstanding material disputes thereunder,
and neither Seller is in breach of any material provision thereof nor is either
of them aware of any breach thereunder by any other party thereto.
Section 3.10. Intellectual Property. Sellers have the right to use the
software listed on Schedule 1.2(g) hereto in the IDDD Business, and no claims
have been asserted in writing by any individual, corporation, partnership, joint
venture or other entity against Sellers for the use of such software nor, to
Sellers' knowledge, is there a basis for such a claim.
Section 3.11. Employees. Except as disclosed in Schedule 3.11 hereto,
there are no grievances or other labor disputes with respect to individuals
employed in the IDDD Business and Sellers have not experienced any such labor
controversy within the past two (2) years.
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Except as disclosed in Schedule 3.11 hereto, there are no pending or, to the
knowledge of either Seller, threatened complaints or charges with any
Governmental Authority or court or any arbitrator with respect to any individual
or group of individuals currently or formerly employed in the IDDD Business
alleging employment discrimination or other unfair labor practice charges or
otherwise relating to their employment by Sellers, and Sellers have not
experienced any such proceeding, litigation or arbitration within the past two
(2) years. No individuals employed in the IDDD Business are represented by any
labor organization.
Section 3.12. Environmental Matters. To the knowledge of Sellers, the
activities and operations of the IDDD Business have been in material compliance
with all Environmental Laws.
Section 3.13. Taxes. Except as disclosed on Schedule 3.13, Sellers have
duly filed, or have obtained a filing extension (which extension has not
expired) from the appropriate federal, state, local and foreign governments or
Governmental Authorities with respect to, all material Tax returns required to
be filed by either of them on or prior to the date hereof. Payment in full of
all Taxes shown to be due on such Tax returns has been made. All written
assessments of Taxes due and payable by, on behalf of or with respect to Sellers
have been paid by Sellers, or are being contested in good faith by appropriate
proceedings and have been adequately reserved for. There are no liens or other
encumbrances for Taxes on any Assets that would remain as of the date hereof
after giving effect to the transactions contemplated hereby that arose in
connection with any failure (or alleged failure) to pay any Tax, except for
liens for Taxes not yet due and payable. All amounts required to be withheld by
Sellers from employees of the IDDD Business for income Taxes, social security,
payroll Taxes and other similar Taxes have been collected and withheld, and have
either been paid to the respective Governmental Authorities, set aside in
accounts for such purpose, or accrued, reserved against and entered upon
Sellers' books and records.
Section 3.14. Permits and Approvals. Sellers have all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities required for the conduct of the IDDD Business as
presently conducted by Sellers. Within the past eighteen (18) months, neither
Seller has received a written notice alleging a violation or probable violation
or notice of revocation or other written communication from or on behalf of any
Governmental Authority which violation has not been corrected or otherwise
settled alleging (i) any violation of any material license, permit, consent,
approval, authorization, qualification or order or (ii) that such Seller
requires any material license, permit, consent, approval, authorization,
qualification or order not currently held by it.
Section 3.15. Affiliate Transactions. Other than transactions with
Sprint Corporation and its affiliates, the obligations and liabilities of
Sellers with respect to which will not be
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<PAGE>
assumed by Purchaser, and except as disclosed on Schedule 3.15 hereto, neither
Seller has engaged in any transaction with any affiliate, officer, employee or
director.
Section 3.16. Subsidiaries. Neither Seller owns any capital stock of or
any other interest in any corporation, partnership, joint venture or other
person.
Section 3.17. Sufficiency of Assets. Except as disclosed on Schedule
3.17, the Assets comprise all of the assets necessary for Purchaser to conduct
the IDDD Business as currently conducted by Sellers.
Section 3.18. Customer Contracts. Except as disclosed on Schedule 3.18,
to Sellers' knowledge, none of the customers of the IDDD Business intend to
terminate or refuse to renew their customer contracts referred to in Section
1.2(c) or otherwise modify said contracts or take any adverse action against
Purchaser or any action which would otherwise adversely affect Purchaser as a
result of the consummation of the transactions contemplated by this Agreement or
otherwise. For purposes of the foregoing, a Seller will be deemed to have
"knowledge" of a particular fact or other matter if Stephan Folgnand, Peter
Hammer, Peter Tippkoetter, Steve Campbell, Debora Harvey or Michael Trudnak is
actually aware of such fact or other matter. Sellers have received written
representations from each such person with respect to the matter set forth in
this Section 3.18.
Section 3.19. Disclosure. To Sellers' knowledge, no representations or
warranties made by Sellers in this Agreement or in any of the Seller Ancillary
Documents and no statement contained in any document (including, without
limitation, the Schedules hereto), certificate or other writing furnished or to
be furnished by Sellers to Purchaser pursuant to the provisions hereof or the
transactions contemplated hereby, contains any untrue statement of material
fact, or omits to state any material fact necessary in light of the
circumstances under which it has made, in order to make the statements herein or
therein not misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
Section 4.1. Organization. Purchaser is a limited liability company
duly organized and validly existing under the laws of Germany and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted.
Section 4.2. Authorization. Purchaser has full corporate power and
authority to execute and deliver this Agreement and each of the Purchaser
Ancillary Documents (as hereinafter defined) and to perform its obligations
hereunder and thereunder and to consummate
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the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and each of the Purchaser Ancillary Documents by Purchaser, the
performance by Purchaser of its obligations hereunder and thereunder and the
consummation of the transactions provided for herein and therein have been duly
and validly authorized by all necessary corporate action on the part of
Purchaser. Each of this Agreement and the Purchaser Ancillary Documents has been
duly executed and delivered by Purchaser and constitutes a valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and each of the Purchaser Ancillary
Documents, the consummation of the transactions contemplated hereby and thereby,
and the fulfillment of and compliance with the terms and conditions hereof and
thereof do not and will not, with the passing of time or the giving of notice or
both, violate or conflict with, constitute a breach of or default under, result
in the loss of any material benefit under, or permit the acceleration of any
obligation under, (i) any term or provision of the Articles of Association of
Purchaser, (ii) except as disclosed in Schedule 4.5 hereto, any contract,
agreement, commitment or understanding to which Purchaser is a party or to which
Purchaser or any of Purchaser's properties is subject, (iii) any judgment,
decree or order of any court or Governmental Authority to which Purchaser is a
party or by which Purchaser or any of Purchaser's properties is bound, or (iv)
except as disclosed in Schedule 4.5 hereto, any statute, law, regulation or rule
applicable to Purchaser, which, in the case of subsections (ii) through (iv)
above, will or is reasonably likely to have a material adverse effect on the
assets, liabilities, results of operations, financial condition, business or
prospects of Purchaser and its subsidiaries taken as a whole.
Section 4.4. Brokers, Finders, Etc. Purchaser has not incurred any
liability to any broker, finder or agent for any brokerage fees, finders' fees
or other like commissions with respect to the transactions contemplated by this
Agreement.
Section 4.5. Consents. Except for the consents described in Schedule
4.5 hereto, no waiver, permit, license, approval, authorization, qualification,
order or consent of any court or Governmental Authority or any other third party
is required to be obtained by Purchaser in connection with the execution,
delivery or performance of this Agreement or any of the Purchaser Ancillary
Documents or the consummation of the transactions contemplated hereby or
thereby.
Section 4.6. Disclosure. To Purchaser's knowledge, no representations
or warranties made by it in this Agreement or any of the Purchaser Ancillary
Documents and no statement contained in any document (including, without
limitation, the Schedules hereto), certificate, or other writing furnished or to
be furnished by Purchaser to Sellers pursuant to the provisions hereof or the
transactions contemplated hereby, contains any untrue statement of material
fact, or
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<PAGE>
omits to state any material fact necessary in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Public Announcements. Neither party hereto will issue any
press release or make any other public announcement relating to the transactions
contemplated by this Agreement without the prior consent of the other party
hereto, which consent shall not be unreasonably withheld or delayed, except that
either party may make any disclosure required to be made under applicable law or
stock exchange rule if such party determines in good faith that it is necessary
to do so and gives prior notice to the other party. Either party shall be deemed
to have given its consent to a press release of the other party if it does not
respond to a request for consent within three (3) business days of its receipt
of the draft press release.
Section 5.2. No Solicitation of Employees; Non-Interference. (a) For a
period of two (2) years after the date hereof, Sellers shall not, and shall
cause each of their affiliates not to, directly or indirectly, (i) persuade or
attempt to persuade any person providing goods or services to the IDDD Business
not to do business with the IDDD Business or to reduce the amount of business it
does with the IDDD Business, (ii) persuade or attempt to persuade any person who
is or during such period becomes a director, officer or employee of Purchaser
and who devotes all or substantially all of his time to the IDDD Business of
Purchaser (each a "Purchaser IDDD Person") to terminate his relationship with
Purchaser, (iii) dissuade or attempt to dissuade any person from becoming a
Purchaser IDDD Person, or (iv) degrade, denigrate, deride or otherwise disparage
the competence, service, condition (financial or otherwise), integrity or
prospects of Purchaser, the IDDD Business or any Purchaser IDDD Person in an
effort to solicit customers for a competing business or otherwise.
(b) For a period of two (2) years after the date hereof,
Sellers, in good faith, shall use all commercially reasonable efforts to cause
Global One Communications and DT not to, directly or indirectly, (i) persuade or
attempt to persuade any person providing goods or services to the IDDD Business
not to do business with the IDDD Business or to reduce the amount of business it
does with the IDDD Business, (ii) persuade or attempt to persuade any person who
is or during such period becomes a director, officer or employee of Purchaser
and who devotes all or substantially all of his time to the IDDD Business of
Purchaser to terminate his relationship with Purchaser, (iii) dissuade or
attempt to dissuade any person from becoming a Purchaser IDDD Person, or (iv)
degrade, denigrate, deride or otherwise disparage the competence, service,
condition (financial or otherwise), integrity or prospects of Purchaser, the
IDDD Business or any Purchaser IDDD Person in an effort to solicit customers for
a competing business or otherwise. The parties agree that Sellers shall have
satisfied their obligations under this subsection (b) as to DT if Sellers (x)
shall cause the appropriate executive officer of Sprint
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Corporation, promptly after the date hereof, to advise an officer of DT with
similar responsibilities as those of such officer of Sprint Corporation in
writing of the consummation of the transactions contemplated hereby and the
commitments of Sellers pursuant to this subsection (b) and (y) shall cause such
officer of Sprint Corporation to contact such officer of DT by telephone within
a reasonable period of time after such written notice to confirm DT's receipt of
such notice, to request DT's compliance with the requirements of this subsection
(b), and to answer any questions which DT may have concerning the transactions
consummated on the date hereof or the requirements of this subsection (b).
(c) For a period of two (2) years after the date hereof,
Sellers, in good faith, shall use all commercially reasonable efforts to cause
the purchaser of the Data Business not to, directly or indirectly, (i) persuade
or attempt to persuade any person providing goods or services to the IDDD
Business not to do business with the IDDD Business or to reduce the amount of
business it does with the IDDD Business, (ii) persuade or attempt to persuade
any person who is or during such period becomes a director, officer or employee
of Purchaser and who devotes all or substantially all of his time to the IDDD
Business of Purchaser to terminate his relationship with Purchaser, (iii)
dissuade or attempt to dissuade any person from becoming a Purchaser IDDD
Person, or (iv) degrade, denigrate, deride or otherwise disparage the
competence, service, condition (financial or otherwise), integrity or prospects
of Purchaser, the IDDD Business or any Purchaser IDDD Person in an effort to
solicit customers for a competing business or otherwise.
(d) For a period of two (2) years after the date hereof,
Purchaser shall not, and shall cause each of its affiliates not to, directly or
indirectly, (i) persuade or attempt to persuade any person providing goods or
services to the Data Business not to do business with the Data Business or to
reduce the amount of business it does with Data Business, (ii) persuade or
attempt to persuade any person who is or during such period becomes a director,
officer or employee of a Seller and who devotes all or substantially all of his
time to the Data Business of Sellers (each a "Seller Data Person") to terminate
his relationship with such Seller, (iii) dissuade or attempt to dissuade any
person from becoming a Seller Data Person, or (iv) degrade, denigrate, deride or
otherwise disparage the competence, service, condition (financial or otherwise),
integrity or prospects of a Seller, the Data Business or any Seller Data Person
in an effort to solicit customers for a competing business or otherwise.
(e) For purposes of this Agreement, "person" shall include an
individual, corporation, joint venture, partnership or other entity.
Section 5.3. VAT Taxes. As part of the Purchase Price to be paid by
Purchaser pursuant to Section 1.5 hereof, a German Value Added Tax
(Umsatzsteuer, hereinafter called "VAT") is due of [*] and Sellers have
issued and delivered to Purchaser an invoice showing that the Purchase Price
includes the VAT amount presumed to be due as aforesaid.
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[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
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For the purpose of payment (and not instead of such payment),
Purchaser hereby assigns to Sellers, and at such time will deliver to Sellers
evidence of such assignment including, without limitation, the completed
assignment notification (Abtretungsanzeige) form prescribed by German law, the
VAT refund claim (Umsatzsteuererstattungs-anspruch) accruing to Purchaser as a
result of the consummation of the transactions contemplated by this Agreement.
Purchaser will duly file with the Tax authorities, no later than June 10, 1996,
the VAT return and the assignment notification mentioned in the preceding
sentence, and Sellers will set-off the claim assigned to them against the VAT
payment obligation and apply to the Tax authorities for an interest free set-off
deferral ("zinslose Verrechnungsstundung"). Sellers and Purchaser will cooperate
in order to achieve the aforementioned assignment and setoff. If and to the
extent Sellers are required for any reason to pay to the Tax authorities the VAT
invoiced to Purchaser by other means than by such set-off, Purchaser shall
promptly pay to Sellers in cash all and any amounts thus payable and in exchange
therefor ("Zug um Zug"), Sellers shall reassign to Purchaser any part of the
VAT refund claim not used by such set-off. Purchaser shall indemnify Sellers
pursuant to and in accordance with Article 6 hereof for all penalties, including
but not limited to penalties for late payment of Taxes imposed as a result of a
non-payment by Purchaser of the VAT invoiced to Purchaser and for all interests,
costs (including reasonable legal fees), losses and liabilities (collectively,
the "VAT Losses") incurred in connection with the efforts to achieve the
assignment of and set-off with the VAT input refund claim unless such VAT Losses
should have been incurred as a result of Sellers' fault, without regard to the
limitation set forth in Section 6.6 hereof.
If the Tax authorities should determine that no VAT is due
under German law as a result of the consummation of the transactions
contemplated hereby, then (i) Sellers shall issue a new invoice showing the
Purchase Price net of the aforesaid VAT amount, (ii) Sellers shall deliver such
new invoice to Purchaser against return of the original invoice issued and
delivered to Purchaser, (iii) Sellers shall promptly apply to the Tax
authorities for a refund of the VAT amount paid, and (iv) Sellers shall
reimburse the amount of the VAT paid by Purchaser promptly upon such VAT having
been refunded by the Tax authorities to Sellers or, if such refund should be
refused or reduced as a result of other tax obligations of Sellers, at such time
when it would have been refunded to Sellers if all Tax obligations of Sellers
payable at such time had been settled in cash. To secure Sellers' reimbursement
obligation under clause (iv) of the preceding sentence, Sellers hereby assign to
Purchaser their refund claim for such VAT amount paid, and Purchaser hereby
accepts such assignment.
Purchaser shall indemnify Sellers pursuant to and in accordance with Article
6 hereof from, and hold harmless against, any and all VAT or similar Taxes
payable under German law upon the consummation of the transactions
contemplated by this Agreement in excess of [*] any other liabilities,
damages, costs and expense resulting from or arising out of (a) the failure
of Purchaser to pay any amount of VAT or similar Taxes payable under German
law upon the consummation of the transactions contemplated by this Agreement
in excess of [*] and (b) any action or levy made as a result thereof, without
regard to the limitation set forth in Section 6.6 hereof.
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[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
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Section 5.4. Sale of Assets and IDDD Business. For a period of eighteen
(18) months after the date hereof, Purchaser shall not, without the prior
written consent of Sellers, Transfer the Assets or Transfer control of the IDDD
Business to any Major Competitor of Sprint Corporation. For purposes of this
Section 5.4, a "Transfer of control of the IDDD Business to a Major Competitor
of Sprint" shall be deemed to have occurred whenever any one or more Major
Competitors of Sprint Corporation and their respective affiliates control the
IDDD Business. For purposes of this Section 5.4, "Transfer" shall mean any act
pursuant to which, directly or indirectly, the ownership of all or substantially
all of the Assets or control of the IDDD Business in question is sold,
transferred, conveyed or otherwise disposed of, and "Major Competitor of Sprint
Corporation" shall mean the following entities and the affiliates of such
entities: American Telephone & Telegraph Co.; PTT Netherlands; PTT Switzerland;
Telia AB; Telefonica de Espana, S.A.; British Telecommunications plc; and MCI
Communications Corporation. For purposes of this Agreement, "affiliate" shall
mean with respect to any person, (i) any person directly or indirectly
controlling, controlled by or under common control with such person, (ii) any
officer, director, general partner or trustee of, or a person serving in a
similar capacity with respect to, such person, or (iii) any person who is an
officer, director, general partner, or trustee of any person described in clause
(i) or (ii) of this sentence. For purposes of this Agreement, the term
"control," "controlling," "controlled by," or "under common control with" shall
mean (i) the ownership, direct or indirect, of more than fifty percent (50%) of
the voting power of a person, or (ii) the possession, direct or indirect, of the
power (a) to elect a majority of the board of directors of a person or (b) to
direct or cause the direction of the management and policies of a person,
whether through the ownership of securities, by contract or otherwise.
Section 5.5. Customer Contracts. Schedule 3.8 of this Agreement
describes certain consents and approvals required to be obtained by Sellers in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated by this Agreement, including
consents and approvals which may be required from customers of the IDDD Business
under the customer contracts described in Schedule l.2(c) hereto. Sellers and
Purchaser have agreed that, in light of the desire of Sellers and Purchaser to
conclude the transactions contemplated by this Agreement as promptly as
practicable and the existing termination rights of customers under such consumer
contracts, Sellers and Purchaser have consummated the transactions contemplated
by this Agreement on the date hereof without obtaining such customer consents.
Sellers and Purchaser agree to develop a mutually agreeable plan for disclosing
the consummation of the transactions contemplated hereby to such customers and
agree to approach each such customer in accordance with such plan as promptly as
practical after the date hereof; provided, however, that if the parties do not
agree to such a plan by May 21, 1996, Sellers shall be able to approach such
customers wherever located and to disclose to them such information regarding
the transactions contemplated hereunder as Sellers reasonably determine to be
necessary and, if Sellers and Purchaser shall have agreed on the nature of the
disclosure to any such customer, as shall be reasonably consistent with such
agreed
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upon disclosure. Sellers and Purchaser further agree that, except as otherwise
specifically agreed by Sellers and Purchaser on the date hereof, neither Sellers
nor any of their affiliates shall be responsible or liable to Purchaser or any
of its affiliates, whether pursuant to Article 6 hereof or otherwise, for any
claims, liabilities, obligations, losses, costs, expenses, penalties, fines or
other judgments (at law or in equity) or damages of Purchaser arising out of or
related to (a) the termination of any customer contract described in Schedule
1.2(c) hereto on or after the date hereof or (b) any action brought or levy made
as a result thereof, and Sellers and Purchaser further agree that, except as
otherwise specifically agreed by Sellers and Purchaser on the date hereof, no
such termination of a customer contract shall be deemed to be a breach by
Sellers of any representation, warranty, covenant, agreement or undertaking made
by Sellers in this Agreement or any Seller Ancillary Document (as hereinafter
defined) or give rise to any adjustment of the Purchase Price paid by Purchaser
pursuant to Section 1.5 hereof.
Section 5.6. Accounts Receivable.
(a) For a period commencing on the date hereof and ending on
December 31, 1996 (the "Collection Period"), Purchaser shall use all
commercially reasonable efforts to collect on behalf of Sellers the
accounts receivable of Sellers relating to the IDDD Business in
existence on the date hereof as well as the accounts receivable created
after the date hereof with respect to the conduct of the IDDD Business
by Sellers prior to the date hereof (collectively, the "Pre-Closing
Receivables"). For purposes of this Section 5.6, all amounts
collected from any customer of the IDDD Business shall be applied to
the oldest outstanding receivable from such customer unless such
customer shall dispute a specific receivable in writing or designate a
specific invoice or receivable for payment.
(b) The parties acknowledge that for a period of time after
the date hereof, customers of the IDDD Business will make payments on
invoices to a bank account of Sellers and that at a date to be agreed
to by the parties invoices of the IDDD Business will be amended to
provide that customers should make payments to a bank account of
Purchaser.
(c) The parties agree to establish reasonable procedures for
verifying the amounts paid by customers into bank accounts of Sellers
or Purchaser and for the disbursement of such amounts to Sellers or
Purchaser as appropriate. In any event, the parties agree that the
party that receives any payment in its bank account which is due to the
other party shall pay such amount to the other party within five (5)
business days after the funds so paid become available to the party in
whose bank account the payment is deposited. In addition, each party
that receives any such payment in its bank account shall provide a
written report to the other party on all such collections not less than
once every month.
(d) Notwithstanding Purchaser's obligation to use all
commercially reasonable efforts to collect the Pre-Closing Receivables,
Sellers acknowledge and agree that
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Purchaser is under no obligation to initiate legal proceedings of any
sort with respect to the Pre-Closing Receivables, and Purchaser
agrees not to initiate legal proceedings of any sort against any
customer with respect to Pre-Closing Receivables without the prior
written consent of Sellers. With respect to the collection of accounts
receivable other than Pre-Closing Receivables that are due and payable
by existing customers of the IDDD Business under their existing
contracts, Purchaser further agrees not to initiate legal proceedings
of any sort against such customers without providing Sellers with at
least ten (10) days prior written notice of Purchaser's intention to
initiate such legal proceeding.
(e) Upon the expiration of the Collection Period, Purchaser
shall deliver to Sellers copies of all invoices and records, if any,
relating to the Pre-Closing Receivables which have not been collected
and Purchaser shall have no further obligation to collect the same. At
such time, Sellers and their successors in interest may pursue in a
commercially reasonable manner and consistent with past practice the
collection of outstanding Pre-Closing Receivables on their own behalf
and at their own expense. The parties hereto acknowledge and agree that
Purchaser shall have no duties or obligations with respect to the
Pre-Closing Receivables except as specifically set forth in this
Section 5.6.
Section 5.7. Employees. The parties agree that, effective as of the
date hereof, the employees listed on Schedule 5.7 hereto shall cease to be
employees of Sellers and shall be and become employees of Purchaser and that,
except for amounts which are described on Schedule 5.7 hereto which shall be
paid by Sellers to such employees after the date hereof, Purchaser shall be
responsible for all compensation, salary, pension, severance and other employee
benefits, taxes and costs which accrue to the benefit of, or with respect to,
such employees on and after the date hereof and with respect to services
provided to Purchaser on or after the date hereof.
Section 5.8. Access to Records. Purchaser and Sellers shall provide
each other and their respective employees, counsel, accountants and other
representatives, upon reasonable prior notice, on a reasonable basis and during
normal business hours, with reasonable access to their respective books and
records with respect to periods prior to the date hereof as shall be reasonably
necessary for Purchaser or Sellers to prepare any Tax returns relating to the
IDDD Business or the sale thereof to Purchaser and the right to make copies and
extracts therefrom (at the cost of the party requesting access) for such
purpose. Purchaser and Sellers shall cooperate with each other and their
respective employees, counsel, accountants and other representatives in these
matters.
Section 5.9. Domestic Access Lines. Sprint Telecommunication Services
GmbH ("STS") is the lessee of certain access lines of DT which are (a) dedicated
to the IDDD Business
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<PAGE>
(the "Dedicated IDDD Lines"), (b) shared by the IDDD Business and the Data
Business (the "Shared Lines"), and (c) dedicated to the Data Business. On the
date hereof, STS has advised DT that it no longer desires to lease the Dedicated
IDDD Lines or the Shared Lines and Purchaser has entered into a lease
arrangement with DT to lease the Dedicated IDDD Lines and the Shared Lines.
Sellers shall pay to DT, on behalf of Purchaser, any installation fee which DT
may charge Purchaser for initiating such lease arrangements. During the period
of time (the "Transition Period") commencing on the date hereof and ending on
the earlier of (i) December 31, 1996, and (ii) provided that Sellers shall have
given Purchaser at least thirty (30) days advance written notice of the closing
date of sale of the Data Business, ninety (90) days after the closing of the
sale of the Data Business, Purchaser agrees to make available to Sellers
capacity on the Shared Lines comparable to the capacity used by Sellers prior to
the date hereof in connection with the services provided on the date hereof by
the Data Business to four (4) of its customers, and Sellers agree to pay for
such capacity on a pass-through basis. At the expiration of the Transition
Period, Sellers' rights to use capacity on the Shared Lines in connection with
the Data Business shall terminate.
Section 5.10. Miscellaneous Agreements. The parties acknowledge that
the agreements, contracts and instruments described in Schedule 5.10 hereto (the
"Miscellaneous Agreements") relate to the assets which are used by Sellers in
the IDDD Business and the Data Business. Promptly as practicable after the date
hereof, Sellers shall enter into negotiations with the vendors named in the
Miscellaneous Agreements for Sellers to enter into agreements for the use of
assets used in connection with the IDDD Business and for Purchaser to enter into
agreements for the use of assets in connection with the Data Business. Sellers
shall pay to such vendors all termination charges of such vendors related to the
restructuring of the Miscellaneous Agreements as provided in this Section 5.10
and shall pay to such vendors all customary installation or activation charges
of such vendors to establish new accounts for Purchaser to use the assets for
the IDDD Business on the same terms on which Sellers used such assets prior to
the date hereof. Until the restructuring of the Miscellaneous Agreements is
completed, Sellers and Purchaser shall share the costs incurred by Sellers under
the Miscellaneous Agreements, with Purchaser being responsible for that portion
of such costs which the parties reasonably determine to be related to the use of
the assets in connection with their respective businesses.
Section 5.11. Telephone Numbers. The parties acknowledge that Sellers
have one set of telephone numbers and telefax numbers for the IDDD Business and
the Data Business. Until the expiration of the Transition Period, Sellers and
Purchaser shall share such telephone numbers and telefax numbers for the purpose
of conducting the IDDD Business and the Data Business on such terms as the
parties shall reasonably determine to be appropriate. At the expiration of the
Transition Period, Purchaser shall discontinue its use of such numbers.
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<PAGE>
ARTICLE 6.
INDEMNIFICATION
Section 6.1. Indemnification Obligations of Sellers. From and after the
date hereof, Sellers shall indemnify and hold harmless Purchaser and its
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Purchaser
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) The Excluded Liabilities;
(b) Any breach of any representation, warranty, covenant,
agreement or undertaking made by Sellers in this Agreement or in any
certificate, agreement, exhibit, schedule or other writing delivered by
Sellers to Purchaser pursuant to the provisions hereof (collectively,
the "Seller Ancillary Documents") or in the performance of its
obligations hereunder or thereunder; or
(c) Any fraud, willful misconduct, bad faith or any
intentional breach of any representation, warranty, covenant, agreement
or undertaking made by Sellers in this Agreement or the Seller
Ancillary Documents or in the performance of its obligations hereunder
or thereunder.
Notwithstanding the foregoing, Sellers' indemnification obligation with respect
to any of the foregoing matters shall be governed by the terms of any Seller
Ancillary Document which expressly provides for indemnification by Sellers for a
specific matter which is different from that provided in this Article 6. The
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
damages of the Purchaser Indemnified Parties described in this Section 6.1 as to
which the Purchaser Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Purchaser Losses."
Section 6.2. Indemnification Obligations of Purchaser. From and after
the date hereof, Purchaser shall indemnify and hold harmless Sellers and their
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Seller
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages
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<PAGE>
whenever arising or incurred (including, without limitation, amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
arising out of or relating to:
(a) The Assumed Liabilities;
(b) Any breach of any representation, warranty, covenant,
agreement or undertaking made by Purchaser in this Agreement or in any
certificate, agreement, exhibit, schedule or other writing delivered by
Purchaser to Sellers pursuant to the provisions hereof (the "Purchaser
Ancillary Documents") or in the performance of its obligations
hereunder or thereunder; or
(c) Any fraud, willful misconduct, bad faith or any
intentional breach of any representation, warranty, covenant, agreement
or undertaking made by Purchaser in this Agreement or the Purchaser
Ancillary Documents or in the performance of its obligations hereunder
or thereunder.
Notwithstanding the foregoing, Purchaser's indemnification obligation with
respect to any of the foregoing matters shall be governed by the terms of a
Purchaser Ancillary Document which expressly provides for indemnification by
Purchaser for a specific matter which is different from that provided in this
Article 6. The claims, liabilities, obligations, losses, costs, expenses,
penalties, fines and damages of the Seller Indemnified Parties described in this
Section 6.2 as to which the Seller Indemnified Parties are entitled to
indemnification are hereinafter collectively referred to as "Seller Losses."
Section 6.3. Indemnification Procedure.
(a) Promptly after receipt by a Purchaser Indemnified Party or
a Seller Indemnified Party (hereinafter collectively referred to as an
"Indemnified Party") of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such Indemnified Party shall
notify Purchaser or Sellers, whichever is the appropriate indemnifying
party hereunder (the "Indemnifying Party"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying
Party shall relieve the Indemnifying Party from liability which the
Indemnifying Party may have hereunder with respect to such claim if,
but only if, and only to the extent that, such failure to notify the
Indemnifying Party results in the forfeiture by the Indemnifying Party
of rights and defenses otherwise available to the Indemnifying Party
with respect to such claim. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, to assume the
defense of such action or proceeding, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the
payment of the fees and disbursements of such counsel. In the
-20-
<PAGE>
event, however, that the Indemnifying Party declines or fails to assume the
defense of the action or proceeding or to employ counsel reasonably satisfactory
to the Indemnified Party, in either case in a timely manner, then such
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Indemnifying Party shall pay the reasonable fees
and disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such litigation and to retain its own counsel
at such party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of any action the defense of which they
are maintaining and to cooperate in good faith with each other with respect to
the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder without the prior written consent of the Indemnifying Party,
unless such settlement, compromise or consent includes an unconditional release
of the Indemnifying Party from all liability arising out of such claim. An
Indemnifying Party may not, without the prior written consent of the Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five (5) business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
-21-
<PAGE>
Section 6.4. Claims Period. Except as provided in this Section 6.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the date hereof and shall terminate (a) with
respect to the representations and warranties set forth in Sections 3.1, 3.3,
3.5, 3.6, 3.7, 3.8, 3.9, 3.14, 3.15, 3.16, 4.1, 4.3, 4.4 and 4.5 hereof and the
covenants and agreements set forth in Section 5.1 hereof, eighteen (18) months
after the date hereof, (b) with respect to the representations and warranties
set forth in Sections 3.2, 3.4, 3.12, 3.13, 3.18, 3.19, 4.2 and 4.6 hereof and
the covenants and agreements set forth in Sections 5.3 and 5.4 hereof, the
applicable statute of limitations therefor, and (c) with respect to all other
representations and warranties and covenants and agreements of the parties
hereunder, two (2) years after the date hereof. No Indemnified Party shall be
entitled to make any claim for indemnification hereunder after the appropriate
Claims Period; provided, however, that if prior to the close of business on the
last day of the Claims Period, an Indemnifying Party shall have been properly
notified of a claim for indemnity hereunder and such claim shall not have been
finally resolved or disposed of at such date, the basis of such claim shall
continue to survive with respect to such claim and shall remain a basis for
indemnity hereunder with respect to such claim until such claim is finally
resolved or disposed of in accordance with the terms hereof.
Section 6.5. Maximum Liability. Notwithstanding anything in this
Agreement to the contrary, the maximum aggregate liability of Sellers for
Purchaser Losses and of Purchaser for Seller Losses shall be [*] except as
otherwise provided in Sections 6.6 and 6.8.
Section 6.6. Threshold Liability. No party shall make any claim for
indemnification under this Agreement with respect to any matter set forth in
Section 6.1 or 6.2 unless and until (i) the aggregate amount of all Purchaser
Losses or Seller Losses incurred by the Purchaser Indemnified Parties or the
Seller Indemnified Parties, as the case may be, exceed [*] in which event
such party may claim indemnification for the amount of such losses in excess
of [*] or (ii) the aggregate amount of all Purchaser Losses or Seller Losses
incurred by the Purchaser Indemnified Parties or the Seller Indemnified
Parties, as the case may be, exceeds [*] in which event such party may claim
indemnification for the entire amount of such losses; provided, however, if a
party makes a claim pursuant to clause (i) of this Section 6.6, such party
forfeits its right to make a claim pursuant to clause (ii) of this Section
6.6; provided, further, that this Section 6.6 shall not apply to the payment
obligations of any party hereto under Section 5.3 or 5.6 hereof.
Section 6.7. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each
Indemnifying Party irrevocably designates and appoints each of the
parties set forth under its name below as its authorized agent upon
which process may be served in any suit or proceeding arising out of or
relating to this Agreement that may be instituted in any state or
federal court in New York, New York.
- ----------
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
-22-
<PAGE>
Sellers:
Sprint Telecommunication Services GmbH
Sprint Fon, Inc.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
Purchaser:
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each party agrees that service of process upon
the above-designated individuals shall be deemed in every respect
effective service of process upon such Indemnifying Party in any such
suit or proceeding. Each such Indemnifying Party further agrees to take
any and all action reasonably requested by an Indemnified Party,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and
appointment of the above-designated individuals in full force and
effect so long as this Agreement shall be in effect. The foregoing
shall not limit the rights of any party to serve process in any other
matter permitted by law.
(b) To the extent that any Indemnifying Party has or hereafter
may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, each Indemnifying Party hereby
irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The parties hereto hereby agree that the appropriate forum
and venue for any disputes between any of the parties hereto arising
out of this Agreement shall be any state or federal court in New York,
New York and each of the parties hereto hereby submits to the personal
jurisdiction of any such court. The foregoing shall not limit the
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<PAGE>
rights of any party to obtain execution of judgment in any other
jurisdiction. The parties further agree, to the extent permitted by
law, that a final and unappealable judgment against any of them in any
action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States
by suit on the judgment, a certified or exemplified copy of which shall
be conclusive evidence of the fact and amount of such judgment.
Section 6.8. Compliance with Bulk Sales Laws. Purchaser and Sellers
hereby waive compliance by Purchaser and Sellers with the bulk sales law and any
other similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement. Sellers shall indemnify Purchaser pursuant to
and in accordance with this Article from, and hold Purchaser harmless against,
any liabilities, damages, costs and expense resulting from or arising out of (a)
the parties failure to comply with any such laws in respect of the transactions
contemplated by this Agreement and (b) any action brought or levy made as a
result thereof, without regard to the limitation set forth in Section 6.5
hereof.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
Section 7.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder pursuant to which it is given or being made, and
shall be deemed given or made on the date delivered if delivered in person, on
the date initially received if delivered by telecopy transmission followed by
registered or certified mail confirmation, on the date delivered if delivered by
a nationally recognized overnight courier service or on the third business day
after it is mailed if mailed by registered or certified mail (return receipt
requested) (with postage and other fees prepaid) as follows:
To Purchaser:
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn: Itzhak Fisher
Telecopy No.: (212) 572-3825
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<PAGE>
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohl, Esq.
Telecopy No.: (212) 940-8776
To Sellers:
Sprint Telecommunication Services GmbH
Sprint Fon Inc.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
Telecopy No.: (913) 624-8426
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No.: (404) 572-5145
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 7.2. Computation of Time. Whenever the last day for the
exercise of any privilege or the discharge of any duty hereunder shall fall upon
a Saturday, Sunday, or any date on which banks in New York, New York are closed,
the party having such privilege or duty may exercise such privilege or discharge
such duty on the next succeeding day which is a regular business day.
Section 7.3. Assignment: Successors in Interest. No assignment or
transfer by Purchaser or Seller of their respective rights and obligations
hereunder after the date hereof shall be made except with the prior written
consent of the other parties hereto. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
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<PAGE>
and assigns, and any reference to a party hereto shall also be a reference to a
permitted successor or assign.
Section 7.4. Investigations; Representations and Warranties. The
respective representations and warranties of Purchaser and Sellers contained
herein or in any certificate, or other document delivered by any party prior to
the date hereof shall not be deemed waived or otherwise affected by any
investigation made by a party hereto.
Section 7.5. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
Section 7.6. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement and all references to Exhibits are
references to Exhibits to this Agreement.
Section 7.7. Controlling Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without reference to New York's choice of law rules. This Agreement
supersedes all negotiations, agreements and understandings among the
parties and their affiliates and constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof; provided,
however, that nothing herein shall affect (i) the validity of the
Confidentiality Agreement dated January 9, 1996, and the
Non-Solicitation Agreement dated January 17, 1996, by and between
Purchaser and Sellers, (ii) the agreements specified in Section 2.1, or
(iii) any other written agreements or understandings entered into by
the parties or their affiliates contemporaneously with the execution
and delivery of this Agreement, all of which shall remain in full force
and effect.
(b) This Agreement may be amended by the parties hereto at any
time. Without limiting the foregoing, this Agreement may not be
amended, modified or supplemented except by written agreement executed
by each of the parties hereto.
Section 7.8. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
Section 7.9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making
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<PAGE>
proof of this Agreement or the terms hereof to produce or account for more than
one of such counterparts.
Section 7.10. Remedies. Each party hereto agrees that the remedies
provided in Article VI shall constitute the sole and exclusive remedies of a
party against another party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other party in this Agreement or any
Purchaser Ancillary Document or Seller Ancillary Document. Nothing in this
Section 7.10 shall prevent a party hereto from seeking and obtaining equitable
relief, including, but not limited to, injunctive relief and specific
performance in respect of such breach.
Section 7.11. Enforcement of Certain Rights. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
Section 7.12. Waiver. A waiver by one party of the performance of any
covenant, agreement, obligation, condition, representation or warranty shall not
be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by any party of the performance
of any act shall not constitute a waiver of the performance of any other act or
an identical act required to be performed at a later time.
Section 7.13. Fees and Expenses. Sellers will bear all costs and
expenses (including, without limitation, any investment banker's, broker's or
finder's fees and any attorney's and accountant's fees) incurred by Sellers in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on the date hereof, and
Purchaser will bear all such costs and expenses incurred by Purchaser in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
SIENA VERMOGENSVERWALTUNGS-GMBH
By:/s/ Itzhak Fisher
-----------------------------------------
Itzhak Fisher, Managing Director
SPRINT TELECOMMUNICATION
SERVICES GMBH
By:/s/ Stephan Folgnand
-----------------------------------------
Stephan Folgnand, Managing Director
By:/s/ Dennis Piper
-----------------------------------------
Dennis Piper, Attorney-in-Fact
SPRINT FON INC.
By:/s/ Donald S. Parker
-----------------------------------------
Donald S. Parker, Vice President
By:/s/ Dennis Piper
-----------------------------------------
Dennis Piper, Attorney-in-Fact
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<PAGE>
Schedule 1.2(a) - Machinery and Equipment
See the attached list entitled "Germany Assets."
<PAGE>
Germany Assets
Schedule 1.2(a)
<TABLE>
<CAPTION>
Germany Assets:
Item Description Quantity Location Notes:
<S> <C> <C> <C> <C>
1 Desk (expanded) 1 Stephan Folgnand
2 Chairs 3 Stephan Folgnand
3 Rollaway Storage Cabinets 3 Stephan Folgnand
4 Sideboard 1 Stephan Folgnand
5 Lap Top PC Toshiba T4700CT 1 Stephan Folgnand
6 Docking Station, screen, CD-ROM for the Lap Top 1 Stephan Folgnand
7 Printer HP LaserJet 4L 1 Stephan Folgnand
8 Polycom Loudspeaker Telephone 1 Stephan Folgnand
9 Stabo Wireless Telephone 1 Stephan Folgnand
10 Board 1 Stephan Folgnand
11 Desk (w. corner and side desk) 1 Elfi Moorefield
12 Chairs 2 Elfi Moorefield
13 Rollaway Storage Cabinets 2 Elfi Moorefield
14 Sideboard 1 Elfi Moorefield
15 PC Proline 486 DX4-100 w. screen 1 Elfi Moorefield
16 Printer HP LaserJet III 1 Elfi Moorefield
17 PC Proline 486 DX4-100 w. screen 1 Silvia Brehm
18 Desk (w. corner and side desk) 1 Martina Luetge
19 Side Table 1 Martina Luetge
20 Chairs 3 Martina Luetge
21 Rollaway Storage Cabinet 1 Martina Luetge
22 PC Proline 486 DX4-100 w. screen 1 Martina Luetge
23 Printer HP LaserJet III 1 Martina Luetge
24 TI Table Calculator 1 Martina Luetge
25 Board 1 Martina Luetge
26 Desk (w. corner and side desk) 1 Peter Hammer
27 Chairs 3 Peter Hammer
28 Rollaway Storage Cabinets 3 Peter Hammer
29 Sideboard 1 Peter Hammer
30 Lap Top PC Compaq 1 Peter Hammer
</TABLE>
Note: Leasehold and Building Improvements Convey.
5/7/96
Page 1
<PAGE>
Germany Assets
Schedule 1.2(a)
<TABLE>
<CAPTION>
Germany Assets:
Item Description Quantity Location Notes:
<S> <C> <C> <C> <C>
31 Docking Station and screen for the Lap Top 1 Peter Hammer
32 Board 1 Peter Hammer
33 Flip Chart 1 Peter Hammer
34 Overhead Projector 1 Peter Hammer
35 Photo Copier Canon NP3050 (leased) 1 Other Equipment
36 Canon Fax-L700 (leased) 1 Other Equipment
37 Typewriter TA Gabriele 110 DS 1 Other Equipment
38 Reception Desk and Chair 1 Reception Area Added since last listing
39 Desk (w. corner and side desk) 3 Open Office
40 Chairs 6 Open Office
41 Rollaway Storage Cabinet 3 Open Office
42 Sideboard 3 Open Office
43 Board 3 Open Office
44 PC Server, 100 MHz, 16 MB 1GB HD 1 Office Equipment
45 Wyatt Switch 3 Computer Room
46 Power Supplies 6 Computer Room
47 Batteries 6 Computer Room
48 DCME Equippment 1 Computer Room
49 Echo Canceller Equipment 1 Computer Room
50 Trunk Signalling Converter Equipment 1 Computer Room
51 Datel Fuse Panels 2 Computer Room
52 Patch Panels 7 Computer Room
53 PBX Data Recorder 2 Computer Room
54 Channelbanks 2 Computer Room
55 Test Set 1 Computer Room
56 XXT prewired jackfield 6-wire 3 Computer Room
57 2-Mbit Concentrator 1 Computer Room
58 Bert Tester 1 Computer Room
59 Protocol Tester 1 Computer Room
60 AC-15 Signal Boxes 16 Computer Room
</TABLE>
Note: Leasehold and Building Improvements Convey.
5/7/96
Page 2
<PAGE>
Germany Assets
Schedule 1.2(a)
<TABLE>
<CAPTION>
Germany Assets:
Item Description Quantity Location Notes:
<S> <C> <C> <C> <C>
61 AC-15 Signal Pulse Dial Boxes 11 Computer Room
62 Imxxxxxx boxes 7 Computer Room
63 Oscilloscope 1 Computer Room
64 PCM/VFCall Analyzer 1 Computer Room
65 WorkStation Pentium 75MHz 16MB RAM 1 Computer Room
66 Workstation 486DX-4 100 MHz 16MB RAM 1 Computer Room
67 Notebook 486 25MHz + Docking Station 1 Computer Room
68 Test Handsets (Harris and Ziad) 2 Computer Room
69 Solder Station 1 Computer Room
70 Multimeter 1 Computer Room
71 MK-4 Measuring Kit 1 Computer Room
72 Jensen Tool Kit 1 Computer Room
73 19" Cabinets 5 Computer Room
74 Storage Cabinets 6 Computer Room
75 Computer Tables 6 Computer Room
76 Chairs 4 Computer Room
77 Rollaway Storage Cabinets 3 Computer Room
78 Telenorma 2MB Card 1 Computer Room
79 Alcatel 2MB Card 1 Computer Room
80 DCME Spare Parts Test-RX 1 Computer Room
81 DCME Spare Part Mapping & Speech Interolation-PX 1 Computer Room
82 DCME Spare Part Message Receiver 1 Computer Room
83 DCME Spare Part Voice ADPCM Dodac 1 Computer Room
84 DCME Spare Part Band Dexxx Codec 1 Computer Room
85 DCME Spare Part Input Switch-Rx 1 Computer Room
86 DCME Spare Part System Interface 1 Computer Room
87 DCME Spare Part Test-Tx 1 Computer Room
88 DCME Spare Part Speech Detector 1 Computer Room
89 DCME Spare Part Tone Detector 1 Computer Room
90 DCME Spare Part Mapping and Speech Interpoletion-Tx 1 Computer Room
</TABLE>
Note: Leasehold and Building Improvements Convey.
5/7/96
Page 3
<PAGE>
Germany Assets
Schedule 1.2(a)
<TABLE>
<CAPTION>
Germany Assets:
Item Description Quantity Location Notes:
<S> <C> <C> <C> <C>
91 DCME Spare Part Message Transmitter 1 Computer Room
92 DCME Spare Part Bearer Output Switch-Tx 1 Computer Room
93 DCME Spare Part Main CPU 1 Computer Room
94 DCME Spare Part Reduncy Switch 1 Computer Room
95 DCME Spare Part Digital Line Interface 2 Computer Room
96 DCME Spare Part Clock Selector 1 Computer Room
97 DCME Spare Part Redundance and Differential Buffer 1 Computer Room
98 DCME Spare Part Alarm CPU 1 Computer Room
99 DCME Spare Part Communication CPU 1 Computer Room
100 DCME Spare Part Power Supply 1 Computer Room
101 DCME Spare Part Fax Modulator 1 Computer Room
102 DCME Spare Part Fax Time Slot Interchange 1 Computer Room
103 DCME Spare Part Fax Interface 1 Computer Room
104 DCME Spare Part Fax Demodulator 1 Computer Room
105 DCME Spare Part Fax CPU 1 Computer Room
106 DCME Spare Part Balanced Switching 1 Computer Room
</TABLE>
Note: Leasehold and Building Improvements Convey.
5/7/96
Page 4
<PAGE>
Schedule 1.2(b) - Contracts, Agreements and Other Instruments
1. Maintenance Agreements
1.1 relating to the following copying machines(1):
Canon NP 3050, series number: 1 A 409180
between Sprint Telecommunication Services GmbH, Frankfurt am Main,
Germany, and Reinhold Buromaschinen GmbH, Aschaffenburg, Germany, dated
January 28, 1994.
1.2 relating to the following fax machines(2):
Canonfax L 700, series number: GBF 02160
between Sprint Telecommunication Services GmbH, Frankfurt am Main,
Germany, and Reinhold Buromaschinen GmbH, Aschaffenburg, Germany, dated
January 28, 1994.
2. Leasing Agreements
2.1 relating to company cars of employees between Sprint Telecommunication
Services GmbH, Frankfurt am Main, Germany, and
2.1.1 Volkswagen Leasing GmbH, Braunschweig, Germany, dated June 20, 1995,
for S. Folgnand, contract number 3135844.
2.1.2 Volkswagen Leasing GmbH, Braunschweig, Germany, dated December 20,
1993, for P. Hammer, contract number 1590496.
2.1.3 Volkswagen Leasing GmbH, Braunschweig, Germany, dated May 5, 1995, for
J. Werner, contract number 4159514.
2.2 relating to copying machine Canon NP 3050 between Sprint
Telecommunication Services GmbH, Frankfurt am Main, Germany, and MMV
Leasing GmbH, Koblenz, Germany, dated February 9, 1994, contract number
6130127 6012.
- -------------------
(1) The contract covers two more copying machines and therefore will
have to be separated into two contracts, one for the voice and the other
contract for the data business.
(2) The contract covers two more fax machines and therefore will have
to be separated into two contracts, one for the voice and the other contract for
the data business.
<PAGE>
2.3 relating to fax machine Canon L 700 # 08117 between Sprint
Telecommunication Services GmbH, Frankfurt am Main, Germany, and MMV
Leasing GmbH, Koblenz, Germany, dated July 21, 1994, contract number
6130127 6022.
3. Insurance policies between Sprint Telecommunication Services GmbH and
KRAVAG AG, Hamburg, uber: Strassenverkehrsgenossenschaft, Konigsberger
Strasse 1-3, 60487 Frankfurt am Main, Germany
comprehensive plus collision automobile insurance with DM1,000
retention
and partial car insurance with DM 300 retention
for the company cars of the following employees:
S. Folgnand
P. Hammer
J. Werner
4. Agreement between Sprint Telecommunication Services GmbH and Deutscher
Herold Lebensversicherung AG, Bonn, Germany (relating to pension
insurance)
in favor of the following employees:
S. Folgnand
P. Hammer
J. Werner
E. Moorefield
S. Brehm
M. Lutge
5. Alltrade Reseller Agreement
Fondirect Reseller Agreement by and between Sprint Telecommunication
Services GmbH and Alltrade Informationstechnologie GmbH dated November
6, 1995
6. Reuters Rebate Agreement
Rebate agreement between Sprint Telecommunication Services GmbH and
Reuters AG as evidenced by letter addressed by Reuters AG dated June
20, 1995
7. Purchase and License Agreement (Kauf-und Lizenzvertrag) dated October
16/27, 1995, between Sprint Telecommunication Services GmbH and Reuters
AG relating to the sale of one WATTS Node DK 2OOO/MRX, one Bill Back
Fac., 16 Dig. Line Cards, 16 Disc. for DLCs and the installation of
such equipment for a total price of DM 379,630.00
<PAGE>
8. Sale/Purchase Agreement between Sprint Telecommunication Services GmbH
and Alltrade Informationstechnologie for equipment described in item 7
above and installation for a total price of DM 475,037.50
<PAGE>
Schedule 1.2(c) - Customer Contracts
<TABLE>
<CAPTION>
Customer Contracting Office Signing Date(s)
<S> <C> <C>
ABB Buro-und Mannheim Oct. 5, 1995
Infrastrukturdienste GmbH
Bankers Trust International Frankfurt Jan. 6, 1994
PLC
Bayerische Motoren Werke Munchen Aug. 8, 1995/Aug. 15, 1994
Aktiengesellschaft
Carl Schenck AG Darmstadt Dec. 23, 1994/Jan. 20, 1995
Delta Air Lines, Inc. Frankfurt am Main Apr. 26 1994
Deutsche Prazisions-Ventil Hattersheim July 21, 1994
GmbH
Dresdner Bank AG Frankfurt am Main Mar. 28, 1994/Mar. 29, 1994
Dresdner Bank New York March 1994
EDS (Deutschland) GmbH Russelsheim Nov. 24, 1994/Nov. 28, 1994
Frankfurt Marriot Hotel Frankfurt am Main May 31, 1994
Management GmbH
Helm AG Hamburg Sept. 8, 1994/Sept. 16, 1994
Kodak Aktiengesellschaft Stuttgart Dec.20, 1993/May 16, 1994]
Linotype-Hell AG Kiel June 8, 1995/June 16, 1995
Mercedes-Benz AG Stuttgart Aug.14, 1995
Messe Frankfurt GmbH Frankfurt am Main May 9, 1994/May 31, 1994
NUR Touristic GmbH Oberursel Nov.22, 1993
Samsung Deutschland GmbH Eschborn Sept. 2, 1994
Silicon Graphics GmbH Gransbrunn-Neukeferloh July 4, 1995/Aug. 23, 1995
Bijing-Europe Trading Bremen April 4, 1996
GmbH
Cosric Shipping Agency Bremen April 4, 1996
GmbH
<PAGE>
Customer Contracting Office Signing Date(s)
MDG Ming Design GmbH Bremen April 4, 1996
T&G Trading Company mbH April 4, 1996
BBI Bremen Business Bremen April 4, 1996
International GmbH (World
Trade Center Management)
Exotic Seafood Handelsges, Bremen April 4. 1996
mbH
Hayn Electronic GmbH Bremen April 4, 1996
Kroning & Roth GmbH & Bremen April 4, 1996
Co. KG
Rigel Schiffahrts GmbH Bremen April 4, 1996
T.G. Trade Globe Bremen April 4, 1996
Finanzservice GmbH
Transfare Relocation Service Bremen April 4, 1996
Wallenius & Geuther GmbH Bremen April 4, 1996
& Co. KG
OOCL (Deutschland) GmbH Bremen April 4, 1996
AP Handels- & Vertriebsges, Bremen April 4, 1996
mbH
Shany Handelsges, fur Im- Bremen April 4, 1996
und Export mbH
TIF Food Handels GmbH Bremen April 4, 1996
DAE Yang Handels-GmbH Bremen April 4, 1996
KI-ON Handels GmbH Bremen April 4, 1996
L. Slotwinski, Bremen April 4, 1996
Rechtsanwaltin
AZTECH Systems GmbH Bremen April 4, 1996
NOL (Germany) GmbH Bremen April 4, 1996
Reederei
-2-
<PAGE>
Customer Contracting Office Signing Date(s)
Honorarkonsulat Sri Lanka Bremen April 4, 1996
Codegen Technology GmbH Bremen April 4, 1996
Trend Import Export GmbH Bremen April 4, 1996
Bremen Marriott Hotel Bremen April 4, 1996
</TABLE>
-3-
<PAGE>
Schedule 1.2(d) - Business Licenses and Permits
None.
<PAGE>
Schedule 1.2(f) - Software
1. All software elements of the System designated as WYATTS Digital
Keydeals 2000 Multi Ring Switch (MRX) as defined in the Kauf- und Lizenzvertrag
between Reuters AG, Frankfurt am Main, Germany and Sprint Datenservice GmbH (now
Sprint Telecommunication Services GmbH) dated June 23, 1994.
<PAGE>
Schedule 1.7(i) - Special Employee Arrangements
1. Each of the employees listed on Schedule 5.7 is eligible for a
retention bonus equal to fifteen percent (15%) of base pay, payable by Sellers.
An amount equal to 7.5% of base pay has already been paid out in March 1996. A
further amount equal to 1.5% of base pay will be paid at the time the salary for
June 1996 would have been paid if the employee had still been employed by Sprint
Telecommunication Services GmbH. The amount equal to 6% of base pay will be paid
out if (i) remain employed with Sellers until the date hereof, (ii) transfer to
the purchaser of the IDDD Business at closing and (iii) remain employed with the
purchaser of the IDDD Business through the date of closing for the sale of the
Data Business. Any employee that Sellers reassign prior to the closing for the
sale of the Data Business is also eligible for the retention bonus.
2. The following employees are also eligible for a transition
management bonus, payable by Sellers, in the amount set forth opposite the
employee's name:
Name of Employee Amount of Bonus
Stephan Folgnand 10% of base pay
Peter Hammer 20% of base pay
Elfriede Moorefield 5% of base pay
One half of the transition management bonuses described above have already been
paid out. The amount equal to the other half of the transition management
bonuses will be paid out under the same conditions as the third payment of the
retention bonuses, but in addition, payout is conditional upon a subjective
evaluation by Sellers of the employee's contributions to the success of the
transition and achieving the following four transition objectives: customer
retention, staff retention, maximizing transition speed and maximizing sale
value.
<PAGE>
Schedule 3.4 - Encumbrances or Imperfections in Title
None.
<PAGE>
Schedule 3.6 - Litigation
None.
<PAGE>
Schedule 3.8 - Consents
1. Contracts, Agreements and Other Instruments.
<TABLE>
<CAPTION>
Title of Contract etc. Name of Contracting Party Date
<S> <C> <C>
Software license under Reuters AG, Frankfurt June 23, 1994
Section 3 of the Kauf- und
Lizenzvertrag
Maintenance Agreement(1) Reinhold Buromaschinen January 28, 1994
relating to copying machine GmbH, Aschaffenburg
Canon NP 3050, series
number: 1 A 409180
Maintenance Agreement(2) Reinhold Buromaschinen January 28, 1994
relating to fax machine GmbH, Aschaffenburg
Canonfax L 700, series
number: GBF 02160
Leasing Agreement relating Volkswagen Leasing GmbH, June 20, 1995
to company car (S. Braunschweig
Folgnand), contract number
3135844
Leasing Agreement relating Volkswagen Leasing GmbH, December 20, 1993
to company car (P. Hammer), Braunschweig
contract number 1590496
Leasing Agreement relating Volkswagen Leasing GmbH, May 5, 1995
to company car (J. Werner), Braunschweig
contract number 4159514
Leasing Agreement relating MMV Leasing GmbH, February 9, 1994
to copying machine Canon Koblenz
NP 3050, contract number
6130127 6012
</TABLE>
- -------------------
(1) This contract covers two more copying machines and
therefore will have to be separated into two contracts, one for the IDDD
Business and the other for the Data Business.
(2) This contract covers two more fax machines and therefore
will have to be separated into two contracts, one for the IDDD Business and the
other for the Data Business.
<PAGE>
<TABLE>
<S> <C> <C>
Leasing Agreement relating MMV Leasing GmbH, July 21, 1994
to fax machine Canon L 500 Koblenz
#08117, contract number
6130127 6022
Comprehensive plus collision KRAVAG AG, Hamburg,
automobile insurance and uber, StraBenverkehrsgeno-
partial car insurance for the ssenschaft, Frankfurt am
company cars of S. Folgnand, Main
P. Hammer and J. Werner
Alltrade Reseller Agreement Alltrade November 6, 1995
Informationstechnologie
GmbH
Reuters Rebate Agreement Reuters AG June 20, 1995
</TABLE>
2. Customer Contracts. All the customer contracts listed on Schedule
1.2(c) require the consent of the contracting party in order to be assigned.
3. Domestic Access Lines. Deutsche Telekom must give its consent to the
arrangements described in Section 5.9 hereof.
4. Office and Equipment Space. The landlord must give its consent to
the temporary sublease of office space by Sellers to Purchaser and to the
sharing of the equipment room until such time as the equipment may be moved.
<PAGE>
Schedule 3.9 - Enforceability of Agreements
1. With the exception of the transfer of the software license from
Reuters AG, consents have not been obtained for the assignment of any of the
agreements listed in items 1-2 of Schedule 3.8.
<PAGE>
Schedule 3.11- Employee Matters
None.
<PAGE>
Schedule 3.13- Taxes
1. Sellers have not filed income Tax returns with the German Tax
authorities for the years ending December 31, 1994 and December 31, 1995.
<PAGE>
Schedule 3.15 - Affiliate Transactions
1. Employment Contracts
1.1 between Sprint Datenservice GmbH, Frankfurt am Main, Germany, and Mr.
Stephan Folgnand, signing dates November 1/2/3, 1992.
1.2 between Sprint Telecommunication Services GmbH, Frankfurt am Main,
Germany, and
Name of Employee Signing Date(s)
Ms. Silvia Brehm Nov. 15, 1995 / Nov. 16, 1995
Mr. Peter Hammer Nov. 8, 1994 / Nov. 28, 1994
Ms. Elfriede Moorefield June 17, 1993
Mr. Jochen Werner May 27, 1994
1.3 for a fixed period of four months, i.e. until May 31, 1996, between
Sprint Telecommunication Services GmbH, Frankfurt am Main, Germany, and
Ms. Martina Lutge, signing date January 24, 1996.
2. The special employee arrangements described in Schedule 1.7(i) are
incorporated herein by this reference.
3. Agreements relating to Company Cars
between Sprint Telecommunication Services GmbH, Frankfurt am Main,
Germany, and
3.1 Peter Hammer, signing dates November 8, 1994 / Nov. 18, 1996.
3.2 Jochen Werner, signing date January 2, 1996.
<PAGE>
Schedule 3.17 - Sufficiency of Assets
1. The Global One Joint Venture, Sprint Corporation and/or their
affiliates provide the following support services to the IDDD Business: order
entry, provisioning, CDR collection/transport, invoice generation, corporate
security, GCSC, accounting and engineering services. None of the assets
associated with providing these services will be transferred to Purchaser.
2. None of the international half circuits or national access lines
which are used in connection with the IDDD Business will be transferred to
Purchaser, nor are Sellers, the Global One Communications, Sprint Corporation
and/or their affiliates transferring any assets associated with terminating
traffic outside Germany.
3. None of the assets listed on the attached list, entitled "Germany
Shared Assets," are being transferred to Purchaser as of the date hereof. The
"Germany Shared Assets" may be transferred to Purchaser after the date hereof in
accordance with the terms and conditions set forth in the Transition Services
between Purchaser and Sellers dated as of the date hereof.
4. Sellers are not transferring their leasehold interest in the real
property used to conduct the IDDD Business.
5. Sellers are only transferring the employees listed on Schedule 5.7,
despite the fact that other employees may have devoted part of their time to the
IDDD Business prior to Closing.
6. The Sprint worldwide E-mail system will not be transferred to
Purchaser.
7. The telephone, telefax and telex numbers used in connection with the
IDDD Business will not be transferred to Purchaser.
8. None of the software used to operate the computer equipment listed
on Schedule 1.2(a).
<PAGE>
Germany Shared Assets
Germany Shared Assets:
Item Description Quantity Location Notes:
1 PABX & Telephone Sets 1 Office
2 Telephone Number: 1 Office
3 Distribution Frame 1 Computer Room
4 Power Distribution 1 Computer Room
5 Battery Back-up 1 Computer Room
6 Air Conditioning 1 Computer Room
General Definitions:
1 PABX & Telephone Sets: This piece of equipment is utilized by
office personnel for voice communications.
2 Telephone Number: Main access line for incoming calls.
3 Distribution Frame: This piece of equipment is utilized to
terminate PTT connections and cross-connect to voice and data
equipment.
4 Power Distribution: This piece of equipment is utilized to
dispense the correct power to the appropriate piece of voice and
data equipment.
5 Battery Back-up: This piece of equipment is utilized to
filter all power to voice and data equipment as well as
provide continued power if commercial power is lost until the
generator is engaged.
6 Air Conditioning: This piece of equipment is utilized to provide
climate control air to voice and data equipment.
Current Net Book Value as of 3/31/96: (000 US$)
1 PABX: 40
2 Telephone Number: N/A
3 Distribution Frame: 6.6
4 Power Distribution: 20
5 Battery Back-up: 80
6 Air Conditioning: 13.3
Page 1
5/1/96
<PAGE>
Schedule 3.18 - Customer Contract Terminations
None.
<PAGE>
Schedule 4.5 - Consents
None.
<PAGE>
Schedule 5.7 - Employees
1. The following employees will be transferred to Purchaser: Stephan
Folgnand, Elfi Moorefield, Silvia Brehm, Jochen Werner, Peter Hammer and Martina
Lutge.
2. The bonuses described in Schedule 1.7(i) shall be payable by Sellers
in accordance with their terms.
<PAGE>
Schedule 5.10 - Miscellaneous Agreements
The contracts described in items 1.1 and 1.2 of Schedule 1.2(b) shall
be considered "Miscellaneous Agreements" for purposes of this Agreement.
<PAGE>
Exhibit 10.33
Exhibit 10.33 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED BY "[*]"
and RSL Communications, Ltd. AND FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 406 OF
THE SECURITIES ACT OF 1933
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into this
8th day of May, 1996, by and among SPRINT FON INC. and SPRINT TELECOMMUNICATION
SERVICES GMBH (collectively, "Sprint") and SIENA VERMOGENSVERWALTUNGS-GMBH (to
be renamed RSL COM Deutschland GmbH), a German limited liability company ("RSL")
(collectively, the "Parties").
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of the date
hereof (the "Purchase Agreement"), by and between Sprint and RSL, RSL has
purchased from Sprint, and Sprint has sold to RSL, certain assets related to the
international direct distance dialing business of Sprint in Germany (the "IDDD
Business"); and
WHEREAS, in connection with the purchase and sale of the IDDD Business,
Sprint and certain of its affiliates, have agreed to provide to RSL certain
transitional services, including the services to be provided to RSL hereunder;
NOW, THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
CONSTRUCTION
Section 1. Gender, Headings, Etc. The definitions of terms defined herein
shall apply equally to both the singular and plural forms of the defined terms.
whenever the context may require, any pronoun shall include the correspondence
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
All references herein to Articles, Sections and Exhibits shall be deemed to be
references to Articles and Sections of and Exhibits to this Agreement unless the
context shall otherwise require, and all references herein to "this Agreement"
shall refer to this Agreement and the Exhibits hereto. The headings of the
Articles and Sections are included for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. Unless the context shall otherwise require, any reference to any
agreement or other instrument or statute or regulation is to such agreement,
instrument, statute or regulation as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor provision). Any
reference in this Agreement to a "day" or a number of "days" (without the
explicit qualification of "business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by
<PAGE>
a particular calendar day, and such calendar day is not a business day, then
such action or notice shall be deferred until, or may be taken or given, on the
next business day.
ARTICLE II
SHARED EMPLOYEES
Section 2.1 Sharing of Employees' Time. For a period of time (the
"Transition Period") commencing on the date hereof and ending on the earlier of
(i) December 31, 1996 and (ii) provided that Sprint shall have given all RSL at
least thirty (30) days advance written notice of the date of sale of the Data
Business (as hereinafter defined), ninety (90) days after the closing date of
sale of the Data Business. RSL and Sprint acknowledge that it will be necessary
for (i) certain employees of RSL to devote some reasonable portion of their time
to the management of Sprint's data, messaging services and card business
(collectively, the "Data Business"), and (ii) certain employees of Sprint to
devote some reasonable portion of their time to the management of the IDDD
Business (in either case, "Shared Employees"). RSL and Sprint agree that Shared
Employees shall only be made available for the functions listed on Exhibit A
hereto. which shall include training other employees to perform the functions
listed in such exhibit (collectively, the "Specified Functions"). RSL and Sprint
agree to make their respective Shared Employees available to perform the
Specified Functions, provided that each Party has the right to transfer and
replace any Shared Employee with their qualified personnel. Shared Employees
shall perform the Specified Functions only at the offices of the IDDD Business
or the Data Business located at Lyoner StraBe 36, D-60528 Frankfurt am Main,
Germany. During the Transition Period, RSL and Sprint agree to use their
commercially reasonable efforts to establish reasonable procedures for sharing
the time of Shared Employees. For the first two months of the Transition Period,
no Party shall charge the other for any costs associated with the Shared
Employees. Thereafter until the end of the Transition Period, each Shared
Employee shall be required to record the amount of time, in increments of
one-half hour, that he spends working for the other Party. Within ten (10) days
after the end of each calendar quarter during the Transition Period, commencing
ten (10) days after the calendar quarter ending June 30, 1996, and within ten
(10) days after the end of the Transition Period, the RSL Country Manager for
the IDDD Business and the Sprint Country Manager for the Data Business shall
approve the time records of all Shared Employees for the prior calendar quarter
(or portion thereof) and shall calculate (i) the value of all time devoted by
Shared Employees of RSL to the Data Business during such period at the hourly
rates for such Shared Employees set forth on Exhibit A hereto (the "RSL Time"),
and (ii) the value of all time devoted by the Shared Employees of Sprint to the
IDDD Business during such period at the rates for such Shared Employees set
forth on Exhibit A hereto (the "Sprint Time"), and shall promptly notify RSL and
Sprint of the RSL Time and the Sprint Time for such period. If the RSL Time
exceeds the Sprint Time for any such period, RSL shall promptly invoice Sprint
for such difference, and if the Sprint Time exceeds the RSL Time for any such
period, Sprint shall promptly invoice RSL for such difference, and such invoices
shall be paid within thirty (30) days of the receipt thereof.
At the end of the Transition Period, neither
2
<PAGE>
RSL nor Sprint is required to make available the time of its Shared Employees or
any other employees to the other Party and all obligations and rights described
in this Section 2.1 shall terminate.
ARTICLE III
LEASED SPACE
Section 31 Office Space. RSL and Sprint acknowledge that the offices of
the IDDD Business and the Data Business of Sprint are currently located on
the 5th and 18th floors of a building located at Lyoner StraBe 36, D-60528
Frankfurt am Main, Germany (the "Building"). As soon as practical after the
date hereof, RSL intends to lease space on the 6th floor of the Building for
the offices of the IDDD Business. Sprint agrees to pay up to [*] of the
reasonable out-of-pocket expenses incurred by RSL to improve the 6th floor of
the building for RSL's use as the offices of the IDDD Business. Pursuant to a
Sublease Agreement, dated as of the date hereof between RSL and Sprint, RSL
has agreed to sublease from Sprint a portion of the office space on the 18th
floor of the Building used in connection with the IDDD Business and Data
Business, until such time as RSL is able to move to the 6th floor which in
any event shall occur no later than the end of the Transition Period (the
"Sublease Period"). RSL and Sprint acknowledge that in light of the temporary
nature of this sublease, the office space on the 18th floor of the Building
used in connection with the IDDD Business will not be physically separated
from the Data Business during the Sublease Period. During the Sublease
Period, RSL and Sprint agree to share such office space in accordance with
such procedures for sharing such office space.
Section 3.2. Equipment Space. RSL and Sprint acknowledge that certain
equipment used in connection with both the IDDD Business and the Data
Business is currently located in space leased to Sprint on the 5th floor of
the Building (the "Equipment Space"). Sprint agrees that as promptly as
practical after the date hereof, Sprint will move the technical employees of
Sprint who now have offices on the 5th Floor of the Building to the 18th
floor of the Building. Until the expiration of the Transition Period, Sprint
also agrees to give RSL access to the Equipment Space for the purpose of
conducting the IDDD Business, and Sprint and RSL agree to share the Equipment
Space during such period in accordance with such reasonable procedures for
sharing the Equipment Space as the Parties shall establish. Sprint also
agrees that, if during the Transition Period, RSL reasonably determines that
Sprint's use of the Equipment Space is limiting the ability of RSL to expand
the IDDD Business in Germany, RSL may so inform Sprint, and upon receipt of
such notice from RSL, Sprint shall pay the costs not to exceed U.S. [*]
incurred by RSL to move the equipment used on the date hereof by RSL in the
IDDD Business to the 6th floor of the Building.
Section 3.3. Waiver of Option Rights. The Parties acknowledge and agree
that as soon as practical following the date hereof, RSL intends to enter into a
lease for the 6th floor of
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
3
<PAGE>
the Building and obtain an option to lease the 5th floor of the Building if the
Data Business vacates such floor. In connection with the foregoing, Sprint
agrees to waive any options it holds with respect to the leasing of the 6th
floor of the Building and, if the Data Business vacates the 5th floor, Sprint
shall (a) notify RSL, or shall cause the buyer of the Data Business to notify
RSL of such party's intention to vacate such floor and (b) grant any waivers
necessary to release any option such party may have with regard to the 5th
floor.
Section 3.4. Prorations. Sprint and RSL shall prorate the expenses set
forth in Exhibit B hereto in an equitable and reasonable manner that reflects
each Party's proportionate use of the goods and services that give rise to such
expenses.
ARTICLE IV
SHARED EQUIPMENT
Section 4.1. Shared Equipment. RSL and Sprint acknowledge that the
equipment listed on Exhibit C (the "Shared Equipment") is currently used in
connection with both the IDDD Business and the Data Business and has not been
transferred to RSL under the terms of the Purchase Agreement. Until the
expiration of the Transition Period, Sprint agrees to give RSL access to the
Shared Equipment for the purpose of conducting the IDDD Business, and Sprint and
RSL agree to share the Shared Equipment during such period in accordance with
such reasonable procedures for sharing the Shared Equipment as the Parties shall
establish. At the expiration of the Transition Period, Sprint shall have the
option (i) to remove all or any items of the Shared Equipment from the premises
at its cost and to replace at its cost any such removed Shared Equipment with
other equipment which shall have the same purpose and function in the IDDD
Business and shall be of substantially the same quality as the Shared Equipment
removed by Sprint and shall meet such other specifications as RSL and Sprint
shall reasonably agree upon on or before the date of sale of the Data Business,
and/or (ii) to transfer to RSL all right, title and interest of Sprint in all or
any items of the Shared Equipment which is on the premises and has not been
removed by Sprint and all items of replacement equipment, provided that at the
end of the Transition Period, RSL shall be vested with good and valid title,
free and clear of all liens, charges and other encumbrances, in and to the
Shared Equipment or replacement equipment, which together with any Shared
Equipment transferred to RSL, is substantially equivalent in function, purpose
and quality to the Shared Equipment. Sprint shall exercise such option in
writing not later than the date of sale of the Data Business. Any removal and
replacement of Shared Equipment shall be completed by Sprint prior to the
expiration of the Transition Period and shall be completed in such a manner that
RSL will be able to provide IDDD services to its customers without interruption.
4
<PAGE>
ARTICLE V
CONFIDENTIALITY
Section 5.1 Confidentiality. Except as otherwise provided herein. Sprint
and RSL each agree that all information communicated to it by the other, whether
before or after the date hereof in connection with the matters provided herein
(the "Confidential Information"), shall be and was received in strict confidence
and shall be used only for purposes of this Agreement, and that no such
Confidential Information, including without limitation, the provisions of this
Agreement, shall be disclosed by the recipient Party, its agents, contractors or
employees without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed, except as may be necessary by
reason of legal, accounting or regulatory requirements beyond the reasonable
control of the recipient Party and except for such disclosure by the Parties as
may be necessary in order for any Party to perform its obligations hereunder. A
Party may disclose Confidential Information to its agents. contractors,
financing sources, investors or employees who have a need to know such
information. but in such circumstances the disclosing Party shall be completely
liable for the acts of its agents, contractors, financing sources, investors and
employees and, prior to giving any such agent, contractor, financing source,
investor or employee access to Confidential Information, the Party shall advise
such agent. contractor, financing source, investor or employee of its obligation
to preserve the confidentiality of the Confidential Information. Notwithstanding
the foregoing, the restrictions and obligations of this Section 5.1 shall not
apply to any information which the recipient Party can establish to have (i)
become publicly available without breach of this Agreement, (ii) been
independently developed by the recipient Party outside the scope of this
Agreement without reference to Confidential Information received hereunder, or
(iii) been rightfully obtained by the recipient Party from third parties which
are not obligated to protect its confidentiality. The provisions of this Section
5.1 shall survive the expiration or termination of this Agreement for any
reason.
ARTICLE VI
TERM AND TERMINATION
Section 6.1 Term of Agreement. This Agreement shall commence on the date
hereof and terminate (i) on December 31, 1996, (ii) upon a termination of this
Agreement pursuant to Section 6.2, 6.3 or 9.12, or (iii) upon the written
agreement of the Parties.
Section 6.2 Termination for Cause. In the event that any Party hereto
materially breaches any of its duties or obligations hereunder or is the
breaching party under the Purchase Agreement, any Purchaser Ancillary Document
or Seller Ancillary Document (as each such term is defined in the Purchase
Agreement) or any other instrument or agreement executed and delivered by it in
connection with the transactions contemplated by the Purchase Agreement, as
5
<PAGE>
applicable, which breach shall not be substantially cured within ten (10) days
after written notice is given to the breaching party specifying the breach. then
(a) Sprint, in the event that RSL is the breaching party, or (b) RSL, in the
event that Sprint, Sprint Communications Company L.P. or Global One
Communications (as defined in the Purchase Agreement) (each, a "Sprint Party")
is the breaching party, may, by giving written notice thereof to the other,
terminate this Agreement as of a date specified in such notice of termination,
which date shall be no earlier than ten (10) days after the date of such notice.
Section 6.3 Termination for Bankruptcy. In the event that either RSL or a
Sprint Party (a) is unable to pay its debts generally as they become due or is
declared bankrupt or insolvent, (b) is the subject of any proceedings relating
to its liquidation, insolvency or for the appointment of a receiver or similar
officer for it which results in the entry of an order for relief or such
adjudication or appointment is not dismissed, discharged or bonded within a
reasonable period of time thereafter, (c) makes an assignment for the benefit of
all or substantially all of its creditors, or (d) enters into an agreement for
the composition, extension or readjustment of all or substantially all of its
obligations, then (i) Sprint, in the case of any such event affecting RSL, and
(ii) RSL, in the case of any such event affecting a Sprint Party, may, by giving
written notice thereof to the other, terminate this Agreement as of a date
specified in the notice of termination, which date shall be no earlier than ten
(10) days after the date of such notice.
Section 6.4 Effect of Termination. Except as otherwise provided herein, in
the event of termination of this Agreement, all rights and obligations of the
Parties hereunder shall terminate as of the effective date of such termination,
except that (i) such termination shall not constitute a waiver of any rights
that a Party may have by reason of a breach of this Agreement and (ii) the
provisions of Articles V and VIII and this Section 6.4 shall continue in full
force and effect.
ARTICLE VII
DISCLAIMER
Section 7.1 DISCLAIMER EXCEPT AS OTHERWISE PROVIDED IN THE PURCHASE
AGREEMENT OR THE LETTER AGREEMENT, DATED AS OF EVEN DATE HEREOF, AMONG THE
PARTIES SPRINT MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
CONCERNING THE SERVICES PROVIDED HEREUNDER, INCLUDING ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE.
6
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification Obligations of Sprint. From and after the date
hereof, Sprint shall indemnify and hold harmless RSL and its subsidiaries and
affiliates, each of their respective officers, directors, employees, agents and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "RSL Indemnified Parties") from. against and
in respect of any and all claims. liabilities, obligations, losses. costs.
expenses, penalties, fines and other judgments (at equity or at law) and damages
whenever arising or incurred (including, without limitation, amounts paid in
settlement. costs of investigation and reasonable attorneys' fees and expenses)
arising out of or relating to:
(a) Any breach of any covenant, agreement or undertaking made by Sprint in
this Agreement or in the performance of its obligations hereunder; or
(b) Any fraud, willful misconduct. bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by Sprint
in this Agreement or in the performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the RSL Indemnified Parties described in this Section 8.1 as to
which the RSL Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "RSL Losses."
Section 8.2. Indemnification Obligations of Purchaser. From and after the
date hereof, RSL shall indemnify and hold harmless Sprint and its subsidiaries
and affiliates, each of their respective officers, directors, employees, agents
and representatives and each of the heirs, executors, successors and assigns of
any of the foregoing (collectively, the "Sprint Indemnified Parties") from,
against and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys' fees and
expenses) arising out of or relating to:
(a) Any breach of any representation, warranty, covenant, agreement or
undertaking made by RSL in this Agreement or in the performance of its
obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder.
The claims, liabilities obligations, losses, costs, expenses, penalties, fines
and damages of the Sprint Indemnified Parties described in this Section 8.2 as
to which the Sprint Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Sprint Losses."
7
<PAGE>
Section 8.3. Indemnification Procedure.
(a) Promptly after receipt by an RSL Indemnified Party or a Sprint
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being or may be
sought hereunder, such Indemnified Party shall notify RSL or Sprint. whichever
is the appropriate indemnifying Party hereunder (the "Indemnifying Party"), of
such complaint or of the commencement of such action or proceeding; provided,
however, that the failure to so notify the Indemnifying Party shall not relieve
the Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying Party shall
relieve the Indemnifying Party from liability which the Indemnifying Party may
have hereunder with respect to such claim if, but only if, and only to the
extent that, such failure to notify the Indemnifying Party results in the
forfeiture by the Indemnifying Party of rights and defenses otherwise available
to the Indemnifying Party with respect to such claim. The Indemnifying Party
shall have the right, upon written notice to the Indemnified Party, to assume
the defense of such action or proceeding. including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of the fees and
disbursements of such counsel. In the event, however, that the Indemnifying
Party declines or fails to assume the defense of the action or proceeding or to
employ counsel reasonably satisfactory to the Indemnified Party, in either case
in a timely manner, then such Indemnified Party may employ counsel to represent
or defend it in any such action or proceeding and the Indemnifying Party shall
pay the reasonable fees and disbursements of such counsel as incurred; provided,
however, that the Indemnifying Party shall not be required to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
jurisdiction in any single action or proceeding. In any action or proceeding
with respect to which indemnification is being sought hereunder, the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to retain its
own counsel at such Party's own expense. The Indemnifying Party or the
Indemnified Party, as the case may be, shall at all times use reasonable efforts
to keep the Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the defense of
which they are maintaining and to cooperate in good faith with each other with
respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
such settlement, compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
party may not, without the prior written consent of the Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
8
<PAGE>
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying
Party shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
Section 8.4. Claims Period. Except as provided in this Section 8.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the date hereof and shall terminate two (2)
years after the date hereof. No Indemnified Party shall be entitled to make any
claim for indemnification hereunder after the appropriate Claims Period;
provided, however, that if prior to the close of business on the last day of the
Claims Period, an Indemnifying Party shall have been properly notified of a
claim for indemnity hereunder and such claim shall not have been finally
resolved or disposed of at such date. the basis of such claim shall continue to
survive with respect to such claim and shall remain a basis for indemnity
hereunder with respect to such claim until such claim is finally resolved or
disposed of in accordance with the terms hereof.
Section 8.5. Maximum Liability. Notwithstanding anything in this Agreement
to the contrary, the maximum aggregate liability of Sprint for RSL Losses and of
RSL for Sprint Losses shall not exceed [*].
Section 8.6. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Party
irrevocably designates and appoints each of the Parties set forth under its name
below as its authorized agent upon which process may be served in any suit or
proceeding arising out of or relating to this Agreement that may be instituted
in any state or federal court in New York, New York.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
9
<PAGE>
Sprint:
Sprint Telecommunication Services GmbH
Sprint Fon Inc.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each Party agrees that service of process upon the
above-designated individuals shall be deemed in every respect effective service
of process upon such Party in any such suit or proceeding. Each Party further
agrees to take any and all action reasonably requested by a Party, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of the above-designated
individuals in full force and effect so long as this Agreement shall be in
effect. The foregoing shall not limit the rights of any Party to serve process
in any other matter permitted by law.
(b) To the extent that any party has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each Party
hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The Parties hereto hereby agree that the appropriate forum and venue
for any disputes between any of the Parties hereto arising out of this Agreement
shall be any state or federal court in New York, New York and each of the
Parties hereto hereby submits to the personal jurisdiction of any such court.
The foregoing shall not limit the rights of any Party to obtain execution of
judgment in any other jurisdiction. The Parties further agree, to the extent
permitted by law, that a final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction
10
<PAGE>
within or outside the United States by suit on the judgment. a certified or
exemplified copy of which shall be conclusive evidence of the fact and amount
of such judgment.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be given in the manner provided in the Purchase Agreement
and to the addresses provided in Exhibit D hereto.
Section 9.2 Assignment; Subcontracting. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of the other
Party; provided that Sprint may subcontract or assign to any affiliate or third
party its obligations and rights hereunder provided in each case that Sprint
shall remain responsible for assuring that the subcontractor's or assignee's
performance conforms to the requirements hereof.
Section 9.3 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be deemed
restated to reflect the original intention of the Parties as nearly as possible
in accordance with applicable law, and, if capable of substantial performance,
the remaining provisions of this Agreement shall be enforced as if this
Agreement was entered into without the invalid provision.
Section 9.4 Attorneys' Fees. In the event attorneys' fees or other
out-of-pocket costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable attorneys fees and
out-of-pocket costs incurred therein.
Section 9.5 Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
Section 9.6 Relationship of Parties. Sprint, in furnishing services to RSL
hereunder, is acting only as an independent contractor. Nothing set forth in
this Agreement shall be construed to create the relationship of principal and
agent between Sprint and RSL. Sprint shall have no authority, express or
implied, to enter into contracts on behalf of RSL. Neither Party shall act or
attempt to act to represent itself, directly or by implication, as an agent of
another Party or in any manner assume or create, or attempt to assume or create,
an obligation of or in the name of, the other Party.
11
<PAGE>
Section 9.7 Approvals and Similar Actions. where agreement, approval,
acceptance, consent or similar action by either Party hereto is required by
any provision of this Agreement, such action shall not be unreasonably
delayed or withheld.
Section 9.8 Modification; Waiver. This Agreement may be modified only by a
written instrument duly executed by or on behalf of each Party hereto. No delay
or omission by either Party hereto to exercise any right or power hereunder
shall impair such right or power or be construed to be a waiver thereof. A
waiver by either of the Parties hereto of any of the obligations to be performed
by the other or any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other obligation herein contained.
Section 9.9 Remedies. Each Party hereto agrees that the remedies provided
in Articles VI and VIII shall constitute the sole and exclusive remedies of a
Party against another Party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other Party in this Agreement.
Nothing in this Section 9.9 shall prevent a Party hereto from seeking and
obtaining equitable remedies, including, but not limited to, injunctive relief
and specific performance in respect of such breach.
Section 9.10 No Third Party Beneficiaries. The Parties agree that this
Agreement is for the sole benefit of the Parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee of
either Party hereto, and that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement.
Section 9.11 Governing Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York without
reference to New York's choice of law rules. This Agreement supersedes all
negotiations, agreements and understandings among the Parties or any of
their affiliates and constitutes the entire agreement among the Parties
hereto with respect to the subject matter hereof; provided, however, that
nothing herein shall affect any other written agreements or understandings
entered into by the Parties or any of their affiliates contemporaneously
with the execution and delivery of this Agreement, all of which shall
remain in full force and effect.
(b) This Agreement may be amended by the Parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended,
modified or supplemented except by written agreement executed by each of
the Parties hereto.
Section 9.12 Force Majeure. If either Party to this Agreement shall be
prevented, hindered or delayed in the performance or observance of any of its
obligations hereunder by reason by any circumstances beyond its reasonable
control, and such delay could not have been prevented by reasonable precautions
and cannot reasonably be circumvented by the Party through the use of alternate
sources, work-around plans, or other means (a "Force Majeure"),
12
<PAGE>
then such Party shall be excused from any other further performance or
observance of the obligations so affected for so long as such circumstances
prevail and such Party continues to use its best efforts to recommence
performance or observance whenever and to whatever extent possible without
delay. Any Party so delayed in its performance shall immediately notify the
other and shall describe at a reasonable level of detail the circumstances
causing such delay. Notwithstanding the foregoing, should a Party be unable to
perform any of its obligations hereunder for a period of more than thirty (30)
consecutive days by reason of a Force Majeure, the other Party, at its option,
shall have the right to terminate this Agreement in whole or solely with respect
to the section hereof under which the nonperforming Party has been unable to
perform its obligations, in which case the provision so terminated shall have no
further force or effect and this Agreement shall remain in effect as to all
other provisions.
13
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective officers.
SPRINT FON INC.
By: /s/ Donald S. Parker
-----------------------------------------
Donald S. Parker, Vice President
By: /s/ Dennis Piper
-----------------------------------------
Dennis Piper, Attorney-in-Fact
SPRINT TELECOMMUNICATION SERVICES GMBH
By: /s/ Stephan Folgnand
-----------------------------------------
Stephan Folgnand, Managing Director
By: /s/ Dennis Piper
-----------------------------------------
Dennis Piper, Attorney-in-Fact
SIENA VERMOGENSVERWALTUNGS-GMBH
By: /s/ Itzhak Fisher
-----------------------------------------
Itzhak Fisher, Managing Director
14
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EXHIBIT A
SPECIFIED FUNCTIONS
Either RSL or Sprint may utilize Shared Employees for the following
functions at the following hourly rates:
Function Hourly Rate (U.S. $)
Executive management (country manager) [*]
Finance (country controller) [*]
Customer service [*]
Senior technical operations management
(operations manager) [*]
Technical operations support (on-site and
field engineering) [*]
Program management [*]
Sales representative [*]
Administrative assistance [*]
Receptionist [*]
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
A-1
<PAGE>
EXHIBIT B
See the attached list entitled "Germany Prorations."
B-1
<PAGE>
Item (DM) Monthly Fee Sprint RSL
Monthly Fee Monthly Fee
1 Office Lease (18th Floor) [*] [*] [*]
2 Office Lease (5th Floor) [*] [*] [*]
3 Parking Space [*] [*] [*]
4 Electricity [*] [*] [*]
5 Cleaning [*] [*] [*]
6 PC, Copy and Fax Maintenance [*] [*] [*]
7 HICOM 210 Maintenance and Insurance [*] [*] [*]
8 Deutche Telecom Telephone Service [*] [*] [*]
9 Water, Other Costs (utilities) [*] [*] [*]
Item 1 Sprint and RSL will prorate the 18th Floor based upon RSL personnel
until RSL moves to the 6th floor.*
Item 2 Sprint will pay the monthly lease amount up until the time when RSL
personnel move from the 18th floor to the 6th floor and Sprint
personnel move from the 5th floor to the 18th floor at which time RSL
will be responsible for 100% of the monthly lease amount.*
Item 3 Sprint and RSL will divide the monthly amount based upon number of
employees.
Item 4 This is an estimation based upon historical data. Sprint and RSL will
divide the monthly utility invoice where Sprint pays 60% and RSL 40%.
Item 5 Sprint and RSL will divide the monthly cleaning fee in half.
Item 6 Sprint and RSL will divide the monthly personal computer maintenance
fee in half.
Item 7 Sprint and RSL will divide the monthly maintenance and insurance fee
for the PABX.
Item 8 Sprint and RSL will divide the monthly fee in half and reconcile the
usage fee based upon personnel extension data.
Item 9 Sprint and RSL will divide the monthly water fee in half.
- ----------
* RSL will pay its share of the monthly lease payments with respect to
the 18th and 5th floors pursuant to the terms of the Sublease Agreement
between RSL and Sprint Telecommunication Services GmbH.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
5/7/96 Page 1
<PAGE>
EXHIBIT C
See the attached list of Shared Equipment.
C-1
<PAGE>
- --------------------------------------------------------------------------------
Germany Shared Assets:
- --------------------------------------------------------------------------------
Item Description Quantity Location Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 PABX & Telephone Sets 1 Office
- --------------------------------------------------------------------------------
2 Telephone Number 1 Office
- --------------------------------------------------------------------------------
3 Distribution Frame 1 Computer Room
- --------------------------------------------------------------------------------
4 Power Distribution 1 Computer Room
- --------------------------------------------------------------------------------
5 Battery Back-Up 1 Computer Room
- --------------------------------------------------------------------------------
6 Air Conditioning 1 Computer Room
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
General Definitions:
- --------------------------------------------------------------------------------
1 PABX & Telephone Sets: This piece of equipment is utilized by office
personnel for voice communications
- --------------------------------------------------------------------------------
2 Telephone Number: Main access line for incoming calls.
- --------------------------------------------------------------------------------
3 Distribution Frame: This piece of equipment is utilized to terminate
PTT connections and cross-connect to voice and data equipment.
- --------------------------------------------------------------------------------
4 Power Distribution: This piece of equipment is utilized to despense the
correct power to the appropriate piece of voice and data equipment.
- --------------------------------------------------------------------------------
5 Battery back-up: This piece of equipment is utilized to filter all power
to voice and data equipment as well as provide continue power if
commercial power is loss until the generator is engaged.
- --------------------------------------------------------------------------------
6 Air conditioning: This piece of equipment is utilized to provide
climate control air to voice and data equipment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current Percent of Utilization of voice versus data:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Voice Data
- --------------------------------------------------------------------------------
1 PABX: 30% 70%
- --------------------------------------------------------------------------------
2 Telephone Number: 30% 70%
- --------------------------------------------------------------------------------
3 Distribution Frame: 5% 95%
- --------------------------------------------------------------------------------
4 Power Distribution: 10% 90%
- --------------------------------------------------------------------------------
5 Battery Back-Up: 4% 96%
- --------------------------------------------------------------------------------
6 Air Conditioning: 25% 75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current Net Book Value as of 3/31/96: (000 US$)
- --------------------------------------------------------------------------------
1 PABX: 40
- --------------------------------------------------------------------------------
2 Telephone Number: N/A
- --------------------------------------------------------------------------------
3 Distribution Frame: 6.6
- --------------------------------------------------------------------------------
4 Power Distribution: 20
- --------------------------------------------------------------------------------
5 Battery Back-Up: 80
- --------------------------------------------------------------------------------
6 Air Conditioning: 13.3
- --------------------------------------------------------------------------------
4/22/96 Page 1
<PAGE>
EXHIBIT D
ADDRESSES FOR NOTICES
To RSL:
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
Telecopy No.: (212) 572-3825
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohl, Esq.
Telecopy No.: (212) 940-8776
To Sprint:
Sprint Fon Inc.
Sprint Telecommunication Services GmbH
c/o Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Telecopy No.: (913) 624-8426
Attn.: J. Richard Devlin, Esq.
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No.: (404) 572-5145
D-1
<PAGE>
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing.
D-2
<PAGE>
Exhibit 10.34
Exhibit 10.34 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED
and RSL Communications, Ltd. BY "[*]" AND FILED
SEPARATELY WITH THE
COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 406
OF THE SECURITIES ACT
OF 1933
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into
this 8th day of May, 1996, by and between SPRINT COMMUNICATIONS COMPANY
L.P., a Delaware limited partnership ("Sprint LP"), and SIENA
VERMOGENSVERWALTUNGS-GMBH (to be renamed RSL COM Deutschland GmbH), a
German limited liability company ("RSL") (collectively, the "Parties").
WHEREAS, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement"), dated as of the date hereof, by and among Sprint Fon Inc. and
Sprint Telecommunications Services GmbH (collectively, "Sellers") and RSL,
RSL has purchased from Sellers, and Sellers have sold to RSL, certain
assets related to the international direct distance dialing business of
Sellers in Germany (the "IDDD Business");
WHEREAS, in connection with the purchase and sale of said assets of
the IDDD Business, Sellers and certain of their affiliates, including
Sprint LP, have agreed to provide the RSL certain transitional services
pursuant to transition services agreements (the "Transition Services
Agreements"), including this Agreement;
WHEREAS, in accordance with the foregoing, Sprint LP has agreed to
terminate long distance voice telephone traffic which originates from the
IDDD Business through the Sprint network or the network of Global One
Communications, a joint venture formed by Sprint Corporation, Deutsche
Telekom and France Telecom (the various entities that comprise such joint
venture and are controlled, directly or indirectly, by Sprint Corporation,
Deutsche Telekom and France Telecom shall collectively be referred to
herein as "Global One Communications") and to provide RSL with the right to
use a trademark of Sprint Corporation under certain limited circumstances;
and
WHEREAS, Sprint LP is an affiliate of Sprint Corporation, the sole
shareholder of each Seller;
NOW, THEREFORE, in consideration of the mutual covenants herein
expressed and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"Taxes" shall mean all federal, state, local or foreign income, capital
gains, profits, gross receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment, disability, real property, personal
property, stamp, excise, occupation, sales, use, transfer, mining, value-added,
investment credit recapture alternative or add-on minimum, environmental,
estimated or other taxes, duties or assessments of any kind, including any
interest, penalty and additions imposed with respect to such amounts levied by
any foreign, federal, state or local taxing authority.
Additional Definitions:
Defined Term Defined In
------------ ----------
"Agreement" Recitals
"Confidential Information" Section 5.1
"Credited Amount" Section 8.5
"IDDD Business" Recitals
"Purchase Agreement Recitals
"RSL" Recitals
"Services" Section 2.1
"Services Supplement" Section 2.2
"Sprint LP" Recitals
"Sprint Party" Section 6.2
Section 1.2 Interpretation. The definitions in Sections 1.1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
All references herein to Articles, Sections and Exhibits shall be deemed to be
references to Articles and Sections of and Exhibits to this Agreement unless the
context shall otherwise require, and all references herein to "this Agreement"
shall refer to this Agreement and the Exhibits hereto. The headings of the
Articles and Sections are included for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. Unless the context shall otherwise require, any reference to any
agreement or other instrument or statute or regulation is to such agreement,
instrument, statute or regulation as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor provision). Any
reference in this Agreement to a "day" or a number of "days" (without the
explicit qualification of "business") shall be interpreted as a reference to a
calendar day or
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number of calendar days. If any action or notice is to be taken or given on or
by a particular calendar day, and such calendar day is not a business day, then
such action or notice shall be deferred until, or may be taken or given, on the
next business day.
ARTICLE II
SERVICES
Section 2.1 Services. During the term of this Agreement, Sprint LP
shall terminate or provide for the termination of long distance voice telephone
traffic which originates from the IDDD Business through the Sprint network or
the network of Global One Communications in the countries listed on Exhibit A
hereto (the "Services") in accordance with and subject to the terms and
conditions of this Agreement. Sprint LP shall not be obligated to transit or hub
any traffic through the switch that services the IDDD Business other than
traffic originated in Germany.
Section 2.2 Services Supplement. Sprint LP and RSL may enter into a
services supplement (the "Services Supplement") with respect to the Services to
be provided by Sprint LP hereunder. Any such Services Supplement may further
define and describe the Services to be provided by Sprint LP hereunder, the
performance or quality standards in accordance with which Sprint LP shall
provide such Services, the compensation that Sprint LP shall receive in
accordance with Section 4.1 for providing such Services, the expiration dates
for providing such Services and any additional information with respect to such
Services as the Parties may agree. Unless otherwise stated in a related Services
Supplement, the rates charged by Sprint LP for the Services shall remain fixed
during the term of this Agreement.
Section 2.3 Employees. Sprint LP shall have complete operational,
management, administrative, legal and financial responsibility for the Sprint LP
personnel used to provide the Services hereunder.
Section 2.4 Access. During the term hereof, Sprint LP shall have, at no
cost to Sprint LP, such access to and use of the space and related facilities
and equipment at the IDDD Business as shall be reasonably necessary for Sprint
LP to provide the Services to RSL hereunder.
ARTICLE III
SPRINT TRADEMARK
Section 3.1 Use of Sprint Trademark. In order to assist in the orderly
transition of control of the IDDD Business from Seller to RSL and in the
collection by RSL of accounts receivable in existence on the date hereof as well
as the accounts receivable created after the date hereof with respect to the
conduct of the IDDD Business by Sellers prior to the date hereof, which shall be
collected by RSL for Sellers under the terms of the Purchase Agreement, Sprint
LP hereby grants RSL the limited right to use the Sprint trademark on invoices
sent to existing
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customers of the IDDD Business under their existing contracts until December 31,
1996, provided that if RSL prepares invoices using a billing system other than
the one used by Sellers as of the date hereof, Sprint LP shall have the right to
approve the use of the Sprint trademark in connection with the new billing
system, such approval not be unreasonably withheld. All such invoices shall be
identical in all material respects to either the existing form of invoice or the
form of invoice attached hereto as Exhibit B. Such form of invoice shall be
amended to provide that payments by customers shall be made to a bank account of
RSL by no later than June 30, 1996. Sprint LP also hereby grants RSL the limited
right to use the Sprint trademark in a letter; to be sent after the date hereof.
Sprint LP shall have the right to approve the form of such letter; provided that
(i) Sprint LP shall not unreasonably withhold its approval and (ii) Sprint LP
shall be deemed to have given its approval in the event that Sprint LP does not
respond to RSL within three (3) business days of the submission by RSL of the
form of such letter to Sprint LP. RSL shall, in addition to complying with the
terms and conditions set forth herein, adhere to Sprint LP's policies and
procedures relating to the use and duplication of the Sprint trademark, as may
be reasonably promulgated from time to time by Sprint LP. In addition, so long
as RSL is using the Sprint trademark as contemplated hereby, RSL shall notify
Sprint LP within three (3) business days of any complaints actually known by it
to have been made by any of the existing customers of the IDDD Business under
their existing contracts. If, in Sprint LP's reasonable determination, Sprint LP
believes that such complaints may impair or otherwise put at risk the goodwill
associated with the Sprint trademark as to the complaining customer or as to the
customers of the IDDD Business generally, Sprint LP shall have the right to
demand that RSL immediately terminate its use of the Sprint trademark as to such
complaining customer or all of the customers of the IDDD Business, as the case
may be. RSL shall not take any action which could reasonably be expected to
compromise the Sprint trademark. The Sprint trademark is proprietary and nothing
herein constitutes a general license authorizing its use. RSL may not: (a)
promote or advertise Sprint's name or capabilities to customers of the IDDD
Business or prospective customers of the IDDD Business; (b) attempt to sell its
service using Sprint's name; or (c) represent to customers of the IDDD Business
or prospective customers of the IDDD Business that they would be Sprint
customers or that they may obtain Sprint service from RSL, except as expressly
provided herein or in other authorized agreements. RSL shall not use, and shall
return to Sprint LP promptly after the date hereof, materials relating to the
IDDD Business which bear the Sprint trademark, including any unused stationery,
other than the invoices and cover letters specifically approved for RSL's use in
this Section 3.1.
ARTICLE IV
PAYMENTS
Section 4.1 Components of Sprint LP's Charges. Sprint LP's charges to
RSL for the provision of the Services hereunder shall consist of the following
components: (i) Service Charges, (ii) Taxes, and (iii) other amounts expressly
payable to Sprint LP pursuant to this Agreement.
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Section 4.2 Service Charges. RSL shall pay to Sprint LP, for each
calendar month during the term of this Agreement, the aggregate amount of all
charges for the Services provided by Sprint LP to RSL pursuant to Section 2.1
during each such month (the "Service Charges"). The Service Charges shall be
calculated in accordance with the schedule of rates shown on Exhibit A hereto.
Such rates include costs of all international half circuits used by Sprint LP to
perform the Services contemplated by Section 2.1.
Section 4.3 Reimbursable Expenses. RSL shall reimburse Sprint LP for
the reasonable out-of-pocket expenses which are incurred by Sprint LP on behalf
of RSL in connection with the provision of the Services hereunder (other than
costs which are included within the Service Charges) which are approved in
advance by RSL, upon the presentation of reasonably satisfactory documentation
evidencing such costs and Sprint LP's payment thereof.
Section 4.4 Taxes. There shall be added to any charges under this
Agreement, and RSL shall pay to Sprint LP, amounts equal to any Taxes, however
designated or levied, based upon such charges, the Services or this Agreement,
and any amounts in lieu thereof paid or payable by Sprint LP in respect of the
foregoing, which Sprint LP and its affiliates or Global One Communications
customarily charge customers in connection with the provision of the type of
services contemplated by Section 2.1 and shall not include any income taxes
payable by Sprint LP and other Taxes for which RSL would not be liable if such
Taxes were not paid or withheld by Sprint LP. The Parties shall cooperate with
each other in minimizing any applicable Taxes and, in connection therewith,
shall provide the other Party with any information reasonably requested by such
Party in connection with any such Taxes.
Section 4.5 Proration. All periodic charges hereunder shall be computed
on a calendar month basis and shall be prorated for any partial month.
Section 4.6 Payments Due: Late Payment Charges. Unless otherwise stated
in the Services Supplement, amounts due hereunder shall be paid within thirty
(30) days of receipt of the invoice therefor. Unless otherwise stated in the
Services Supplement, any undisputed amount due hereunder not paid within thirty
(30) days of receipt of the invoice therefor shall accrue interest from the date
such amount was due at the rate of ten percent (10%) per annum, compounded
daily.
Section 4.7 Disputed Payments. If a dispute arises with respect to any
amount due hereunder, RSL shall pay when due the undisputed portion of such
amount, if any, and, if the dispute is resolved in Sprint LP's favor, promptly
pay the disputed portion (or applicable part thereof) when the dispute is
resolved without the applicable late payment charge, if such dispute arises in
good faith.
Section 4.8 Currency. All payments hereunder shall be made in U.S.
Dollars.
Section 4.9 Invoices. Sprint LP shall provide RSL written invoices
covering all charges payable by RSL hereunder, which invoices shall describe in
reasonable detail the
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Services provided during the periods covered by such invoices and the Taxes
payable with respect thereto.
ARTICLE V
CONFIDENTIALITY
Section 5.1 Confidentiality. Except as otherwise provided herein,
Sprint LP and RSL each agree that all information communicated to it by the
other, whether before or after the date hereof in connection with the Services
to be provided hereunder to the IDDD Business (the "Confidential Information"),
shall be and was received in strict confidence and shall be used only for
purposes of this Agreement, and that no such Confidential Information, including
without limitation, the provisions of this Agreement, shall be disclosed by the
recipient Party, its agents, contractors or employees without the prior written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed, except as may be necessary by reason of legal, accounting or regulatory
requirements beyond the reasonable control of the recipient Party and except for
such disclosures by Sprint LP to Global One Communications or other carriers as
may be necessary in order for Sprint LP to perform its obligations hereunder.
Either Party may disclose Confidential Information to its agents, contractors,
financing sources, investors or employees who have a need to know such
information, but in such circumstances the disclosing Party shall be completely
liable for the acts of its agents, contractors, financing sources, investors and
employees and, prior to giving any such agent, contractor, financing source,
investor or employee access to Confidential Information, the recipient Party
shall advise such agent, contractor, financing source, investor or employee of
its obligation to preserve the confidentiality of the Confidential Information.
Notwithstanding the foregoing, the restrictions and obligations of this Section
5.1 shall not apply to any information which the recipient Party can establish
to have (i) become publicly available without breach of this Agreement, (ii)
been independently developed by the recipient Party outside the scope of this
Agreement without reference to Confidential Information received hereunder, or
(iii) been rightfully obtained by the recipient Party from third parties which
are not obligated to protect its confidentiality. The provisions of this Section
5.1 shall survive the expiration or termination of this Agreement for any
reason.
ARTICLE VI
TERM AND TERMINATION
Section 6.1 Term of Agreement. This Agreement shall commence on the
date hereof and terminate (i) on December 31, 1996, (ii) upon a termination of
this Agreement pursuant to Section 6.2, 6.3 or 9.12, or (iii) upon the written
agreement of the Parties.
Section 6.2 Termination for Cause. In the event that (i) either Party
hereto materially breaches any of its duties or obligations hereunder or (ii) a
party to the Purchase Agreement or any Purchaser Ancillary Document or Seller
Ancillary Document (as each such
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term is defined in the Purchase Agreement) or any Transition Services Agreement
or other instrument or agreement entered into in connection with the
transactions contemplated by the Purchase Agreement, as applicable, materially
breaches any of its duties or obligations under the Purchase Agreement or any
such Purchaser Ancillary Document or Seller Ancillary Document, which breach
shall not be substantially cured within ten (10) days after written notice is
given to the breaching party specifying the breach, then (a) Sprint LP, in the
event that RSL is the breaching party, or (b) RSL, in the event that a Seller,
Sprint LP or Global One Communications (each, a "Sprint Party") is the breaching
party, may, by giving written notice thereof to the other, terminate this
Agreement as of a date specified in such notice of termination, which date shall
be no earlier than ten (10) days after the date of such notice.
Section 6.3 Termination for Bankruptcy. In the event that RSL or a
Sprint Party (a) is unable to pay its debts generally as they become due or is
declared bankrupt or insolvent, (b) is the subject of any proceedings relating
to its liquidation or insolvency or for the appointment of a receiver or similar
officer for it which results in the entry of an order for relief or such
adjudication or appointment is not dismissed, discharged or bonded within a
reasonable period of time thereafter, (c) makes an assignment for the benefit of
all or substantially all of its creditors, or (d) enters into an agreement for
the composition, extension or readjustment of all or substantially all of its
obligations, then (i) Sprint LP, in the case of any such event affecting RSL,
and (ii) RSL, in the case of any such event affecting a Sprint Party, may, by
giving written notice thereof to the other, terminate this Agreement as of a
date specified in the notice of termination, which date shall be no earlier than
ten (10) days after the date of such notice.
Section 6.4 Effect of Termination. Except as otherwise provided herein,
in the event of termination of this Agreement, all rights and obligations of the
Parties hereunder shall terminate as of the effective date of such termination,
except that (i) such termination shall not constitute a waiver of any rights
that a Party may have by reason of a breach of this Agreement and (ii) the
provisions of Section 3.1 and this Section 6.4 and of Articles V and VIII shall
continue in full force and effect. Notwithstanding the foregoing, if RSL has the
right under Section 6.2 hereof to terminate this Agreement, RSL may, in lieu of
terminating the entire agreement, terminate the provisions of Articles II or
III, in which case the provisions so terminated shall have no further force or
effect and this Agreement will remain in effect as to all other provisions.
ARTICLE VII
LIMITED WARRANTY
Section 7.1 DISCLAIMER OF GENERAL WARRANTY. EXCEPT AS SET
FORTH IN SECTION 7.2 OR ANY SERVICES SUPPLEMENT, SPRINT LP MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, CONCERNING THE SERVICES PROVIDED
HEREUNDER, INCLUDING ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY OR OTHERWISE.
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Section 7.2. Limited Warranty. Sprint LP represents and warrants that
(i) it has the power, right and authority to provide or cause Global One
Communications to provide the Services and that Sprint LP or its affiliates or
Global One Communications are in the business of providing services in the
nature of the Services, (ii) each Service provided to RSL hereunder shall be of
at least the same quality as the same service that Sprint LP provides to its
best customers within one hundred and eighty (180) days prior to the provision
of the Service in question, (iii) it has the power, right and authority to
permit RSL to use the Sprint trademark as contemplated under this Agreement and
(iv) this Agreement is a valid and binding agreement of Sprint LP, enforceable
against it in accordance with its terms.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnification Obligations of Sprint LP. From and after
the date hereof, Sprint LP shall indemnify and hold harmless RSL and its
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "RSL
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) Any breach of any representation, warranty, covenant, agreement or
undertaking made by Sprint LP in this Agreement or in the performance of its
obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach
of any representation, warranty, covenant, agreement or undertaking made by
Sprint LP in this Agreement or in the performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the RSL Indemnified Parties described in this Section 8.1 as to
which the RSL Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "RSL Losses."
Section 8.2. Indemnification Obligations of RSL. From and after the
date hereof, RSL shall indemnity and hold harmless Sprint LP and their
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Sprint LP
Parties") from, against and in respect of any and all claims, liabilities,
obligations, losses, costs, expenses, penalties, fines and other judgments (at
equity or at law) and damages whenever arising or incurred (including, without
limitation, amounts paid in settlement, costs of investigation and reasonable
attorneys' fees and expenses) arising out of or relating to:
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(a) Any breach of any covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach
of any covenant, agreement or undertaking made by RSL in this Agreement or in
the performance of its obligations hereunder.
The claims, liabilities obligations, losses, costs, expenses, penalties, fines
and damages of the Sprint LP Indemnified Parties described in this Section 8.2
as to which the Sprint LP Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "Sprint LP Losses."
Section 8.3. Indemnification Procedure.
(a) Promptly after receipt by an RSL Indemnified Party or a Sprint LP
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being or may be
sought hereunder, such Indemnified Party shall notify RSL or Sprint LP,
whichever is the appropriate indemnifying Party hereunder (the "Indemnifying
Party"), of such complaint or of the commencement of such action or proceeding;
provided, however, that the failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party from liability for such claim arising
otherwise than under this Agreement and such failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party from liability which the
Indemnifying Party may have hereunder with respect to such claim if, but only
if, and only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of the reasonable fees and disbursements of such counsel. In the event,
however, that the Indemnifying Party declines or fails to assume the defense of
the action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such Indemnified
Party may employ counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such litigation and to retain its own counsel
at such Party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of any action the defense of which they
are maintaining and to cooperate in good faith with each other with respect to
the defense of any such action.
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(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder without the prior written consent of the Indemnifying Party,
unless such settlement, compromise or consent includes an unconditional release
of the Indemnifying Party from all liability arising out of such claim. An
Indemnifying Party may not, without the prior written consent of the Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five (5) business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
[CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED]
Section 8.4. Claims Period. Except as provided in this Section 8.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the date hereof and shall terminate two (2)
years after the date hereof. No Indemnified Party shall be entitled to make any
claim for indemnification hereunder after the appropriate Claims Period;
provided, however, that if prior to the close of business on the last day of the
Claims Period, an Indemnifying Party shall have been properly notified of a
claim for indemnity hereunder and such claim shall not have been finally
resolved or disposed of at such date, the basis of such claim shall continue to
survive with respect to such claim and shall remain a basis for indemnity
hereunder with respect to such claim until such claim is finally resolved or
disposed of in accordance with the terms hereof.
Section 8.5. Maximum Liability. Notwithstanding anything in this
Agreement to the contrary, the maximum aggregate liability of Sprint LP for RSL
Losses and of RSL for Sprint LP Losses shall not exceed the following amounts
(as applicable):
(a) in the case of a claim made pursuant to Section 8.1 or 8.2
hereof in respect of a breach by either Party of its obligations under
Section 3.1, an amount equal to U.S. [*]
(b) in the case of a claim made pursuant to Section 8.1(a) in
respect of a breach by Sprint LP of its obligations under Section 2.1,
(i) an amount equal to U.S. [*] if such breach occurs during the
period commencing on the date hereof and ending 120 days after the
date hereof, and (ii) an amount equal to the "Credited Amount"
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
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(as hereinafter defined) payable as provided in this Section 8.5 if
such breach occurs after 120 days after the date hereof;
(c) in the case of a claim made pursuant to Section 8.1(b) in
respect of a breach by Sprint LP of its obligations under Section
2.1, an amount equal to U.S. [*] and
(d) in the case of a claim for indemnification pursuant to
Section 8 1 or 8.2 in respect of a breach by Sprint LP or RSL of any
obligation hereunder which is not described in clause (a), (b) or (c)
above, an amount equal to [*].
For purposes of this Agreement, the "Credited Amount" shall be equal to
the aggregate Service Charges which were paid or payable by RSL to Sprint LP in
respect of the Services hereunder during the period during which Sprint LP
failed to provide the Services as required hereunder, which amount shall be
credited by Sprint LP against future Service Charges payable by RSL to Sprint LP
hereunder commencing with the invoice for the billing period following such
breach and continuing until the Credited Amount has been credited by Sprint LP
in full against the Service Charges or reimbursed to RSL in accordance with
customary practice.
Section 8.6. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Party
irrevocably designates and appoints each of the parties set forth under its
name below as its authorized agent upon which process may be served in any suit
or proceeding arising out of or relating to this Agreement that may be
instituted in any state or federal court in New York, New York.
Sprint LP:
Sprint Communications Company L.P.
c/o Sprint Corporation
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
RSL:
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
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In addition, each Party agrees that service of process upon the above-designated
individuals shall be deemed in every respect effective service of process upon
such Party in any such suit or proceeding. Each Party further agrees to take any
and all action reasonably requested by a Party, including the execution and
filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of the above-designated individuals in
full force and effect so long as this Agreement shall be in effect. The
foregoing shall not limit the rights of any Party to serve process in any other
matter permitted by law.
(b) To the extent that any Party has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, each
Party hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The Parties hereto hereby agree that the appropriate forum and
venue for any disputes between any of the Parties hereto arising out of this
Agreement shall be any state or federal court in New York, New York and each of
the Parties hereto hereby submits to the personal jurisdiction of any such
court. The foregoing shall not limit the rights of any Party to obtain execution
of judgment in any other jurisdiction. The Parties further agree, to the extent
permitted by law, that a final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be given in the manner provided in the Purchase Agreement
and to the addresses provided in Exhibit C hereto.
Section 9.2 Assignment: Subcontracting. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of the other
Party; provided that Sprint LP may subcontract or assign to any affiliate, and
with respect to the provision of the Services only, to any third party its
obligations and rights hereunder provided in each case that Sprint LP shall
remain responsible for assuring that the subcontractor's or assignee's
performance conforms to the requirements hereof.
Section 9.3 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such
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provision will be deemed restated to reflect the original intention of the
Parties as nearly as possible in accordance with applicable law, and, if capable
of substantial performance, the remaining provisions of this Agreement shall be
enforced as if this Agreement was entered into without the invalid provision.
Section 9.4 Attorneys' Fees. In the event attorneys' fees or other
out-of-pocket costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
out-of-pocket costs incurred therein.
Section 9.5 Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
Section 9.6 Relationship of Parties. Sprint LP, in furnishing the
Services to RSL hereunder, is acting only as an independent contractor. Nothing
set forth in this Agreement shall be construed to create the relationship of
principal and agent between Sprint LP and RSL. Sprint LP shall have no
authority, express or implied, to enter into contracts on behalf of RSL. Neither
Party shall act or attempt to act to represent itself, directly or by
implication, as an agent of another Party or in any manner assume or create, or
attempt to assume or create, an obligation of or in the name of, the other
Party.
Section 9.7 Approvals and Similar Actions. Where agreement, approval,
acceptance, consent or similar action by either Party hereto is required by any
provision of this Agreement, such action shall not be unreasonably delayed or
withheld.
Section 9.8 Modification: Waiver. This Agreement may be modified only
by a written instrument duly executed by or on behalf of each Party hereto. No
delay or omission by either Party hereto to exercise any right or power
hereunder shall impair such right or power or be construed to be a waiver
thereof. A waiver by either of the Parties hereto of any of the obligations to
be performed by the other or any breach thereof shall not be construed to be a
waiver of any succeeding breach thereof or of any other obligation herein
contained.
Section 9.9 Remedies. Each Party agrees that the remedies provided in
Articles VI and VIII shall constitute the sole and exclusive remedies of a Party
against another Party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other Party in this Agreement.
Nothing in this Section 9.9 shall prevent a Party hereto from seeking and
obtaining equitable relief, including, but not limited to, injunctive relief
and specific performance in respect of any such breach.
Section 9.10 No Third Party Beneficiaries. The Parties agree that this
Agreement is for the sole benefit of the Parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee of
either Party hereto, and that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement.
13
<PAGE>
Section 9.11 Governing Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without reference to New York's choice of law rules. This Agreement
supersedes all negotiations, agreements and understandings among the
Parties or any of their affiliates and constitutes the entire agreement
among the Parties hereto with respect to the subject matter hereof;
provided, however, that nothing herein shall affect any other written
agreements or understandings entered into by the Parties or any of
their affiliates contemporaneously with the execution and delivery of
this Agreement, all of which shall remain in full force and effect.
(b) This Agreement may be amended by the Parties hereto at any
time. Without limiting the foregoing, this Agreement may not be
amended, modified or supplemented except by written agreement executed
by each of the Parties hereto.
Section 9.12 Force Majeure. If either Party to this Agreement shall be
prevented, hindered or delayed in the performance or observance of any of its
obligations hereunder by reason by any circumstances beyond its reasonable
control, and such delay could not have been prevented by reasonable precautions
and cannot reasonably be circumvented by the Party through the use of alternate
sources, work-around plans or other means (a "Force Majeure"), then such Party
shall be excused from any other further performance or observance of the
obligations so affected for so long as such circumstances prevail and such Party
continues to use its best efforts to recommence performance or observance
whenever and to whatever extent possible without delay. Any Party so delayed in
its performance shall immediately notify the other and shall describe at a
reasonable level of detail the circumstances causing such delay. Notwithstanding
the foregoing, should a Party be unable to perform any of its obligations
hereunder for a period of more than seven (7) consecutive days by reason of a
Force Majeure, the other Party, at its option, shall have the right to terminate
this Agreement in whole or solely with respect to the section hereof under which
the non-performing Party has been unable to perform its obligations, in which
case the provision so terminated shall have no further force or effect and this
Agreement shall remain in effect as to all other provisions.
14
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective officers.
SPRINT COMMUNICATIONS COMPANY L.P.
By: US TELECOM, INC.,
as General Partner
By: /s/ Don A Jensen
--------------------------------------
Don A Jensen, Vice President-Law
By: /s/ Dennis Piper
--------------------------------------
Dennis Piper, Attorney-in-Fact
SIENA VERMOGENSVERWALTUNGS-GMBH
/s/ Itzhak Fisher
--------------------------------------
By: Itzhak Fisher, Managing Director
15
<PAGE>
EXHIBIT A
DESCRIPTION OF COUNTRIES AND RATES
See the attached list of rates by country.
A-1
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Afghanistan N/A
- --------------------------------------------------------------------------------
Alaska [*]
- --------------------------------------------------------------------------------
Albania [*]
- --------------------------------------------------------------------------------
Algeria [*]
- --------------------------------------------------------------------------------
Andorra [*]
- --------------------------------------------------------------------------------
Angola [*]
- --------------------------------------------------------------------------------
Anguilla [*]
- --------------------------------------------------------------------------------
Antarctic Territories N/A
- --------------------------------------------------------------------------------
Antigua [*]
- --------------------------------------------------------------------------------
Antilles (Netherlands) [*]
- --------------------------------------------------------------------------------
Argentina [*]
- --------------------------------------------------------------------------------
Armenia [*]
- --------------------------------------------------------------------------------
Aruba [*]
- --------------------------------------------------------------------------------
Ascension Island [*]
- --------------------------------------------------------------------------------
Astelit N/A
- --------------------------------------------------------------------------------
Australia [*]
- --------------------------------------------------------------------------------
Austria [*]
- --------------------------------------------------------------------------------
Azerbaijan [*]
- --------------------------------------------------------------------------------
Azores [*]
- --------------------------------------------------------------------------------
Bahamas [*]
- --------------------------------------------------------------------------------
Bahrain [*]
- --------------------------------------------------------------------------------
Balearics N/A
- --------------------------------------------------------------------------------
Bangladesh [*]
- --------------------------------------------------------------------------------
Barbados [*]
- --------------------------------------------------------------------------------
BCLM N/A
- --------------------------------------------------------------------------------
Belarus [*]
- --------------------------------------------------------------------------------
Belgium [*]
- --------------------------------------------------------------------------------
Belize [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 1
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benin [*]
- --------------------------------------------------------------------------------
Bermuda [*]
- --------------------------------------------------------------------------------
Bhutan [*]
- --------------------------------------------------------------------------------
Bolivia [*]
- --------------------------------------------------------------------------------
Bosnia-Herzegovina [*]
- --------------------------------------------------------------------------------
Botswana [*]
- --------------------------------------------------------------------------------
Brazil [*]
- --------------------------------------------------------------------------------
British Virgin Islands [*]
- --------------------------------------------------------------------------------
Brunei Darussalam [*]
- --------------------------------------------------------------------------------
Bulgaria [*]
- --------------------------------------------------------------------------------
Burkina Faso [*]
- --------------------------------------------------------------------------------
Burundi [*]
- --------------------------------------------------------------------------------
Cambodia [*]
- --------------------------------------------------------------------------------
Cameroon [*]
- --------------------------------------------------------------------------------
Canada [*]
- --------------------------------------------------------------------------------
Canary Islands [*]
- --------------------------------------------------------------------------------
Cape Verde Islands [*]
- --------------------------------------------------------------------------------
Caribbean N/A
- --------------------------------------------------------------------------------
Cayman Islands [*]
- --------------------------------------------------------------------------------
Central African Republic [*]
- --------------------------------------------------------------------------------
Chad [*]
- --------------------------------------------------------------------------------
Chatham Islands [*]
- --------------------------------------------------------------------------------
Chile [*]
- --------------------------------------------------------------------------------
China [*]
- --------------------------------------------------------------------------------
Christmas Island (I.O.) [*]
- --------------------------------------------------------------------------------
Cocos Island [*]
- --------------------------------------------------------------------------------
Colombia [*]
- --------------------------------------------------------------------------------
Combellga N/A
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 2
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cominica [*]
- --------------------------------------------------------------------------------
Comoro Islands/ Mayotte [*]
- --------------------------------------------------------------------------------
Comstar N/A
- --------------------------------------------------------------------------------
Congo [*]
- --------------------------------------------------------------------------------
Cook Island [*]
- --------------------------------------------------------------------------------
Costa Rica [*]
- --------------------------------------------------------------------------------
Croatia Republic [*]
- --------------------------------------------------------------------------------
Cuba [*]
- --------------------------------------------------------------------------------
Cyprus [*]
- --------------------------------------------------------------------------------
Czech. Republic [*]
- --------------------------------------------------------------------------------
Denmark [*]
- --------------------------------------------------------------------------------
Diego Garcia [*]
- --------------------------------------------------------------------------------
Djibouti [*]
- --------------------------------------------------------------------------------
Dominican Republic [*]
- --------------------------------------------------------------------------------
Ecudor [*]
- --------------------------------------------------------------------------------
Egypt [*]
- --------------------------------------------------------------------------------
El Salvador [*]
- --------------------------------------------------------------------------------
Equatorial Guinea [*]
- --------------------------------------------------------------------------------
Eritrea [*]
- --------------------------------------------------------------------------------
Estonia [*]
- --------------------------------------------------------------------------------
Ethioppia [*]
- --------------------------------------------------------------------------------
Falkland Islands [*]
- --------------------------------------------------------------------------------
Faroes (via Denmark) [*]
- --------------------------------------------------------------------------------
Fiji [*]
- --------------------------------------------------------------------------------
Finland [*]
- --------------------------------------------------------------------------------
France/Germany [*]
- --------------------------------------------------------------------------------
French Antilles [*]
- --------------------------------------------------------------------------------
French Guiana [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 3
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
French Polynesia [*]
- --------------------------------------------------------------------------------
Gabon [*]
- --------------------------------------------------------------------------------
Gambia [*]
- --------------------------------------------------------------------------------
Georgia [*]
- --------------------------------------------------------------------------------
Ghana [*]
- --------------------------------------------------------------------------------
Gibraltar [*]
- --------------------------------------------------------------------------------
Greece [*]
- --------------------------------------------------------------------------------
Greenland [*]
- --------------------------------------------------------------------------------
Greneda (Carracou) [*]
- --------------------------------------------------------------------------------
Guadaloupe [*]
- --------------------------------------------------------------------------------
Guam [*]
- --------------------------------------------------------------------------------
Guantanamo [*]
- --------------------------------------------------------------------------------
Guatemala [*]
- --------------------------------------------------------------------------------
Guinea [*]
- --------------------------------------------------------------------------------
Guinea Bissau [*]
- --------------------------------------------------------------------------------
Guyana [*]
- --------------------------------------------------------------------------------
Haiti [*]
- --------------------------------------------------------------------------------
Hawaii [*]
- --------------------------------------------------------------------------------
Hondoras [*]
- --------------------------------------------------------------------------------
Hong Kong [*]
- --------------------------------------------------------------------------------
Hungary [*]
- --------------------------------------------------------------------------------
Iceland [*]
- --------------------------------------------------------------------------------
India [*]
- --------------------------------------------------------------------------------
Indonesia [*]
- --------------------------------------------------------------------------------
Iran [*]
- --------------------------------------------------------------------------------
Iraq [*]
- --------------------------------------------------------------------------------
Ireland [*]
- --------------------------------------------------------------------------------
Israel [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 4
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Italy [*]
- --------------------------------------------------------------------------------
Ivory Coast [*]
- --------------------------------------------------------------------------------
Jamaica [*]
- --------------------------------------------------------------------------------
Japan [*]
- --------------------------------------------------------------------------------
Jordan [*]
- --------------------------------------------------------------------------------
Kampuchea [*]
- --------------------------------------------------------------------------------
Kazakhstan [*]
- --------------------------------------------------------------------------------
Kenya [*]
- --------------------------------------------------------------------------------
Kirghizia N/A
- --------------------------------------------------------------------------------
Kiribati [*]
- --------------------------------------------------------------------------------
Kuwait [*]
- --------------------------------------------------------------------------------
Kyrgyzstan [*]
- --------------------------------------------------------------------------------
Laos [*]
- --------------------------------------------------------------------------------
Latvia [*]
- --------------------------------------------------------------------------------
Lebanon [*]
- --------------------------------------------------------------------------------
Lechtenstein [*]
- --------------------------------------------------------------------------------
Lesotho [*]
- --------------------------------------------------------------------------------
Liberia [*]
- --------------------------------------------------------------------------------
Libya [*]
- --------------------------------------------------------------------------------
Lithuania [*]
- --------------------------------------------------------------------------------
Luxembourg [*]
- --------------------------------------------------------------------------------
Macao [*]
- --------------------------------------------------------------------------------
Macedonia [*]
- --------------------------------------------------------------------------------
Madagascar [*]
- --------------------------------------------------------------------------------
Madeira [*]
- --------------------------------------------------------------------------------
Malawi [*]
- --------------------------------------------------------------------------------
Malaysia [*]
- --------------------------------------------------------------------------------
Maldive Islands [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 5
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mali [*]
- --------------------------------------------------------------------------------
Malta [*]
- --------------------------------------------------------------------------------
Marshall Island [*]
- --------------------------------------------------------------------------------
Martinique [*]
- --------------------------------------------------------------------------------
Mauritania [*]
- --------------------------------------------------------------------------------
Mauritius/Rodriguez Island [*]
- --------------------------------------------------------------------------------
Mayotte Island [*]
- --------------------------------------------------------------------------------
Mexico [*]
- --------------------------------------------------------------------------------
Micronesia [*]
- --------------------------------------------------------------------------------
Midway Islands N/A
- --------------------------------------------------------------------------------
Moldovia [*]
- --------------------------------------------------------------------------------
Monaco [*]
- --------------------------------------------------------------------------------
Mongolia [*]
- --------------------------------------------------------------------------------
Monserrat [*]
- --------------------------------------------------------------------------------
Morocco [*]
- --------------------------------------------------------------------------------
Mozambique [*]
- --------------------------------------------------------------------------------
Mustique [*]
- --------------------------------------------------------------------------------
Myanmar (Burma) [*]
- --------------------------------------------------------------------------------
Nakhodka N/A
- --------------------------------------------------------------------------------
Namibia [*]
- --------------------------------------------------------------------------------
Nauru [*]
- --------------------------------------------------------------------------------
Nepal [*]
- --------------------------------------------------------------------------------
Netherlands [*]
- --------------------------------------------------------------------------------
Nevis [*]
- --------------------------------------------------------------------------------
New Caledonia [*]
- --------------------------------------------------------------------------------
New Zealand [*]
- --------------------------------------------------------------------------------
Nicaragua [*]
- --------------------------------------------------------------------------------
Niger [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 6
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nigeria [*]
- --------------------------------------------------------------------------------
Niue Island [*]
- --------------------------------------------------------------------------------
Norfold Island [*]
- --------------------------------------------------------------------------------
North Korea [*]
- --------------------------------------------------------------------------------
North Mariana Island [*]
- --------------------------------------------------------------------------------
Norway [*]
- --------------------------------------------------------------------------------
Oman [*]
- --------------------------------------------------------------------------------
Pakistan [*]
- --------------------------------------------------------------------------------
Palau [*]
- --------------------------------------------------------------------------------
Panama [*]
- --------------------------------------------------------------------------------
Papua New Guinea [*]
- --------------------------------------------------------------------------------
Paraguay [*]
- --------------------------------------------------------------------------------
Peru [*]
- --------------------------------------------------------------------------------
Philippines [*]
- --------------------------------------------------------------------------------
Picairn Islands N/A
- --------------------------------------------------------------------------------
Poland [*]
- --------------------------------------------------------------------------------
Portugal [*]
- --------------------------------------------------------------------------------
PPalm Island [*]
- --------------------------------------------------------------------------------
Puerto Rico [*]
- --------------------------------------------------------------------------------
Qatar [*]
- --------------------------------------------------------------------------------
Radius N/A
- --------------------------------------------------------------------------------
Reunion Island [*]
- --------------------------------------------------------------------------------
Rodrigues Islands [*]
- --------------------------------------------------------------------------------
Romania [*]
- --------------------------------------------------------------------------------
Russia [*]
- --------------------------------------------------------------------------------
Rwanda [*]
- --------------------------------------------------------------------------------
Saint Helena [*]
- --------------------------------------------------------------------------------
Saint Kitts [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 7
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Saint Lucia [*]
- --------------------------------------------------------------------------------
Saint Pierre & Miquelon [*]
- --------------------------------------------------------------------------------
Saint Vincent [*]
- --------------------------------------------------------------------------------
Saipan [*]
- --------------------------------------------------------------------------------
Sakhalin N/A
- --------------------------------------------------------------------------------
Samoa (U.S.) [*]
- --------------------------------------------------------------------------------
Samoa (Western) [*]
- --------------------------------------------------------------------------------
San Marino [*]
- --------------------------------------------------------------------------------
Sao Tome Et Principe [*]
- --------------------------------------------------------------------------------
Saudi Arabia [*]
- --------------------------------------------------------------------------------
Senegal [*]
- --------------------------------------------------------------------------------
Serbia [*]
- --------------------------------------------------------------------------------
Seychelles [*]
- --------------------------------------------------------------------------------
Sierra Leone [*]
- --------------------------------------------------------------------------------
Singapore [*]
- --------------------------------------------------------------------------------
Slovakia [*]
- --------------------------------------------------------------------------------
Slovenia [*]
- --------------------------------------------------------------------------------
Slovenia Republic N/A
- --------------------------------------------------------------------------------
Soloman Island [*]
- --------------------------------------------------------------------------------
Somalia [*]
- --------------------------------------------------------------------------------
South Africa [*]
- --------------------------------------------------------------------------------
South Korea [*]
- --------------------------------------------------------------------------------
Spain [*]
- --------------------------------------------------------------------------------
Sri Lanka [*]
- --------------------------------------------------------------------------------
Sudan [*]
- --------------------------------------------------------------------------------
Surinam [*]
- --------------------------------------------------------------------------------
Swaziland [*]
- --------------------------------------------------------------------------------
Sweden [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 8
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Switzerland [*]
- --------------------------------------------------------------------------------
Syria [*]
- --------------------------------------------------------------------------------
Taiwan [*]
- --------------------------------------------------------------------------------
Tajikistan [*]
- --------------------------------------------------------------------------------
Tanzania [*]
- --------------------------------------------------------------------------------
Thailand [*]
- --------------------------------------------------------------------------------
Togo [*]
- --------------------------------------------------------------------------------
Tokelau N/A
- --------------------------------------------------------------------------------
Tonga [*]
- --------------------------------------------------------------------------------
Trinidad [*]
- --------------------------------------------------------------------------------
Tristan da Cunha [*]
- --------------------------------------------------------------------------------
Tunisia [*]
- --------------------------------------------------------------------------------
Turkey [*]
- --------------------------------------------------------------------------------
Turkmenistan [*]
- --------------------------------------------------------------------------------
Turks and Caicos [*]
- --------------------------------------------------------------------------------
Tuvalu [*]
- --------------------------------------------------------------------------------
Uganda [*]
- --------------------------------------------------------------------------------
UK [*]
- --------------------------------------------------------------------------------
Ukraine [*]
- --------------------------------------------------------------------------------
Union Island [*]
- --------------------------------------------------------------------------------
United Arab Emirates [*]
- --------------------------------------------------------------------------------
Uruguay [*]
- --------------------------------------------------------------------------------
USA [*]
- --------------------------------------------------------------------------------
Uzbekistan [*]
- --------------------------------------------------------------------------------
Vanuatu [*]
- --------------------------------------------------------------------------------
Vatican City [*]
- --------------------------------------------------------------------------------
Venezuela [*]
- --------------------------------------------------------------------------------
Viet Nam [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 9
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Virgin Islands (U.S.) [*]
- --------------------------------------------------------------------------------
Wake Islands N/A
- --------------------------------------------------------------------------------
Wallis Islands [*]
- --------------------------------------------------------------------------------
Yemen (Republic of) [*]
- --------------------------------------------------------------------------------
Yugoslavia [*]
- --------------------------------------------------------------------------------
Zaire [*]
- --------------------------------------------------------------------------------
Zambia [*]
- --------------------------------------------------------------------------------
Zimbabwe [*]
- --------------------------------------------------------------------------------
Note: where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 10
<PAGE>
EXHIBIT B
See the attached form of invoice.
<PAGE>
[Logo] Sprint [Logo] RSLCOM
Sprint Telecommunications Services RSL COM Europe Ltd.
Lyon[illegible] 36 RSL COM Deutscheland Gmbh
[illegible] Lyonerstrasse 36
00520 Frankfurt / Main
[Telephone #]
- --------------------------------------------------------------------------------
[illegible]
TELEFONRECHNUNG
================================================================================
[illegible] 40,000.00
[illegible] 40,000.00
[illegible] 6,000.00
================================================================================
[illegible]
GEBUCHT 2 9. Feb. 1996
[illegible]
<PAGE>
EXHIBIT C
ADDRESSES FOR NOTICES
To RSL:
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
Telecopy No: (212) 572-3825
with a copy to:
Roseman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohn, Esq.
Telecopy No: (212) 940-8776
To Sprint LP:
Sprint Communications Company L.P.
c/o Sprint Corporation
2330 Shawnee Mission Parkway, East Wing
Westwood, KA 66205
U.S.A.
Attn.: J. Richard Devlin, Esq.
Telecopy: (913) 624-6000
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, GA 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Te1ecopy No.: (404) 572-5145
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing.
C-1
<PAGE>
Exhibit 10.35
Exhibit 10.35 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED
and RSL Communications, Ltd. BY "[*]" AND FILED
SEPARATELY WITH THE
COMMISSION PURSUANT TO
A REQUEST FOR COFIDENTIAL
TREATMENT UNDER RULE 406
OF THE SECURITIES ACT
OF 1933
AMENDMENT NO. 1
TO THE TRANSITION SERVICES AGREEMENT
THIS AMENDMENT NO. 1 TO THE TRANSITION SERVICES AGREEMENT among Sprint
Communications Company L.P., a Delaware limited partnership ("Sprint LP"), RSL
COM Deutschland GmbH, a Germany limited liability company ("RSL"), and Sprint
Telecommunication Services GmbH, a German limited liability company ("STS")
takes effect as of May 8, 1996.
WHEREAS Sprint LP and RSL have entered into a Transition Services
Agreement ("the Agreement") as of May 8, 1996, in connection with the purchase
of the IDDD Business (as defined in the Agreement) by RSL; and
WHEREAS Sprint LP, STS and RSL acknowledge and agree that the provision of
the international half circuits used in connection with the IDDD Business to RSL
should be provided by STS;
NOW THEREFORE, it is agreed as follows:
1. Additional Party to the Agreement. STS is hereby made a party to the
Agreement. Except with respect to Section 3.1 of the Agreement, wherever the
term "Sprint LP" appears such term shall refer to both Sprint LP and STS.
2. Section 2.1. Section 2.1 of the Agreement is deleted in its entirety
and the following is substituted therefor:
During the term of this Agreement and in accordance with its terms and
conditions, (i) Sprint LP shall terminate or provide for the termination
of long distance voice telephone traffic which originates from the IDDD
Business through the Sprint network or the network of Global One
Communications in the countries listed on Exhibit A hereto and (ii) Sprint
Telecommunication Services GmbH shall provide to RSL the use of
international half circuits for long distance voice telephone traffic
which originates from the IDDD Business through the Sprint network or the
network of Global One Communications (collectively, the "Services").
Neither Sprint LP nor Sprint Telecommunication Services GmbH shall be
obligated to transit or hub any traffic through the switch that services
the IDDD Business other than traffic originated in Germany.
<PAGE>
3. Section 4.2. Section 4.2 of the Agreement is deleted in its entirety
and the following is substituted therefor:
RSL shall pay (i) to Sprint LP the amount due under paragraph (1) of
Exhibit A for each calendar month during the term of this Agreement for
the provision of the Services provided by Sprint LP pursuant to Section
2.1 and (ii) to Sprint Telecommunication Services GmbH the amount due
under paragraph (2) of Exhibit A for each calendar month during the term
of this Agreement for the provision of the Services provided by Sprint
Telecommunication Services GmbH pursuant to Section 2.1 (collectively, the
"Service Charges").
4. Effect of Amendment No. 1. Notwithstanding anything contained herein,
in no event shall the aggregate amount of Service Charges calculated under the
Agreement as amended by this Amendment No. 1 for any given period of time exceed
the aggregate amount of Services Charges calculated under the Agreement prior to
the execution of this Amendment No. 1 for the same period of time.
5. Exhibit A. Exhibit A is deleted in its entirety and the Amended and
Restated Exhibit A attached hereto is substituted therefor.
Except as amended herein, the provisions of the Agreement shall remain in
full force and effect.
[Signatures on next page]
-2-
<PAGE>
IN WITNESS WHEREOF, each of STS, Sprint LP and RSL has caused its duly
authorized representative to execute this Amendment No. 1 as of May 8, 1996.
SPRINT COMMUNICATIONS COMPANY L.P.
By: US Telecom, Inc., as General Partner
By: _____________________________
Name: Don A. Jensen
Title: Vice President-Law
By: _____________________________
Name: Dennis Piper
Title: Attorney in Fact
SPRINT TELECOMMUNICATION SERVICES GMBH
By: _____________________________
Name: _____________________________
Title: _____________________________
RSL COM DEUTSCHLAND GMBH.
By: _____________________________
Name: _____________________________
Title: _____________________________
-3-
<PAGE>
AMENDED AND RESTATED EXHIBIT A
1. Service Charges due to Sprint LP:
Service Charges due to Sprint LP are calculated in accordance with the
attached list of termination rates and then reduced by the amount of Service
Charges invoiced to RSL by Sprint Telecommunication Services GmbH for use of the
international half circuits.
2. Service Charges due to Sprint Telecommunication Services GmbH:
Service Charges due to Sprint Telecommunication Services GmbH for use of
the international half circuits shall be determined by reference to the volume
of the traffic but shall not exceed a value of [*] for any given month.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Afghanistan N/A
- --------------------------------------------------------------------------------
Alaska [*]
- --------------------------------------------------------------------------------
Albania [*]
- --------------------------------------------------------------------------------
Algeria [*]
- --------------------------------------------------------------------------------
Andorra [*]
- --------------------------------------------------------------------------------
Angola [*]
- --------------------------------------------------------------------------------
Anguilla [*]
- --------------------------------------------------------------------------------
Antarctic Territories N/A
- --------------------------------------------------------------------------------
Antigua [*]
- --------------------------------------------------------------------------------
Antilles (Netherlands) [*]
- --------------------------------------------------------------------------------
Argentina [*]
- --------------------------------------------------------------------------------
Armenia [*]
- --------------------------------------------------------------------------------
Aruba [*]
- --------------------------------------------------------------------------------
Ascension Island [*]
- --------------------------------------------------------------------------------
Astelit N/A
- --------------------------------------------------------------------------------
Australia [*]
- --------------------------------------------------------------------------------
Austria [*]
- --------------------------------------------------------------------------------
Azerbaijan [*]
- --------------------------------------------------------------------------------
Azores [*]
- --------------------------------------------------------------------------------
Bahamas [*]
- --------------------------------------------------------------------------------
Bahrain [*]
- --------------------------------------------------------------------------------
Balearics N/A
- --------------------------------------------------------------------------------
Bangladesh [*]
- --------------------------------------------------------------------------------
Barbados [*]
- --------------------------------------------------------------------------------
BCLM N/A
- --------------------------------------------------------------------------------
Belarus [*]
- --------------------------------------------------------------------------------
Belgium [*]
- --------------------------------------------------------------------------------
Belize [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 1
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benin [*]
- --------------------------------------------------------------------------------
Bermuda [*]
- --------------------------------------------------------------------------------
Bhutan [*]
- --------------------------------------------------------------------------------
Bolivia [*]
- --------------------------------------------------------------------------------
Bosnia-Herzegovina [*]
- --------------------------------------------------------------------------------
Botswana [*]
- --------------------------------------------------------------------------------
Brazil [*]
- --------------------------------------------------------------------------------
British Virgin Islands [*]
- --------------------------------------------------------------------------------
Brunei Darussalam [*]
- --------------------------------------------------------------------------------
Bulgaria [*]
- --------------------------------------------------------------------------------
Burkina Faso [*]
- --------------------------------------------------------------------------------
Burundi [*]
- --------------------------------------------------------------------------------
Cambodia [*]
- --------------------------------------------------------------------------------
Cameroon [*]
- --------------------------------------------------------------------------------
Canada [*]
- --------------------------------------------------------------------------------
Canary Islands [*]
- --------------------------------------------------------------------------------
Cape Verde Islands [*]
- --------------------------------------------------------------------------------
Caribbean N/A
- --------------------------------------------------------------------------------
Cayman Islands [*]
- --------------------------------------------------------------------------------
Central African Republic [*]
- --------------------------------------------------------------------------------
Chad [*]
- --------------------------------------------------------------------------------
Chatham Islands [*]
- --------------------------------------------------------------------------------
Chile [*]
- --------------------------------------------------------------------------------
China [*]
- --------------------------------------------------------------------------------
Christmas Island (I.O.) [*]
- --------------------------------------------------------------------------------
Cocos Island [*]
- --------------------------------------------------------------------------------
Colombia [*]
- --------------------------------------------------------------------------------
Combellga N/A
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 2
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cominica [*]
- --------------------------------------------------------------------------------
Comoro Islands/ Mayotte [*]
- --------------------------------------------------------------------------------
Comstar N/A
- --------------------------------------------------------------------------------
Congo [*]
- --------------------------------------------------------------------------------
Cook Island [*]
- --------------------------------------------------------------------------------
Costa Rica [*]
- --------------------------------------------------------------------------------
Croatia Republic [*]
- --------------------------------------------------------------------------------
Cuba [*]
- --------------------------------------------------------------------------------
Cyprus [*]
- --------------------------------------------------------------------------------
Czech. Republic [*]
- --------------------------------------------------------------------------------
Denmark [*]
- --------------------------------------------------------------------------------
Diego Garcia [*]
- --------------------------------------------------------------------------------
Djibouti [*]
- --------------------------------------------------------------------------------
Dominican Republic [*]
- --------------------------------------------------------------------------------
Ecudor [*]
- --------------------------------------------------------------------------------
Egypt [*]
- --------------------------------------------------------------------------------
El Salvador [*]
- --------------------------------------------------------------------------------
Equatorial Guinea [*]
- --------------------------------------------------------------------------------
Eritrea [*]
- --------------------------------------------------------------------------------
Estonia [*]
- --------------------------------------------------------------------------------
Ethioppia [*]
- --------------------------------------------------------------------------------
Falkland Islands [*]
- --------------------------------------------------------------------------------
Faroes (via Denmark) [*]
- --------------------------------------------------------------------------------
Fiji [*]
- --------------------------------------------------------------------------------
Finland [*]
- --------------------------------------------------------------------------------
France/Germany [*]
- --------------------------------------------------------------------------------
French Antilles [*]
- --------------------------------------------------------------------------------
French Guiana [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 3
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
French Polynesia [*]
- --------------------------------------------------------------------------------
Gabon [*]
- --------------------------------------------------------------------------------
Gambia [*]
- --------------------------------------------------------------------------------
Georgia [*]
- --------------------------------------------------------------------------------
Ghana [*]
- --------------------------------------------------------------------------------
Gibraltar [*]
- --------------------------------------------------------------------------------
Greece [*]
- --------------------------------------------------------------------------------
Greenland [*]
- --------------------------------------------------------------------------------
Greneda (Carracou) [*]
- --------------------------------------------------------------------------------
Guadaloupe [*]
- --------------------------------------------------------------------------------
Guam [*]
- --------------------------------------------------------------------------------
Guantanamo [*]
- --------------------------------------------------------------------------------
Guatemala [*]
- --------------------------------------------------------------------------------
Guinea [*]
- --------------------------------------------------------------------------------
Guinea Bissau [*]
- --------------------------------------------------------------------------------
Guyana [*]
- --------------------------------------------------------------------------------
Haiti [*]
- --------------------------------------------------------------------------------
Hawaii [*]
- --------------------------------------------------------------------------------
Hondoras [*]
- --------------------------------------------------------------------------------
Hong Kong [*]
- --------------------------------------------------------------------------------
Hungary [*]
- --------------------------------------------------------------------------------
Iceland [*]
- --------------------------------------------------------------------------------
India [*]
- --------------------------------------------------------------------------------
Indonesia [*]
- --------------------------------------------------------------------------------
Iran [*]
- --------------------------------------------------------------------------------
Iraq [*]
- --------------------------------------------------------------------------------
Ireland [*]
- --------------------------------------------------------------------------------
Israel [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 4
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Italy [*]
- --------------------------------------------------------------------------------
Ivory Coast [*]
- --------------------------------------------------------------------------------
Jamaica [*]
- --------------------------------------------------------------------------------
Japan [*]
- --------------------------------------------------------------------------------
Jordan [*]
- --------------------------------------------------------------------------------
Kampuchea [*]
- --------------------------------------------------------------------------------
Kazakhstan [*]
- --------------------------------------------------------------------------------
Kenya [*]
- --------------------------------------------------------------------------------
Kirghizia N/A
- --------------------------------------------------------------------------------
Kiribati [*]
- --------------------------------------------------------------------------------
Kuwait [*]
- --------------------------------------------------------------------------------
Kyrgyzstan [*]
- --------------------------------------------------------------------------------
Laos [*]
- --------------------------------------------------------------------------------
Latvia [*]
- --------------------------------------------------------------------------------
Lebanon [*]
- --------------------------------------------------------------------------------
Lechtenstein [*]
- --------------------------------------------------------------------------------
Lesotho [*]
- --------------------------------------------------------------------------------
Liberia [*]
- --------------------------------------------------------------------------------
Libya [*]
- --------------------------------------------------------------------------------
Lithuania [*]
- --------------------------------------------------------------------------------
Luxembourg [*]
- --------------------------------------------------------------------------------
Macao [*]
- --------------------------------------------------------------------------------
Macedonia [*]
- --------------------------------------------------------------------------------
Madagascar [*]
- --------------------------------------------------------------------------------
Madeira [*]
- --------------------------------------------------------------------------------
Malawi [*]
- --------------------------------------------------------------------------------
Malaysia [*]
- --------------------------------------------------------------------------------
Maldive Islands [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 5
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mali [*]
- --------------------------------------------------------------------------------
Malta [*]
- --------------------------------------------------------------------------------
Marshall Island [*]
- --------------------------------------------------------------------------------
Martinique [*]
- --------------------------------------------------------------------------------
Mauritania [*]
- --------------------------------------------------------------------------------
Mauritius/Rodriguez Island [*]
- --------------------------------------------------------------------------------
Mayotte Island [*]
- --------------------------------------------------------------------------------
Mexico [*]
- --------------------------------------------------------------------------------
Micronesia [*]
- --------------------------------------------------------------------------------
Midway Islands N/A
- --------------------------------------------------------------------------------
Moldavia [*]
- --------------------------------------------------------------------------------
Monaco [*]
- --------------------------------------------------------------------------------
Mongolia [*]
- --------------------------------------------------------------------------------
Monserrat [*]
- --------------------------------------------------------------------------------
Morocco [*]
- --------------------------------------------------------------------------------
Mozambique [*]
- --------------------------------------------------------------------------------
Mustique [*]
- --------------------------------------------------------------------------------
Myanmar (Burma) [*]
- --------------------------------------------------------------------------------
Nakhodka N/A
- --------------------------------------------------------------------------------
Namibia [*]
- --------------------------------------------------------------------------------
Nauru [*]
- --------------------------------------------------------------------------------
Nepal [*]
- --------------------------------------------------------------------------------
Netherlands [*]
- --------------------------------------------------------------------------------
Nevis [*]
- --------------------------------------------------------------------------------
New Caledonia [*]
- --------------------------------------------------------------------------------
New Zealand [*]
- --------------------------------------------------------------------------------
Nicaragua [*]
- --------------------------------------------------------------------------------
Niger [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 6
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nigeria [*]
- --------------------------------------------------------------------------------
Niue Island [*]
- --------------------------------------------------------------------------------
Norfold Island [*]
- --------------------------------------------------------------------------------
North Korea [*]
- --------------------------------------------------------------------------------
North Mariana Island [*]
- --------------------------------------------------------------------------------
Norway [*]
- --------------------------------------------------------------------------------
Oman [*]
- --------------------------------------------------------------------------------
Pakistan [*]
- --------------------------------------------------------------------------------
Palau [*]
- --------------------------------------------------------------------------------
Panama [*]
- --------------------------------------------------------------------------------
Papua New Guinea [*]
- --------------------------------------------------------------------------------
Paraguay [*]
- --------------------------------------------------------------------------------
Peru [*]
- --------------------------------------------------------------------------------
Philippines [*]
- --------------------------------------------------------------------------------
Picairn Islands N/A
- --------------------------------------------------------------------------------
Poland [*]
- --------------------------------------------------------------------------------
Portugal [*]
- --------------------------------------------------------------------------------
PPalm Island [*]
- --------------------------------------------------------------------------------
Puerto Rico [*]
- --------------------------------------------------------------------------------
Qatar [*]
- --------------------------------------------------------------------------------
Radius N/A
- --------------------------------------------------------------------------------
Reunion Island [*]
- --------------------------------------------------------------------------------
Rodrigues Islands [*]
- --------------------------------------------------------------------------------
Romania [*]
- --------------------------------------------------------------------------------
Russia [*]
- --------------------------------------------------------------------------------
Rwanda [*]
- --------------------------------------------------------------------------------
Saint Helena [*]
- --------------------------------------------------------------------------------
Saint Kitts [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 7
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Saint Lucia [*]
- --------------------------------------------------------------------------------
Saint Pierre & Miquelon [*]
- --------------------------------------------------------------------------------
Saint Vincent [*]
- --------------------------------------------------------------------------------
Saipan [*]
- --------------------------------------------------------------------------------
Sakhalin N/A
- --------------------------------------------------------------------------------
Samoa (U.S.) [*]
- --------------------------------------------------------------------------------
Samoa (Western) [*]
- --------------------------------------------------------------------------------
San Marino [*]
- --------------------------------------------------------------------------------
Sao Tome Et Principe [*]
- --------------------------------------------------------------------------------
Saudi Arabia [*]
- --------------------------------------------------------------------------------
Senegal [*]
- --------------------------------------------------------------------------------
Serbia [*]
- --------------------------------------------------------------------------------
Seychelles [*]
- --------------------------------------------------------------------------------
Sierra Leone [*]
- --------------------------------------------------------------------------------
Singapore [*]
- --------------------------------------------------------------------------------
Slovakia [*]
- --------------------------------------------------------------------------------
Slovenia [*]
- --------------------------------------------------------------------------------
Slovenia Republic N/A
- --------------------------------------------------------------------------------
Solomon Island [*]
- --------------------------------------------------------------------------------
Somalia [*]
- --------------------------------------------------------------------------------
South Africa [*]
- --------------------------------------------------------------------------------
South Korea [*]
- --------------------------------------------------------------------------------
Spain [*]
- --------------------------------------------------------------------------------
Sri Lanka [*]
- --------------------------------------------------------------------------------
Sudan [*]
- --------------------------------------------------------------------------------
Surinam [*]
- --------------------------------------------------------------------------------
Swaziland [*]
- --------------------------------------------------------------------------------
Sweden [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 8
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Switzerland [*]
- --------------------------------------------------------------------------------
Syria [*]
- --------------------------------------------------------------------------------
Taiwan [*]
- --------------------------------------------------------------------------------
Tajikistan [*]
- --------------------------------------------------------------------------------
Tanzania [*]
- --------------------------------------------------------------------------------
Thailand [*]
- --------------------------------------------------------------------------------
Togo [*]
- --------------------------------------------------------------------------------
Tokelau N/A
- --------------------------------------------------------------------------------
Tonga [*]
- --------------------------------------------------------------------------------
Trinidad [*]
- --------------------------------------------------------------------------------
Tristan da Cunha [*]
- --------------------------------------------------------------------------------
Tunisia [*]
- --------------------------------------------------------------------------------
Turkey [*]
- --------------------------------------------------------------------------------
Turkmenistan [*]
- --------------------------------------------------------------------------------
Turks and Caicos [*]
- --------------------------------------------------------------------------------
Tuvalu [*]
- --------------------------------------------------------------------------------
Uganda [*]
- --------------------------------------------------------------------------------
UK [*]
- --------------------------------------------------------------------------------
Ukraine [*]
- --------------------------------------------------------------------------------
Union Island [*]
- --------------------------------------------------------------------------------
United Arab Emirates [*]
- --------------------------------------------------------------------------------
Uruguay [*]
- --------------------------------------------------------------------------------
USA [*]
- --------------------------------------------------------------------------------
Uzbekistan [*]
- --------------------------------------------------------------------------------
Vanuatu [*]
- --------------------------------------------------------------------------------
Vatican City [*]
- --------------------------------------------------------------------------------
Venezuela [*]
- --------------------------------------------------------------------------------
Viet Nam [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 9
<PAGE>
Termination Rates ($/Minute)
- --------------------------------------------------------------------------------
Global One/RSL
- --------------------------------------------------------------------------------
Country Agreed Rates
- --------------------------------------------------------------------------------
4/11/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Virgin Islands (U.S.) [*]
- --------------------------------------------------------------------------------
Wake Islands N/A
- --------------------------------------------------------------------------------
Wallis Islands [*]
- --------------------------------------------------------------------------------
Yemen (Republic of) [*]
- --------------------------------------------------------------------------------
Yugoslavia [*]
- --------------------------------------------------------------------------------
Zaire [*]
- --------------------------------------------------------------------------------
Zambia [*]
- --------------------------------------------------------------------------------
Zimbabwe [*]
- --------------------------------------------------------------------------------
Note: Where indicated with N/A - Sprint has no available arrangement with the
foreign PTT to terminate traffic.
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
F/G 4/11/96 Page 10
<PAGE>
Exhibit 10.36
Exhibit 10.36 to Registration Statement on CONFIDENTIAL INFORMATION
Form S-4 of RSL Communications PLC OMITTED WHERE INDICATED
and RSL Communications, Ltd. BY "[*]" AND FILED
SEPARATELY WITH THE
COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 406
OF THE SECURITIES ACT
OF 1933
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into this
8th day of May, 1996, by and between GLOBAL ONE COMMUNICATIONS WORLD OPERATIONS,
LIMITED, an Irish company ("Global 0ne") and SIENA VERMOGENSVERWALTUNGS-GMBH (to
be renamed RSL COM Deutschland GmbH), a German limited liability company ("RSL")
(collectively, the "Parties").
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of date hereof
(the "Purchase Agreement"), by and among Sprint Fon Inc. and Sprint
Telecommunications Services GmbH (collectively, "Sellers") and RSL, RSL has
purchased from Sellers, and Sellers have sold to RSL, certain assets related to
the international direct distance dialing business of Sellers in Germany (the
"IDDD Business");
WHEREAS, Global One is an affiliate of Sprint Corporation, the ultimate
beneficial owner of all the outstanding capital stock of each Seller;
WHEREAS, in connection with the purchase and sale of said assets of the
IDDD Business, Sellers and certain of their affiliates have agreed to provide to
RSL certain transitional services pursuant to transitional services agreements
(the "Transition Services Agreements"), including this Agreement;
WHEREAS, in accordance with the foregoing, Global One has agreed to provide
under this Agreement, certain services related to the IDDD Business; and
WHEREAS, RSL has agreed to provide to Global One traffic termination
services previously provided by Sellers;
NOW, THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:
"Billing Services" shall mean the billing services to be provided hereunder
as such services are described in Exhibit A hereto.
<PAGE>
"Customer Support Services" shall mean the customer support services to be
provided hereunder as such services are described in Exhibit A hereto.
"Engineering Services" shall mean the engineering services provided
hereunder as such services are described in Exhibit A hereto.
"Monthly Fees" shall mean, with respect to the Services (as hereinafter
defined) to be provided by Global One to RSL hereunder, the monthly fees with
respect to the Services described in Exhibit B hereto.
"Services" shall mean the Billing Services, the Customer Support Services
and the Engineering Services.
"Taxes" shall mean all federal, state, local or foreign income, capital
gains, profits, gross receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment, disability, real property, personal
property, stamp, excise, occupation, sales, use, transfer, mining, value-added,
investment credit recapture alternative or add-on minimum, environmental,
estimated or other taxes, duties or assessments of any kind, including any
interest, penalty and additions imposed with respect to such amounts levied by
any foreign, federal, state or local taxing authority.
"Traffic Termination" shall mean the provision of termination of long
distance voice telephone traffic in Germany which originates from the network of
Global One Communications, a joint venture formed by Sprint Corporation,
Deutsche Telekom, and France Telecom (the various entities that comprise such
joint venture and are controlled, directly or indirectly, by Sprint Corporation,
Deutsche Telekom and France Telecom shall collectively be referred to herein as
"Global One Communications") in such volume as has been customarily terminated
by Sellers on behalf of Global One Communications or its predecessors in the six
(6) months prior to the date hereof.
Additional Definitions:
Defined Term Defined In
"Agreement" Recitals
"Confidential Information" Section 5.1
"Global One" Recitals
"IDDD Business" Recitals
"RSL" Recitals
"Services Supplement" Section 2.2
"Sprint Party" Section 6.2
2
<PAGE>
Section 1.2 Interpretation. The definitions in Sections 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." All references
herein to Articles, Sections and Exhibits shall be deemed to be references to
Articles and Sections of and Exhibits to this Agreement unless the context shall
otherwise require, and all references herein to "this Agreement" shall refer to
this Agreement and the Exhibits hereto. The headings of the Articles and
Sections are included for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement. Unless
the context shall otherwise require, any reference to any agreement or other
instrument or statute or regulation is to such agreement, instrument, statute or
regulation as amended and supplemented from time to time (and, in the case of a
statute or regulation, to any successor provision). Any reference in this
Agreement to a "day" or a number of "days" (without the explicit qualification
of "business") shall be interpreted as a reference to a calendar day or number
of calendar days. If any action or notice is to be taken or given on or by a
particular day, and such day is not a business day, then such action or notice
shall be deferred until, or may be taken or given, on the next business day.
ARTICLE II
SERVICES
Section 2.1 Services. During the term of this Agreement, Global One shall
provide to RSL, and RSL shall procure from Global One, the Services in
accordance with and subject to the terms and conditions of this Agreement.
Section 2.2 Service Supplements. Global One and RSL may enter into a
service supplement (the "Services Supplement") with respect to any Service to be
provided by Global One hereunder. Any such Services Supplement may further
define and describe the Service to be provided by Global One hereunder, the
performance or quality standards in accordance with which Global One shall
provide such Service, the compensation that Global One shall receive in
accordance with Section 4.1 for providing such Service, the expiration dates for
providing such Service and any additional information with respect to such
Service as the Parties may agree. Unless otherwise stated in a related Service
Supplement, the rates charged by Global One for any particular Service shall
remain fixed during the term of this Agreement.
Section 2.3 Requests for Engineering Services. RSL shall make requests for
Engineering Services in such form and in accordance with such procedures as the
Parties may from time to time establish. All other types of Services shall be
provided automatically and without any action on the part of RSL.
3
<PAGE>
Section 2.4 Facilities. During the term hereof, Global One shall have, at
no cost to Global One, such access to and use of the space and related
facilities and equipment at the premises of RSL as shall be reasonably necessary
for Global One to provide the Services hereunder.
Section 2.5 Employees. Global One shall have complete operational,
management, administrative, legal and financial responsibility for the Global
One personnel used to provide the Services hereunder. For a period of two (2)
years after the date hereof, Global One shall not, and shall cause each of its
affiliates not to, directly or indirectly, (i) persuade or attempt to persuade
any person providing goods or services to the IDDD Business not to do business
with the IDDD Business or to reduce the amount of business it does with the IDDD
Business, (ii) persuade or attempt to persuade any person who is or during such
period becomes a director, officer or employee of RSL and who devotes all or
substantially all of his time to the IDDD Business of Purchaser (each an "RSL
IDDD Person") to terminate his relationship with RSL, (iii) dissuade or attempt
to dissuade any person from becoming an RSL IDDD Person, or (iv) degrade,
denigrate, deride or otherwise disparage the competence, service, condition
(financial or otherwise), integrity or prospects of RSL, the IDDD Business or
any RSL IDDD Person in an effort to solicit customers for a competing business
or otherwise.
ARTICLE III
TRAFFIC TERMINATION
Section 3.1 Traffic Termination. During the term of this Agreement, RSL
shall provide to Global One, and Global One shall procure from RSL, Traffic
Termination in accordance with and subject to the terms of this Agreement and on
a cost pass-through basis. The provisions of Sections 4.3, 4.4, 4.5, 4.6, 4.7,
4.8 and 4.9 shall be applicable to Traffic Termination pursuant to this Section
3.1 with such appropriate adjustments to indicate that RSL is the provider of
such service to Global One.
ARTICLE IV
PAYMENTS
Section 4.1 Components of Global One's Charges. Global One's charges to RSL
for the provision of the Services hereunder shall consist of the following
components: (i) Monthly Fees, (ii) Taxes, and (iii) other amounts expressly
payable to Global One pursuant to this Agreement.
4
<PAGE>
Section 4.2 Monthly Fees. RSL shall pay to Global One, for each calendar
month during the term of this Agreement, the applicable Monthly Fees for each
Service provided during such calendar month.
Section 4.3 Reimbursable Expenses. RSL shall reimburse Global One for the
reasonable out-of-pocket expenses which are incurred by Global One on behalf of
RSL in connection with the provision of the Services hereunder (other than costs
which are included within the Monthly Fees) which are approved in advance by
RSL, upon the presentation of reasonably satisfactory documentation evidencing
such costs and Global One's payment thereof.
Section 4.4 Taxes. There shall be added to any charges under this
Agreement, and RSL shall pay to Global One, amounts equal to any Taxes, however
designated or levied, based upon such charges, the Services or this Agreement,
and any amounts in lieu thereof paid or payable by Global One in respect of the
foregoing, which Global One customarily charges customers in connection with the
provision of the type of services contemplated by Section 2.1, and shall not
include any income taxes payable by Global One and other Taxes for which RSL
would not be liable if such Taxes were not paid or withheld by Global One. The
Parties shall cooperate with each other in minimizing any applicable Taxes and,
in connection therewith, shall provide the other Party with any information
reasonably requested by such Party in connection with any such Taxes.
Section 4.5 Proration. All periodic charges hereunder shall be computed on
a calendar month basis and shall be prorated for any partial month.
Section 4.6 Payments Due; Late Payment Charges. Unless otherwise stated in
the Service Supplements, amounts due hereunder shall be paid within thirty (30)
days of receipt of the invoice therefor. Unless otherwise stated in the Service
Supplements, any undisputed amount due hereunder not paid within thirty (30)
days of receipt of the invoice therefor shall accrue interest from the date such
amount was due at the rate of ten percent (10%) per annum, compounded daily.
Section 4.7 Disputed Payments. If a dispute arises with respect to any
amount due hereunder, the RSL shall pay when due the undisputed portion of such
amount, if any, and, if the dispute is resolved in Global One's favor promptly
pay the disputed portion (or applicable part thereof) when the dispute is
resolved without the applicable late payment charge, if such dispute arises in
good faith.
Section 4.8 Currency. All payments hereunder shall be made in U.S. Dollars.
Section 4.9 Invoices. Global One shall provide RSL written invoices
covering all charges payable by RSL hereunder, which invoices shall describe in
reasonable detail the Services during the periods covered by such invoices and
the Taxes payable with respect thereto.
5
<PAGE>
ARTICLE V
CONFIDENTIALITY
Section 5.1 Confidentiality. Except as otherwise provided herein, Global
One and RSL each agree that all information communicated to it by the other,
whether before or after the date hereof in connection with the Services to be
provided hereunder to the IDDD Business (the "Confidential Information"), shall
be and was received in strict confidence and shall be used only for purposes of
this Agreement, and that no such Confidential Information, including without
limitation, the provisions of this Agreement, shall be disclosed by the
recipient Party, its agents, contractors or employees without the prior written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed, except as may be necessary by reason of legal, accounting or regulatory
requirements beyond the reasonable control of the recipient Party and except for
such disclosures by Global One as may be necessary in order for Global One to
perform its obligations hereunder. Either Party may disclose Confidential
Information to its agents, contractors, financing sources, investors or
employees who have a need to know such information, but in such circumstances
the disclosing Party shall be completely liable for the acts of its agents,
contractors, financing sources, investors and employees and, prior to giving any
such agent, contractor, financing source, investor or employee access to
Confidential Information, the recipient Party shall advise such agent,
contractor, financing source, investor or employee of its obligation to preserve
the confidentiality of the Confidential Information. Notwithstanding the
foregoing, the restrictions and obligations of this Section 5.1 shall not apply
to any information which the recipient Party can establish to have (i) become
publicly available without breach of this Agreement, (ii) been independently
developed by the recipient Party outside the scope of this Agreement without
reference to Confidential Information received hereunder, or (iii) been
rightfully obtained by the recipient Party from third parties which are not
obligated to protect its confidentiality. The provisions of this Section 5.1
shall survive the expiration or termination of this Agreement for any reason.
ARTICLE VI
TERM AND TERMINATION
Section 6.1 Term of Agreement. This Agreement shall commence on the date
hereof and terminate (i) on December 31, 1996, (ii) upon a termination of this
Agreement pursuant to Section 6.2, 6.3 or 9.12, upon ten (10) days written
notice from Global One to RSL, or (iii) upon the written agreement of the
Parties.
Section 6.2 Termination for Cause. In the event that (i) either Party
hereto materially breaches any of its duties or obligations hereunder or (ii) a
party to the Purchase Agreement, any Purchaser Ancillary Document or Seller
Ancillary Document (as each such term is defined in the Purchase Agreement) or
any Transition Services Agreement or other instrument
6
<PAGE>
or agreement entered into in connection with the transactions contemplated by
the Purchase Agreement, as applicable, materially breaches any of its
obligations under the Purchase Agreement or any such Purchaser Ancillary
Document or Seller Ancillary Document, which breach shall not be substantially
cured within ten (10) days after written notice is given to the breaching Party
specifying the breach, then (a) Global One, in the event that RSL is the
breaching party or (b) RSL, in the event that a Seller, Global One or Sprint
Communications Company L.P. (collectively, a "Sprint Party") is the breaching
party, may, by giving written notice thereof to the other, terminate this
Agreement as of a date specified in such notice of termination, which date shall
be no earlier than ten (10) days after the date of such notice.
Section 6.3 Termination for Bankruptcy. In the event that RSL or a Sprint
Parry (a) is unable to pay its debts generally as they become due or is declared
bankrupt or insolvent, (b) is the subject of any proceedings relating to its
liquidation, insolvency or for the appointment of a receiver or similar officer
for it which results in the entry of an order for relief or such adjudication or
appointment is not dismissed, discharged or bonded within a reasonable period of
time, (c) makes an assignment for the benefit of all or substantially all of its
creditors, or (d) enters into an agreement for the composition, extension or
readjustment of all or substantially all of its obligations, then (i) Global
One, in the case of any such event affecting RSL, and (ii) RSL, in the case of
any such event affecting a Sprint Party, may, by giving written notice thereof
to the other, terminate this Agreement as of a date specified in the notice of
termination, which date shall be no earlier than ten (10) days after the date of
such notice.
Section 6.4 Effect of Termination. Except as otherwise provided herein, in
the event of termination of this Agreement, all rights and obligations of the
Parties hereunder shall terminate as of the effective date of such termination,
except that (i) such termination shall not constitute a waiver of any rights
that a Party may have by reason of a breach of this Agreement and (ii) the
provisions of Articles V and VIII and Section 2.5 (other than the first sentence
thereof) and this Section 6.4 shall continue in full force and effect.
Notwithstanding anything herein to the contrary, Global One has the right to
terminate Article III hereof upon no less than ten (10) days notice, in which
case Article III shall have no further force or effect and this Agreement will
remain in effect as to all other provisions.
ARTICLE VII
LIMITED WARRANTY
Section 7.1 DISCLAIMER OF GENERAL WARRANTY. EXCEPT AS SET FORTH IN SECTION
7.2 OR THE SERVICES SUPPLEMENTS, GLOBAL ONE MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, CONCERNING THE SERVICES PROVIDED HEREUNDER, INCLUDING ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR
OTHERWISE.
7
<PAGE>
Section 7.2 Limited Warranty. Global One represents and warrants that (i)
it has the power, right and authority to provide the Services and that Global
One is in the business of providing services in the nature of the Services, (ii)
each Service provided to RSL hereunder shall be of at least the same quality as
the same service that Global One provides to its best customers within one
hundred eighty (180) days prior to the provision of the Service in question and
(iii) this Agreement is a valid and binding agreement of Global One, enforceable
against it in accordance with its terms.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification Obligations of Global One. From and after the
date hereof, Global One shall indemnify and hold harmless RSL and its
subsidiaries and affiliates, each of their respective officers, directors.
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "RSL
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) Any breach of any representation, warranty, covenant, agreement or
undertaking made by Global One in this Agreement or in the performance of its
obligations hereunder: or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by Global
One in this Agreement or in the performance of its obligations hereunder.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the RSL Indemnified Parties described in this Section 8.1 as to
which the RSL Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "RSL Losses."
Section 8.2 Indemnification Obligations of RSL. From and after the date
hereof, RSL shall indemnify and hold harmless Global One and its subsidiaries
and affiliates, each of their respective officers, directors, employees, agents
and representatives and each of the heirs, executors, successors and assigns of
any of the foregoing (collectively, the "Global One Indemnified Parties") from,
against and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys' fees and
expenses) arising out of or relating to:
8
<PAGE>
(a) Any breach of any covenant, agreement or undertaking made by RSL in
this Agreement or in the performance of its obligations hereunder; or
(b) Any fraud, willful misconduct, bad faith or any intentional breach of
any covenant, agreement or undertaking made by RSL in this Agreement or in the
performance of its obligations hereunder.
The claims, liabilities obligations, losses, costs, expenses, penalties, fines
and damages of the Global One Indemnified Parties described in this Section 8.2
as to which the Global One Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "Global One Losses."
Section 8.3 Indemnification Procedure.
(a) Promptly after receipt by a RSL Indemnified Party or a Global One
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being or may be
sought hereunder, such Indemnified Party shall notify RSL or Global One,
whichever is the appropriate indemnifying Party hereunder (the "Indemnifying
Party"), of such complaint or of the commencement of such action or proceeding;
provided, however, that the failure to so notify the Indemnifying Parry shall
not relieve the Indemnifying Party from liability for such claim arising
otherwise than under this Agreement and such failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party from liability which the
Indemnifying Party may have hereunder with respect to such claim if, but only
if, and only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of the reasonable fees and disbursements of such counsel. In the event,
however, that the Indemnifying Party declines or fails to assume the defense of
the action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such Indemnified
Party may employ counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such litigation and to retain its own counsel
at such Party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of
9
<PAGE>
any action the defense of which they are maintaining and to cooperate in good
faith with each other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
such settlement, compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not, without the prior written consent of the Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Parry shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five (5) business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party immediately available funds in an
amount equal to such claim as determined hereunder.
Section 8.4 Claims Period. Except as provided in this Section 8.4, no claim
for indemnification under this Agreement may be asserted by an Indemnified Party
after the expiration of the appropriate claims period (the "Claims Period")
which shall commence on the date hereof and shall terminate two (2) years after
the date hereof. No Indemnified Party shall be entitled to make any claim for
indemnification hereunder after the appropriate Claims Period; provided,
however, that if prior to the close of business on the last day of the Claims
Period, an Indemnifying Party shall have been properly notified of a claim for
indemnity hereunder and such claim shall not have been finally resolved or
disposed of at such date, the basis of such claim shall continue to survive with
respect to such claim and shall remain a basis for indemnity hereunder with
respect to such claim until such claim is finally resolved or disposed of in
accordance with the terms hereof.
Section 8.5 Maximum Liability. Notwithstanding anything in this Agreement
to the contrary, the maximum aggregate liability of Global One for RSL Losses or
of RSL for Global One Losses shall not exceed [*]
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
10
<PAGE>
Section 8.6 Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Party irrevocably
designates and appoints each of the Parties set forth under its name below as
its authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement that may be instituted in any state
or federal court in New York, New York.
Global One:
Global One Communications World Operations, Limited
12490 Sunrise Valley Drive
Reston, VA 22096
Attn.: Donald S. Parker, Esq.
RSL:
RSL COM Deutschland
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
In addition, each Party agrees that service of process upon the
above-designated individuals shall be deemed in every respect effective service
of process upon such Indemnifying Party in any such suit or proceeding. Each
Party further agrees to take any and all action reasonably requested by a Party,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
the above-designated individuals in full force and effect so long as this
Agreement shall be in effect. The foregoing shall not limit the rights of any
Party to serve process in any other matter permitted by law.
(b) To the extent that any Party has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each Party
hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(c) The Parties hereto hereby agree that the appropriate forum and venue
for any disputes between any of the Parties hereto arising out of this Agreement
shall be any state or federal court in New York, New York and each of the
Parties hereto hereby submits to the personal jurisdiction of any such court.
The foregoing shall not limit the rights of any Party to obtain execution
of judgment in any other jurisdiction. The Parties further agree, to the extent
11
<PAGE>
permitted by law, that a final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be given in the manner provided in the Purchase Agreement
and to the addresses provided in Exhibit C hereto.
Section 9.2 Assignment; Subcontracting. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of the other
Party; provided that Global One may subcontract or assign to any affiliate and,
with respect to Billing Services, to any third party its obligations and rights
hereunder provided in each case that Global One shall remain responsible for
assuring that the subcontractor's or assignee's performance conforms to the
requirements hereof.
Section 9.3 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be deemed
restated to reflect the original intention of the Parties as nearly as possible
in accordance with applicable law, and, if capable of substantial performance,
the remaining provisions of this Agreement shall be enforced as if this
Agreement was entered into without the invalid provision.
Section 9.4 Attorneys' Fees. In the event attorneys' fees or other
out-of-pocket costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
out-of-pocket costs incurred therein.
Section 9.5 Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
Section 9.6 Relationship of Parties. Global One, in furnishing Services to
RSL hereunder, is acting only as an independent contractor. Nothing set forth in
this Agreement shall be construed to create the relationship of principal and
agent between Global One and RSL.
12
<PAGE>
Global One shall have no authority, express or implied, to enter into contracts
on behalf of RSL. Neither Party shall act or attempt to act to represent itself,
directly or by implication, as an agent of another Party or in any manner assume
or create, or attempt to assume or create, an obligation of or in the name of,
the other Party.
Section 9.7 Approvals and Similar Actions. Where agreement, approval,
acceptance, consent or similar action by either Party hereto is required by any
provision of this Agreement, such action shall not be unreasonably delayed or
withheld.
Section 9.8 Modification; Waiver. This Agreement may be modified only by a
written instrument duly executed by or on behalf of each Party hereto. No delay
or omission by either Party hereto to exercise any right or power hereunder
shall impair such right or power or be construed to be a waiver thereof. A
waiver by either of the Parties hereto of any of the obligations to be performed
by the other or any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other obligation herein contained.
Section 9.9 Remedies. Each Party agrees that the remedies provided in
Articles VI and VIII shall constitute the sole and exclusive remedies of a Party
against another Party for monetary damages arising from any breach of any
covenant, agreement or undertaking of such other Party in this Agreement.
Nothing in this Section 8.9 shall prevent a Party hereto from seeking and
obtaining equitable relief, including, but not limited to, injunctive relief and
specific performance in respect of any such breach.
Section 9.10 No Third Party Beneficiaries. The Parties agree that this
Agreement is for the sole benefit of the Parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee of
either Party hereto, and that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement.
Section 9.11 Governing Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without
reference to New York's choice of law rules. This Agreement supersedes all
negotiations, agreements and understandings among the Parties or any of
their affiliates and constitutes the entire agreement among the Parties
hereto with respect to the subject matter hereof, provided however, that
nothing herein shall affect any other written agreements or understandings
entered into by the Parties or any of their affiliates contemporaneously
with the execution and delivery of this Agreement, all of which shall
remain in full force and effect.
(b) This Agreement may be amended by the Parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended, modified
or supplemented except by written agreement executed by each of the Parties
hereto.
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<PAGE>
Section 9.12 Force Majeure. If either Party to this Agreement shall be
prevented, hindered or delayed in the performance or observance of any of its
obligations hereunder by reason by any circumstances beyond its reasonable
control, and such delay could not have been prevented by reasonable precautions
and cannot reasonably be circumvented by the Party through the use of alternate
sources, work-around plans, or other means (a "Force Majeure"), then such Party
shall be excused from any other further performance or observance of the
obligations so affected for so long as such circumstances prevail and such Party
continues to use its best efforts to recommence performance or observance
whenever and to whatever extent possible without delay. Any Party so delayed in
its performance shall immediately notify the other and shall describe at a
reasonable level of detail the circumstances causing such delay. Notwithstanding
the foregoing, should a Party be unable to perform any of its obligations
hereunder for a period of more than thirty (30) consecutive days by reason of a
Force Majeure, the other Party, at its option, shall have the right to terminate
this Agreement in whole or solely with respect to the section hereof under which
the nonperforming Party has been unable to perform its obligations, in which
case the provision so terminated shall have no further force or effect and this
Agreement shall remain in effect as to all other provisions. The existence of a
Force Majeure which causes Global One to be unable to render any or all of the
Services shall excuse RSL from the payment under Section 3.2 of the Monthly Fees
with respect to the Services not provided for the period during which the same
are not provided.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective officers.
GLOBAL ONE COMMUNICATIONS WORLD OPERATIONS,
LIMITED
By /s/ Charles S. Maranty
-----------------------------
Name: Charles S. Maranty
Title: Director Mergers and Aquisitions
SIENA VERMOGENSVERWALTUNGS-GMBH
By /s/ SIENA VERMOGENSVERWALTUNGS-GMBH
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
DESCRIPTION OF SERVICES
A. Billing Services
Global One shall maintain the systems that are in place as of the date
hereof for the collection, verification, rating, invoicing, and reporting
of billing data for the IDDD Business in Germany. The Parties acknowledge
that the Billing Services to be provided by Global One hereunder shall
initially include CDR transport and storage. RSL has advised Global One
that RSL intends to acquire its own CDR transport and storage capabilities.
RSL shall promptly inform Global One in writing when RSL obtains such CDR
transport and storage capabilities, and after receipt of such notice by
Global One, RSL agrees that the Billing Services to be provided hereunder
shall not include CDR transport and storage.
B. Customer Support Services
Global One shall provide customer service to RSL's customers in Germany,
using existing Global One facilities and personnel. A customer service
representative will be available to RSL's customers in Germany twenty-four
(24) hours a day, seven (7) days a week. The customer service
representative will record service-related complaints from customers and
communicate within three days the appropriate information to RSL's
operations groups in Germany.
C. Engineering Services
Global One shall provide engineering services in response to specific
customer requirements. Such engineering services shall be substantially
similar to the engineering services being provided as of the date hereof.
These services may include installation specification, procurement
preparation, implementation, testing and acceptance.
A-1
<PAGE>
EXHIBIT B
MONTHLY FEES
(in U.S. Dollars)
Monthly Period Billing Services Customer Engineering Total
- -------------- ---------------- Support Services Services -----
---------------- --------
May, 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
June. 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
July, 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
August 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
September, 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
October, 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
November, 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
December, 1996 [*] [*] [*] [*]
---------- ---------- --------- ---------
[*] CONFIDENTIAL PORTIONS OMITTED WHERE INDICATED AND FILED SEPARATELY WITH
THE COMMISSION
B-1
<PAGE>
EXHIBIT C
ADDRESSES FOR NOTICES
To RSL:
RSL COM Deutschland GmbH
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn.: Itzhak Fisher
Telecopy No: (212)572-3825
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn.: Robert L. Kohl, Esq.
Telecopy No: (212) 940-8776
To Global One:
Global One Communications World Operations, Limited
12490 Sunrise Valley Drive
Reston, Virginia 22096
U.S.A.
Attn.: Donald S. Parker
Telecopy: (703) 689-5321
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
U.S.A.
Attn.: John D. Capers, Jr., Esq.
Telecopy No.: (404)572-5145
C-I
<PAGE>
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing
C-2
<PAGE>
Exhibit 10.37
ASSET PURCHASE AGREEMENT
by and between
RSL COM UK LIMITED
and
INCOM (UK) LIMITED
As of August 12, 1996
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of August 12, 1996 (the "Agreement"), by and
between RSL COM UK Limited, a United Kingdom limited liability company
("Purchaser"), and Incom (UK) Limited, a United Kingdom limited liability
company ("Seller").
WITNESSETH:
WHEREAS, Seller is licensed to engage in the international
telecommunications business in the United Kingdom (the "Business"); and
WHEREAS, Seller and Purchaser desire to enter into this Agreement pursuant
to which Seller proposes to sell to Purchaser, and Purchaser proposes to
purchase from Seller, all of the assets of the Business except Excluded Assets
(as defined below) and Purchaser proposes to assume certain Assumed Liabilities
(as defined below) of the Seller related to the Business.
NOW, THEREFORE, in consideration of the premises and of the mutual
convenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
ASSET PURCHASE AND SALE
Section 1.1 Agreement to Sell. Except as otherwise specifically provided
in this Article 1, Seller hereby grants, sells, conveys, assigns, transfers and
delivers to Purchaser, upon and subject to the terms and conditions of this
Agreement, all right, title and interest of Seller in and to all of the assets
of the Seller used in the Business (the "Assets") except Excluded Assets (as
hereinafter defined) as of the date hereof, free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever.
Section 1.2 Included Assets. The Assets of the Business to be sold to
Purchaser shall include, without limitation, the following assets, properties
and rights of Seller as of the date hereof:
<PAGE>
(a) All machinery, equipment, business machines, vehicles,
furniture, fixture, leasehold and building improvements and other tangible
or intangible property of Seller including that listed on Schedule 1.2(a)
hereto;
(b) All right, title and interest of Seller in contracts, agreements
and other instruments including those listed on Schedule 1.2(b) hereto;
(c) All right, title and interest of Seller in customer contracts
including those listed on Schedule 1.2(c) hereto;
(d) All business licenses and permits of Seller including those
listed on Schedule 1.2(d) hereto, except as otherwise provided in Section
1.3 hereof;
(e) All customer lists, customer credit information, sales records,
database information, invoice files and correspondence files of Seller
used in or relating to the Business;
(f) All right, title and interest of Seller in the software
dedicated to or used in connection with the Business including that listed
in Schedule 1.2(f) hereto;
(g) All prepaid expenses of Seller related to the Business; and
(h) All accounts receivable, notes receivable, deposits and advances
of Seller as of the date hereof and arising after the date hereof which
are related to Purchaser or any person controlling, controlled by or
under common control with (hereinafter, an "Affiliate"), the Purchaser
(including, without limitation, ITC, ITG and Intelco Europe (as such terms
are defined below)), even if such accounts receivable relate to the
provision by Seller of products or services prior to the date hereof.
Section 1.3 Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is agreed that Seller is not selling and Purchaser is not
buying the following assets of Seller (hereinafter collectively referred to as
"Excluded Assets"):
(a) Cash and cash equivalents of Seller as of the date hereof;
(b) All rights in and to the licensing, marketing and other
proprietary uses of the names "Incom (UK) Ltd." and "Incom (UK) Limited"
and related commercial marks, together with the Seller's United Kingdom
telecommunications licenses set forth on Schedule 1.3(b);
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<PAGE>
(c) Any intangibles of Seller which by their nature are
nonassignable. and
(d) Shares of common stock of International Telecommunications
Group, Ltd. ("ITG") owned by Seller.
Section 1.4 Agreement to Purchase. Purchaser hereby purchases the Assets
from Seller, upon and subject to the terms and conditions of this Agreement and
in reliance on the representations, warranties and covenants of Seller contained
herein, in exchange for the Purchase Price (as hereinafter defined) and the
assumption of the Purchaser of the Assumed Liabilities as provided in Section
1.6 hereof.
Section 1.5 The Purchase Price. The aggregated purchase price (the
"Purchase Price") for the Assets is (i) U.S. $500,000 to be paid by Purchaser to
Seller contemporaneously with the execution and delivery of this Agreement by
certified or official bank check or wire transfer and (ii) 3,954 non-voting
shares of International Telecommunications Group Ltd., a Delaware corporation
("ITG") (representing 1.25% of the outstanding common stock of ITG on a
fully-dilutive basis) (the "Shares"), which shares are not subject to dilution
and are to be delivered to Seller within twenty-one (21) days following the date
hereof. Purchaser and Seller agee that within twenty-one (21) days from the date
hereof the 3,333 shares of ITG voting common stock currently owned by Seller
shall be exchanged for 3,333 shares of non-voting common stock of ITG which are
not subject to dilution.
Section 1.6 Assumption of Assumed Liabilities. Purchaser hereby assumes
and agrees to pay only the liabilities listed on Schedule 1.6 hereto in the
amounts set forth thereon (the "Assumed Liabilities").
Section 1.7 Excluded Liabilities. Notwithstanding anything to the contrary
set forth herein, other than the Assumed Liabilities, Purchaser has not assumed,
agreed to pay, discharge or perform or incurred any liability or obligation
under this Agreement or otherwise become responsible in respect of any liability
or obligation of Seller (the "Excluded Liabilities"). Without limiting the
generality of the foregoing and notwithstanding anything in Section 1.6 to the
contrary, Purchaser has not assumed and shall not be liable for any of the
following liabilities or obligations of Seller:
(a) Any federal, state, local or foreign income, capital gains,
profits, gross receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment, disability, real property,
personal property, stamp, excise, occupation, sales, use, transfer,
mining, value-added, investment credit
-3-
<PAGE>
recapture, alternative or add-on minimum, environmental, estimated or
other taxes, duties or assessments of any kind, including any interest,
penalty and additions imposed with respect to such amounts (collectively,
"Taxes") levied by any national, state, regional or local taxing authority
whether or not levied in connection with the sale of the Assets to
Purchaser;
(b) Any liabilities or obligations of Seller for severance, accrued
vacation or similar payments to employees which arise as a result of
consummation of the transactions contemplated hereby and any other
liabilities or obligations of Seller which arise out of or are incurred
with respect to this Agreement and the transactions contemplated hereby
(including, without limitation, Seller's legal and accounting fees);
(c) Any liabilities or obligations of Seller directly or indirectly
incident to or arising out of or incurred with respect to the Assets;
(d) Any liabilities or obligations of Seller arising under any
governmental statute, code, rule, regulation, ordinance, decree, or other
requirement or law relating to (i) the protection of human health and
safety or the environment (collectively, "Environmental Laws") or (ii)
labor or employment with respect to the conduct of the Business or
conditions in connection with the Business prior to the date hereof; and
(e) Any accounts payable or trade payables of Seller.
Section 1.8 Prorations. All property and ad valorem taxes, business
licenses, permits, communications lines, utilities and other customarily
proratable expenses of Seller relating to the Assets payable prior or subsequent
to the date hereof and relating to the period of time both prior to and
subsequent to the date hereof will be prorated between Purchaser and Seller as
of the date hereof based on the number of days in such period, with Seller being
responsible for a proportionate share of such expenses based on the number of
days in the period prior to the date hereof and Purchaser being responsible for
a proportionate share of such expenses based on the sum of the date hereof and
the number of days in such period subsequent to the date hereof.
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<PAGE>
ARTICLE 2.
ITEMS DELIVERED; FURTHER ASSURANCES
Section 2.1 Items Delivered. Seller from time to time after the date hereof,
at Purchaser's request, will execute, acknowledge and deliver to Purchaser such
other instruments of conveyance and transfer and will take such other actions
and execute and deliver such other documents, certifications and further
assurances as Purchaser may reasonably request in order to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform or discharge any of
the Assumed Liabilities. Each of the parties hereto will cooperate with the
other and execute and deliver to the other such other instruments and documents
and take such other actions as may be reasonably requested from time to time by
any party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to Purchaser as follows:
Section 3.1 Authorization, Etc. The execution and delivery of this
Agreement and each of the Seller Ancillary Documents (as hereinafter defined) by
Seller and the due consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Seller. Each of this Agreement and the Seller Ancillary Documents has been
duly executed and delivered by Seller. Each of this Agreement and the Seller
Ancillary Documents constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
Section 3.2 Absence of Restrictions and Conflicts. The execution, delivery
and performance of this Agreement and each of the Seller Ancillary Documents,
the consummation of the transactions contemplated hereby and thereby, and the
fulfillment of and compliance with the terms and conditions of this Agreement
and each of the Seller Ancillary Documents do not and will not, with the passing
of time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Articles or
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Memorandum of Association or Byelaws or other governing instrument of Seller,
(ii) any contract, agreement, commitment or understanding to which Seller is a
party or to which Seller or any of either Seller's properties is subject, (iii)
any judgment, decree or order of any court or any national, or local
governmental authority or agency or public or regulatory unit, agency, body or
authority (collectively, a "Governmental Authority") to which Seller is a party
or by which Seller or any of Seller's properties is bound, or (iv) any statute,
law, regulation or rule applicable to Seller.
Section 3.3 Ownership of Assets and Related Matters. Seller has
transferred to Purchaser as of the date hereof good and valid title to all of
the Assets, free and clear of all liens, pledges, security interests, charges,
claims, restrictions and encumbrances of any nature whatsoever, other than such
encumbrances or imperfections of title as are set forth in Schedule 3.3 hereto.
The liens, encumbrances and restrictions described in Schedule 3.3 hereto are
hereinafter collectively referred to as "Permitted Liens." All of the Assets
that constitute tangible property are in good operating condition and repair
subject to normal wear and maintenance, are usable in the regular and ordinary
course of business and conform to all applicable laws, ordinances, codes, rules
and regulations applicable thereto.
Section 3.4 [Intentionally omitted]
Section 3.5 Litigation; Compliance With Law. Except as set forth in
Schedule 3.5 hereto, (a) the Seller is not engaged in or a party to, and is not
threatened with, any legal action or other proceeding, before any court,
arbitrator or administrative agency which would have a material adverse effect
on the Assets or the Business; and (b) Seller is not a party to or subject to
any judgment, decree or order entered in any lawsuit or proceeding brought by
any Governmental Authority or by any other person against Seller which could
have a material adverse effect on the Assets or the Business or its ability to
enter into or perform its obligations under this Agreement or any of the Seller
Ancillary Documents or to consummate the transactions contemplated hereby or
thereby. Seller is not in conflict with, or in default or violation of, any law,
rule, regulation, order, judgment or decree applicable to Seller or by which any
of the Assets is bound or affected which would have a material adverse effect on
the Assets or the Business or its ability to enter into or perform its
obligations under this Agreement or any of the Seller Ancillary Documents or to
consummate the transactions contemplated hereby or thereby.
Section 3.6 Brokers, Finders, etc. Seller has not incurred any liability
to any broker, finder or agent for any brokerage fees, finders' fees or other
like commissions with respect to the transactions contemplated by this
Agreement.
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Section 3.7 Consents. Except for the consents described in Schedule 3.7
hereto, no waiver, permit, license, approval, authorization, qualification,
order or consent of or filing with any court or Governmental Authority or any
other third party is required to be obtained or made by Seller in connection
with the execution, delivery or performance of this Agreement or any of the
Seller Ancillary Documents or the consummation of the transactions contemplated
hereby or thereby.
Section 3.8 Contracts. Except as disclosed in Schedule 3.8 each contract
to be assumed by Purchaser is in full force and effect and is valid and
enforceable in all material respects. Seller has performed in all material
respects all obligations required to be performed by it under each contract to
be assumed by Purchaser, there are no outstanding material disputes thereunder
and Seller is not in breach of any material provision thereof nor is either of
them aware of any breach thereunder by any other party thereto.
Section 3.9 Employees. Except as disclosed in Schedule 3.9 hereto, there
are no grievances or other labor disputes with respect to individuals employed
in the Business and Seller has not experienced any such labor controversy within
the past two (2) years.
Section 3.10 Payables. Seller represents, warrants and covenants that all
accounts payable or trade payables of Seller as of the date of this Agreement
have been or will be paid in full or otherwise settled by Seller.
Section 3.11 Permits and Approvals. Seller has all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Authorities required for the conduct of the Business as presently conducted by
Seller. Within the past eighteen (18) months, Seller has not received a written
notice alleging a violation or probable violation or notice of revocation or
other written communication from or on behalf of any Governmental Authority
which violation has not been corrected or otherwise settled alleging (i) any
violation of any material license, permit, consent, approval, authorization,
qualification or order or (ii) that Seller requires any material license,
permit, consent, approval, authorization, qualification, or order not currently
held by it.
Section 3.12 Customer Contracts. Except as disclosed on Schedule 3.12, to
Seller's knowledge, none of the customers of the Business intend to terminate or
refuse to renew their customer contracts referred to in Section 1.2(c) or
otherwise modify said contracts or take any adverse action against Purchaser or
any action
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which would otherwise adversely affect Purchaser as a result of the consummation
of the transactions contemplated by this Agreement or otherwise.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1 Organization. Purchaser is a limited liability company duly
organized and validly existing under the laws of the United Kingdom and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. International
Telecommunications Europe ("Intelco Europe") is duly organized, validly existing
and in good standing under the laws of the state of Delaware.
Section 4.2 Authorization. Purchaser has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by Purchaser, the
performance by Purchaser of its obligations hereunder and thereunder and the
consummation of the transactions provided for herein and therein have been duly
and validly authorized by all necessary corporate action on the part of
Purchaser. This Agreement has been duly executed and delivered by Purchaser and
constitutes a valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms.
Section 4.3 Absence of Restrictions and Conflicts. The execution, delivery
and performance of this Agreement, the consummation of the transactions
contemplated hereby and thereby, and the fulfillment of and compliance with the
terms and conditions hereof and thereof do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Articles or Memorandum of Association or Byelaws of Purchaser, (ii) any
contract, agreement, commitment or understanding to which Purchaser is a party
or to which Purchaser or any of Purchaser's properties is subject, (ii) any
judgment, decree or order of any court or Governmental Authority to which
Purchaser is a party or by which Purchaser or any of Purchaser's properties is
bound, or (iv) any statute, law, regulation or rule applicable to Purchaser.
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Section 4.4 Brokers, Finders, Etc. Purchaser has not incurred any
liability to any broker, finder or agent for any brokerage fees, finder's fees
or other like commissions with respect to the transactions contemplated by this
Agreement.
Section 4.5 Consents. Except for consents described in Schedule 4.5
hereto, no waiver, permit, license, approval, authorization, qualification,
order or consent of any court or Governmental Authority or any other third party
is required to be obtained by Purchaser in connection with the execution,
delivery or performance of this Agreement or any of the Purchaser Ancillary
Documents or the consummation of the transactions contemplated hereby or
thereby.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1 [Intentionally omitted]
Section 5.2 No Solicitation of Employees and Customers: Non-Interference.
(a) For a period of two (2) years after the date hereof, Seller shall not,
and shall cause each of its Affiliates not to, directly or indirectly, (i)
persuade or attempt to persuade any person currently providing, or which
potentially may provide, goods or services to the Business not to do business
with the Business or to reduce the amount of business it does with the Business,
(ii) persuade or attempt to persuade any person who is or during such period
becomes a director, officer or employee of Purchaser (each a "Purchaser Person")
to terminate his relationship with Purchaser, (iii) dissuade or attempt to
dissuade any person from becoming a Purchaser Person, (iv) degrade, denigrate,
deride or otherwise disparage the competence, service, condition (financial or
otherwise), integrity or prospects of Purchaser, the Business or any Purchaser
Person, or (v) cause or attempt to cause any current customer, client,
advertiser or sponsor of Purchaser (including without limitation those persons
which are parties to the agreements listed on Schedule 1.2(c) hereof) not to
conduct business with Purchaser or to reduce the amount of business it conducts
with Purchaser, or solicit any such person to conduct business with Seller
and/or any of its Affiliates.
(b) For purposes of this Agreement, "person" shall include an individual,
corporation, joint venture, partnership or other entity.
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(c) It is the desire and intent of the parties to this Agreement that the
provisions of this Section 5.2 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provision or portion of this
Section 5.2 shall be adjudicated to be invalid or unenforceable, this Section
shall be deemed amended to delete thereform such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of such Section in the particular jurisdiction in which
such adjudication is made.
Section 5.3 V.A.T. Seller and Purchaser acknowledge that the assets are
being sold hereunder as part of the transfer of a going concern. However, Seller
will provide any required V.A.T. invoice to Purchaser in connection with the
sale of assets hereunder, if appropriate, and Purchaser will be responsible for
payment of any VAT, as appropriate.
Section 5.4 Customer Contracts and Indemnity Amount. Schedule 3.8 of this
Agreement describes certain consents and approvals required to be obtained by
Seller in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated by this
Agreement, including consents and approvals which may be required from customers
of the Business under the customer contracts described in Schedule 1.2(c)
hereto. Seller agrees to use commercially reasonable efforts to obtain all
consents required to consummate the transactions contemplated in this Agreement.
Seller hereby agrees that to the extent the transactions contemplated by this
Agreement are consummated on the date hereof without obtaining such consents,
including customer consents, Seller and Purchaser shall develop a mutually
agreeable plan for disclosing the consummation of the transactions contemplated
hereby to such customers and agree to approach each such customer or other
person or entity in accordance with such plan as promptly as practical after the
date hereof.
Section 5.5 Employees. The parties agree that, effective as of the date
hereof, the employees listed on Schedule 5.5 hereto shall cease to be employees
of Seller and shall be and become employees of Purchaser and that, except for
amounts which are described on Schedule 5.5 hereto which shall be paid by Seller
to such employees after the date hereof, Purchaser shall be responsible for all
compensation, salary, pension, severance and other employee benefits, taxes and
costs which accrue to the benefit of, or with respect to, such employees on and
after the date hereof and with respect to services provided to Purchaser on or
after the date hereof.
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Section 5.6 Access to Records. Purchaser and Seller shall provide each
other and their respective employees, counsel, accountants and other
representatives, upon reasonable prior notice, on a reasonable basis and during
normal business hours, with reasonable access to their respective books and
records with respect to periods prior to the date hereof as shall be reasonably
necessary for Purchaser or Seller to prepare any Tax return relating to the
Business or the sale thereof to Purchaser and the right to make copies and
extracts therefrom (at the cost of the party requesting access) for such
purpose. Purchaser and Seller shall cooperate with each other and their
respective employees, counsel, accountants and other representatives in these
matters.
Section 5.7 Miscellaneous Agreements.
(a) As to Intelco Europe, Purchaser will, within 15 days following
the execution and delivery of this Agreement, cause ITG to redeem all its
ownership interests in Intelco Europe so that Seller shall be the sole
owner of Intelco Europe, contribute to Intelco Europe $192,000 and release
Intelco Europe from any and all obligations it has to ITG as of the date
hereof, and Purchaser further agrees that the Federal Communications
Commission 214 facilities based license and all other assets of Intelco
Europe (except any rights to the IRU (defined below) on the PTAT fiber
optic cable system) shall remain the property of Intelco Europe. In
exchange for the foregoing, Seller hereby waives, and agrees to cause its
Affiliates to waive, any and all rights, existing now or arising after the
date hereof, it may have (A) to indefeasible rights of use ("IRU") on the
PTAT fiber optic cable system owned by Intelco Europe, and/or (B) under
that certain operating agreement between International Telecommunications
Corporation ("ITC") and Mercury Communications PLC, including any rights
of Intelco Europe pursuant to an agreement between Intelco Europe and ITC
whereby ITC has agreed to assign any of the foregoing rights to Intelco
Europe and will execute any appropriate transfer documents to Purchaser
for such IRU and operating agreement. In addition, Purchaser agrees to
cause ITC to assume the liabilities, if any, of Intelco Europe existing as
of the date hereof (including any tax liabilities, penalties and
interest), other than liabilities between or among Purchaser and/or any of
its Affiliates, on the one hand, and Seller and/or any of its Affiliates,
on the other hand. Purchaser shall assure that all tax returns will be
filed for all periods prior to the date of the redemption of ITC's
ownership interest in Intelco Europe (the "Redemption Date"), and Seller
agrees to cause all records relating to tax returns and reports of Intelco
Europe in its possession to be delivered to Seller promptly following the
Redemption Date. Copies of returns and reports filed by Purchaser will be
given to Seller. In addition, Intelco Europe agrees that, commencing upon
the Redemption Date, it will change its name and that it will no longer
use the name "Intelco" in any part of its name or otherwise.
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(b) Seller shall be permitted to utilize ITC's facilities for a
period of 180 days following the date hereof; provided, however, that
Seller shall not be permitted to exceed its current level of use of such
facilities. During such period, ITC shall waive all charges to Seller for
the use of such facilities, except that Seller shall pay to ITC
termination fees for Seller's and its Affiliates' traffic carried by ITC
at standard carrier tariffs. No later than upon the expiration of such
180-day period, Seller shall cease to utilize and shall promptly vacate
[ILLEGIBLE] therefrom) at Seller's expense but with ITC's reasonable
assistance, ITC's facilities. Purchaser agrees to use its reasonable
efforts to cause ITC to respond to customer complaints during such 180-day
period. Purchaser further agrees that, during such 180-day period, Seller
shall be permitted to utilize its own employees at ITC's facilities.
(c) Seller hereby waives its right of first refusal to purchase
2,476 shares of common stock to be sold by Charles M. Piluso ("Piluso")
and Richard P. Rebetti, Jr. ("Rebetti") to RSL Communications Limited
under a Shareholders Agreement dated September 1, 1994, as amended,
between RSL Communications, Inc. ("RSL"), ITG, Seller, Piluso and Rebetti
pursuant to the waivers attached hereto as Schedule 5.7(c).
(d) Purchaser agrees and shall cause its Affiliates to agree that in
the event that an initial public offering [ILLEGIBLE] Purchaser or any
Affiliate thereof (the "IPO Entity") is contemplated, Seller shall have
the right (the "Option") to exchange, within 30 days following the closing
of the RSL-IPO, any shares of common stock of ITG which it then owns, for
shares of common stock of the IPO Entity equal to the fair market value of
Seller's ITG common stock on that date; provided that the Option is timely
exercised as set forth below. In connection with the exercise of the
Option, Purchaser shall notify Seller of the RSL-IPO 60 days prior to the
filing of a registration statement in connection therewith with the
Securities and Exchange Commission. Seller shall then have 45 days from
receipt of such notice to exercise the Option by providing written
notification of its intent to do so to Purchaser. In the event Seller
exercises the Option, shares of the IPO Entity's common stock shall be
valued at the RSL-IPO price to public per share, and shares of ITG's stock
owned by Seller shall be valued in writing by the Managing Underwriter of
the RSL-IPO using its best professional judgment as to the fair market
value of such shares.
(e) Seller, its officers, directors, shareholders and Affiliates
hereby release Purchaser and its officers, directors, shareholders and
Affiliates, including ITC and ITG, from any and all claims and damages
pursuant to the Release attached hereto as Schedule 5.7(e).
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(f) Purchaser, its officers, directors, shareholders and Affiliates,
hereby release Seller and its officers, directors, shareholders and
Affiliates from any and all claims and damages pursuant to the Release
attached hereto as Schedule 5.7(f).
(g) Seller hereby grants RSL Communications, Ltd., a Bermuda
corporation, the right of first refusal on the sale of any of Sellers'
shares of ITG on the same terms and conditions as offered to Seller in any
bona fide third party offer or other transfer, for a period of 30 days
after receipt by Seller of any such offer. In addition, Purchaser shall
make available to loan to Seller, within 15 days from the date hereof,
$500,000 (the "Loan"), which Loan shall be due and payable nine months
from the date on which it is made, shall accrue interest at a rate of
LIBOR plus 1% (payable quarterly in arrears), shall be secured by the
Shares as further set forth below and shall be on such other terms as
shall be mutually agreed upon by the parties hereto; provided that, prior
to the date on which the Loan is made, Seller shall have placed the Shares
in escrow pursuant to an escrow agreement in a form satisfactory to
Purchaser, which agreement shall provide that in the event the Loan is not
repaid in full within three days of the date upon which it is due and
payable, the escrow agent shall immediately transfer all of the Shares to
Purchaser, in consideration for which Purchaser shall waive receipt of
payment of the principal amount of the Loan and accrued interest thereon.
(h) Purchaser agrees to pay up to $10,000 of the fees charged by
Price Waterhouse, UK, for tax research conducted with respect to the
transactions contemplated by this Agreement, upon presentation of an
invoice for such from Price Waterhouse, UK.
(i) Purchaser and Seller shall cooperate in maintaining quality and
efficiency in telecommunications lines between London and Incom Advanced
Communications Systems Ltd. (the "IACS Traffic"). In the event Seller
reasonably determines that there has been a deterioration in the terms,
conditions, quality or level of service with respect to the IACS Traffic,
it shall so notify Purchaser in writing and if Purchaser does not
reasonably remedy the alleged deterioration within 15 business days, then
Seller may move the IACS Traffic to another supplier or otherwise deal
with the IACS Traffic.
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ARTICLE 6.
INDEMNIFICATION
Section 6.1 Indemnification Obligations of Seller. From and after the date
hereof, Seller shall indemnify and hold harmless Purchaser and its subsidiaries
and Affiliates, each of their respective officers, directors, employees, agents
and representatives and each of the heirs, executors, successors and assigns of
any of the foregoing (collectively, the "Purchaser Indemnified Parties") from,
against and in respect of any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys' fees and
expenses) arising out of or relating to:
(a) The Excluded Liabilities;
(b) Any breach of any representation, warranty, covenant, agreement or
undertaking made by Seller in this Agreement or in any certificate, agreement,
exhibit, schedule or other writing delivered by Sellers to Purchaser pursuant to
the provisions hereof (collectively, the "Seller Ancillary Documents") or in the
performance of its obligations hereunder or thereunder; or
(c) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by Seller
in this Agreement or the Seller Ancillary Documents or in the performance of its
obligations hereunder.
Notwithstanding the foregoing, (i) the maximum liability of Seller in respect of
which the Purchaser Indemnified Parties shall be entitled to indemnification
pursuant to this Section 6.1 shall not exceed the Purchase Price and (ii)
Seller's indemnification obligation with respect to any of the foregoing matters
shall be governed by the terms of any Seller Ancillary Document which expressly
provides for indemnification by Seller for a specific matter which is different
from that provided in this Article 6. The claims, liabilities, obligations,
losses, costs, expenses, penalties, fines and damages of the Purchaser
Indemnified Parties described in this Section 6.1 as to which the Purchaser
Indemnified Parties are entitled to indemnification are hereinafter collectively
referred to as "Purchaser Losses."
Section 6.2 Indemnification Obligations of Purchaser. From and after the
date hereof, Purchaser shall indemnify and hold harmless Seller and its
subsidiaries, Affiliates, officers, directors, employees, agents and
representatives and
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each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Seller Indemnified Parties") from, against and in respect of
any and all claims, liabilities, obligations, losses, costs, expenses,
penalties, fines and other judgments (at equity or at law) and damages whenever
arising or incurred (including, without limitation, amounts paid in settlement,
costs of investigation and reasonable attorneys' fees and expenses) arising out
of or relating to:
(a) The Assumed Liabilities;
(b) Any breach of any representation, warranty, covenant, agreement or
undertaking made by Purchaser in this Agreement or in any certificate,
agreement, exhibit, schedule or other writing delivered by Purchaser to Seller
pursuant to the provisions hereof or in the performance of its obligations
hereunder; or
(c) Any fraud, willful misconduct, bad faith or any intentional breach of
any representation, warranty, covenant, agreement or undertaking made by
Purchaser in this Agreement or in the performance of its obligations hereunder.
Notwithstanding the foregoing, the maximum liability of Purchaser in respect of
which the Seller Indemnified Parties shall be entitled to indemnification
pursuant to this Section 6.2 shall not exceed the Purchase Price.
The claims, liabilities, obligations, losses, costs, expenses, penalties, fines
and damages of the Seller Indemnified Parties described in this Section 6.2 as
to which the Seller Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Seller Losses."
Section 6.3 Indemnification Procedure.
(a) Promptly after receipt by a Purchaser Indemnified Party or a
Seller Indemnified Party (hereinafter collectively referred to as an
"Indemnified Party") of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such Indemnified Party shall
notify Purchase or Seller, whichever is the appropriate indemnifying party
hereunder (the "Indemnifying Party"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying Party
shall relieve the Indemnifying Party from liability which the Indemnifying
Party may have hereunder with respect to such claim if, but only if, and
only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the
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Indemnifying Party of rights and defenses otherwise available to the
Indemnifying Party with respect to such claim. The Indemnifying Party
shall have the right, upon written notice to the Indemnified Party, to
assume the defense of such action or proceeding, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the
payment of the fees and disbursements of such counsel. In the event,
however, that the Indemnifying Party declines or fails to assume the
defense of the action or proceeding or to employ counsel reasonably
satisfactory to the Indemnified Party, in either case in a timely manner,
then such Indemnified Party may employ counsel to represent or defend it
in any such action or proceeding and the Indemnifying Party shall pay the
reasonable fees and disbursements of such counsel as incurred; provided,
however, that the Indemnifying Party shall not be required to pay the fees
and disbursements of more than one counsel for all Indemnified Parties in
any jurisdiction in any single action or proceeding. In any action or
proceeding with respect to which indemnification is being sought
hereunder, the Indemnified Party or the Indemnifying Party, whichever is
not assuming the defense of such action, shall have the right to
participate in such litigation and to retain its own counsel at such
party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the defense
of which they are maintaining and to cooperate in good faith with each
other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification
is being sought hereunder without the prior written consent of the
Indemnifying Party, unless such settlement, compromise or consent includes
an unconditional release of the Indemnifying Party from all liability
arising out of such claim. An Indemnifying Party may not, without the
prior written consent of the Indemnified Party, settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder unless such settlement,
compromise or consent includes an unconditional release of the Indemnified
Party from all liability arising out of such claim and does not contain
any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any
of the Indemnified Party's respective Affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written
notice of such claim to the appropriate Indemnifying Party. Such notice
shall specify the basis for such claim. As promptly as possible after the
Indemnified Party has given such notice, such Indemnified Party and the
appropriate Indemnifying Party shall establish the merits and amount of
such claim (by mutual agreement, litigation, arbitration or otherwise)
and, within five (5) business days
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of the final determination of the merits and amounts of such claim, the
Indemnifying Party shall deliver to the Indemnified Party immediately
available funds in an amount equal to such claim as determined hereunder.
Section 6.4 Claims Period. Except as provided in this Section 6.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of twelve (12) months after the date hereof (the
"Claims Period"). No Indemnified Party shall be entitled to make any claim for
indemnification hereunder after the appropriate Claims Period; provided,
however, that if prior to the close of business on the last day of the Claims
Period, an Indemnifying Party shall have been properly notified of a claim for
indemnity hereunder and such claim shall not have been finally resolved or
disposed of at such date, the basis of such claim shall continue to survive with
respect to such claim and shall remain a basis for indemnity hereunder with
respect to such claim until such claim is finally resolved or disposed of in
accordance with the terms hereof.
Section 6.5 Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each
Indemnifying Party irrevocably designates and appoints each of the parties
set forth under its name below as its authorized agent upon which process
may be served in any suit or proceeding arising out of or relating to this
Agreement that may be instituted in any court with jurisdiction in the
United Kingdom.
Seller:
Incom (UK) Limited
Northway House
1379 High Road
Whetstone London B20 9NN
United Kingdom
Attn: Managing Director
Purchaser:
RSL COM UK Limited
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn: Itzhak Fisher, President
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In addition, each party agrees that service of process upon the
above-designated individuals shall be deemed in every respect effective
service of process upon such Indemnifying Party in any such suit or
proceeding. Each such Indemnifying Party further agrees to take any and
all action reasonably requested by an Indemnified Party, including the
execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of the
above-designated individuals in full force and effect so long as this
Agreement shall be in effect. The foregoing shall not limit the rights of
any party to serve process in any other matter permitted by law.
(b) To the extent that any Indemnifying Party has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to
itself or its property, each Indemnifying Party hereby irrevocably waives
such immunity in respect of its obligations with respect to this
Agreement.
(c) The parties hereto hereby agree that the appropriate forum and
venue for any disputes between any of the parties hereto arising out of
this Agreement shall be the courts of the United Kingdom and each of the
parties hereto hereby submits to the personal jurisdiction of any such
court. The foregoing shall not limit the rights of any party to obtain
execution of judgment in any other jurisdiction. The parties further
agree, to the extent permitted by law, that a final and unappealable
judgment against any of them in any action or proceeding contemplated
above shall be conclusive and may be enforced in any jurisdiction within
or outside the United Kingdom by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and
amount of such judgment.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
Section 7.1 Notices. All notices, communications and deliveries hereunder
shall be made in writing signed by the party making the same, shall specify the
Section hereunder pursuant to which it is given or being made, and shall be
deemed given or made on the date delivered if delivered in person, on the date
initially received if delivered by telecopy transmission followed by registered
or certified mail confirmation, on the date delivered if delivered by a
nationally recognized overnight courier service or on the third business day
after it is mailed if mailed by registered or certified mail (return receipt
requested) (with postage and other fees prepaid) as follows:
-18-
<PAGE>
To Purchaser:
RSL COM UK Limited
c/o RSL Communications, Inc.
767 Fifth Avenue
43rd Floor
New York, NY 10153
Attn: Itzhak Fisher, President
Telecopy No.: (212) 572-3825
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn: Robert L. Kohl, Esq.
Telecopy No.: (212) 940-8776
To Seller:
Incom (UK) Limited
Northway House
1379 High Road
Whetstone London B20 9NN
United Kingdom
Attn: Managing Director
with a copy to:
Tunik and Company
2 Kaplan Street
Tel Aviv, Israel
Attn: Michael M. Milo, Esq.
Telecopy No. 972-3-695-0727
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 7.2 Computation of Time. Whenever the last day for the exercise of
any privilege or the discharge of any duty hereunder shall fall upon a Saturday,
Sunday, or any date on which banks in the United Kingdom are closed, the party
having such privilege or duty may exercise such privilege or discharge such duty
on the next succeeding day which is a regular business day.
-19-
<PAGE>
Section 7.3 Assignment; Successors in Interest. No assignment or transfer
by Purchaser or Seller of their respective rights and obligations hereunder
after the date hereof shall be made except with the prior written consent of the
other parties hereto. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their permitted successors and assigns,
and any reference to a party hereto shall also be a reference to a permitted
successor or assign.
Section 7.4 Investigations; Representations and Warranties. The respective
representations and warranties of Purchaser and Seller contained herein or in
any certificate, or other document delivered by any party prior to the date
hereof shall not be deemed waived or otherwise affected by any investigation
made by a party hereto.
Section 7.5 Number; Gender. Whenever the context so requires, the singular
number shall include the plural and the plural shall include the singular, and
the gender of any pronoun shall include the other genders.
Section 7.6 Captions. The titles, captions and table of contents contained
in this Agreement are inserted herein only as a matter of convenience and for
reference and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof. Unless otherwise specified to
the contrary, all references to Articles and Sections of this Agreement and all
references to Exhibits are references to Exhibits to this Agreement.
Section 7.7 Controlling Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the United Kingdom. This Agreement
supersedes all negotiations, agreements and understandings among the
parties and their Affiliates and constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof.
(b) This Agreement may be amended by the parties hereto at any time.
Without limiting the foregoing, this Agreement may not be amended,
modified or supplemented except by written agreement executed by each of
the parties hereto.
Section 7.8 Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not
-20-
<PAGE>
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by law, the parties hereto waive any provision of law which
renders any such provision prohibited or unenforceable in any respect.
Section 7.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
Section 7.10 Remedies. Each party hereto agrees that the remedies provided
in Article 6 shall constitute the sole and exclusive remedies of a party against
another party for monetary damages arising from any breach of any covenant,
agreement or undertaking of such other party in this Agreement or any Seller
Ancillary Document. Nothing in this Section 7.10 shall prevent a party hereto
from seeking and obtaining equitable relief, including, but not limited to,
injunctive relief and specific performance in respect of such breach.
Section 7.11 Enforcement of Certain Rights. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto, and their successors
or assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, or result in such person, firm or corporation being deemed a
third party beneficiary of this Agreement.
Section 7.12 Waiver. A waiver by one party of the performance of any
covenant, agreement, obligation, condition, representation or warranty shall not
be construed as waiver of any other covenant, agreement, obligation, condition,
representation or warranty. A waiver by any party of the performance of any act
shall not constitute a waiver of the performance of any other act or an
identical act required to be performed at a later time.
Section 7.13 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included herein shall be resolved by an
arbitrator in accordance with the following provisions:
(a) Arbitrator. The arbitration shall be before a single arbitrator
(hereinafter, "the Arbitrator") appointed upon the mutual agreement of the
parties; provided, however, that in the event the parties cannot reach such
agreement, each of the parties shall appoint an arbitrator and such arbitrators
shall select the Arbitrator.
-21-
<PAGE>
(b) Applicable Law and Procedures. The Arbitrator will be bound by
the substantive law of the United Kingdom but will not be bound by the laws of
evidence and procedure customary in courts of law. The Arbitrator shall be
obliged to conduct a protocol of the minutes of each session and he shall be
obliged to give the reasons for his judgment.
(c) Location. The arbitration shall take place in the United
Kingdom.
(d) Deemed Execution of Arbitration Agreement. The execution of this
Agreement shall constitute an execution of an Arbitration Agreement as well.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
RSL COM UK Limited
By: /s/ Itzhak Fisher
-----------------------------------
Itzhak Fisher, President
INCOM (U.K.) LIMITED
By: /s/ Benny Lebowitz
-----------------------------------
-22-
<PAGE>
Schedule 1.2(A)
Assets
Pounds Sterling
1 ISDX SYSTEM [ILLEGIBLE]
2 MEGABIT DANNY BOX 180
TEST EQUIPMENT [ILLEGIBLE]
ROOM DIVIDERS 444
VELLEMAN KIT, TESTER 97
FAX EXTERNAL MODEM [ILLEGIBLE]
DESK + PEDESTAL 189
NEFAX FACSIMILE 1,400
JUMBO TRACKER [ILLEGIBLE]
SPORTSTER MODEM 405
COAXIAL CABLE 105
[ILLEGIBLE] PLUG [ILLEGIBLE]
KETTLE 11
MICROWAVE [ILLEGIBLE]
TELEPHONE SYSTEM 2,500
ISDX 25,773
MIXED DRIVER FOR DOS [ILLEGIBLE]
AT & T [ILLEGIBLE] [ILLEGIBLE]
FAN PURCHASE [ILLEGIBLE]
TOSHIBA LAP-TOP [ILLEGIBLE]
486SX PC [ILLEGIBLE]
HARD DISK SEAGATE [ILLEGIBLE]
FURNITURE [ILLEGIBLE]
IACS CABINET [ILLEGIBLE]
EQUIP-INCOM UK 221
COAXIAL CABLES 212
COMPUTER SOFTWARE [ILLEGIBLE]
HARD DISK IDE CONNOR [ILLEGIBLE]
2 TOSHIBA LAPTOPS 2,100
OFFICE FURNITURE 148
FURNITURE [ILLEGIBLE]
FURNITURE 244
FURNITURE 111
MEMORY-SUSAN COMPUTER [ILLEGIBLE]
H. MARR EQUIPMENT [ILLEGIBLE]
LAPTOP PC [ILLEGIBLE]
CABLES FOR [ILLEGIBLE] [ILLEGIBLE]
PENTIUM PC BILLING SYS 1,665
PORTABLE PHONES 116
COMPUTER EQUIPMENT [ILLEGIBLE]
OFFICE FURNITURE [ILLEGIBLE]
OFFICE FURNITURE 204
COMPUTER EQUIPMENT [ILLEGIBLE]
PC 486DX, OFFICE SUPP [ILLEGIBLE]
ISDX-L 3000 SHELF KIT [ILLEGIBLE]
<PAGE>
EARTH STN RENEWAL FEE [ILLEGIBLE]
PORTABLE COMPUTER BATERY [ILLEGIBLE]
COMP USA MS WINDOWS `89 [ILLEGIBLE] [ILLEGIBLE]
2 SPORTSTER FAX MODEMS [ILLEGIBLE]
RSS CONNOR HARD DISK [ILLEGIBLE]
ARGOS-COMPUTER TROLLEY 26
2GB CONNOR HARD DISK 1,122
[ILLEGIBLE] CONTRACT PARTITION 2,300
M2-[ILLEGIBLE] RAM FAULTY CARD 2,045
CABINET, KETTLE, RACK [ILLEGIBLE]
DAN PENTIUM 133 & 100 [ILLEGIBLE]
DANTIUM [ILLEGIBLE]P133 & P100 [ILLEGIBLE]
SPORTSTER MODEM 14.4 210
[ILLEGIBLE] PLUG 18
TECHNOMTIC 14" MONITOR [ILLEGIBLE]
[ILLEGIBLE] PHONES [ILLEGIBLE]
SOFTWARE DRIVERS 45
GREY SCREEN DIVIDER [ILLEGIBLE]
[ILLEGIBLE] IDE I/O CARD [ILLEGIBLE]
[ILLEGIBLE] BROADCAST UNIT 340
BETTERBOX BROADCAST [ILLEGIBLE]
VIKING OFFICE SCREEN 111
[ILLEGIBLE] AUTODIALLER [ILLEGIBLE]
CONFERENCE TABLE&CHAIR 182
CONFERENCE CHAIRS [ILLEGIBLE]
IKEA-CONFRNCE RM TABLE 112
BINATONE TELEPHONES [ILLEGIBLE]
COMPUTER TROLLEY [ILLEGIBLE]
ARM SET FOR CHAIRS 45
FIRE RESISTANT SAFE 277
MAN [ILLEGIBLE] NET & USER [ILLEGIBLE]
PARTITIONING 1,424
USR SPORTSTER MODEM 202
PRINTERS LASER/DESK JET [ILLEGIBLE]
CONFERENCE TABLE 101
4 MB 30 PIN [ILLEGIBLE] [ILLEGIBLE]
LASERMOON LINUX FT 71
MEMAX PIONEER QUAD X4 [ILLEGIBLE]
[ILLEGIBLE] SOFTWARE DIRECT 28
14" COLOUR SVGA MONITOR 187
VIATELL PROJECT [ILLEGIBLE] [ILLEGIBLE]
DLI CARD & BACKPLANE [ILLEGIBLE]
EDEN COMMS DLI CARD [ILLEGIBLE]
2 NOKIA 2110 [ILLEGIBLE] MOBIL [ILLEGIBLE]
IDEAL SOFTWARE CD ROM [ILLEGIBLE]
AURORA 30 PACKAGE [ILLEGIBLE]
IDEAL QUAD CD ROM [ILLEGIBLE]
PENTIUM [ILLEGIBLE] [ILLEGIBLE]
REBOOT BOX FOR [ILLEGIBLE] [ILLEGIBLE]
[ILLEGIBLE] MEMORY MANAGER 64
BASE P120T [ILLEGIBLE] PC 1,200
EQ [ILLEGIBLE] LITTLE BIGLAN [ILLEGIBLE]
DELTEC [ILLEGIBLE] KVA UPS 14,012
<PAGE>
V. DIRECT-1 DESK 120
HP LASERJET PRINTER [ILLEGIBLE]
POWER SUPPLIERS ECHO C 2,727
2 COMPUTERS 2,810
POWER SUPPLIER ECHO CA 282
BACKPLANE, SHELF, CABL 1,200
ATC BACKPLANE 1,200
[ILLEGIBLE] RACKS 435
ATC BACKPLANE 1,200
OFFICE EXPENSES + CHAIR 121
OFFICE-DESK 120
NETWARE LITE 132
OFFICE-CUPBOARD [ILLEGIBLE]
V. DIRECT 1 CUPBOARD [ILLEGIBLE]
V. DIRECT-1 SHREDDER [ILLEGIBLE]
V. DIRECT-1 DESK 242
[ILLEGIBLE] EXPRESSS SVGA SCREEN [ILLEGIBLE]
[ILLEGIBLE] COMPONENTS EQUIPMEN [ILLEGIBLE]
[ILLEGIBLE] KEYBOARD [ILLEGIBLE]
V. DIRECT-1 CUPBOARD 111
3 DRAWER PEDASTAL 212
TAYLOR 2XDLI CARDS [ILLEGIBLE]
DAN TECH 486DX PC [ILLEGIBLE]
[ILLEGIBLE] COMPUTER SUPPLIES [ILLEGIBLE]
G & A COMPUTER [ILLEGIBLE] [ILLEGIBLE]
[ILLEGIBLE] RACKS & SHELVES [ILLEGIBLE]
[ILLEGIBLE] CHERRY KEYBOARD [ILLEGIBLE]
DAN 75MHZ PENTIUM PC [ILLEGIBLE]
AIR CONDITION CONTRACT [ILLEGIBLE]
INTERFAX-PHOTOCOPIER [ILLEGIBLE]
[ILLEGIBLE] FANCARD & CPU COOL [ILLEGIBLE]
VIKING-FILING CABINE 115
XIXIN-RACKS 413
DELL [ILLEGIBLE] BILLING PC [ILLEGIBLE]
VIKING-3 DRWR CUPBOARD [ILLEGIBLE]
OFFICE PARTITIONS 1,444
WEBTEK 16MB RAM MEMORY [ILLEGIBLE]
COST OF RLX EQPT [ILLEGIBLE]
MCDOUG [ILLEGIBLE] CARD [ILLEGIBLE]
AT & T [ILLEGIBLE] 102,745
[ILLEGIBLE] SEAGATE HARD DISK [ILLEGIBLE]
ISDN [ILLEGIBLE] ENHANCED [ILLEGIBLE]
[ILLEGIBLE] PENTIUM [ILLEGIBLE] 1,111
SPORTSTER EXT. MODEM 232
CRISTECH CALL LOG SYST [ILLEGIBLE]
[ILLEGIBLE] FAX MODEM [ILLEGIBLE]
[ILLEGIBLE] MEMORY MATTHEWPC [ILLEGIBLE]
SONY CD ROM & HARDDISK [ILLEGIBLE]
ARGOS-TELEPHONE 31
[ILLEGIBLE] E1 CARD GENEVA TEL 1,510
486DX [ILLEGIBLE] MHZ [ILLEGIBLE] GENEVA 1,411
OFFICE LIGHT INSTALLTN 255
20" EXHIBITION MONITOR 836
<PAGE>
PRO WIN + MODEM [ILLEGIBLE]
3 ISDZ DLI CARDS [ILLEGIBLE]
72" HIGH CUPBOARD [ILLEGIBLE]
TRAILING SOCKETS [ILLEGIBLE]
ELECTROWISE 1.2 DRIVE [ILLEGIBLE]
SEAGATE 4BG SCSI HDD 1,490
PC ANYWHERE + MODEM [ILLEGIBLE]
TELEPOWER CD + MODEM [ILLEGIBLE]
[ILLEGIBLE]-SECURITYLOCK [ILLEGIBLE]
<PAGE>
Schedule 1.2(B)
Rights and Interests in Contracts
1. Mercury Communications, BT, MFS, ITC, Viatel, Incom Advanced Communications
Systems Ltd. for line rentals and call usage.
2. City Sites for office space rental.
3. Siemens and Netrix for equipment maintenance.
<PAGE>
Schedule 1.2(C)
Rights in Customer Contracts
1. RSS
2. Multi-Commerce
3. Israel Gov't Office
4. ITC
5. Jewish Agency
6. Econophone
7. Incom Advanced Communications Systems Ltd
8. TM Communications
9. Intelco
10. Viatel
11. Agrexco
12. LSI
13. Sapiens UK
Assignments are subject to customer consent
<PAGE>
Schedule 1.2(D)
Business Licenses and Permits
1. Licence According to Section 7 (June 1994)
Licence granted by the Secretary of State to Incom (UK) to run
Telecommunications Systems, under Section 7 of the Telecommunications Act 1984.
International Simple Resale Services
Refers to telecommunications services consisting of conveyance of messages.
These include the two/way live speech, which are at present (or will be in the
future) transmitted through in the following methods:
a) Public Switched Network
b) An International Private Leased Circuit
2. Licence granted under Section 7 of the Telecommunications Act of 1984 to
Incom (UK) to build and run Infra Structure Platforms for the provision of
Satellite Telecommunications Services (November 11, 1993).
<PAGE>
Schedule 1.2 (F)
Software
1. Billing System
Consents may be necessary
<PAGE>
Schedule 1.6
Assumed Liabilities
<TABLE>
<CAPTION>
Name of Supplier Contract No. Type of Service Amount per Quarter
- ---------------- ------------ --------------- ------------------
<S> <C> <C> <C>
Mercury 56075 64K Eurolink Band 1 (pound)2.090,00
Mercury 75761 64K Eurolink Bank 1 (pound)2.090,00
Mercury 80811 64K Domestic Line (pound)806,05
Mercury 113946 64K Domestic Line (pound)806,05
Mercury 103740 1.5M Transatlantic Link (pound)32.472,50
Mercury 113878 1.5M Transatlantic Link (pound)32.472,50
Mercury 113944 1.0M Transatlantic Link (pound)21.680,00
Mercury 114082 256K (pound)1.264,00
Mercury 56082 Circuit Reference S33920 (pound)1.012,50
Mercury 66337 Circuit Reference S33919 (pound)1.012,50
Mercury 75608 Circuit Reference S33697 (pound)1.012,50
Mercury 82021 Circuit Reference S35458 (pound)1.012,50
Mercury 101983 Circuit Reference S45769 (pound)1.012,50
Mercury S34689 DASS (pound)1.012,50
Mercury S43025 DASS (pound)1.012,50
Mercury S51497 DASS (pound)1.012,50
Mercury 5000 INCM02 Rental (pound)1.505,19
Mercury Paging Paging Service (pound)63,79
Siemens MR292887E ISDX #1 Maintenance (pound)3.901,47
Siemens MR550226B ISDX #2 Maintenance (pound)1.340,30
Queensbridge Rent-Top Floor (pound)5.762,50
Queensbridge Rent-Ground Floor (pound)7.500,00
Grimley Service Charge-Top Floor (pound)1.885,00
Grimley Service Charge-Ground Floor (pound)1.830,00
LB of Barnet Rates-Top Floor Front Right (pound)1.055,15
LB of Barnet Rates-Top Floor Rear Part (pound)1.375,06
LB of Barnet Rates-Ground Floor (pound)2.104,69
ACTS Cleaning Services (pound)367,32
Answercall Answering Service (pound)184,89
France Telecom FR-UK circuit 44,718.48 Fr
Dorman Insurance Insurance for Equipment (pound)389,73
Compuserve Internet (pound)18,00
BT Circuit Ref:ANUK 104600 (pound)534,25
BT Circuit Ref:KXUK 600787 (pound)858,32
BT Circuit Ref:RLN 61197 (pound)499,45
BT Circuit Ref:KXUK 703012 (pound)890,00
BT Circuit Ref: MXUK 266476 (pound)2.692,50
BT Alarm (pound)34,17
BT Auto Dialler (pound)31,65
BT ISDN 30 (pound)4.006,20
BT 0800 International-Line Rental (pound)1.110,00
BT 0800 International-Line Rental (pound)370,00
Netrix RIO, RLX, RNET Maintenance (pound)4.885,65
Peoples Phone Mobile Phone Line Rental (pound)225,00
Vodac Mobile Phone Line Rental (pound)75,00
Incom Advanced Communication Systems Bezek & Mercury Line Charges (pound)31.000,00
Mercury Line Charges - one stop shopping (pound)10.245,00
Telindus RLX, RIO Maintenance 4584.75 Fr
Bladon Payroll Services (pound)51,75
Quality Street Staff Flat (pound)1.711,87
Lombard 2 Company Cars (pound)2.182,14
Databit Billing System Software - 1 time (pound)27.000,00
Danny Webb Subcontracting (pound)2.000,00
Insurance Broker Car Insurance (pound)600,00
Call usage charges from BT, Mercury Mfs, Viatel, ITC
Above list does not include VAT
</TABLE>
<PAGE>
Schedule 3.3
Liens and Encumbrances on Assets
None
<PAGE>
Schedule 3.5
Legal Actions
Tele8
<PAGE>
Schedule 3.7
Consents
None
<PAGE>
Schedule 3.8
Limitations on Contracts
Consents are needed from customers and suppliers as per Schedules 1.2 (b)
and 1.2 (c)
<PAGE>
Schedule 3.9
Labor Disputes
None
<PAGE>
Schedule 3.12
Modification of Customer Contracts
1. Received notice that Econophone is immediately terminating its rental
of a 512 kps UK - US line.
2. Received notice from LSI to immediately cancel the 64 KPS ISR - UK
line.
<PAGE>
Schedule 4.5
Consents
None
<PAGE>
Schedule 5.5
Listing of Employees
Name
----
Mr. M. Sokel Special Projects/Business Development
Mr. Y Braha Operations Mngr
Mr. D. Simpson Marketing Mngr
Mr. M. Demetriou Billing Systems
Mr. M. Young Technician
Miss S. Kushner Secretary
<PAGE>
Schedule 5.7(c)
INCOM (UK) LTD.
Northway House
1379 High Road
Whetstone, London
N20 9NN
Great Britain
August 5, 1996
TELECOPY/CERTIFIED MAIL -
RETURN RECEIPT REQUESTED
Mr. Richard P. Rebetti, Jr.
c/o International Telecommunications Group, Ltd.
EAB Plaza, West Tower, 8th Floor
Uniondale, New York 11556
Dear Mr. Rebetti:
This letter responds to your correspondence dated August 5, 1996 (the
"Transfer Notice"). I hereby advise you that Incom (UK) Ltd. declines to
purchase any of the Eleven Thousand Five Hundred Ten (11,510) Rebetti Transfer
Shares (as defined in the Transfer Notice) offered in the Transfer Notice. Incom
(UK) Ltd. also waives any rights it may have pursuant to the Shareholder's
Agreement dated the first day of September, 1994, as amended, by and between
you, Charles M. Piluso, Incom (UK) Ltd., RSL Communications Inc. ("RSL") and
International Telecommunications Group, Ltd. in connection with the timing and
nature of transmittal of the Transfer Notice or the responses to such Transfer
Notice or the timing of the closing of the sale to RSL of the Rebetti Transfer
Shares.
Sincerely,
Incom (UK) Ltd.
By: /s/ Benny Lebowitz
----------------------------------
Name: Benny Lebowitz
Title: Managing Director
cc: Mr. Charles M. Piluso
RSL Communications Inc.
International Telecommunication Group, Ltd.
<PAGE>
Schedule 5.7(c)
INCOM (UK) LTD.
Northway House
1379 High Road
Whetstone, London
N20 9NN
Great Britain
August 5, 1996
HAND DELIVERY/CERTIFIED MAIL -
RETURN RECEIPT REQUESTED
Mr. Charles M. Piluso
c/o International Telecommunications Group, Ltd.
EAB Plaza, West Tower, 8th Floor
Uniondale, New York 11556
Dear Mr. Piluso:
This letter responds to your correspondence dated August 5, 1996 (the
"Transfer Notice"). I hereby advise you that Incom (UK) Ltd. declines to
purchase any of the One Hundred Twenty Two Thousand Six Hundred Four (122,604)
Piluso Transfer Shares (as defined in the Transfer Notice) offered in your
Transfer Notice. Incom (UK) Ltd. also waives any rights it may have pursuant to
the Shareholder's Agreement dated the first day of September, 1994, as amended,
by and between you, Richard P. Rebetti, Jr., Incom (UK) Ltd., RSL Communications
Inc. ("RSL") and International Telecommunications Group, Ltd. in connection
with the timing and nature of transmittal of the Transfer Notice or the
responses to such Transfer Notice or the timing of the closing of the sale to
RSL of the Piluso Transfer Shares.
Sincerely,
Incom (UK) Ltd.
By: /s/ Benny Lebowitz
----------------------------------
Name: Benny Lebowitz
Title: Managing Director
cc: Mr. Richard P. Rebetti,, Jr.
RSL Communications Inc.
International Telecommunications Group, Ltd.
<PAGE>
Exhibit 10.38
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 3rd
day of July, 1996 (the "Effective Date"), by and between CHARLES M. PILUSO
("Piluso") having an address at EAB Plaza, West Tower, Eighth Floor, Uniondale,
New York 11556, RSL COMMUNICATIONS LIMITED, a United Kingdom corporation (the
"Investor") , with offices at 767 Fifth Avenue, Suite 4300, New York, New York
10153 and INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a Delaware corporation
(the "Company") with offices at EAB Plaza, West Tower, Eighth Floor, Uniondale,
New York 11556.
W I T N E S S E T H:
WHEREAS, Piluso owns 132,223 shares of Common Stock, par value $.01
per share (the "Common Stock") of the Company; and
WHEREAS, Piluso desires to sell and the Investor desires to purchase
up to 106,985 shares of the Common Stock owned by Piluso (the "Shares") at a
Purchase Price as set forth in Section 1.1 of this Agreement.
NOW, THEREPORE, in consideration for the agreements contained herein,
intending to be legally bound, Piluso, the Company and the Investor hereby agree
as follows:
ARTICLE I
Purchase and Sale of Comon Stock
Section 1.1 Sale of Shares and Purchase Price. Subject to the terms
and conditions set forth in this Agreement, the Investor agrees to purchase from
Piluso at the Initial Closing Date and the Second Closing Date (as defined
below, each of which is herein referred to as a "Closing" and which together are
referred to as the "Closings"), and Piluso agrees to sell to the Investor at the
Closings the Shares at an aggregate price to the Investor of Ten Million Dollars
($10,000,000) in cash, payable $2.5 million at the Initial Closing Date, and
$7.5 million by issuance by Investor of its 6% secured promissory note or notes
in the form set forth as Exhibit A hereto (the "RSL Note") providing for three
principal payments aggregating $2.5 million on each of the first, second and
third anniversary dates of the Initial Closing Date (the "Purchase Price"),
provided, that the full Purchase Price may not be paid, as more fully set forth
in Section 1.2, below. In addition, (i) Investor, the Company, Piluso, Victoria
Piluso, Jacqueline Piluso (Victoria Piluso and Jacqueline Piluso hereinafter
referred to together as the "Piluso Daughters") and Richard P. Rebetti, Jr.
("Rebetti") shall also, at the Initial Closing Date, enter into a New
Shareholders Agreement providing certain exchange rights for
<PAGE>
Piluso's and the Piluso Daughters' remaining Common Stock of the Company and
terminating all prior Company shareholders agreements as they relate to Piluso,
the Piluso Daughters, Investor and Rebetti, in the form as set forth in Exhibit
B hereto, and (ii) the Company and Piluso shall have executed, at the Initial
Closing Date, an amendment to the Piluso Employment Agreement (as defined below)
in the form of Exhibit C attached hereto. The New Shareholders Agreement and the
Amendment to the Piluso Employment Agreement are herein referred to as the
"Other Agreements."
Section 1.2 Right of First Refusal Shares. Piluso's obligation to sell
the Shares to Investor is subject to the right of first refusal of Incom (UK)
Ltd. ("Incom") to purchase 2,235 of such Shares (the "Right of First Refusal
Shares") pursuant to a Shareholders Agreement dated September 1, 1994, as
amended, between Investor, the Company, Incom, Piluso and Rebetti (the "Company
Stockholders Agreement"). The Closings, therefore, shall consist of (A) an
Initial Closing Date on the third business day following notice to the Company
and Investor of approval by the Federal Communications Commission ("FCC") of a
Transfer of Control Application or at such other time and place or date as
Piluso, the Company and the Investor shall agree upon, at which Initial Closing
Date 104,750 Shares shall be sold to Investor by Piluso for $2,447,773.05 in
cash and an RSL Note for $7,343,319.16, and (B) provided that Incom declines to
exercise its rights of first refusal under the Company Stockholders Agreement, a
Second Closing Date which shall occur on the second business day following the
date on which Incom's rights of first refusal expire under Section I.D. (in the
case of no exercise) and Section IV.A (in the case of an exercise but no
payment) of the Company Stockholders Agreement, at which Second Closing Date
2,235 Shares shall be sold to Investor by Piluso for $52,226.95 in cash and an
RSL Note for $l56,680.84. All cash payments shall be made by certified or bank
check payable to the order of Piluso or by wire transfer to an account
previously designated in writing by Piluso at least two days prior to the
applicable Closing. If Incom exercises its rights of first refusal under the
Company Stockholders Agreement and fully performs its payment obligations in
connection therewith, the Second Closing Date shall not occur, Piluso shall not
be required to deliver to Investor the Right of First Refusal Shares, and
Investor shall not be required to deliver the Purchase Price therefor as set out
in (B), above.
ARTICLE II
Closing; Delivery
Section 2.1 The Closings. The Closings shall take place at 10:00 a.m.
at the offices of Rosenman & Colin LLP, 575 Madison Avenue, New York, New York
10022.
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Section 2.2 Deliveries. At each of the Closings, Piluso shall deliver
to the investor a certificate or certificates representing the Shares being
purchased by the Investor at such Closing, free and clear of all liens, charges
and encumbrances, registered in Investor's name or duly endorsed or accompanied
by executed stock powers, in exchange for delivery to Piluso by the Investor of
the Purchase Price payable at such Closing as provided in Section 1.2, above,
and the documents referred to in Articles VI and VII shall be delivered by the
appropriate parties.
ARTICLE III
Representations, Warranties and Covenants of Piluso
Except as set forth in the Schedules attached hereto, which describe
the nature of the exception in reasonable detail and which specifically refer to
the Section of this Agreement to which such exception applies (the "Schedules"),
and except as to those matters as to which Investor has actual knowledge, Piluso
hereby represents, warrants and/or covenants to the Investor as follows:
Section 3.1 Governmental and Other Consents. To the best of their
knowledge, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority or any other third party is required on the part of
the Company or Piluso in connection with the Company's and Piluso's valid
execution, delivery and performance of this Agreement or the Other Agreements,
or the assignment of the Shares by Piluso to the Investor; provided, however,
that prior approval by the FCC will be required prior to the sale of the Shares.
The Company and Piluso hereby agree to promptly file with the FCC and all
relevant state Public Service Commissions ("PSC") and will diligently pursue,
support to completion and not oppose, a Transfer of Control Application, any
special temporary authorization deemed appropriate by Investor's counsel to that
effect as well as corresponding applications and authorization from all relevant
PSC's.
Section 3.2 Litigation; Compliance with Law. Except as provided on
Schedule 3.2 attached hereto, to the best of their knowledge there are no
actions, suits, proceedings or investigations pending (a) against the Company or
any of its subsidiaries (other than against Cyberlink, Inc.) (excluding
Cyberlink, Inc., the "Entities") or against the assets, properties or business
of any of the Entities which could have a material adverse effect on the
business, properties, assets. or financial condition of any such Entity,
including, without limitation, any action, suit, proceeding or investigation
pending
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or, to the knowledge of the Company or Piluso, threatened, in which it is sought
to restrain, prohibit, invalidate or put aside, in whole or in part, the
transactions contemplated hereby, (b) which questions the validity of this
Agreement or of any action taken or to be taken by any of the Entities pursuant
to or in connection with the provisions of this Agreement and the transactions
contemplated hereby or (c) which would otherwise prevent or materially hinder
the consummation or performance of this Agreement. To the best of their
knowledge, none of the Entities is a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality that would reasonably be expected to have a material adverse
effect on the respective Entities' business, assets, properties or financial
condition. To the best of their knowledge, there is no action, suit, proceeding
or investigation by any of the Entities currently pending or, to the knowledge
of the Company or Piluso, threatened, or that such Entity currently intends to
initiate, which, if determined adversely to such Entity, could reasonably be
expected to have a material adverse effect on the business, assets, properties
or financial condition of any such Entity. "Pending" for this purpose shall mean
an action, suit, proceeding or investigation as to which Piluso or the Entity
shall have knowledge or received notice, whether in proper form or not. To the
best of their knowledge, except as set forth on Schedule 3.2, none of the
Entities is in material violation of any applicable statute, law or regulation
relating to its or their business operations the result of which violation would
have a material adverse effect upon the Company, and no material expenditures
will be required in order to comply with any such existing statute, law or
regulation.
Section 3.3 Transactions with Affiliates. Except for regular salary
payments, bonuses and fringe benefits under an individual's compensation package
with the Company or International Telecommunications Corporation, and except as
set forth on Schedule 3.3 hereof, none of the officers, employees, directors or
other affiliates of the Entities, or members of their families, has to the best
of the knowledge of Piluso, received payments, whether in cash or in kind, from
the Company, or is a party to any material agreements, understandings,
indebtedness or proposed transactions with the Entities. Neither the Company nor
the Subsidiary has guaranteed or assumed any material obligations of the
Company's officers, directors or employees.
Section 3.4 Voting. Piluso covenants that, as Custodian for his
daughters, Victoria and Jacqueline, he will vote their shares of stock of the
Company, and vote them in accordance with any agreements he has made relating to
voting of shares of the Company.
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ARTICLE IV
Representations and Warranties of Piluso
Piluso hereby represents and warrants to Investor as follows:
Section 4.1 Authority. Piluso has adequate power and authority to
enter into and to perform his obligations under this Agreement and the Other
Agreements and to consummate the transaction contemplated hereby and thereby.
Section 4.2 Binding Obligation. This Agreement and the Other
Agreements constitute the valid, binding and enforceable obligations of Piluso,
except to the extent that such enforcement may be limited by bankruptcy,
insolvency and other laws now or hereafter in effect relating to the enforcement
of creditors' rights generally, and except to the extent that equitable
principles may limit the right to obtain specific performance or other equitable
remedies.
Section 4.3 No Conflicts. To the best of Piluso's knowledge, the entry
into and performance by Piluso of this Agreement and the Other Agreements will
not: (i) violate any judgment, order, law or regulation applicable to Piluso; or
(ii) result in any breach of, constitute a default under or result in the
creation of any lien, charge, security interest, pledge, or other encumbrance on
the Shares pursuant to any indenture, mortgage, deed of trust, bank loan or
credit agreement or other instrument to which Piluso is a party or to which his
assets are bound.
Section 4.4 Consents. Except for Rebetti's waiver (see Section 6.4
below) all consents and/or waivers to the transaction contemplated herein as
required by the Company Stockholders Agreement have been obtained except for
Incom's waiver of its rights of first refusal, for which the Right of First
Refusal Shares have been reserved in the event that Incom elects to purchase its
proportionate share of the Shares.
Section 4.5 Ownership of Shares. The Shares are owned of record and
beneficially by Piluso, free and clear of any liens, charges, encumbrances,
pledges, claims, security interests or other rights of third parties. Piluso has
good and marketable title to the Shares and has the absolute right, power and
capacity to sell, assign and transfer the Shares to Investor free and clear of
any liens, encumbrances, security interests or other restrictions (other than
restrictions imposed generally by state and federal securities laws with respect
to unregistered securities).
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ARTICLE V
Representations and Warranties of the Investor
The Investor hereby represents and warrants to the company that:
Section 5.1 Investment Intent. The Shares are being acquired by the
Investor solely for its own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of such
Shares. The Investor understands that the Shares have not been registered under
the Securities Act of 1933, as amended "the "Securities Act"), by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the Investor's investment intent and accuracy of the Investor's representations,
as expressed herein.
Section 5.2 Restricted Securities. The Investor understands that the
Shares it is purchasing are "restricted securities" under the federal securities
laws inasmuch as they are being acquired from an affiliate of the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. The Investor
understands that there is no public market for the Shares and that there may
never be a public market for such securities, and that even if a market develops
for such securities the Investor may never be able to sell or dispose of the
Shares and may thus have to bear the risk of its investment in such stock for a
substantial period of time, or forever.
Section 5.3 Authorization. All corporate action on the part of the
Investor and its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance by the Investor of this
Agreement, the RSL Note(s) and the Other Agreements, the purchase of the Shares
and the performance of all of the Investor's obligations hereunder has been
taken or will be taken prior to the Closings.
Section 5.4 Organization and Standing. The Investor is a corporation
which is duly organized, validly existing and in good standing under the laws of
the United Kingdom. The Investor has all requisite legal and corporate power to
execute and deliver this Agreement, the RSL Note(s) and the Other Agreements, to
purchase the Shares hereunder and to carry out and perform its obligations under
the terms of this Agreement, the RSL Note(s) and the Other Agreements.
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Section 5.5 Legend. It is understood that the certificates evidencing
the Shares shall bear the following legend:
"These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to International Telecommunications Group, Ltd. that such
registration is not required or unless sold pursuant to Rule 144 of
such Act."
Section 5.6 Line of Credit. Investor, through its parent, RSL
Communications Inc. (the "Parent"), has in place a line of credit with a
commercial bank for U.S.$40,OOO,COO.
Section 5.7 Senior Notes. Investor is currently negotiating the terms
of issuance of U.S.$200,000,000 principal amount of senior notes and will use
reasonable efforts to consummate such a transaction. Investor currently intends
to utilize the proceeds of the issuance of such notes to pay down its line of
credit and generally for purposes relating to the furtherance of its global
telecommunications network. If (i) any of the principal shareholders of Investor
engage in a business involving the creation of a global telecommunications
network, which business would not benefit the current shareholders of Investor
and (ii) Investor's President, Itzhak Fisher ("Fisher"), participates in such
business, then the Investor will assure that Piluso is provided the opportunity
to participate in such business with Fisher in the same proportion as Fisher and
Piluso own equity securities of Investor, and on the same terms.
ARTICLE VI
Conditions to Investor Obligations at Closings
The obligations of the Investor to purchase and pay for the Shares
which it has agreed to purchase at each Closing and the other obligations of the
Investor under this Agreement are subject to the fulfillment at or prior to the
relevant Closing of the following conditions, any of which may be waived in
writing in whole or in part by the Investor:
Section 6.1 Representations and Warranties. On the date of each
Closing, the representations and warranties of Piluso contained in this
Agreement shall be true and correct in all material respects with the same force
and effect as though
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such representations and warranties had been made at and as of the time of each
such Closing, except to the extent that any changes therein are specifically
contemplated by this Agreement. Piluso shall deliver to the Investor at each
Closing, a certificate to such effect.
Section 6.2 New Shareholders Agreement. The New Shareholders Agreement
as set forth in Exhibit B attached hereto shall have been entered into at the
Initial Closing Date.
Section 6.3 Amendment to Employment Agreement. There has been
executed, effective as of the Initial Closing Date, an amendment to the Amended
and Restated Employment Agreement dated March 10, 1995, as amended by the First
Amendment to Employment Agreement dated as of September 22, 1995, between the
Company and Piluso (the "Piluso Employment Agreement") as set forth on Exhibit C
attached hereto.
Section 6.4 First Refusal Rights. Rebetti shall have waived his first
refusal rights under the Company Stockholders Agreement. Investor shall have
been furnished evidence of the waiver by Incom of its first refusal rights or
such rights shall have expired as described in Section 1.2, above, prior to any
Second Closing Date.
Section 6.5 FCC Approval. The FCC shall have approved the Transfer of
Control Application.
Section 6.6 Company Stockholders Meeting. There shall have been a
stockholders meeting of the Company or the execution of a written consent in
lieu thereof at which meeting or by such written consent the holders of the
requisite number of shares in the Company shall have approved the waiver by the
Company of its first refusal rights in connection with the sale of the Shares to
Investor and shall have set an appropriate price (substantially equal to the
Purchase Price per Share) for Incom's first refusal rights under the Company
Stockholders Agreement.
Section 6.7 Performance. The Company and Piluso shall have performed
and complied in all material respects with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by them on or before the Closing. The Company and Piluso shall
deliver to the Investor at the Closing certificates to such effect.
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ARTICLE VII
Conditions of Piluso's Obligations at Closing
The obligations of Piluso under this Agreement are subject to the
fulfillment at or prior to the relevant Closing of the following conditions, any
of which may be waived in writing in whole or in part by Piluso:
Section 7.1 Representations and Warranties. On the date of each
Closing, the representations and warranties of the Investor contained in Article
V shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as of
the time of such Closing, except to the extent that any changes therein are
specifically contemplated by this Agreement. The Investor shall deliver to
Piluso at each Closing a certificate of its President or Vice President to such
effect.
Section 7.2 Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied in all material respects
with by such Investor on or before such Closing, including payment to Piluso of
the applicable portion of the Purchase Price set forth in Section 1.2 of this
Agreement. The Investor shall deliver to Piluso at each Closing a certificate of
its President or Vice President to such effect.
Section 7.3 New Shareholders Agreement. The New Shareholders Agreement
as set forth in Exhibit B attached hereto shall have been entered into at the
Initial Closing Date.
Section 7.4 Amendment to Employment Agreement. There has been
executed, effective as of the Initial Closing Date, an amendment to the Piluso
Employment Agreement as set forth on Exhibit C attached hereto.
Section 7.5 Agreements with Rebetti. Investor shall have made
available to Rebetti for signing, effective as of the Initial Closing Date, (i)
an agreement between Rebetti and the Investor similar in form and substance to
this Agreement (without any representations and warranties concerning the
Company) providing for the purchase of up to 11,510 shares of the Company's
common stock ("Rebetti Shares") at a purchase price of $96 per share, 25% of
such purchase price to be payable at the closing, and the remaining 75% of such
purchase price to be payable in three annual payments of 25% of the purchase
price each, payable on the first, second and third anniversaries of the closing,
with interest at a rate of 6% annually, pursuant to a secured promissory note or
notes and further secured by a Stock Pledge and Security Agreement pledging the
Rebetti Shares, and in
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each case subject to the right of first refusal of Incom granted pursuant to the
Company Stockholders Agreement and (ii) a registration rights agreement between
Rebetti and the Investor, in connection with shares of the Investor obtained
pursuant to the New Shareholders Agreement, mutually acceptable to the parties'
counsel, providing for Form S-3 piggy-back registration rights beginning twelve
months after Investor's initial public offering.
Section 7.6 Agreement with the Piluso Daughters. Investor shall have
made available to Piluso, for signing as custodian for the Piluso Daughters,
effective as of the Initial Closing, a registration rights agreement between the
Piluso Daughters and the Investor, mutually acceptable to the parties' counsel,
in connection with shares of the Investor obtained pursuant to the New
Shareholders Agreement, providing for Form S-3 piggy-back registration rights
beginning twelve months after the Investor's initial public offering.
ARTICLE VIII
Closing and Post-Closing Covenants
Section 8.1 Indemnification.
(a) Indemnification Obligation of Piluso. Piluso agrees to indemnify
and hold harmless Investor, its directors, officers and employees from and
against any and all losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and all costs and expenses of enforcing
such right of indemnification against Piluso) and penalties, if any, arising out
of or based on or with respect to the breach of any representation or warranty
made by Piluso herein.
(b) Indemnification Obligation of Investor. Investor agrees to
indemnify and hold harmless Piluso from and against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
all costs and expenses of enforcing such right of indemnification against
Investor) and penalties, if any, arising out of or based on or with respect to
the breach of any representation or warranty made by Investor herein.
(c) Survival of Indemnity Obligations. The indemnities contained in
this Section 8.1 shall survive until December 31, 1996.
Section 8.2 Amendment to Certificate of Incorporation of the Company.
The Investor agrees to cause the Company to amend its Certificate of
Incorporation to update the reference to
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Piluso's Employment Agreement in paragraph 8 of Article Four thereof so that
such reference shall include amendments to the Employment Agreement as of even
date herewith.
ARTICLE IX
Miscellaneous
Section 9.1 Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Company, Piluso and
the Investor contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing until December 3l,
1996.
Section 9.2 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement may not be assigned by any party hereto without
the consent of the other party hereto. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective heirs, successors and permitted assigns of
the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective heirs,
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Section 9.3 Governing Law. The validity, interpretation and effect of
this Agreement shall be governed by the laws of the State of New York applicable
to contracts entered into and to be performed entirely within such state. All
parties hereto hereby consent to the nonexclusive jurisdiction of all courts in
said State.
Section 9.4 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 9.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 9.6 Notices. (i) Any notice required or permitted to be given
under the terms and provisions of this Agreement, or by any law or governmental
regulation, shall be in writing and, deemed duly given if mailed by registered
mail, postage prepaid, addressed as follows:
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(a) Any notice to the Investor shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Company shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
(ii) By giving the other party at least ten (10) days' prior
written notice, any party may, by notice given as above provided, designate a
different address or addresses for notices.
Section 9.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties hereto.
Section 9.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision or provisions
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision or provisions were so excluded and shall be
enforceable in accordance with its terms.
Section 9.9 Entire Agreement. This Agreement, the Exhibits hereto, the
Other Agreements and the other documents required to be delivered pursuant
hereto, constitute the entire understanding and agreement between the parties
with regard to the specific subject matter hereof and no party shall be liable
or bound by any representation, warranty, covenant or agreement except as
specifically set forth herein. Any previous agreement (whether written, oral or
implied) among the parties relative to
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the specific subject matter hereof is superseded by this Agreement.
Section 9.10 Expenses. The Company shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by Piluso, Rebetti and
the Investor in connection with entering into this Agreement.
Section 9.11 Arbitration. Any dispute between the parties with respect
to this Agreement or any of the terms included herein and including the
validity, interpretation, breach, and remedies for breach, and the enforcement
of this Agreement, shall be resolved by an arbitrator in accordance with the
following provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By /s/ Charles M. Piluso
-----------------------------------------
Name: Charles M. Piluso
Title: President
RSL COMMUNICATIONS LIMITED
By: /s/ Itzhak Fisher
-----------------------------------------
Name: Itzhak Fisher
Title: President
/s/ Charles M. Piluso
-----------------------------------------
Charles M. Piluso
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/s/ Charles M. Piluso
-----------------------------------------
Charles M. Piluso as custodian for
Victoria Piluso
/s/ Charles M. Piluso
-----------------------------------------
Charles M. Piluso as custodian for
Jacqueline Piluso
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SCHEDULE 3.2
LITIGATION
1. IDB/World Com
2. LDDS (Cyberlink)
3. Newbridge Networks (Cyberlink)
4. DCC: counterclaim
<PAGE>
SCHEDULE 3.3
TRANSACTIONS WITH AFFILIATES
None except as reflected in the entities financial statements.
<PAGE>
COPY
EXHIBIT A
SECURED PROMISSORY NOTE
$7,500,000.00 September 9, 1996
FOR VALUE RECEIVED, the undersigned RSL COMMUNICATIONS PLC, a United
Kingdom corporation (the "Payor") , promises to pay to the order of CHARLES M.
PILUSO (the "Payee") the principal sum of Seven Million, Five Hundred Thousand
U.S. DOLLARS ($7,500,000.00) together with interest thereon at the rate set
forth below in Section 2, at the offices of International Telecommunications
Group, Ltd., EAB Plaza West Tower, 8th Floor, Uniondale, New York 11556, or at
such other place as the Payee may from time to time designate.
The following terms shall apply to this Note:
1. Payments. The principal amount on this promissory note (the "Note")
shall be payable in 3 annual installments of $2,500,000 each, payable on
September 9, 1997, September 9, 1998 and September 9, 1999 (collectively, the
"Installment Dates").
2. Interest. The Payor shall pay interest from the date of this Note,
quarterly in arrears, at the rate equal to the higher of 6% per annum or the
lowest applicable Federal rate on the date of this Note, on the unpaid principal
balance hereof which shall be due and payable on the first day of each of
January, April, July and October, (each a "Quarterly Payment Date"), commencing
on the first Quarterly Payment Date following the date of this Note.
3. Payment not on a Business day. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
4. Prepayment. The Payor may at any time prepay this Note, in whole or in
part, without premium or penalty. All amounts paid by the Payor shall first be
applied to principal due hereunder and then to accrued interest.
5. Security Interest. In order to secure the full and punctual payment of
all obligations of the Payor under this Note, the Payor hereby grants to the
Payee a security interest in all
<PAGE>
rights and interests of the Payor in 80,238.75 shares (the "Shares") of the
common stock, par value $0.01 per share, of International Telecommunications
Group, Ltd. owned by the Payor, provided, that at each Installment Date at which
principal and interest is timely paid to the Payee pursuant to the terms of this
Note, one-third of the Shares shall be released from the pledge hereunder and
shall then be released from any restrictions on transfer contained herein, all
pursuant to the terms of a stock pledge and security agreement (the "Security
Agreement"), dated September 9, 1996, by and between the Payor and the Payee, in
the form attached hereto as Exhibit A. The Payor represents and warrants to the
Payee that the fair market value of such Shares is currently at least equal to
the principal amount of the aggregate of the loan hereto and that all such
Shares are owned by the Payor free and clear of any existing liens, charges or
encumbrances. The Payor shall, in such manner and form as the Payee may at any
time and from time to time reasonably require, execute, deliver, file and record
all security agreements, pledge agreements, security assignments, or other
documents or instruments and take all other actions that may be necessary or
desirable, or that Payee may request, in order to create, preserve or perfect
the foregoing security interest.
6. Restrictions on Transfer of Shares. So long as this Note is outstanding,
the Payor shall not assign, transfer or grant any security interest in any of
the Shares which continue to be subject to the lien created in the Security
Agreement without the prior written consent of the Payee.
7. Costs and Expenses. The Payor shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Payee in
collecting or enforcing this Note.
8. Defaults. (a) The occurrence of any of the following shall constitute an
"Event of Default":
(i) the Payor shall fail to pay when due within five days of the
Installment Date or Quarterly Payment Date, as applicable, any amounts required
to be paid hereunder;
(ii) a case or proceeding shall have been commenced against the Payor
in a court having competent jurisdiction seeking a decree or order in respect of
the Payor (A) under any applicable bankruptcy or other similar law, which is not
dismissed within 60 days with respect to an involuntary case, (B) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Payor or of any of its properties, or (C) ordering the
winding-up or liquidation of the affairs of the Payor;
(iii) the Payor shall (A) file a petition seeking relief under any
applicable bankruptcy or other similar law, (B)
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consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
the Payor or of any of its properties, (C) fail generally to pay its debts as
such debts become due, or (D) take any corporate or other action in furtherance
of any such action; or
(iv) the Payor shall default on its obligations under the Security
Agreement, the Stock Purchase Agreement among Payor, Payee and International
Telecommunications Group, Ltd., dated July 3, 1996, or any guaranty thereof.
(b) The Payor shall notify the Payee of the occurrence of any Event of
Default promptly after the Payor obtains knowledge thereof.
(c) Upon the occurrence of any Event of Default, all amounts payable
hereunder, including all accrued interest, shall automatically and immediately
become due and payable.
(d) Without limiting any other right of the Payor, in the event that
the Payee defaults on its obligations under any instrument pursuant to which the
Payee owes monies to the Payor (or the Payor's affiliates) in any capacity
(hereinafter a "Default Instrument"), the Payor, at its election, may setoff,
against any and all such monies owed to the Payor (or its affiliates) by the
Payee pursuant to a Default Instrument any and all principal and/or interest due
and payable under this Note.
9. Late Payment Charge. In the event that the Payor fails to make any
payment of principal and/or interest under this Note within 5 days after it
becomes due and payable hereunder, then the Payor shall promptly pay to the
Payee, in addition to other amounts owing hereunder, a late payment charge of 5%
of that portion of the principal and/or interest which was due and payable
hereunder and has not been paid in such 5-day period.
10. Modification. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Payor
and the Payee and only to the extent set forth therein.
11. Waivers. (a) The Payor and all endorsers, sureties and guarantors
of this Note hereby jointly and severally waive presentment, demand for payment,
notice of dishonor, notice of protest, and protest in connection with the
delivery, acceptance, performance, default, endorsement or guaranty of this
Note.
(b) No delay by the Payee in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right
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<PAGE>
preclude other or further exercise thereof, or the exercise of any other power
or right hereunder or otherwise. No waiver or modification of the terms hereof
shall be valid unless set forth in writing by the Payee.
12. Binding Nature. This Note shall inure to the benefit of and be
enforceable by the Payee and its successors and assigns and shall be binding and
enforceable against the Payor and its successors and assigns. In the event that
the Payor assigns its obligations hereunder, the Payor shall immediately notify
the Payee of such assignment, and shall remain liable for the fulfillment of its
obligations hereunder.
13. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
14. Governing Law: Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law. Any action or proceedings to enforce
or arising out of this Note may be commenced in any court of the State of New
York or in the United States District Court for the Southern District of New
York. The Payor agrees that venue will be proper in such courts in any such
matters, and agrees that New York is the most convenient forum for litigation in
any suit, action or legal proceeding. The Payor agrees that a final judgment in
any such action or proceeding may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
15. Governing Law; Consent to Jurisdiction; Venue Waiver; Waiver of
Jury Trial. The validity, interpretation and effect of this Agreement shall be
governed by the laws of the State of New York applicable to contracts entered
into and to be performed entirely within such state. The Payor hereby consents
to the nonexclusive jurisdiction of all courts in said State and hereby waives
all right to trial by jury in any action, suit or
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proceeding brought to enforce or defend any rights or remedies under this
Agreement.
16. Confessed Judgment. Upon the occurrence of an Event of Default
hereunder, the Payor hereby authorizes any attorney designated by the Payee or
any clerk of any court of record to appear for the Payor in any court of record
and confess judgment against the Payor, without prior hearing, in favor of the
Payee for, and in an amount equal to, the full amount then due and payable by
the Payor hereunder, all other amounts then due and payable by the Payor to the
Payee under the provisions of this Note, costs of suit and attorneys' fees of
15% of the amount of such obligations. In connection therewith, the Payor hereby
releases, to the extent permitted by applicable laws, all errors and all rights
of exemption, appeal, stay of execution, inquisition, and other rights to which
the Payor may otherwise be entitled under the applicable laws now in force and
which may hereafter be enacted, including, without limitation, those of the
United States of America. The authority and power to appear for and enter
judgment against the Payor shall not be exhausted by one or more exercises
thereof or by any imperfect exercise thereof and shall not be extinguished by
any judgment entered pursuant thereto. Such authority may be exercised on one or
more occasions or from time to time in the same or different jurisdictions as
often as the Payee shall deem necessary and desirable, for all of which this
Note shall be sufficient warrant.
17. Guaranty. RSL Communications, Ltd., a Bermuda corporation,
successor in interest to RSL Communications Inc., a British Virgin Islands
corporation, irrevocably and unconditionally guarantees the timely and complete
fulfillment of the Payor's obligations hereunder.
IN WITNESS WHEREOF, the Payor has executed this Note on the date first
above written.
RSL COMMUNICATIONS PLC
By:_____________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.
By:______________________________
Name:
Title:
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EXHIBIT A
STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 767 Fifth Avenue, Suite 4300, New
York, New York 10153, CHARLES M. PILUSO the ("Secured Party") having an address
at 169 EAB Plaza, West Tower, Eighth Floor, Uniondale, New York 11556-0169, and
FLETCHER, HEALD & HILDRETH, P.L.C. ("Security Agent") with offices at 1300 North
17th Street, 11th Floor, Rosslyn, Virginia 22209.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated July 3, 1996, pursuant to
which the Secured Party agreed to sell to the Debtor and the Debtor agreed to
purchase from the Secured Party up to 106,985 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue
a Secured Promissory Note (the "Note") in the amount of $7,500,000 to the
Secured Party;
WHEREAS, the Debtor has agreed to execute this instrument as security
for its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any Event
of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all principal amount thereof and interest thereon,
this Agreement or the Purchase Agreement.
<PAGE>
"Shares" shall mean 80,238.75 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 80,238.75 Shares, endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Fletcher, Heald &
Hildreth, P.L.C., 1300 North 17th Street, 11th Floor, Rosslyn, VA 22209,
Attention: Eric Fishman, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
(c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of
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Default; then, and in such event, the Debtor shall accept the same as the
Secured Party's agent, in trust for the Secured Party, and shall deliver them
forthwith to the Security Agent in the exact form received with, as applicable,
its endorsements when necessary, or appropriate stock powers duly executed in
blank, to be held by the Security Agent, subject to the terms hereof, as part of
the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event of
Default.
3.2 The term "Event of Default", as used in this Agreement, shall mean
the occurrence or happening, at any time and from time to time, of any one or
more of the following:
(a) An Event of Default shall occur and be continuing under the
Note or this Agreement; or
(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
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<PAGE>
ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations. Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require the Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares
at public sale or, if permitted by law, private sale, subject to appropriate
U.C.C. rules, and in lieu of actual payment of such purchase price, may set off
the amount of such price against the Obligations. Except as otherwise provided
by law, the proceeds realized from the sale of any of the Shares may be applied
by the Secured Party first to the reasonable costs, expenses and attorneys' fees
and expenses incurred by the Secured Party for collection and for sale and
delivery of the Shares, and then to any of the Obligations in such order and
manner as the Secured Party, in its sole discretion, deems advisable. If any
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<PAGE>
deficiency shall arise, the Debtor shall remain liable to the Secured Party
therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
(a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured Party
arising under this Agreement, the Note or any other agreement with the Debtor or
by operation of law shall be cumulative and non-exclusive, to the fullest extent
permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the Shares, and, in connection
therewith, to deliver any of the Shares to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as it
may determine, all without liability except to account for property actually
received by it. The Secured Party shall have no duty to
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<PAGE>
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
ARTICLE 5
Representations and Warranties of Debtor
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest in such shares or
the proceeds thereof.
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<PAGE>
ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.1 The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall be liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Ob1igations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security agent, then the resigning Security Agent shall promptly
deliver the Shares to a successor security agent selected by the Security Agent
in its reasonable discretion exercised in good faith; whereupon, in either case,
the Security Agent shall be relieved of all further obligations and released
from all liability under
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<PAGE>
this Agreement. Without limiting the provisions of this Section 7.2, the
resigning Security Agent shall be entitled to be reimbursed by the other parties
hereto for any expenses incurred in connection with its resignation or transfer
of the Shares to a successor security agent.
7.3 Indemnification. The Debtor and the Secured Part agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorney's fees), assessments, liabilities, claims, damages, actions,
suits, proceedings or other charges incurred by or assessed against the Security
Agent in the performance of the Security Agent's duties hereunder, except as a
result of the Security Agent's own bad faith or gross negligence. The Security
Agent will send notice to each of the Secured Party and the Debtor within a
reasonable time after any issue of indemnification arises. The agreement in this
paragraph shall survive any termination of the Security Agent's duties
hereunder.
7.4 Arbitration. Any dispute between the parties with respect to this
Agreement or any of the terms included therein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any
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<PAGE>
act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices.
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted) ; or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
(a) Any Notice to the Debtor shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Secured Party shall be addressed to
such party at its address hereinabove set forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle,
P.C.
Canal Square
1054 Thirty-First Street, N.W.
Washington, DC 20007-4492
Attention: Joseph B. Hoffman, Esq.
(c) Any Notice to the Security Agent shall be addressed to
such party at its address hereinabove set forth.
(ii) or to such other place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall
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<PAGE>
be deemed given when delivered or telecopied on a business day and such hand
delivery or telecopy is received before 5:00 p.m. by the addressee thereof;
otherwise, such notice by hand deliver or telecopy shall be deemed given on the
next succeeding business day; and if sent by overnight courier, notice shall be
deemed given on the next business day after being deposited with he overnight
courier service.
8.3 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party with
all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an
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<PAGE>
original but all of which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
RSL COMMUNICATIONS PLC
By_________________________________
Name:
Title:
___________________________________
CHARLES M. PILUSO
FLETCHER, HEALD & HILDRETH, P.L.C.
By:________________________________
As Security Agent
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<PAGE>
EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint CHARLES M. PILUSO ("Piluso"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Piluso, that number of shares of common stock
of the Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is
coupled with an interest, and was granted for the consideration stated in the
Agreement and cannot be lawfully revoked or limited in any respect whatsoever
(including the death, bankruptcy or adjudication of incompetency or insanity of
either of the undersigned), except as provided in the Agreement. This Proxy
shall be binding upon any transferee or assignee of any stock of the Company
standing in the name of the undersigned at any time prior to the expiration date
of this Proxy and constituting "Shares" as defined in the Agreement; and the
sale, assignment, pledge, transfer or other disposition of such stock standing
in the name of the undersigned shall not revoke or in any way limit the
authority herein granted to said attorney and proxy, except as otherwise
expressly provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it
with respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney
and proxy or its substitute or substitutes may lawfully do or cause to be done
by virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
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<PAGE>
Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 80,238.75 or such lesser amount as is provided in accordance with
Section 2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By:_______________________________
Name:
Title:
13
<PAGE>
EXHIBIT B
NEW SHAREHOLDERS AGREEMENT
THIS NEW SHAREHOLDERS AGREEMENT (this "Agreement"), dated September 9,
1996, is made by and among CHARLES M. PILUSO ("Piluso"), residing at 129
Woodmere Boulevard, Woodmere, New York 11598, JACQUELINE and VICTORIA PILUSO,
both residing at 129 Woodmere Boulevard, Woodmere, New York 11598 (the "Piluso
Daughters"), RICHARD P. REBETTI, JR. ("Rebetti"), residing at 51 Midland Road,
Roslyn, NY 11577, RSL COMMUNICATIONS, LTD., a Bermuda corporation, as successor
in interest to RSL Communications Inc. ("Parent") , and RSL Communications PLC,
a United Kingdom corporation ("PLC") (Parent and PLC are collectively referred
to herein as "RSL"), with offices at 767 Fifth Avenue, Suite 4300, New York, New
York 10153 (individually a "Shareholder" and collectively the "Shareholders")
and INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD. ("ITG"), a Delaware corporation
with offices at 169 EAB Plaza, West Tower, 8th Floor, Uniondale, New York
11556-0169.
W I T N E S S E T H:
WHEREAS, ITG, the Shareholders (other than RSL and the Piluso
Daughters) and Incom (UK) Ltd. ("Incom") entered into a shareholders' agreement,
dated the first day of September, 1994 (the "Shareholders' Agreement") , as
amended by the Amendment to Shareholders' Agreement dated as of March 10, 1995
(the "First Amendment"), and the Shareholders (other than the Piluso Daughters)
and ITG entered into an Ancillary Shareholders' Agreement dated September 22,
1995 (the "Ancillary Agreement"), with respect to, among other things, the
transfer or other disposition of the authorized and outstanding stock of ITG
owned by the Shareholders and Incom;
WHEREAS, Piluso has, subject to Incom's exercise of its right of first
refusal pursuant to the Shareholders' Agreement, agreed to sell 106,985 shares
of ITG's common stock owned by him to RSL; and
WHEREAS, the parties hereto wish, as between and among them, to
terminate the Shareholders' Agreement, First Amendment and Ancillary Agreement
and enter into this Agreement, providing, among other things, for the granting
of certain exchange and other rights to Piluso.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
<PAGE>
1. Termination of Shareholders' Agreement. First Amendment and
Ancillary Agreement. Except with respect to any rights Incom may have pursuant
to (i) the rights of first refusal under Section I of the Shareholders'
Agreement in the event of future sales by the Shareholders (other than shares of
ITG capital stock held by RSL, which are not subject to restrictions on
transfer) of ITG capital stock, (ii) its "tag along rights" pursuant to Section
5 of the First Amendment, and except only as to the extent to which RSL's
agreements contained in Sections 2 and 5 of the First Amendment may benefit
Incom, as between and among themselves, the Shareholders hereby repeal,
terminate and replace with this Agreement, the Shareholders' Agreement, the
First Amendment and the Ancillary Agreement and the same shall have no force and
effect as between and among ITG and the Shareholders. In addition, the
Shareholders hereby waive any and all future preemptive rights which may
otherwise be granted to any Shareholders pursuant to Section IX of the
Shareholders' Agreement. The Shareholders hereby agree and confirm that that
certain New Shareholders Agreement, dated July 1, 1996, attached as Exhibit B to
that certain Promissory Note in the principal amount of $5,000,000 made by ITG
in favor of RSL Communications PLC (as successor in interest to RSL
Communications Limited), dated July 1, 1996, is ab initio, of no force and
effect.
2. Composition of the Board of Directors and Abolishment of
Committees. Pursuant to a letter to Piluso sent by Eli Lior, the Managing
Director of Incom, dated June 16, 1995 (the "Incom Letter"), Incom relinquished
its rights to elect two (2) members to the Board of Directors of ITG and
provided that such positions on the Board of Directors be eliminated unless the
majority of the Board of Directors decided otherwise. The Board of Directors has
not decided otherwise and, therefore, the two (2) Board member positions
entitled to be elected by Incom were eliminated. With such elimination of Board
member positions, and pursuant to the Shareholders' Agreement as amended by the
First Amendment, the Board of Directors is presently to be comprised of nine (9)
members, six entitled to be elected by Piluso ("Piluso Directors") and three (3)
entitled to be elected by RSL (the "RSL Directors"). The parties hereto agree
that of the Piluso Directors, Piluso shall nominate and elect five (5) nominees
designated by RSL and Piluso shall nominate and elect the sixth Board member
that Piluso is entitled to appoint pursuant to the Shareholders' Agreement as
amended by the First Amendment. The parties hereto, therefore, agree to vote all
their shares of capital stock of ITG for the election of a Board of Directors
consisting of nine (9) persons, of whom one person shall be nominated or
designated by Piluso and eight (8) persons shall be nominated or designated by
RSL. Furthermore, the parties acknowledge that pursuant to the Incom Letter,
Incom relinquished its rights to elect one (1) member to each of the committees
described in Paragraph 3 of the First Amendment and provided that such positions
be eliminated unless the majority of the Board of Directors decided otherwise.
The Board of Directors has not
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decided otherwise, and the Shareholders agree that they shall not form, or cause
to be formed, either of the committees discussed in such paragraph.
3. Piluso, Piluso Daughters and Rebetti Anti-Dilution Rights. (a) In
the event (i) RSL or its Affiliates purchase additional shares of capital stock
of ITG directly from ITG or are issued additional shares of capital stock of ITG
directly by ITG and/or (ii) Incom or its Affiliates are issued additional shares
of capital stock as a result of Incom's anti-dilution rights triggered by such
purchase by or issuance to RSL or its Affiliates, then the Shareholders hereby
agree to amend the Certificate of Incorporation of ITG to provide for a class of
convertible common stock and to cause ITG to issue to the Piluso Daughters and
Piluso, in the aggregate, on a one-for-one exchange basis, convertible common
stock of ITG, convertible at the option of the holder into such number of shares
of common stock of ITG as shall, at all times until an initial public offering
of RSL (the "RSL IPO") shall occur, be equal to the following: 0.0532 times the
sum of the additional number of shares of capital stock of ITG so purchased by
or issued to RSL or its Affiliates and any additional shares of such capital
stock issued to Incom or its Affiliates as a result of such purchase or
issuance, such that the Piluso Daughters and Piluso, in the aggregate, together
maintain a five percent (5%) interest in ITG (not taking into account the 15,619
shares of ITG (the "Other Piluso Shares") to be transferred by Piluso to RSL
pursuant to that certain Agreement and Plan of Reorganization, dated as of
September 9, 1996 among PLC, Piluso and Parent) after giving effect to any
shares so purchased or issued as provided in clauses (i) and (ii) above and
paragraph (b) below. Notwithstanding that the Incom Issuance (as defined below)
would not give rise to the rights set forth in the preceding sentence, the
Shareholders further agree that, immediately following the issuance of 3,954
non-voting shares of ITG to Incom (the "Incom Issuance") pursuant to that
certain Asset Purchase Agreement, dated as of August 12, 1996, between RSL COM
UK Limited and Incom, the Shareholders will cause ITG to issue to the Piluso
Daughters and Piluso, in the aggregate, such number of shares of common stock of
ITG as shall cause Piluso and the Piluso Daughters together to own an aggregate
five percent of the capital stock of ITG at such time (not taking into account
the Other Piluso Shares).
(b) In the event (i) RSL or its Affiliates purchase additional
shares of capital stock of ITG directly from ITG or are issued additional shares
of capital stock of ITG directly by ITG and/or (ii) Incom or its Affiliates are
issued additional shares of capital stock as a result of Incom's anti-dilution
rights triggered by such purchase by or issuance to RSL or its Affiliates, then
the Shareholders hereby agree to amend the Certificate of Incorporation of ITG
to provide for a class of convertible common stock and to cause ITG to issue to
Rebetti, on a one-for-one exchange basis, convertible common stock of ITG,
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<PAGE>
convertible at the option of the holder into such number of shares of common
stock of ITG as shall, at all times until an RSL IPO shall occur, be equal to
the following: 0.01063 times the sum of the additional number of shares of
capital stock of ITG so purchased by or issued to RSL or its Affiliates and any
additional shares of such capital stock issued to Incom or its Affiliates as a
result of such issuance or purchase, such that Rebetti maintains a one percent
(1%) interest in ITG after giving effect to any shares so purchased or issued as
provided in clauses (i) and (ii) above and paragraph (a) above. Notwithstanding
that the Incom Issuance would not give rise to the rights set forth in the
preceding sentence, the Shareholders further agree that, immediately following
the Incom Issuance, the Shareholders will cause ITG to issue to Rebetti such
number of shares of common stock of ITG as shall cause Rebetti to own an
aggregate one percent of the capital stock of ITG at such time.
(c) For purposes of this Section 3, "Affiliate" shall mean with
respect to any person, any other person, directly or indirectly controlling, or
controlled by, or under common control with, such person.
4. Piluso and Rebetti Exchange Rights. On the closing date of the RSL
IPO, RSL will grant to each of Piluso, the Piluso Daughters and Rebetti the
right to exchange all shares of common stock of ITG which Piluso, the Piluso
Daughters or Rebetti, as the case may be, then own for shares of RSL common
stock equal to the fair market value of Piluso's, the Piluso Daughters' and/or
Rebetti's ITG common stock on that date. For purposes of this Section 4, shares
of RSL common stock shall be valued at the RSL IPO price to public per share and
shares of ITG common stock owned by Piluso, the Piluso Daughters and/or Rebetti
shall be valued in writing by the Managing Underwriter of the RSL IPO using its
best professional judgment as to the fair market value of such shares. The
parties agree to cooperate in good faith to take such actions as may be
reasonable to effect any exchange under this Section 4 on a tax-free basis to
Piluso, the Piluso Daughters and/or Rebetti as may be permitted by applicable
law.
5. [intentionally omitted]
6. Tap-Along and Drag-Along Rights. (a) RSL agrees that it will not
sell or transfer its shares of ITG or any other securities of ITG that may now
or hereafter be held or owned by it to a third party other than an Affiliate who
agrees in writing to be bound by the terms hereof unless RSL first notifies
Piluso, the Piluso Daughters and Rebetti in writing (the "Notice") of its
intention to sell its ITG shares, as well as the proposed sale price per share.
Piluso, the Piluso Daughters and Rebetti shall each have the right, within ten
(10) days of the receipt of the Notice, to elect to require the third party to
purchase from them at such sale price per share specified in the Notice the same
proportion of ITG shares held by each of them as the proportion of ITG shares
owned by RSL that are proposed to be sold to the third party. The closing of
such sale shall occur at the same time as the closing of RSL's sale of shares of
ITG.
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<PAGE>
(b) RSL further agrees that in the event substantially all of its
assets are purchased by a third party and such assets purchased include RSL's
shares of ITG, or in the event all of RSL's stock is purchased by a third party,
RSL will ensure that such third party offers to purchase shares of ITG then held
by Piluso, the Piluso Daughters and/or Rebetti at the "Purchase Price per Share"
(defined in (c) below). Such Purchase Price per Share shall be payable by the
third party in the same form of consideration as is paid to RSL. The closing of
such sale shall occur at the same time as the closing of the purchase of
substantially all the assets of RSL.
(c) The purchase price per share of ITG stock shall be based on
an appraisal, made by a qualified independent appraiser mutually selected by
holders of the Series A Convertible Preferred Stock and Piluso, of all of the
assets or stock sold by RSL to determine the relative value of the ITG shares
included in such sale, it being understood that such value will constitute a
fraction of the total purchase price paid to RSL. In the event such parties are
unable to mutually agree on an appraiser, each such party shall select one (1)
appraiser, and the two (2) appraisers so selected shall appoint a third
appraiser whose appraisal shall govern the determination of the Purchase Price
per Share. The appraised value of ITG shall be divided by the total number of
shares of ITG stock then outstanding to determine the per share purchase price
of the shares of ITG stock to be purchased by the third party (the "Purchase
Price per Share").
(d) Piluso, the Piluso Daughters and Rebetti agree that in the
event RSL receives an offer to purchase any of its shares of capital stock of
ITG from a third party other than an Affiliate of RSL (the "Third Party Offer"),
which Third Party Offer is accepted by RSL, they will, if requested by such
third party, sell to such third party the same proportion of the shares of
capital stock of ITG owned by each of them and so offered to be purchased as the
proportion of shares of capital stock of ITG owned by RSL that are proposed to
be purchased, at the same time and on the same terms and conditions as are
contained in the Third Party Offer.
(e) For the purposes of this Section 6, "Affiliate" shall mean
with respect to any person, any other person, directly or indirectly
controlling, or controlled by, or under common control with, such person.
7. Entire Agreement; Conflict. This Agreement embodies the entire
agreement of the Stockholders with respect to their capital stock of ITG and the
subject matter hereof, and supersedes, as between and among the Stockholders,
and as between the Stockholders and ITG, any and all other or prior agreements
or arrangements, whether written or oral, which the Stockholders may have had
with respect to the subject matter hereof including,
5
<PAGE>
without limitation, the Shareholders' Agreement, the First Amendment and the
Ancillary Agreement, which agreements shall be null and void and of no further
force and effect as of the date hereof as between and among the Stockholders and
as between the Stockholders and ITG. In furtherance of the foregoing and not in
limitation thereof, whenever there shall exist an inconsistency between the
terms of this Agreement and the terms of the Shareholders' Agreement, the First
Amendment or the Ancillary Agreement, the terms of this Agreement shall prevail
and any right given to Piluso in any of the Shareholders' Agreement, the First
Amendment or the Ancillary Agreement and not expressly set forth herein shall be
deemed terminated upon the execution of this Agreement.
8. Captions. The sections and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning,
interpretation or construction of this Agreement.
9. Counterparts; Severability. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
10. Successors and Assigns. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective legal
representatives, heirs, successors and assigns.
11. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding choice of law.
12. Arbitration. Any dispute between the parties with respect to this
Agreement or any of the terms included herein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
____________________________________
Charles M. Piluso
____________________________________
Richard P. Rebetti, Jr.
RSL COMMUNICATIONS, LTD.
By:_________________________________
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By:_________________________________
Name:
Title:
RSL COMMUNICATIONS PLC
By:_________________________________
Name:
Title:
____________________________________
Charles M. Piluso as custodian for
Jacqueline Piluso
____________________________________
Charles M. Piluso as custodian for
Victoria Piluso
7
<PAGE>
EXHIBIT C
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
(As Amended and Restated as of March 10, 1995)
This Second Amendment to Employment Agreement (this "Amendment") is
made this _____ day of ________ , 1996 by and between INTERNATIONAL
TELECOMMUNICATIONS GROUP, LTD., a Delaware corporation (the "Company") with
offices at 169 EAB Plaza, West Tower, Eighth Floor, Uniondale, NY 11556-0169 and
CHARLES M. PILUSO, an individual residing at 129 Woodmere Boulevard, Woodmere,
New York 11598 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an Employment
Agreement made as of October 25, 1994 and amended and restated as of March 10,
1995 and further amended on September 22, 1995 (the "Employment Agreement") ;
and
WHEREAS, the parties wish to amend certain provisions of the
Employment Agreement as set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in the Employment Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Sections I and III of the Employment Agreement are amended by, in
each case, deleting the term "Chief Executive Officer" therein and substituting
therefor the word "President". In addition, there shall be added to the end of
Section I the following phrase (moving the period to the end of such phrase) and
sentence:
", provided that it is understood that Employee shall resign as
President, but shall remain Chairman of the Board, at such time as the
Board of Directors shall appoint a successor President.
Notwithstanding anything else in the Employment Agreement to the
contrary, the duties of the Chairman of the Board shall only be those
specified in detail from time to time by the Board of Directors of the
Company (provided that such responsibilities shall be at least such
that Piluso shall have opportunities to earn the bonus provided for in
Section 7(ii) of this Second Amendment to Employment Agreement), and
Employee's change in status from Chief Executive Officer to President
to Chairman of the Board (no matter what the duties assigned to him by
the Board of Directors of the Company, consistent with the above
parenthetical phrase) shall not be deemed a diminution in
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<PAGE>
status or responsibilities such as may give rise to a claim for "Good Reason"
under Section VII D. of the Employment Agreement."
2. The first multiple-word parenthetical phrase of subsection E. (7)
of Section VII of the Employment Agreement is amended to read as follows:
"(for so long as Fisher remains associated with the holders of
Preferred Stock, and the common stock of RSL Communications Inc., or
its successor, RSL Communications Ltd., is not publicly traded)."
3. Section VII E.(l) shall be amended to add a new sentence following
the first sentence thereof as follows:
"If, pursuant to the provisions of Section VII A., Employee shall be
terminated due to the conviction of a felony as finally determined
after all appeals have been exhausted, then, effective as of such
termination, the Company shall have the right to repurchase all of the
Common Stock of the Company owned by Employee and all vested options
owned by Employee at the Fair Market Value (as defined above) for such
Common Stock and/or options in accordance with the provisions of
Section VII.E.6 below, and all unvested options to purchase any
securities of the Company owned by Employee at such time shall
terminate."
4. The fourth and fifth sentences of Section VII E.(2) shall be
deleted and the following shall be substituted in lieu thereof:
"Effective as of such termination, Employee shall have the right to
require the Company to repurchase all stock and vested options owned by
Employee (and all unvested options shall terminate if such unvested
options have not been exercised within 60 days following Employee's
termination) at Fair Market Value (as defined above) in accordance with
the provisions of Section VII.E.6 below.
5. The third and fourth sentences of Section VII E.(3) shall be
deleted and the following shall be substituted in lieu thereof:
"Effective as of such termination, Employee shall have the right to
require the Company to repurchase all stock and vested options owned
by Employee (and all unvested options shall terminate if such unvested
options have not been exercised within 60 days following Employee's
termination) at Fair Market Value (as defined above) in accordance
with the provisions of Section VII.E.6 below.
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<PAGE>
6. The first sentence of Section VII.E.6 shall be amended by adding
the following phrase after the word "repurchase":
", or is required to repurchase pursuant to the terms hereof,"
7. Notwithstanding the provisions of Exhibit A to the Employment
Agreement, on January 15, 1997 and on each January 15 during the term of the
Agreement thereafter, the Company shall pay to Employee the greater of (i) the
amount determined as set forth above on Exhibit A to the Employment Agreement,
or (ii) an amount equal to one percent of the purchase price of any business
entity acquired by the Company in the United States (or outside the United
States if the contact with such business entity was initiated solely by Employee
or if the Board of Directors of the Company had requested that Employee devote
business time thereto) as to which Employee has devoted any business time. The
purchase price for purposes of the prior sentence shall be cash invested and
committed by the Company (e.g., deferred purchase price, earn out, etc.) at the
Closing.
8. Except as specifically amended or modified herein, all of the terms
and conditions of the Employment Agreement shall remain in full force and
effect.
9. The sections and other headings contained in this Amendment are for
reference purposes only and shall not affect the meaning, interpretation or
construction of this Amendment.
10. This Amendment may be executed in multiple counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument. To the extent any provision or part of a provision of
this Amendment is held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision or part thereof.
11. This Amendment shall be binding on and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns and no other person shall have any right, benefit or obligation
hereunder.
12. This Amendment and the legal relations between the parties hereto
shall be governed by and construed in accordance with the laws of the State of
New York without regard to whether New York would be the governing law under
that state's principles regarding choice of law; provided, however, that in the
event of a termination of the Employment Agreement, the parties shall address
any claim that such termination was not valid or permitted by the terms of the
Employment Agreement in accordance with the provisions set forth in Section XIX
of the Employment Agreement entitled "Arbitration".
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
COMPANY:
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By: ________________________________________
Name:
Title:
EMPLOYEE:
____________________________________________
Charles M. Piluso
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<PAGE>
CONSENT
The undersigned, an authorized officer of RSL Communications, Ltd.
("RSL"), as successor in interest to RSL Communications Inc., hereby consents on
behalf of RSL, as holder of all the Series A Convertible Preferred Stock of the
Company, pursuant to the requirements set forth in paragraph 8 of Article FOURTH
of the Company's Certificate of Incorporation, as amended, to the execution of
this Agreement.
RSL COMMUNICATIONS, LTD.
____________________________________________
Name:
Title:
<PAGE>
Exhibit 10.39
SECURED PROMISSORY NOTE
$7,500,000.00 September 9, 1996
FOR VALUE RECEIVED, the undersigned RSL COMMUNICATIONS PLC, a United
Kingdom corporation (the "Payor"), promises to pay to the order of CHARLES M.
PILUSO (the "Payee") the principal sum of Seven Million, Five Hundred Thousand
U.S. DOLLARS ($7,500,000.00) together with interest thereon at the rate set
forth below in Section 2, at the offices of International Telecommunications
Group, Ltd., EAB Plaza West Tower, 8th Floor, Uniondale, New York 11556, or at
such other place as the Payee may from time to time designate.
The following terms shall apply to this Note:
1. Payments. The principal amount on this promissory note (the "Note")
shall be payable in 3 annual installments of $2,500,000 each, payable on
September 9, 1997, September 9, 1998 and September 9, 1999 (collectively, the
"Installment Dates").
2. Interest. The Payor shall pay interest from the date of this Note,
quarterly in arrears, at the rate equal to the higher of 6% per annum or the
lowest applicable Federal rate on the date of this Note, on the unpaid principal
balance hereof which shall be due and payable on the first day of each of
January, April, July and October, (each a "Quarterly Payment Date"), commencing
on the first Quarterly Payment Date following the date of this Note.
3. Payment not on a Business day. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
4. Prepayment. The Payor may at any time prepay this Note, in whole or in
part, without premium or penalty. All amounts paid by the Payor shall first be
applied to principal due hereunder and then to accrued interest.
5. Security Interest. In order to secure the full and punctual payment of
all obligations of the Payor under this Note, the Payor hereby grants to the
Payee a security interest in all
<PAGE>
rights and interests of the Payor in 80,238.75 shares (the "Shares") of the
common stock, par value $0.01 per share, of International Telecommunications
Group, Ltd., owned by the Payor, provided, that at each Installment Date at
which principal and interest is timely paid to the Payee pursuant to the terms
of this Note, one-third of the Shares shall be released from any restrictions on
transfer contained herein, all pursuant to the terms of a stock pledge and
security agreement (the "Security Agreement"), dated September 9, 1996, by and
between the Payor and the Payee, in the form attached hereto as Exhibit A. The
Payor represents and warrants to the Payee that the fair market value of such
Shares is currently at least equal to the principal amount of the aggregate of
the loan hereto and that all such Shares are owned by the Payor free and clear
of any existing liens, charges or encumbrances. The Payor shall, in such manner
and form as the Payee may at any time and from time to time reasonably require,
execute, deliver, file and record all security agreements, pledge agreements,
security assignments, or other documents or instruments and take all other
actions that may be necessary or desirable, or that Payee may request, in order
to create, preserve or perfect the foregoing security interest.
6. Restrictions on Transfer of Shares. So long as this Note is
outstanding, the Payor shall not assign, transfer or grant any security interest
in any of the Shares which continue to be subject to the lien created in the
Security Agreement without the prior written consent of the Payee.
7. Costs and Expenses. The Payor shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Payee in
collecting or enforcing this Note.
8. Defaults. (a) The occurrence of any of the following shall constitute
an "Event of Default":
(i) the Payor shall fail to pay when due within five days of the
Installment Date or Quarterly Payment Date, as applicable, any amounts required
to be paid hereunder;
(ii) a case or proceeding shall have been commenced against the
Payor in a court having competent jurisdiction seeking a decree or order in
respect of the Payor (A) under any applicable bankruptcy or other similar law,
which is not dismissed within 60 days with respect to an involuntary case, (B)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of the Payor or of any of its properties, or (C) ordering
the winding-up or liquidation of the affairs of the Payor;
(iii) the Payor shall (A) file a petition seeking relief under any
applicable bankruptcy or other similar law, (B)
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<PAGE>
consent to the institution of the proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
the Payor or of any of its properties, (C) fail generally to pay its debts as
such debts become due, or (D) take any corporate or other action in furtherance
of such action; or
(iv) the Payor shall default on its obligations under the Security
Agreement, the Stock Purchase Agreement among Payor, Payee and International
Telecommunications Group, Ltd., dated July 3, 1996, or any guaranty thereof.
(b) The Payor shall notify the Payee of the occurrence of any Event of
Default promptly after the Payor obtains knowledge thereof.
(c) Upon the occurrence of any Event of Default, all amounts payable
hereunder, including all accrued interest, shall automatically and immediately
become due and payable.
(d) Without limiting any other right of the Payor, in the event that the
Payee defaults on its obligations under any instrument pursuant to which the
Payee owes monies to the Payor (or the Payor's affiliates) in any capacity
(hereinafter a "Default Instrument"), the Payor, at its election, may setoff,
against any and all such monies owed to the Payor (or its affiliates) by the
Payee pursuant to a Default Instrument any and all principal and/or interest due
and payable under this Note.
9. Late Payment Charge. In the event that the Payor fails to make any
payment of principal and/or interest under this Note within 5 days after it
becomes due and payable hereunder, then the Payor shall promptly pay to the
Payee, in addition to other amounts owing hereunder, a late payment charge of 5%
of that portion of the principal and/or interest which was due and payable
hereunder and has not been paid in such 5-day period.
10. Modification. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Payor
and the Payee and only to the extent set forth therein.
11. Waivers. (a) The Payor and all endorsers, sureties and guarantors of
this Note hereby jointly and severally waive presentment, demand for payment,
notice of dishonor, notice of protest, and protest in connection with the
delivery, acceptance, performance, default, endorsement or guaranty of this
Note.
(b) No delay by the Payee in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right
3
<PAGE>
preclude other or further exercise thereof, or the exercise of any other power
or right hereunder or otherwise. No waiver or modification of the terms hereof
shall be valid unless set forth in writing by the Payee.
12. Binding Nature. This Note shall inure to the benefit of and be
enforceable by the Payee and its successors and assigns and shall be binding and
enforceable against the Payor and its successors and assigns. In the event that
the Payor assigns its obligations hereunder, the Payor shall immediately notify
the Payee of such assignment, and shall remain liable for the fulfillment of its
obligations hereunder.
13. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
14. Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law. Any action or proceedings to enforce
or arising out of this Note may be commenced in any court of the State of New
York or in the United States District Court for the Southern District of New
York. The Payor agrees that venue will be proper in such courts in any such
matters, and agrees that New York is the most convenient forum for litigation
in any suit, action or legal proceeding. The Payor agrees that a final judgment
in any such action or proceeding may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
15. Governing Law; Consent to Jurisdiction; Venue Waiver; Waiver of Jury
Trial. The validity, interpretation and effect of this Agreement shall be
governed by the laws of the State of New York applicable to contracts entered
into and to be performed entirely within such state. The Payor hereby consents
to the nonexclusive jurisdiction of all courts in said State and hereby waives
all right to trial by jury in any action, suit or
4
<PAGE>
proceeding brought to enforce or defend any rights or remedies under this
Agreement.
16. Confessed Judgment. Upon the occurrence of an Event of Default
hereunder, the Payor hereby authorizes any attorney designated by the Payee or
any clerk of any court of record to appear for the Payor in any court of record
and confess judgment against the Payor, without prior hearing, in favor of
the Payee for, and in an amount equal to, the full amount then due and payable
by the Payor hereunder, all other amounts then due and payable by the Payor to
the Payee under the provisions of this Note, costs of suit and attorneys' fees
of 15% of the amount of such obligations. In connection therewith, the Payor
hereby releases, to the extent permitted by applicable laws, all errors and all
rights of exemption, appeal, stay of execution, inquisition, and other rights to
which the Payor may otherwise be entitled under the applicable laws now in force
and which may hereafter be enacted, including, without limitation, those of the
United States of America. The authority and power to appear for and enter
judgment against the Payor shall not be exhausted by one or more exercises
thereof or by any imperfect exercise thereof and shall not be extinguished by
any judgment entered pursuant thereto. Such authority may be exercised on one or
more occasions or from time to time in the same or different jurisdictions as
often as the Payee shall deem necessary and desirable, for all of which this
Note shall be sufficient warrant.
17. Guaranty. RSL Communications, Ltd., a Bermuda corporation, successor
in interest to RSL Communications Inc., a British Virgin Islands corporation,
irrevocably and unconditionally guarantees the timely and complete fulfillment
of the Payor's obligations hereunder.
IN WITNESS WHEREOF, the Payor has executed this Note on the date first
above written.
RSL COMMUNICATIONS PLC
By /s/Itzhak Fisher
-----------------
Name:
Title:
RSL COMMUNICATIONS, LTD.
By: /s/Itzhak Fisher
-----------------
Name:
Title:
5
<PAGE>
EXHIBIT A
TO SECURED
PROMISSORY NOTE
STOCK PLEDGE AND SECURITY AGREEMENT
-----------------------------------
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 767 Fifth Avenue, Suite 4300, New
York, New York 10153, CHARLES M. PILUSO (the "Secured Party") having an address
at 169 EAB Plaza, West Tower, Eighth Floor, Uniondale, New York 11556-0169, and
FLETCHER, HEALD & HILDRETH, P.L.C. ("Security Agent") with offices at 1300 North
17th Street, 11th Floor, Rosslyn, Virginia 22209.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated July 3, 1996, pursuant to
which the Secured Party agreed to sell to the Debtor and the Debtor agreed to
purchase from the Secured Party up to 106,985 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue a
Secured Promissory Note (the "Note") in the amount of $7,500,000 to the Secured
Party;
WHEREAS, the Debtor has agreed to execute this instrument as security for
its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any
Event of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all principal amount thereof and interest thereon,
this Agreement or the Purchase Agreement.
<PAGE>
"Shares" shall mean 80,238.75 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 80,238.75 Shares, endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Fletcher, Heald &
Hildreth, P.L.C., 1300 North 17th Street, 11th Floor, Rosslyn, VA 22209,
Attention: Eric Fishman, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
(c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of
2
<PAGE>
Default; then, and in such event, the Debtor shall accept the same as the
Secured Party's agent, in trust for the Secured Party, and shall deliver them
forthwith to the Security Agent in the exact form received with, as applicable,
its endorsements when necessary, or appropriate stock powers duly executed in
blank, to be held by the Security Agent, subject to the terms hereof, as part of
the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event of
Default.
3.2 The term "Event of Default", as used in this Agreement, shall
mean the occurrence or happening, at any time and from time to time, of any one
or more of the following:
(a) An Event of Default shall occur and be continuing under
the Note or this Agreement; or
(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
3
<PAGE>
ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require the Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares at
public sale or, if permitted by law, private sale, subject to appropriate U.C.C.
rules, and in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Except as otherwise provided by
law, the proceeds realized from the sale of any of the Shares may be applied by
the Secured Party first to the reasonable costs, expenses and attorneys' fees
and expenses incurred by the Secured Party for collection and for sale and
delivery of the Shares, and then to any of the Obligations in such order and
manner as the Secured Party, in its sole discretion, deems advisable. If any
4
<PAGE>
deficiency shall arise, the Debtor shall remain liable to the Secured Party
therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
(a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus
proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured
Party arising under this Agreement, the Note or any other agreement with the
Debtor or by operation of law shall be cumulative and non-exclusive, to the
fullest extent permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the Shares, and, in connection
therewith, to deliver any of the Shares to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as it
may determine, all without liability except to account for property actually
received by it. The Secured Party shall have no duty to
5
<PAGE>
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
ARTICLE 5
Representations and Warranties of Debtor
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest in such shares or
the proceeds thereof.
6
<PAGE>
ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.1 The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall be liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security agent, then the resigning Security Agent shall promptly
deliver the Shares to a successor security agent selected by the Security Agent
in its reasonable discretion exercised in good faith; whereupon, in either case,
the Security Agent shall be relieved of all further obligations and released
from all liability under
7
<PAGE>
this Agreement. Without limiting the provisions of this Section 7.2, the
resigning Security Agent shall be entitled to be reimbursed by the other parties
hereto for any expenses incurred in connection with its resignation or transfer
of the Shares to a successor security agent.
7.3 Indemnification. The Debtor and the Secured Party agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorneys' fees), assessments, liabilities, claims, damages, actions,
suits, proceedings or other charges incurred by or assessed against the Security
Agent in the performance of the Security Agent's duties hereunder, except as a
result of the Security Agent's own bad faith or gross negligence. The Security
Agent will send notice to each of the Secured Party and the Debtor within a
reasonable time after any issue of indemnification arises. The agreement in this
paragraph shall survive any termination of the Security Agent's duties
hereunder.
7.4 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included therein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any
8
<PAGE>
act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices.
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted); or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
(a) Any Notice to the Debtor shall be addressed to
such party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Secured Party shall be addressed
to such party at its address hereinabove set
forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle, P.C.
Canal Square
1054 Thirty-First Street, N.W.
Washington, DC 20007-4492
Attention: Joseph B. Hoffman, Esq.
(c) Any Notice to the Security Agent shall be
addressed to such party at its address hereinabove
set forth.
(ii) or to other such place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall
9
<PAGE>
be deemed given when delivered or telecopied on a business day and such hand
delivery or telecopy is received before 5:00 p.m. by the addressee thereof;
otherwise, such notice by hand delivery or telecopy shall be deemed given on the
next succeeding business day; and if sent by overnight courier, notice shall be
deemed given on the next business day after being deposited with the overnight
courier service.
8.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party
with all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be considered an
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<PAGE>
original but all of which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
RSL COMMUNICATIONS PLC
By:___________________________
Name:
Title:
______________________________
CHARLES M. PILUSO
FLETCHER, HEALD & HILDRETH, P.L.C.
By:___________________________
As Security Agent
11
<PAGE>
EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint CHARLES M. PILUSO ("Piluso"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Piluso, that number of shares of common stock
of the Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is coupled
with an interest, and was granted for the consideration stated in the Agreement
and cannot be lawfully revoked or limited in any respect whatsoever (including
the death, bankruptcy or adjudication of incompetency or insanity of either of
the undersigned), except as provided in the Agreement. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting "Shares" as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy, except as otherwise expressly
provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it with
respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney and
proxy or its substitute or substitutes may lawfully do or cause to be done by
virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
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<PAGE>
Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 80,238.75 or such lesser amount as is provided in accordance with
Section 2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By:____________________________
Name:
Title:
13
<PAGE>
Exhibit 10.40
STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 767 Fifth Avenue, Suite 4330, New
York, New York 10153, CHARLES M. PILUSO (the "Secured Party"), having an address
at l69 EAB Plaza, West Tower, Eighth Floor, Uniondale, New York 11556-0169, and
FLETCHER, HEALD & HILDRETH, P.L.C. ("Security Agent") with offices at 1300 North
17th Street, 11th Floor, Rosslyn, Virginia 22209.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated July 3, 1996, pursuant to
which the Secured Party agreed to sell to the Debtor and the Debtor agreed to
purchase from the Secured Party up to l06,985 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue a
Secured Promissory Note (the "Note") in the amount of $7,500,000 to the Secured
Party;
WHEREAS, the Debtor has agreed to execute this instrument as security for
its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any
Event of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all principal amount thereof and interest thereon,
this Agreement or the Purchase Agreement.
<PAGE>
"Shares" shall mean 80,238.75 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 80,238.75 Shares, endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Fletcher, Heald &
Hildreth, P.L.C., 1300 North 17th Street, 11th Floor, Rosslyn, VA 22209,
Attention: Eric Fishman, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
(c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of
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Default; then, and in such event, the Debtor shall accept the same as the
Secured Party's agent, in trust for the Secured Party, and shall deliver them
forthwith to the Security Agent in the exact form received with, as applicable,
its endorsements when necessary, or appropriate stock powers duly executed in
blank, to be held by the Security Agent, subject to the terms hereof, as part of
the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event of
Default.
3.2 The term "Event of Default", as used in this Agreement, shall
mean the occurrence or happening, at any time and from time to time, of any one
or more of the following:
(a) An Event of Default shall occur and be continuing under
the Note or this Agreement; or
(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
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ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations. Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares at
public sale or, if permitted by law, private sale, subject to appropriate U.C.C.
rules, and in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Except as otherwise provided by
law, the proceeds realized from the sale of any of the Shares may be applied by
the Secured Party first to the reasonable costs, expenses and attorneys' fees
and expenses incurred by the Secured Party for collection and for sale and
delivery of the Shares, and then to any of the Obligations in such order and
manner as the Secured Party, in its sole discretion, deems advisable. If any
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deficiency shall arise, the Debtor shall remain liable to the Secured Party
therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
(a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus
proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured
Party arising under this Agreement, the Note or any other agreement with the
Debtor or by operation of law shall be cumulative and non-exclusive, to the
fullest extent permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the Shares, and, in connection
therewith, to deliver any of the Shares to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as it
may determine, all without liability except to account for property actually
received by it. The Secured Party shall have no duty to
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exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
ARTICLE 5
Representations and Warranties of Debtor
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest in such shares or
the proceeds thereof.
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ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.l The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall held liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security agent, then the resigning Security Agent shall promptly
deliver the Shares to a successor security agent selected by the Security Agent
in its reasonable discretion exercised in good faith; whereupon, in either case,
the Security Agent shall be relieved of all further obligations and released
from all liability under
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<PAGE>
this Agreement. Without limiting the provisions of this Section 7.2, the
resigning Security Agent shall be entitled to be reimbursed by the other parties
hereto for any expenses incurred in connection with its resignation or transfer
of the Shares to a successor security agent.
7.3 Indemnification. The debtor and the Secured Party agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorneys' fees), assessments, liabilities, claims, damages, actions,
suits, proceedings or other charges incurred by or assessed against the Security
Agent in the performance of the Security Agent's duties hereunder, except as a
result of the Security Agent's own bad faith or gross negligence. The Security
Agent will send notice to each of the Secured Party and the Debtor within a
reasonable time after any issue of indemnification arises. The agreement in this
paragraph shall survive any termination of the Security Agent's duties
hereunder.
7.4 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included herein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any
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act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted); or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
a) Any Notice to the Debtor shall he addressed to
such party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Secured Party shall be
addressed to such party at its address
hereinabove set forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle, P.C.
Canal Square
1054 Thirty-First Street, N.W.
Washington, DC 20007-4492
Attention: Joseph B. Hoffman, Esq.
(c) Any Notice to the Security Agent shall be
addressed to such party at its address hereinabove
set forth.
(ii) or to such other place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall
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be deemed given when delivered or telecopied on a business day and such hand
delivery or telecopy is received before 5:00 p.m. by the addressee thereof;
otherwise, such notice by hand delivery or telecopy shall be deemed given on the
next succeeding business day; and if sent by overnight courier, notice shall be
deemed given on the next business day after being deposited with the overnight
courier service.
8.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party
with all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an
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original but all of which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
September 9th, 1996.
RSL COMMUNICATIONS PLC
By /s/ Itzhak Fisher
-----------------
Name: Itzhak Fisher
Title: President
/s/ Charles M. Piluso
---------------------
CHARLES M. PILUSO
FLETCHER, HEALD & HILDRETH, P.L.C.
By: /s/ Eric Fishman
---------------------
As Security Agent
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EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint CHARLES M. PILUSO ("Piluso"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Piluso, that number of shares of common stock
of the Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is coupled
with an interest, and was granted for the consideration stated in the Agreement
and cannot be lawfully revoked or limited in any respect whatsoever (including
the death, bankruptcy or adjudication of incompetency or insanity of either of
the undersigned), except as provided in the Agreement. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting "Shares" as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy, except as otherwise expressly
provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it with
respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney and
proxy or its substitute or substitutes may lawfully do or cause to be done by
virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
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Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 80,238.75 or such lesser amount as is provided in accordance
with Section 2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By:_________________________________
Name:
Title:
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Exhibit 10.41
NEW SHAREHOLDERS AGREEMENT
THIS NEW SHAREHOLDERS AGREEMENT (this "Agreement"), dated September 9,
1996, is made by and among CHARLES M. PILUSO ("Piluso"), residing at 129
Woodmere Boulevard, Woodmere, New York 11598, JACQUELINE and VICTORIA PILUSO,
both residing at 129 Woodmere Boulevard, Woodmere, New York 11598 (the "Piluso
Daughters"), RICHARD P. REBETTI, JR. ("Rebetti"), residing at 51 Midland Road,
Roslyn, NY 11577, RSL COMMUNICATIONS, LTD., a Bermuda corporation, as successor
in interest to RSL Communications Inc. ("Parent"), and RSL Communications PLC, a
United Kingdom corporation ("PLC") (Parent and PLC are collectively referred to
herein as "RSL"), with offices at 767 Fifth Avenue, Suite 4300, New York, New
York 10153 (individually a "Shareholder" and collectively the "Shareholders")
and INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD. ("ITG"), a Delaware corporation
with offices at 169 EAB Plaza, West Tower, 8th Floor, Uniondale, New York
11556-0169.
W I T N E S S E T H:
WHEREAS, ITG, the Shareholders (other than RSL and the Piluso Daughters)
and Incom (UK) Ltd. ("Incom") entered into a shareholders' agreement, dated the
first day of September, 1994 (the "Shareholders' Agreement"), as amended by the
Amendment to Shareholders' Agreement dated as of March 10, 1995 (the "First
Amendment"), and the Shareholders (other than the Piluso Daughters) and ITG
entered into an Ancillary Shareholders' Agreement dated September 22, 1995 (the
"Ancillary Agreement"), with respect to, among other things, the transfer or
other disposition of the authorized and outstanding stock of ITG owned by the
Shareholders and Incom;
WHEREAS, Piluso has, subject to Incom's exercise of its right of first
refusal pursuant to the Shareholders' Agreement, agreed to sell 106,985 shares
of ITG's common stock owned by him to RSL; and
WHEREAS, the parties hereto wish, as between and among them, to terminate
the Shareholders' Agreement, First Amendment and Ancillary Agreement and enter
into this Agreement, providing, among other things, for the granting of certain
exchange and other rights to Piluso.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
<PAGE>
1. Termination of Shareholders' Agreement, First Amendment and Ancillary
Agreement. Except with respect to any rights Incom may have pursuant to (i) the
rights of first refusal under Section I of the Shareholders' Agreement in the
event of future sales by the Shareholders (other than shares of ITG capital
stock held by RSL, which are not subject to restrictions on transfer) of ITG
capital stock, (ii) its "tag along rights" pursuant to Section 5 of the First
Amendment, and except only as to the extent to which RSL's agreements contained
in Sections 2 and 5 of the First Amendment may benefit Incom, as between and
among themselves, the Shareholders hereby repeal, terminate and replace with
this Agreement, the Shareholders' Agreement, the First Amendment and the
Ancillary Agreement and the same shall have no force and effect as between and
among ITG and the Shareholders. In addition, the Shareholders hereby waive any
and all future preemptive rights which may otherwise be granted to any
Shareholders pursuant to Section IX of the Shareholders' Agreement. The
Shareholders hereby agree and confirm that that certain New Shareholders
Agreement, dated July 1, l996, attached as Exhibit B to that certain Promissory
Note in the principal amount of $5,000,000 made by ITG in favor of RSL
Communications PLC (as successor in interest to RSL Communications Limited)
dated July 1, 1996, is ab initio, of no force and effect.
2. Composition of the Board of Directors and Abolishment of Committees.
Pursuant to a letter to Piluso sent by Eli Lior, the Managing Director of Incom,
dated June 16, 1995 (the "Incom Letter") , Incom relinquished its rights to
elect two (2) members to the Board of Directors of ITG and provided that such
positions on the Board of Directors be eliminated unless the majority of the
Board of Directors decided otherwise. The Board of Directors has not decided
otherwise and, therefore, the two (2) Board member positions entitled to be
elected by Incom were eliminated. With such elimination of Board member
positions, and pursuant to the Shareholders' Agreement as amended by the First
Amendment, the Board of Directors is presently to be comprised of nine (9)
members, six entitled to be elected by Piluso ("Piluso Directors") and three (3)
entitled to be elected by RSL (the "RSL Directors") . The parties hereto agree
that of the Piluso Directors, Piluso shall nominate and elect five (5) nominees
designated by RSL and Piluso shall nominate and elect the sixth Board member
that Piluso is entitled to appoint pursuant to the Shareholders' Agreement as
amended by the First Amendment. The parties hereto, therefore, agree to vote all
their shares of capital stock of ITG for the election of a Board of Directors
consisting of nine (9) persons, of whom one person shall be nominated or
designated by Piluso and eight (8) persons shall be nominated or designated by
RSL. Furthermore, the parties acknowledge that pursuant to the Incom Letter,
Incom relinquished its rights to elect one (1) member to each of the committees
described in Paragraph 3 of the First Amendment and provided that such positions
be eliminated unless the majority of the Board of Directors decided otherwise.
The Board of Directors has not
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decided otherwise, and the Shareholders agree that they shall not form, or cause
to be formed, either of the committees discussed in such paragraph.
3. Piluso, Piluso Daughters and Rebetti Anti-Dilution Rights. (a) In the
event (i) RSL or its Affiliates purchase additional shares of capital stock of
ITG directly from ITG or are issued additional shares of capital stock of ITG
directly by ITG and/or (ii) Incom or its Affiliates are issued additional shares
of capital stock as a result of Incom's anti-dilution rights triggered by such
purchase by or issuance to RSL or its Affiliates, then the Shareholders hereby
agree to amend the Certificate of Incorporation of ITG to provide for a class of
convertible common stock and to cause ITG to issue to the Piluso Daughters and
Piluso, in the aggregate, on a one-for-one exchange basis, convertible common
stock of ITG, convertible at the option of the holder into such number of shares
of common stock of ITG as shall, at all times until an initial public offering
of RSL (the "RSL IPO") shall occur, be equal to the following: 0.0532 times the
sum of the additional number of shares of capital stock of ITG so purchased by
or issued to RSL or its Affiliates and any additional shares of such capital
stock issued to Incom or its Affiliates as a result of such purchase or
issuance, such that the Piluso Daughters and Piluso, in the aggregate, together
maintain a five percent (5%) interest in ITG (not taking into account the 15,619
shares of ITG (the "Other Piluso Shares") to be transferred by Piluso to RSL
pursuant to that certain Agreement and Plan of Reorganization, dated as of
September 9, 1996 among PLC, Piluso and Parent) after giving effect to any
shares so purchased or issued as provided in clauses (i) and (ii) above and
paragraph (b) below. Notwithstanding that the Incom Issuance (as defined below)
would not give rise to the rights set forth in the preceding sentence, the
Shareholders further agree that, immediately following the issuance of 3,954
non-voting shares of ITG to Incom (the "Incom Issuance") pursuant to that
certain Asset Purchase Agreement, dated as of August 12, 1996, between RSL COM
UK Limited and Incom, the Shareholders will cause ITG to issue to the Piluso
Daughters and Piluso, in the aggregate, such number of shares of common stock of
ITG as shall cause Piluso and the Piluso Daughters together to own an aggregate
five percent of the capital stock of ITG at such time (not taking into account
the Other Piluso Shares).
(b) In the event (i) RSL or its Affiliates purchase additional
shares of capital stock of ITG directly from ITG or are Issued additional shares
of capital stock of ITG directly by ITG and/or (ii) Incom or its Affiliates are
issued additional shares of capital stock as a result of Incom's anti-dilution
rights triggered by such purchase by or issuance to RSL or its Affiliates, then
the Shareholders hereby agree to amend the Certificate of Incorporation of ITG
to provide for a class of convertible common stock and to cause ITG to issue to
Rebetti, on a one-for-one exchange basis, convertible common stock of ITG,
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convertible at the option of the holder into such number of shares of common
stock of ITG as shall, at all times until an RSL IPO shall occur, be equal to
the following: 0.0l063 times the sum of the additional number of shares of
capital stock of ITG so purchased by or issued to RSL or its Affiliates and any
additional shares of such capital stock issued to Incom or its Affiliates as a
result of such Issuance or purchase, such that Rebetti maintains a one percent
(l%) interest in ITG after giving effect to any shares so purchased or issued as
provided in clauses (i) and (ii) above and paragraph (a) above. Notwithstanding
that the Incom Issuance would not give rise to the rights set forth in the
preceding sentence, the Shareholders further agree that, immediately following
the Incom Issuance, the Shareholders will cause ITG to issue to Rebetti such
number of shares of common stock of ITG as shall cause Rebetti to own an
aggregate one percent of the capital stock of ITG at such time.
(c) For purposes of this Section 3, "Affiliate" shall mean with
respect to any person, any other person, directly or indirectly controlling, or
controlled by, or under common control with, such person.
4. Piluso and Rebetti Exchange Rights. On the closing date of the RSL IPO,
RSL will grant to each of Piluso, the Piluso Daughters and Rebetti the right to
exchange all shares of common stock of ITG which Piluso, the Piluso Daughters or
Rebetti, as the case may be, then own for shares of RSL common stock equal to
the fair market value of Piluso's, the Piluso Daughters' and/or Rebetti's ITG
common stock on that date. For purposes of this Section 4, shares of RSL common
stock shall be valued at the RSL IPO price to public per share and shares of ITG
common stock owned by Piluso, the Piluso Daughters and/or Rebetti shall be
valued in writing by the Managing Underwriter of the RSL IPO using its best
professional judgment as to the fair market value of such shares. The parties
agree to cooperate in good faith to take such actions as may be reasonable to
effect any exchange under this Section 4 on a tax-free basis to Piluso, the
Piluso Daughters and/or Rebetti as may be permitted by applicable law.
5. [intentionally omitted]
6. Tag-Along and Drag-Along Rights. (a) RSL agrees that it will not sell
or transfer its shares of ITG or any other securities of ITG that may now or
hereafter be held or owned by it to a third party other than an Affiliate who
agrees in writing to be bound by the terms hereof unless RSL first notifies
Piluso, the Piluso Daughters and Rebetti in writing (the "Notice") of its
intention to sell its ITG shares, as well as the proposed sale price per share.
Piluso, the Piluso Daughters and Rebetti shall each have the right, within ten
(10) days of the receipt of the Notice, to elect to require the third party to
purchase from them at such sale price per share specified in the Notice the same
proportion of ITG shares held by each of them as the proportion of ITG shares
owned by RSL that are proposed to be sold to the third party. The closing of
such sale shall occur at the same time as the closing of RSL's sale of shares of
ITG.
4
<PAGE>
b) RSL further agrees that in the event substantially all of its
assets are purchased by a third party and such assets purchased include RSL's
shares of ITG, or in the event all of RSL's stock is purchased by a third party,
RSL will ensure that such third party offers to purchase shares of ITG then held
by Piluso, the Piluso Daughters and/or Rebetti at the "Purchase Price per Share"
(defined in (c) below). Such Purchase Price per Share shall be payable by the
third party in the same form of consideration as is paid to RSL. The closing of
such sale shall occur at the same time as the closing of the purchase of
substantially all the assets of RSL.
(c) The purchase price per share of ITG stock shall be based on an
appraisal, made by a qualified independent appraiser mutually selected by
holders of the Series A Convertible Preferred Stock and Piluso, of all of the
assets or stock sold by RSL to determine the relative value of the ITG shares
included in such sale, it being understood that such value will constitute a
fraction of the total purchase price paid to RSL. In the event such parties are
unable to mutually agree on an appraiser, each such party shall select one (1)
appraiser, and the two (2) appraisers so selected shall appoint a third
appraiser whose appraisal shall govern the determination of the Purchase Price
per Share. The appraised value of ITG shall be divided by the total number of
shares of ITG stock then outstanding to determine the per share purchase price
of the shares of ITG stock to be purchased by the third party (the "Purchase
Price per Share").
(d) Piluso, the Piluso Daughters and Rebetti agree that in the event
RSL receives an offer to purchase any of its shares of capital stock of ITG from
a third party other than an Affiliate of RSL (the "Third Party offer") , which
Third Party offer is accepted by RSL, they will, if requested by such third
party, sell to such third party the same proportion of the shares of capital
stock of ITG owned by each of them and so offered to be purchased as the
proportion of shares of capital stock of ITG owned by RSL that are proposed to
be purchased, at the same time and on the same terms and conditions as are
contained in the Third Party offer.
(e) For the purposes of this Section 6, "Affiliate" shall mean with
respect to any person, any other person, directly or indirectly controlling, or
controlled by, or under common control with, such person.
7. Entire Agreement; Conflict. This Agreement embodies the entire
agreement of the Stockholders with respect to their capital stock of ITG and the
subject matter hereof, and supersedes, as between and among the Stockholders,
and as between the Stockholders and ITG, any and all other or prior agreements
or arrangements, whether written or oral, which the Stockholders may have had
with respect to the subject matter hereof including,
5
<PAGE>
without limitation, the Shareholders' Agreement, the First Amendment and the
Ancillary Agreement, which agreements shall be null and void and of no further
force and effect as of the date hereof as between and among the Stockholders and
as between the Stockholders and ITG. In furtherance of the foregoing and not in
limitation thereof, whenever there shall exist an inconsistency between the
terms of this Agreement and the terms of the Shareholders' Agreement, the First
Amendment or the Ancillary Agreement, the terms of this Agreement shall prevail
and any right given to Piluso in any of the Shareholders' Agreement, the First
Amendment or the Ancillary Agreement and not expressly set forth herein shall be
deemed terminated upon the execution of this Agreement.
8. Captions. The sections and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Agreement
9. Counterparts; Severability. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
10. Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
11. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding choice of law.
12. Arbitration. Any dispute between the parties with respect to this
Agreement or any of the terms included herein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
/s/ Charles M. Piluso
---------------------
Charles M. Piluso
/s/ Richard P. Rebetti, Jr.
---------------------------
Richard P. Rebetti, Jr.
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
------------------
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
By: /s/ Charles M. Piluso
---------------------
Name:
Title:
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
------------------
Name:
Title:
/s/ Charles M. Piluso
---------------------
Charles M. Piluso as custodian for
Jacqueline Piluso
/s/ Charles M. Piluso
---------------------
Charles M. Piluso as custodian for
Victoria Piluso
7
<PAGE>
Exhibit 10.42
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the
9th day of September, l996 (the "Effective Date"), by and between RICHARD P.
REBETTI, JR. (Rebetti) having an address at 51 Midland Road, Roslyn, New York
11577, RSL COMMUNICATIONS, PLC, a United Kingdom Corporation (the "Investor"),
with offices at 767 Fifth Avenue, Suite 4300, New York, New York 10153 and
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a Delaware corporation (the
"Company") with offices at EAB Plaza, West Tower, Eighth Floor, Uniondale, New
York l5556.
W I T N E S S E T H:
WHEREAS, Rebetti owns l4,634 shares of Common Stock, par value $.0l
per share (the "Common Stock") of the Company; and
WHEREAS, Rebetti desires to sell and the Investor desires to
purchase 11,510 shares of the Common Stock owned by Rebetti (the "Shares") at a
Purchase Price as set forth in Section 1.1 of this Agreement.
NOW, THEREFORE, in consideration for the agreements contained
herein, intending to be legally bound, Rebetti, the Company and the Investor
hereby agree as follows:
ARTICLE I
Purchase and Sale of Common Stock
Section 1.1 Sale of Shares and Purchase Price. Subject to the terms
and conditions set forth in this Agreement, the Investor agrees to purchase from
Rebetti at the Closing Date (as defined below) (hereinafter, the "Closing"),
and Rebetti agrees to sell to the Investor at the Closing, the Shares at an
aggregate price to the Investor of One Million One Hundred Four Thousand Nine
Hundred Sixty U.S. Dollars ($1,104,960) in cash, payable $276,240 at the Closing
Date, and $828,720 by issuance by Investor of its 6% secured promissory note in
the form set forth as Exhibit A hereto (the "RSL Note") providing for three
principal payments aggregating $276,240 on each of the first, second and third
anniversary dates of the Closing Date (the "Purchase Price"). In addition,
Investor, the Company, Charles M. Piluso ("Piluso"), Victoria Piluso,
Jacqueline Piluso (Victoria Piluso and Jacqueline Piluso hereinafter referred to
together as the "Piluso Daughters") and Rebetti shall also, at the Closing Date,
enter into a New Shareholders Agreement terminating all prior Company
shareholders agreements as they relate to Piluso, the Piluso Daughters, Investor
and Rebetti, in the form as set forth in Exhibit B attached hereto.
<PAGE>
ARTICLE II
Closing; Delivery
Section 2.1 The Closing. The Closing Date shall be the third
business day following notice to the Company and Investor of approval by the
Federal Communications Commission ("FCC") of a Transfer of Control Application
or at such other time and place or date as Rebetti, the Company and the Investor
shall agree upon. The Closing shall take place at 10:00 a.m. at the offices of
Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022.
Section 2.2 Deliveries. At the Closing, Rebetti shall deliver to the
Investor a certificate or certificates representing the Shares being purchased
by the Investor, free and clear of all liens, charges and encumbrances,
registered in Investor's name or duly endorsed or accompanied by executed stock
powers, in exchange for delivery to Rebetti by the Investor of the Purchase
Price, and the documents referred to in Articles VI and VII shall be delivered
by the appropriate parties. All cash payments shall be made by certified or bank
check payable to the order of Rebetti or by wire transfer to an account
previously designated in writing by Rebetti at least two days prior to the
Closing.
ARTICLE III
(Intentionally omitted)
ARTICLE IV
Representations and Warranties of Rebetti
Rebetti hereby represents and warrants to Investor as follows:
Section 4.1 Authority. Rebetti has adequate power and authority to
enter into and to perform his obligations under this Agreement and the New
Shareholders Agreement and to consummate the transaction contemplated hereby and
thereby.
Section 4.2 Binding Obligation. This Agreement and the New
Shareholders Agreement constitute the valid, binding and enforceable obligations
of Rebetti, except to the extent that such enforcement may be limited by
bankruptcy, insolvency and other laws now or hereafter in effect relating to the
enforcement of creditors' rights generally, and except to the extent that
2
<PAGE>
equitable principles may limit the right to obtain specific performance or other
equitable remedies.
Section 4.3. No Conflicts. To the best of Rebetti's knowledge, the
entry into and performance by Rebetti of this Agreement and the New Shareholders
Agreement will not: (i) violate any judgment, order, law or regulation
applicable to Rebetti, or (ii) result in any breach of, constitute a default
under or result in the creation of any lien, charge, security interest, pledge,
or other encumbrance on the Shares pursuant to any indenture, mortgage, deed of
trust, bank loan or credit agreement or other instrument to which Rebetti is a
party or to which his assets are bound.
Section 4.4 Consents. Except for Piluso's waiver (see Section 6.3
below) all consents and/or waivers to the transaction contemplated herein as
required by that certain Shareholders Agreement, dated September 1, 1994, as
amended, between Investor, the Company, Incom, Piluso and Rebetti (the "Company
Stockholders Agreement") have been obtained.
Section 4.5 Ownership of Shares. The Shares are owned of record and
beneficially by Rebetti, free and clear of any liens, charges, encumbrances,
pledges, claims, security interests or other rights of third parties. Rebetti,
has good and marketable title to the Shares and has the absolute right, power
and capacity to sell, assign and transfer the Shares to Investor free and clear
of any liens, encumbrances, security interests or other restrictions (other than
restrictions imposed generally by state and federal securities laws with respect
to unregistered securities).
ARTICLE V
Representations and Warranties of the Investor
The Investor hereby represents and warrants to the Company that:
Section 5.1 Investment Intent. The Shares are being acquired by the
Investor solely for its own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of such
Shares. The Investor understands that the Shares have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the Investor's investment intent and accuracy of the Investor's representations,
as expressed herein.
3
<PAGE>
Section 5.2 Restricted Securities. The Investor understands that the
Shares it is purchasing are "restricted securities" under the federal securities
laws inasmuch as they are being acquired from an affiliate of the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. The Investor
understands that there is no public market for the Shares and that there may
never be a public market for such securities, and that even if a market develops
for such securities the Investor may never be able to sell or dispose of the
Shares and may thus have to bear the risk of its investment in such stock for a
substantial period of time, or forever.
Section 5.3 Authorization. All corporate action on the part of the
Investor and its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance by the Investor of this
Agreement, the RSL Note and the New Shareholders Agreement, the purchase of the
Shares and the performance of all of the Investor's obligations hereunder has
been taken or will be taken prior to the Closing.
Section 5.4 Organization and Standing. The Investor is a corporation
which is duly organized, validly existing and in good standing under the laws of
the United Kingdom. The Investor has all requisite legal and corporate power to
execute and deliver this Agreement, the RSL Note and the New Shareholders
Agreement, to purchase the Shares hereunder and to carry out and perform its
obligations under the terms of this Agreement, the RSL Note and the New
Shareholders Agreement.
Section 5.5 Legend. It is understood that the certificates
evidencing the Shares shall bear the following legend:
These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to International Telecommunications Group, Ltd. that such
registration is not required or unless sold pursuant to Rule 144 of such
Act.
Section 5.6 Line of Credit. Investor, through its parent, RSL
Communications, Ltd. (the "Parent"), has in place a line of credit with a
commercial bank for U.S. $40,000,000.
4
<PAGE>
Section 5.7 Senior Notes. Investor is currently negotiating the
terms of issuance of at least U.S. $50,000,000 principal amount of debt or
equity and will use reasonable efforts to consummate such a transaction.
Investor currently intends to utilize the proceeds of the issuance of such notes
to pay down its line of credit and generally for purposes relating to the
furtherance of its global telecommunications network.
ARTICLE VI
Conditions to Investor Obligations at Closing
The obligations of the Investor to purchase and pay for the Shares
which it has agreed to purchase at the Closing and the other obligations of the
Investor under this Agreement are subject to the fulfillment at or prior to the
Closing of the following conditions, any of which may be waived in writing in
whole in part by the Investor:
Section 6.l Representations and Warranties. On the date of the
Closing, the representations and warranties of Rebetti contained in this
Agreement shall be true and correct in all material respects with the same force
and effect as though such representations and warranties had been made at and as
of the time of such Closing, except to the extent that any changes therein are
specifically contemplated by this Agreement. Rebetti shall deliver to the
Investor at the Closing a certificate to such effect.
Section 6.2 New Shareholders Agreement. The New Shareholders
Agreement as set forth in Exhibit B attached hereto shall have been entered into
at the Closing Date.
Section 6.3 First Refusal Rights. Piluso shall have waived his first
refusal rights under the Company Stockholders Agreement.
Section 6.4 FCC Approval. The FCC shall have approved the Transfer
of Control Application.
Section 6.5 Company Stockholders Meeting. There shall have been a
stockholders meeting of the Company or the execution of a written consent in
lieu thereof at which meeting or by such written consent the holders of the
requisite number of shares in the Company shall have approved the waiver by the
Company of its first refusal rights in connection with the sale of the Shares to
Investor.
Section 6.6 Performance. The Company and Rebetti shall have
performed and complied in all material respects with all agreements,
obligations and conditions contained in this
5
<PAGE>
Agreement that are required to be performed or complied with by them on or
before the Closing. The Company and Rebetti shall deliver to the Investor at the
Closing certificates to such effect.
ARTICLE VII
Conditions of Rebetti's Obligations at Closing
The obligations of Rebetti under this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, any of which
may be waived in writing in whole or in part by Rebetti:
Section 7.1 Representations and Warranties. On the date of the
Closing, the representations and warranties of the Investor contained in Article
V shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as of
the time of such Closing, except to the extent that any changes herein are
specifically contemplated by this Agreement. The Investor shall deliver to
Rebetti at the Closing a certificate of its President or Vice President to such
effect.
Section 7.2 Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied in all material respects
with by such Investor on or before the Closing, including payment to Rebetti of
the Purchase Price. The Investor shall deliver to Rebetti at the Closing a
certificate of its President or Vice President to such effect.
Section 7.3 New Shareholders Agreement. The New Shareholders
Agreement as set forth in Exhibit B attached hereto shall have been entered into
at the Closing Date.
ARTICLE VIII
Closing and Post-Closing Covenants
Section 8.1 Indemnification.
(a) Indemnification Obligation of Rebetti. Rebetti agrees to
indemnify and hold harmless Investor, its directors, officers and employees from
and against any and all losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and all costs and expenses of enforcing
such right of indemnification against Rebetti) and penalties, if any, arising
out of or based on or with respect to
6
<PAGE>
to the breach of any representation or warranty made by Rebetti herein.
(b) Indemnification Obligation of Investor. Investor agrees to
indemnify and hold harmless Rebetti from and against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
all costs and expenses of enforcing such right of indemnification against
Investor) and penalties, if any, arising out of or based on or with respect to
the breach of any representation or warranty made by Investor herein.
(c) Survival of Indemnity Obligations. The indemnities contained in
this Section 8.1 shall survive until December 31, l996.
ARTICLE IX
Miscellaneous
Section 9.1 Survival of Representations, Warranties and Covenants.
The representations, warranties, covenants and agreements of the Company,
Rebetti and the Investor contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing until
December 31, 1996.
Section 9.2 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement may not be assigned by any party hereto without
the consent of the other party hereto. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective heirs, successors and permitted assigns of
the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective heirs,
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Section 9.3 Governing Law. The validity, interpretation and effect
of this Agreement shall be governed by the laws of the State of New York
applicable to contracts entered into and to be performed entirely within such
state. All parties hereto hereby consent to the nonexclusive jurisdiction of all
courts in said State.
Section 9.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7
<PAGE>
Section 9.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 9.6 Notices. (i) Any notice required or permitted to be
given under the terms and provisions of this Agreement, or by any law or
governmental regulation, shall be in writing and, deemed duly given if mailed by
registered mail, postage prepaid, addressed as follows:
(a) Any notice to the Investor shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Company shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
(c) Any Notice to Rebetti shall be addressed to such
party at his address hereinabove set forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle, P.C.
Canal Square
1054 Thirty-First Street, N.W.
Washington, D.C. 20007-4492
Attention: Joseph B. Hoffman, Esq.
(ii) By giving the other party at least ten (10) days' prior
written notice, any party may, by notice given as
8
<PAGE>
above provided, designate a different address or addresses for notices.
Section 9.7 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties hereto.
Section 9.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision or
provisions shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision or provisions were so
excluded and shall be enforceable in accordance with its terms.
Section 9.9 Entire Agreement. This Agreement, the Exhibits hereto,
the New Shareholders Agreement and the other documents required to be delivered
pursuant hereto, constitute the entire understanding and agreement between the
parties with regard to the specific subject matter hereof and no party shall be
liable or bound by any representation, warranty, covenant or agreement except as
specifically set forth herein. Any previous agreement (whether written, oral or
implied) among the parties relative to the specific subject matter hereof is
superseded by this Agreement.
Section 9.10 Expenses. The Company shall pay all reasonable costs
and expenses, including reasonable attorneys' fees, incurred by Piluso, Rebetti
and the Investor in connection with entering into this Agreement.
Section 9.11 Arbitration. Any dispute between the parties with
respect to this Agreement or any of the terms included herein and including the
validity, interpretation, breach, and remedies for breach, and the enforcement
of this Agreement, shall be resolved by an arbitrator in accordance with the
following provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP,
LTD.
By /s/ Charles M. Piluso
----------------------------------
Name: Charles M. Piluso
Title: President
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
----------------------------------
Name: Itzhak Fisher
Title: President
/s/ Richard P. Rebetti, Jr.
-------------------------------------
Richard P. Rebetti, Jr.
10
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$828,720 September 9, 1996
FOR VALUE RECEIVED, the undersigned RSL COMMUNICATIONS PLC, a United
Kingdom corporation (the "Payor"), promises to pay to the order of RICHARD P.
REBETTI,JR. (the "Payee") the principal sum of Eight Hundred Twenty-Eight
Thousand Seven Hundred Twenty U.S. DOLLARS ($828,720) together with interest
thereon at the rate set forth below in Section 2, at the offices of
International Telecommunications Group, Ltd., EAB Plaza West Tower, 8th Floor,
Uniondale, New York 11556, or at such other place as the Payee may from time to
time designate.
The following terms shall apply to this Note:
1. Payments. The principal amount on this promissory note (the "Note")
shall be payable in 3 annual installments of $276,240 each, payable on September
9, 1997, September 9, 1998 and September 9, 1999 (collectively, the "Installment
Dates").
2. Interest. The Payor shall pay interest from the date of this Note,
quarterly in arrears, at the rate equal to the higher of 6% per annum or the
lowest applicable Federal rate on the date of this Note, on the unpaid principal
balance hereof which shall be due and payable on the first day of each of
January, April, July and October, (each a "Quarterly Payment Date"), commencing
on the first Quarterly Payment Date following the date of this Note.
3. Payment not on a Business day. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
4. Prepayment. The Payor may at any time prepay this Note, in whole or in
part, without premium or penalty. All amounts paid by the Payor shall first be
applied to principal due hereunder and then to accrued interest.
5. Security Interest. In order to secure the full and punctual payment of
all obligations of the Payor under this Note, the Payor hereby grants to the
Payee a security interest in all rights and interest of the Payor in 8,632.50
shares (the "Shares") of the common stock, par value $0.01 per share, of
<PAGE>
International Telecommunications Group, Ltd. owned by the Payor, provided, that
at each Installment Date at which principal and interest is timely paid to the
Payee pursuant to the terms of this Note, one-third of the Shares shall be
released from the pledge hereunder and shall then be released from any
restrictions on transfer contained herein, all pursuant to the terms of a stock
pledge and security agreement (the "Security Agreement"), dated September 9,
1996, by and between the Payor and the Payee, in the form attached hereto as
Exhibit A. The Payor represents and warrants to the Payee that the fair market
value of such Shares is currently at least equal to the principal amount of the
aggregate of the loan hereto and that all such Shares are owned by the Payor
free and clear of any existing liens, charges or encumbrances. The Payor shall,
in such manner and form as the Payee may at any time and from time to time
reasonably require, execute, deliver, file and record all security agreements,
pledge agreements, security assignments, or other documents or instruments and
take all other actions that may be necessary or desirable, or that Payee may
request, in order to create, preserve or perfect the foregoing security
interest.
6. Restrictions on Transfer of Shares. So long as this Note is
outstanding, the Payor shall not assign, transfer or grant any security interest
in any of the Shares which continue to be subject to the lien created in the
Security Agreement without the prior written consent of the Payee.
7. Costs and Expenses. The Payor shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Payee in
collecting or enforcing this Note.
8. Defaults. (a) The occurrence of any of the following shall constitute
an "Event of Default":
(i) the Payor shall fail to pay when due within five days of the
Installment Date or Quarterly Payment Date, as applicable, any amounts required
to be paid hereunder;
(ii) a case or proceeding shall have been commenced against the
Payor in a court having competent jurisdiction seeking a decree or order in
respect of the Payor (A) under any applicable bankruptcy or other similar law,
which is not dismissed within 60 days with respect to an involuntary case, (B)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of the Payor or of any of its properties, or (C) ordering
the winding-up or liquidation of the affairs of the Payor;
(iii) the Payor shall (A) file a petition seeking relief under any
applicable bankruptcy or other similar law, (B) consent to the institution of
proceedings thereunder or to the
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filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Payor or of any of its properties, (C) fail generally to pay
its debts as such debts become due, or (D) take any corporate or other action in
furtherance of any such action; or
(iv) the Payer shall default on its obligations under the Security
Agreement, or the Stock Purchase Agreement among Payor, Payee and International
Telecommunications Group, Ltd. dated as of September 9, 1996, or any guaranty
thereof.
(b) The Payor shall notify the Payee of the occurrence of any Event of
Default promptly after the Payor obtains knowledge thereof.
(c) Upon the occurrence of any Event of Default, all amounts payable
hereunder, including all accrued interest, shall automatically and immediately
become due and payable.
9. Late Payment Charge. In the event that the Payor fails to make any
payment of principal and/or interest under this Note within 5 days after it
becomes due and payable hereunder, then the Payor shall promptly pay to the
Payee, in addition to other amounts owing hereunder, a late payment charge of 5%
of that portion of the principal and/or interest which was due and payable
hereunder and has not been paid in such 5-day period.
10. Modification. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Payor
and the Payee and only to the extent set forth therein.
11. Waivers. (a) The Payor and all endorsers, sureties and guarantors of
this Note hereby jointly and severally waive presentment, demand for payment,
notice of dishonor, notice of protest, and protest in connection with the
delivery, acceptance, performance, default, endorsement or guaranty of this
Note.
(b) No delay by the Payee in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise. No waiver or
modification of the terms hereof shall be valid unless set forth in writing by
the Payee.
12. Binding Nature. This Note shall inure to the benefit of and be
enforceable by the Payee and its successors and assigns
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and shall be binding and enforceable against the Payor and its successors and
assigns. In the event that the Payor assigns its obligations hereunder, the
Payor shall immediately notify the Payee of such assignment, and shall remain
liable for the fulfillment of its obligations hereunder.
13. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
14. Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law. Any action or proceedings to enforce
or arising out of this Note may be commenced in any court of the State of New
York or in the United States District Court for the Southern District of New
York. The Payor agrees that venue will be proper in such courts in any such
matters, and agrees that New York is the most convenient forum for litigation in
any suit, action or legal proceeding. The Payor agrees that a final judgment in
any such action or proceeding may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
15. Governing Law; Consent to Jurisdiction; Venue Waiver; Waiver of Jury
Trial. The validity, interpretation and effect of this Agreement shall be
governed by the laws of the State of New York applicable to contracts entered
into and to be performed entirely within such state. The Payor hereby consents
to the nonexclusive jurisdiction of all courts in said State and hereby waives
all right to trial by jury in any action, suit or proceeding brought to enforce
or defend any rights or remedies under this Agreement.
16. Confessed Judgment. Upon the occurrence of an Event of Default
hereunder, the Payor hereby authorizes any attorney designated by the Payee or
any clerk of any court of record to appear for the Payor in any court of record
and confess judgment
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against the Payor, without prior hearing, in favor of the Payee for, and in an
amount equal to, the full amount then due and payable by the Payor hereunder,
all other amounts then due and payable by the Payor to the Payee under the
provisions of this Note, costs of suit and attorneys' fees of 15% of the amount
of such obligations. In connection therewith, the Payor hereby releases, to the
extent permitted by applicable laws, all errors and all rights of exemption,
appeal, stay of execution, inquisition, and other rights to which the Payor may
otherwise be entitled under the applicable laws now in force and which may
hereafter be enacted, including, without limitation, those of the United States
of America. The authority and power to appear for and enter judgment against the
Payor shall not be exhausted by one or more exercises thereof or by any
imperfect exercise thereof and shall not be extinguished by any judgment entered
pursuant thereto. Such authority may be exercised on one or more occasions or
from time to time in the same or different jurisdictions as often as the Payee
shall deem necessary and desirable, for all of which this Note shall be
sufficient warrant.
17. Guaranty. RSL Communications, Ltd., a Bermuda corporation, irrevocably
and unconditionally guarantees the timely and complete fulfillment of the
Payor's obligations hereunder.
IN WITNESS WHEREOF, the Payor has executed this Note on the date first
above written.
RSL COMMUNICATIONS PLC
By: _______________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.
By: _______________________________
Name:
Title:
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EXHIBIT A
TO SECURED
PROMISSORY NOTE
STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 767 Fifth Avenue, Suite 4300, New
York, New York 10153, RICHARD P. REBETTI, JR. (the "Secured Party") having an
address at 51 Midland Road, Roslyn, New York 11577, and FLETCHER, HEALD &
HILDRETH, P.L.C. ("Security Agent") with offices at 1300 North 17th Street, 11th
Floor, Rosslyn, Virginia 22209.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated as of September 9, 1996,
pursuant to which the Secured Party agreed to sell to the Debtor and the Debtor
agreed to purchase from the Secured Party 11,510 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue a
Secured Promissory Note or Notes (collectively, the "Note") in the amount of
$828,720 to the Secured Party;
WHEREAS, the Debtor has agreed to execute this instrument as security for
its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any
Event of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all
<PAGE>
principal amount thereof and interest thereon, this Agreement or the Purchase
Agreement.
"Shares" shall mean 8,632.50 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 8,632.50 Shares endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Fletcher, Heald &
Hildreth, P.L.C., 1300 North 17th Street, 11th Floor, Rosslyn, VA 22209,
Attention: Eric Fishman, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
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(c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of Default; then, and in such event, the Debtor
shall accept the same as the Secured Party's agent, in trust for the Secured
Party, and shall deliver them forthwith to the Security Agent in the exact form
received with, as applicable, its endorsements when necessary, or appropriate
stock powers duly executed in blank, to be held by the Security Agent, subject
to the terms hereof, as part of the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event of
Default.
3.2 The term "Event of Default", as used in this Agreement, shall
mean the occurrence or happening, at any time and from time to time, of any one
or more of the following:
(a) An Event of Default shall occur and be continuing under
the Note or this Agreement; or
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(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations. Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require the Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares at
public sale or, if permitted by law, private sale, subject to appropriate U.C.C.
rules, and in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Except as otherwise provided by
law, the proceeds realized from the sale of any of the Shares may
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<PAGE>
be applied by the Secured Party first to the reasonable costs, expenses and
attorneys' fees and expenses incurred by the Secured Party for collection and
for sale and delivery of the Shares, and then to any of the Obligations in such
order and manner as the Secured Party, in its sole discretion, deems advisable.
If any deficiency shall arise, the Debtor shall remain liable to the Secured
Party therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
(a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus
proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured
Party arising under this Agreement, the Note or any other agreement with the
Debtor or by operation of law shall be cumulative and non-exclusive, to the
fullest extent permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the
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Shares, and, in connection therewith, to deliver any of the Shares to any
committee, depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability except to
account for property actually received by it. The Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.
ARTICLE 5
Representations and Warranties of Debtor
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor
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free of any pledge, mortgage, hypothecation, lien, charge, encumbrance or
security interest in such shares or the proceeds thereof.
ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.1 The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall be liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security
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<PAGE>
agent, then the resigning Security Agent shall promptly deliver the Shares to a
successor security agent selected by the Security Agent in its reasonable
discretion exercised in good faith; whereupon, in either case, the Security
Agent shall be relieved of all further obligations and released from all
liability under this Agreement. Without limiting the provisions of this Section
7.2, the resigning Security Agent shall be entitled to be reimbursed by the
other parties hereto for any expenses incurred in connection with its
resignation or transfer of the Shares to a successor security agent.
7.3 Indemnification. The Debtor and the Secured Party agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorneys' fees) , assessments, liabilities, claims, damages,
actions, suits, proceedings or other charges incurred by or assessed against the
Security Agent in the performance of the Security Agent's duties hereunder,
except as a result of the Security Agent's own bad faith or gross negligence.
The Security Agent will send notice to each of the Secured Party and the Debtor
within a reasonable time after any issue of indemnification arises. The
agreement in this paragraph shall survive any termination of the Security
Agent's duties hereunder.
7.4 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included therein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
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<PAGE>
waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices.
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted) ; or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
(a) Any Notice to the Debtor shall be addressed to
such party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Secured Party shall be
addressed to such party at its address
hereinabove set forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle,
P.C.
Canal Square
1054 Thirty-First Street, N. W.
Washington, DC 20007-4492
Attention: Joseph B. Hoffman, Esq.
(c) Any Notice to the Security Agent shall be
addressed to such party at its address hereinabove
set forth.
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<PAGE>
(ii) or to such other place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall be deemed given when delivered or telecopied on a
business day and such hand delivery or telecopy is received before 5:00 p.m. by
the addressee thereof; otherwise, such notice by hand delivery or telecopy shall
be deemed given on the next succeeding business day; and if sent by overnight
courier, notice shall be deemed given on the next business day after being
deposited with the overnight courier service.
8.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party
with all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original but all of which
shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
September 9, 1996.
RSL COMMUNICATIONS PLC
By: _______________________________
Name:
Title:
___________________________________
RICHARD P. REBETTI, JR.
FLETCHER, HEALD & HILDRETH, P.L.C.
By: _______________________________
As Security Agent
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EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint RICHARD P. REBETTI, JR. ("Rebetti"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Rebetti, that number of shares of common stock
of the Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is coupled
with an interest, and was granted for the consideration stated in the Agreement
and cannot be lawfully revoked or limited in any respect whatsoever (including
the death, bankruptcy or adjudication of incompetency or insanity of either of
the undersigned), except as provided in the Agreement. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting "Shares" as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy, except as otherwise expressly
provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it with
respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney and
proxy or its substitute or substitutes may lawfully do or cause to be done by
virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
<PAGE>
Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 8,632.50 or such lesser amount as
is provided in accordance with Section
2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT B
NEW SHAREHOLDERS AGREEMENT
THIS NEW SHAREHOLDERS AGREEMENT (this "Agreement"), dated September 9,
1996, is made by and among CHARLES M. PILUSO ("Piluso"), residing at 129
Woodmere Boulevard, Woodmere, New York 11598, JACQUELINE and VICTORIA PILUSO,
both residing at 129 Woodmere Boulevard, Woodmere, New York 11598 (the "Piluso
Daughters"), RICHARD P. REBETTI, JR. ("Rebetti"), residing at 51 Midland Road,
Roslyn, NY 11577, RSL COMMUNICATIONS, LTD., a Bermuda corporation, as successor
in interest to RSL Communications Inc. ("Parent"), and RSL Communications PLC, a
United Kingdom corporation ("PLC") (Parent and PLC are collectively referred to
herein as "RSL"), with offices at 767 Fifth Avenue, Suite 4300, New York, New
York 10153 (individually a "Shareholder" and collectively the "Shareholders")
and INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD. ("ITG"), a Delaware corporation
with offices at 169 EAB Plaza, West Tower, 8th Floor, Uniondale, New York
11556-0169.
W I T N E S S E T H
WHEREAS, ITG, the Shareholders (other than RSL and the Piluso Daughters)
and Incom (UK) Ltd. ("Incom") entered into a shareholders' agreement, dated the
first day of September, 1994 (the "Shareholders' Agreement"), as amended by the
Amendment to Shareholders' Agreement dated as of March 10, 1995 (the "First
Amendment"), and the Shareholders (other than the Piluso Daughters) and ITG
entered into an Ancillary Shareholders' Agreement dated September 22, 1995 (the
"Ancillary Agreement"), with respect to, among other things, the transfer or
other disposition of the authorized and outstanding stock of ITG owned by the
Shareholders and Incom;
WHEREAS, Piluso has, subject to Incom's exercise of its right of first
refusal pursuant to the Shareholders' Agreement, agreed to sell 106,985 shares
of ITG's common stock owned by him to RSL; and
WHEREAS, the parties hereto wish, as between and among them, to terminate
the Shareholders' Agreement, First Amendment and Ancillary Agreement and enter
into this Agreement, providing, among other things, for the granting of certain
exchange and other rights to Piluso.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
<PAGE>
1. Termination of Shareholders' Agreement, First Amendment and Ancillary
Agreement. Except with respect to any rights Incom may have pursuant to (i) the
rights of first refusal under Section I of the Shareholders' Agreement in the
event of future sales by the Shareholders (other than shares of ITG capital
stock held by RSL, which are not subject to restrictions or transfer) of ITG
capital stock, (ii) its "tag along rights" pursuant to Section 5 of the First
Amendment, and except only as to the extent to which RSL's agreements contained
in Sections 2 and 5 of the First Amendment may benefit Incom, as between and
among themselves, the Shareholders hereby repeal, terminate and replace with
this Agreement, the Shareholders' Agreement, the First Amendment and the
Ancillary Agreement and the same shall have no force and effect as between and
among ITG and the Shareholders. In addition, the Shareholders hereby waive any
and all future preemptive rights which may otherwise be granted to any
Shareholders pursuant to Section IX of the Shareholders' Agreement. The
Shareholders hereby agree and confirm that that certain New Shareholders
Agreement, dated July 1, l996, attached as Exhibit B to that certain Promissory
Note in the principal amount of $5,000,000 made by ITG in favor of RSL
Communications PLC (as successor in interest to RSL Communications Limited)
dated July 1, 1996, is ab initio, of no force and effect.
2. Composition of the Board of Directors and Abolishment of Committees.
Pursuant to a letter to Piluso sent by Eli Lior, the Managing Director of Incom,
dated June 16, 1995 (the "Incom Letter") , Incom relinquished its rights to
elect two (2) members to the Board of Directors of ITG and provided that such
positions on the Board of Directors be eliminated unless the majority of the
Board of Directors decided otherwise. The Board of Directors has not decided
otherwise and, therefore, the two (2) Board member positions entitled to be
elected by Incom were eliminated. With such elimination of Board member
positions, and pursuant to the Shareholders' Agreement as amended by the First
Amendment, the Board of Directors is presently to be comprised of nine (9)
members, six entitled to be elected by Piluso ("Piluso Directors") and three (3)
entitled to be elected by RSL (the "RSL Directors") . The parties hereto agree
that of the Piluso Directors, Piluso shall nominate and elect five (5) nominees
designated by RSL and Piluso shall nominate and elect the sixth Board member
that Piluso is entitled to appoint pursuant to the Shareholders' Agreement as
amended by the First Amendment. The parties hereto, therefore, agree to vote all
their shares of capital stock of ITG for the election of a Board of Directors
consisting of nine (9) persons, of whom one person shall be nominated or
designated by Piluso and eight (8) persons shall be nominated or designated by
RSL. Furthermore, the parties acknowledge that pursuant to the Incom Letter,
Incom relinquished its rights to elect one (1) member to each of the committees
described in Paragraph 3 of the First Amendment and provided that such positions
be eliminated unless the majority of the Board of Directors decided otherwise.
The Board of Directors has not
2
<PAGE>
decided otherwise, and the Shareholders agree that they shall not form, or cause
to be formed, either of the committees discussed in such paragraph.
3. Piluso, Piluso Daughters and Rebetti Anti-Dilution Rights. (a) In the
event (i) RSL or its Affiliates purchase additional shares of capital stock of
ITG directly from ITG or are issued additional shares of capital stock of ITG
directly by ITG and/or (ii) Incom or its Affiliates are issued additional shares
of capital stock as a result of Incom's anti-dilution rights triggered by such
purchase by or issuance to RSL or its Affiliates, then the Shareholders hereby
agree to amend the Certificate of Incorporation of ITG to provide for a class of
convertible common stock and to cause ITG to issue to the Piluso Daughters and
Piluso, in the aggregate, on a one-for-one exchange basis, convertible common
stock of ITG, convertible at the option of the holder into such number of shares
of common stock of ITG as shall, at all times until an initial public offering
of RSL (the "RSL IPO") shall occur, be equal to the following: 0.0532 times the
sum of the additional number of shares of capital stock of ITG so purchased by
or issued to RSL or its Affiliates and any additional shares of such capital
stock issued to Incom or its Affiliates as a result of such purchase or
issuance, such that the Piluso Daughters and Piluso, in the aggregate, together
maintain a five percent (5%) interest in ITG (not taking into account the
15,619 shares of ITG (the "Other Piluso Shares") to be transferred by Piluso to
RSL pursuant to that certain Agreement and Plan of Reorganization, dated as of
September 9, 1996 among PLC, Piluso and Parent) after giving effect to any
shares so purchased or issued as provided in clauses (i) and (ii) above and
paragraph (b) below. Notwithstanding that the Incom Issuance (as defined below)
would not give rise to the rights set forth in the preceding sentence, the
Shareholders further agree that, immediately following the issuance of 3,954
non-voting shares of ITG to Incom (the "Incom Issuance") pursuant to that
certain Asset Purchase Agreement, dated as of August 12, 1996, between RSL COM
UK Limited and Incom, the Shareholders will cause ITG to issue to the Piluso
Daughters and Piluso, in the aggregate, such number of shares of common stock of
ITG as shall cause Piluso and the Piluso Daughters together to own an aggregate
five percent of the capital stock of ITG at such time (not taking into account
the Other Piluso Shares).
(b) In the event (i) RSL or its Affiliates purchase additional
shares of capital stock of ITG directly from ITG or are issued additional shares
of capital stock of ITG directly by ITG and/or (ii) Incom or its Affiliates are
issued additional shares of capital stock as a result of Incom's anti-dilution
rights triggered by such purchase by or issuance to RSL or its Affiliates, then
the Shareholders hereby agree to amend the Certificate of Incorporation of ITG
to provide for a class of convertible common stock and to cause ITG to issue to
Rebetti, on a one-for-one exchange basis, convertible common stock of ITG,
3
<PAGE>
convertible at the option of the holder into such number of shares of common
stock of ITG as shall, at all times until an RSL IPO shall occur, be equal to
the following: 0.01063 times the sum of the additional number of shares of
capital stock of ITG so purchased by or issued to RSL or its Affiliates and any
additional shares of such capital stock issued to Incom or its Affiliates as a
result of such issuance or purchase, such that Rebetti maintains a one percent
(l%) interest in ITG after giving effect to any shares so purchased or issued as
provided in clauses (i) and (ii) above and paragraph (a) above. Notwithstanding
that the Incom Issuance would not give rise to the rights set forth in the
preceding sentence, the Shareholders further agree that, immediately following
the Incom Issuance, the Shareholders will cause ITG to issue to Rebetti such
number of shares of common stock of ITG as shall cause Rebetti to own an
aggregate one percent of the capital stock of ITG at such time.
(c) For purposes of this Section 3, "Affiliate" shall mean with
respect to any person, any other person, directly or indirectly controlling, or
controlled by, or under common control with, such person.
4. Piluso and Rebetti Exchange Rights. On the closing date of the RSL IPO,
RSL will grant to each of Piluso, the Piluso Daughters and Rebetti the right to
exchange all shares of common stock of ITG which Piluso, the Piluso Daughters or
Rebetti, as the case may be, then own for shares of RSL common stock equal to
the fair market value of Piluso's, the Piluso Daughters' and/or Rebetti's ITG
common stock on that date. For purposes of this Section 4, shares of RSL common
stock shall be valued at the RSL IPO price to public per share and shares of ITG
common stock owned by Piluso, the Piluso Daughters and/or Rebetti shall be
valued in writing by the Managing Underwriter of the RSL IPO using its best
professional judgment as to the fair market value of such shares. The parties
agree to cooperate in good faith to take such actions as may be reasonable to
effect any exchange under this Section 4 on a tax-free basis to Piluso, the
Piluso Daughters and/or Rebetti as may be permitted by applicable law.
5. [intentionally omitted]
6. Tag-Along and Drag-Along Rights. (a) RSL agrees that it will not sell
or transfer its shares of ITG or any other securities of ITG that may now or
hereafter be held or owned by it to a third party other than an Affiliate who
agrees in writing to be bound by the terms hereof unless RSL first notifies
Piluso, the Piluso Daughters and Rebetti in writing (the "Notice") of its
intention to sell its ITG shares, as well as the proposed sale price per share.
Piluso, the Piluso Daughters and Rebetti shall each have the right, within ten
(10) days of the receipt of the Notice, to elect to require the third party to
purchase from them at such sale price per share specified in the Notice the same
proportion of ITG shares held by each of them as the proportion of ITG shares
owned by RSL that are proposed to be sold to the third party. The closing of
such sale shall occur at the same time as the closing of RSL's sale of shares of
ITG.
4
<PAGE>
(b) RSL further agrees that in the event substantially all of its
assets are purchased by a third party and such assets purchased include RSL's
shares of ITG, or in the event all of RSL's stock is purchased by a third party,
RSL will ensure that such third party offers to purchase shares of ITG then held
by Piluso, the Piluso Daughters and/or Rebetti at the "Purchase Price per Share"
defined in (c) below). Such Purchase Price per Share shall be payable by the
third party in the same form of consideration as is paid to RSL. The closing of
such sale shall occur at the same time as the closing of the purchase of
substantially all the assets of RSL.
(c) The purchase price per share of ITG stock shall be based on an
appraisal, made by a qualified independent appraiser mutually selected by
holders of the Series A Convertible Preferred Stock and Piluso, of all of the
assets or stock sold by RSL to determine the relative value of the ITG shares
included in such sale, it being understood that such value will constitute a
fraction of the total purchase price paid to RSL. In the event such parties are
unable to mutually agree on an appraiser, each such party shall select one (1)
appraiser, and the two (2) appraisers so selected shall appoint a third
appraiser whose appraisal shall govern the determination of the Purchase Price
per Share. The appraised value of ITG shall be divided by the total number of
shares of ITG stock then outstanding to determine the per share purchase price
of the shares of ITG stock to be purchased by the third party (the "Purchase
Price per Share").
(d) Piluso, the Piluso Daughters and Rebetti agree that in the event
RSL receives an offer to purchase any of its shares of capital stock of ITG from
a third party other than an Affiliate of RSL (the "Third Party Offer"), which
Third Party Offer is accepted by RSL, they will, if requested by such third
party, sell to such third party the same proportion of the shares of capital
stock of ITG owned by each of them and so offered to be purchased as the
proportion of shares of capital stock of ITG owned by RSL that are proposed to
be purchased, at the same time and on the same terms and conditions as are
contained in the Third Party Offer.
(e) For the purposes of this Section 6, "Affiliate" shall mean with
respect to any person, any other person, directly or indirectly controlling, or
controlled by, or under common control with, such person.
7. Entire Agreement; Conflict. This Agreement embodies the entire
agreement of the Stockholders with respect to their capital stock of ITG and the
subject matter hereof, and supersedes, as between and among the Stockholders,
and as between the Stockholders and ITG, any and all other or prior agreements
or arrangements, whether written or oral, which the Stockholders may have had
with respect to the subject matter hereof including,
5
<PAGE>
without limitation, the Shareholders' Agreement, the First Amendment and the
Ancillary Agreement, which agreements shall be null and void and of no further
force and effect as of the date hereof as between and among the Stockholders and
as between the Stockholders and ITG. In furtherance of the foregoing and not in
limitation thereof, whenever there shall exist an inconsistency between the
terms of this Agreement and the terms of the Shareholders' Agreement, the First
Amendment or the Ancillary Agreement, the terms of this Agreement shall prevail
and any right given to Piluso in any of the Shareholders' Agreement, the First
Amendment or the Ancillary Agreement and not expressly set forth herein shall be
deemed terminated upon the execution of this Agreement.
8. Captions. The sections and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Agreement.
9. Counterparts; Severability. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
10. Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
11. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding choice of law.
12. Arbitration. Any dispute between the parties with respect to this
Agreement or any of the terms included herein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
________________________________________
Charles M. Piluso
________________________________________
Richard P. Rebetti, Jr.
RSL COMMUNICATIONS, LTD.
By:_____________________________________
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS GROUP,
LTD.
By:_____________________________________
Name:
Title:
RSL COMMUNICATIONS PLC
By:_____________________________________
Name:
Title:
________________________________________
Charles M. Piluso as custodian for
Jacqueline Piluso
________________________________________
Charles M. Piluso as custodian for
Victoria Piluso
7
<PAGE>
Exhibit 10.43
SECURED PROMISSORY NOTE
$828,720 September 9, 1996
FOR VALUE RECEIVED, the undersigned RSL COMMUNICATIONS PLC, a United
Kingdom corporation (the "Payor"), promises to pay to the order of RICHARD P.
REBETTI, JR. (the "Payee") the principal sum of Eight Hundred Twenty-Eight
Thousand Seven Hundred Twenty U.S. DOLLARS ($828,720) together with interest
thereon at the rate set forth below in Section 2, at the offices of
International Telecommunications Group, Ltd., EAB Plaza West Tower, 8th Floor,
Uniondale, New York 11556, or at such other place as the Payee may from time to
time designate.
The following terms shall apply to this Note:
1. PAYMENTS. The principal amount on this promissory note (the "Note")
shall be payable in 3 annual installments of $276,240 each, payable on September
9, 1997, September 9, 1998 and September 9, 1999 (collectively, the "Installment
Dates").
2. INTEREST. The Payor shall pay interest from the date of this Note,
quarterly in arrears, at the rate equal to the higher of 6% per annum or the
lowest applicable Federal rate on the date of this Note, on the unpaid principal
balance hereof which shall be due and payable on the first day of each of
January, April, July and October, (each a "Quarterly Payment Date"), commencing
on the first Quarterly Payment Date following the date of this Note.
3. PAYMENT NOT ON A BUSINESS DAY. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
4. PREPAYMENT. The Payor may at any time prepay this Note, in whole
or in part, without premium or penalty. All amounts paid by the Payor shall
first be applied to principal due hereunder and then to accrued interest.
5. SECURITY INTEREST. In order to secure the full and punctual
payment of all obligations of the Payor under this Note, the Payor hereby
grants to the Payee a security interest in all rights and interests of the
Payor in 8,632.50 shares (the "Shares") of the common stock, par value $0.01
per share, of
<PAGE>
International Telecommunications Group, Ltd. owned by the Payor, provided, that
at each Installment Date at which principal and interest is timely paid to the
Payee pursuant to the terms of this Note, one-third of the Shares shall be
released from the pledge hereunder and shall then be released from any
restrictions on transfer contained herein, all pursuant to the terms of a stock
pledge and security agreement (the "Security Agreement"), dated September 9,
1996, by and between the Payor and the Payee, in the form attached hereto as
Exhibit A. The Payor represents and warrants to the Payee that the fair market
value of such Shares is currently at least equal to the principal amount of the
aggregate of the loan hereto and that all such Shares are owned by the Payor
free and clear of any existing liens, charges or encumbrances. The Payor shall,
in such manner and form as the Payee may at any time and from time to time
reasonably require, execute, deliver, file and record all security agreements,
pledge agreements, security assignments, or other documents or instruments and
take all other actions that may be necessary or desirable, or that Payee may
request, in order to create, preserve or perfect the foregoing security
interest.
6. RESTRICTIONS ON TRANSFER OF SHARES. So long as this Note is outstanding,
the Payor shall not assign, transfer or grant any security interest in any of
the Shares which continue to be subject to the lien created in the Security
Agreement without the prior written consent of the Payee.
7. COSTS AND EXPENSES. The Payor shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Payee in
collecting or enforcing this Note.
8. DEFAULTS. (a) The occurrence of any of the following shall constitute an
"Event of Default":
(i) the Payor shall fail to pay when due within five days of the
Installment Date or Quarterly Payment Date, as applicable, any amounts required
to be paid hereunder;
(ii) a case or proceeding shall have been commenced against the Payor
in a court having competent jurisdiction seeking a decree or order in respect of
the Payor (A) under any applicable bankruptcy or other similar law, which is not
dismissed within 60 days with respect to an involuntary case, (B) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Payor or of any of its properties, or (C) ordering the
winding-up or liquidation of the affairs of the Payor;
(iii) the Payor shall (A) file a petition seeking relief under any
applicable bankruptcy or other similar law, (B) consent to the institution of
proceedings thereunder or to the
2
<PAGE>
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Payor or of any of its properties, (C) fail generally to pay
its debts as such debts become due, or (D) take any corporate or other action in
furtherance of any such action; or
(iv) the Payor shall default on its obligations under the Security
Agreement or the Stock Purchase Agreement among Payor, Payee and International
Telecommunications Group, Ltd., dated as of September 9, 1996, or any guaranty
thereof.
(b) The Payor shall notify the Payee of the occurrence of any Event of
Default promptly after the payor obtains knowledge thereof.
(c) Upon the occurrence of any Event of Default, all amounts payable
hereunder, including all accrued interest, shall automatically and immediately
become due and payable.
9. LATE PAYMENT CHARGE. In the event that the Payor fails to make any
payment of principal and/or interest under this Note within 5 days after it
becomes due and payable hereunder, then the Payor shall promptly pay to the
Payee, in addition to other amounts owing hereunder, a late payment charge of 5%
of that portion of the principal and/or interest which was due and payable
hereunder and has not been paid in such 5-day period.
10. MODIFICATION. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Payor
and the Payee and only to the extent set forth therein.
11. WAIVERS. (a) The Payor and all endorsers, sureties and guarantors of
this Note hereby jointly and severally waive presentment, demand for payment,
notice of dishonor, notice of protest, and protest in connection with the
delivery, acceptance, performance, default, endorsement or guaranty of this
Note.
(b) No delay by the Payee in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise. No waiver or
modification of the terms hereof shall be valid unless set forth in writing by
the Payee.
12. BINDING NATURE. This Note shall inure to the benefit of and be
enforceable by the Payee and its successors and assigns
3
<PAGE>
and shall be binding and enforceable against the Payor and its successors and
assigns. In the event that the Payor assigns its obligations hereunder, the
Payor shall immediately notify the Payee of such assignment, and shall remain
liable for the fulfillment of its obligations hereunder.
13. SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jursidiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
14. GOVERNING LAW; JURISDICTION. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law. Any action or proceedings to enforce
or arising out of this Note may be commenced in any court of the State of New
York or in the United States District Court for the Southern District of New
York. The Payor agrees that venue will be proper in such courts in any such
matters, and agrees that New York is the most convenient forum for litigation in
any suit, action or legal proceeding. The Payor agrees that a final judgment in
any such action or proceeding may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
15. GOVERNING LAW; CONSENT TO JURISDICTION; VENUE WAIVER; WAIVER OF JURY
TRIAL. The validity, interpretation and effect of this Agreement shall be
governed by the laws of the State of New York applicable to contracts entered
into and to be performed entirely within such state. The Payor hereby consents
to the nonexclusive jurisdiction of all courts in said State and hereby waives
all right to trial by jury in any action, suit or proceeding brought to enforce
or defend any rights or remedies under this Agreement.
16. CONFESSED JUDGMENT. Upon the occurrence of an Event of Default
hereunder, the Payor hereby authorizes any attorney designated by the Payee or
any clerk of any court of record to appear for the Payor in any court of record
and confess judgment
4
<PAGE>
against the Payor, without prior hearing, in favor of the Payee for, and in an
amount equal to, the full amount then due and payable by the Payor hereunder,
all other amounts then due and payable by the Payor to the Payee under the
provisions of this Note, costs of suit and attorneys' fees of 15% of the amount
of such obligations. In connection therewith, the Payor hereby releases, to the
extent permitted by applicable laws, all errors and all rights of exemption,
appeal, stay of execution, inquisition, and other rights to which the Payor may
otherwise be entitled under the applicable laws now in force and which may
hereafter be enacted, including, without limitation, those of the United States
of America. The authority and power to appear for and enter judgment against the
Payor shall not be exhausted by one or more exercises thereof or by any
imperfect exercise thereof and shall not be extinguished by any judgment entered
pursuant thereto. Such authority may be exercised on one or more occasions or
from time to time in the same or different jurisdictions as often as the Payee
shall deem necessary and desirable, for all of which this Note shall be
sufficient warrant.
17. GUARANTY. RSL Communications, Ltd., a Bermuda corporation, irrevocably
and unconditionally guarantees the timely and complete fulfillment of the
Payor's obligations hereunder.
IN WITNESS WHEREOF, the Payor has executed this Note on the date first
above written.
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
-----------------
Name:
Title:
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
-----------------
Name:
Title:
5
<PAGE>
EXHIBIT A
TO SECURED
PROMISSORY
NOTE
STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 767 Fifth Avenue, Suite 4300, New
York, New York 10153, RICHARD P. REBETTI, JR. (the "Secured Party") having an
address at 51 Midland Road, Roslyn, New York 11577, and FLETCHER, HEALD &
HILDRETH, P.L.C. ("Security Agent") with offices at 1300 North 17th Street, 11th
Floor, Rosslyn, Virginia 22209.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated as of September 9, 1996,
pursuant to which the Secured Party agreed to sell to the Debtor and the Debtor
agreed to purchase from the Secured Party 11,510 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue a
Secured Promissory Note or Notes (collectively, the "Note") in the amount of
$828,720 to the Secured Party;
WHEREAS, the Debtor has agreed to execute this instrument as security for
its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any
Event of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all
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principal amount thereof and interest thereon, this Agreement or the Purchase
Agreement.
"Shares" shall mean 8,632.50 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 8,632.50 Shares endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Fletcher, Heald &
Hildreth, P.L.C., 1300 North 17th Street, 11th Floor, Rosslyn, VA 22209,
Attention: Eric Fishman, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
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(c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of Default; then, and in such event, the Debtor
shall accept the same as the Secured Party's agent, in trust for the Secured
Party, and shall deliver them forthwith to the Security Agent in the exact form
received with, as applicable, its endorsements when necessary, or appropriate
stock powers duly executed in blank, to be held by the Security Agent, subject
to the terms hereof, as part of the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event of
Default.
3.2 The term "Event of Default", as used in this Agreement, shall
mean the occurrence or happening, at any time and from time to time, of any one
or more of the following:
(a) An Event of Default shall occur and be continuing under
the Note or this Agreement; or
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(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations. Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require the Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares at
public sale or, if permitted by law, private sale, subject to appropriate U.C.C.
rules, and in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Except as otherwise provided by
law, the proceeds realized from the sale of any of the Shares may
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be applied by the Secured Party first to the reasonable costs, expenses and
attorneys' fees and expenses incurred by the Secured Party for collection and
for sale and delivery of the Shares, and then to any of the Obligations in such
order and manner as the Secured Party, in its sole discretion, deems advisable.
If any deficiency shall arise, the Debtor shall remain liable to the Secured
Party therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
(a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus
proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured
Party arising under this Agreement, the Note or any other agreement with the
Debtor or by operation of law shall be cumulative and non-exclusive, to the
fullest extent permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the
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Shares, and, in connection therewith, to deliver any of the Shares to any
committee, depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability except to
account for property actually received by it. The Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DEBTOR
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor
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free of any pledge, mortgage, hypothecation, lien, charge, encumbrance or
security interest in such shares or the proceeds thereof.
ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.1 The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall be liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security
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agent, then the resigning Security Agent shall promptly deliver the Shares to a
successor security agent selected by the Security Agent in its reasonable
discretion exercised in good faith; whereupon, in either case, the Security
Agent shall be relieved of all further obligations and released from all
liability under this Agreement. Without limiting the provisions of this Section
7.2, the resigning Security Agent shall be entitled to be reimbursed by the
other parties hereto for any expenses incurred in connection with its
resignation or transfer of the Shares to a successor security agent.
7.3 Indemnification. The Debtor and the Secured Party agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorneys' fees), assessments, liabilities, claims, damages,
actions, suits, proceedings or other charges incurred by or assessed against the
Security Agent in the performance of the Security Agent's duties hereunder,
except as a result of the Security Agent's own bad faith or gross negligence.
The Security Agent will send notice to each of the Secured Party and the Debtor
within a reasonable time after any issue of indemnification arises. The
agreement in this paragraph shall survive any termination of the Security
Agent's duties hereunder.
7.4 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included therein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
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waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices.
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted); or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
(a) Any Notice to the Debtor shall be addressed to
such party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Secured Party shall be
addressed to such party at its address
hereinabove set forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle, P.C.
Canal Square
1054 Thirty-First Street, N.W.
Washington, DC 20007-4492
Attention: Joseph B. Hoffman, Esq.
(c) Any Notice to the Security Agent shall be
addressed to such party at its address hereinabove
set forth.
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(ii) or to such other place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall be deemed given when delivered or telecopied on a
business day and such hand delivery or telecopy is received before 5:00 p.m. by
the addressee thereof; otherwise, such notice by hand delivery or telecopy shall
be deemed given on the next succeeding business day; and if sent by overnight
courier, notice shall be deemed given on the next business day after being
deposited with the overnight courier service.
8.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party
with all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original but all of which
shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
September 9, 1996.
RSL COMMUNICATIONS PLC
By____________________________________
Name:
Title:
______________________________________
RICHARD P. REBETTI, JR.
FLETCHER, HEALD & HILDRETH, P.L.C.
By:___________________________________
As Security Agent
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EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint RICHARD P. REBETTI, JR. ("Rebetti"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Rebetti, that number of shares of common stock
of the Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is coupled
with an interest, and was granted for the consideration stated in the Agreement
and cannot be lawfully revoked or limited in any respect whatsoever (including
the death, bankruptcy or adjudication of incompetency or insanity of either of
the undersigned), except as provided in the Agreement. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting "Shares" as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy, except as otherwise expressly
provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it with
respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney and
proxy or its substitute or substitutes may lawfully do or cause to be done by
virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
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Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 8,632.50 or such lesser amount as is provided in accordance
with Section 2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By:_____________________________
Name:
Title:
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Exhibit 10.44
STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 767 Fifth Avenue, Suite 4300, New
York, New York 10153, RICHARD P. REBETTI, JR. (the "Secured Party") having an
address at 51 Midland Road, Roslyn, New York 11577, and FLETCHER, HEALD &
HILDRETH, P.L.C. ("Security Agent") with offices at 1300 North 17th Street, 11th
Floor, Rosslyn, Virginia 22209.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated as of September 9, 1996,
pursuant to which the Secured Party agreed to sell to the Debtor and the Debtor
agreed to purchase from the Secured Party 11,510 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue a
Secured Promissory Note or Notes (collectively, the "Note") in the amount of
$828,720 to the Secured Party;
WHEREAS, the Debtor has agreed to execute this instrument as security for
its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any
Event of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all
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principal amount thereof and interest thereon, this Agreement or the Purchase
Agreement.
"Shares" shall mean 8,632.50 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 8,632.50 Shares endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Fletcher, Heald &
Hildreth, P.L.C., 1300 North 17th Street, 11th Floor, Rosslyn, VA 22209,
Attention: Eric Fishman, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
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c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of Default; then, and in such event, the Debtor
shall accept the same as the Secured Party's agent, in trust for the Secured
Party, and shall deliver them forthwith to the Security Agent in the exact form
received with, as applicable, its endorsements when necessary, or appropriate
stock powers duly executed in blank, to be held by the Security Agent, subject
to the terms hereof, as part of the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event
of Default.
3.2 The term "Event of Default", as used in this Agreement, shall
mean the occurrence or happening, at any time and from time to time, of any one
or more of the following:
(a) An Event of Default shall occur and be continuing under
the Note or this Agreement; or
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(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations. Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require the Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares at
public sale or, if permitted by law, private sale, subject to appropriate U.C.C.
rules, and in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Except as otherwise provided by
law, the proceeds realized from the sale of any of the Shares may
4
<PAGE>
be applied by the Secured Party first to the reasonable costs, expenses and
attorneys' fees and expenses incurred by the Secured Party for collection and
for sale and delivery of the Shares, and then to any of the Obligations in such
order and manner as the Secured Party, in its sole discretion, deems advisable.
If any deficiency shall arise, the Debtor shall remain liable to the Secured
Party therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus
proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured
Party arising under this Agreement, the Note or any other agreement with the
Debtor or by operation of law shall be cumulative and non-exclusive, to the
fullest extent permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the
5
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Shares, and, in connection therewith, to deliver any of the Shares to any
committee, depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability except to
account for property actually received by it. The Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.
ARTICLE 5
Representations and Warranties of Debtor
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor
6
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free of any pledge, mortgage, hypothecation, lien, charge, encumbrance or
security interest in such shares or the proceeds thereof.
ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.1 The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall be liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security
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agent, then the resigning Security Agent shall promptly deliver the Shares to a
successor security agent selected by the Security Agent in its reasonable
discretion exercised in good faith; whereupon, in either case, the Security
Agent shall be relieved of all further obligations and released from all
liability under this Agreement. Without limiting the provisions of this Section
7.2, the resigning Security Agent shall be entitled to be reimbursed by the
other parties hereto for any expenses incurred in connection with its
resignation or transfer of the Shares to a successor security agent.
7.3 Indemnification. The Debtor and the Secured Party agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorneys' fees), assessments, liabilities, claims, damages,
actions, suits, proceedings or other charges incurred by or assessed against the
Security Agent in the performance of the Security Agent's duties hereunder,
except as a result of the Security Agent's own bad faith or gross negligence.
The Security Agent will send notice to each of the Secured Party and the Debtor
within a reasonable time after any issue of indemnification arises. The
agreement in this paragraph shall survive any termination of the Security
Agent's duties hereunder.
7.4 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included therein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
8
<PAGE>
waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices.
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted); or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
(a) Any Notice to the Debtor shall be addressed to
such party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Secured Party shall be
addressed to such party at its address
hereinabove set forth,
with a copy to:
Galland, Kharasch, Morse & Garfinkle,
P.C.
Canal Square
1054 Thirty-First Street, N.W.
Washington, DC 20007-4492
Attention: Joseph B. Hoffman, Esq.
(c) Any Notice to the Security Agent shall be
addressed to such party at its address hereinabove
set forth.
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<PAGE>
(ii) or to such other place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall be deemed given when delivered or telecopied on a
business day and such hand delivery or telecopy is received before 5:00 p.m. by
the addressee thereof; otherwise, such notice by hand delivery or telecopy shall
be deemed given on the next succeeding business day; and if sent by overnight
courier, notice shall be deemed given on the next business day after being
deposited with the overnight courier service.
8.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party
with all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original but all of which
shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of September 9, 1996.
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
--------------------------------------
Name: Itzhak Fisher
Title: President
/s/ Richard P. Rebetti, Jr.
------------------------------------------
RICHARD P. REBETTI, JR.
FLETCHER, HEALD & HILDRETH, P.L.C.
By: /s/ Fletcher, Heald & Hildreth, P.L.C.
--------------------------------------
As Security Agent
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EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint RICHARD P. REBETTI, JR. ("Rebetti"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Rebetti, that number of shares of common stock
of he Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is coupled
with an interest, and was granted for the consideration stated in the Agreement
and cannot be lawfully revoked or limited in any respect whatsoever (including
the death, bankruptcy or adjudication of incompetency or insanity of either of
the undersigned), except as provided in the Agreement. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting "Shares" as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy, except as otherwise expressly
provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it with
respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney and
proxy or its substitute or substitutes may lawfully do or cause to be done by
virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
<PAGE>
Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 8,632.50 or such lesser amount as is provided in accordance
with Section 2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By: __________________________________
Name:
Title:
<PAGE>
Exhibit 10.45
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
September 9, 1996, among RSL Communications PLC, a United Kingdom corporation
("RSL"), RSL Communications, Ltd., a Bermuda corporation (the "Parent"), as
successor in interest to RSL Communications Inc., a British Virgin Islands
corporation, and Charles M. Piluso (the "Shareholder"), being the owner of
record of Fifteen Thousand Six Hundred Nineteen (15,619) shares of International
Telecommunications Group, Ltd., a Delaware corporation ("ITG").
WHEREAS, RSL wishes to acquire and the Shareholder wishes to transfer the
Fifteen Thousand Six Hundred Nineteen (15,619) shares of ITG owned by the
Shareholder (the "ITG Shares") in a transaction intended to qualify as a
reorganization within the meaning of Internal Revenue Code Secion 368(a)(l)(B),
as amended.
WHEREAS, within thirty (30) days from the date of this Agreement, RSL
shall receive from Parent all of the shares of ITG currently owned by Parent.
WHEREAS, at or prior to the date of the Initial Closing (as hereinafter
defined), RSL shall receive from Parent the number of shares of Parent necessary
to complete the reorganization provided for herein.
NOW, THEREFORE, RSL, Parent and Shareholder adopt this plan of
reorganization and agree as follows:
1. Exchange of Stock
1.1. Number of Shares. Shareholder agrees to transfer the ITG Shares to
RSL in exchange for an aggregate of Six Hundred Forty Thousand Six Hundred Two
(640,602) shares of voting common stock of Parent, $O.01 par value per share
(the "RSL Shares"), to be issued to the Shareholder at all of the Closings (as
hereinafter defined). Such exchange may occur as one exchange or as a series of
partial exchanges pursuant to the "tag-along" or "drag-along" rights of the
Shareholder as provided in the Parent's Amended and Restated Stockholders
Agreement dated August 11, 1995, as amended (the "Shareholders Agreement"), and
to be amended by Exhibit A hereto at the date of the Initial Closing.
1.2. Adjustment to Number of RSL Shares. The RSL Shares shall have
anti-dilution rights such that while they will be convertible initially on a
one-for-one basis, the number of RSL Shares specified in Section 1.1 shall be
adjusted in the event that, between the date of this Agreement and any of the
Closings, any of the current shareholders of Parent, disproportionately or
proportionately, increase the number of Parent shares owned by such shareholder,
other than by exercise of options (except for Excess Options, as defined in
Section 5.3), such that after adjustment, the total number of RSL Shares to be
delivered to Shareholder at all of the Closings (assuming all the ITG Shares
were exchanged) shall be five percent (5%) of the total number of shares of
common and preferred stock of Parent owned by current shareholders of Parent,
taking into account any increase in that total occurring after the date of this
Agreement, other than by exercise of options (except for Excess
<PAGE>
Options). For purposes of the preceding sentence, an affiliate of an owner shall
be deemed a current shareholder of Parent. "Affiliate" shall mean with respect
to any person, any other person, directly or indirectly controlling, or
controlled by, or under common control with, such person. In the event of any
adjustment described herein, all references to the RSL Shares herein shall refer
to the number of RSL Shares as thus adjusted.
1.3. Additional Rights. At the time of receipt of any RSL Shares by the
Shareholder at the Initial Closing, the Shareholder shall also receive, with
respect to such RSL Shares: (a) "tag-along" rights (and become subject to
"drag-along" rights), as defined in the Shareholders Agreement; and (b)
registration rights, as defined in the Registration Rights Agreement, attached
hereto as Exhibit B, to be executed at the Initial Closing.
2. Triggering Events; Closing
2.1 Definition of "Triggering Event". For purposes of this Agreement, the
term "Triggering Event" shall mean the earlier of (a) the day after the closing
of an initial public offering of any shares of Parent; (b) any event with
respect to which the Shareholder or a third party is entitled to "tag-along" or
"drag-along" rights as defined in the Shareholders Agreement (as if Exhibit A
hereto were in full force and effect) and with respect to which the Shareholder
or the third party actually exercises such right; (c) any event that would
entitle the Shareholder to "tag-along" or "drag-along" rights as provided in the
ITG New Shareholders Agreement by and among ITG and the shareholders thereof
with respect to which the ITG Shares are to be converted into an appropriate
number of RSL Shares and with respect to which the Shareholder or the third
party actually exercises such right (in each instance (b) and (c) above only to
the extent of the number of RSL Shares with respect to which the Shareholder has
exercised or has been required to exercise); or (d) October 1, 1998.
2.2 Demand Notice. Upon the occurrence of a Triggering Event, either party
shall have the right to give notice to the other party demanding the holding of
a Closing ("Demand Notice"). Upon the delivery of a Demand Notice by one party
to the other party, both parties shall be obligated to deliver certain shares at
such Closing, as provided in Section 2.3 below. A Closing shall take place (10)
days after delivery of the Demand Notice at the principal offices of RSL at
10:00 a.m., unless another place or time is agreed on in writing by the parties.
The first such Closing to occur shall be the "Initial Closing" and all closings
hereunder shall be referred to as "Closings."
2.3. Delivery of Certificates. At any Closing, subject to the terms and
conditions of this Agreement and in full consideration for the assignment,
transfer and delivery to RSL of all or any part of the ITG Shares, RSL shall
deliver to the Shareholder the RSL Shares or such commensurate part thereof, as
the case may be, as defined in Section 1.1 above, subject to modification under
Sections 1.2 and 5.3. The transfer of such ITG Shares to RSL and the transfer of
such RSL Shares to the Shareholder at each such Closing shall be effected by the
delivery to the other party at the Closing of certificates representing such ITG
Shares or such RSL Shares endorsed in blank or accompanied by stock powers
executed in blank, which shares shall be fully paid and non-assessable.
2
<PAGE>
2.4. Further Action. At a Closing and from time to time thereafter, each
of the parties shall execute such additional instruments and take such other
action as the other party may request in order more effectively to perform,
complete and consummate the reorganization provided herein.
2.5. Appointment of Agent. The Shareholder hereby appoints RSL, and RSL
hereby appoints the Shareholder, as his/its agent and attorney-in-fact for the
purpose of executing and delivering any and all documents necessary to convey
the ITG Shares or the RSL Shares pursuant to the provisions of this Agreement.
In the event either party refuses to comply with the provisions of this
Agreement or is not present at a Closing, any conveyance by such agent and
attorney-in-fact shall be a conveyance of all of the other party's right, title
and equity in and to the ITG Shares or the RSL Shares.
3. Representations and Warranties of the Shareholder
As a material inducement to RSL to execute and perform its obligations
under this Agreement, the Shareholder hereby represents and warrants to RSL as
follows:
3.1. Authority. The Shareholder has the full legal right, power and
authority to enter into this Agreement and perform or be subject to each of the
agreements and obligations undertaken by the Shareholder in this Agreement and
the documents contemplated hereby, and to consummate the transactions
contemplated hereby, without the consent or approval of any other person or
entity.
3.2. Binding Obligation. This Agreement has been duly executed and
delivered by the Shareholder and constitutes the Shareholder's legal, valid and
binding obligation, enforceable against the Shareholder in accordance with its
terms, except to the extent that such binding effect, validity and
enforceability may be limited by bankruptcy, insolvency and other laws relating
to or affecting creditors' rights generally and by such principles of equity as
a court having jurisdiction may impose.
3.3. Absence of Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in a breach or default by the Shareholder under any judgment, order,
writ, decree, rule or regulation of any court or administrative agency to which
the Shareholder is bound or is subject; breach, conflict with, or result in a
breach of any of the terms, conditions or provisions of, or constitute a default
under, any contract, lease, agreement, understanding or instrument to which the
Shareholder is a party, or by which the Shareholder is bound; or result in the
imposition of any lien, charge or encumbrance of any nature whatsoever upon, or
give to others any interest or rights, including rights of termination or
cancellation in, or with respect to, any of the Shareholder's properties,
assets, contracts, licenses or businesses.
3.4. Investment Intent. The Shareholder is acquiring the RSL Shares to be
transferred to it under this Agreement for investment and not with a view to the
sale or distribution thereof, and the Shareholder has no commitment or present
intention to sell or otherwise dispose of his RSL Shares. The Shareholder
understands that the RSL Shares have not been registered under the Securities
Act
3
<PAGE>
of 1933 by reason of a specific exemption from the registration provisions of
said Act, the applicability of which depends on, among other things, the bona
fide nature of the Shareholder's investment intent and truth of the
Shareholder's representations as expressed herein.
3.5 Restricted Securities. The Shareholder understands that the RSL Shares
are "restricted securities" under federal securities laws, inasmuch as they are
being acquired from RSL in a transaction that is not a public offering; under
such laws and applicable regulations, restricted securities may be resold
without registration under the Securities Act of 1933 only under limited
circumstances. The Shareholder understands that (a) there is no public market
for the RSL Shares; (b) there may never be a public market for the RSL Shares;
and (c) even if a public market for the RSL Shares develops, the Shareholder may
never be able to sell or dispose of the RSL Shares in any way and may be forced
to bear the risk of investment in the RSL Shares for a substantial period of
time or forever.
3.6. Legend. It is understood that the certificates evidencing the RSL
Shares shall bear the following legend:
These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel that
such registration is not required or unless sold pursuant to Rule 144 of
such Act.
4. Representations and Warranties of Parent and RSL
As a material inducement to the Shareholder to execute and perform the
Shareholder's obligations under this Agreement, Parent and RSL (collectively,
the "RSL Companies") hereby represent and warrant to the Shareholder, jointly
and severally, as follows:
4.1. Authority. The RSL Companies have the full legal right, power and
authority to enter into this Agreement and perform or be subject to each of the
agreements and obligations undertaken by the RSL Companies in this Agreement and
the documents contemplated hereby, and to consummate the transactions
contemplated hereby. Each of the RSL Companies has the necessary Board and
shareholder authorization and approval to execute this Agreement and perform all
corporate action necessary or appropriate to fulfillment of the terms and
conditions of this Agreement. Each of the RSL Companies is duly organized,
validly existing, and in good standing under and by virtue of the laws of its
respective jurisdiction of incorporation. The authorized capital stock of Parent
is twenty million (20,000,000) common shares and twenty million (20,000,000)
preferred shares, of which 2,927,564 common shares are outstanding and 9,243,866
preferred shares are outstanding as of the date of this Agreement. Parent
represents and warrants that no outstanding warrants, options, subscriptions,
calls, demands, commitments, convertible securities or any other arrangement
under which Parent is obligated to issue voting or non-voting common or
preferred shares, except as specified in Schedule A attached hereto.
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4.2. Binding Obligation. This Agreement has been duly executed and
delivered by the RSL Companies and constitutes the RSL Companies' legal, valid
and binding obligation, enforceable against the RSL Companies in accordance with
its terms, except to the extent that such binding effect, validity and
enforceability may be limited by bankruptcy, insolvency and other laws relating
to or affecting creditors' rights generally and by such principles of equity as
a court having jurisdiction may impose.
4.3 Absence of Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
conflict with or result in a breach of the respective Articles of Incorporation
or Bylaws of the RSL Companies; violate any statute, license or regulation of
any governmental authority; result in a breach or default by either of the RSL
Companies under any judgment, order, writ, decree, rule or regulation of any
court or administrative agency to which either of the RSL Companies is bound or
is subject; breach, conflict with, or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, any contract, lease,
agreement, understanding or instrument to which either of the RSL Companies is a
party, or by which either of the RSL Companies is bound; or result in the
imposition of any lien, charge or encumbrance of any nature whatsoever upon, or
give to others any interest or rights, including rights of termination or
cancellation in, or with respect to, any of either of the RSL Companies'
properties, assets, contracts, licenses or businesses.
4.4 Investment Intent. RSL is acquiring the ITG Shares to be transferred
to it under this Agreement for investment and not with a view to the sale or
distribution thereof, and RSL has no commitment or present intention to
liquidate ITG or to sell or otherwise dispose of its stock. RSL understands that
the ITG Shares have not been registered under the Securities Act of 1933 by
reason of a specific exemption from the registration provisions of said Act, the
applicability of which depends upon, among other things, the bona fide nature of
RSL's investment intent and truth of RSL's representations as expressed herein.
4.5. Restricted Securities. RSL understands that the ITG Shares are
"restricted securities" under federal securities laws, inasmuch as they are
being acquired from the Shareholder in a transaction that is not a public
offering; under such laws and applicable regulations, restricted securities may
be resold without registration under the Securities Act of 1933 only under
limited circumstances. RSL understands that (a) there is no public market for
the ITG Shares; (b) there may never be a public market for the ITG Shares; and
(c) even if a public market for the ITG Shares develops, RSL may never be able
to sell or dispose of the ITG Shares in any way and may be forced to bear the
risk of investment in the ITG Shares for a substantial period of time or
forever.
4.6 Legend. It is understood that the certificates evidencing the
ITG Shares shall bear the following legend:
These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such
5
<PAGE>
Act or an opinion of counsel that such registration is not required or
unless sold pursuant to Rule 144 of such Act.
5. Covenants of Parent and RSL
5.1 Within thirty (30) days from the date of this Agreement, Parent shall
contribute to RSL all of the shares of ITG currently owned by Parent.
5.2 At or prior to the date of the Initial Closing, Parent shall
contribute to RSL the number of shares of Parent necessary to complete the
reorganization provided for herein.
5.3. Adjustments Reflecting Issuance of Options. Between the date of
this Agreement and the Closing pursuant to which the last of the RSL Shares are
transferred to the Shareholder and the last of the ITG Shares are transferred to
RSL (the "Final Closing"), Parent may grant options to purchase Parent stock
only to employees of Parent. To the extent that the aggregate amount of shares
represented by such stock options, whether granted before the date of this
Agreement or after the date of this Agreement but before the Final Closing,
exceed 6 1/2% of the total number of shares of Parent voting or non-voting
common and preferred stock outstanding as of the date of this Agreement (the
"Excess Options"), notwithstanding Section 1.1 hereof, the number of Excess
Options shall be added to the number of common and preferred shares of Parent
owned by Parent's current owners for purposes of calculating an increase in the
number of RSL Shares to be received by the Shareholder at all of the Closings
pursuant to this Agreement.
5.4. Treatment of Transaction. Subject to Sections 5.6 and 5.7 below, RSL
shall use its reasonable efforts in good faith to ensure, in consultation with
counsel and to reconcile with RSL's business goals and objectives, that it shall
not perform any action between the date of this Agreement and the Final Closing,
including, without limitation, performance of any transaction involving or
relating to shares of ITG, that would impair the treatment of the transaction
contemplated herein as a reorganization within the meaning of Internal Revenue
Code Secion 368(a)(1)(B).
5.5 RSL Control of ITG. RSL shall use its reasonable efforts in good faith
to ensure, in consultation with Shareholder's counsel and to reconcile with
RSL's business goals and objectives, that between the date of this Agreement and
the Final Closing, it shall not engage in any sale, transfer or disposition of
shares of ITG (a "Disposition Transaction") such that RSL will not, after
consummating the transaction contemplated herein, have "control" of ITG within
the meaning of Internal Revenue Code Section 368(c), except to the extent that
RSL sells all or substantially all of its shares of ITG and the provisions in
the ITG New Shareholders Agreement by and among ITG and the shareholders thereof
regarding "tag-along" rights or "drag-along" obligations are called into effect
with respect to the Shareholder. Subject to and consistent with the foregoing,
if RSL determines to engage in any Disposition Transaction, it shall provide
Shareholder with thirty (30) days prior written notice thereof, detailing the
specifics of the Disposition Transaction, and Shareholder shall, at his option,
at any time prior to the end of said thirty (30) day notice period, have the
right, notwithstanding Sections 2.1 and 2.2 hereof to the contrary, to demand
that a closing occur prior to
6
<PAGE>
RSL's consummation of the Disposition Transaction, and provided further, in the
event that due to the Disposition Transaction and in connection with the
transfer of the RSL Shares for the ITG Shares, the exchange of ITG Shares for
RSL Shares is not reported by the Shareholder and/or does not qualify as a
tax-free reorganization under Internal Revenue Code Section 368(a)(1)(B), then,
in such event, RSL or Parent (as may be determined between RSL and Parent) shall
loan an amount of money to Shareholder ten (10) days in advance of the payment
of his taxes, in the full amount of all Federal and state income taxes payable
by Shareholder with respect thereto. Such loan shall bear interest at the higher
of six percent (6%) per annum or the lowest applicable Federal rate on the date
of this Agreement, with the entire principal balance and accrued interest due
and payable in full contemporaneously with, and only to the extent of (i) the
net after-tax cash proceeds derived from one or more transactions in which the
Shareholder receives cash consideration for the sale of such RSL Shares or any
part thereof; or (ii) the first October 31st following the date on which an
initial offering of shares of Common Stock of Parent to the public (an "IPO") is
consummated, whichever first occurs.
5.6 Corporate Structure. At the time of each Closing, RSL shall be a first
tier subsidiary of Parent.
5.7. Post-Closing Covenant of RSL. In no event shall RSL, either before or
after the Final Closing, liquidate or merge RSL into Parent; provided, however,
that after the Final Closing, RSL may merge or liquidate RSL into Parent with
the consent of Shareholder, such consent not to be unreasonably withheld.
6. Conditions Precedent - RSL
All obligations of RSL under this Agreement are subject, at RSL's option,
to the fulfillment, before or at each of the Closings, of each of the following
conditions:
6.1. The Shareholder's representations and warranties contained in this
Agreement shall be deemed to have been made again at and as of each Closing and
shall then be true in all material respects.
6.2. The Shareholder shall have performed and complied with all the terms
and conditions required by this Agreement to be performed or complied with
before the Closing.
6.3. Incom (UK) Ltd., which enjoys rights of first refusal to purchase
shares in ITG pursuant to a Shareholders Agreement dated September 1, 1994, as
amended, shall have declined to exercise such rights under said agreement, which
the parties hereto acknowledge that Incom has in fact declined in writing to
exercise such rights.
RSL may waive any condition specified in this Section 6 if it executes a
writing so stating at or prior to the corresponding Closing.
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<PAGE>
7. Conditions Precedent - Shareholder
All obligations of the Shareholder under this Agreement are subject, at
the Shareholder's option, to the fulfillment, before or at each of the Closings,
of each of the following conditions:
7.1. RSL's representations and warranties contained in this Agreement
shall be deemed to have been made again at and as of each Closing and shall then
be true in all material respects.
7.2. RSL shall have performed and complied with all the terms and
conditions required by this Agreement to be performed or complied with before
the Closing. RSL shall deliver to the Shareholder complete and accurate copies
of all Board and shareholder resolutions authorizing and approving the execution
and performance of this Agreement.
7.3. RSL shall have received from Parent (a) all of the shares of ITG
owned by Parent as of or prior to the date of this Agreement; and (b) the number
of shares of Parent necessary to complete the reorganization provided herein.
7.4. RSL shall have obtained, at RSL's expense, all necessary and proper
approvals in compliance with any and all applicable federal and state
securities, blue sky and other laws.
7.5. Incom (UK) Ltd., which enjoys rights of first refusal to purchase
shares in ITG pursuant to a Shareholders Agreement dated September 1, 1994, as
amended, shall have declined to exercise such rights under said agreement, which
the parties hereto acknowledge that Incom has in fact declined in writing to
exercise such rights.
The Shareholder may waive any condition specified in this Section 7 if the
Shareholder executes a writing so stating at or prior to the corresponding
Closing.
8. Indemnification
8.1 RSL agrees to indemnify and hold harmless the Shareholder from and
against any and all losses, claims, damages, liabilities, costs, expenses
(including reasonable attorneys' fees and all costs and expenses of enforcing
such right of indemnification against RSL) and penalties, if any, arising out of
or based on or with respect to the breach of any representation or warranty or
covenant made by RSL herein.
8.2 The Shareholder agrees to indemnify and hold harmless RSL, its
directors, officers and employees from and against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees and
all costs and expenses of enforcing such right of indemnification against the
Shareholder) and penalties, if any, arising out of or based on or with respect
to the breach of any representation or warranty or covenant made by the
Shareholder herein.
8
<PAGE>
8.3. The indemnities contained in this Section 8 shall survive until three
years from the date of the Final Closing.
9. Termination
This Agreement may be terminated (1) by mutual consent of the parties in
writing; (2) by either party if there has been a material misrepresentation or
material breach of any warranty or covenant by the other party; or (3) upon the
failure of a condition precedent; provided, however, that in the event of a
failure of such condition precedent (other than those specified in Sections 6.3
and 7.5) the parties shall retain and not be deemed to have waived any rights
and claims arising out of such termination.
10. Miscellaneous Matters
10.1. Survival of Representations and Warranties. The representations,
warranties and covenants of RSL and the Shareholder contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and each of the Closings for six (6) months thereafter.
10.2. Captions. The sections and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning,
interpretation or construction of this Agreement.
10.3. Counterparts; Severability. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof
10.4. Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
10.5. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding choice of law.
10.6. Notices. Any notice to RSL shall be addressed to such party at the
following address:
RSL Communications, Ltd.
767 Fifth Avenue, Suite 4300
New York, NY 10153
9
<PAGE>
with a copy to: Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attention: Robert L. Kohl, Esq.
Any notice to the Shareholder shall be addressed to such party at the
following address:
Charles M. Piluso
c/o International Telecommunications Group, Ltd.
169 EAB Plaza
West Tower, Eighth Floor
Uniondale, NY 11556
with a copy to: Fletcher, Heald & Hildreth, PLC
1300 North 17th Street
Rosslyn, VA 22209
Attention: Eric Fishman, Esq.
10.7. Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties with regard to the specific
subject matter thereof and there are no agreements, understandings,
restrictions, warranties or representations between the parties other than set
forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
/s/ Charles M. Piluso
------------------------------------
Charles M. Piluso
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
--------------------------------
Name: Itzhak Fisher
Title: President
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
--------------------------------
Name: Itzhak Fisher
Title: President
10
<PAGE>
Schedule A
Stock Option Vesting
RSL Communications, Ltd.
Number of outstanding shares: 1,000,000 shares of Common Stock par value $0.01
per share.*
Option Granted:
Karen Van de Vrande: 60,000 shares of Common Stock
Vesting:
(i) 20,000 shares on March 15, 1997.
(ii) 20,000 shares on March 15, 1998.
(iii) 20,000 shares on March 15, 1999.
Mark Hirschhorn: 42,600 shares of Common Stock
Vesting:
(i) 14,200 shares on 1.1.1997.
(ii) 14,200 shares on 1.1.1998.
(iii) 14,200 shares on 1.1.1999.
Nir Tarlovsky **: 400,000 shares of Common Stock vested.
Nesim Bildirici***:250,000 shares of Common Stock all vested.
*The Company is expected to issue additional options at the closing of Senior
Notes.
** Mr. Tarlovsky has agreed not to exercise options to acquire shares of Class A
Common Stock in excess of 2% of the outstanding Class A Common Stock as of the
date on which their current employment agreement expires.
***Mr. Bildirici has agreed not to exercise options to acquire shares of Class A
Common Stock in excess of 1% of the outstanding Class A Common Stock as of the
date on which their current employment agreement expires.
<PAGE>
Exhibit 10.46
TAX AGREEMENT
AGREEMENT (this "Agreement"), dated as of September 9, 1996, between RSL
COMMUNICATIONS PLC, a United Kingdom corporation ("RSL"), RSL COMMUNICATIONS,
LTD., a Bermuda corporation, as successor in interest to RSL Communications,
Inc., a British Virgin Islands corporation ("Parent") and CHARLES M. PILUSO
("Piluso").
W I T N E S S E T H:
WHEREAS, RSL and Piluso have simultaneously herewith entered into that
certain Agreement and Plan of Reorganization, dated as of September 9, 1996,
among RSL, Piluso and Parent (the "Exchange Agreement"), pursuant to which
Piluso shall transfer to RSL up to 15,619 shares of International
Telecommunications Group, Ltd. ("ITG") (the "Transferred Shares") in a
transaction intended by the parties to qualify as a reorganization within the
meaning of Internal Revenue Code ("IRC") Section 368(a)(1)(B) (a "Tax-Free
Reorganization"); and
WHEREAS, the U.S. Internal Revenue Service has not, as of the date hereof,
issued final regulations under Section 367(a) of the U.S. Internal Revenue
Service Code, as amended, relevant to the determination of whether the
transaction contemplated by the Exchange Agreement can be consummated as a
Tax-Free Reorganization and, accordingly, the parties have not yet determined
whether such transaction can be consummated as a Tax-Free Reorganization; and
WHEREAS, Piluso shall continue to consult with his professional advisers
to determine whether the transaction contemplated by the Exchange Agreement can
be consummated as a Tax-Free Reorganization; and
WHEREAS, the parties wish to provide in this Agreement, which Agreement
will come into effect only in the event that a tax adviser to Piluso employed by
Galland, Kharasch, Morse & Garfinkle, P.C., or otherwise, who is acceptable to
RSL (the "Adviser") determines in good faith that the transaction contemplated
by the Exchange Agreement most likely cannot be consummated as a Tax-Free
Reorganization (referred to as a "Tax Determination") that (i) such transaction
will be consummated as a taxable transfer pursuant to the terms of the Exchange
Agreement as modified by this Agreement and (ii) RSL will loan certain monies to
Piluso on the terms and conditions, and under the circumstances, set forth
herein.
NOW, TREREFORE, in consideration of the premises and covenants
contained herein and other good and valuable consideration,
<PAGE>
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Effective Date. This Agreement shall become effective on the
date upon which Piluso gives written notice to the Escrow Agent (defined below),
with a copy to RSL, that the Adviser has reached a Tax Determination. This
Agreement, however, shall, be null and void and of no force and effect ab
initio, on such date as the Transaction is otherwise consummated as a Tax-Free
Reorganization pursuant to the terms of the Exchange Agreement.
Section 2. The Loan. In the event that (i) an initial offering of the
shares of common stock of Parent to the public (an "IPO") has not been
consummated, and (ii) Piluso incurs tax liability arising out of the transfer of
the Transferred Shares pursuant to the Exchange Agreement either (a) by
reporting such liability on returns he files or (b) by virtue of an IRS
assessment being issued or (c) by virtue of RSL, or any affiliate of RSL,
reporting the transaction contemplated by the Exchange Agreement as a taxable
transaction, or (d) as may be determined by Piluso's Adviser (the "Tax
Liability"), promptly upon receipt of a written request therefor specifying the
date on which such Tax Liability is payable (including any applicable
extensions) (the "Tax Payment Date"), RSL or Parent (as they may determine
between them) will loan to Piluso three business days prior to the Tax Payment
Date, pursuant to a promissory note in the form attached hereto as Exhibit A
(the "Note"), monies equal to the amount of the Tax Liability; provided,
however, that such monies shall not exceed U.S. $1,700,000; and provided,
further, that such $1,700,000 or other loan amount shall be further reduced by
any after tax (such tax liability to be evidenced by the relevant year's Form
1040 to be furnished by Piluso to Parent prior to the time of making the Loan)
cash proceeds previously received by Piluso as the result of an RSL Sale (as
defined in the Note) (the "Loan"); and provided further, that the loan amount
may exceed $1,700,000 if the Tax Liability results from a Disposition
Transaction (as defined in the Exchange Agreement) pursuant to paragraph 5.5 of
the Exchange Agreement.
Section 3. Escrow Agreement. This Agreement, including the Note, shall
upon execution be deposited with Rosenman & Colin LLP (the "Escrow Agent")
pursuant to the terms of the Escrow Agreement attached hereto as Exhibit B.
Section 4. Modification of Exchange Agreement. Upon the effectiveness of
this Agreement, the Exchange Agreement shall be modified ab initio as follows:
(a) Sections 5.4, 5.5, 5.6 and 5.7 of the Exchange Agreement shall be
deleted; and
2
<PAGE>
(b) Notwithstanding the triggering events set forth in Section 2.1 of the
Exchange Agreement, a new closing of the transactions contemplated by the
Exchange Agreement will occur at such time as Piluso shall determine.
Section 5. Notices. All notices and other communications given under this
Agreement shall be in writing and shall be deemed to have been duly given (i) on
the date delivered, if delivered personally or by reputable overnight courier
with delivery confirmed or (ii) five days after its deposit in the United States
mail, if sent by registered or certified mail, return receipt requested, postage
prepaid and addressed to the parties as follows:
If to RSL, to:
RSL Communications PLC
767 Fifth Avenue, Suite 4300
New York, New York 10153
Attention: Itzhak Fisher
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert L. Kohl, Esq.
If to Piluso, to:
Charles M. Piluso
EAB Plaza, West Tower, Eighth Floor
Uniondale, New York 11556
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
with a copy to:
Galland, Kharasch, Morse & Garfinkle, P.C.
Canal Square
1054 Thirty First Street, N.W.
Washington, D.C. 20007-4492
Attention: Joseph B. Hoffman, Esq.
or to such other address as any party shall have specified by notice in writing
to the others in compliance with this Section 5 except that any notice
specifying a change in address shall only
3
<PAGE>
be deemed given when actually received. Any notice to the Escrow Agent shall be
copied to all other parties hereto.
Section 6. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without reference to its principles of conflicts of laws.
Section 7. Binding Nature; Assignability. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Notwithstanding the first sentence of this
Section 7, this Agreement may not be assigned by either party without the prior
written consent of the other party.
Section 8. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
Section 9. Enforceability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Agreement would be
held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 10. No Waiver. No delay by the parties in exercising any power or
right hereunder shall operate as a waiver of any power or right, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof, or the exercise of any other power or right hereunder or
otherwise. No
4
<PAGE>
waiver or modification of the terms hereof shall be valid unless set forth in
writing by the parties hereto.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
of the date first written above.
RSL COMMUNICATIONS PLC
By: /s/ Itzhak Fisher
-----------------------------
Name:
Title:
By: /s/ Charles M. Piluso
-----------------------------
Charles M. Piluso
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
-----------------------------
Name:
Title:
5
<PAGE>
EXHIBIT A
SPECIAL PROMISSORY NOTE
$________________ ____________, ___
FOR VALUED RECEIVED, CHARLES M. PILUSO (the "Maker"), hereby promises to
pay to the order of RSL COMMUNICATIONS PLC, a United Kingdom corporation (the
"Holder"), the principal amount of___________________________________($______)
in lawful money of the United States of America, plus any accrued but unpaid
interest through the date of maturity hereof.
1. Payments. The principal amount on this promissory note (the "Note")
shall be due and payable on the earliest date (the "Maturity Date") on which any
of the following circumstances occur:
a. The outstanding principal amount of this Note (and any accrued
but unpaid interest thereon) shall be due and payable on the first October 31
following the date on which an initial offering of the shares of common stock of
RSL Communications, Ltd. (the "RSL Shares") to the public (an "IPO") is
consummated.
b. Regardless of whether an IPO has occurred, in the event that
Piluso from time to time shall sell any RSL Shares for cash consideration (an
"RSL Sale"), such portion of the outstanding principal amount of this Note (and
any accrued but unpaid interest thereon) which is equal to the after tax (such
tax liability to be evidenced by Piluso's Form 1040 for the relevant year, which
Form 1040 shall promptly be furnished by Piluso to the Holder or RSL
Communications, Ltd.) cash proceeds of any RSL Sale shall immediately become due
and payable on the date of receipt of such proceeds from such RSL Sale, and all
such cash after tax proceeds of any such RSL Sale shall be applied to the
payment of all or such portion of the amount due and payable hereunder; and
c. July 20, 2010.
2. Interest. Interest shall accrue on the outstanding principal amount of
this Note at the higher of 6% per annum or the lowest applicable Federal rate on
the date of this Note, from the date hereof to (and including) the Maturity
Date. Such interest shall be payable on the Maturity Date.
<PAGE>
3. Prepayment. This Note may be prepaid, in whole or in part, at any time
or from time to time, without premium or penalty, but with accrued but unpaid
interest through the date of prepayment. All amounts paid by the Maker shall
first be applied to principal due hereunder and then to accrued interest.
4. Payment not on a Business day. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
5. Late Payment Charge. In the event that the Maker fails to make any
payment of principal and/or interest under this Note within 5 days after it
becomes due and payable hereunder, then the Maker shall promptly pay the Holder,
in addition to other amounts owing hereunder, a late payment charge of 5% of
such unpaid and overdue principal and/or interest which was due and payable
hereunder and has not been paid in such 5-day period.
6. Events of Default. For purposes hereof, the occurrence of any of
following events shall constitute an "Event of Default":
(a) Failure to make any payment of principal or interest under this
Note within 5 days after the date when it becomes due and payable; or
(b) If the Maker makes an assignment for the benefit of its
creditors, is adjudicated bankrupt or insolvent, petitions or applies to any
tribunal for the appointment of a trustee or receiver for it or any substantial
part of its assets, commences any proceedings relating to it under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debts,
dissolution or liquidation law, or similar laws, of any jurisdiction, whether
now or hereafter in effect, consents to, approves of or acquiesces in or to any
such petition or application being filed, or any such proceedings commenced
against it, by any other person, or fails to remove any order entered appointing
any trustee or receiver or approving the petition or application in any such
proceedings or decreeing its dissolution or liquidation, within 60 days after
such order is entered.
Subject to the provisions hereof, if an Event of Default set forth
in clause (a) above shall occur and be continuing, the Holder may, without
notice or demand to the Maker, declare the unpaid principal of this Note,
together with accrued and unpaid interest thereon, to become due and payable. If
an Event of Default set forth in clause (b) above shall occur, the
-2-
<PAGE>
unpaid principal of this Note, together with accrued and unpaid interest
thereon, shall immediately become due and payable without notice, demand or
other act on the part of the Holder. The Maker shall notify the Holder of the
occurrence of any Event of Default promptly after the Maker obtains knowledge
thereof.
7. Successors and Assigns. This Note shall inure to the benefit of and be
enforceable by the Holder and its successors and assigns and shall be binding
and enforceable against the Maker and its successors and assigns. In the event
that the Maker assigns its obligations hereunder, the Maker shall immediately
notify the Holder of such assignment and shall remain liable for the fulfillment
of its obligations hereunder.
8. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9. Waivers. The Maker and all endorsers, sureties and guarantors of this
Note hereby jointly and severally waive presentment, demand for payment, notice
of dishonor, notice of protest, and protest in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note.
No delay by the Holder in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise. No waiver or
modification of the terms hereof shall be valid unless set forth in writing by
the Holder.
10. Modification. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Maker
and the Holder and only to the extent set forth therein.
11. Place of Payment. Payments of principal, interest and any other
amounts payable hereunder are to be made to the Holder
-3-
<PAGE>
at 767 Fifth Avenue, Suite 4300, New York, NY 10153, or such other place as the
Holder shall designate to the Maker in writing.
12. Expenses. The Maker shall pay all reasonable costs and expenses,
including reasonable attorneys' fees, incurred by the Holder in collecting or
enforcing this Note.
13. Governing Law; Jurisdiction; Waiver of Jury Trial. This Note shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law. Any action or
proceedings to enforce or arising out of this Note may be commenced in any court
of the State of New York or in the United States District Court for the Southern
District of New York. The Maker agrees that venue will be proper in such courts
in any such matters, and agrees that New York is the most convenient forum for
litigation in any suit, action or legal proceeding. The Maker agrees that a
final judgment in any such action or proceeding may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The Maker hereby waives all right to trial by jury in any action, suit or
proceeding brought to enforce or defend any rights or remedies under this
Agreement.
14. Confessed Judgment. Upon the occurrence of an Event of Default
hereunder, the Maker hereby authorizes any attorney designated by the Holder or
any clerk of any court of record to appear for the Maker in any court of record
and confess judgment against the Maker, without prior hearing, in favor of the
Holder for, and in an amount equal to, the full amount then due and payable by
the Maker hereunder, all other amounts then due and payable by the Maker to the
Holder under the provisions of this Note, costs of suit and attorneys' fees of
15% of the amount of such obligations. In connection therewith, the Maker hereby
releases, to the extent permitted by applicable laws, all errors and all rights
of exemption, appeal, stay of execution, inquisition, and other rights to which
the Maker may otherwise be entitled under the applicable laws now in force and
which may hereafter be enacted, including, without limitation, those of the
United States of America. The authority and power to appear for and enter
judgment against the Maker shall not be exhausted by one or more exercises
thereof or by any imperfect exercise thereof and shall not be extinguished by
any judgment entered pursuant thereto. Such authority may be exercised on one
or more occasions or from time to time in the same or different jurisdictions as
often as the Holder shall deem necessary and desirable, for all of which this
Note shall be sufficient warrant.
-4-
<PAGE>
IN WITNESS WHEREOF, the Maker has executed this Note as of the date first
above written.
By:___________________________
CHARLES M. PILUSO
-5-
<PAGE>
Exhibit 10.47
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
effective the 22nd day of September 1995, by and between CHARLES M. PILUSO, a
resident of the State of New York ("Stockholder") and RSL COMMUNICATIONS, INC.,
a Delaware corporation ("RSL").
W I T N E S S E T H:
WHEREAS, Stockholder owns One Hundred Fifty Three Thousand (153,000) shares
of the issued and outstanding common stock of International Telecommunications
Group, Ltd., a Delaware corporation ("ITG"), par value One Cent ($.01) per
share;
WHEREAS, Stockholder desires to sell Fourteen Thousand Seven Hundred
Seventy Seven (14,777) of his shares in ITG to RSL pursuant to the terms and
conditions stated herein (the "Shares"); and
WHEREAS, RSL desires to purchase the Shares on the terms and conditions
stated herein.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION I - PURCHASE AND SALE OF SHARES
1.01 Purchase and Sale. Subject to and on the terms and conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, Stockholder
<PAGE>
agrees at the Initial Closing (as defined herein) and the Second Closing (as
defined herein) of the transactions contemplated by this Agreement to sell,
transfer, convey, assign and deliver to RSL all of the Shares, and RSL agrees to
purchase from Stockholder all of the Shares, subject to the right of first
refusal of Incom (UK) Ltd. ("Incom") to Five Hundred Nine (509) shares in ITG
(the "Right of First Refusal Shares") pursuant to the Shareholders' Agreement
dated September 1, 1994, as amended, by and between Stockholder, Richard
Rebetti, Incom, RSL and ITG.
1.02 Purchase Price. Subject to adjustment for the Right of First Refusal
Shares as set forth in Section 1.02(b) below, in consideration of the sale,
transfer, conveyance, assignment and delivery of the Shares by Stockholder to
RSL, and in reliance on the representations, warranties and covenants of
Stockholder contained herein, RSL shall pay to Stockholder, at the times
indicated herein, by certified or bank check payable to the order of
Stockholder, One Million Nine Hundred Thirty Nine Thousand Four Hundred Eighty
One Dollars and Twenty Five Cents ($1,939,481.25) at the rate of One Hundred
Thirty One Dollars and Twenty Five Cents ($131.25) for each of the Shares (the
"Purchase Price"), as follows:
(a) One Million Eight Hundred Seventy Two Thousand Six Hundred Seventy Five
Dollars ($1,872,675.00) on the Initial Closing Date (as defined herein); and
(b) Sixty Six Thousand Eight Hundred Six Dollars and Twenty Five Cents
($66,806.25) on the Second Closing Date (as defined herein).
1.03 Closings and Closing Dates. The closing of the purchase and sale of
the Shares other than the Right of First Refusal Shares (the "Initial Closing")
shall occur on September 22, 1995. The date on which the Initial Closing occurs
is herein referred to as the "Initial Closing Date". The
<PAGE>
closing of the purchase and sale of the Right of First Refusal Shares (the
"Second Closing") shall occur on the day following the date on which Incom's
rights of first refusal expire, provided that Incom declines to exercise such
rights of first refusal with respect to the Right of First Refusal Shares. The
date on which the Second Closing occurs is herein referred to as the "Second
Closing Date". The Initial Closing and the Second Closing shall be held at the
offices of ITG at EAB Plaza, West Tower, Eighth Floor, Uniondale, New York
11556-0169 at 10:00 A.M. Eastern Time on the Initial Closing Date and the Second
Closing Date, respectively.
1.04 Closing Obligations.
(a) Stockholder's Obligations. At the Initial Closing, Stockholder
shall deliver to RSL a stock certificate or certificates representing the Shares
other than the Right of First Refusal Shares, duly endorsed or accompanied by
appropriate stock powers executed by Stockholder, free and clear of any liens or
other encumbrances whatsoever, other than restrictions imposed by federal and
state laws generally with respect to unregistered securities. At the Second
Closing, Stockholder shall deliver to RSL a stock certificate or certificates
representing the Right of First Refusal Shares, duly endorsed or accompanied by
appropriate stock powers executed by Stockholder, free and clear of any liens or
other encumbrances whatsoever, other than restrictions imposed by federal and
state laws generally with respect to unregistered securities.
(b) RSL's Obligations. At the Initial Closing, RSL shall deliver to
Stockholder (i) a certified or bank check payable to the order of Stockholder in
the amount of the Purchase Price payable on the Initial Closing Date and (ii) a
promissory note substantially in the form attached hereto and incorporated
herein as Exhibit A (the "Purchase Money Promissory Note").
<PAGE>
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder represents and warrants to RSL, as of the date hereof and as of
the Initial Closing Date with respect to the Shares other than the Right of
First Refusal Shares, and as of the Second Closing Date with respect to the
Right of First Refusal Shares, as follows:
2.01 Authority. Stockholder has adequate power and authority to enter into
and to perform his obligations under this Agreement and to consummate the
transaction contemplated hereby.
2.02 Binding Obligation. This Agreement constitutes the valid, binding and
enforceable obligation of Stockholder, except to the extent that such
enforcement may be limited by bankruptcy, insolvency and other laws now or
hereafter in effect relating to the enforcement of creditors' rights generally,
and except to the extent that equitable principles may limit the right to obtain
specific performance or other equitable remedies.
2.03 No Conflicts. The entry into and performance by Stockholder of this
Agreement will not: (i) violate any judgment, order, law or regulation
applicable to Stockholder; or (ii) result in any breach of, constitute a default
under or result in the creation of any lien, charge, security interest or other
encumbrance on the Shares pursuant to any indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument to which the Stockholder is a
party. The parties acknowledge that all consents and/or waivers to the
transaction contemplated herein as required by the ITG Shareholder's Agreement
dated September 1, 1994, as amended, have been obtained except for Incom's
waiver of its rights of first refusal for which the Right of First Refusal
<PAGE>
Shares have been reserved in the event that Incom elects to purchase its
proportionate share of the Shares.
2.04 Consents. No consent, approval, authorization of, or designation,
declaration or filing with, any governmental authority or other third party is
required on the part of Stockholder in connection with Stockholder's execution,
delivery and performance of this Agreement. The parties acknowledge that all
consents and/or waivers to the transaction contemplated herein as required by
the ITG Shareholder's Agreement dated September 1, 1994, as amended, have been
obtained except for Incom's waiver of its rights of first refusal for which the
Right of First Refusal Shares have been reserved in the event that Incom elects
to purchase its proportionate share of the Shares.
2.05 Ownership of Shares. The Shares are owned legally and beneficially by
Stockholder, free and clear of any liens, charges, pledges, claims, security
interests or other rights of third parties. Stockholder has good and marketable
title to the Shares and has the absolute right, power and capacity to sell,
assign and transfer the Shares to RSL free and clear of any liens, encumbrances,
security interests or other restrictions (other than restrictions imposed
generally by state and federal securities laws with respect to unregistered
securities).
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF RSL
RSL represents and warrants to Stockholder, as of the date hereof and as of
each of the Initial Closing Date and the Second Closing Date, as follows:
<PAGE>
3.01 Organization and Authority. RSL is a corporation duly organized,
validly existing and in good standing under the laws of the British Virgin
Islands with adequate power and authority to enter into and to perform its
obligations under this Agreement and to consummate the transaction contemplated
hereby.
3.02 Binding Obligation. This Agreement constitutes the valid, binding and
enforceable obligation of RSL, except to the extent that such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws now
or hereafter in effect relating to the enforcement of creditors' rights
generally, and except to the extent that equitable principles may limit the
right to obtain specific performance or other equitable remedies.
3.03 No Conflicts. The entry into and performance by RSL of this Agreement
will not: (i) violate any judgment, order, law or regulation applicable to RSL
or any provision of RSL's Restated Certificate of Incorporation or By-Laws; or
(ii) result in any breach of, constitute a default under or result in the
creation of any lien, charge, security interest or other encumbrance on the
Shares pursuant to any indenture, mortgage, deed of trust, bank loan or credit
agreement or other instrument to which RSL is a party.
3.04 Consents. No consent, approval, authorization of, or designation,
declaration or filing with, any governmental authority or other third party is
required on the part of RSL in connection with RSL's execution, delivery and
performance of this Agreement.
3.05 Purpose of Purchase. RSL understands that the Shares are being sold by
Stockholder without registration under the Securities Act of 1933, as amended
(the "Securities Act") or any applicable state securities laws. RSL is entering
into this Agreement with the intent to
<PAGE>
purchase the Shares solely for investment, and RSL does not have any intent to
resell or otherwise distribute or dispose of any of the Shares, and will not
take any action after the Initial Closing or the Second Closing which would
result in a public offering of the Shares or any other distribution of the
Shares in violation of any securities laws or regulations then applicable.
SECTION 4 - CONDITIONS PRECEDENT TO OBLIGATIONS OF RSL
The obligation of RSL to consummate the transaction contemplated by this
Agreement is subject to the satisfaction at or prior to the Initial Closing or
the Second Closing (as the case may be) of each of the following conditions (any
of which may be waived by RSL):
4.01 Representations and Warranties of Stockholder. All representations and
warranties of Stockholder shall be true and correct in all materials respects on
the Initial Closing Date and the Second Closing Date as if then made.
4.02 Deliveries by Stockholder.
(a) At the Initial Closing, Stockholder shall have delivered to RSL
stock certificates representing the Shares other than the Right of First Refusal
Shares, duly endorsed or accompanied by appropriate stock powers executed by
Stockholder in form and substance satisfactory to RSL to convey to RSL good and
marketable title to the Shares other than the Right of First Refusal Shares,
free and clear of all liens, claims and encumbrances.
(b) At the Second Closing, Stockholder shall have delivered to RSL
stock certificates representing the Right of First Refusal Shares, duly endorsed
or accompanied by appropriate stock powers executed by Stockholder in form and
substance satisfactory to RSL to
<PAGE>
convey to RSL good and marketable title to the Right of First Refusal Shares,
free and clear of all liens, claims and encumbrances.
(c) Stockholder shall have executed and delivered an agreement
substantially in the form attached hereto and incorporated herein as Exhibit B
(the "Ancillary Shareholders' Agreement").
(d) Stockholder shall have executed and delivered a First
Amendment to Employment Agreement substantially in the form attached hereto and
incorporated herein as Exhibit C (the "First Amendment to Employment
Agreement").
4.03 No Proceedings. No investigation, action or proceeding by or before
any court or other governmental body shall have been commenced or threatened,
and no inquiry shall have been received that in the opinion of RSL may
reasonably lead to an action or proceeding to restrain or otherwise challenge
the transaction contemplated hereby.
SECTION 5 - CONDITIONS PRECEDENT TO STOCKHOLDER'S OBLIGATIONS
The obligation of Stockholder to consummate the transaction contemplated by
this Agreement is subject to the satisfaction at or prior to the Initial Closing
Date or the Second Closing Date (as the case may be) of each of the following
conditions (any of which may be waived by Stockholder):
5.01 Representations and Warranties of RSL. All representations and
warranties of RSL set forth herein shall be true and correct in all material
respects on the Initial Closing Date and the Second Closing Date as if then
made.
<PAGE>
5.02 Deliveries by RSL.
(a) Stockholder shall have received the portion of the Purchase Price
payable on the Initial Closing Date in accordance with the provisions of Section
1.02(a) hereof.
(b) RSL shall have executed and delivered the Ancillary Shareholders'
Agreement and an Amendment to Stock Purchase Agreement substantially in the form
attached hereto and incorporated herein as Exhibit D (the "Amendment to Stock
Purchase Agreement").
(c) RSL shall have executed and delivered to Stockholder the Purchase
Money Promissory Note.
5.03 No Proceedings. No investigation, action or proceeding by or before
any court or other governmental body shall have been commenced or threatened,
and no inquiry shall have been received that in the opinion of Stockholder may
reasonably lead to an action or proceeding to restrain or otherwise challenge
the transaction contemplated hereby.
5.04 Other Actions.
(a) ITG shall have executed and delivered the First Amendment to
Employment Agreement, the Ancillary Shareholders' Agreement and the Amendment to
Stock Purchase Agreement.
(b) ITG shall have amended its Certificate of Incorporation by filing
with the Delaware Secretary of State the Certificate of Amendment substantially
in the form attached hereto and incorporated herein as Exhibit E.
<PAGE>
SECTION 6 - CLOSING AND POST-CLOSING COVENANTS
6.01 Survival of Representations and Warranties. The representations and
warranties of the parties contained in this Agreement shall survive the Initial
Closing and the Second Closing until the first anniversary of the later of the
Initial Closing Date or the Second Closing Date.
6.02 Indemnification.
(a) Indemnification Obligation of Stockholder. Stockholder agrees to
indemnify and hold harmless RSL, its directors, officers and employees from and
against any and all losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and all costs and expenses of enforcing
such right of indemnification against Stockholder) and penalties, if any,
arising out of or based on or with respect to the breach of any representation
or warranty made by Stockholder herein.
(b) Indemnification Obligation of RSL. RSL agrees to indemnify and
hold harmless Stockholder from and against any and all losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and all costs
and expenses of enforcing such right of indemnification against RSL) and
penalties, if any, arising out of or based on or with respect to the breach of
any representation or warranty made by RSL herein.
(c) Survival of Indemnity Obligations. The indemnities contained in
this Section 6 shall survive until the first anniversary of the later of the
Initial Closing Date or the Second Closing Date.
<PAGE>
SECTION 7 - MISCELLANEOUS
7.01 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns and no other person shall have any right, benefit or
obligation hereunder.
7.02 Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware without regard to whether Delaware would be the governing
law under that state's principles regarding choice of law.
7.03 Captions. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Agreement.
7.04 Waivers and Amendments. Either Stockholder or RSL may by written
notice to the other (i) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement; and (ii) waive performance
of any of the obligations of the other. This Agreement may be amended, modified
or supplemented only by a written instrument executed by the parties hereto.
7.05 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and there are no promises, representations, warranties, covenants or
undertakings of either party to the other with
<PAGE>
respect to such subject matter other than those expressly set forth or referred
to herein. This Agreement supersedes all prior discussions, agreements,
writings, and undertakings between the parties with respect to such subject
matter.
7.06 Notices. All notices that are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered personally or transmitted by telex or telecopier, receipt
acknowledged, or in the case of documented overnight delivery service or
registered or certified mail, return receipt requested, postage prepaid, on the
date shown on the receipt therefor:
If to Stockholder:
Charles M. Piluso
129 Woodmere Boulevard
Woodmere, New York 11598
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
If to RSL:
RSL Communications, Inc.
767 Fifth Avenue
Suite 4200
New York, New York 10153
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Robert L. Kohl, Esq.
<PAGE>
or to such other addresses as either such party shall specify by notice in
accordance herewith to the other.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
STOCKHOLDER:
/s/ Charles M. Piluso
------------------------
Charles M. Piluso
RSL:
RSL COMMUNICATIONS, INC.
By: ____________________
Title: _________________
<PAGE>
or to such other addresses as either such party shall specify by notice in
accordance herewith to the other.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
STOCKHOLDER:
_________________________
Charles M. Piluso
RSL:
RSL COMMUNICATIONS, INC.
By: /s/Itzhak Fisher
----------------
Title: President
-------------
<PAGE>
EXHIBIT A
PURCHASE MONEY PROMISSORY NOTE
$ 66,806.25 September __, 1995
FOR VALUE RECEIVED, the undersigned, RSL COMMUNICATIONS, INC., a British
Virgin Islands corporation (the "Maker"), promises to pay to the order of
CHARLES M. PILUSO (the "Holder") at 129 Woodmere Boulevard, Woodmere, New York
11598, or at such other place as the Holder may from time to time designate in
writing, the principal sum of Sixty Six Thousand Eight Hundred Six Dollars and
Twenty Five Cents ($66,806.25). This Note shall not bear any interest.
As used in this Note, the term "Note" shall mean this note.
The principal sum of this Note shall be due and payable on the day
following the date of expiration of the rights of first refusal of Incom (UK)
Ltd. ("Incom") with respect to the Right of First Refusal Shares (as defined in
the Stock Purchase Agreement of even date herewith between the Holder and Maker
(the "Purchase Agreement")), provided that Incom declines to exercise such
rights of first refusal with respect to the Right of First Refusal Shares. In
the event that Incom elects to exercise such rights of first refusal, this Note
shall be null and void.
All payments received hereon shall be applied: first, to the payment of
late charges, if any, and the balance thereof credited to the principal. The
principal of this Note shall be payable in immediately available funds in lawful
money of the United States that is legal tender for public and private debts at
the time of payment. Any payment by other than immediately available funds that
Holder, at his option, elects to accept shall be subject to collection.
If default be made in the payment of any installment due under this Note,
and Maker shall fail to cure the same within five (5) calendar days after
receipt of written notice thereof, then the entire principal balance hereof
shall at once become due and payable at the option of the Holder of this Note,
provided that failure of the Holder of this Note to exercise this option to
accelerate shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default.
The Maker shall incur a late charge of four percent (4%) of any payment due
under this Note not received within fifteen (15) days of its due date.
The Maker hereof (i) waives presentment, demand, protest and notice of
presentment, notice of protest and notice of any kind respecting this Note; (ii)
<PAGE>
agrees that the Holder hereof, at any time or times, without notice to Maker or
without Maker's consent, may grant extensions of time, without limit as to the
number or the aggregate period of such extensions, for the payment of any
principal and no such extension shall result in any release, discharge,
modification, change of or effect on the liability of Maker under this Note;
(iii) agrees that no release of any security for the payment of this Note shall
release, discharge, modify, change or affect the liability of Maker under this
Note; (iv) to the extent not prohibited by law, waives the benefit of any law or
rule of law intended for Maker's advantage or protection as an obligor hereunder
or providing for Maker's release or discharge from liability hereon, in whole or
in part, on account of any facts or circumstances other than full and complete
payment of all amounts due hereunder; and (v) agrees that this Note shall be
binding on Maker and Maker's successors and assigns; provided, however, that
this Note shall not be assignable by Maker nor assumable by any party without
the Holder's prior written consent.
MAKER HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
INSTITUTED BY OR AGAINST MAKER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
NOTE, THE PURCHASE AGREEMENT OR WHICH ARISES OUT OF OR IS ANY WAY CONNECTED TO
THE RELATIONSHIP BETWEEN MAKER AND HOLDER HEREUNDER.
Maker hereby waives all claims, defenses or setoffs with respect to the
negotiation of this Note or the Purchase Agreement. Maker represents, warrants
and agrees that Holder has made no representations or commitments, oral or
written, or undertaken any obligations other than as expressly set forth in this
Note and the Purchase Agreement.
Maker hereby represents and warrants that the indebtedness evidenced by
this Note is being obtained for the purpose of acquiring and carrying on a
business or commercial enterprise and all proceeds of such indebtedness will be
used solely in connection with such business or commercial enterprise.
The undersigned hereby consents and submits to the jurisdiction of the
courts of the State of New York, and expressly waives any right to challenge the
venue and jurisdiction of any New York court.
Maker hereof promises to pay all costs of collection, including reasonable
attorneys' fees, in the event the Holder incurs any costs in recovering any sum
due under this Note, whether or not suit is filed hereon.
In the event any one or more of the provisions contained in this Note shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall, at the option of the
Holder hereof, not affect any other provision of this Note, but this Note shall
be construed
<PAGE>
as if such invalid, illegal or unenforceable provision had never been contained
herein.
All notices that are required or may be given under this Note shall be in
writing and shall be deemed to have been duly given when delivered personally or
transmitted by telecopier, receipt acknowledged, or in the case of documented
overnight delivery service or registered or certified mail, return receipt
requested, postage prepaid, on the date shown on the receipt therefor:
If to Maker:
RSL Communications, Inc.
767 Fifth Avenue
Suite 4200
New York, New York 10153
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Robert L. Kohl, Esq.
If to Holder:
Charles M. Piluso
129 Woodmere Boulevard
Woodmere, New York 11598
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street, 11th Floor
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
or to such other addresses as either such party shall specify by notice in
accordance herewith to the other.
This Note may not be changed orally but only by an agreement in writing and
signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note shall be interpreted in accordance with the laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed and delivered this Note on the
day and year first above written.
MAKER:
ATTEST: RSL COMMUNICATIONS, INC.
_________________________ By: ____________________
Title: _________________
<PAGE>
EXHIBIT B
ANCILLARY SHAREHOLDERS' AGREEMENT
THIS ANCILLARY SHAREHOLDERS' AGREEMENT (this "Agreement"), dated September
__, 1995, is made by and among CHARLES M. PILUSO ("Piluso"), residing at 129
Woodmere Boulevard, Woodmere, New York 11598, RICHARD REBETTI ("Rebetti"),
residing at 77 Sands Point Road, Port Washington, New York 11050, RSL
COMMUNICATIONS, INC. ("RSL"), a British Virgin Islands corporation with offices
at 767 Fifth Avenue, Suite 4200, New York, New York 10153 (individually a
"Shareholder" and collectively the "Shareholders") and INTERNATIONAL
TELECOMMUNICATIONS GROUP, LTD. ("ITG"), a Delaware corporation with offices at
60 Hudson Street, New York, New York 10013.
W I T N E S S E T H:
WHEREAS, ITG, the Shareholders and Incom (UK) Ltd. ("Incom") entered into a
shareholders' agreement, dated the first day of September, 1994 (the
"Shareholders' Agreement"), as amended by the Amendment to Shareholders'
Agreement dated as of March 10, 1995 (the "First Amendment"), both attached
hereto as Exhibit A with respect to, among other things, the transfer or other
disposition of the authorized and outstanding stock of ITG owned by the
Shareholders and Incom;
WHEREAS, ITG and the Shareholders desire that ITG issue and sell to RSL, up
to Forty Six Thousand Eight Hundred Ninety Five (46,895) shares of its common
stock for One Hundred Thirty One Dollars and Twenty Five Cents ($131.25) per
share; and
WHEREAS, the parties hereto wish to supplement certain aspects of the
relationship between and among them.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Defined Terms. Terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Shareholders' Agreement. The defined term
"Restated Certificate" shall mean the Amended and Restated Certificate of
Incorporation of ITG, dated as of March 9, 1995, as amended by the Certificate
of Amendment dated September __, 1995.
2. Sale and Purchase of ITG Common Stock by RSL. Each of the parties hereto
acknowledge and agree that ITG shall authorize, issue and sell to RSL up to
Forty Six Thousand Eight Hundred Ninety Five (46,895) shares of ITG common stock
for the purchase price of One Hundred Thirty One Dollars and Twenty Five Cents
($131.25) per share paid by RSL to ITG by wire transfer of immediately available
funds. The parties acknowledge that RSL has paid to ITG Six Million Dollars
($6,000,000) prior to the execution of this Agreement in consideration for ITG's
issuance to RSL of Forty Five Thousand Seven Hundred Fourteen (45,714) shares of
ITG's common stock. The balance of RSL's payment due to ITG, if any, and the
corresponding issuance of up to an additional One Thousand One Hundred Eighty
One (1,181) shares of ITG common stock to RSL, shall be governed by the
provisions of Paragraph 4 below. Pursuant to the second paragraph of Article IX
of the Shareholders' Agreement, entitled "Pre-Emptive Rights," RSL, as holder of
a majority in Ownership Interest of all non-employee shareholders of ITG, hereby
consents to the waiver of any pre-emptive
<PAGE>
rights of the shareholders of ITG with respect to ITG's issuance to RSL of up to
Forty Six Thousand Eight Hundred Ninety Five (46,895) shares of its common
stock.
3. Sale by Piluso and Rebetti of ITG Common Stock to RSL. Each of the
parties hereto acknowledge and agree that RSL shall purchase, and Piluso and
Rebetti shall sell, up to Fourteen Thousand Seven Hundred Seventy Seven (14,777)
and up to Two Thousand Three Hundred Sixty Six (2,366), respectively, shares of
common stock in ITG for the purchase price of One Hundred Thirty One Dollars and
Twenty Five Cents ($131.25) per share pursuant to the terms and conditions of
the respective stock purchase agreements between RSL and Piluso and Rebetti.
Pursuant to Section I of the Shareholders' Agreement entitled "Restrictions on
Disposition of Authorized and Outstanding Shares," Piluso waives any rights to
notice or rights of first refusal to purchase Two Thousand Three Hundred Sixty
Six (2,366) shares of Rebetti's common stock being offered for sale to RSL, and
Rebetti waives any rights to notice or rights of first refusal to purchase
Fourteen Thousand Seven Hundred Seventy Seven (14,777) shares of Piluso's common
stock being offered for sale to RSL.
4. Reservation of Shares of Common Stock. If Incom exercises any of its
rights of first refusal pursuant to Section I of the Shareholders' Agreement
entitled "Restrictions on Disposition of Authorized and Outstanding Shares" with
respect to the sales to RSL by Piluso and Rebetti discussed in Paragraph 3
above, the parties acknowledge and agree that ITG shall authorize, issue and
sell to RSL, for the purchase price of One Hundred Thirty One Dollars and Twenty
Five Cents ($131.25) per share, (i) One Thousand Seventeen (1,017) shares of ITG
common stock if Incom exercises its rights of first refusal with respect only to
the sale by Piluso to RSL, (ii) One Hundred Sixty Three (163) shares of ITG
common stock if Incom exercises its rights of first refusal with respect only to
the sale by Rebetti to RSL, and (iii) One Thousand One Hundred Eighty One
(1,181) shares of ITG common stock if Incom exercises its rights of first
refusal with respect to both sales by Piluso and Rebetti to RSL. Any amount due
by RSL under the terms of the preceding sentence shall be paid by RSL to ITG by
wire transfer of immediately available funds on the day following the date that
ITG provides RSL with written notice of the fact that Incom exercised its rights
of first refusal. If Incom declines to exercise its rights of first refusal in
connection with the sales to RSL by Piluso and/or Rebetti, the terms of the
respective stock purchase agreements between RSL and Piluso and Rebetti shall
govern, pursuant to which (y) Piluso shall sell Five Hundred Nine (509) shares
of ITG common stock to RSL if Incom declines to exercise its rights of first
refusal with respect to the sale of ITG common stock by Piluso to RSL and (z)
Rebetti shall sell Eighty Two (82) shares of ITG common stock to RSL if Incom
declines to exercise its rights of first refusal with respect to the sale of ITG
common stock by Rebetti to RSL.
5. Procuring Loans to ITG. RSL agrees to use its best efforts to obtain for
ITG a loan of Eight Million Dollars ($8,000,000) on commercially reasonable
terms to enable ITG to invest in the Mexican deal known as "Geocomm", or any
other acquisitions of additional telecommunications businesses.
6. Initial Public Offering. RSL agrees to use its best efforts to cause,
within twenty four (24) months from the execution of this Agreement, ITG's
shares to be offered for sale on a national securities exchange or to be
designated as national market system securities on an interdealer quotation
system by the National Association of Securities Dealers, Inc., it being
understood that RSL's efforts are required to be expended only to obtain a firm
commitment underwriting by an investment banker of national reputation to
produce aggregate net proceeds to ITG of at least Fifty Million Dollars
($50,000,000).
<PAGE>
7. Composition and Voting of the Board of Directors; Committees.
Notwithstanding Section X of the Shareholders' Agreement as amended by Paragraph
3 of the First Amendment, the parties hereto agree that they shall vote their
ITG shares regarding the composition and voting of the Board of Directors as
follows:
a. Board of Directors. Pursuant to a letter to Piluso sent by Eli
Lior, the Managing Director of Incom, dated June 16, 1995 (the "Incom
Letter"), Incom relinquished its rights to elect two (2) members to
the Board of Directors of ITG and provided that such positions on the
Board of Directors be eliminated unless the majority of the Board of
Directors decided otherwise. The Board of Directors has not decided
otherwise and, therefore, the two (2) Board member positions entitled
to be elected by Incom were eliminated. With such elimination of Board
member positions, and pursuant to the Shareholders' Agreement as
amended by the First Amendment, the Board of Directors is presently to
be comprised of nine (9) members, six entitled to be elected by Piluso
("Piluso Directors") and three (3) entitled to be elected by RSL (the
"RSL Directors"). The parties hereto agree that (i) of the Piluso
Directors, Piluso shall elect any one (1) nominee designated by RSL
and (ii) the sixth (6th) member position of the Board that Piluso is
entitled to elect shall remain vacant unless and until there exists a
deadlock between the Directors on any issue other than those issues
requiring the consent of at least one RSL Director pursuant to
Paragraph (b) below. In the event of any such deadlock, the Board
meeting shall adjourn temporarily, and the Chairman of the Board
immediately shall call a special meeting of the shareholders of ITG or
present a written consent to be signed by all the Shareholders. At
such special meeting of shareholders or pursuant to such written
consent, Piluso shall be permitted to nominate and appoint the sixth
(6th) Board member (the "Additional Member") that Piluso is entitled
to appoint pursuant to the Shareholders' Agreement as amended by the
First Amendment, and the Shareholders shall take all actions to effect
the election of such Additional Member at such special meeting or
pursuant to such written consent. Once the Additional Member of the
Board is elected, and for purposes of the issue with respect to which
such deadlock occurred, all nine (9) Board member positions shall be
filled: five (5) Piluso Directors (including the Piluso elected
nominee of RSL), three (3) RSL Directors and the Additional Member.
Such nine (9) member Board shall reconvene the adjourned meeting as
promptly as possible and consider and vote on the issue with respect
to which a deadlock occurred. Thereafter, the Additional Member shall
promptly resign and the Board shall consist of five (5) Piluso
Directors (including the Piluso elected nominee of RSL) and three (3)
RSL Directors, and one Piluso Director vacancy shall exist until such
time as another deadlock (if any) occurs.
b. Voting by the Board of Directors. None of the following
matters shall be decided without the affirmative vote of at least one
(1) RSL Director or the Piluso elected nominee of RSL: (i)
compensation of Piluso, including any amendments to the Employment
Agreement dated October 25, 1994 and as amended and restated on March
10, 1995 and as further amended on September 22, 1995 by and between
ITG and Piluso and any options or other "perks" for Piluso or Richard
Rebetti or "perks" in excess of Ten Thousand Dollars ($10,000) per
year or options for other ITG officers; (ii) any amendment to ITG's
Restated Certificate or its By-Laws or the adoption of any Certificate
of Designation of any series of preferred stock, and (iii) any action
by the Board of Directors required in connection with (a) the matters
requiring the consent of 33 1/3% of the shares of the Series A
Convertible Preferred Stock of ITG, pursuant to
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<PAGE>
the Restated Certificate or (b) the voting of ITG owned stock in
International Telecommunications Corporation ("ITC") in any ITC
matters analogous to (A) the matters requiring the consent of 33 1/3%
of the holders of the shares of the Series A Convertible Preferred
Stock of ITG pursuant to ITG's Restated Certificate or (B) the matters
requiring the affirmative vote of at least one (1) RSL Director.
c. Termination. The provisions of subsection (b) of this Section
7 shall terminate automatically when the holders of the Series A
Convertible Preferred Stock hold less than ten percent (10%) of ITG's
fully diluted equity, or when all of the Series A Convertible
Preferred Stock is either converted or redeemed, whichever event
occurs first; provided however that if the holders of Series A
Convertible Preferred Stock own less than ten percent (10%), but not
less than five percent (5%), of the then outstanding fully diluted
equity of ITG, then the holders of the Series A Convertible Preferred
Stock shall have the right to attend and comment at all meetings of
the Board of Directors of ITG and shall be given the same notice as is
required by the By-Laws to be given to the directors of ITG (and shall
be sent any written consents at the same time that such consents are
sent to the directors of ITG for signature), but shall not have any
right to vote at such meetings.
d. Remaining Corporate Governance Issues in Shareholders'
Agreement. Each of the parties hereto agrees that it or he will not
seek to implement, and hereby waives any rights such party may
otherwise have to enforce, any provisions in Section X of the
Shareholders' Agreement, as amended by Paragraph 3 of the First
Amendment, concerning shifts in the composition of the Board of
Directors upon the occurrence of certain events. Furthermore, the
parties acknowledge that pursuant to the Incom Letter, Incom
relinquished its rights to elect one (1) member to each of the
committees described in Paragraph 3 of the First Amendment and
provided that such positions be eliminated unless the majority of the
Board of Directors decided otherwise. The Board of Directors has not
decided otherwise, and the parties agree that they shall not form, or
cause to be formed, either of the committees discussed in such
paragraph.
8. Tag-Along Rights
a. The parties agree that, with respect to rights granted by RSL
to Rebetti and Piluso in Paragraph 5 of the First Amendment, the
second sentence of Paragraph 5 of the First Amendment is replaced by
the following:
"RSL agrees that it will not sell or transfer its shares of ITG
or any other securities of ITG that may now or hereafter be held
or owned by it to a third party unless RSL first notifies Piluso
and Rebetti in writing (the "Notice") of its intention to sell
its ITG shares, as well as the proposed sale price per share.
Piluso and Rebetti shall each have the right, within ten (10)
days of the receipt of the Notice, to elect to require the third
party to purchase from them at such sale price per share
specified in the Notice the same proportion of ITG shares held by
each of them as the proportion of ITG shares owned by RSL that
are proposed to be sold to
<PAGE>
the third party. The closing of such sale shall occur at the same
time as the closing of RSL's shares of ITG."
Any tag-along rights granted by RSL to Incom pursuant to the
second sentence of Paragraph 5 of the First Amendment shall remain in
full force and effect.
b. RSL further agrees that in the event substantially all of its
assets are purchased by a third party and such assets purchased
include RSL's shares of ITG, RSL will ensure that such third party
offers to purchase shares of ITG then held by Piluso and/or Rebetti at
the "Purchase Price per Share" (defined in (c) below). Such Purchase
Price per Share shall be payable by the third party in the same form
of consideration as is paid to RSL. The closing of such sale shall
occur at the same time as the closing of the purchase of substantially
all the assets of RSL.
c. The purchase price per share of ITG stock shall be based on an
appraisal, made by a qualified independent appraiser mutually selected
by holders of the Series A Convertible Preferred Stock and Piluso, of
all of the assets sold by RSL to determine the relative value of the
ITG shares included within such assets, it being understood that such
value will constitute a fraction of the total purchase price paid to
RSL. In the event such parties are unable to mutually agree on an
appraiser, each such party shall select one (1) appraiser, and the two
(2) appraisers so selected shall appoint a third appraiser whose
appraisal shall govern the determination of the Purchase Price per
Share. The appraised value of ITG shall be divided by the total number
of shares of ITG stock then outstanding to determine the per share
purchase price of the shares of ITG stock to be purchased by the third
party (the "Purchase Price per Share")."
9. Noncompetition. RSL agrees that it will treat Paragraph 6 of the First
Amendment as if it were amended by deleting the following phrase from the second
to last sentence in Section XII of the Shareholders' Agreement as added by the
First Amendment:
", unless having presented such investment to the Board of Directors
of ITG for its consideration, the Board of Directors has rejected such
direct equity investment"
10. Emplovment Matters. Within ninety (90) days from the date of this
Agreement, the parties agree that they shall cause ITG to retain the services of
a qualified consultant or other professional to advise ITG on restructuring the
company's existing bonus plans and arrangements relating to senior management.
In addition, within ninety (90) days from the date of this Agreement, the
parties agree that they shall cause ITG to make an offer in good faith to
Rebetti of a written employment agreement to include terms and conditions that
are appropriate for an executive of comparable stature in telecommunications
companies similarly situated to ITG, including but not limited to an employment
term of between three (3) to five (5) years and total compensation package of
One Hundred Twenty Five Thousand Dollars ($125,000) annually.
11. Effect on the Shareholders' Agreement. Except as supplemented and
modified by this Agreement, all of the terms and conditions of the Shareholders'
Agreement shall remain in full force and
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<PAGE>
effect. The parties understand and agree that the rights of Incom pursuant to
the Shareholders Agreement, as amended, have not been modified or affected by
this Agreement.
12. Captions. The sections and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Agreement.
13. Counterparts; Severability. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
14. Successors and Assigns. This Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
15. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding choice of law.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
_________________________________
Charles M. Piluso
_________________________________
Richard Rebetti
RSL COMMUNICATIONS, INC.
By: _____________________________
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By: _____________________________
Name:
Title:
<PAGE>
EXHIBIT C
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
(As Amended and Restated as of March 10, 1995)
This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made
this ____ day of September, 1995, by and between International
Telecommunications Group, Ltd., a Delaware corporation (the "Company") with
offices at 60 Hudson Street, New York, New York 10013, and Charles M. Piluso, an
individual residing at 129 Woodmere Boulevard, Woodmere, New York 11598 (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an employment agreement
made as of October 25, 1994 and amended and restated as of March 10, 1995 (the
"Employment Agreement"), attached hereto as Exhibit A; and
WHEREAS, the parties wish to amend certain provisions of the Employment
Agreement as set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in the Employment Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Term of Employment. Section I of the Employment Agreement entitled "Term
of Employment" is amended by deleting the Section in its entirety and
substituting the following in lieu thereof:
"Section I. Term of Employment.
The Company agrees to employ Employee from the date hereof until May 1,
2000, as Chief Executive Officer responsible for continuing the business
heretofore conducted by the Company, as detailed in Section III."
2. Compensation. Subsection A of Section II of the Employment Agreement
entitled "Compensation" is amended by deleting the words and number "One Hundred
Seventy Five Thousand Dollars ($175,000)" and inserting in lieu thereof the
following words and number: "Two Hundred Thousand Dollars ($200,000)".
3. Termination of Employment.
(a) Cause or Early Termination by Employee. Subsection (E)( 1) of
Section VII of the Employment Agreement entitled "Cause or Early
Termination by Employee" is amended by deleting the second sentence of
this subsection in its entirety.
<PAGE>
(b) Good Reason or Early Termination by the Company; Severance.
Subsection (E)(4) of Section VII of the Employment Agreement entitled
"Good Reason or Early Termination by the Company; Severance" is
amended by deleting the period at the end of the last sentence
currently in Subsection (E)(4) and adding the following words: "and
shall also pay Employee the Bonus and Special Bonus due him, if any,
pursuant to Section II.D hereof for the Severance Period. In addition,
but not in limitation thereof, Employee's benefits set forth in
Section VI.B shall continue, at no cost to Employee, for the duration
of the Severance Period; provided, however, that the premiums for the
existing whole life insurance policy currently in force for the
Employee (or any policy hereafter substituted therefor) shall continue
to be paid by the Company until such policy is fully paid even if the
payment of such premiums extends beyond the Severance Period. At the
sole discretion of the Employee, the Employee may sell, and the
Company shall repurchase, any or all of the Employee's stock, and
vested options to purchase stock, of the Company at Fair Market Value
(as defined above) in accordance with the provisions of Section
VII.E.6 below."
(c) Termination by Expiration of Agreement. Subsection (E) of Section
VII of the Employment Agreement is amended by adding the following
provision:
"7. Termination by Expiration of Agreement. Provided that if
Itzhak Fisher ("Fisher") remains associated with the holders
of Preferred Stock at the time this Agreement expires in
accordance with its terms and the Company's stock is not
publicly-traded, Employee shall have the option, in his
sole and absolute discretion, to enter into an annually
renewable (for so long as Fisher remains associated with the
holders of Preferred Stock and the Company's stock is not
publicly-traded) Personal Services Agreement with the
Company pursuant to which the Employee shall continue to
serve as Chairman of the Company's Board of Directors (and
any subsidiaries of the Company) in consideration for annual
compensation equal to the annual Base Salary paid to
-2-
<PAGE>
Employee immediately prior to the expiration of this
Agreement."
4. Contingent Compensation. Exhibit A to the Employment Agreement entitled
"Contingent Compensation" is amended by deleting the first sentence in its
entirety and substituting the following sentence in lieu thereof:
"On January 15, 1997 and on each January 15 during the term of the
Agreement thereafter, the Company, in addition to the Base Salary, any
Special Bonus and any other benefits due to Employee pursuant to the
Agreement, agrees to pay Employee a bonus (the "Bonus") for the
Company's respective calendar years ending 1996, 1997, 1998 and 1999 to
the extent the Company, in such respective calendar year, has achieved
at least 80% to 120% (the "Performance Percentage") of each of the
mutually agreed financial targets."
5. Bonus Plan. Within ninety (90) days from the date of this Amendment, the
Company shall retain the services of a qualified consultant or other
professional to advise the Company on restructuring the Company's existing bonus
plans and arrangements relating to the Employee (and senior management
generally). Notwithstanding the foregoing, the provisions in the Employment
Agreement related to the Employee's bonus shall remain in full force and effect
until such time that the Company and the Employee amend the Employment
Agreement.
6. Effect on the Employment Agreement. Except as specifically amended or
modified herein, all of the terms and conditions of the Employment Agreement
shall remain in full force and effect.
7. Captions. The sections and other headings contained in this Amendment
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Amendment.
8. Counterparts; Severability; This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Amendment is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
9. Successors and Assigns. This Amendment shall be binding on and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns and no other person shall have any right, benefit or
obligation hereunder.
10. Applicable Law. This Amendment and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding
-3-
<PAGE>
choice of law; provided, however, that in the event of a termination of the
Employment Agreement, the parties shall address any claim that such termination
was not valid or permitted by the terms of the Employment Agreement in
accordance with the provisions set forth in Section XIX of the Employment
Agreement entitled "Arbitration".
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of the date first above written.
COMPANY:
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
By: _____________________________
Name:
Title:
EMPLOYEE:
_________________________________
Charles M. Piluso
<PAGE>
EXHIBIT D
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is made on
September __, 1995 by and among INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
("ITG"), INTERNATIONAL TELECOMMUNICATIONS CORPORATION ("ITC"), each a Delaware
corporation with offices at 60 Hudson Street, New York, New York 10013, and RSL
COMMUNICATIONS, INC. ("RSL"), a British Virgin Islands corporation with offices
at 767 Fifth Avenue, Suite 4200, New York, New York 10153.
W I T N E S S E T H:
WHEREAS, pursuant to the Stock Purchase Agreement dated as of March 10,
1995 by and among the parties hereto (the "Purchase Agreement"), the parties
agreed to, among other things, the purchase by RSL of ITG's Series A Convertible
Preferred Stock for Three Million Dollars ($3,000,000), subject to increase, to
a maximum of Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000); and
WHEREAS, RSL has paid the initial Three Million Dollars ($3,000,000) in
full and the parties desire to complete the transactions contemplated in the
Purchase Agreement with respect to the payment of the additional One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000).
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Additional Agreements. The Purchase Agreement is amended by deleting
Section 9.11 in its entirety and substituting the following in lieu thereof:
"Section 9.11 Additional Agreements. The parties hereto further agree as
follows:
(a) Within ten (10) calendar days from the date that the Company and the
Subsidiary each deliver to the Investor a certificate of its respective
President certifying that the Company and the Subsidiary have complied with
its respective obligations set forth in subsections (b) and (c) below, the
Investor shall pay to the Company the additional amount of One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000) as payment in full for
the Convertible Preferred Stock. The parties understand and agree that the
sole condition precedent to the payment of such funds, which the Investor
shall deliver by wire transfer of immediately available funds to the
Company, is the satisfaction by the Company and the Subsidiary of the
filing requirements (i.e., no consent, approval, authorization or grant of
any governmental authority is required) set forth in subsections (b) and
(c) below.
<PAGE>
(b) The Company and/or the Subsidiary shall file the following items
with the appropriate authorities:
(i) Two (2) service mark registration applications pursuant to
Section 7.10 of the Agreement of "International
Telecommunications Corporation" (together with ITC's logo) and
"INTELCO", but only if such service marks are registrable in the
opinion of counsel to the Company;
(ii) All tax returns described in the first sentence of Section
7.11 of the Agreement and Schedule 3.20 hereof;
(iii) A tariff transmittal as described in Section 7.20 of the
Agreement, except that such tariff transmittal shall not be
required to be filed within ten (10) days after Closing or be
approved by the Executive Finance Committee; and
(c) The Company shall provide its audited financial statements for the
1994 calendar year to an insurer for purposes of securing directors'
and officers' liability insurance (provided that such insurance has
not been provided previously by an insurance company)."
2. Effect on the Purchase Agreement. Except as specifically amended or
modified herein, all of the terms and conditions of the Purchase Agreement shall
remain in full force and effect.
3. Captions. The sections and other headings contained in this Amendment
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Amendment.
4. Counterparts; Severability. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Amendment is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
5. Successors and Assigns. This Amendment shall be binding on and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns and no other person shall have any right, benefit or
obligation hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of the date first above written.
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD
By: ____________________________
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS CORPORATION
By: ____________________________
Name:
Title:
RSL COMMUNICATIONS, INC.
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT E
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
International Telecommunications Group, Ltd., a Delaware corporation having
its registered office in the State of Delaware c/o The Company Corporation,
Three Christina Centre, 201 N. Walnut Street, Wilmington, Delaware 19801, New
Castle County (hereinafter called the "Corporation"), hereby certifies to the
Delaware Secretary of State that:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by deleting paragraph 3 of Article FOURTH in its entirety and
substituting the following therefor:
"3. Redemption. On April 30 in each of the years 1998 and 1999, the
Corporation shall redeem fifty percent (50%) of the initial number of
shares of Preferred Stock (or such lesser number then outstanding) at a
price equal to the Initial Conversion Price per share plus any accrued but
unpaid dividends; provided, however, that such redemption shall only be
required to be made on each such date to the extent of the Corporation's
cash flow from operations, as established by the Corporation's audited
financial statements as of December 31 of the year prior to the year in
which each such redemption payment must be made; and provided, further,
that the remainder of any redemption amounts otherwise required to be made
on April 30, 1998 and 1999 shall be payable on April 30, 2000. "Cash flow
from operations" for this purpose shall exclude, for any fiscal period,
extraordinary items reflected in the Corporation's income statement and
capital contributions reflected in the Corporation's balance sheet, and
shall include all of the Corporation's debt service payments of principal
and interest. If holders of the Preferred Stock wish to avoid such
mandatory redemption, they shall convert into Common Stock before such
dates."
SECOND: The Certificate of Incorporation of the Corporation is hereby
further amended by deleting paragraph 8 of Article FOURTH in its entirety and
substituting the following provision in lieu thereof:
"8. Special Voting Required. The following actions may be taken by the
Corporation only with the consent of 33-1/3% of the shares of Preferred
Stock, voting separately as a class: (1) altering, changing or amending any
terms of the Preferred Stock, including the powers, privileges, preferences
or rights of the Preferred Stock; (2) authorizing, issuing, assuming or
guaranteeing any debt in excess of an aggregate of Two Hundred Fifty
Thousand Dollars ($250,000) at one time outstanding (except that such
consent shall not be required for any debt issued in connection with the
purchase of securities from Charles M. Piluso ("Piluso") (or his
<PAGE>
successors) pursuant to Sections VII.E.2, VII.E.3 or VII.E.4 (or any
successor provisions thereto) of the amended and restated Employment
Agreement dated March 10, 1995, as further amended September __, 1995, by
and between the Corporation and Piluso (the "Employment Agreement")), or
authorizing or issuing new shares of equity securities, or authorizing any
shares of Preferred Stock or other stock with rights senior to those of the
Preferred Stock; provided, however, that if the Corporation's shares are
not offered for sale on a national securities exchange or are not
designated as national market system securities on an interdealer quotation
system by the National Association of Securities Dealers, Inc. on or before
September __, 1997, the affirmative vote of at least one (1) Preferred
Stock Director shall not be required for any decision required by the Board
of Directors in connection with the Corporation's shares being offered for
sale on a national securities exchange or being designated as national
market system securities on an interdealer quotation system by the National
Association of Securities Dealers, Inc. if such public offering is pursuant
to a firm commitment underwriting by an investment banker of national
reputation to produce aggregate net proceeds to the Corporation of at least
Fifty Million Dollars ($50,O00,000); (3) merging with or acquiring another
entity or its substantial assets, or selling substantially all of the
assets of the Corporation; (4) engaging in any business other than the
telecommunications business; (5) increasing or decreasing the authorized
number of directors constituting the Board of Directors; (6) the
termination or substitution of members of the Corporation's Board of
Directors to be selected by the holders of Preferred Stock; (7)
repurchasing or redeeming any securities (except that such consent shall
not be required for any purchase of securities from Piluso or his
successors pursuant to Sections VII.E.2, VII.E.3 or VII.E.4 (or any
successor provisions thereto) of the Employment Agreement or the required
redemptions of Preferred Stock); (8) the authorization of any of the
Corporation's assets for personal use (excluding use of the company car, as
provided in the Employment Agreement), and of any transactions between the
Corporation or its subsidiaries and any officers of the Corporation;
provided, however, the term "transaction" for purposes of this subsection
(8) shall mean transactions between the Corporation, Piluso and/or Richard
P. Rebetti ("Rebetti"), in which Piluso and/or Rebetti receive a personal
benefit; and (9) approval of the budget for each fiscal year."
THIRD: The Certificate of Incorporation of the Corporation is hereby
further amended by adding the following provision as paragraph 10 of Article
FOURTH:
"10. Stockholder Voting Requirements. Notwithstanding any other provision
of this Certificate of Incorporation or the By-Laws of the Corporation, a
favorable vote of the holders of at least Fifty One and Three Tenths
Percent (51.30%) of the outstanding shares of the Corporation's common
stock shall be required to approve, adopt or authorize (1) the
authorization or issuance of any shares of equity securities and (2) any
matter presented for a vote of the holders of the Corporation's stock,
including but not limited to, any amendment of this Certificate of
Incorporation."
-2-
<PAGE>
FOURTH: The Certificate of Incorporation of the Corporation is hereby
further amended by adding the following provision as Section 8 of Article
SEVENTH:
"8. Executive Dividend Committee: The Board of Directors shall appoint an
Executive Dividend Committee comprised of all of the Corporation's
directors elected by the holders of Preferred Stock. The Executive Dividend
Committee shall decide all matters by affirmative vote of the majority of
its members. The Board of Directors vests the sole authority to declare and
issue cash dividends to the Executive Dividend Committee; provided,
however, that no cash dividend may be declared by the Executive Dividend
Committee unless the following conditions are satisfied: (a) each share of
Common Stock and Preferred Stock shall be entitled to the same cash
dividend; and (b) the total aggregate amount of money to be distributed as
cash dividends in any one year shall not exceed sixty two percent (62%) of
the Corporation's net cash flow, as established by the Corporation's
audited financial statements as of December 31 of the year prior to the
year in which the Executive Dividend Committee declares such cash
dividends. "Net cash flow" for this purpose shall mean, for any one year,
the net change in the Corporation's sources and uses of funds as decreased
by the Corporation's debt proceeds, insurance proceeds and contributions to
capital."
FIFTH: Section 9 of Article FOURTH is hereby amended by extending the
application of such section to Section 8 of Article SEVENTH (in addition to
Section 8 of Article FOURTH).
SIXTH: The foregoing amendment has been effected in the manner and by the
vote required by the Corporation's Certificate of Incorporation and Section 242
of the General Corporate Law of the State of Delaware. The amendment was set
forth in a resolution adopted and declared advisable by the Board of Directors.
In accordance with the provisions of Section 228 of the General Corporate Law of
the State of Delaware, the stockholders holding a majority of the outstanding
shares of the Corporation entitled to vote thereon have given their written
consent to the amendment and written notice of such consent has been given as
provided in such section.
SEVENTH: Except as amended hereby, the Corporation's Certificate of
Incorporation shall remain in full force and effect.
The President acknowledges this Certificate of Amendment to be the
corporate act and deed of the Corporation and states that the facts set forth in
this Certificate of Amendment are true, and that this statement is made under
the penalties of perjury.
-3-
<PAGE>
IN WITNESS WHEREOF, International Telecommunications Group, Ltd. has caused
this Certificate of Amendment to be signed in its name and on its behalf by its
President, a duly authorized officer of the Corporation, and attested by its
Assistant Secretary effective the ____ day of September, 1995.
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
By: ____________________________
Charles M. Piluso
President
ATTEST:
____________________________
Eric Fishman
Assistant Secretary
<PAGE>
Exhibit 10.48
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
effective the 22nd day of September 1995, by and between RICHARD REBETTI, a
resident of the State of New York ("Stockholder") and RSL COMMUNICATIONS, INC.,
a Delaware corporation ("RSL").
WITNESSETH:
WHEREAS, Stockholder owns Seventeen Thousand (17,000) shares of the issued
and outstanding common stock of International Telecommunications Group, Ltd., a
Delaware corporation ("ITG"), par value One Cent ($.01) per share;
WHEREAS, Stockholder desires to sell Two Thousand Three Hundred Sixth Six
(2,366) of his shares in ITG to RSL pursuant to the terms and conditions stated
herein (the "Shares"); and
WHEREAS, RSL desires to purchase the Shares on the terms and conditions
stated herein.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION I - PURCHASE AND SALE OF SHARES
1.01 Purchase and Sale. Subject to and on the terms and conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, Stockholder agrees at the Initial Closing (as defined herein) and the
Second Closing (as defined herein) of the
<PAGE>
transactions contemplated by this Agreement to sell, transfer, convey, assign
and deliver to RSL all of the Shares, and RSL agrees to purchase from
Stockholder all of the Shares, subject to the right of first refusal of Incom
(UK) Ltd. ("Incom") to Eighty Two (82) shares in ITG (the "Right of First
Refusal Shares") pursuant to the Shareholders' Agreement dated September 1,
1994, as amended, by and between Stockholder, Charles M. Piluso, Incom, RSL and
ITG.
1.02 Purchase Price. Subject to adjustment for the Right of First Refusal
Shares as set forth in Section 1.02(b) below, in consideration of the sale,
transfer, conveyance, assignment and delivery of the Shares by Stockholder to
RSL, and in reliance on the representations, warranties and covenants of
Stockholder contained herein, RSL shall pay to Stockholder, at the times
indicated herein, by certified or bank check payable to the order of
Stockholder, Three Hundred Ten Thousand Five Hundred Thirty Seven Dollars and
Fifty Cents ($310,537.50) at the rate of One Hundred Thirty One Dollars and
Twenty Five Cents ($131.25) for each of the Shares (the "Purchase Price"), as
follows:
(a) Two Hundred Ninety Nine Thousand Seven Hundred Seventy Five
Dollars ($299,775.00) on the Initial Closing Date (as defined herein); and
(b) Ten Thousand Seven Hundred Sixty Two Dollars and Fifty Cents
($10,762.50) on the Second Closing Date (as defined herein).
1.03 Closings and Closing Dates. The closing of the purchase and sale of
the Shares other than the Right of First Refusal Shares (the "Initial Closing")
shall occur on September 22, 1995. The date on which the Initial Closing occurs
is herein referred to as the "Initial Closing Date". The closing of the purchase
and sale of the Right of First Refusal Shares (the "Second Closing") shall
<PAGE>
occur on the day following the date on which Incom's rights of first refusal
expire, provided that Incom declines to exercise such rights of first refusal
with respect to the Right of First Refusal Shares. The date on which the Second
Closing occurs is herein referred to as the "Second Closing Date". The Initial
Closing and the Second Closing shall be held at the offices of ITG at EAB Plaza,
West Tower, Eighth Floor, Uniondale, New York 11556-0169 at 10:00 A.M. Eastern
Time on the Initial Closing Date and the Second Closing Date, respectively.
1.04 Closing Obligations.
(a) Stockholders Obligations. At the Initial Closing, Stockholder
shall deliver to RSL a stock certificate or certificates representing the Shares
other than the Right of First Refusal Shares, duly endorsed or accompanied by
appropriate stock powers executed by Stockholder, free and clear of any liens or
other encumbrances whatsoever, other than restrictions imposed by federal and
state laws generally with respect to unregistered securities. At the Second
Closing, Stockholder shall deliver to RSL a stock certificate or certificates
representing the Right of First Refusal Shares, duly endorsed or accompanied by
appropriate stock powers executed by Stockholder, free and clear of any liens or
other encumbrances whatsoever, other than restrictions imposed by federal and
state laws generally with respect to unregistered securities.
(b) RSL's Obligations. At the Initial Closing, RSL shall deliver to
Stockholder a certified or bank check payable to the order of Stockholder in the
amount of the Purchase Price payable on the Initial Closing Date and (ii) a
promissory note substantially in the form attached hereto and incorporated
herein as Exhibit A (the "Purchase Money Promissory Note").
<PAGE>
SECTION 2 -- REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder represents and warrants to RSL, as of the date hereof
and as of the Initial Closing Date with respect to the Shares other than the
Right of First Refusal Shares, and as of the Second Closing Date with respect to
the Right of First Refusal Shares, as follows:
2.01 Authority. Stockholder has adequate power and authority to
enter into and to perform his obligations under this Agreement and to consummate
the transaction contemplated hereby.
2.02 Binding Obligation. This Agreement constitutes the valid,
binding and enforceable obligation of Stockholder, except to the extent that
such enforcement may be limited by bankruptcy, insolvency and other laws now or
hereafter in effect relating to the enforcement of creditors' rights generally,
and except to the extent that equitable principles may limit the right to obtain
specific performance or other equitable remedies.
2.03 No Conflicts. The entry into and performance by Stockholder of
this Agreement will not: (i) violate any judgment, order, law or regulation
applicable to Stockholder; or (ii) result in any breach of, constitute a default
under or result in the creation of any lien, charge, security interest or other
encumbrance on the Shares pursuant to any indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument to which the Stockholder is a
party. The parties acknowledge that all consents and/or waivers to the
transaction contemplated herein as required by the ITG Shareholder's Agreement
dated September 1, 1994, as amended, have been obtained except for Incom's
waiver of its rights of first refusal for which the Right of First Refusal
<PAGE>
Shares have been reserved in the event that Incom elects to purchase its
proportionate share of the Shares.
2.04 Consents. No consent, approval, authorization of, or
designation, declaration or filing with, any governmental authority or other
third party is required on the part of Stockholder in connection with
Stockholder's execution, delivery and performance of this Agreement. The parties
acknowledge that all consents and/or waivers to the transaction contemplated
herein as required by the ITG Shareholder's Agreement dated September 1, 1994,
as amended, have been obtained except for Incom's waiver of its rights of first
refusal for which the Right of First Refusal Shares have been reserved in the
event that Incom elects to purchase its proportionate share of the Shares.
2.05 Ownership of Shares. The Shares are owned legally and
beneficially by Stockholder, free and clear of any liens, charges, pledges,
claims, security interests or other rights of third parties. Stockholder has
good and marketable title to the Shares and has the absolute right, power and
capacity to sell, assign and transfer the Shares to RSL free and clear of any
liens, encumbrances, security interests or other restrictions (other than
restrictions imposed generally by state and federal securities laws with respect
to unregistered securities).
SECTION 3 -- REPRESENTATIONS AND WARRANTIES OF RSL
RSL represents and warrants to Stockholder, as of the date hereof
and as each of the Initial Closing Date and the Second Closing Date, as follows:
<PAGE>
3.01 Organization and Authority. RSL is a corporation duly
organized, validly existing and in good standing under the laws of the British
Virgin Islands with adequate power and authority to enter into and to perform
its obligations under this Agreement and to consummate the transaction
contemplated hereby.
3.02 Binding Obligation. This Agreement constitutes the valid,
binding and enforceable obligation of RSL, except to the extent that such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
and other laws now or hereafter in effect relating to the enforcement of
creditors' rights generally, and except to the extent that equitable principles
may limit the right to obtain specific performance or other equitable remedies.
3.03 No Conflicts. The entry into and performance by RSL of this
Agreement will not: (i) violate any judgment, order, law or regulation
applicable to RSL or any provision of RSL's Restated Certificate of
Incorporation or By-Laws; or (ii) result in any breach of, constitute a default
under or result in the creation of any lien, charge, security interest or other
encumbrance on the Shares pursuant to any indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument to which RSL is a party.
3.04 Consents. No consent, approval, authorization of, or
designation, declaration or filing with, any governmental authority or other
third party is required on the part of RSL in connection with RSL's execution,
delivery and performance of this Agreement.
3.05 Purpose of Purchase. RSL understands that the Shares are being
sold by Stockholder without registration under the Securities Act of 1933, as
amended (the "Securities Act") or any applicable state securities laws. RSL is
entering into this Agreement with the intent to
<PAGE>
purchase the Shares solely for investment, and RSL does not have any intent to
resell or otherwise distribute or dispose of any of the Shares, and will not
take any action after the Initial Closing or the Second Closing which would
result in a public offering of the Shares or any other distribution of the
Shares in violation of any securities laws or regulations then applicable.
SECTION 4 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF RSL
The obligation of RSL to consummate the transaction contemplated by
this Agreement is subject to the satisfaction at or prior to the Initial Closing
or the Second Closing (as the case may be) of each of the following conditions
(any of which may be waived by RSL):
4.01 Representations and Warranties of Stockholder. All
representations and warranties of Stockholder shall be true and correct in all
materials respects on the Initial Closing Date and the Second Closing Date as if
then made.
4.02 Deliveries by Stockholder.
(a) At the Initial Closing, Stockholder shall have delivered
to RSL stock certificates representing the Shares other than the Right of First
Refusal Shares, duly endorsed or accompanied by appropriate stock powers
executed by Stockholder in form and substance satisfactory to RSL to convey to
RSL good and marketable title to the Shares other than the Right of First
Refusal Shares, free and clear of all liens, claims and encumbrances.
(b) At the Second Closing, Stockholder shall have delivered to
RSL stock certificates representing the Right of First Refusal Shares, duly
endorsed or accompanied by appropriate stock powers executed by Stockholder in
form and substance satisfactory to RSL to
<PAGE>
convey to RSL good and marketable title to the Right of First Refusal Shares,
free and clear of all liens, claims and encumbrances.
(c) Stockholder shall have executed and delivered an agreement
substantially in the form attached hereto and incorporated herein as Exhibit B
(the "Ancillary Shareholders' Agreement").
4.03 No Proceedings. No investigation, action or proceeding by or
before any court or other governmental body shall have been commenced or
threatened, and no inquiry shall have been received that in the opinion of RSL
may reasonably lead to an action or proceeding to restrain or otherwise
challenge the transaction contemplated hereby.
SECTION 5 -- CONDITIONS PRECEDENT TO STOCKHOLDER'S OBLIGATIONS
The obligation of Stockholder to consummate the transaction contemplated
by this Agreement is subject to the satisfaction at or prior to the Initial
Closing Date or the Second Closing Date (as the case may be) of each of the
following conditions (any of which may be waived by Stockholder):
5.01 Representations and Warranties of RSL. All representations and
warranties of RSL set forth herein shall be true and correct in all material
respects on the Initial Closing Date and the Second Closing Date as if then
made.
5.02 Deliveries by RSL.
(a) Stockholder shall have received the portion of the
Purchase Price payable on the Initial Closing Date in accordance with the
provisions of Section 1.02(a) hereof.
<PAGE>
(b) RSL shall have executed and delivered the Ancillary
Shareholders' Agreement and an Amendment to Stock Purchase Agreement
substantially in the form attached hereto and incorporated herein as Exhibit C
(the "Amendment to Stock Purchase Agreement").
(c) RSL shall have executed and delivered to Stockholder the
Purchase Money Promissory Note.
5.03 No Proceedings. No investigation, action or proceeding by or
before any court or other governmental body shall have been commenced or
threatened, and no inquiry shall have been received that in the opinion of
Stockholder may reasonably lead to an action or proceeding to restrain or
otherwise challenge the transaction contemplated hereby.
5.04 Other Actions.
(a) ITG shall have executed and delivered the Ancillary
Shareholders' Agreement and the Amendment to Stock Purchase Agreement.
(b) ITG shall have amended its Certificate of Incorporation by
filing with the Delaware Secretary of State the Certificate of Amendment
substantially in the form attached hereto and incorporated herein as Exhibit D.
SECTION 6 -- CLOSING AND POST-CLOSING COVENANTS
6.01 Survival of Representations and Warranties. The representations
and warranties of the parties contained in this Agreement shall survive the
Initial Closing and the Second Closing until the first anniversary of the later
of the Initial Closing Date or the Second Closing Date.
<PAGE>
6.02 Indemnification.
(a) Indemnification Obligation of Stockholder. Stockholder
agrees to indemnify and hold harmless RSL, its directors, officers and employees
from and against any and all losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and all costs and expenses of
enforcing such right of indemnification against Stockholder) and penalties, if
any, arising out of or based on or with respect to the breach of any
representation or warranty made by Stockholder herein.
(b) Indemnification Obligation of RSL. RSL agrees to indemnify
and hold harmless Stockholder from and against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
all costs and expenses of enforcing such right of indemnification against RSL)
and penalties, if any, arising out of or based on or with respect to the breach
of any representation or warranty made by RSL herein.
(c) Survival of Indemnity Obligations. The indemnities
contained in this Section 6 shall survive until the first anniversary of the
later of the Initial Closing Date or the Second Closing Date.
SECTION 7 -- MISCELLANEOUS
7.01 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding on and inure to the benefit of the
<PAGE>
parties hereto and their respective successors and assigns and no other person
shall have any right, benefit or obligation hereunder.
7.02 Applicable Law. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to whether Delaware would be the
governing law under that state's principles regarding choice of law.
7.03 Captions. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning,
interpretation or construction of this Agreement.
7.04 Waivers and Amendments. Either Stockholder or RSL may by
written notice to the other (i) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement; and (ii) waive performance
of any of the obligations of the other. This Agreement may be amended, modified
or supplemented only by a written instrument executed by the parties hereto.
7.05 Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and there are no promises, representations, warranties, covenants or
undertakings of either party to the other with respect to such subject matter
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior discussions, agreements, writings, and undertakings between
the parties with respect to such subject matter.
<PAGE>
7.06 Notices. All notices that are required or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered personally or transmitted by telex or telecopier, receipt
acknowledged, or in the case of documented overnight delivery service or
registered or certified mail, return receipt requested, postage prepaid, on the
date shown on the receipt therefor:
If to Stockholder:
Richard Rebetti
77 Sands Point Road
Port Washington, New York 11050
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
<PAGE>
If to RSL:
RSL Communications, Inc.
767 Fifth Avenue
Suite 4200
New York, New York 10153
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Robert L. Kohl, Esq.
or to such other addresses as either such party shall specify by notice in
accordance herewith to the other.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
STOCKHOLDER:
/s/ Richard Rebetti
-------------------
Richard Rebetti
RSL:
RSL COMMUNICATIONS, INC.
By: /s/ Itzhak Fisher
---------------------
Title: President
<PAGE>
EXHIBIT A
PURCHASE MONEY PROMISSORY NOTE
$ 10,762.50 September __, 1995
FOR VALUE RECEIVED, the undersigned, RSL COMMUNICATIONS, INC., a
British Virgin Islands corporation (the "Maker"), promises to pay to the order
of RICHARD REBETTI (the "Holder") at 77 Sands Point Road, Port Washington, New
York 11050, or at such other place as the Holder may from time to time designate
in writing, the principal sum of Ten Thousand Seven Hundred Sixty Two Dollars
and Fifty Cents ($10,762.50). This Note shall not bear any interest.
As used in this Note, the term "Note" shall mean this note.
The principal sum of this Note shall be due and payable on the day
following the date of expiration of the rights of first refusal of Incom (UK)
Ltd. ("Incom") with respect to the Right of First Refusal Shares (as defined in
the Stock Purchase Agreement of even date herewith between the Holder and Maker
(the "Purchase Agreement")), provided that Incom declines to exercise such
rights of first refusal with respect to the Right of First Refusal Shares. In
the event that Incom elects to exercise such rights of first refusal, this Note
shall be null and void.
All payments received hereon shall be applied: first, to the payment
of late charges, if any, and the balance thereof credited to the principal. The
principal of this Note shall be payable in immediately available funds in lawful
money of the United States that is legal tender for public and private debts at
the time of payment. Any payment by other than immediately available funds that
Holder, at his option, elects to accept shall be subject to collection.
If default be made in the payment of any installment due under this
Note, and Maker shall fail to cure the same within five (5) calendar days after
receipt of written notice thereof, then the entire principal balance hereof
shall at once become due and payable at the option of the Holder of this Note,
provided that failure of the Holder of this Note to exercise this option to
accelerate shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default.
The Maker shall incur a late charge of four percent (4%) of any
payment due under this Note not received within fifteen (15) days of its due
date.
The Maker hereof (i) waives presentment, demand, protest and notice
of presentment, notice of protest and notice of any kind respecting this Note;
(ii)
<PAGE>
agrees that the Holder hereof, at any time or times, without notice to Maker or
without Maker's consent, may grant extensions of time, without limit as to the
number or the aggregate period of such extensions, for the payment of any
principal and no such extension shall result in any release, discharge,
modification, change of or effect on the liability of Maker under this Note;
(iii) agrees that no release of any security for the payment of this Note shall
release, discharge, modify, change or affect the liability of Maker under this
Note; (iv) to the extent not prohibited by law, waives the benefit of any law or
rule of law intended for Maker's advantage or protection as an obligor hereunder
or providing for Maker's release or discharge from liability hereon, in whole or
in part, on account of any facts or circumstances other than full and complete
payment of all amounts due hereunder; and (v) agrees that this Note shall be
binding on Maker and Maker's successors and assigns; provided, however, that
this Note shall not be assignable by Maker nor assumable by any party without
the Holder's prior written consent.
MAKER HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INSTITUTED BY OR AGAINST MAKER WHICH PERTAINS DIRECTLY OR INDIRECTLY
TO THIS NOTE, THE PURCHASE AGREEMENT OR WHICH ARISES OUT OF OR IS ANY WAY
CONNECTED TO THE RELATIONSHIP BETWEEN MAKER AND HOLDER HEREUNDER.
Maker hereby waives all claims, defenses or setoffs with respect to
the negotiation of this Note or the Purchase Agreement. Maker represents,
warrants and agrees that Holder has made no representations or commitments, oral
or written, or undertaken any obligations other than as expressly set forth in
this Note and the Purchase Agreement.
Maker hereby represents and warrants that the indebtedness evidenced
by this Note is being obtained for the purpose of acquiring and carrying on a
business or commercial enterprise and all proceeds of such indebtedness will be
used solely in connection with such business or commercial enterprise.
The undersigned hereby consents and submits to the jurisdiction of
the courts of the State of New York, and expressly waives any right to challenge
the venue and jurisdiction of any New York court.
Maker hereof promises to pay all costs of collection, including
reasonable attorneys' fees, in the event the Holder incurs any costs in
recovering any sum due under this Note, whether or not suit is filed hereon.
In the event any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall, at the option of
the Holder hereof, not affect any other provision of this Note, but this Note
shall be construed
<PAGE>
as if such invalid, illegal or unenforceable provision had never been contained
herein.
All notices that are required or may be given under this Note shall
be in writing and shall be deemed to have been duly given when delivered
personally or transmitted by telecopier, receipt acknowledged, or in the case of
documented overnight delivery service or registered or certified mail, return
receipt requested, postage prepaid, on the date shown on the receipt therefor:
If to Maker:
RSL Communications, Inc.
767 Fifth Avenue
Suite 4200
New York, New York 10153
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Robert L. Kohl, Esq.
If to Holder:
Richard Rebetti
77 Sands Point Road
Port Washington, New York 11050
with a copy to:
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street, 11th Floor
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
or to such other addresses as either such party shall specify by notice in
accordance herewith to the other.
This Note may not be changed orally but only by an agreement in
writing and signed by the parties against whom enforcement of any waiver,
change, modification or discharge is sought.
This Note shall be interpreted in accordance with the laws of the
State of New York.
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed and delivered this Note
on the day and year first above written.
MAKER:
ATTEST: RSL COMMUNICATIONS, INC.
___________________________ By: _________________________
Title: ______________________
<PAGE>
EXHIBIT B
ANCILLARY SHAREHOLDERS' AGREEMENT
THIS ANCILLARY SHAREHOLDERS' AGREEMENT (this "Agreement"), dated September
__, 1995, is made by and among CHARLES M. PILUSO ("Piluso"), residing at 129
Woodmere Boulevard, Woodmere, New York 11598, RICHARD REBETTI ("Rebetti"),
residing at 77 Sands Point Road, Port Washington, New York 11050, RSL
COMMUNICATIONS, INC. ("RSL"), a British Virgin Islands corporation with offices
at 767 Fifth Avenue, Suite 4200, New York, New York 10153 (individually a
"Shareholder" and collectively the "Shareholders") and INTERNATIONAL
TELECOMMUNICATIONS GROUP, LTD. ("ITG"), a Delaware corporation with offices at
60 Hudson Street, New York, New York 10013.
W I T N E S S E T H:
WHEREAS, ITG, the Shareholders and Incom (UK) Ltd. ("Incom") entered into
a shareholders' agreement, dated the first day of September, 1994 (the
"Shareholders' Agreement"), as amended by the Amendment to Shareholders'
Agreement dated as of March 10, 1995 (the "First Amendment"), both attached
hereto as Exhibit A with respect to, among other things, the transfer or other
disposition of the authorized and outstanding stock of ITG owned by the
Shareholders and Incom;
WHEREAS, ITG and the Shareholders desire that ITG issue and sell to RSL,
up to Forty Six Thousand Eight Hundred Ninety Five (46,895) shares of its common
stock for One Hundred Thirty One Dollars and Twenty Five Cents ($131.25) per
share; and
WHEREAS, the parties hereto wish to supplement certain aspects of the
relationship between and among them.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Defined Terms. Terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Shareholders' Agreement. The defined term
"Restated Certificate" shall mean the Amended and Restated Certificate of
Incorporation of ITG, dated as of March 9, 1995, as amended by the Certificate
of Amendment dated September __, 1995.
2. Sale and Purchase of ITG Common Stock by RSL. Each of the parties
hereto acknowledge and agree that ITG shall authorize, issue and sell to RSL up
to Forty Six Thousand Eight Hundred Ninety Five (46,895) shares of ITG common
stock for the purchase price of One Hundred Thirty One Dollars and Twenty Five
Cents ($131.25) per share paid by RSL to ITG by wire transfer of immediately
available funds. The parties acknowledge that RSL has paid to ITG Six Million
Dollars ($6,000,000) prior to the execution of this Agreement in consideration
for ITG's issuance to RSL of Forty Five Thousand Seven Hundred Fourteen (45,714)
shares of ITG's common stock. The balance of RSL's payment due to ITG, if any,
and the corresponding issuance of up to an additional One Thousand One Hundred
Eighty One (1,181) shares of ITG common stock to RSL, shall be governed by the
provisions of Paragraph 4 below. Pursuant to the second paragraph of Article IX
of the Shareholders' Agreement, entitled "Pre-Emptive Rights," RSL, as holder of
a majority in Ownership Interest of all non-employee shareholders of ITG, hereby
consents to the waiver of any pre-emptive
<PAGE>
rights of the shareholders of ITG with respect to ITG's issuance to RSL of up to
Forty Six Thousand Eight Hundred Ninety Five (46,895) shares of its common
stock.
3. Sale by Piluso and Rebetti of ITG Common Stock to RSL. Each of the
parties hereto acknowledge and agree that RSL shall purchase, and Piluso and
Rebetti shall sell, up to Fourteen Thousand Seven Hundred Seventy Seven (14,777)
and up to Two Thousand Three Hundred Sixty Six (2,366), respectively, shares of
common stock in ITG for the purchase price of One Hundred Thirty One Dollars and
Twenty Five Cents ($131.25) per share pursuant to the terms and conditions of
the respective stock purchase agreements between RSL and Piluso and Rebetti.
Pursuant to Section I of the Shareholders' Agreement entitled "Restrictions on
Disposition of Authorized and Outstanding Shares," Piluso waives any rights to
notice or rights of first refusal to purchase Two Thousand Three Hundred Sixty
Six (2,366) shares of Rebetti's common stock being offered for sale to RSL, and
Rebetti waives any rights to notice or rights of first refusal to purchase
Fourteen Thousand Seven Hundred Seventy Seven (14,777) shares of Piluso's common
stock being offered for sale to RSL.
4. Reservation of Shares of Common Stock. If Incom exercises any of its
rights of first refusal pursuant to Section I of the Shareholders' Agreement
entitled "Restrictions on Disposition of Authorized and Outstanding Shares" with
respect to the sales to RSL by Piluso and Rebetti discussed in Paragraph 3
above, the parties acknowledge and agree that ITG shall authorize, issue and
sell to RSL, for the purchase price of One Hundred Thirty One Dollars and Twenty
Five Cents ($131.25) per share, (i) One Thousand Seventeen (1,017) shares of ITG
common stock if Incom exercises its rights of first refusal with respect only to
the sale by Piluso to RSL, (ii) One Hundred Sixty Three (163) shares of ITG
common stock if Incom exercises its rights of first refusal with respect only to
the sale by Rebetti to RSL, and (iii) One Thousand One Hundred Eighty One
(1,181) shares of ITG common stock if Incom exercises its rights of first
refusal with respect to both sales by Piluso and Rebetti to RSL. Any amount due
by RSL under the terms of the preceding sentence shall be paid by RSL to ITG by
wire transfer of immediately available funds on the day following the date that
ITG provides RSL with written notice of the fact that Incom exercised its rights
of first refusal. If Incom declines to exercise its rights of first refusal in
connection with the sales to RSL by Piluso and/or Rebetti, the terms of the
respective stock purchase agreements between RSL and Piluso and Rebetti shall
govern, pursuant to which (y) Piluso shall sell Five Hundred Nine (509) shares
of ITG common stock to RSL if Incom declines to exercise its rights of first
refusal with respect to the sale of ITG common stock by Piluso to RSL and (z)
Rebetti shall sell Eighty Two (82) shares of ITG common stock to RSL if Incom
declines to exercise its rights of first refusal with respect to the sale of ITG
common stock by Rebetti to RSL.
5. Procuring Loans to ITG. RSL agrees to use its best efforts to obtain
for ITG a loan of Eight Million Dollars ($8,000,000) on commercially reasonable
terms to enable ITG to invest in the Mexican deal known as "Geocomm", or any
other acquisitions of additional telecommunications businesses.
6. Initial Public Offering. RSL agrees to use its best efforts to cause,
within twenty four (24) months from the execution of this Agreement, ITG's
shares to be offered for sale on a national securities exchange or to be
designated as national market system securities on an interdealer quotation
system by the National Association of Securities Dealers, Inc., it being
understood that RSL's efforts are required to be expended only to obtain a firm
commitment underwriting by an investment banker of national reputation to
produce aggregate net proceeds to ITG of at least Fifty Million Dollars
($50,000,000).
<PAGE>
7. Composition and Voting of the Board of Directors Committees.
Notwithstanding Section X of the Shareholders' Agreement as amended by Paragraph
3 of the First Amendment, the parties hereto agree that they shall vote their
ITG shares regarding the composition and voting of the Board of Directors as
follows:
a. Board of Directors. Pursuant to a letter to Piluso sent by Eli
Lior, the Managing Director of Incom, dated June 16, 1995 (the "Incom
Letter"), Incom relinquished its rights to elect two (2) members to the
Board of Directors of ITG and provided that such positions on the Board of
Directors be eliminated unless the majority of the Board of Directors
decided otherwise. The Board of Directors has not decided otherwise and,
therefore, the two (2) Board member positions entitled to be elected by
Incom were eliminated. With such elimination of Board member positions,
and pursuant to the Shareholders' Agreement as amended by the First
Amendment, the Board of Directors is presently to be comprised of nine (9)
members, six entitled to be elected by Piluso ("Piluso Directors") and
three (3) entitled to be elected by RSL (the "RSL Directors"). The parties
hereto agree that (i) of the Piluso Directors, Piluso shall elect any one
(1) nominee designated by RSL and (ii) the sixth (6th) member position of
the Board that Piluso is entitled to elect shall remain vacant unless and
until there exists a deadlock between the Directors on any issue other
than those issues requiring the consent of at least one RSL Director
pursuant to Paragraph (b) below. In the event of any such deadlock, the
Board meeting shall adjourn temporarily, and the Chairman of the Board
immediately shall call a special meeting of the shareholders of ITG or
present a written consent to be signed by all the Shareholders. At such
special meeting of shareholders or pursuant to such written consent,
Piluso shall be permitted to nominate and appoint the sixth (6th) Board
member (the "Additional Member") that Piluso is entitled to appoint
pursuant to the Shareholders' Agreement as amended by the First Amendment,
and the Shareholders shall take all actions to effect the election of such
Additional Member at such special meeting or pursuant to such written
consent. Once the Additional Member of the Board is elected, and for
purposes of the issue with respect to which such deadlock occurred, all
nine (9) Board member positions shall be filled: five (5) Piluso Directors
(including the Piluso elected nominee of RSL), three (3) RSL Directors and
the Additional Member. Such nine (9) member Board shall reconvene the
adjourned meeting as promptly as possible and consider and vote on the
issue with respect to which a deadlock occurred. Thereafter, the
Additional Member shall promptly resign and the Board shall consist of
five (5) Piluso Directors (including the Piluso elected nominee of RSL)
and three (3) RSL Directors, and one Piluso Director vacancy shall exist
until such time as another deadlock (if any) occurs.
b. Voting by the Board of Directors. None of the following matters
shall be decided without the affirmative vote of at least one (1) RSL
Director or the Piluso elected nominee of RSL: (i) compensation of Piluso,
including any amendments to the Employment Agreement dated October 25,
1994 and as amended and restated on March 10, 1995 and as further amended
on September 22 1995 by and between ITG and Piluso and any options or
other "perks" for Piluso or Richard Rebetti or "perks" in excess of Ten
Thousand Dollars ($10,000) per year or options for other ITG officers;
(ii) any amendment to ITG's Restated Certificate or its By-Laws or the
adoption of any Certificate of Designation of any series of preferred
stock; and (iii) any action by the Board of Directors required in
connection with (a) the matters requiring the consent of 33 1/3% of the
shares of the Series A Convertible Preferred Stock of ITG, pursuant to
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<PAGE>
the Restated Certificate or (b) the voting of ITG owned stock in International
Telecommunications Corporation ("ITC") in any ITC matters analogous to (A) the
matters requiring the consent of 33 1/3% of the holders of the shares of the
Series A Convertible Preferred Stock of ITG pursuant to ITG's Restated
Certificate or (B) the matters requiring the affirmative vote of at least one
(1) RSL Director.
c. Termination. The provisions of subsection (b) of this Section 7 shall
terminate automatically when the holders of the Series A Convertible Preferred
Stock hold less than ten percent (10%) of ITG's fully diluted equity, or when
all of the Series A Convertible Preferred Stock is either converted or redeemed,
whichever event occurs first; provided, however, that if the holders of Series A
Convertible Preferred Stock own less than ten percent (10%), but not less than
five percent (5%), of the then outstanding fully diluted equity of ITG, then the
holders of the Series A Convertible Preferred Stock shall have the right to
attend and comment at all meetings of the Board of Directors of ITG and shall be
given the same notice as is required by the By-Laws to be given to the directors
of ITG (and shall be sent any written consents at the same time that such
consents are sent to the directors of ITG for signature), but shall not have any
right to vote at such meetings.
d. Remaining Corporate Governance Issues in Shareholders' Agreement. Each
of the parties hereto agrees that it or he will not seek to implement, and
hereby waives any rights such party may otherwise have to enforce, any
provisions in Section X of the Shareholders' Agreement, as amended by Paragraph
3 of the First Amendment, concerning shifts in the composition of the Board of
Directors upon the occurrence of certain events. Furthermore, the parties
acknowledge that pursuant to the Incom Letter, Incom relinquished its rights to
elect one (1) member to each of the committees described in Paragraph 3 of the
First Amendment and provided that such positions be eliminated unless the
majority of the Board of Directors decided otherwise. The Board of Directors has
not decided otherwise, and the parties agree that they shall not form, or cause
to be formed, either of the committees discussed in such paragraph.
8. Tag-Along Rights.
a. The parties agree that, with respect to rights granted by RSL to
Rebetti and Piluso in Paragraph 5 of the First Amendment, the second sentence of
Paragraph 5 of the First Amendment is replaced by the following:
"RSL agrees that it will not sell or transfer its shares of ITG or any
other securities of ITG that may now or hereafter be held or owned by it
to a third party unless RSL first notifies Piluso and Rebetti in writing
(the "Notice") of its intention to sell its ITG shares, as well as the
proposed sale price per share. Piluso and Rebetti shall each have the
right, within ten (10) days of the receipt of the Notice, to elect to
require the third party to purchase from them at such sale price per share
specified in the Notice the same proportion of ITG shares held by each of
them as the proportion of ITG shares owned by RSL that are proposed to be
sold to
- 4 -
<PAGE>
the third party. The closing of such sale shall occur at the same time as
the closing of RSL's shares of ITG."
Any tag-along rights granted by RSL to Incom pursuant to the second
sentence of Paragraph 5 of the First Amendment shall remain in full force
and effect.
b. RSL further agrees that in the event substantially all of its
assets are purchased by a third party and such assets purchased include
RSL's shares of ITG, RSL will ensure that such third party offers to
purchase shares of ITG then held by Piluso and/or Rebetti at the "Purchase
Price per Share" (defined in (c) below). Such Purchase Price per Share
shall be payable by the third party in the same form of consideration as
is paid to RSL. The closing of such sale shall occur at the same time as
the closing of the purchase of substantially all the assets of RSL.
c. The purchase price per share of ITG stock shall be based on an
appraisal, made by a qualified independent appraiser mutually selected by
holders of the Series A Convertible Preferred Stock and Piluso, of all of
the assets sold by RSL to determine the relative value of the ITG shares
included within such assets, it being understood that such value will
constitute a fraction of the total purchase price paid to RSL. In the
event such parties are unable to mutually agree on an appraiser, each such
party shall select one (1) appraiser, and the two (2) appraisers so
selected shall appoint a third appraiser whose appraisal shall govern the
determination of the Purchase Price per Share. The appraised value of ITG
shall be divided by the total number of shares of ITG stock then
outstanding to determine the per share purchase price of the shares of ITG
stock to be purchased by the third party (the "Purchase Price per
Share")."
9. Noncompetition. RSL agrees that it will treat Paragraph 6 of the First
Amendment as if it were amended by deleting the following phrase from the second
to last sentence in Section XII of the Shareholders' Agreement as added by the
First Amendment:
", unless having presented such investment to the Board of Directors of
ITG for its consideration, the Board of Directors has rejected such direct
equity investment"
10. Employment Matters. Within ninety (90) days from the date of this
Agreement, the parties agree that they shall cause ITG to retain the services of
a qualified consultant or other professional to advise ITG on restructuring the
company's existing bonus plans and arrangements relating to senior management.
In addition, within ninety (90) days from the date of this Agreement, the
parties agree that they shall cause ITG to make an offer in good faith to
Rebetti of a written employment agreement to include terms and conditions that
are appropriate for an executive of comparable stature in telecommunications
companies similarly situated to ITG, including but not limited to an employment
term of between three (3) to five (5) years and total compensation package of
One Hundred Twenty Five Thousand Dollars ($125,00O) annually.
11. Effect on the Shareholders' Agreement. Except as supplemented and
modified by this Agreement, all of the terms and conditions of the Shareholders'
Agreement shall remain in full force and
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<PAGE>
effect. The parties understand and agree that the rights of Incom pursuant to
the Shareholders' Agreement, as amended, have not been modified or affected by
this Agreement.
12. Captions. The sections and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Agreement.
13. Counterparts; Severability. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Agreement is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
14. Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective legal representatives,
heirs, successors and assigns.
15. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to whether New York would be the governing
law under that state's principles regarding choice of law.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
________________________________________
Charles M. Piluso
________________________________________
Richard Rebetti
RSL COMMUNICATIONS, INC.
By: ____________________________________
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT C
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is made on
September __, 1995 by and among INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
("ITG"), INTERNATIONAL TELECOMMUNICATIONS CORPORATION ("ITC"), each a Delaware
corporation with offices at 60 Hudson Street, New York, New York 10013, and RSL
COMMUNICATIONS, INC. ("RSL"), a British Virgin Islands corporation with offices
at 767 Fifth Avenue, Suite 4200, New York, New York 10153.
WITNESSETH:
WHEREAS, pursuant to the Stock Purchase Agreement dated as of March 10,
1995 by and among the parties hereto (the "Purchase Agreement"), the parties
agreed to, among other things, the purchase by RSL of ITG's Series A Convertible
Preferred Stock for Three Million Dollars ($3,000,000), subject to increase, to
a maximum of Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000); and
WHEREAS, RSL has paid the initial Three Million Dollars ($3,000,000) in
full and the parties desire to complete the transactions contemplated in the
Purchase Agreement with respect to the payment of the additional One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000).
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Additional Agreements. The Purchase Agreement is amended by deleting
Section 9.11 in its entirety and substituting the following in lieu thereof:
"Section 9.11 Additional Agreements. The parties hereto further agree as
follows:
(a) Within ten (10) calendar days from the date that the Company and
the Subsidiary each deliver to the Investor a certificate of its
respective President certifying that the Company and the Subsidiary
have complied with its respective obligations set forth in
subsections (b) and (c) below, the Investor shall pay to the Company
the additional amount of One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) as payment in full for the Convertible
Preferred Stock. The parties understand and agree that the sole
condition precedent to the payment of such funds, which the Investor
shall deliver by wire transfer of immediately available funds to the
Company, is the satisfaction by the Company and the Subsidiary of
the filing requirements (i.e., no consent, approval, authorization
or grant of any governmental authority is required) set forth in
subsections (b) and (c) below.
<PAGE>
(b) The Company and/or the Subsidiary shall file the following items
with the appropriate authorities:
(i) Two (2) service mark registration applications pursuant to
Section 7.10 of the Agreement of "International
Telecommunications Corporation" (together with ITC's logo) and
"INTELCO", but only if such service marks are registrable in
the opinion of counsel to the Company;
(ii) All tax returns described in the first sentence of
Section 7.11 of the Agreement and Schedule 3.20 hereof;
(iii) A tariff transmittal as described in Section 7.20 of the
Agreement, except that such tariff transmittal shall not be
required to be filed within ten (10) days after Closing or be
approved by the Executive Finance Committee; and
(c) The Company shall provide its audited financial statements for
the 1994 calendar year to an insurer for purposes of securing
directors' and officers' liability insurance (provided that such
insurance has not been provided previously by an insurance
company)."
2. Effect on the Purchase Agreement. Except as specifically amended or
modified herein, all of the terms and conditions of the Purchase Agreement shall
remain in full force and effect.
3. Captions. The sections and other headings contained in this Amendment
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Amendment.
4. Counterparts; Severability. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Amendment is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
5. Successors and Assigns. This Amendment shall be binding on and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns and no other person shall have any right, benefit or
obligation hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By: ____________________________________
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS CORPORATION
By: ____________________________________
Name:
Title:
RSL COMMUNICATIONS, INC.
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT D
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
International Telecommunications Group, Ltd., a Delaware corporation
having its registered office in the State of Delaware c/o The Company
Corporation, Three Christina Centre, 201 N. Walnut Street, Wilmington, Delaware
19801, New Castle County (hereinafter called the "Corporation"), hereby
certifies to the Delaware Secretary of State that:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by deleting paragraph 3 of Article FOURTH in its entirety and
substituting the following therefor:
"3. Redemption. On April 30 in each of the years 1998 and 1999, the
Corporation shall redeem fifty percent (50%) of the initial number of
shares of Preferred Stock (or such lesser number then outstanding) at a
price equal to the Initial Conversion Price per share plus any accrued but
unpaid dividends; provided, however, that such redemption shall only be
required to be made on each such date to the extent of the Corporation's
cash flow from operations, as established by the Corporation's audited
financial statements as of December 31 of the year prior to the year in
which each such redemption payment must be made; and provided, further,
that the remainder of any redemption amounts otherwise required to be made
on April 30, 1998 and 1999 shall be payable on April 30, 2000. "Cash flow
from operations" for this purpose shall exclude, for any fiscal period,
extraordinary items reflected in the Corporation's income statement and
capital contributions reflected in the Corporation's balance sheet, and
shall include all of the Corporation's debt service payments of principal
and interest. If holders of the Preferred Stock wish to avoid such
mandatory redemption, they shall convert into Common Stock before such
dates."
SECOND: The Certificate of Incorporation of the Corporation is hereby
further amended by deleting paragraph 8 of Article FOURTH in its entirety and
substituting the following provision in lieu thereof:
"8. Special Voting Required. The following actions may be taken by the
Corporation only with the consent of 33-1/3% of the shares of Preferred
Stock, voting separately as a class: (1) altering, changing or amending
any terms of the Preferred Stock, including the powers, privileges,
preferences or rights of the Preferred Stock; (2) authorizing, issuing,
assuming or guaranteeing any debt in excess of an aggregate of Two Hundred
Fifty Thousand Dollars ($250,000) at one time outstanding (except that
such consent shall not be required for any debt issued in connection with
the purchase of securities from Charles M. Piluso ("Piluso") (or his
<PAGE>
successors) pursuant to Sections VII.E.2, VII.E.3 or VII.E.4 (or any
successor provisions thereto) of the amended and restated Employment
Agreement dated March 10, 1995, as further amended September __, 1995, by
and between the Corporation and Piluso (the "Employment Agreement")), or
authorizing or issuing new shares of equity securities, or authorizing any
shares of Preferred Stock or other stock with rights senior to those of
the Preferred Stock; provided, however, that if the Corporation's shares
are not offered for sale on a national securities exchange or are not
designated as national market system securities on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
on or before September __, 1997, the affirmative vote of at least one (1)
Preferred Stock Director shall not be required for any decision required
by the Board of Directors in connection with the Corporation's shares
being offered for sale on a national securities exchange or being
designated as national market system securities on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
if such public offering is pursuant to a firm commitment underwriting by
an investment banker of national reputation to produce aggregate net
proceeds to the Corporation of at least Fifty Million Dollars
($50,000,000); (3) merging with or acquiring another entity or its
substantial assets, or selling substantially all of the assets of the
Corporation; (4) engaging in any business other than the
telecommunications business; (5) increasing or decreasing the authorized
number of directors constituting the Board of Directors; (6) the
termination or substitution of members of the Corporation's Board of
Directors to be selected by the holders of Preferred Stock; (7)
repurchasing or redeeming any securities (except that such consent shall
not be required for any purchase of securities from Piluso or his
successors pursuant to Sections VII.E.2, VII.E.3 or VII.E.4 (or any
successor provisions thereto) of the Employment Agreement or the required
redemptions of Preferred Stock); (8) the authorization of any of the
Corporation's assets for personal use (excluding use of the company car,
as provided in the Employment Agreement), and of any transactions between
the Corporation or its subsidiaries and any officers of the Corporation;
provided, however, the term "transaction" for purposes of this subsection
(8) shall mean transactions between the Corporation, Piluso and/or Richard
P. Rebetti ("Rebetti"), in which Piluso and/or Rebetti receive a personal
benefit; and (9) approval of the budget for each fiscal year."
THIRD: The Certificate of Incorporation of the Corporation is hereby
further amended by adding the following provision as paragraph 10 of Article
FOURTH:
"10. Stockholder Voting Requirements. Notwithstanding any other provision
of this Certificate of Incorporation or the By-Laws of the Corporation, a
favorable vote of the holders of at least Fifty One and Three Tenths
Percent (51.30%) of the outstanding shares of the Corporation's common
stock shall be required to approve, adopt or authorize (1) the
authorization or issuance of any shares of equity securities and (2) any
matter presented for a vote of the holders of the Corporation's stock,
including but not limited to, any amendment of this Certificate of
Incorporation."
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<PAGE>
FOURTH: The Certificate of Incorporation of the Corporation is hereby
further amended by adding the following provision as Section 8 of Article
SEVENTH:
"8. Executive Dividend Committee: The Board of Directors shall appoint an
Executive Dividend Committee comprised of all of the Corporation's
directors elected by the holders of Preferred Stock. The Executive
Dividend Committee shall decide all matters by affirmative vote of the
majority of its members. The Board of Directors vests the sole authority
to declare and issue cash dividends to the Executive Dividend Committee;
provided, however, that no cash dividend may be declared by the Executive
Dividend Committee unless the following conditions are satisfied: (a) each
share of Common Stock and Preferred Stock shall be entitled to the same
cash dividend; and (b) the total aggregate amount of money to be
distributed as cash dividends in any one year shall not exceed sixty two
percent (62%) of the Corporation's net cash flow, as established by the
Corporation's audited financial statements as of December 31 of the year
prior to the year in which the Executive Dividend Committee declares such
cash dividends. "Net cash flow" for this purpose shall mean, for any one
year, the net change in the Corporation's sources and uses of funds as
decreased by the Corporation's debt proceeds, insurance proceeds and
contributions to capital."
FIFTH: Section 9 of Article FOURTH is hereby amended by extending the
application of such section to Section 8 of Article SEVENTH (in addition to
Section 8 of Article FOURTH).
SIXTH: The foregoing amendment has been effected in the manner and by the
vote required by the Corporation's Certificate of Incorporation and Section 242
of the General Corporate Law of the State of Delaware. The amendment was set
forth in a resolution adopted and declared advisable by the Board of Directors.
In accordance with the provisions of Section 228 of the General Corporate Law of
the State of Delaware, the stockholders holding a majority of the outstanding
shares of the Corporation entitled to vote thereon have given their written
consent to the amendment and written notice of such consent has been given as
provided in such section.
SEVENTH: Except as amended hereby, the Corporation's Certificate of
Incorporation shall remain in full force and effect.
The President acknowledges this Certificate of Amendment to be the
corporate act and deed of the Corporation and states that the facts set forth in
this Certificate of Amendment are true, and that this statement is made under
the penalties of perjury.
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<PAGE>
IN WITNESS WHEREOF, International Telecommunications Group, Ltd. has
caused this Certificate of Amendment to be signed in its name and on its behalf
by its President, a duly authorized officer of the Corporation, and attested by
its Assistant Secretary effective the ___ day of September, 1995.
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
By: ________________________
Charles M. Piluso
President
ATTEST:
_________________________________
Eric Fishman
Assistant Secretary
<PAGE>
Exhibit 10.49
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is made on
September 22, 1995 by and among INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
("ITG"), INTERNATIONAL TELECOMMUNICATIONS CORPORATION ("ITC"), each a Delaware
corporation with offices at 60 Hudson Street, New York, New York 10013, and RSL
COMMUNICATIONS, INC. ("RSL"), a British Virgin Islands corporation with offices
at 767 Fifth Avenue, Suite 4200, New York, New York 10153.
WITNESSETH:
WHEREAS, pursuant to the Stock Purchase Agreement dated as of March 10,
1995 by and among the parties hereto (the "Purchase Agreement"), the parties
agreed to, among other things, the purchase by RSL of ITG's Series A Convertible
Preferred Stock for Three Million Dollars ($3,000,000), subject to increase, to
a maximum of Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000);
and
WHEREAS, RSL has paid the initial Three Million Dollars ($3,000,000) in
full and the parties desire to complete the transactions contemplated in the
Purchase Agreement with respect to the payment of the additional One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000).
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Additional Agreements. The Purchase Agreement is amended by deleting
Section 9.11 in its entirety and substituting the following in lieu thereof:
"Section 9.11 Additional Agreements. The parties hereto further agree as
follows:
(a) Within ten (10) calendar days from the date that the Company and
the Subsidiary each deliver to the Investor a certificate of its
respective President certifying that the Company and the Subsidiary
have complied with its respective obligations set forth in
subsections (b) and (c) below, the Investor shall pay to the Company
the additional amount of One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) as payment in full for the Convertible
Preferred Stock. The parties understand and agree that the sole
condition precedent to the payment of such funds, which the Investor
shall deliver by wire transfer of immediately available funds to the
Company, is the satisfaction by the Company and the Subsidiary of
the filing requirements (i.e., no consent, approval, authorization
or grant of any governmental authority is required) set forth in
subsections (b) and (c) below.
<PAGE>
(b) The Company and/or the Subsidiary shall file the following items
with the appropriate authorities:
(i) Two (2) service mark registration applications pursuant to
Section 7.10 of the Agreement of "International
Telecommunications Corporation" (together with ITC's logo) and
"INTELCO", but only if such service marks are registrable in
the opinion of counsel to the Company;
(ii) All tax returns described in the first sentence of
Section 7.11 of the Agreement and Schedule 3.20 hereof;
(iii) A tariff transmittal as described in Section 7.20 of the
Agreement, except that such tariff transmittal shall not be
required to be filed within ten (10) days after Closing or be
approved by the Executive Finance Committee; and
(c) The Company shall provide its audited financial statements for
the 1994 calendar year to an insurer for purposes of securing
directors' and officers' liability insurance (provided that such
insurance has not been provided previously by an insurance
company)."
2. Effect on the Purchase Agreement. Except as specifically amended or
modified herein, all of the terms and conditions of the Purchase Agreement shall
remain in full force and effect.
3. Captions. The sections and other headings contained in this Amendment
are for reference purposes only and shall not affect the meaning, interpretation
or construction of this Amendment.
4. Counterparts; Severability. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. To the extent any
provision or part of a provision of this Amendment is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision or part thereof.
5. Successors and Assigns. This Amendment shall be binding on and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns and no other person shall have any right, benefit or
obligation hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
By: /s/ International Telecommunications
Group, LTD.
-------------------------------------
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS
CORPORATION
By: /s/ International Telecommunications
Corporation
-------------------------------------
Name:
Title:
RSL COMMUNICATIONS, INC.
By: /s/ Itzhak Fisher
-------------------------------------
Name: Itzhak Fisher
Title: President
<PAGE>
Exhibit 10.50
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the
10 day of March, 1995 (the "Effective Date"), by and between INTERNATIONAL
TELECOMMUNICATIONS GROUP, LTD. (the "Company"), and INTERNATIONAL
TELECOMMUNICATIONS CORPORATION ("ITC" or, the "Subsidiary"), each a Delaware
corporation with offices at 60 Hudson Street, New York, New York 10013, and RSL
COMMUNICATIONS, INC., a Delaware corporation (the "Investor") with offices at
767 Fifth Avenue, Suite 4200, New York, New York 10153.
W I T N E S S E T H:
WHEREAS, the Investor has loaned to ITC, a 94%-owned subsidiary of
the Company, the sum of $1,000,000 (the "Loan") and as material consideration
for the Loan, the Company gave to the Investor a promissory note (the "Note");
and
WHEREAS, the Company desires to sell and the Investor desires to
purchase 66,667 shares of Convertible Preferred Stock of the Company at a
Purchase Price of $45.00 per share, subject to adjustment pursuant to Section
9.11 of this Agreement.
NOW, THEREFORE, in consideration for the agreements contained
herein, intending to be legally bound, the Company and the Investor hereby agree
as follows:
ARTICLE I
Purchase and Sale of Convertible Preferred Stock
Section 1.1 Authorization. The Company has or will have, prior to
Closing, authorized the sale and issuance of up to sixty-six thousand six
hundred sixty-seven (66,667) shares of its Series A Convertible Preferred Stock
(the "Convertible Preferred Stock"), having the rights, privileges, preferences
and restrictions as stated in the Amended and Restated Certificate of
Incorporation of the Company (the "Restated Certificate") set forth in Exhibit A
to this Agreement. (The Convertible Preferred Stock being sold and purchased
hereunder is sometimes referred to herein as the "Shares".)
Section 1.2 Sale and Issuance of Preferred Stock. Subject to the
terms and conditions set forth in this Agreement, the Investor agrees to
purchase at the Closing (as defined below), and the Company agrees to sell and
issue to the Investor at the Closing, sixty-six thousand six hundred sixty-seven
<PAGE>
(66,667) shares of its Convertible Preferred Stock at a price per share of
$45.00, payable in cash, for a purchase price to the Investor of Three Million
Dollars ($3,000,000) (the "Purchase Price"), subject to increase, to a maximum
of $4,750,000 as provided in Section 9.11 of this Agreement. At Closing, the
Company and/or ITC shall pay to the Investor all amounts due on the Note,
including accrued interest up to the date of the Closing, from the proceeds of
the sale by the Company of the Convertible Preferred Stock to the Investor, in
full satisfaction of the Loan and Investor shall release its related security
interest and terminate the Promissory Note Conversion Agreement, dated December
1, 1994 and the related Security Agreement, dated December 1, 1994. The
Convertible Preferred Stock shall be convertible at any time (and if converted
prior to May 1, 1995, shall nevertheless be subject to Section 9.11 of this
Agreement) at the holder's option, into the Company's common stock, initially on
a one-for-one basis, representing initially 25% of the outstanding securities of
the Company (including all options which may be granted or exercised), on a
fully diluted basis. The Convertible Preferred Stock shall automatically convert
into the Company's Common Stock in the event of a Qualified IPO (as defined
below). The Convertible Preferred Stock shall have all the rights, privileges,
preferences and restrictions as stated in the Restated Certificate set forth in
Exhibit A attached hereto.
Section 1.3 Required Use of Proceeds. The Company shall utilize all
the proceeds of the Purchase Price as provided in Schedule 1.3 attached hereto.
ARTICLE II
Closing; Delivery
Section 2.1 The Closing. The purchase and sale of the Shares shall
take place at the offices of Rosenman & Colin, 575 Madison Avenue, New York, New
York 10022, at 10:00 A.M., on March 10, 1995 or as soon as practicable
thereafter, or at such other place and at such other time or date as the Company
and the Investor shall agree upon (which place, time and date are designated as
the "Closing").
Section 2.2 Deliveries. At the Closing, the Company shall deliver to
the Investor a certificate or certificates representing the Convertible
Preferred Stock being purchased by the Investor, registered in its name, in
exchange for delivery to the Company by the Investor of the Purchase Price by
check made payable to the order of the Company or wire transfer to an account or
accounts previously designated in writing by the Company at least two days prior
to the Closing.
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<PAGE>
ARTICLE III
Representations and Warranties of the Company
Except as set forth in the Schedules attached hereto, which describe
the nature of the exception in reasonable detail and which specifically refer to
the Section of this Agreement to which such exception applies (the "Schedules"),
the Company, notwithstanding the Investor's own audit or investigation, hereby
represents and warrants to the Investor as follows:
Section 3.1 Organization, Good Standing and Qualification. Each of
the Company and the Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and each has all
requisite corporate power and authority to own and operate its respective
properties and assets and to carry on its respective businesses as now
conducted. Each of the Company's other affiliates listed in Schedule 3.1 (the
"Other Affiliates") is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its respective organization and each has
all requisite power and authority to own and operate its respective properties
and assets and to carry on its respective businesses as now conducted. Each of
the Company, the Subsidiary and the Other Affiliates (collectively, the
"Entities") is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on its respective business, properties or financial condition.
Each of Intelco Caribe, Ltd., INTACS, Ltd., Intelco Jordan and Gilbert
International Ltd. is a corporation or a partnership that has no assets,
conducts no business and is currently inactive.
Section 3.2 Capitalization and Voting Rights. The authorized capital
of the Company consists of:
(a) Preferred Stock. There are authorized 66,667 shares of
Preferred Stock (the "Preferred Stock"), all of which have been designated as
Series A Convertible Preferred Stock and have the designation, rights and
privileges as set forth in Exhibit A to this Agreement. No other shares of
Preferred Stock are authorized, issued or outstanding. The Restated Certificate
has been duly adopted and filed with the Secretary of State of the State of
Delaware. The shares of Series A Convertible Preferred Stock have been duly
authorized, and upon receipt by the Company of the Purchase Price at the Closing
will be validly issued and delivered, fully paid and nonassessable, and free
from restrictions on transfer except as set forth in this Agreement and each of
the other agreements referred to herein, or attached as Exhibits hereto, to be
entered into at or prior to the Closing (the "Other Agreements").
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<PAGE>
(b) Common Stock. There are authorized one million (1,000,000)
shares of common stock, (the "Common Stock"), of the Company, par value $0.01
per share, of which 200,000 shares of Common Stock have been duly authorized,
validly issued and are outstanding. There are authorized three thousand (3,000)
shares of common stock, of ITC, no par value, of which 2,880 shares of common
stock have been duly authorized, validly issued and are outstanding. The
outstanding shares of common stock of both the Company and the Subsidiary are
fully paid, nonassessable and have been issued in compliance with all state and
federal securities laws except for matters addressed in Section 7.13 of this
Agreement. The Common Stock issuable upon conversion of the Convertible
Preferred Stock (the "Conversion Stock") has been duly and validly authorized
and reserved for issuance and, upon issuance in accordance with the terms of the
Restated Certificate, will be duly and validly issued, fully paid and
non-assessable and will be free of restrictions on transfer, other than
restrictions on transfer set forth in this Agreement and the Other Agreements.
(c) Except for (i) the conversion privileges of the
Convertible Preferred Stock, (ii) the rights provided in this Agreement and
(iii) except as provided in Schedule 3.2(c) attached hereto, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights, except that Incom (UK), Ltd., Charles M. Piluso and Richard Rebetti have
preemptive rights pursuant to an agreement with the Company) or agreements for
the purchase or acquisition from any of the Entities of any shares of its
respective capital stock. Except as provided in this Agreement, none of the
Entities is a party or subject to, any agreement or understanding, and to the
best knowledge of the Company, there is no agreement or understanding, between
any persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any of the Entities' voting securities or
securities convertible into such voting securities.
Section 3.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association or other business entity or have any subsidiaries and at the time of
the Closing will not be, a participant in any joint venture, partnership or
similar arrangement, except as specified in Schedule 3.3 attached hereto.
Schedule 3.3 includes a listing of the ownership, both as to type and
percentage, directly and indirectly owned by the Company in any of the other
Entities and sets forth the names and ownership of any of the shareholders of
the other Entities.
4
<PAGE>
Section 3.4 Authorization.
(a) Each of the Company and the Subsidiary has all corporate
and other requisite authority to execute, deliver, carry out and perform its
obligations under the terms of this Agreement and the Other Agreements to which
it is a party and all of the transactions contemplated hereunder and thereunder,
including, without limitation, the sale and issuance of the Convertible
Preferred Stock to the Investor.
(b) This Agreement and the Other Agreements, when executed and
delivered by the Company and/or the Subsidiary, will constitute valid and
binding obligations of the Company and/or the Subsidiary, enforceable in
accordance with their respective terms, except as (a) the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or
similar laws affecting the enforcement of creditors' or secured parties' rights
or debtors' obligations generally, and (b) the availability of specific
performance or other equitable remedies may be limited by equitable principles
of general applicability (whether in a court of law or in equity).
Section 3.5 Governmental and Other Consents. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental authority
or any other third party is required on the part of the Company or the
Subsidiary in connection with the Company's and the Subsidiary's valid
execution, delivery and performance of this Agreement or the Other Agreements,
or the offer, sale or issuance of the Convertible Preferred Stock or the
Conversion Stock by the Company to the Investor; provided, however, that prior
approval by the FCC may be required to enable the Investor to exercise certain
of its rights granted under this Agreement and the Other Agreements which may
give rise to a "transfer of control."
Section 3.6 Litigation; Compliance with Law. Except as provided on
Schedule 3.6 attached hereto, there are no actions, suits, proceedings or
investigations pending (a) against any of the Entities or against the assets,
properties or business of any of the Entities which could have a material
adverse effect on the business, properties, assets or financial condition of any
such Entity, including, without limitation, any action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened in which
it is sought to restrain, prohibit, invalidate or put aside, in whole or in
part, the transactions contemplated hereby or by any of the Other Agreements,
(b) which questions the validity of this Agreement or any of the Other
Agreements or of any action taken or to be taken by any of the Entities pursuant
to or in connection with the provisions of this Agreement or any of the Other
Agreements and the transactions
5
<PAGE>
contemplated hereby or thereby or (c) which would otherwise prevent or
materially hinder the consummation of this Agreement or any of the Other
Agreements. None of the Entities is a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality that would reasonably be expected to have a material adverse
effect on the respective Entities' business, assets, properties or financial
condition. There is no action, suit, proceeding or investigation by any of the
Entities currently pending or, to the knowledge of the Company, threatened or
that such Entity currently intends to initiate, which, if determined adversely
to such Entity, could reasonably be expected to have a material adverse effect
on the business, assets, properties or financial condition of any such Entity.
"Material" for this purpose shall be a $150,000 claim in any one lawsuit.
"Pending" for this purpose shall mean an action, suit, proceeding or
investigation as to which the Entity shall have knowledge or received notice,
whether in proper form or not. Except as set forth on Schedule 3.6, none of the
Entities is in material violation of any applicable statute, law or regulation
relating to its or their business operations and no material expenditures will
be required in order to comply with any such existing statute, law or
regulation.
Section 3.7 Registration Rights. The Company is not a party to any
agreement or commitment which obligates the Company to register under the
Securities Act of 1933, as amended (the "Securities Act") any of its presently
outstanding securities or any of its securities which may hereafter be issued
other than pursuant to the Registration Rights Agreement attached hereto as
Exhibit D.
Section 3.8 Contracts; Certain Actions.
(a) Contracts. Except as set forth in Schedule 3.8(a) attached
hereto (which Schedule shall include all operating, carrier and service
agreements and like agreements), neither the Company nor the Subsidiary is a
party to any contract, agreement, lease, commitment or instrument, proposed or
otherwise, written or oral, absolute or contingent, other than (i) contracts
that were entered into in the ordinary course of business and that do not
involve more than $100,000, (ii) sales contracts entered into in the ordinary
course of business and (iii) contracts terminable at will by the Company or the
Subsidiary, respectively, with no more than ninety (90) days' notice without
cost or liability to the Company or the Subsidiary, respectively, and that do
not involve any employment or consulting arrangement and are not material to the
conduct of the Company's or the Subsidiary's respective business. For the
purpose of this Subsection, employment and consulting contracts, contracts with
labor unions, license agreements and any other
6
<PAGE>
agreements relating to the acquisition or disposition of the Company's
technology (other than standard end-user license agreements) shall not be
considered to be contracts entered into in the ordinary course of business.
Except as set forth on Schedule 3.8(a), all material contracts of the Company
and the Subsidiary, respectively, set forth on Schedule 3.8(a) attached hereto,
are valid and binding as to the Company or the Subsidiary respectively, and are
in full force and effect and shall remain in full force and effect upon and
after giving effect to consummation of the transactions contemplated herein,
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance or similar laws affecting the
enforcement of creditors' or secured parties' rights or debtors' obligations
generally, and (b) the availability of specific performance or other equitable
remedies may be limited by equitable principles of general applicability
(whether in a court of law or in equity).
(b) Certain Actions. Except as set forth in Schedule 3.8(b)
attached hereto, neither the Company nor the Subsidiary has, since January 1,
1995 (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or any other liabilities individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate, (iii)
made any loans or advances to any person, other than advances for business or
travel expenses in aggregate of $5,000 or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights other than in the ordinary course of
business.
Section 3.9 Patents, Trademarks. There are no pending or, to the
knowledge of the Company, threatened claims against any of the Entities alleging
that the conduct of any of the Entities or their respective businesses,
infringes or conflicts with the rights of others under patents, trademarks,
service marks, copyrights and trade secrets, where any such infringement or
conflict could be reasonably expected to have a material adverse effect on the
business, assets, properties, prospects or financial condition of any of the
Entities, respectively. "Pending" for this purpose shall mean an action, suit,
proceeding or investigation as to which the Entity shall have knowledge or
received notice, whether in proper form or not. To the Company's knowledge, the
businesses of the Entities do not and will not infringe or conflict with the
rights of others, including rights under patents, trademarks, service marks,
copyrights and trade secrets where any such infringement or conflict could be
reasonably expected to have a material adverse effect on the business, assets,
properties, prospects or financial condition of such Entity and each of the
Entities owns or has rights to use
7
<PAGE>
all the patents, copyrights, trademarks, trade names, service marks, licenses
and rights with respect to the foregoing necessary for the operation of its or
their businesses. The Company is not aware of any infringement by a third party,
of any of the Entities' patents, licenses, trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary rights where any such
infringement or conflict could be reasonably expected to have a material adverse
effect on the business, assets, properties, prospects or financial condition of
such Entity. Schedule 3.9 contains a complete list of all registered patents,
trademarks, trade names, service marks, licenses (excluding the Federal
Communications Commission ("FCC") licenses listed on Schedule 3.12), operating
agreements, other proprietary information and copyright registrations (and
applications pending for such proprietary rights) of the Entities.
Section 3.10 Compliance with Other Instruments. Except as set forth
on Schedules 3.8(a) and 3.10 attached hereto, neither the Company nor the
Subsidiary is in violation or default of any provisions of its respective
Certificate of Incorporation, as currently in effect and as in effect
immediately prior to and after the filing of the Restated Certificate or its
respective Bylaws, or in material violation or material default of any
instrument, judgment, order, writ, decree or oral or written contract or other
agreement to which it or the Other Affiliates is a party or by which it or the
Other Affiliates is bound (including, without limitation, any contract set forth
in the Schedules) or of any provision of federal, state or local statute, rule
or regulation applicable to the Entities where such violation or default could
have a material adverse effect on its respective business, assets, properties or
financial condition of such Entity. The execution, delivery and performance of
this Agreement and the Other Agreements, and the consummation of the
transactions contemplated hereby, will not result in any such violation or be in
conflict with the Restated Certificate, the Company's or the Subsidiary's Bylaws
or any such provision, or be in conflict with any instrument, judgment, order,
writ, decree, contract or other agreement and will not be an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Entities.
Section 3.11 Licenses and Permits. Except as set forth on Schedule
3.11 attached hereto, the Entities have all franchises, permits, licenses and
any similar authority necessary or legally required for the conduct of their
respective businesses as now being conducted by them. Except as set forth on
Schedule 3.11, the Entities are not in default in any material respect under any
of such franchises, permits, licenses or other similar authority.
8
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Section 3.12 Communications Licenses and Regulations. All of the
material certificates, licenses, permits, franchises and other authorizations
(collectively, the "Communications Licenses") issued to the Entities by the
communications regulatory authorities of any federal, state, local or foreign
government, including, but not limited to, the FCC and state public utility
commissions or like agencies (collectively, the "Regulatory Authorities"), are
listed in Schedule 3.12 attached hereto. The Company represents and warrants
that (i) each and every Communications License is in full force and effect
except as set forth on Schedule 3.12 attached hereto; (ii) the Communications
Licenses constitute all of the material certificates, licenses, permits,
franchises and authorizations necessary or legally required for the conduct of
the Entities' respective businesses as now being conducted by them; (iii) except
as set forth in Schedule 3.12 attached hereto, the Entities comply in all
material respects with any and all applicable federal, state, municipal or
foreign statutes, rules, regulations, policies, orders or ordinances
(collectively, the "Communications Laws") governing or relating to the
Communications Licenses; (iv) all necessary applications for renewal or
extension of any Communications License have been timely filed under the
relevant Communications Laws; (v) no allegations, complaints, charges,
investigations, renewal or revocation hearings, or other proceedings have been
initiated or, to the knowledge of the Company, threatened, nor has any
Regulatory Authority proposed, announced, issued or adopted any amendment,
modification or change to any Communications Law or Communications License, that
could have a materially adverse effect on the Entities' ability to continue to
hold and/or renew or extend any of the Communications Licenses; (vi) the
Entities hold no Communications Licenses issued by the FCC that would subject
any of the Entities to the foreign ownership restrictions established by Section
310(b) of the Communications Act of 1934, as amended, 47 U.S.C. Section 310(b),
and the FCC policies, rules, and regulations promulgated with respect thereto;
and (vii) the Entities have not entered into any agreement or relationship that
would cause one or more of them to be treated as an international "dominant
carrier" under the FCC policies, rules and regulations, with the possible
exception of International Telecommunications Europe, Ltd., which the FCC may
determine to be a dominant carrier.
Section 3.13 International Operating Agreements. All international
operating agreements, international service agreements or other contracts
involving, or intended to facilitate, the carriage of international
telecommunications traffic (the "Operating Agreements") among one or more of the
Entities and a carrier or other telecommunications entity headquartered outside
of the United States (the "Foreign Correspondent"), whether said Foreign
Correspondent is publicly or privately owned or an agency
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or instrumentality of a foreign government, are listed in Schedule 3.13. The
Company represents and warrants that (i) the Operating Agreements listed in
Schedule 3.13 represent all of the international operating agreements,
international service agreements and like contracts necessary or legally
required for the conduct of the Entities' respective businesses as such
businesses are now being conducted by them; (ii) each and every Operating
Agreement is in full force and effect; (iii) no Entity or, to the best of the
Company's knowledge and belief after reasonable inquiry, no Foreign
Correspondent is in material breach or default under any of the Operating
Agreements, nor has any allegation, charge or notice of breach or default been
served on any Entity by a Foreign Correspondent or on a Foreign Correspondent by
an Entity; (iv) each Operating Agreement complies in all material respects with
the applicable Communications Laws of the relevant Regulatory Authorities,
including, but not limited to, the FCC's international settlements policies,
rules, and regulations, and no allegation, complaint, charge, investigation or
other proceeding has been initiated or, to the knowledge of the Company,
threatened, by any Regulatory Authority or third party regarding the activities
of an Entity or, to the best of the Company's knowledge and belief after
reasonable inquiry, a Foreign Correspondent under an Operating Agreement; and
(v) no Regulatory Authority has proposed, announced, issued or adopted any
amendment, modification or change to any Communications Law that could have a
material adverse effect on the Entities' enjoyment of any of their rights under
an Operating Agreement.
Section 3.14 Corporate Documents. The Certificate of Incorporation
of the Company and of the Subsidiary and the Bylaws of the Company and of the
Subsidiary are in the form provided to the Investor or its counsel prior to the
execution of this Agreement.
Section 3.15 Title to Property and Assets; Inventories. (a) Each of
the Entities owns its material properties and assets free and clear of all
liens, charges and encumbrances, except such encumbrances and liens which arise
in the ordinary course of business and do not materially impair the respective
Entity's ownership or use of such property or assets and except for liens listed
on Schedule 3.15 attached hereto. With respect to any material property and
assets such Entity leases, such leases are valid and binding and enforceable in
accordance with their terms and such Entity is in compliance in all material
respects with such leases and, to the best of such Entity's knowledge, holds a
valid leasehold interest free and clear of any liens, claims or encumbrances.
(b) All inventories reflected on the most recent balance sheet
included in the Financial Statements (as defined in Section 3.18 hereof) are
current and readily merchantable, con-
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taining no amount of obsolete or damaged goods which have not been written down
or reserved in conformity with GAAP (as defined in Section 3.18 hereof). Such
inventories are accounted for at the lower of cost or market and with costs
determined on a first-in, first-out basis in accordance with GAAP.
Section 3.16 Employees and Labor. The Entities do not have any
Employee Benefit Plans, except for employee health benefit plans, as defined in
the Employee Retirement Income Security Act of 1974, as amended. The Entities
have no agreement or arrangement with any labor union, and no labor union has
requested or, to the best knowledge of the Company, has sought to represent any
of the employees, representatives or agents of the Entities. There is no strike
or other labor dispute involving the Entities pending, or to the best knowledge
of the Company threatened, which could reasonably be expected to have a material
adverse effect on the assets, properties, prospects, financial condition,
operating results, or business of the Entities. Attached hereto on Schedule 3.16
is a list of all the names of the current directors, officers and employees of
the Company and the Subsidiary.
Section 3.17 Insurance. The Entities have in full force and effect
(i) insurance on their respective assets and activities of a type customarily
insured, covering property damage and loss of income by fire or other casualty,
customarily used by businesses similar to the Company and the Subsidiary and
(ii) adequate insurance protection against all liabilities, claims and risks
against which it is customary for companies similarly situated as the Entities
to insure.
Section 3.18 Financial Statements. The Company has delivered to the
Investor the Subsidiary's balance sheet, statement of income and cash flows
including notes thereto at April 30, 1994 and for the fiscal year then ended
prepared by Delloitte Touche, LLP, and Intelco Europe's unaudited balance sheet
and statement of income at April 30, 1994, and for the fiscal year then ended,
and the Subsidiary's unaudited balance sheet at December 31, 1994, and pursuant
to Section 7.19 will, within 5 business days of the Closing, deliver to Investor
its unaudited statement of income for the eight (8) month period ended December
31, 1994, (together the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles in the
United States of America in effect from time to time ("GAAP") consistently
applied throughout the periods involved and with each other (except that all
Financial Statements do not contain all footnotes required by GAAP) and fairly
present the financial condition of the Company and its subsidiaries as of such
dates and the results of operations of the Company and its subsidiaries for such
periods and are reasonable representations of the Company's cash flow,
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results of operations and financial condition for their respective periods and
dates. Since December 31, 1994, there has not been (a) any material adverse
change to the financial condition of the company or the Subsidiary from that set
forth in the Financial Statements, (b) any damage, destruction or loss, whether
or not covered by insurance, which has materially adversely affected the
business or assets of the Company or the Subsidiary or (c) any event or
condition of any character whatsoever the occurrence of which materially
adversely affected, or threatens to materially adversely affect, the business,
assets, financial condition or results of operations of the Company or the
Subsidiary. Except as disclosed in the Financial Statements, none of the
Entities is a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation. The Company, on a consolidated basis, maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
Section 3.19 Undisclosed Liabilities. None of the Entities is
subject to any liabilities of any nature, whether absolute, contingent or
otherwise (whether or not required to be accrued or disclosed under SFAS No. 5)
which have had or can reasonably be expected to have a material adverse
financial effect on the respective Entity, except to the extent set forth or
provided for in the Company's consolidated Financial Statements. All debts,
liabilities and obligations incurred by the Entities, after the date of the
Financial Statements, were incurred in the ordinary course of business and are
usual and normal in amount.
Section 3.20 Tax Returns. (a) Except as set forth in Schedule 3.20,
all the Entities have timely filed all federal, state, local and material
foreign tax returns and reports and excise tax returns as required by law. These
returns and reports are true and correct in all material respects and reflect
all material liability for taxes of any nature whatsoever (including, without
limitation, all federal, state, local and material foreign income taxes,
estimated taxes, excise taxes, sales taxes, use taxes, transfer taxes,
communications taxes, gross receipts taxes, franchise taxes, employment and
payroll related taxes, property taxes and import duties, whether or not measured
in whole or in part by net income), together with any related material penalties
and material interest (any of the foregoing being referred to herein as a
"Tax"), for the periods covered thereby. The Entities have paid all their
respective Taxes and other assessments due, except those contested in good faith
and listed on Schedule 3.20. Except as set forth on Schedule 3.20, none of the
Entities has made any elections under the Internal Revenue Code of 1986, as
amended (the "IRC"), that would have a material adverse effect on the business,
properties or financial condition of the Company or the Subsidiary and that are
not
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disclosed in the Financial Statements provided to the Investor. Except as set
forth on Schedule 3.20, neither the Company nor the Subsidiary has ever had a
tax deficiency proposed or assessed against it by any federal, state or local
government tax authority and has not executed any waiver of any statute of
limitations on the assessment or collection of any Tax or governmental charge.
The Company and the Subsidiary have withheld or collected from each payment made
to each of its employees, the amount of all necessary Taxes and required
withholdings, and has paid the same to the proper Tax receiving officers or
authorized depositories. For purposes of this Section 3.20(a) only, "material"
shall mean amounts in excess of an aggregate of $50,000.
(b) Neither the Company nor the Subsidiary is currently being
audited by any taxing authority with respect to the returns and reports
described in subparagraph (a) above and there are no claims or assessments
pending against the Company or the Subsidiary, including without limitation, any
potential assessment of fines, penalties and interest for the failure to
properly file any excise tax returns. True and correct copies of any closing
agreements with respect to the Company or the Subsidiary which were entered into
with the Internal Revenue Service or any other taxing authority have heretofore
been furnished to the Investor.
Section 3.21 Returns and Complaints; Accounts Receivable. (a)
Neither the Company nor the Subsidiary has received any customer complaints
concerning alleged defects in its products (or the design thereof) or services
that, if true, would materially adversely affect the operations or financial
condition of the Company or the Subsidiary.
(b) All accounts receivable (other than those, if any, owing from
Investor or its affiliates) reflected in the most recent consolidated Financial
Statements and on the books of the Company and the Subsidiary at the close of
business at the Closing represented and will represent receivables (i) which
arose from bona fide transactions in the ordinary course of business, (ii) which
represent credit extended in a manner consistent with trade and credit practices
of the Company and the Subsidiary, (iii) which have an aggregate amount of
$544,877 which are greater than 90 days overdue and (iv) are fully collectable
at face value or were and are properly reserved against on the Financial
Statements in accordance and in conformity with GAAP.
Section 3.22 Transactions with Affiliates. Except for regular salary
payments, bonuses and fringe benefits under an individual's compensation package
with the Company or the Subsidiary, none of the officers, employees, directors
or other
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affiliates of the Entities, or members of their families, is a party to any
material agreements, understandings, indebtedness or proposed transactions with
the Entities. Neither the Company nor the Subsidiary has guaranteed or assumed
any material obligations of the Company's officers, directors or employees.
Schedule 3.22 sets forth all salary, dividend, bonuses, perquisites and other
compensations in excess of $5,000, or distributions paid or made, or proposed to
be paid or made in the next three months, by the Entities to any officer of any
such Entity.
Section 3.23 Disclosure. The books and records of the Company and
the Subsidiary to which the Investor has been given access and to which it will
be given access at or prior to the Closing, are the true books and records of
the Company and the Subsidiary and truly and accurately reflect the underlying
facts and transactions which they purport to represent in all material respects.
Neither this Agreement nor the Other Agreements nor any other written statements
or certificates made or delivered in connection herewith, in each case taken
together with all such documents, nor any information that the Company or the
Subsidiary have provided the Investor, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
Section 3.24 Brokerage. None of the Entities has dealt with, or incurred
liability for a fee to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the Other Agreements or the negotiations looking toward the
consummation of such transactions. The Company agrees to indemnify and hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company, the Subsidiary or
any of its officers, employees or representatives is responsible.
Section 3.25 Other Agreements of Officers and Key Employees. No
employees whose participation in any aspect of the Company's business is deemed
by the Company to be of critical importance to the Company or the Subsidiary,
(the "Key Employees", such Key Employees being listed in Schedule 3.25) are
parties to, bound by, or subject to any agreement, contract, commitment or
restriction, including without limitation any nondisclosure or non-competition
agreements or legal restrictions on the use by such person of trade secrets or
proprietary information of others, which adversely affects, or which in the
future may (so far as the Company or the Subsidiary can now foresee) adversely
affect the business or operations of the Company or the Subsidiary or the right
of any such person to participate in the affairs of the Company or the
Subsidiary.
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ARTICLE IV
Representations and Warranties of the Investor
The Investor hereby represents and warrants to the Company that:
Section 4.1 Investment Intent. The Shares to be purchased by the
Investor and the Conversion Stock into which the Shares are convertible, are
being acquired by the Investor solely for its own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of such Shares or Conversion Stock. The Investor understands
that the Shares and the Conversion Stock have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the Investor's investment intent and
accuracy of the Investor's representations, as expressed herein.
Section 4.2 Restricted Securities. The Investor understands that the
Shares it is purchasing and any Conversion Stock subsequently issued to the
Investor are or will be "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. The Investor understands that there is no
public market for the Shares (and the Conversion Stock) and that there may never
be a public market for such securities, and that even if a market develops for
such securities the Investor may never be able to sell or dispose of the Shares
or the Conversion Stock and may thus have to bear the risk of its investment in
such stock for a substantial period of time, or forever.
Section 4.3 Authorization. All corporate action on the part of the
Investor and its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance by the Investor of this
Agreement and the Other Agreements, the purchase of the Shares and the
performance of all of the Investor's obligations hereunder has been taken or
will be taken prior to the Closing.
Section 4.4 Organization and Standing. The Investor is a corporation
which is duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Investor has all requisite legal and corporate power
to execute and deliver this Agreement and the Other Agreements, to purchase the
Shares hereunder and to carry out and perform its obligations under the terms of
this Agreement and the Other Agreements.
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Section 4.5 Legend. It is understood that upon original issuance,
the certificates evidencing the Shares and the Conversion Stock shall bear the
following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
Section 4.6 Brokerage. The Investor has not dealt with, or incurred
liability for a fee to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the negotiations looking toward the consummation of such
transactions. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees or
representatives is responsible.
Section 4.7 Risks. Investor has evaluated and understands the risks
and terms of investing in the Company, and has received all the information it
has requested in writing from the Company and the Subsidiary.
ARTICLE V
Conditions to Investor Obligations at Closing
The obligations of the Investor to purchase and pay for the Shares
which it has agreed to purchase at the Closing and the other obligations of the
Investor under this Agreement are subject to the fulfillment at or prior to the
Closing of the following conditions, any of which may be waived in writing in
whole or in part by the Investor:
Section 5.1 Representations and Warranties. On the date of the
Closing, the representations and warranties of the Company and the other
Entities contained in Article III shall be true and correct in all material
respects with the same force and effect as though such representations and
warranties had been made at and as of the time of Closing, except to the extent
that any changes therein are specifically contemplated by this Agreement. The
Company and the Subsidiary shall deliver to the Investor at the Closing,
certificates of their respective Presidents to such effect.
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Section 5.2 Issuance of Convertible Preferred Stock. The Company
shall have duly issued and delivered to the Investor a certificate for the
Convertible Preferred Stock being purchased by it pursuant to Section 1.2 of
this Agreement.
Section 5.3 No Material Adverse Changes. There have been no material
adverse changes in the assets, business or financial condition of any of the
Entities.
Section 5.4 Financial Projections. The Company's Financial
Statements and are in form and substance satisfactory to the Investor.
Section 5.5 Amendment to Employment Agreement. There has been,
effective as of the Closing, an amendment to the employment agreement between
the Company and Charles M. Piluso ("Piluso"), as set forth on Exhibit B attached
to this Agreement.
Section 5.6 Amendment to Shareholders' Agreements. An agreement as
set forth in Exhibit C attached hereto (the "Amendment to Shareholders'
Agreement") amending and restating the International Telecommunications Group,
Ltd. Shareholders' Agreement dated as of September 1, 1994 (the Shareholders'
Agreement") by and between Charles M. Piluso, Richard Rebetti, Incom (UK), Ltd.,
the Company and the Investor, has been entered into.
Section 5.7 Performance. The Company and the Subsidiary shall have
performed and complied in all material respects with all agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by them on or before the Closing. The Company and the Subsidiary
shall deliver to the Investor at the Closing a certificate of their respective
Presidents to such effect.
Section 5.8 Qualifications; Legal Investment. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state or any other third party that are required
in connection with the lawful sale and issuance of the Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of the
Closing. No injunction or other order enjoining the sale of the Shares or the
proposed issuance of the Conversion Stock shall have been issued and no
proceedings for such purpose shall be pending or threatened by the Securities
and Exchange Commission (the "SEC") or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares and the proposed
issuance of the Conversion Stock shall be legally permitted by all laws and
regulations to which the Company and the Investor are subject.
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Section 5.9 Restated Certificate. The Company shall have adopted and
filed with the Secretary of State of Delaware the Restated Certificate as set
forth in Exhibit A to this Agreement.
Section 5.10 Registration Rights Agreement. The Company and the
Investor shall have entered into a registration rights agreement as set forth in
Exhibit D to this Agreement, pursuant to which the Company has granted
registration rights with respect to the Shares and Conversion Stock to the
Investor.
Section 5.11 Payment of Loan. The Company and/or the Subsidiary
shall have prepaid the principal amount of the Loan in the amount of $1,000,000
plus any accrued interest up to the date of the Closing, out of the proceeds of
the sale of the Shares to the Investor.
Section 5.12 Indemnity Agreements. The Company and Piluso shall have
entered into an indemnity agreement as set forth in Exhibit E to this Agreement,
providing that Piluso and the Company will jointly and severally indemnify the
Investor against any loss resulting from misstatements or omissions of material
facts in this Agreement and from losses to the Company or the Subsidiary
resulting from a breach by the Subsidiary of its covenant contained in the last
sentence of Section 5.17 of this Agreement; provided, however, that the
indemnity shall (a) not exceed an amount equal to the aggregate Purchase Price
plus accrued but unpaid dividends to the date of the indemnity payment, (b) not
include any incidental or consequential damages and (c) expire on the earlier of
(i) the date of the closing of the Company's Qualified IPO (as defined in such
agreement) or (ii) the date all the Convertible Preferred Stock is either
converted or redeemed pursuant to the Restated Certificate of the Company.
Section 5.13 [specifically omitted]
Section 5.14 Opinion of Counsel. The Investor shall have received
from the firm of Fletcher, Heald & Hildreth, P.L.C., counsel to the Company and
the Subsidiary, a written opinion as set forth in Exhibit F attached to this
Agreement and otherwise in form and substance acceptable to the Investor.
Section 5.15 Closing Documents. The Company and the Subsidiary shall
have delivered to the Investor, unless waived in writing by the Investor:
(a) copies, certified by the Presidents or Secretaries of the
Company and the Subsidiary, of the resolutions duly adopted by the shareholders
of the Company and the Subsidiary authorizing the adoption of the Restated
Certificate of the Company and the Restated Certificate of Incorporation of the
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Subsidiary, and the authorization and issuance of the Shares and the execution,
delivery and performance of this Agreement and the Other Agreements;
(b) a facsimile copy, certified by the President or Secretary
of the Company, of the Company's Restated Certificate of Incorporation and the
Subsidiary's Restated Certificate of Incorporation as amended through the date
of the Closing, and a copy, certified by the President or Secretary of the
Company and the Subsidiary, of its respective Bylaws as amended through the date
of the Closing; and
(c) such other documents relating to the transactions
contemplated by this Agreement as the Investor or the Investor's counsel may
reasonably request.
Section 5.16 Estoppel from MCI and other Lenders. The Company and
the Subsidiary shall have received and delivered to the Investor, for the
benefit and reliance of the Investor, an executed copy of a letter from MCI or
from the accounting firm of Deloitte & Touche LLP stating that ITC is current
and not in default in its arrangement to pay approximately $54,000 per month
pursuant to the terms of a 2 year promissory note in favor of MCI.
Section 5.17 Spin Off of Intelco Russia Corporation and
Intelco-Ukraine Ltd.. The Company shall have divested itself and/or its
subsidiaries of any ownership interests in Intelco Russia Corporation ("Intelco
Russia") and Intelco-Ukraine Ltd. ("Intelco Ukraine"), which ownership interests
shall be transferred to the stockholders of the Company (the "New Owners"), and
shall have received from the New Owners indemnification agreements, in form
satisfactory to the Investor, jointly and severally indemnifying the Company
against any and all claims, expenses or liabilities imposed on the Company as a
result of its ownership interest in such entities prior to their divestiture by
the Company. If ITC or the Company shall provide services to Intelco Russia or
Intelco Ukraine, such services shall be provided on a basis no less favorable to
ITC or the Company than is obtainable from an independent third party. Schedule
5.17 shall set forth the nature, cost and pricing of services proposed to be
rendered by ITC or the Company to Intelco Russia or Intelco Ukraine. The Company
and the Subsidiary covenant and agree with Investor that, should any receivable
from Intelco Russia or Intelco Ukraine be more than 90 days past due, ITC or the
Company shall suspend the provision of services to Intelco Russia or Intelco
Ukraine, respectively, until all receivables from Intelco Russia or Intelco
Ukraine, respectively, are paid in full. In addition, the Company agrees that it
will not engage in any business activity with EEST-Russia, unless
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prior approval of the Executive Finance Committee of the Board of Directors of
the Company has been obtained.
Section 5.18 Expenses. The Company shall reimburse the Investor for
all fees and expenses relating to the transactions contemplated herein incurred
by Investor, as provided in Section 9.1 of this Agreement.
Section 5.19 Excise Tax. The Company and the Subsidiary shall have
filed all required excise tax returns and shall have paid all excise taxes due
to taxing authorities, and shall have presented to Investor evidence
satisfactory to it of such filings and payments.
Section 5.20 Amendment of By-Laws of the Company. (i) Article XIII,
Section 3 of the Company's By-Laws shall have been amended and restated as
follows:
The President, any Executive Vice President or any Vice President,
and the Secretary, the Treasurer, any Assistant Secretary or any
Assistant Treasurer, or any other officer designated by the Board of
Directors, but only in accordance with specific direction from the
Board of Directors, may vote and/or sign on behalf of the
Corporation proxies to vote or written consents upon shares of stock
of other companies standing in the name of the Corporation.
(ii) Article V, Section 1 of the Company's By-Laws entitled Executive Committees
shall have been amended to allow for committees to be established pursuant to
the Restated Certificate attached hereto as Exhibit A.
Section 5.21 Restated Certificate of Subsidiary. The Subsidiary
shall have adopted and filed with the Secretary of State of Delaware a Restated
Certificate of Incorporation which shall amend Article Seventh of the
Subsidiary's Certificate of Incorporation giving the shareholders of the
Subsidiary alone the power and the right to amend the By-laws of the Subsidiary.
Section 5.22 Amendment of By-laws of Subsidiary. The Investor shall
have received evidence satisfactory to it that the By-laws of the Subsidiary
have been amended to require the approval and consent of the shareholders of the
Subsidiary on Subsidiary matters analogous to those requiring the vote of 33
1/3% of the holders of the Preferred Stock of the Company.
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ARTICLE VI
Conditions of the Company's Obligations at Closing
The obligations of the Company under this Agreement are subject to
the fulfillment at or prior to the Closing of the following conditions, any of
which may be waived in writing in whole or in part by the Company:
Section 6.1 Representations and Warranties. On the date of the
Closing, the representations and warranties of the Investor contained in Article
IV shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as of
the time of Closing, except to the extent that any changes therein are
specifically contemplated by this Agreement. The Investor shall deliver to the
Company at the Closing a certificate of its President and Chief Financial
Officer to such effect.
Section 6.2 Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied in all material respects
with by such Investor on or before the Closing, including payment to the Company
of the Purchase Price set forth in Section 1.2 of this Agreement. The Investor
shall deliver to the Company at the Closing a certificate of its President and
Chief Financial Officer to such effect.
Section 6.3 Release of Security Interest. Upon payment of the Loan
at Closing, Investor shall release its security interest in connection with the
Loan and terminate the related Promissory Note Conversion Agreement, dated
December 1, and the Security Agreement, dated December 1, 1994.
ARTICLE VII
Covenants of the Company
Section 7.1 Delivery of Financial Statements and Other Information.
The Company shall prepare and deliver to the Investor:
(a) Annual Financial Statements. Within ninety days (90) days
after the end of each fiscal year of the Company, an audit report including
consolidated financial statements prepared in accordance with GAAP, certified by
an independent public accounting firm of nationally or regionally recognized
standing selected by the Company, and a copy of such independent public
accounting firm's "management letter" to the Company. Such report shall be
accompanied by a statement from the Company's independent auditors regarding
compliance by the
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Company with the terms of this Agreement, the Preferred Stock, the Shareholders'
Agreement and the Amendment to Shareholders' Agreement.
(b) Quarterly Reports. Within forty-five (45) days after the
end of each quarter, an unaudited consolidated income statement, statement of
cash flows and balance sheet of the Company for and as of the end of such
quarter, and with year-to-date figures, comparison to budget and variances. Each
quarterly report shall include an analysis prepared by the Company of the
figures set forth therein. Each quarterly report shall be accompanied by a brief
written report of the Company's President discussing operations, problems and
achievements during the subject quarter and discussing Company goals for the
ensuing quarter or quarters, as considered appropriate by the President.
(c) Monthly Reports. Within thirty (30) days after the close
of each month, an unaudited consolidated income statement, statement of cash
flows and balance sheet of the Company for and as of the end of such month.
(d) Annual Budget. Not later than (30) days prior to the
beginning of each fiscal year, a proposed annual budget and business plan of the
Company and the Subsidiary for such fiscal year approved by the Board of
Directors of the Company and the Subsidiary, including a projected consolidated
income statement, statement of cash flows and balance sheet, a brief written
description of the Company's and the Subsidiary's strategy to achieve the
budgeted figures for such fiscal year by the Presidents of the Company and the
Subsidiary, respectively, reports of adverse developments, copies of management
letters, communications with stockholders or directors and press releases.
(e) Board Materials. All written information including, but
without limitation, reports of adverse developments, copies of management
letters, communication with stockholders or directors and press releases,
provided to the Board of Directors of the Company and a written summary of all
material which is presented orally to the Board of Directors if a representative
of the Investor is not present at the Board of Directors meeting in which such
information is provided or presented to the Board of Directors.
Section 7.2 Inspection. The Company and/or the Subsidiary shall
permit the Investor to visit and inspect its respective properties, to examine
its respective books of account and records and to discuss the Company's or the
Subsidiary's affairs, finances and accounts with its officers, all at such
reasonable times and for such duration so as not to interfere with the Company's
or the Subsidiary's respective normal operations as may be requested by the
Investor; provided, however,
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that with respect to any requested audit separate from that required by Section
7.1(a), such right shall be exercised at Investor's expense as to each Entity
and shall be available not more than once per year.
Section 7.3 Termination of Information and Inspection Covenants.
Except as otherwise provided herein, the covenants set forth in Section 7.1,
Section 7.2 and Section 7.6 of this Agreement shall terminate and be of no
further force or effect upon the earliest to occur of (i) the date on which the
sale of securities for an aggregate offering price to the public of not less
than $25,000,000 and a price per share (excluding underwriters' commissions and
expenses) of not less than 250% of the conversion price per share of the
Preferred Stock then in effect, pursuant to a registration statement filed by
the Company under the Securities Act in connection with the firm commitment
underwritten offering of its securities to the general public (the "Qualified
IPO") is consummated and (ii) the date the Investor's interest in the Company
equals 10% or less of the company's fully diluted equity.
Section 7.4 Proprietary Information. All executive officers of the
Company who join the Company after the date hereof shall execute a Proprietary
Information and Inventions Agreement in the form attached as Exhibit A-l to this
Agreement.
Section 7.5 Conduct of Business for Remainder of Fiscal Year. Prior
to May 1, 1995, except as otherwise consented to or approved by the Investor in
writing and except as otherwise agreed herein, none of the Entities shall sell,
lease or dispose of any of its respective assets or properties other than in the
ordinary course of business and shall not take any action which shall cause it
not to, in any material respect:
(a) operate its business in the ordinary course and use its
best efforts to (i) preserve its present business organization intact,
(ii) keep available the services of the present officers of the Entities,
(iii) preserve its present relationships with, and goodwill of, employees
and independent contractors (except to the extent of voluntary
terminations of employment), customers and suppliers of such Entity and
(iv) maintain in force all insurance policies with respect to the Company
or its assets or properties;
(b) maintain its books, accounts and records in the usual and
ordinary manner, and reflect income, expenses, assets and liabilities in a
manner consistent with its past practices;
(c) use its diligent efforts to conduct its affairs such
that all representations and warranties set
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forth herein with respect to the Company will be true and correct at April
30, 1995 as if made at and as of April 30, 1995; and
(d) maintain all assets and properties of the Entities in
customary repair, order and condition, reasonable wear and tear excepted.
Section 7.6 Securities. Neither the Company nor any of the other
Entities shall issue any new securities with an aggregate fair market value in
excess of $500,000 without the consent of holders of 33 1/3% of the Convertible
Preferred Stock.
Section 7.7 Modification of Indebtedness. Without the consent of
holders of 33 1/3% of the Convertible Preferred Stock, neither the Company nor
the Subsidiary shall enter into any new loan arrangement calling for borrowing
in excess of $250,000 or modify any agreement as a result of which the terms of
the payment of any of its existing material indebtedness are amended, waived,
modified or refinanced or to increase the repayment obligations thereunder, or
so as to contain terms materially adverse to the Company or the Subsidiary as
compared to the terms in existence on the date hereof, provided that, this
Section 7.7 shall not survive if the Investor's interest in the Company equals
10% or less of the Company's fully diluted equity.
Section 7.8 Insurance. The Company shall maintain (i) insurance on
its assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, in amounts reasonably
calculated to allow the Company to replace any of its material properties that
might be damaged or destroyed and (ii) adequate insurance protection against all
liabilities, claims and risks against which it is customary for companies
similarly situated as the Company to insure. In addition, the Company shall
obtain within 10 business days of the date of Closing (i) directors' and
officers' liability insurance in reasonable amounts (initially at least
$1,000,000) from established and reputable insurers and (ii) "Key Man" life
insurance on the life of Piluso, payable to the Company, in the amount of at
least $2.5 million.
Section 7.9 Additional Investment. If the Closing of the
transactions contemplated herein takes place, the Company shall promptly
thereafter initiate and conduct in good faith, negotiations whereby the Company
shall increase the Subsidiary's authorized number of shares and offer 576 shares
of the Common Stock of ITC to Bezeq, The Israel Telecommunication Corp. Ltd., a
corporation organized under the laws of the State of Israel ("Bezeq"), for an
aggregate purchase price of $2,400,000, or such lesser number of shares at the
sole option of Bezeq, at a price of $4,166.67 per share of ITC's common stock;
provided, however,
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that the Company shall not be required to keep such an offer open pursuant to
this Section 7.9 after April 30, 1995 and provided, further, that such purchase
price and amount shall be subject to adjustment in the same manner as is
provided in Section 9.11 with respect to the Investor's purchase of equity
securities of the Company.
Section 7.10 Proprietary Rights. The Entities shall prior to May 1,
1995, take all reasonable steps necessary or appropriate to safeguard and
maintain their respective material proprietary rights in each of the foregoing
trademarks, service marks, patents and other proprietary rights.
Section 7.11 Taxes. Each of the Entities shall, within 30 days
following the Closing, file all respective federal, state, local and material
foreign tax returns and reports required to be filed by law and which have not
been so filed, including without limitation, those as set forth in Schedule 3.20
of this Agreement. Each of the Entities shall take all steps necessary to timely
file all subsequent federal, state, local and material foreign tax returns and
reports as required by law.
Section 7.12 Transfer of Control Application. The Company shall,
within five business days after Closing, have caused ITC to file with the FCC a
request for approval of a transfer of control of ITC to the shareholders of the
Company ("Transfer of Control Application"). Prior to such filing, the Company's
FCC counsel shall consult closely with the Investor's FCC counsel regarding the
form and content of the Transfer of Control Application. The Company shall
diligently pursue FCC approval of the Transfer of Control Application and file
appropriate amendments to any pending FCC applications in which the Company is a
controlling party.
Section 7.13 Blue Sky Filings. The Entities shall, within 30 days
following the Closing, complete all required "Blue Sky" filings that have not
been completed as of such date.
Section 7.14 Filing of International and Intrastate Traffic Reports.
Investor shall, within 30 days following the Closing, have received evidence
satisfactory to it that all international traffic reports that are required to
be filed with the FCC have been filed and within 5 business days following the
Closing, have received evidence satisfactory to it that the Subsidiary has filed
an application with the Public Service Commission in the State of New York
("PSC") for authority to provide intrastate service. Within 90 days of receipt
of such authority, the Subsidiary shall file all necessary tariffs with the PSC.
25
<PAGE>
Section 7.15 Removal of Liens. Investor shall, within 60 days
following the Closing, have received evidence satisfactory to it that the
Company has either had all the liens referred to in Schedule 3.16 attached
hereto removed or, that despite its utilization of its best efforts to secure
such removal, one or more such liens have not been removed.
Section 7.16 PTAT Consent to Assignment. ITC shall, within 10 days
following the FCC grant of the application of International Telecommunications
Europe, Ltd. ("Intelco Europe") for authority to provide service on the PTAT
Submarine Cable, have obtained the consent of Private Transatlantic
Telecommunications System, Inc., and/or Private Transatlantic Telecommunications
System (N.J.) Inc. (individually or collectively, "PTAT"), to the assignment
from the Subsidiary to Intelco Europe, of the following agreements between PTAT
and ITC: PTAT-l Submarine System Indefeasible Right of Use Agreement, dated as
of May 12, 1994; PTAT-l U.S.A. Backhaul Indefeasible Right of Use Agreement,
dated as of May 12, 1994; and PTAT Restoration Agreement, dated as of May 12,
1994. The Company shall provide the Investor with a copy, certified by the
Company to be true and correct, of each of the foregoing consents.
Section 7.17 Mercury Consent to Assignment. The Subsidiary shall
have obtained the consent of Mercury Communications Limited ("Mercury") to the
assignment from the Subsidiary to Intelco Europe of the following agreement
between Mercury and the Subsidiary: International Telecommunication Services
Agreement, dated as of May 10, 1994. The Company shall provide the Investor with
a copy, certified by the Company to be true and correct, of the foregoing
consent.
Section 7.18 Carrier's Group, Inc. Litigation. On or before June 1,
1995, the Company shall either (i) have obtained a written release from the
Carriers Group, Inc., signed by an authorized officer, with respect to any and
all claims that it had or has against the Company or the Subsidiary or (ii) the
Investor shall have received evidence satisfactory to it that the Company or the
Subsidiary is in full compliance with any and all agreements it has with the
Carriers Group, Inc.
Section 7.19 Unaudited Statement of Income. The Company will, within
5 business days of the Closing, deliver to Investor its unaudited statement of
income for the eight (8) month period ended December 31, 1994.
Section 7.20 Tariffs. Within ten (10) days after Closing, the
Subsidiary shall file a tariff transmittal with the Federal Communications
Commission setting forth new rates for international telecommunications
services. This transmittal, and all transmittals of the Subsidiary from the date
of Closing
26
<PAGE>
through April 30, 1995, shall be approved by the Executive Finance Committee.
ARTICLE VIII
Confidentiality
Section 8.1 Key Employees. Each Key Employee will, prior to May 1,
1995, have executed an agreement (a copy of which has previously been
furnished), in which such employee agrees, among other things, (a) that for one
year after termination of his employment under any circumstances he will not
divulge, disclose, or communicate to any person, firm, or corporation any
information pertaining to the business of the Company and/or the Subsidiary, (b)
that for one year after termination of his employment under certain
circumstances he will not compete, in any location where the Company or the
Subsidiary shall have done business during the term of such employee's
employment, in the development, marketing, or service of equipment, products or
services similar to those which the Company of the Subsidiary designs, markets
or services during the period of the employee's employment, and that during such
one-year period he will not call upon any customer of the Company for the
purpose of soliciting or selling such equipment, products, or services (c) to do
all acts which are necessary to provide the Company or the Subsidiary with the
sole benefit of, exclusive ownership of, and all patents for any inventions or
improvements in things used or produced by the Company or the Subsidiary which
such employee may have made or discovered while employed by the Company and (d)
to spend 100% of his working time in fulfilling his duties and responsibilities
to the Company or the Subsidiary and in pursuing, on behalf of the Company, any
opportunities of which he may become aware which are related to the business of
the Company or the Subsidiary.
Section 8.2 Parties. The Entities and the Investor, respectively,
will keep confidential all information and documents obtained from the other and
in the event the Closing does not occur will promptly return such documents and
will not use such information for its own advantage, except to the extent that
(a) the information must be disclosed by law, (b) the information becomes
publicly available by reason other than disclosure by the party subject to the
confidentiality obligation, (c) the information is independently developed, (d)
the information is obtained from another source not obligated to keep such
information confidential or (e) the information is already publicly known or
known to the receiving party when disclosed.
27
<PAGE>
ARTICLE IX
Miscellaneous
Section 9.1 Expenses. All fees and expenses relating to the
transactions contemplated herein incurred by the Investor, including, without
limitation, the negotiation and consummation of this Agreement and any related
agreements, those of the independent accounting firm of Deloitte & Touche, LLP
(or any other independent auditors for this purpose), any consultants engaged by
the Investor and of counsel to the Investor, any legal fees and expenses in
connection therewith, shall be reimbursed to Investor by the Company at Closing
upon presentation of satisfactory documentation reflecting such costs and the
Investor's payment thereof; provided, however, that the Company will not be
required to reimburse the Investor for aggregate costs and expenses exceeding
eighty-five thousand dollars ($85,000).
Section 9.2 Survival of Representations, Warranties and Covenants.
The representations, warranties, covenants and agreements of the Company and the
Investor contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing unless otherwise
provided in this Agreement, and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investor or the
Company. Investor's completion to its satisfaction of a customary due diligence
investigation shall in no way prevent the Investor from relying on the
representations and warranties contained herein.
Section 9.3 Publicity. None of the Entities or the Investor shall
release any information to any third party with respect to the terms of this
Agreement or the transactions contemplated hereby without the prior written
consent of the other party, other than as may be required by applicable law or
court order. Each party agrees to consult the other party as to the form and
content of all subsequent public announcements relating to this Agreement or the
transactions contemplated hereby.
Section 9.4 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement may not be assigned by any party hereto without
the consent of the other party hereto; provided, however, that the Investor may
assign its rights and obligations hereunder to a wholly-owned subsidiary of the
Investor. Except as otherwise expressly provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties (including any
transferee of any shares of Convertible Preferred Stock or of the Conversion
Stock). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective
28
<PAGE>
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Section 9.5 Governing Law. The validity, interpretation and effect
of this Agreement shall be governed by the laws of the State of New York
applicable to contracts entered into and to be performed entirely within such
state. The Company hereby consents to the nonexclusive jurisdiction of all
courts in said State.
Section 9.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 9.7 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 9.8 Notices. (i) Any notice required or permitted to be
given under the terms and provisions of this Agreement, or by any law or
governmental regulation, shall be in writing and, deemed duly given if mailed by
registered mail, postage prepaid, addressed as follows:
(a) Any notice to the Investor shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin
575 Madison Avenue,
New York, New York 10022,
Attention: Robert L. Kohl, Esq.
(b) Any Notice to the Company shall be addressed to such
party at its address hereinabove set forth,
with a copy to
Fletcher, Heald & Hildreth, P.L.C.
1300 North 17th Street
Rosslyn, Virginia 22209
Attention: Eric Fishman, Esq.
29
<PAGE>
(ii) By giving the other party at least ten (10) days' prior
written notice, any party may, by notice given as above provided, designate a
different address or addresses for notices.
Section 9.9 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the shares of Convertible Preferred Stock purchased pursuant to
this Agreement (treated as if converted at the conversion rate then in effect).
Any amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities and the Company. The
Company shall not amend its Certificate of Incorporation or its By-Laws so as to
alter, amend or change any terms of the Convertible Preferred Stock or the
Conversion Shares, including the preferences or rights thereof, unless 33.33% of
the holders of the Convertible Preferred Stock and Conversion Shares shall first
approve such amendment in writing.
Section 9.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision or
provisions shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision or provisions were so
excluded and shall be enforceable in accordance with its terms.
Section 9.11 Additional Agreements; Valuation Formula. The parties
hereto further agree as follows:
(a) "New Company Valuation" shall be determined by a calculation
utilizing allowable revenue and prepaid calling cards. The allowable
revenue and prepaid calling card amounts for the purpose of such
calculation shall be determined as follows:
(i) Allowable revenues are those of the Company for the months of
February, March and April, 1995 multiplied by four (4) to
annualize; and,
(ii) As to prepaid calling cards, the greater of (A) 20% of the
contract value for the initial one year period provided in
prepaid calling card contracts submitted and approved by the
Company and signed by the other party thereto prior to April
30, 1995; or, (B) cash received by the Company from
30
<PAGE>
May 1, 1994 to April 30, 1995 from these contracts.
The calculation of these two amounts form the basis for application
of the valuation formula, which is:
1.27 x (amount calculated in (i) + (ii)) = New Company
Valuation
The following shall be applied in calculating the above:
a. The revenue in (i) above will be determined in accordance
with GAAP;
b. Allowable revenue for purposes of (i) above shall exclude
revenues attributable to contracts which are covered by (ii),
above;
c. Prepaid calling card contracts will be counted only if they
are submitted from GTE International, GTE CODETEL, or are from
mutually agreed - upon creditworthy customers;
d. Reductions in allowable revenue for the period specified in
(i) above are permitted for credit memos and "uncollectible
receivables" to the extent they relate to revenues earned in
such period;
e. The revenue period will be audited under normal audit tests
that Delloite Touche, LLP conducts to insure correct audited
revenues;
f. Payment of additional monies for the shares, if required,
should be paid after Prior Notice and submission to Investor
of the audited revenue calculations with a completion date
estimated at 45 days after April 30, 1995;
g. Such payment will not be held awaiting final audited
financial statements which may not be available until July 30,
1995;
h. "Uncollectible receivables" shall be those receivables of
the Company generated in the February 1, 1995 through April
30, 1995 period as to which Delloite Touche, LLP, in
performing its normal audit checks, determines are
uncollectable.
(b) If the New Company Valuation is less than $12,000,000,
then at the option of the Company, the Company may, after presentation to
Investor of such audited information, and the details of the determination of
New Company Valuation, on 10 business days advance written notice (the "Prior
Notice"), require the Investor to purchase a number of shares of a new series of
convertible preferred stock of the Company, at a purchase price per share
determined as follows:
31
<PAGE>
New Company Valuation
-------------------------------
No. shares of capital stock of Company outstanding
provided, that the Company may not require Investor to purchase in excess of
$1,750,000 aggregate value of such convertible preferred stock at a purchase
price per share as determined above. The terms of such new series of convertible
preferred stock shall be identical to those of the Convertible Preferred Stock
except that its initial conversion price per share shall be the purchase price
per share for such new shares. It is understood and agreed that pursuant to the
anti-dilution provisions of the Convertible Preferred Stock, its Conversion
Price will be adjusted if new shares of convertible preferred stock are issued
to Investor pursuant to this Section 9.11(b).
(c) If the New Company Valuation is more than $12,000,000, then at the
option of the Company, the Company may, on Prior Notice, require that the
Investor pay additional consideration for the 66,667 shares of Convertible
Preferred Stock purchased pursuant to this Agreement, with such additional
consideration to be the amount in excess of $45 per share determined as follows:
New Company Valuation
-------------------------------
No. shares of capital stock of Company outstanding
provided, however, that the total additional consideration to be paid by
Investor pursuant to this formula shall not exceed $1.75 million. For example,
if the New Company Valuation is $14,000,000 then such amount divided by 266,667
(the number of shares of capital stock outstanding after issuance of 66,667
shares of Convertible Preferred Stock) is $52.50. Thus, Investor may be required
to pay an additional $7.50 per share on each of the 66,667 shares of Convertible
Preferred Stock previously purchased. Since this amount is less than $1.75
million, the full additional amount may be required to be paid to the Company at
its option.
(d) As a condition precedent to Investor's obligations under this Section
9.11, the Company and the Subsidiary shall deliver a certificate of its
respective Presidents certifying that the Company and the Subsidiary have
complied in all material respects with all agreements, obligations, covenants
and conditions contained in this Agreement that are or were required to be
performed or complied with by each of them prior to the date of such
certificate.
Section 9.12 Entire Agreement. This Agreement, the Exhibits hereto,
the Other Agreements and the other documents required to be delivered pursuant
hereto, constitute the entire understanding and agreement between the parties
with regard to
32
<PAGE>
the specific subject matter hereof and no party shall be liable or bound by any
representation, warranty, covenant or agreement except as specifically set forth
herein. Any previous agreement (whether written, oral or implied) among the
parties relative to the specific subject matter hereof is superseded by this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By /s/ Charles M. Piluso
------------------------------------------
Name: Char1es M. Piluso
Title:
INTERNATIONAL TELECOMMUNICATIONS CORPORATION
By /s/ Charles M. Piluso
------------------------------------------
Name:
Title:
RSL COMMUNICATIONS, INC.
By: /s/ Itzhak Fisher
------------------------------------------
Name:
Title:
33
<PAGE>
SCHEDULE 1.3
USE OF PROCEEDS
ITEM AMOUNT
- ---- ------
Equipment $ 680,000
Leasehold Improvement $ 325,000
Letters of Credit/Deposit $ 750,000
Vendor Debt $ 800,000
Network and Network Installation $ 400,000
Labor $ 795,000
Payment of RSL Loan $1,000,000
TOTAL $4,750,000
<PAGE>
SCHEDULE 3.1
OTHER AFFILIATES
Affliate Company Ownership
- -------- -----------------
International Telecommunications Europe, Ltd. 50% Common Stock
ITG also holds a 50% common stock interest in Intelco Russia Corporation,
and a 47.5% common stock interest in Intelco-Ukraine, Ltd. These two
subsidiaries are excluded from the definition of "Affiliates" and "Subsidiaries"
since they will be spun off from ITG on or prior to Closing pursuant to Section
5.19 of the Stock Purchase Agreement.
Also excluded from the definition of Affiliate are Intelco Caribe, Ltd.
and INTACS, Ltd., two Delaware corporations incorporated by Charles M. Piluso
in which there are currently no shareholders.
By Memorandum of Understanding as of July 1, 1993, ITG and Braticom Corp.
agreed to participate in a joint venture to be called Gilbert International,
Ltd. ITG has never been issued shares in this company.
By agreement executed April 12, 1993, as revised August 25, ITG, Nabiel J.
Fareed, Onofrio N. Modica and Qusai M. Al-Mahasneh formed Intelco Jordan, a
partnership.
Neither Gilbert International, Intelco Jordan, Intelco Caribe nor INTACS
is currently doing business.
<PAGE>
SCHEDULE 3.2(C)
OPTIONS
By resolution adopted March 6, 1995, the Subsidiary has approved a Stock
Option Agreement to give Deborah Karns, an employee of the Company, an option to
acquire 1% of the Subsidiary's outstanding common stock (30 shares).
The shareholders of ITG and ITC have certain rights set forth in their
respective Shareholders Agreements.
<PAGE>
SCHEDULE 3.3
SUBSIDIARIES
Subsidiary Company Ownership
- ---------- -----------------
International Telecommunications Corporation 94% Common Stock
International Telecommunications Europe, Ltd. 50% Common Stock
The remaining shareholders of International Telecommunications
Corporation are Joseph R. Panzarella, Joseph S. Panzarella, Robert Panzarella
and Michael Piluso. The remaining shareholder of International
Telecommunications Europe, Ltd. is Incom, Ltd., an Israeli corporation.
ITG also holds a 50% common stock interest in Intelco Russia Corporation,
and a 47.5% common stock interest in Intelco-Ukraine, Ltd. These two
subsidiaries are excluded from the definition of "Affiliates" and "Subsidiaries"
since they will be spun off from ITG on or prior to Closing pursuant to Section
5.19 of the Stock Purchase Agreement.
Also excluded from the definition of Affiliate are Intelco Caribe, Ltd.
and INTACS, Ltd., two Delaware corporations incorporated by Charles M. Piluso
in which there are currently no shareholders.
The Company is also signatory to a Partnership Agreement, dated April 12,
1993 as revised August 25, 1994, with Nabiel J. Fareed, Onofrio N. Modica and
Qusai M. Al-Mahasneh. The Agreement forms an Entity, Intelco Jordan, to supply
telecommunications services in Jordan. Pursuant to the Agreement, profits in the
partnership will be divided as follows: ITG - 61%; Modica - 13%; Fareed - 13%;
Al-Mahasneh - 13%. This partnership is excluded from the definition of Affiliate
and Entity.
By Memorandum of Understanding as of July 1, 1993, ITG and Braticom Corp.
agreed to participate in a joint venture to be called Gilbert International,
Ltd. ITG has never been issued shares in this company.
Neither Gilbert International, Intelco Jordan, Intelco Caribe nor INTACS
is currently doing business.
<PAGE>
SCHEDULE 3.6
LITIGATION
Pending Litigation
IDB Communications Group, Inc. v. ITC, Supreme Court, Kings County, New
York, Index 1999 of 1994. Breach of contract action for telecommunications
services rendered; claim of $1,364,266.58
US Sprint, Inc. v. ITC, Supreme Court, New York County, New York, Index
122087 of 1994. Breach of contract action for telecommunications services
rendered, claim of $227,537.22
Threatened Litigation
The Carrier Group, Inc. has threatened to sue ITC for breach of
contract for telecommunications services in the amount of $1,824,046.12.
Regulatory Compliance
See Schedules 3.12 and 3.13.
<PAGE>
SCHEDULE 3.8(a)
CONTRACTS
I. Operating Agreements
International Telecommunications Corporation has International
Telecommunications Services Agreements between International Telecommunications
Corporation ("ITC") and (1) Euronet Digital Communications (1992), Ltd.; (2)
Datacom, S.A.; (3) Chilesat, S.A.; (4) International Communication Management
Services; (5) MIG International; (6) Fonetel Global Communications A.B.; (7)
Russian Satellite Communications Company; (8) Jordan Telecommunications
Corporation; (9) Mercury Communications Limited; and (10) Compania Dominicana De
Telefonos, C. for A.
II. Employment Contract
Employment Agreement between ITG and Charles M. Piluso
III. Carrier Contracts
A. EconoPhone, Inc.
1. Global Hub Tariff, executed by ITC and EconoPhone, Inc.
2. Service Agreement Addendum No.1, dated September 28, 1992,
ITC and EconoPhone, Inc.
3. Service Agreement Addendum No.2, dated May 15, 1993, ITC
and EconoPhone, Inc.
4. Assignment Agreement (for one PTAT IRU circuit), dated June
27, 1994, ITC and EconoPhone, Inc.
B. Melbourne International Communications, Ltd.
1. Global Hub Tariff, five year term, executed by Vincent Tormos,
General Manager of MICL (October 20, 1994) and Deborah Karns,
ITC (October 31, 1994)
2. Addendum No.1, executed by Karns, October 31, 1994 and
Tormos, October 20, 1994 - Initial 3 year term
3. Switched Service Agreement, executed December 17,1993 by
Jimmy R. Sheppard, Director of Operations, and December 21,
1993, Karns-six
<PAGE>
2
month term.
C. Dominican Communications, Inc.
1. Global Hub Tariff, 3 year term, executed by Piluso, November 11,
1994 and Roger Zepka, COO of DCI, October 27, 1994
2. Addendum No.1 to Service Agreement - 3 year term
D. Open Networks Global Services
1. Global Hub Tariff 3 year term, signed December 9, 1993, Piluso,
November 23, 1993 by Joseph F. Haydu, President of ONGS
2. Addendum No.1 to Service Agreement, dated November 3, 1993,
signed November 23, 1993 by Haydu, December 9, 1993 by Piluso, 3
year term
3. Support Services Agreement, dated October 26, 1993, executed
November 23, 1993 by Haydu, December 9, 1993 by Piluso - 3 year
term
E. Interactive Telephone Company
1. Global Hub Tariff, executed July 1, 1993 by Piluso and Joseph
Pannullo, CEO of Interactive, 5 year term
2. Addendum No.1, signed by Piluso and Pannullo July 1, 1993 - 3
year term
3. Support Services Agreement, 3 year term, signed July 1, 1993 by
Piluso and Pannullo
F. Telecommunity
1. Global Hub Tariff, 5 year term, signed July 25, 1994 by Piluso and
July 20, 1994 by Geoffrey C. Stief, President of Telecommunity
a. Termination Rates as of February 1, 1995, executed January
25, 1995 by Deborah Karns and Stief
G. Datacom
1. Global Hub Tariff, 5 year term, executed July 15, 1992 by
Piluso, July 13, 1992 by Rafael Zamora, President of Datacom
<PAGE>
3
2. Service Agreement Addendum No.1, signed by Piluso and Pannullo
July 10, 1992
3. Confidentiality Agreement dated July 13, 1992
H. Communications Telesystems International
1. Global Hub Tariff, month to month, signed January 20, 1995
by Edward S. Soren, CTI, and February 2, 1995 by Karns
2. Addendum to Service Agreement, executed by Soren and Karns,
January 20, 1995, month to month
IV. Prepaid Card Contracts
A. Prepaid Card Distributor Agreement, dated January 5, 1995,
between ITC and Viaggiando, executed by Piluso and Alberto Amico,
Managing Director of Viagginado, one year term
B. Prepaid Card Distributor Agreement, dated January 5, 1995,
between ITC and CIT Tours Corporation, executed by Piluso and
Silvio Amori, President of CIT Tours, 2 year term
V. Agent Agreements
A. Master Agent Sales Agreement, dated July 2, 1992, between ITC and
Three V Enterprises, signed by Rebetti and Three V. Enterprises,
Inc., by President, 3 year term
B. Master Agent Sales Agreement, dated December 24,1992 between ITC
and Margaret J. Mahon of Consortium Communications Services,
Inc., signed by Mahon, effective until cancelled by either party
C. Confidentiality Agreement between ITC and Ronav, Inc., signed
February 5, 1991
D. Partnership Agreement for Intelco Jordan executed April 12, 1993,
as revised August 25, 1994, executed by ITG, Nabiel J. Fareed,
Onofrio N. Modica, and Qusai M. Al-Mahasneh
E. Representative Agent Agreement, dated November 8, 1993, between
ITC and Saad A. Abu-Odeh (Jordan)
<PAGE>
4
F. Representative Agent Agreement, dated April 12, 1993, between ITC
and Nabiel Fareed (Jordan)
VI. Vendor Contracts
A. PTAT-1 Submarine System Indefeasible Right of Use Agreement between
Private Transatlantic Telecommunications System, Inc. and ITC and
First Amendment thereto, dated May 12, 1994 -- 33 month payment
schedule for $669,144
B. PTAT-l U.S.A. Backhaul Indefeasible Right of Use Agreement
between Private Trans-Atlantic Telecommunications System (N.J.)
Inc. and ITC, with First Amendment thereto -- 33 month payment
schedule for $185,873
C. PTAT Restoration Agreement between ITC and Private Transatlantic
System, Inc.
D. Digital Satellite Service Agreement, dated April 1, 1993 between
ITC and Crescomm Transmission Services, Inc.
E. Contract between The Carriers Group, Inc. and ITC, executed
December 29, 1993 by Deborah Karns and April 15, 1994 by Larry
Davis. The Subsidiary has terminated this Contract and The
Carriers Group has threatened action against ITC. ITC may be in
breach of this Contract, and/or the Contract may not be in force
due to the failure of The Carriers Group to have a tariff on file
in its own name at the FCC for the covered telecommunications
services.
F. GTE Spacenet Corp, March 11, 1994, payment schedule, total principal
$89,871.93 executed by Rebetti April 6, 1994 and by Spacenet April
27, 1994. CP has advised that payment schedule is based on oral
agreement and that no underlying note exists.
VII. Lease Agreements
A. Lease Agreement, dated August 28, 1991 between Telecommunications
Finance Group and ITC for Used DCO-CS and Peripheral Equipment --
Missing, but referenced in Certificate of Delivery and Acceptance.
1. Certificate of Delivery and Acceptance, May 2, 1992 --
$270,395
2. Certificate of Delivery and Acceptance, July 2,1992 --
$272,232.74
<PAGE>
5
3. Certificate of Delivery and Acceptance, February 2, 1993 --
$437,067.19
4. Assignment of Purchase Order, August 27, 1991
5. Assignment of Purchase Order, February 2, 1993 (TFG assumes
ITC rights and liabilities)
B. Lease Agreement, dated November 30, 1992, between TFG (Lessor)
and ITC, 60 month term--no schedule of what is being leased
1. Certificate of Delivery and Acceptance, same date, for Siemens
Switch - $324,414.00
2. Software License Agreement, same date, between TFG and ITC
C. Lease Payment Schedule for TFG, dated February 2, 1995, total
$1,217,249.88
D. Term Lease Master Agreement between ITC and IBM Credit
Corporation (Not signed by IBM), with Supplement
E. Lease Agreement for 60 Hudson Street, made as of January 25, 1991
between Hudson Telegraph Associates (landlord) and Vocall
Communications Corp. (tenant), with (a) Amendment to Lease, dated
March 19, 1991, between Hudson and Vocall; (b) Second Amendment to
Lease, dated March 28, 1991, between Hudson and Vocall; (c) Third
Amendment to Lease, dated April 30, 1991, between Hudson and
Vocall; (e) Guaranty, dated January 25, 1991 between Hdson and
Tele-pro Communications Corp. (Guarantor); (f) Assignment of
Lease, executed August 31, 1992 by Vocall and ITC; and (g)
Landlord's Consent, dated September __, 1992, executed by all
parties.
VIII. Miscellaneous (including loans)
A. Option Agreement between ITG and RSL Communications, Inc., dated
December 1, 1994
B. Secured Term Promissory Note and Agreement, December 1,1994, with
RSL Communications
C. Promissory Note Conversion Agreement, dated December 1, 1994,
between ITG, ITC and RSL Communications
D. Security Agreement, dated December 1, 1994, between ITC and RSL
Communications
<PAGE>
6
E. See Schedule 3.16 on loans and liens.
IX. Options
A. By resolution adopted March 6, 1995, the Subsidiary has approved a
Stock Option Agreement giving Deborah Karns, an employee of the
Company, an option to acquire 1% of the Subsidiary's outstanding
common stock (30 shares).
X. AT&T
Agreement by and between ITC and AT&T Corp., dated May 9, 1994,
executed by Charles Piluso and T. Alec Edge, Sales Director.
<PAGE>
SCHEDULE 3.8(b)
CERTAIN ACTIONS
See Schedule 3.15 on loans and liens.
Accounts payable greater than $50,000:
AT&T
Fonorola
ITG
MCI
PSI Sprint
By a Digital Satellite Service Agreement dated September 15,1993, by and
between ITC and Gilbert International Ltd. ITC agreed to pay all space segment
costs and needed terrestrial interconnections to earth station facilities in
connection with the provision of the U.S. ground segment of a T-1 1.544 Mbps
duplex circuit between Israel and the US via INTELSAT satellite facilities.
Gilbert International was responsible for the provision of satellite
transmission and reception from the INTELSAT satellite, using existing satellite
antennae and radio frequency ground communications equipment, COMSAT and
INTELSAT approved facilities; match orders to COMSAT and other obligations. ITC
has terminated this Agreement due to failure by Gilbert International to fulfil
its obligations.
<PAGE>
SCHEDULE 3.9
PATENTS, TRADEMARKS
FCC Authorizations and Operating Agreements
See Schedules 3.12 and 3.13.
Except for the licenses referred to in the AT&T Agreement listed on Schedule
3.8(a), the Entities have no registered patents, trademarks, trade names,
service marks or licenses other than those set forth above.
<PAGE>
SCHEDULE 3.10
COMPLIANCE
See Schedules 3.12 and 3.13.
<PAGE>
SCHEDULE 3.11
LICENSES AND PERMITS
See Schedules 3.12 and 3.13.
<PAGE>
SCHEDULE 3.12
COMMUNICATONS LICENSES
International Telecommunications Corporation
1. FCC Order and Authorization, File No. I-T-C-93-332, released December
29, 1993
2. FCC Order, Authorization and Certificate, File No. I-T-C-92-072, released
April 10, 1992.
3. FCC Order and Authorization, File No. ITC-92-105, released June 25, 1992
4. FCC Order, Authorization and Certificate, File No. I-T-C-92-112
5. FCC Order, Authorization and Certificate, File No. I-T-C-92-175
6. New York State Public Service Commission Order Issuing Certificate of
Public Convenience and Necessity, Case No. 92-C-0503.
Regulatory Compliance
To date, ITC has not filed annual international traffic reports as
required by Section 43.61 of the FCC's rules. The Company has determined that
its New York State Certificate of Public Convenience and Necessity has expired
and that its provision of intrastate service without such certification is
unlawful.
<PAGE>
SCHEDULE 3.13
INTERNATIONAL OPERATING AGREEMENTS
Operating Agreements
International Telecommunications Corporation has International
Telecommunications Services Agreements between International Telecommunications
Corporation ("ITC") and (1) Euronet Digital Communications (1992), Ltd.; (2)
Datacom, S.A.; (3) Chilesat, S.A.; (4) International Communication Management
Services; (5) MIG International; (6) Fonetel Global Communications A.B.; (7)
Russian Satellite Communications Company; (8) Jordan Telecommunications
Corporation; (9) Mercury Communications Limited; and (10) Compania Dominicana
De Telefonos, C. for A.
Regulatory Compliance
To date, ITC has not filed annual international traffic reports as
required by Section 43.61 of the FCC's rules.
<PAGE>
SCHEDULE 3.15
TITLE TO PROPERTY AND ASSETS
Loans and Liens
I. MCI
A. Promissory Note, dated July 1, 1994, between ITC and MCI
Telecommunications Corporation, for $967,023.67 principal
B. Security and Financing Agreement, dated July 1, 1994 between ITC
and MCI Telecommunications Corporation -- Not signed by MCI
C. True-Up and Confidentiality Agreement, dated June 28, 1994,
between ITC and MCI Telecommunications Corporation -- Not signed
by MCI
D. Promissory Note, dated June 29, 1993, for payment of $622,552,0O
plus interest by August 15, 1994
E. Payment Agreement, dated June 29, 1993 between ITC and MCI
II. GTE Spacenet
A. GTE Spacenet Corp, March 11, 1994, payment schedule, total principal
$89,871.93, executed by Rebetti April 6, 1994 and by Spacenet April
27, 1994. CP has advised that there is no written underlying note.
III. RSL Communications
A. Secured Term Promissory Note and Agreement; Promissory Note
Conversion Agreement, and Security Agreement, all dated December
1, 1994
IV. GTE Hawaiian, start date August 1, 1994, balance: $82,237.10. CP has
advised that payment is pursuant to oral agreement; no written
agreement exists.
V. Equipment Lease Agreements: See Schedule 3.9(a).
VI. WorldCom Lien - June 1, 1990
VII. New York State Lien, 1992 - ITC
VIII. Eaton Financial Corp. - August 7, 1992
<PAGE>
2
IX. Telecommunications Finance Group - October 9, 1991, October 16, 1991,
February 24, 1992, February 1, 1993, February 17, 1993, February 24, 1993,
February 1, 1994, February 18, 1994
X. The ABL Corp. - September 28, 1990
XI. GE Capital Corp - October 2, 1992
XII. Datacom Leasing Corp. - May 13, 1993
The liens which the Company shall undertake to remove pursuant to Section
7.15 of the Stock Purchase Agreement are: the New York State lien; and the liens
of RSL Communications, Datacom Leasing Corp., Eaton Financial Corp.; ABL Corp.;
and GE Capital Corp.
<PAGE>
SCHEDULE 3.16
EMPLOYEES AND LABOR
Officers and Directors of International Telecommunications Group. Ltd.
Name Office Address
- ---- ------ -------
Charles M. Piluso President 129 Woodmere Boulevard
Director Woodmere, NY 11598
Richard P. Rebetti Vice President 77 Sands Point Road
Treasurer Port Washington, NY 11050
Director
Deborah L. Karns Secretary 8 Bruce Road
Montclair, NY 07043-1720
Eric Fishman Asst. Secretary Fletcher, Heald & Hildreth, PLC
1300 North 17th Street
Rosslyn, VA 22209
Robert J. Gardener Director 12517 Woodmill Drive
Palm Beach Gardens, FL 33418
Benny Lebovits Director Mishol Ha Hadas 16, Ramot B
Jerusalem, Israel
Eli Lior Director Ha Meyasdim St. 19, Bet-Hakerem
Jerusalem, Israel
Joanne G. Panzarella Director 129 Woodmere Boulevard
Woodmere, NY 11598
Joseph S. Panzarella Director 409 Club Court
Oceanside, NY 11572
Bruce P. Wechsler Director 1412 Drucker Court, SE
Palm Bay, FL 32909
<PAGE>
Officers and Directors of International Telecommunications Corporation
Name Office Address
- ---- ------ -------
Charles M. Piluso President 129 Woodmere Boulevard
Director Woodmere, NY 11598
Richard P. Rebetti Vice President 77 Sands Point Road
Treasurer Port Washington, NY 11050
Secretary
Director
Eric Fishman Asst. Secretary Fletcher, Heald & Hildreth, PLC
1300 North 17th Street
Rosslyn, VA 22209
<PAGE>
Officers and Directors of International Telecommunications Europe, Ltd.
Name Office Address
- ---- ------ -------
Charles M. Piluso President 129 Woodmere Boulevard
Woodmere, NY 11598
Richard P. Rebetti Treasurer 77 Sands Point Road
Director Port Washington, NY 11050
Eric Fishman Asst. Secretary Fletcher, Heald & Hildreth, PLC
1300 North 17th Street
Rosslyn, VA 22209
Robert J. Gardener Director 12517 Woodmill Drive
Palm Beach Gardens, FL 33418
Benny Lebovits Director Mishol Ha Hadas 16, Ramot B
Vice President Jerusalem, Israel
Eli Lior Director Ha Meyasdim St. 19, Bet-Hakerem
Secretary Jerusalem, Israel
Emanuel Mudrik Director Luz Building
President 5 Kiryat Mada Street
Industrial Park
Har Hotzvim Jerusalem
Israel
<PAGE>
Employees of ITC
Michele Acquaviva
Lucrezia B. Bellanti
Maria Casamento
Biagio Civale
Annette Dickson
Alvin E. Dillman, III
Stephen Garofalo
Susan Giannini
Samuel C. Greene
Philip Grippaldi
Deborah L. Karns
Dennis E. Kinzie
Steven Madson
Laura Magalhaes
Francesco Marino
Nikitas Mendoros
Jorge Monge
Harry Mora
Manuel M. Osorio
Julio Perez, Jr.
Alejandro Reyes
<PAGE>
Emp1oyees of ITG
Charles M. Piluso
Richard P. Rebetti
Elizabeth Vultaggio
<PAGE>
SCHEDULE 3.20
TAX RETURNS
ITG, ITC and Intelco Europe have not filed Federal, state and local income
tax returns for April 30, 1994.
<PAGE>
SCHEDULE 3.22
TRANSACTIONS WITH AFFILIATES
Salaries, Dividends, Bonuses, Material Perquisites of Employees
The sales representative positions of the ITC are composed of salary and
bonus. This bonus is based on a percentage of budget and/or a percentage of
revenue. Anyone that has revenue budget is paid a bonus.
Director of Business Development, Mr. Gino Civale, is paid a base
salary plus a bonus based on the number of international operating
agreements. Mr. Civale's base salary is $65,000 and operating agreements are
compensated on two bases: "A" and "B" countries. "A" countries receive a
$10,000 bonus, and "B" countries receive a $5,000 bonus.
In addition, since Mr. Civale was promoted from a sales position, he will
be compensated based on his sales performance in his previous job, for all
accounts that he has transferred over to the Sales Department, under the
standard sales compensation program for his position.
Director of Switched Services, Mrs. Debbie Karns, is paid a base salary
plus a bonus. The bonus is paid annually and quarterly. The base salary is
$65,000 per year with a $10,000 per quarter bonus based on certain achievements.
If all of the objectives are met, and the accounts receivable on those customers
and are 85 percent current and 15 percent 30 days, with an average of 12
percent, Mrs. Karns would be paid a bonus equal to 50 percent of her
compensation. This plan ends May 1995.
Vice President, Finance, Mr. Richard Rebetti, is paid a base salary, and
as a founder of the Company with Mr. Charles Piluso, he receives certain bonus
compensation. In the past, this bonus compensation related to commissions that
Mr. Piluso received in relationship to Prepaid Calling Cards. Mr. Piluso would
typically allocate 10 percent of the commission he would be paid to Mr. Rebetti.
Any Director, or individual who brings business into the Company or
Subsidiary under the product of Prepaid Calling Cards, that has a 50 percent
gross profit margin, is paid a bonus of 25 percent of the gross profit. All
directors, affiliates and agents are encouraged to bring this type of business
to the Company and Subsidiary.
Bonuses may be maintained on the books for select individuals as a loan
during the first year and thereafter may have a multi-year schedule to payroll
based on employment and tax conditions.
<PAGE>
SCHEDULE 3.25
KEY EMPLOYEES
Charles M. Piluso
<PAGE>
SCHEDULE 5.17
SPIN OFF OF INTELCO RUSSIA AND INTELCO UKRAINE
ITC will provide telecommunications services to Intelco Russia and Intelco
Ukraine pursuant to the terms of its filed FCC tariffs.
<PAGE>
Exhibit 10.51
EXHIBIT C
AMENDMENT TO SHAREHOLDERS' AGREEMENT
THIS AMENDMENT TO SHAREHOLDERS' AGREEMENT (this "Amendment"), dated as of
March 10, 1995, by and among CHARLES M. PILUSO ("Piluso"), residing at 129
Woodmere Boulevard, Woodmere, New York 11598, RICHARD REBETTI ("Rebetti"),
residing at 77 Sands Point Road, Port Washington, New York 11050, INCOM (UK)
LTD. ("Incom"), a corporation organized under the laws of the United Kingdom
with offices at Northway House, 1379 High Road, Whetstone, London N20 9NN, Great
Britain (individually a "Shareholder" and collectively the "Shareholders") RSL
COMMUNICATIONS, INC. ("RSL"), a Delaware corporation with offices at 767 Fifth
Avenue, Suite 4200, New York, New York 10153 and INTERNATIONAL
TELECOMMUNICATIONS GROUP, LTD. ("ITG"), a Delaware corporation with offices at
60 Hudson Street, New York, New York 10013 (individually a "Party" and
collectively the "Parties").
W I T N E S S E T H:
WHEREAS, the Shareholders entered into a shareholders' agreement, dated
the first day of September, 1994 (the "Shareholders' Agreement"), attached
hereto as Exhibit A, with respect to, among other things, the transfer or other
disposition of the authorized and outstanding stock of ITG owned by the
Shareholders;
WHEREAS, the Shareholders desire that ITG issue and sell to RSL, 66,667
shares of its Series A Convertible Preferred Stock having the rights, privileges
and preferences as stated and qualified in the Amended and Restated Certificate
of Incorporation ("Restated Certificate") of ITG, dated as of March 9, 1995,
plus such additional number of shares of convertible preferred stock as may be
required to be purchased (the "Additional Shares") pursuant to Section 9.11 of
that certain Stock Purchase Agreement, dated as of March 10, 1995, by and
between ITG, International Telecommunications Corporation ("ITC") and RSL (the
"Purchase Agreement") for a minimum purchase price of $3,000,000 as may be
increased, pursuant to said Section 9.11 of the Purchase Agreement, to a maximum
of $4,750,000, all in accordance with the terms and provisions of the Purchase
Agreement; and
WHEREAS, the Shareholders desire to amend certain provisions of the
Shareholders' Agreement in the manner hereinafter set forth, and to have RSL
become a party thereto, to be effective upon the closing of the transactions
contemplated by the Purchase Agreement.
<PAGE>
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in the Shareholders' Agreement, the Purchase Agreement and this
Amendment, the parties hereto, intending to be legally bound, do hereby agree as
follows:
Defined Terms. Terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Shareholders' Agreement.
1. Sale and Purchase ITG Preferred Stock. Each of the Parties hereto
acknowledge and agree that ITG will authorize, issue and sell to RSL 66,667
shares of Series A Convertible Preferred Stock, having the rights, powers and
privileges as stated in the Restated Certificate, plus Additional Shares, if
any, for an aggregate purchase price to be paid by RSL of a minimum of
$3,000,000 as may be increased pursuant to Section 9.11 of the Purchase
Agreement to a maximum of $4,750,000 in accordance with the terms and provisions
of the Purchase Agreement. Each party hereto waives any preemptive rights to
purchase any shares pursuant to Section IX "Preemptive Rights" of the
Shareholders' Agreement with respect to such sale. Exhibit A to the
Shareholder's Agreement is hereby amended and restated in the form of Exhibit B
attached hereto, reflecting the authorized shares of Preferred Stock issued to
RSL.
2. No Restriction on RSL to Transfer Shares. RSL shall not be considered a
"Transferring Shareholder", as defined in the Shareholders' Agreement, and any
restrictions on RSL's ability to transfer any of its shares of Preferred Stock
or, upon conversion its common stock otherwise contained in the Shareholders'
Agreement shall be of no force and effect as to RSL and its transferees, and RSL
and its transferees shall have the ability to freely transfer its shares subject
to the terms of this Amendment; provided, however, that RSL shall not sell its
shares of Preferred Stock to a Competitor unless, having presented the
Competitor's offer to the Board of Directors of ITG for consideration, the Board
has, within 10 business days thereafter, rejected the purchase of all such
shares on the terms of such offer. However, if such offer was not rejected, the
Company shall purchase such shares on the terms of such offer within 30 days of
the Board's action. Sections I, II.B. and III of the Shareholders' Agreement
entitled "Restrictions on Disposition of Authorized and Outstanding Shares;
"Restrictions on Purchaser or Transferee" and "Purchase Price", respectively,
shall not be applicable to any transfer by RSL or any transferees from RSL. RSL
shall, however, be considered an "Other Shareholder" for purposes of such
Sections. The second and third sentences of redesignated Section XIII.B.
(current Section XII) and Section XIII.L. shall not apply to any transfer by RSL
or its transferees.
2
<PAGE>
3. Composition of the Board of Directors. Section X of the Shareholders'
Agreement entitled "Directors" is amended by deleting the Section in its
entirety and inserting in lieu thereof the following:
"X. DIRECTORS AND COMMITTEES
A. Board of Directors: The Board of Directors of ITG shall consist
of eleven members, six elected by Charles M. Piluso ("Piluso")
("Class A Directors"), two elected by Incom (UK) Ltd. ("Incom")
("Class B Directors") and three elected by the holders of Series A
Convertible Preferred Stock ("Class C Directors"). In the event of
(i) a material breach by ITG of any of the covenants or restrictions
in the Purchase Agreement, (ii) a material violation of the terms of
the Series A Convertible Preferred Stock or (iii) the termination of
employment of Piluso by ITG for Cause or by Piluso without Good
Reason as defined in the employment agreement made as of October 25,
1994 and as amended and restated as of March 10, 1995, attached
hereto as Exhibit C (the "Employment Agreement"), the holders of the
Series A Convertible Preferred Stock shall be entitled to elect six
of the members of the Board of Directors and Piluso shall be
entitled to elect three directors. Upon receipt of written notice
given by RSL to Piluso of the occurrence of events (i), (ii) or
(iii) above, Piluso shall, after failure to cure (i) and (ii) within
five business days after receipt of the aforesaid notice, cause the
immediate resignation of three directors elected by him in order to
give effect to the provisions of this paragraph. ITG shall not
compensate in such capacities members of the Board of Directors who
are employees or investors, but other members may be compensated.
B. Executive Finance Committee: The Board of Directors of ITG shall
form an Executive Finance Committee. The Executive Finance Committee
shall consist of five members, two elected by the holders of the
Series A Convertible Preferred Stock, two elected by Piluso and one
elected by Incom. The Executive Finance Committee shall decide all
matters by affirmative vote of at least four of its five members.
This committee's approval shall be required for all contracts or
agreements, other than employment agreements of ITG, having a total
contract price or requiring aggregate payments by ITG in excess of
$50,000 above the budget figure approved by the holders of Preferred
Stock, unless such expenditures have been previously approved by the
Board of Directors.
3
<PAGE>
C. Executive Selection Committee: Upon approval by the FCC of the
application of ITC for a transfer of control of ITC to the
shareholders of ITG, the Board of Directors of ITG shall form an
Executive Selection Committee. The Executive Selection Committee
shall consist of three members, one elected by the holders of the
Series A Convertible Preferred Stock, one elected by Piluso and one
elected by Incom. The Executive Selection Committee shall select a
chief operating officer of International Telecommunications
Corporation ("ITC") a 94% owned subsidiary of ITG, and a chief
financial officer for either ITG or ITC, and the chief executive
officer of ITG when the term of Piluso's current employment contract
has run or Piluso's employment has otherwise been terminated. This
selection requires the consensus of all three committee members,
except that if Piluso was terminated for Cause or if Piluso resigns
for other than Good Reason (as defined in the Employment Agreement),
then decisions of the Executive Selection Committee shall be made
solely by the representatives of the holders of the Series A
Convertible Preferred Stock and Incom, acting together.
D. Voting by the Board of Directors: None of the following matters
shall be decided without the affirmative vote of at least one of the
Class C Directors: (i) compensation of Piluso, including any
amendments to the Employment Agreement and any options or other
"perks" for Piluso or Richard Rebetti or "perks" in excess of
$10,000 per year or options for other ITG officers, (ii) any
amendment to ITG's Restated Certificate or its By-Laws or the
adoption of any Certificate of Designation of any series of
preferred stock and (iii) any action by the Board of Directors
required in connection with (a) the matters requiring the consent of
33-1/3% of the shares of the Series A Convertible Preferred Stock of
ITG, pursuant to the Restated Certificate or (b) the voting of ITG
owned stock in ITC in any ITC matters analogous to (A) the matters
requiring the consent of 33 1/3% of the holders of the shares of the
Series A Convertible Preferred Stock of ITG pursuant to ITG's
Restated Certificate or (B) the matters requiring the affirmative
vote of at least one Class C Director of ITG.
E. Termination: The provisions of subsections A, B, C and D of this
Section X, as they relate to the holders of the Preferred Stock,
shall terminate automatically when such holders of the Preferred
Stock hold less than 10% of ITG's fully diluted equity."
4
<PAGE>
4. Transfer Restriction. Notwithstanding any provision in the
Shareholders' Agreement to the contrary, Piluso may not sell, assign, transfer
or otherwise dispose of any shares of common stock other than (i) by will, (ii)
by disposition to members of his immediate family or to trusts of which he or
his counsel, Eric Fishman, is a trustee, provided in each case that (x) such
disposition is made without consideration and (y) the recipient of any such
disposition agrees to be bound by all the terms of this Amended Shareholders'
Agreement or (iii) dispositions to third parties after Piluso has first offered
in writing such shares for purchase to ITG on the same terms and conditions as
offered to the third party; provided, however, that if ITG rejects such offer,
then Piluso has offered in writing such shares for purchase to RSL on such terms
and conditions. Such written offers shall provide 30 days for a response. The
provisions of this Section 4 shall terminate automatically when RSL holds less
than 10% of ITG's fully diluted equity.
5. Tag-Along Rights. In the event that Piluso shall desire to sell any of
his interests in ITG to a third party, RSL shall have the right, at its sole
option, to require the third party to purchase proportionately the same number
of shares of RSL's interest in ITG on the terms substantially identical to those
received by Piluso. In the event that RSL shall sell 25% or more of its equity
ownership of ITG to a third party, Piluso, Incom and Richard Rebetti shall have
the right, at their sole option, to require the third party to purchase from
them, in the aggregate, a number of shares of ITG's common stock equal to 20% of
the number of shares to be sold by RSL.
6. The following shall be inserted as Section XII to the Shareholders'
Agreement (with the existing Section XII to be redesignated Section XIII):
"XII Noncompetition
For so long as RSL remains a record or beneficial owner of ten
percent (10%) or more of the capital stock of ITG, RSL and any company, a
majority of the equity of which is owned by RSL, will not make a direct
equity investment in a U.S.-headquartered company (i) that owns
international fiber optic communications links (such as indefeasible
rights of user in undersea cables) and switching facilities, (ii) that has
entered into operating agreements with foreign carriers and (iii) the
primary business of which is in direct competition with ITC's
facilities-based carriage of international telecommunications traffic
outbound from the United States (for purposes of this Amendment, a
"Competitor"), unless having presented such investment to the Board of
Directors of ITG for its consideration, the Board of Directors has
rejected such direct equity investment. RSL's obligation under this
Section shall
5
<PAGE>
terminate when RSL holds less than 10% of ITG's fully diluted equity.
7. Employment Agreement. Section I.G. of the Shareholders' Agreement
entitled "Termination of Employment," shall not apply to Piluso. The conditions
upon which Piluso may be required to sell his Shares and the terms of such sale
are governed by the Employment Agreement. As to any contradiction in terms or
provisions relating to this subject between the Shareholders' Agreement and the
Employment Agreement, the Employment Agreement shall be controlling.
8. Disputes by Individual Shareholders. Section V.D. of the Shareholders'
Agreement entitled "Disputes By Individual Shareholders," shall not apply to
Piluso. Section VII.B. of the Employment Agreement shall govern with regard to
Piluso's ability to perform his substantial or material duties. As to any
contradiction in terms or provisions relating to this subject between the
Shareholders' Agreement and the Employment Agreement, the Employment Agreement
shall be controlling.
9. Effective Date. Each of the provisions of this Amendment shall be
effective upon the Closing of the transactions contemplated by the Purchase
Agreement.
10. Effect on the Shareholders Agreement. Except as specifically, amended
or modified herein, all of the terms of the Shareholders Agreement shall remain
unchanged and in full force and effect.
11. Severability. Wherever possible, each provision of this Amendment
shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Amendment shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Amendment shall remain unaffected and in full force and effect.
12. Successors and Assigns. This Amendment shall be binding upon and for
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
13. Governing Law. The validity, interpretation and effect of this
Amendment shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state without
regard to its conflicts of laws principles.
14. Articles and Section Titles. The titles of articles and sections
contained in this Amendment are merely for convenience and shall be without
substantive meaning or content.
6
<PAGE>
15. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be considered an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
March 10, 1995.
/s/ Charles M. Piluso
----------------------------------
CHARLES M. PILUSO
/s/ Richard Rebetti
----------------------------------
RICHARD REBETTI
INCOM (UK) LTD.
By /s/ Benny Lebovits
----------------------------------
Name: Benny Lebovits
Title: Managing Director
INTERNATIONAL TELECOMMUNICATIONS GROUP,
LTD.
By /s/ Charles M. Piluso
----------------------------------
Name:
Title:
RSL COMMUNICATIONS, INC.
By /s/ Itzhak Fisher
----------------------------------
Name:
Title:
7
<PAGE>
EXHIBIT A
SHAREHOLDERS' AGREEMENT
8
<PAGE>
EXHIBIT A
AGREEMENT
BY AND BETWEEN
---------------------
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
AND
THE SHAREHOLDERS OF
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
---------------------
<PAGE>
TABLE OF CONTENTS
I. RESTRICTIONS ON DISPOSITION OF AUTHORIZED AND
OUTSTANDING SHARES ............................................... -1-
A. Transfers Subject to Agreement ................................ -1-
B. Legend On Shares .............................................. -2-
C. ITG's First Option ............................................ -2-
D. Shareholder's Second Option ................................... -3-
E. Third Party Offers ............................................ -4-
F. Death or Disqualifying Event .................................. -5-
G. Termination of Employment ..................................... -5-
H. Employee Stock Option Plans ................................. -6-
I. Purchase of Shares by ITG ..................................... -6-
II. RESTRICTIONS ON OPTIONS AND DISPOSITION OF UNAUTHORIZED
SHARES ........................................................... -6-
A. No Restrictions on ITG ........................................ -6-
B. Restrictions on Purchaser or Transferee ....................... -7-
C. Option Agreements ............................................. -7-
III. PURCHASE PRICE -7-
A. General ....................................................... -7-
B. Certificate of Agreed Value ................................... -7-
IV. CLOSINGS ......................................................... -7-
A Place and Time ................................................ -7-
B. Delivery by Seller ............................................ -8-
C. Resignations By Transferring Shareholder ...................... -8-
D. Deliver by Purchaser .......................................... -9-
V. DEFINITION OF DISQUALIFYING EVENT ................................ -9-
A Individual Shareholder ........................................ -9-
B. Shareholder Other Than an Individual Shareholder .............. -9-
C. Failure to Dispute Notice of Disqualifying Event .............. -10-
D. Disputes By Individual Shareholders ........................... -10-
E. Disputes By Shareholders Other Than Individual Shareholders ... -10-
VI. SPECIFIC PERFORMANCE ............................................. -10-
VII. LIFE INSURANCE ................................................... -10-
VIII. TERMINATION OF AGREEMENT ......................................... -11-
<PAGE>
IX. PRE-EMPTIVE RIGHTS ............................................... -11-
X. DIRECTORS ........................................................ -12-
XI. OFFICERS ......................................................... -12-
XII. MISCELLANEOUS .................................................... -12-
A. Notices ....................................................... -12-
B. Binding Effect ................................................ -12-
C. Waiver ........................................................ -13-
D. Enforceability ................................................ -13-
E. Entire Agreement .............................................. -13-
F. Applicable Law ................................................ -13-
G. Attorney's Fees ............................................... -14-
H. Arbitration ................................................... -14-
I. Captions ...................................................... -14-
J. By-Laws to Enforce This Agreement ............................. -14-
K. Certificate of Incorporation to Set Forth Restrictions ........ -14-
L. Surrender of Shares ........................................... -14-
M. Execution of Agreement ........................................ -14-
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INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
SHAREHOLDER'S AGREEMENT
Agreement made this first day of September, 1994, by and between Charles
M. Piluso, residing at 129 Woodmere Boulevard, Woodmere, New York 11598; Richard
Rebetti, residing at 149-48 256th Street, Rosedale, New York 11422; Incom (UK)
Ltd., a United Kingdom corporation with a place of business at Northway House,
1379 High Road, Whetstone, London N20 9NN, Great Britain (individually a
"Shareholder" and collectively the "Shareholders"), and International
Telecommunications Group, Ltd. ("ITG"), a Delaware corporation, having a place
of business at 60 Hudson Street, New York, New York 10013.
WITNESSETH:
WHEREAS, ITG is authorized to issue one million shares of common stock;
and
WHEREAS, the Shareholders own the number of shares of the Common Stock of
ITG set forth opposite their names on Exhibit A annexed hereto, representing in
aggregate 100% of the authorized and outstanding stock of ITG as of the above
date ("Authorized Shares"); and
WHEREAS, the parties desire to enter into a mutual written agreement with
respect to the transfer or other disposition of all the Authorized Shares of ITG
owned by the Shareholders and, except as otherwise provided in this Agreement,
any shares heretofore issued (referred to collectively as "Shares"); and
WHEREAS, the Shareholders and the Board of Directors (the "Board") of ITG
have determined that this Agreement is in the best interest of ITG and the
Shareholders;
NOW THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
I. RESTRICTIONS ON DISPOSITION OF AUTHORIZED AND OUTSTANDING SHARES
A. Transfers subject to Agreement: No Shareholder may, directly or
indirectly, transfer (as hereinafter defined) all or any of the
Shares, or the certificate or certificates representing same, or any
interest therein, held by such Shareholder or which Shareholder or
Shareholder's legal or personal representatives, successors or
assigns thereof, may at any time hereafter own or be entitled to,
except as hereafter expressly permitted by this Agreement. ITG shall
not transfer on their books any of the Shares, or issue any
certificate on account or in lieu thereof, unless all terms and
conditions of this Agreement have been complied with. The term
"transfer", as herein used, shall not include any bequest to a
relative or assignment to a trust but shall include any other sale,
assignment, gift, mortgage, pledge, hypothecation,
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bequest, encumbrance or disposition, or any transfer as a result of
any voluntary or involuntary legal proceeding, execution, sale,
bankruptcy, insolvency, or otherwise, of any of the Shares. Any sale
or transfer of all or any portion of the Shares of a Shareholder
shall be null and void, unless and until all terms and conditions of
this Agreement are first complied with. In case of any violation of
this Agreement by the attempted transfer of Shares without
compliance with the terms hereof, the person or persons for whose
benefit these options are provided shall have the right to compel
the holder or transferee to deliver such Shares in accordance with
the options and at the price hereinafter provided.
B. Legend On Shares: So long as this Agreement shall remain in
effect, the following statement shall be noted conspicuously on
each certificate representing any of the Shares:
"This certificate and the shares represented hereby are subject to terms
and conditions contained in a certain agreement dated September 1, 1994, the
Certificate of Incorporation, the By-laws, and any amendment thereto, copies of
which documents and are on file at the principal office of the corporation, and
any sale, assignment, gift, mortgage, pledge, hypothecation, bequest,
encumbrance or disposition, or any transfer as a result of any voluntary or
involuntary legal proceeding, execution, sale, bankruptcy, insolvency, or
otherwise, of this certificate in violation of said agreement, Certificate of
Incorporation, or By-laws shall be invalid."
C. ITG's First Option: If any Shareholder ("Transferring
Shareholder") intends to transfer all or any portion of said
Shareholder's Shares to ITG or another Shareholder, such
Transferring Shareholder shall give notice (the "Transfer
Notice") to ITG and to the remaining Shareholders setting forth
such intention. If the Transferring Shareholder intends to
transfer all or any portion of said Shareholder's Shares to any
other party, the terms and conditions of subsection E of this
paragraph shall apply and such Transferring Shareholder shall
give notice (the "Third Party Offer Notice") as specified in
subsection E to ITG and to the remaining Shareholders.
ITG shall have the non-assignable first option to purchase all, but not
less than all, of the Shares offered in said Transfer Notice or Third Party
Notice by the Transferring Shareholder as of the date the applicable notice was
given, at the purchase price provided in Paragraph III hereof. Said option shall
be exercisable by giving notice (the "Notice to Purchase") to the Transferring
Shareholder and to the remaining Shareholders, within thirty (30) calendar days
after receipt of the Transfer Notice or Third Party Offer Notice by ITG. In the
event a Notice to Purchase is given, the Transferring Shareholder shall be
obligated to sell all, but not less than all, of the Shares offered in said
Transfer Notice or Third Party Offer Notice as of the date the applicable notice
was given.
The Transferring Shareholder shall take such action as is necessary and
lawful to permit ITG's decision with respect to its exercise of any option
granted to it hereunder to be decided in
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accordance with the wishes of the remaining Shareholders. The Board shall
convene a meeting of the Shareholders in accordance with all procedures set
forth in Article III of the By-laws pertaining to special meetings of the
Shareholders. All Shareholders, other than the Transferring Shareholder, shall
be entitled to vote on any decision by ITG as to whether it desires to exercise
its option to purchase the Shares. Each Shareholder shall be entitled to one (1)
vote per Share.
D. Shareholders' Second Option: If ITG fails to exercise its option
under Paragraph I.C hereof within the thirty (30) calendar day
period set forth therein, or if ITG notifies the Transferring
Shareholder and the remaining Shareholders in writing prior to the
expiration of said thirty (30) calendar day period of its decision
not to exercise such option, then the Shareholders other than the
Transferring Shareholder (individually, the "Other Shareholder" and
collectively, the "Other Shareholders") shall have a non-assignable
option to purchase all, but not less than all, of the Shares offered
in the Transfer Notice or Third Party Offer Notice by the
Transferring Shareholder as of the date the applicable notice was
given, at the purchase price provided in Paragraph III hereof. If
all of the Other Shareholders accept the offer of the Transferring
Shareholder as aforesaid, the Shares offered for Transfer shall be
purchased by the Other Shareholders in pro rata proportion to such
Shareholders' then ownership in ITG, excluding the percentage owned
by the Transferring Shareholder, or in such other proportions as may
be agreed upon by them in writing. If less than all of the Other
Shareholders accept the offer, the Shares offered for transfer shall
be purchased by the accepting Shareholders in pro rata proportion to
each accepting Shareholder's then ownership in ITG, excluding the
percentages owned by the Transferring Shareholder and the
non-accepting Shareholders, or in such other proportions as may be
agreed upon in writing by the accepting shareholders.
The aforesaid option granted to the Other Shareholders shall be
exercisable by each Other Shareholder giving notice (the "Option Notice") to the
Transferring Shareholder and ITG within sixty (60) calendar days after the
earlier of the Shareholder's receipt of the Transfer Notice or Third Party Offer
Notice, or receipt of notice of ITG's intent not to exercise its option. In the
event an Option Notice is given, then the Transferring Shareholder shall be
obligated to sell and the Other Shareholders who served an Option Notice shall
be obligated to purchase all, but not less than all, of the Shares offered by
the Transferring Shareholder as of the date the Transfer Notice or Third Party
Offer Notice was given.
In the event that a Third Party Offer Notice was given by a Transferring
Shareholder and no Option Notice is given by any of the Other Shareholders, then
the terms and conditions of subsection E of this paragraph shall apply to the
purchase of the Transferring Shareholder's Shares by the third party.
E. Third Party Offers: Subject to the terms of this Agreement, the
Transferring Shareholder shall have the right to sell all or any
portion of said Shareholder's Shares to an unaffiliated third party
(the "Third Party"). The Transferring
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Shareholder, who receives and is willing to accept an arms-length,
bona fide, written offer from a Third Party to purchase all or any
portion of the Shares offered (the "Third Party Offer") shall grant
successive irrevocable non-assignable rights of first refusal to buy
his or her Shares to ITG and then to the Other Shareholders on the
same monetary and other substantially economic terms and conditions
as the Third Party Offer by giving notice to ITG and the Other
Shareholders (the "Third Party Offer Notice"). The Third Party Offer
Notice shall contain the name and address of the third party, the
Transferring Shareholder's relationship, if any, to the third party,
and any other information as reasonably requested by the Board. A
copy of the Third Party Offer shall be attached to the Third Party
Notice.
Upon request by the Board or any Shareholder, the Transferring Shareholder
shall deliver appropriate documents to satisfy the Board or the Shareholder that
no violation of Securities Exchange Commission, Federal Commissions Commission,
or other applicable federal, state, or local laws, rules, or ordinances will
occur as a result of the Transferring Shareholder's transfer of the Shares to
the Third Party.
The Terms of the Third Party Offer required to be met by ITG or the Other
Shareholders shall not include any non-monetary terms not reasonably and readily
performable by either ITG or the Other Shareholders. Such rights shall be
exercisable, if at all, by ITG giving notice to the Transferring Shareholder, or
the Other Shareholders giving notice to the Transferring Shareholder and ITG
pursuant to the terms and conditions of Paragraphs I.C and I.D, respectively.
In the event that neither ITG nor the Other Shareholders exercise their
respective rights of first refusal hereunder, the Third Party Offer shall be
accepted by the Transferring Shareholder, if at all, only on the exact terms of
the Third Party Offer and no later than thirty (30) calendar days after the
earlier of the expiration of the Other Shareholders' right of first refusal, or
receipt of notices of intention not to exercise the option from all Other
Shareholders. In the event that the original terms of the Third Party Offer are
modified in any manner, the Transferring Shareholder shall grant new successive
irrevocable non-assignable rights of first refusal to buy his Shares to ITG and
then to the Other Shareholders on the same terms and conditions as the modified
Third Party Offer. Any such options or obligations arising from a modified Third
Party Offer shall be governed by the terms and provisions as set forth above in
this subsection and subsections C and D of this paragraph, as if the offer were
a new Third Party Offer.
Upon ITG's and all other Shareholder's refusal to exercise the right of
first refusal, the Third Party shall execute and promptly deliver to each party
hereto, at the closing of a sale of Shares to the Third Party 1) a signed and
notarized agreement substantially in the form of Exhibit C, attached hereto; and
2) a signed and notarized agreement from the Third Party's spouse substantially
in the form of Exhibit D, attached hereto. Upon such closing the Third Party
shall succeed the Transferring Shareholder as a Shareholder under this
Agreement. In the event the Third Party Offer is not accepted by the
Transferring Shareholder within thirty (30) calendar days of the earlier of the
expiration of the Other Shareholders' right of first refusal, or receipt of
notices
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of intention not to exercise the option from all Other Shareholders, and on the
exact terms of the Third Party Offer or modified Third Party Offer, or if for
any reason the Third Party does not succeed the Transferring Shareholder as a
party to this Agreement, then such transfer shall be of no force and effect.
F. Death or Disqualifying Event: In the event of the death of an
"Individual Shareholder" (as defined in accordance with this
subsection), the beneficiaries of such shareholder's estate shall
acquire such Shareholder's shares subject to all the terms and
conditions hereof. Within thirty (30) days after the Shareholder's
death, the beneficiaries may require the Company and/or other
Shareholders to purchase all, but not less than all, of the Shares
hered by the deceased Shareholder at the purchase price set forth in
Paragraph III hereof. In the event of a "Disqualifying Event" (as
defined in accordance with Paragraph V hereof) concerning any
Shareholder, successive irrevocable non-assignable rights of first
refusal to purchase all, but not less than all, of the Shares owned
by the deceased or disqualified Shareholder shall be granted to ITG
and then the Shareholders, as of the date of death or Disqualifying
Event, at the purchase price set forth in Paragraph III hereof. Any
such options shall be governed by the terms and provisions of
Paragraphs I.C and I.D hereof.
For the purposes of this Agreement: 1) an "Individual Shareholder" is any
Shareholder who is a natural being; and 2) a corporation, partnership, trust, or
any other entity other than a natural being, is a "Shareholder other than an
Individual Shareholder".
G. Termination of Employment: In the event that any Individual
Shareholder, or an agent, employee, officer, or director of a
Shareholder other than an Individual Shareholder is now or may
hereafter be an employee of ITG, and said employment ceases, for any
reason, the terms and conditions of subsections C, D and E of this
Paragraph I may, in the discretion of the Board, apply to said
individual, and all shares of ITG acquired by the individual as a
result of or during the employment relationship, including, but not
limited to, shares acquired from any rights, obligations or the
exercise of options granted to the individual.
The above provision may be applied by the Board provided that 1) a written
agreement by and between the individual and ITG does not provide otherwise; and
2) the Board adopts a resolution at a special meeting called for that express
purpose on not less than fourteen (14) calendar days notice, in accordance with
all procedures contained in Article IV of the By-laws pertaining to Special
Meetings of the Board. If the Board so adopts said resolution, then the
individual 1) shall be considered a Transferring Shareholder for purposes of
this Agreement; and 2) shall grant successive irrevocable non-assignable rights
of first refusal to buy his Shares to ITG and then to the Other Shareholders in
accordance with the terms and conditions contained in subsections C and D of
this Paragraph at the price to be determined in accordance with Paragraph III
hereof; and 3) shall not be entitled to the benefits of any of the options
herein contained, but the Shares of such person shall nevertheless be subject to
the options herein contained.
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H. Employee Stock Option Plans: Within ninety (90) days after the
execution of this Agreement, the Board shall institute an employee
stock option plan, or other method or procedure whereby persons who
are employees of ITG may obtain shares or options to acquire shares
of ITG. Said plan, method, or procedure shall provide that upon
termination of said employment, for whatever reason, shares so
acquired are to be redeemed by ITG or transferred to the
Shareholders in accordance with the terms and conditions of
subsections C and D of this Paragraph I. Upon the issuance of
options or stock in accordance with said plan, method, or procedure,
the employee shall deliver signed and notarized statements
substantially in the form of Exhibits C and D, attached hereto.
Employees who acquire shares pursuant to said employee stock option
plan, method, or procedure shall not be entitled to the benefits of
any of the options herein contained by virtue of said acquisition of
shares.
I. Purchase of Shares by ITG: To the extent required by law, any
purchase of ITG Shares elected to be made by ITG hereunder shall be
made only out of legally available surplus of the Corporation. To
the extent possible and lawful under this Agreement, ITG, the
Shareholders, or any of the personal or legal representatives
thereof, shall take whatever legal steps may be required to create
surplus, to revalue the assets of ITG and to enable ITG to pay debts
as they become due in the usual course of business, so that ITG may
lawfully make any such purchase. However, nothing herein shall be
deemed to obligate ITG to exercise any option or to obligate the
Shareholders to provide funds to ITG for such a purpose.
II. RESTRICTIONS ON OPTIONS AND DISPOSITION OF UNAUTHORIZED SHARES
A. No Restrictions on ITG: Except as otherwise provided in subsection B
of this Paragraph II, no provision of this Agreement shall be
interpreted as restricting, in any manner, the transfer by ITG of
any shares not authorized for issuance by the State of Delaware as
of the date first set forth above ("Unauthorized Shares"), or
options pertaining to any shares not authorized for issuance by the
State of Delaware as of the date first set forth above ("Options for
Unauthorized Shares"), it being the intention of the parties hereto
that ITG retains all rights to transfer said shares and options as
if this Agreement were not in existence.
B. Restrictions on Purchaser or Transferee: Upon the issuance of
Unauthorized Shares, other than upon a public offering and sale of
ITG shares in accordance with the rules and regulations of the
Securities Exchange Commission, the purchaser or transferee of said
shares, pursuant to Paragraph I.E hereof, shall deliver signed and
notarized agreements substantially in the forms of Exhibits C and D
annexed hereto. The shares so acquired shall be subject to this
Agreement,
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and the purchaser or transferee shall be considered a Shareholder
and subject to all terms and conditions of this Agreement
C. Option Agreements: All options hereinafter issued by ITG or a
Shareholder shall be non-transferrable. The terms and conditions of
subsection B of this Paragraph II shall apply upon the exercise of
any option granted by a Shareholder or any Option for Unauthorized
Shares granted by ITG, other than employee stock options, issued
before the termination date of this Agreement.
III. PURCHASE PRICE
A. General: The purchase price at which Shares of ITG shall be sold and
purchased hereunder shall be at the price stated in the most recent
Certificate of Agreed Value ("Certificate") in accordance with
Paragraph III.B hereof. The price specified in the latest such
Certificate shall be binding upon ITG and each Shareholder, or the
legal or personal representatives of the Shareholders for all
purchases under this Agreement.
B. Certificate of Agreed Value: A Certificate stating the agreed price
for each Share purchased pursuant to Paragraph I hereof, except as
otherwise noted, shall be executed on at least an annual basis by
the Shareholder and ITG. The first such Certificate, substantially
in the form of Exhibit B, annexed hereto, shall be executed by the
Shareholders and ITG on the date hereof. Succeeding Certificates,
substantially in the form of Exhibit B, shall be executed at Special
Meetings of the Shareholders held 1) on the anniversary date, or the
nearest business date thereto, of this Agreement; and 2) at any
other times deemed appropriate. Special Meetings of the Shareholders
to determine the value of the Shares and to execute a Certificate
shall be convened in accordance with all procedures set forth in
Article III of the By-laws pertaining to Special Meetings of the
Shareholders. Each Shareholder shall be entitled to one vote (1) per
Share.
IV. CLOSINGS
A. Place and Time: Any purchase of Shares made hereunder shall take
place at a closing (the "Closing") to be held at the New York
offices of ITG at a time and date agreed upon in writing by the
parties thereto, or in the absence of such an agreement, thirty
(30) calendar days following: 1) the date of a timely Notice of
Purchase submitted hereunder by ITG, in the event of a purchase by
ITG; or 2) the date of the last timely Option Notice submitted by a
Shareholder hereunder, in the event of a purchase by the Other
Shareholders; or 3) the earlier of the date of the expiration of
the Other Shareholder's right of first refusal, or receipt of all
notices of intention not to exercise options from the Shareholders,
in the event of a purchase by a Third party.
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B. Delivery by Seller: At the Closing, the Transferring Shareholder
shall deliver or cause to be delivered to the purchaser, free and
clear of all liens, claims, charges and restrictions, a certificate
or certificates representing the Shares being sold, in proper form
for transfer and with evidence of payment of all applicable transfer
taxes and costs.
In the case of a sale due to death or Disqualifying Event concerning an
Individual Shareholder pursuant to Paragraph I.F hereof, the personal or legal
representatives of the deceased or disqualified Individual Shareholder shall
deliver appropriate estate tax waivers and evidence of authority to act on
behalf of a deceased. In the case of a sale due to a Disqualifying Event of a
Shareholder other than an Individual Shareholder pursuant to Paragraph I.F
hereof, the legal or personal representative of the Shareholder, trustee, or
receiver, or other person with legal authority to act on behalf, or instead of
the disqualified Shareholder, shall deliver all documents as reasonably
requested by the Board or a Shareholder.
C. Resignations By Transferring Shareholder: If an Individual
Shareholder transfers all of the Shares he or she owns, the Board
may require the Shareholder to also deliver to ITG a written
resignation from all positions, if any, held by the Shareholder at
ITG, including that of director, employee, or officer. The Board may
require that the Shareholder resign from all positions only if 1) a
written agreement by and between the Shareholder and ITG does not
provide otherwise; and 2) the Board adopts a resolution at a special
meeting called for that express purpose on not less than fourteen
(14) calendar days notice, in accordance with all procedures
contained in Article IV of the By-laws pertaining to Special
Meetings of the Board.
If the Shareholder is a Shareholder other than an Individual Shareholder
and it transfers all of the shares it owns, the Board may require any employee,
officer, director, or agent of the shareholder who holds any positions,
including that of director, employee, or officer of ITG, to deliver to ITG a
written resignation from all positions, if any. The Board may require that an
employee, officer, director, or agent of the Shareholder resign from all
positions only if 1) a written agreement by and between ITG and the Shareholder,
or the Shareholder's employee, officer, director, or agent does not provide
otherwise; and 2) the Board adopts a resolution at a special meeting called for
that express purpose on not less than fourteen (14) calendar days notice, in
accordance with all procedures contained in Article IV of the By-laws pertaining
to Special Meetings of the Board.
The Board may establish procedures sufficient to effectuate the purposes
of this subsection in the event of a transfer of less than all of the Shares
owned by a Shareholder.
D. Delivery by Purchaser: The purchaser shall deliver or cause to be
delivered to the Transferring Shareholder the purchase price for the
Shares being purchased in cash consideration (certified or official
bank check) unless otherwise agreed.
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A Third Party who purchases Shares under this Agreement shall, pursuant to
Paragraph I.E hereof, deliver signed and notarized agreements substantially in
the forms of Exhibits C and D, annexed hereto.
V. DEFINITION OF DISQUALIFYING EVENT
A. Individual Shareholder: For purposes of this Agreement, a
Disqualifying Event concerning an Individual Shareholder, as such
term is defined in Paragraph I.F, shall be deemed to occur, if as a
result of a mental or physical disability, such Shareholder is
unable to perform the substantial and material duties as a director,
officer, employee, and/or Shareholder of ITG and it is likely that
such disability will continue for a period of at least six
consecutive months. At the onset of said six-month period, the Board
on behalf of ITG, shall give written notice to such Shareholder
("Notice of Disqualifying Event") which (a) states that it believes
that a Disqualifying Event has occurred or commenced concerning the
Shareholder; and (b) specifies the date such Disqualifying Event
occurred or commenced.
B. Shareholder Other Than an Individual Shareholder: For the purposes
of this Agreement, a Disqualifying Event shall be deemed to have
occurred concerning a Shareholder other than an Individual
Shareholder in the event that reasonable grounds exist for the
belief that the Shareholder has or will be dissolved, cease its
business operations, sell a majority of its assets or stock, or that
the Shareholder will be a debtor in a voluntary or involuntary
bankruptcy proceeding. The Board shall given written notice to such
Shareholder ("Notice of Disqualifying Event") which (a) states that
it believes that a Disqualifying Event occurred or commenced, or
will occur or commence; and (b) requests adequate assurances that
the Disqualifying Event has not or will not occur or commence.
C. Failure to Dispute Notice of Disqualifying Event: If any Individual
Shareholder fails to dispute in writing a Notice of Disqualifying
Event within (30) thirty calendar days from the mailing thereof, or
a Shareholder other than an Individual Shareholder fails to dispute
in writing a Notice of Disqualifying Event and provide adequate
assurances that the Disqualifying Event has not or will not occur
within thirty (30) calendar days of the mailing thereof, then a
Disqualifying Event regarding such Shareholder shall be deemed to
have occurred as of the date specified in the Notice of
Disqualifying Event.
D. Disputes By Individual Shareholders: If an Individual Shareholder
disputes in writing a Notice of Disqualifying Event, then the matter
shall be referred to a duly licensed physician who shall immediately
perform a physical or other examination on the Shareholder, such
physician shall determine whether the Shareholder is so
disqualified. Such physician shall be selected by ITG. The decision
of such
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physician shall be conclusive and binding upon the Shareholder. A
disqualified Shareholder shall be deemed to have become disqualified
as of the date specified in the Notice of Disqualifying Event.
E. Disputes By Shareholders Other Than Individual Shareholders: If a
Shareholder other than an Individual Shareholder disputes in writing
a Notice of Disqualifying Event, then the Board shall review all
appropriate documentation offered by the Shareholder and determine
within a reasonable time period whether or not the Shareholder has
provide adequate assurances that a Disqualifying Event has not or
will not occur concerning the Shareholder. The decision of the Board
shall be binding and conclusive upon the Shareholder. A disqualified
Shareholder shall deemed to have become disqualified as of the date
specified in the Notice of Disqualifying Event.
VI. SPECIFIC PERFORMANCE
Shares of Company Stock cannot be readily purchased or sold in the open
market, and for that reason, among others, the parties to this Agreement will be
irreparably damaged if this Agreement is not specifically enforced. Therefore,
any party shall be entitled to an injunction restraining any other party from
transferring Shares in violation of this Agreement, without any bond or other
security being required. If any dispute arises concerning any right or
obligation under this Agreement to purchase or sell any of the Shares, the right
or obligation shall be enforceable in a court of equity by a decree of specific
performance. Such remedy shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which the parties may have.
VII. LIFE INSURANCE
ITG may at its option carry life insurance policies on the life of any
Individual Shareholder to provide ITG with sufficient funds to enable it to
purchase such Shareholder's Shares pursuant to the provisions of Paragraph I
hereof. ITG shall own all such policies and each Shareholder waives any rights
such Shareholder may have under such policies. With respect to the purchase by
ITG of insurance policies acquired pursuant to this Paragraph, each Shareholder
specifically agrees to cooperate fully with ITG, and the insurer in obtaining
and maintaining such insurance on such Shareholder's file and shall timely
submit to any requested medical or other examinations therewith. ITG shall pay
all premiums on any such insurance policies. If any Shareholder sells all of the
Shares owned by the Shareholder during the Shareholder's life, or if this
Agreement is terminated for any reason set forth in Paragraph VIII of this
Agreement, the selling Shareholder (in the event of a sale during a
Shareholder's life) and each Shareholder (in the event of termination of this
Agreement pursuant to Paragraph VIII) shall have the right to purchase any such
policy or policies upon such Shareholder' life owned by ITG. The purchase price
for the policy or policies shall be the interpolated terminal reserve value of
such policy or policies as of the date of sale, less any existing indebtedness
against such policy or policies, plus that portion of the premium or premiums on
such policy or policies paid prior to the date of sale which covers
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the period beyond the date of sale. If such policy is term life insurance, said
policy shall be transferred to the insured upon adjustment between the parties
of premium paid beyond the date of sale. Such right of purchase must be
exercised by the insured within sixty (60) calendar days after the sale of such
Shareholder's shares or the termination of this Agreement. If not so exercised,
such right shall terminate. Upon the exercise of such right, the Shareholder
shall deliver the purchase price of the policy or policies on such Shareholder's
life to ITG, and ITG shall simultaneously execute and deliver to such
Shareholder all the documents which are required to transfer ownership of the
policy or policies. If such right of purchase is not exercised within the time
prescribed by this Paragraph, ITG may make whatever disposition of the policy of
policies ITG shall deem proper.
VIII. TERMINATION OF AGREEMENT
This Agreement shall terminate upon the occurrence of any of the following
events: (a) such time as the shares of Stock subject to this Agreement are
either listed on a national securities exchange or are quoted in the daily
over-the-counter list published by NASDAQ; or (b) the Stock is registered
pursuant to the provisions of Section 12(g) of the Securities Exchange Act of
1934, as amended, and is held of record by not less than five hundred (500)
persons at the time such determination is made; (c) cessation of ITG's business
operations; or (d) bankruptcy or receivership or dissolution of ITG; or (e)
death of two or more of the Shareholders, leaving either one or no surviving
Shareholder, provided that notwithstanding such an event a surviving Shareholder
may elect to fulfill the obligations of this Agreement, in which event it shall
remain vital and effective for all purposes; or (f) mutual agreement of
termination between the Shareholders and ITG; or (g) upon the effectiveness of a
merger, consolidation, reorganization, or other acquisition of substantially all
of ITG's assets if ITG is not the surviving corporation, except that a merger or
consolidation with a subsidiary which effects a mere change in the form or
domicile of ITG without changing the respective holdings of the Shareholders
shall not terminate this Agreement event if ITG is not the surviving
corporation.
IX. PRE-EMPTIVE RIGHTS
The Company agrees that prior to the date of registration of Equity
Securities of the Company after the date hereof the Company will not issue for
cash any equity securities or any securities having rights or options to acquire
equity securities (whether through conversion or exercise or otherwise)
(hereinafter "Equity Securities") without first offering such Equity Securities,
on the same terms and at the same price, to each Shareholder, pro rata on the
basis of the Ownership Interest of such Shareholder as of the date of the notice
given pursuant to this Article. Any such offer of Equity Securities to a
Shareholder will be made in writing to the notice address of the Shareholder and
will remain open for a period of not less than twenty (20) days after the date
of the offer unless the pre-emptive rights with respect to such Equity
Securities are waived as provided herein. If at the end of such twenty (20) day
period there remain unpurchased any of the Equity Securities so offered (the
"Remaining Securities"), the Company will so advise each Shareholder who
purchased Equity Securities in such offering (the "Purchasing Shareholders") and
the Purchasing Shareholders shall have the right for ten (10) days from the
-11-
<PAGE>
date of the Company's notice to purchase that portion of the Remaining
Securities which is pro rata to such Purchasing Shareholder's Ownership Interest
in the Company as of the date of the Company notice with respect to the
Remaining Securities.
The rights of the Shareholders under this Article may be waived by a vote
or consent of a majority in Ownership Interest of all non-employee Shareholders.
X. DIRECTORS
So long as Incom (UK) Ltd. ("Incom-UK"), Charles M. Piluso and Richard
Rebetti are Shareholders, each Shareholder shall vote his shares of Stock so as
to assure in so far as possible that designees of Incom UK, Piluso and Rebetti
(the "Founders") will have seats on the Company's Board of Directors at least
proportionate to the Founder's percentage level of ownership in the Company. If
a vacancy on the Board of Directors results from the removal, resignation or
death of a designee of a Founder, each Shareholder shall vote his shares of
Stock so as to assure the election of a successor nominated by such Founder. No
Shareholder shall propose to the shareholders of the Company that the nominee of
the other Shareholder be removed from the Board of Directors of the Company.
XI. OFFICERS
Incom UK shall cause its designee directors to vote for the election of
the Charles M. Piluso as President and Secretary and of Richard Rebetti as Vice
President and Treasurer of the Company.
XII. MISCELLANEOUS
A. Notices: Notices in connection with this Agreement shall be in
writing and shall be mailed, by certified or registered mail, return
receipt requested, with postage paid, to each party who executed
this Agreement on the date first set forth above, at the address set
forth at the beginning of this Agreement, and all other parties who
are subsequently bound by this Agreement at the address provided by
such party in the "Acknowledgement of Restrictions of Shares." The
above addresses shall be changed by like notice.
B. Binding Effect: All the conditions, covenants and options herein
contained shall bind each of the parties hereto, their heirs,
executors, administrators, successors, and assigns, and also any
receiver or trustee in bankruptcy or insolvency, except as the
rejection of the same may be authorized or directed by order of
court. All Shares of ITG in the hands of any person shall at all
times be subject to the provisions hereof, and in the event of any
transfer of Shares each and all of the conditions, agreements, and
options herein contained shall immediately attach to and bind said
shares in the hands of the transferee. However, any person who may
hereafter become a Shareholder who is not one of the original
parties to this agreement and fails to execute this Agreement with
prior acknowledgements as required in Paragraph I.E hereof shall not
be entitled to the benefits of any of the
-12-
<PAGE>
options herein contained, but the Shares of such person shall
nevertheless be subject to the options herein contained.
C. Waiver: No waiver of any provision of this Agreement shall be
effective unless made in a writing signed by the party against which
enforcement of the waiver is sought. No such waiver shall be deemed
to be a waiver of any subsequent breach of such provision, or of any
breach of any other provision of this Agreement.
The failure to exercise any of the options herein contained shall not
relieve said Shares or any part thereof permanently from the conditions hereof,
and all said options and agreements shall again attach to the Shares and bind
each successive holder thereof as soon as the same are acquired.
D. Enforceability: In the event any provision of this Agreement shall
be held invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and shall not
affect or render invalid or unenforceable any other provisions of
the Agreement, and this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid or
unenforceable.
If ITG or the Shareholders are unable to make any purchase desired
hereunder because of the provisions of any applicable statute, ITG's Certificate
of Incorporation or By-laws, each party agrees to take action as may be
necessary to allow the other party or parties to make such purchases.
E. Entire Agreement: This document constitutes the entire agreement
between the parties hereto and supersedes any previous
understandings, commitments, representations and agreements
heretofore made between the parties with respect to the subject
matter hereof. No alteration, amendment, explanation or
interpretation may be introduced to modify the terms hereof unless
it is in writing and signed by the parties hereto affected.
F. Applicable Law: This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of New
York, applicable to contracts made and/or to be performed in New
York, without reference to principles of conflict of laws where
legally permissible.
G. Attorney's Fees: In the event any party hereto institutes legal
action or an arbitration proceeding, or cross-motion for breach or
enforcement of the terms of this Agreement against any other party
hereto, the prevailing party in any such action or proceeding shall,
in addition to all other damages, be entitled to recover such
party's reasonable attorney's fees, together with court or
arbitration costs.
-13-
<PAGE>
H. Arbitration: Except as otherwise set forth herein, it is the intent
of the parties that any and all disputes hereunder shall be subject
to arbitration as provided in Article 75 of the Civil Procedure Law
and Rules of the State of New York. Notwithstanding any provisions
of the aforesaid rules or statutes to the contrary, the refusal or
failure of any party to appear or participate in any hearing or
other portions of any arbitration proceeding pursuant to this
Paragraph shall not prohibit such arbitration hearing from
proceeding, and the arbitrator is empowered to make a decision
and/or fully render an award ex parte which shall be binding on such
party as though such party had participated fully in such hearing or
proceeding. The prevailing party in any arbitration proceeding or
legal proceeding to enforce arbitration shall be entitled to
recover, in addition to all damages the prevailing party's
reasonable attorneys' fees.
I. Captions: The paragraph headings and underscoring of cross
references in this Agreement are for convenience only and shall not
be considered for any purpose in interpreting or construing this
Agreement.
J. By-Laws to Enforce This Agreement: Suitable By-laws shall be adopted
which reference the restriction upon the transfer of shares
contained in this Agreement. This Agreement and said Bylaws shall be
kept in force by ITG and the Shareholders to make this Agreement
effective.
K. Certificate of Incorporation to Set Forth Restrictions: The
Certificate of Incorporation of ITG shall be amended to reference
the restriction upon the transfer of shares contained in this
Agreement. The parties agree to execute any and all documents
necessary to effectuate said amendment.
L. Surrender of Shares: Upon execution of this Agreement, each
Shareholder shall surrender all Shares or certificates representing
ownership of all said Shares to ITG, if any, and in exchange, each
Shareholder shall be issued new Shares or new certificates
representing ownership of all said Shares, which new Shares or
certificates shall contain in the legend specified in Paragraph I.B
herein.
M. Execution of Agreement: This Agreement may be executed
simultaneously in several counterparts, each of which shall be
deemed to be an original and it shall not be necessary in making
proof of this Agreement to produce or account for more than one
counterpart.
IN WITNESS WHEREOF, this Agreement has been duly executed the day and year
first set forth above.
-14-
<PAGE>
/s/ Richard Rebetti
_____________________ -----------------------------
Charles M. Piluso Richard Rebetti
INCOM (UK) LTD. ITG
BY:__________________ BY: /s/ Charles Piluso
President --------------------------
President
-15-
<PAGE>
/s/ Charles M. Piluso
- --------------------- ________________________
Charles M. Piluso Richard Rebetti
INCOM (UK) LTD. ITG
BY: /s/ [illegible] BY: /s/ Charles M. Piluso
- --------------------- ----------------------
President President
-15-
<PAGE>
SPOUSE'S CONSENT
I acknowledge that I have read the foregoing Shareholders Agreement (the
"Agreement") by and between International Telecommunications Group, Ltd. ("ITG")
and the Shareholders of ITG and know its contents. I am aware that under the
Agreement my spouse agrees to sell all of my spouse's interest in ITG, including
any community interest I may have therein, upon my spouse's death, or mental or
physical disability.
I further understand that by the terms of the Agreement, my spouse agrees
to limitations upon my spouse's right to transfer my spouse's interest in ITG
during my spouse's life. I further understand the term "transfer" as used in the
Agreement includes any assignment, gift, mortgage, pledge, hypothecation,
bequest, encumbrance or disposition, or any transfer as a result of any
voluntary or involuntary legal proceeding, execution, sale, bankruptcy,
insolvency, or otherwise, of any of the Shares.
I hereby consent to such sale and such limitations, approve the provisions
of said Agreement, and agree that I shall not bequeath said interest in ITG or
any part thereof or any interest herein by my Will, if I predecease my spouse. I
direct that the residuary clause in my Will shall not be deemed to apply to any
community interest I may have in ITG.
Name of Shareholders:__________________ No. of Shares________
Name of Spouse:______________________
___________________________ Dated:______________ 1994
Spouse's Signature
Sworn to before me on this
day of , 1994
_______________________________
NOTARY PUBLIC
<PAGE>
`
EXHIBIT A
SHAREHOLDERS NUMBER OF SHARES
- ------------ ----------------
Charles M. Piluso 153,000
Richard Rebetti 17,000
Incom (UK) Ltd. 30,000
<PAGE>
EXHIBIT B
CERTIFICATE OF AGREED VALUE
The undersigned agree that for the purposes of an Agreement dated
September 1, 1994 among the undersigned, each share of Common Stock of
International Telecommunications Group, Ltd. has a value of $_____________
determined as of the date set forth below.
Date:______________________, 1994
____________________ ____________________
Charles M. Piluso Richard Rebetti
INCOM (UK) LTD. ITG
BY:_________________ BY:_________________
President President
<PAGE>
EXHIBIT C
ACKNOWLEDGEMENT OF RESTRICTIONS
ON SHARES
I, ______________________, residing at ____________________________ have
received a copy of a certain Agreement entitled "Agreement By and Between
International Telecommunications Group, Ltd. and the Shareholders of
International Telecommunications Group, Ltd.", dated September 1, 1994. I am
familiar with the terms and conditions of said Agreement and acknowledge that
the shares transferred to me by _______________________ on _________________,
19__ are subject to the Agreement, as of said transfer date. Further, I agree to
be personally bound by the aforesaid Agreement.
________________________________
New Shareholder
STATE OF )
)
COUNTY OF )
On the day of , 19 , before me personally came, to me known
to be the individual described in and who executed the foregoing instrument, and
acknowledged that she executed said instrument.
______________________________
NOTARY PUBLIC
My commission expires on
<PAGE>
EXHIBIT D
SPOUSE'S CONSENT
I acknowledge that I have received a copy of a certain Agreement (the
"Agreement") entitled "Agreement By and Between International Telecommunications
Group, Ltd. and the Shareholders of International Telecommunications Group,
Ltd.", and that I have read the Agreement and know its contents. I am aware that
under the Agreement my spouse agrees to sell all of my spouse's interest in
International Telecommunications Group, Ltd. ("ITG"), including any community
interest I may have therein, upon my spouse's death, or mental or physical
disability.
I further understand that by the terms of the Agreement, my spouse agrees
to limitations upon my spouse's right to transfer my spouse's interest in ITG
during my spouse's life. I further understand that the term "transfer" as used
in the Agreement includes any assignment, gift, mortgage, pledge, hypothecation,
bequest, encumbrance or disposition, or any transfer as a result of any
voluntary or involuntary legal proceeding, execution, sale bankruptcy,
insolvency, or otherwise, of any of the Shares.
I hereby consent to such sale and such limitations, approve the provisions
of said Agreement, and agree that I shall not bequeath said interest in ITG or
any part thereof or any interest herein by my Will, if I predecease my spouse. I
direct that the residuary clause in my Will shall not be deemed to apply to any
community interest I may have in ITG.
Name of Shareholder:________________________ No. of Share________
Name of Spouse:______________________
_______________________ Dated:_________________, 19
Spouse's Signature
Sworn to before me this
day of , 199 .
_______________________
NOTARY PUBLIC
<PAGE>
EXHIBIT B
COMMON STOCK
- ------------
Shareholders Number of Shares
------------ ----------------
Charles M. Piluso 153,000
Richard Rebetti 17,000
Incom (UK) Ltd. 30,000
SERIES A CONVERTIBLE PREFERRED STOCK
- ------------------------------------
Shareholders Number of Shares
------------ ----------------
RSL Communications, Inc. 66,667
(subject to change
for possible
issuance of
Additional Shares)
9
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
(SEE TAB NO. 10)
10
<PAGE>
Exhibit 10.52
EXHIBIT E
March 10, 1995
RSL Communications, Inc.
767 Fifth Avenue
Suite 4200
New York, New York 10153
Gentlemen:
Reference is hereby made to that certain Stock Purchase Agreement (the
"Purchase Agreement") dated as of March 10, 1995 by and among International
Telecommunications Group, Ltd. ("ITG"), International Telecommunications
Corporation ("ITC") and RSL Communications, Inc. (the "Corporation"). All
capitalized terms used herein which are not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement or the Amended and Restated
Certificate of Incorporation of ITG.
This letter, when accepted and agreed to by the Corporation, shall
constitute the separate Indemnity Agreement contemplated by Section 5.12 of the
Purchase Agreement as follows:
1. (a) Each of ITG, ITC, International Telecommunications Europe, Ltd.
("Intelco Europe") and Charles M. Piluso ("Piluso") (collectively, the "Parties"
and individually, a "Party" or "Indemnifying Party"), hereby indemnifies and
holds harmless the Corporation, jointly and severally, against any and all
claims, losses, damages or liabilities (or actions in respect thereof) to which
the Corporation may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact by the Parties
contained in the Purchase Agreement, the Other Agreements or any schedule,
exhibit, table or any other information attached to the Purchase Agreement or
otherwise furnished by such Party, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading,
<PAGE>
RSL Communications, Inc.
March 10, 1995
Page 2
and Piluso shall indemnify ITC against any loss to ITG or ITC resulting from a
breach by ITC of its covenant contained in the last sentence of Section 5.17 of
the Purchase Agreement, and the Parties, jointly and severally, shall also
reimburse the Corporation for any legal or any other expenses reasonably
incurred in connection with investigating, preparing to defend, defending or
appearing as a third party witness in connection with any such claim, loss,
damage, liability or action; provided, however, that the obligation of each of
the Parties to indemnify the Corporation under the provisions of this
subparagraph (a) shall be limited to an amount equal to the aggregate Purchase
Price plus accrued but unpaid dividends on the Convertible Preferred Stock
purchased by the Corporation pursuant to the Purchase Agreement up until the
date of the unpaid indemnity payment, (b) shall not include any incidental or
consequential damages of the Corporation and (c) shall expire on the earlier of
(i) the date of the closing of a Qualified Initial Public Offering of ITG, ITC
or Intelco Europe or (ii) the date all the Convertible Preferred Stock purchased
by the Corporation pursuant to the Purchase Agreement is either converted or
redeemed pursuant to the terms of the preferred stock as stated in ITG's
Restated Certificate of Incorporation.
(b) In addition, the Parties shall perform their indemnification
obligations under Section 1(a) with respect to counsel fees and expenses and
other expenses reasonably incurred, by making payments to the Corporation in the
amount of the statements of the Corporation's counsel or other statements which
shall be forwarded by the Corporation, such payments to be made within 45 days
of receipt of such statement, and they shall make such payments notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the obligation to reimburse the Corporation for such expenses and the
possibility that such payment might later be held to have been improper by a
court and a court orders return of such payments, in which event, after a final
order to such effect from which no appeal may be taken, such amounts will be
returned to each of the Parties respectively, with such interest, if any, as the
court may order.
(c) The indemnity provided in Section 1(a) shall be in addition to
any liability which the Parties shall otherwise have and shall extend upon the
same terms and conditions to each person, if any, who controls any of the
Parties within the meaning of the Securities Act of 1933 or the Securities
Exchange Act of 1934.
<PAGE>
RSL Communications, Inc.
March 10, 1995
Page 3
(d) Promptly after receipt by the Corporation of notice of the
commencement of any action which may be the subject of this indemnity (including
any governmental investigation), the Corporation shall notify the Indemnifying
Party in writing of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability which it may have to
the Corporation under Section 1(a) of this Agreement.
(e) In case any such action shall be brought against the
Corporation, and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and
jointly with any other Indemnifying Party similarly notified, assume the defense
thereof, and after notice from the Indemnifying Party to the Corporation of its
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the Corporation under such subsection for any legal or other expenses
subsequently incurred by the Corporation in connection with the defense thereof
other than reasonable costs of investigation. If, however, (i) the Indemnifying
Party has authorized the employment of counsel for the Corporation at the
expense of the Indemnifying Party and (ii) the Corporation shall have reasonably
concluded that representation of the Corporation and the Indemnifying Party by
the same counsel would be inappropriate under applicable standards of
professional conduct due to actual or potential differing interests between
them, and the Corporation so notifies the Indemnifying Party, then the
Corporation shall be entitled to employ counsel different from counsel for the
Indemnifying Party at the expense of the Indemnifying Party and the Indemnifying
Party shall not have the right to assume the defense of the Corporation.
(f) In no event shall the Parties be liable for fees and expenses of
more than one counsel (in addition to local counsel) for the Corporation in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same set of allegations or circumstances.
The counsel with respect to which fees and expenses shall be so reimbursed
pursuant to the second preceding sentence shall be designated in writing by the
Corporation.
(g) If at any time the Corporation shall have requested an
Indemnifying Party to reimburse the Corporation for fees and expenses of counsel
as contemplated by Section 1(b), the Indemnifying Party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such
<PAGE>
RSL Communications, Inc.
March 10, 1995
Page 4
settlement is entered into more than 30 days after receipt by such Indemnifying
Party of the aforesaid request and (ii) such Indemnifying Party shall not have
reimbursed the Corporation in accordance with such request prior to the date of
such settlement. No Indemnifying Party shall, without the prior written consent
of the Corporation, effect any settlement of any pending or threatened
proceeding in respect of which the Corporation is or could have been a party and
indemnity could have been sought hereunder by the Corporation, unless such
settlement includes an unconditional release of the Corporation from all
liability on claims that are the subject matter of such proceeding.
2. This agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute a single agreement.
3. Each of the Parties' obligations under this agreement are joint and
several.
4. Any notices or other communications in connection with this Agreement
shall be deemed sufficiently given if mailed by first class mail, postage
prepaid as follows:
(a) if to ITG or ITC, to its address as set forth in the Purchase
Agreement;
(b) if to Piluso, to 129 Woodmere Boulevard, Woodmere, New York
11598; and
(c) if to the Corporation, to its address set forth in the Purchase
Agreement.
<PAGE>
RSL Communications, Inc.
March 10, 1995
Page 5
5. This agreement shall be governed by the laws of the State of New York,
without giving effect to the conflict of laws principles thereof.
Very truly yours,
INTERNATIONAL TELECOMMUNICATIONS
GROUP, LTD.
By /s/ Charles M. Piluso
-------------------------------
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS
CORPORATION
By /s/ Charles M. Piluso
-------------------------------
Name:
Title:
INTERNATIONAL TELECOMMUNICATIONS
EUROPE, LTD.
By /s/ Benny Lebovits
-------------------------------
Name: Benny Lebovits
Title: V.P.
/s/ Charles M. Piluso
----------------------------------
CHARLES M. PILUSO
Agreed and accepted as of
the date first above written
RSL COMMUNICATIONS, INC.
By /s/ Itzhak Fisher
-----------------------------
Name:
Title:
<PAGE>
Exhibit 10.53
RSL MANAGEMENT CORPORATION
SUITE': 4200
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
July 18, 1996
Mr. Itzhak Fisher
President and CEO
RSL Communications Ltd.
767 Fifth Avenue
New York, New York 10153
Dear Mr. Fisher:
This is to confirm the agreement between RSL Management Corporation
("Sublandlord") and RSL Communications Ltd. ("Subtenant"):
1. Sublandlord leases to Subtenant certain premises ("Suite VI")
located on the 43rd floor of 767 Fifth Avenue, New York New York (the
"Building").
2. Sublandlord and Subtenant have agreed that Subtenant shall occupy
Suite VI subject to the following terms and conditions:
(1) The fixed rent shall be One Hundred Eighty Thousand Two
Hundred Twenty Five Dollars ($180,225) per annum.
(2) The Rentable Area shall be 2,670 square feet.
(3) This lease shall terminate on December 31, 1997 however the
Subtenant shall have the right to extend this lease until
December 31, 1998 for a fixed rent of Two Hundred Thousand
($200,000) per annum. The Subtenant shall notify the
Sublandlord in writing by June 30, 1997 if it intends to
extend this lease beyond December 31, 1997.
Please sign and return the duplicate copy of this letter by way of
your agreement to and acceptance of the terms and conditions set forth herein.
RSL Management Corporation
Agreed and accepted BY /s/ Jacob Z. Schuster
RSL Communications, Ltd. ---------------------
BY /s/ Itzhak Fisher Name: Jacob Z. Schuster
- ------------------------------ Title: Treasurer
NAME: Itzhak Fisher
TITLE: Chief Executive Officer
<PAGE>
Exhibit 10.54
LONGSTREET ASSOCIATES L.P.
LANDLORD
AND
RSL COM U.S.A., INC.
TENANT
LEASE
Dated: As of January 15, 1997
<PAGE>
INDEX
ARTICLE Page
- ------- ----
1 Demise, Premises, Term, Rents .............................. 1
2 Use ........................................................ 2
3 Condition of the Demised Premises .......................... 4
4 Real Estate Taxes .......................................... 5
5 Operating Costs ............................................ 7
6 Subordination, Attornment, Notice to
Lessors and Mortgages .................................... 9
7 Quiet Enjoyment ............................................ 10
8 Assignment, Mortgaging, Subletting ......................... 10
9 Compliance with Laws and Requirements
of Public Authorities .................................... 16
10 Insurance .................................................. 18
11 Rules and Regulations ...................................... 20
12 Tenant's Changes ........................................... 21
13 Tenant's Property .......................................... 24
14 Repairs and Maintenance .................................... 24
15 Electrical Energy .......................................... 25
16 Heat, Ventilation and Air Conditioning ..................... 27
17 Landlord's Other Services .................................. 28
18 Access, Changes in Building Facilities, Name ............... 30
19 Shoring, Notice of Accidents, etc .......................... 31
20 Non-Liability and Indemnification .......................... 32
21 Destruction or Damage ...................................... 33
22 Eminent Domain ............................................. 35
23 Surrender .................................................. 37
24 Conditions of Limitation ................................... 38
25 Re-entry by Landlord - Default Provisions .................. 39
26 Damages .................................................... 40
27 Waivers .................................................... 42
28 No Other Waivers or Modifications .......................... 42
29 Curing Tenant's Defaults ................................... 43
30 Consents ................................................... 44
<PAGE>
- ii -
31 Notices .................................................... 45
32 Informal Arbitration ....................................... 45
33 Formal Arbitration ......................................... 46
34 Estoppel Certificate ....................................... 48
35 No Other Representations, Construction, Governing Law ...... 48
36 Parties Bound .............................................. 49
37 Certain Definitions and Constructions ...................... 49
38 Vaults, Vault Space, etc ................................... 52
39 Brokerage .................................................. 52
40 Failure to Deliver Possession .............................. 52
41 Miscellaneous .............................................. 53
42 Tenant's Termination Option ................................ 53
EXHIBITS
Exhibit "A" -- Floor Plan
Exhibit "B" -- Rules and Regulations
Exhibit "C" -- Cleaning Specifications
<PAGE>
LEASE, dated as of January 15, 1997, between LONGSTREET ASSOCIATES
L.P., a New York limited partnership, having an office for the conduct of
business c/o Corporate Property Investors, 305 East 47th Street, New York, New
York 10017 ("Landlord"), and RSL COM U.S.A., INC., a corporation organized under
the laws of Delaware, qualified to conduct business in New York State, with an
office for the conduct of business at 767 Fifth Avenue, New York, New York 10153
("Tenant")
W I T N E S S E T H:
ARTICLE 1
Demise, Premises, Term, Rents
1.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the premises hereinafter described, in the building situated on the
block bounded by Fifth Avenue, 59th Street, Madison Avenue and 58th Street, in
the Borough of Manhattan, City, County and State of New York and known by the
street address 767 Fifth Avenue (the "Building"), for the term hereinafter
stated, for the rents hereinafter reserved and upon and subject to the
conditions (including limitations, restrictions and reservations) and covenants
hereinafter provided. Each party hereto expressly covenants and agrees to
observe and perform all of the conditions and covenants herein contained on its
part to be observed and performed.
1.02. The premises hereby leased to Tenant consist of approximately
2,589 square feet of rentable area located on the sixth (6th) floor of the
Building as more particularly outlined on the floor plan annexed hereto as
Exhibit "A". Said premises constitute and are hereinafter referred to as the
"Demised Premises".
1.03. The term of this Lease (the "Term") shall commence on January
15, 1997 (the "Commencement Date") and shall end at noon on January 31, 2002
(the "Expiration Date") or shall end on such earlier date upon which the Term
may expire or be canceled or terminated pursuant to any of the conditions or
covenants of this Lease or pursuant to law.
1.04. 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 Landlord or at such other place as Landlord may
designate, the Fixed Rent and "Additional Rent" (as defined below) reserved
under this Lease for each year of the Term, which payments shall consist of:
(A) Fixed Rent ("Fixed Rent") of One Hundred Ten Thousand
Thirty Two and 50/100 Dollars ($110,032.50) per year, and
(B) Additional Rent ("Additional Rent") consisting of all such
other sums of money as shall become due from and payable by Tenant to Landlord
hereunder, payable in monthly installments in advance, unless specifically
provided herein to the contrary, on the first day of each and every calendar
month during the Term.
1.05. All apportionments, allocations, reductions and abatements of
Fixed Rent and/or Additional Rent (Fixed Rent and Additional Rent being
hereinafter referred to collectively as "Rent(s)") or credits against Rents
provided in this Lease to be made with respect to any portion (including any
remainder) of the Demised Premises shall be determined by application of the
ratio of the rentable area of such portion to the rentable area of the Demised
Premises, or by application of per square foot amounts
<PAGE>
-2-
where such per square foot amounts specifically are set forth in this Lease. Any
proration of Rent or credits provided for in this Lease and any refunds or
credit against Rents then or thereafter due, for overpayment of Rents or payment
or Rents due or accrued (as the case may be) shall be made within twenty (20)
days after demand, except where otherwise expressly set forth in this Lease.
1.06. Tenant shall pay Fixed Rent and Additional Rent herein reserved
promptly as and when the same shall become due and payable. If the Commencement
Date shall occur on a day other than the first day of a calendar month, Fixed
Rent and Additional Rent for such calendar month 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 the first full
calendar monthly installment of Fixed Rent on the execution of this Lease.
1.07. Landlord shall have the same remedies for any default in the
payment of any installment or item of Additional Rent as is provided hereunder
for any default in the payment of Fixed Rent.
ARTICLE 2
Use
2.01. Tenant shall use and occupy the Demised Premises for executive
offices, administrative offices and/or general offices for the conduct of its
business, but not any business prohibited by Section 2.02, and for no other
purpose.
2.02. The use of the Demised Premises for the purposes specified in
Section 2.01 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) any sale or display of trucks, passenger cars or similar
vehicles, major household appliances, diesel engines, locomotives, and earth
moving or off-the-road equipment;
(B) sale of, or traffic in, any spiritous liquors, wines, ale
or beer kept in the Demised Premises, except as incidental to the service of
food to its officers, employees and guests in its dining facilities in the
Demised Premises and as may be approved by Landlord;
(C) sale at retail of any other products or materials kept in
the Demised Premises, by vending machines or otherwise, or demonstrations to the
public, except, upon the prior written approval of Landlord, for the sale of
candy, coffee, cigarettes, sandwiches and soda by vending machines to those
employees of Tenant who are employed at the Demised Premises;
(D) manufacturing, printing or electronic data processing,
except, subject to the provisions of this Lease, the operation of normal
business office reproducing and printing equipment, electronic data processing
equipment and other business machines for Tenant's own requirements or for the
requirements of Tenant and others engaged in joint operation of such equipment
and machines (as distinguished from operation for commercial hire or for sale of
the products thereof to others);
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(E) the rendition of medical, dental, or other diagnostic or
therapeutic services, but the foregoing restriction shall not be deemed to
preclude Tenant's employment of a resident nurse for consulting or emergency
services for Tenant's employees normally working at the Demised Premises;
(F) the conduct of a public auction of any kind;
(G) the conduct of a banking, trust company, savings bank, safe
deposit, savings and loan association, or loan company business (except for the
conduct of benefit plans limited to Tenant's employees, which in that event
could include a credit union);
(H) the issuance and sale of traveler's checks, foreign drafts,
letters of credit, foreign exchange or domestic money orders (except as is
incidentally required in the conduct of Tenant's normal business activity);
(I) the receipt of money for transmission (except as is
incidentally required in the conduct of Tenant's normal business activity)
(J) a restaurant, bar, or the sale of confectionery, candy,
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 (except as is otherwise specifically
permitted hereunder or approved in writing by Landlord) ; or
(K) the conduct or maintenance of any gambling or gaming
activities or any political activities or any club activities, whether private
or public.
2.03. 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, lease or mortgage to which this
Lease is subordinate, (ii) violate any laws or requirements of public
authorities (subject to the right to contest such laws or requirements as
provided in Section 9.01), (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
York State 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 lease or mortgage to which this Lease is
subordinate, (v) cause or in Landlord's reasonable 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 sole opinion of 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 designated to receive such fumes, vapors or odors, or otherwise
discharge same in such manner as may unreasonably offend other tenants or
occupants of the Building, (ix) impair or interfere with any of the Building
services or the 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 discomfort, annoyance or inconvenience to, Landlord or
any of the other tenants or occupants of the Building, the determination of any
such
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impairment or interference to be in the sole judgment of Landlord, 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 of any of the following Sections
of this Article or any of the Rules and Regulations referred to in Article 11 or
Exhibit "B" attached hereto, except as may therein be expressly otherwise
provided.
2.04. If any governmental license or permit, other than a Certificate
of Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the Demised Premises, or any part thereof, and if 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 and
submit the same to inspection by Landlord. Tenant shall at all times comply with
the terms and conditions of each such license or permit, but in no event shall
failure to procure and maintain same by Tenant affect Tenant's obligations
hereunder.
2.05. Landlord shall secure a Certificate of Occupancy for the Demised
Premises which will allow Tenant to use the Demised Premises for the primary
purposes permitted by Section 2.01. Tenant shall not at any 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. Landlord
shall not knowingly and willingly do or permit anything to be done which will
result in a change in such Certificate of Occupancy with respect to the Demised
Premises such as would prohibit Tenant's use of the Demised Premises for the
uses permitted under Section 2.01 hereof without Tenant's written consent.
2.06 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 vaults which must be placed by Tenant, such placement to be made at Tenant's
sole expense. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's sole expense, in such manner as shall be
sufficient in Landlord's judgment to absorb and prevent vibration, noise and
annoyance.
ARTICLE 3
Condition of the Demised Premises
3.01. Tenant acknowledges that it has inspected the Demised Premises
and agrees to take the whole of the Demised Premises "as is", without any work
being done thereon by Landlord and without any obligation upon Landlord to make
any contribution toward or to assume the performance of any "Tenant's Changes"
(as such term is hereinafter defined) necessary to make the Demised Premises
ready for occupancy by Tenant. Tenant does hereby assume the full obligation to
pay all costs and expenses which may be incurred in order to make the Demised
Premises ready for occupancy by Tenant.
3.02. On the Commencement Date it shall be conclusively presumed that
the approximate rentable area of the Demised Premises as stated in Section 1.02
is correct.
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ARTICLE 4
Real Estate Taxes
4.01. As used herein:
(A) "Base Year Taxes" shall mean the average of (i) Taxes
(hereinafter defined) for the twelve (12) calendar month period commencing July
1, 1996, and (ii) Taxes for the twelve (12) calendar month period commencing
July 1, 1997 (the twelve (12) calendar month period commencing January 1, 1997
being hereinafter referred to as the "Base Tax Year")
(B) "Tax Year" shall mean the twelve (12) month period
commencing July 1, 1996 and ending June 30, 1997 and each twelve (12) month
period thereafter any portion of which occurs during the term of this Lease.
(C) "Taxes" shall mean the real estate taxes, assessments,
special assessments, water rates, sewer rents and other governmental charges of
like kind or nature, now or hereafter in effect, levied or imposed by any
governmental authority upon the Building and/or the land on which the Building
is located (the "Land") and paid by Landlord, but such term shall not include,
except as provided in the sentence next following, any income, franchise,
transfer, inheritance, capital stock or other like tax. If at any time during
the Term the methods of taxation prevailing at the commencement of the Term
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 on real estate and the improvements
thereon, there shall be levied, assessed and imposed, (i) a tax, assessment,
levy, imposition or charge wholly or partially as a capital levy or otherwise on
the rents received therefrom, or (ii) a tax, assessment, levy, imposition or
charge measured by or based in whole or in part upon the Demised Premises and
imposed upon Landlord, or (iii) a license fee measured by the rent payable by
Tenant to Landlord, then all such taxes, assessments, levies, impositions or
charges, or the part thereof so measured or based, shall be deemed to be
included within the term "Taxes" for the purposes hereof; provided, however,
that the amount of such tax, assessment, levy, imposition or charge or part
thereof deemed to be included in the term "Taxes" shall be determined as if the
Building and the Land were the only assets of Landlord and as if the Rent were
the only income of Landlord. If there are any special assessments that are
payable over a period of time extending beyond the Term, only a pro rata portion
thereof, covering the portion of the Term unexpired at the time of the
imposition of such assessment, shall be included in Taxes. If, by law, any
assessment may be paid in installments, then, for the purposes hereof, (A) such
assessment shall be deemed to have been payable in the maximum number of
installments permitted by law and (B) there shall be included in Taxes for each
Tax Year in which such installments may be paid, the installments of such
assessment becoming payable during such Tax Year, together with any interest
payable during such Tax Year.
(D) "Tenant's Proportionate Share" shall mean .1581%, .1581%
being the proportion which the rentable area of the Demised Premises, which for
purposes of this Lease shall be deemed to be 2,589 square feet, bears to the
rentable area of the Building, which for purposes of this Lease shall be deemed
to be 1,637,379 square feet.
4.02. (A) If Taxes in any Tax Year shall increase above Base Year
Taxes, then Tenant shall pay as Additional Rent
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Tenant's Proportionate Share of such increase. With reasonable promptness after
Taxes for each Tax Year become known, Landlord shall render to Tenant a
comparative statement showing Taxes for the Base Tax Year, the amount of the
Taxes for such Tax Year and the amount of Additional Rent payable by Tenant in
respect of any increase in Taxes, setting forth in such comparative statement
the computation of Additional Rent. If Taxes for any Tax Year, or the assessment
upon which the Taxes are based, shall be reduced, Tenant shall pay to Landlord
Tenant's Proportionate Share of the amount of Landlord's costs and expenses
including, without limitation, attorneys' fees and disbursements, incurred in
connection with obtaining such reduction, within ten (10) days of receipt of a
written demand therefor.
(B) If Base Year Taxes are reduced, Landlord shall have the
right to recalculate Tenant's Proportionate Share of the increase of Taxes over
Base Year Taxes as the same have been reduced. Tenant shall pay the amount of
any adjustment, with respect to the monthly installment(s) of Additional Rent
already paid by Tenant, within forty-five (45) days after receipt of a demand
from Landlord therefor, which demand shall be accompanied by a copy of the
reduced tax bill together with Landlord's computation of the adjustment. All
monthly payments of Additional Rent due after said adjustment shall be based
upon the reduced Base Year Taxes.
(C) Only Landlord shall be eligible to institute tax reduction
or other proceedings to reduce the assessed valuation of the Land and the
Building. Nothing herein shall obligate Landlord to institute any proceeding for
the reduction of Taxes or the assessed valuation of the Land and the Building.
If Landlord shall receive any refund for any Tax Year in which Tenant has paid
Tenant's Proportionate Share of any increase in Taxes over Base Year Taxes,
Landlord shall promptly rebate to Tenant Tenant's Proportionate Share of such
refund and any interest paid thereon, after deducting from such refund the
reasonable costs and expenses, including, without limitation, attorneys' fees
and disbursements incurred in connection with obtaining such refund if Tenant
has not already paid same pursuant to Section 4.02(A) above.
(D) No right of Tenant to receive a payment from Landlord
pursuant to this Article shall entitle Tenant to an offset against any
installment of Fixed Rent or Additional Rent due and payable pursuant to the
provisions of this Lease.
4.03. (A) Whenever Additional Rent shall be payable pursuant to the
provisions of this Article, the same shall be payable in equal monthly
installments commencing with the monthly installment due after the rendering of
the comparative statement by Landlord as provided in Section 4.02(A) hereof.
(B) If the final Tax Year is less than twelve (12) months, any
Additional Rent for such final Tax Year shall be determined on a pro rata basis.
4.04. Every statement given by Landlord pursuant to this Article shall
be conclusive and binding upon Tenant unless within forty-five (45) days after
the receipt of such statement Tenant shall give notice to Landlord in the manner
hereinafter provided that it disputes the correctness thereof, specifying the
particular respect in which the statement is claimed to be incorrect. After
expiration of the aforesaid forty-five (45) day period, if such notice has not
been given to Landlord by Tenant as required hereunder, Tenant shall have waived
its rights in connection therewith and no claim may be made, nor any action
commenced, by Tenant in any court with respect to any matters
<PAGE>
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covered by such statement. If Tenant gives Landlord timely notice and the
parties are thereafter unable to resolve such dispute within thirty (30) days,
then the dispute shall be resolved by informal arbitration pursuant to Article
32. Pending the determination of such dispute, Tenant shall pay Additional Rent
as provided herein in accordance with Landlord's statement and such payment
shall be without prejudice to Tenant's position If the dispute shall be
determined in Tenant's favor, Landlord shall forthwith pay Tenant the amount of
Tenant's overpayment of Additional Rent resulting from the compliance with
Landlord's statement. Landlord agrees to grant Tenant reasonable access to the
portions of Landlord's books and records pertaining to the items referred to in
this Article.
4.05. Landlord's failure during the Term to prepare and deliver any
estimates, statements or bills, or Landlord's failure to make a demand, under
this Article, or any other provisions of this Lease, shall not in any way be
deemed to be a waiver of, or cause Landlord to forfeit or surrender, its rights
to collect any portion of Additional Rent which may become due pursuant to this
Article. The liability of Tenant for the amounts due under this Article shall
survive the expiration or sooner termination of this Lease.
ARTICLE 5
Operating Costs
5.01. As used herein:
(A) "Lease Year" shall mean each consecutive calendar year
during the Term commencing January 1, 1997.
(B) "Wage Rate" shall mean the minimum hourly wage rate,
including adjustments of every kind and nature (including, without limitation,
all sums paid for "Fringe Benefits", as hereinafter defined) prescribed for
"Porters" (as hereinafter defined) for Class A office buildings (or any
successor category), in effect with respect to January 1st of each year,
pursuant to an agreement between the Realty Advisory Board on Labor Relations,
Incorporated (the "Real Estate Advisory Board"), or any successor thereto, and
the local of the Building Service Employees International Union, AFL-CIO (the
"Union"), or any successor thereto, provided, however, that such Wage Rate shall
be computed pursuant to Section 5.02 below; and provided, further, that if, at
any time during the Term, no agreement exists, Wage Rate shall mean the average
hourly wage rate, including adjustments of every kind and nature (including,
without limitation, Fringe Benefits) actually payable to Porters by Landlord or
the contractor performing services of the kind generally supplied by a Porter in
the Building, or, if no Porters are employed at the Building, such rate for
Porters employed at Class A office buildings, computed pursuant to Section 5.02
below.
(C) "Base Rate" shall mean the Wage Rate in effect as of
January 1, 1997.
(D) "Rentable Area of the Demised Premises" shall mean 2,589
square feet.
(E) "Porters" shall mean those employees designated as "Class A
- - Others" in the Commercial Building Agreement between the Realty Advisory Board
and the Union, who have been employed for ten (10) years or more, or, failing
such
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classification in any subsequent Agreement, the most nearly comparable
classification in such Agreement.
(F) "Fringe Benefits" shall mean all sums directly or
indirectly paid during each Lease Year for so-called "fringe benefits",
including, without limitation, the costs of (i) pensions, welfare funds,
training funds and dues, (ii) social security, vacations, sick pay, holidays,
jury duty, medical checkup, lunch time, relief time and other paid time off, and
(iii) unemployment, worker's compensation, disability benefits, health, life,
accident and other types of insurance.
5.02. The Wage Rate, Base Rate and/or the cost of Fringe Benefits on
each applicable occasion pursuant to this Lease, shall be calculated on the
basis of the minimum number of hours that Porters may be required to work under
the union agreement. For example, if the union agreement is predicated on a
2,080 hour work year (40 hours x 52 weeks) and provides that Porters shall be
paid for the following time during which they are not actually required to work:
Vacation - 120 hours; Holidays - 88 hours; Birthday - 8 hours; Medical Checkup -
16 hours; Sick Days - 80 hours; Disaster Day - 8 hours; and Relief Time - 147
hours; totaling 467 hours, then the Wage Rate and the Base Rate and the cost of
Fringe Benefits shall be calculated on the basis of 1,613 hours (2,080 hours
less 467 hours), the amount of hours that the contract requires Porters actually
work.
5.03. If, in any Lease Year during the Term, the Wage Rate shall
exceed the Base Rate, Tenant shall pay as Additional Rent an amount equal to the
sum obtained by multiplying the Rentable Area of the Demised Premised by the
product of (x) .75 and (y) the number of cents by which the Wage Rate exceeds
the Base Rate (i.e., .75 multiplied by the number of cents, including any
fraction of a cent of any increase in such hourly rate multiplied by 2,589
square feet). Landlord shall give Tenant a written statement of each increase
in the Wage Rate and the determination of the Additional Rent resulting
therefrom. If the final Lease Year extends beyond the Term, the amounts payable
pursuant to this Section 5.04 shall be determined on a pro rata basis.
5.04. (A) The amount of Additional Rent payable pursuant to Section
5.03 shall be fixed as of the effective date of such increase or decrease in the
Wage Rate, and Tenant shall pay in equal monthly installments one-twelfth
(1/12th) of the amount of such adjustment until a new adjustment becomes
effective pursuant to the terms of this Article. If the adjustment in the
Additional Rent pursuant to Section 5.03 affects months for which Tenant has
already paid the monthly installment of Additional Rent, the amount of the
increase for such months shall be paid by Tenant to Landlord, as Additional
Rent, within thirty (30) days of receipt of the statement referred to in Section
5.03 hereof.
(B) Any such adjustment for less than a year or for less than a
month shall be determined on a pro rata basis.
5.05. Anything in this Article to the contrary notwithstanding, under
no circumstances shall the Fixed Rent payable under this Lease be less than the
Fixed Rent set forth in Article 1 hereof.
5.06. Landlord's failure during the Term to prepare and deliver any
estimates, statements or bills, or Landlord's failure to make a demand under
this Article, or any other provisions of this Lease, shall not in any way be
deemed to be a waiver of, or cause Landlord to forfeit or surrender, its rights
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to collect any portion of Additional Rent which may have become due during the
Term pursuant to this Article. Tenant's liability for the amount due under this
Article shall survive the expiration or sooner termination of this Lease.
ARTICLE 6
Subordination, Attornment, Notice to Lessors and Mortgages
6.01. 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,
overriding leases and underlying leases and/or grants of term 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 and to all mortgages and building
loan agreements, including leasehold mortgages and building loan agreements,
which may now or hereafter affect the Land and/or the Building and/or any of
such leases, whether or not such mortgages shall also cover other lands and/or
buildings, to each and every advance made or hereafter to be made under such
mortgages, and to all renewals, modifications, replacements and extensions of
such leases and such mortgages and spreaders and consolidations of such
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 such lease or
the holder of any such 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. The leases to which this Lease is,
at the time referred to, subject and subordinate pursuant to this Article are
hereinafter sometimes called "superior leases" and the mortgages to which this
lease is, at the time referred to, subject and subordinate are hereinafter
sometimes called "superior mortgages" and the lessor of a superior lease or its
successor in interest at the time referred to is hereinafter sometimes called a
"lessor".
6.02. Landlord hereby notifies Tenant that this Lease may not be
modified or amended so as to reduce the Rents, shorten the Term, or adversely
affect in any other respect to any material extent the rights of the Landlord
hereunder, or be canceled or surrendered without the prior written consent of
each superior lessor and each superior mortgagee in each instance, except that
said consent shall not be required for the institution or prosecution of any
action or proceedings against Tenant by reason of a default on the part of
Tenant under the terms of this Lease.
6.03. This Lease shall not terminate or be terminable by Tenant by
reason of any termination of any superior lease, by summary proceedings, or
otherwise, unless lessor under the terminated superior lease shall elect in
connection therewith to terminate this Lease and the right of Tenant to
possession of the Demised Premises. Tenant agrees, without further instruments
of attornment in such case, to attorn to such lessor, to waive the provisions of
any statute or rule of 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 such superior lease is
terminated, and that unless and until said lessor shall elect to terminate this
Lease and extinguish the leasehold estate demised hereunder, this Lease shall
not be affected in any way whatsoever
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by any such proceeding or termination, and Tenant shall take no steps to
terminate this Lease without giving written notice to such lessor, and a
reasonable opportunity to cure (without such lessor being obligated to cure),
any default on the part of the Landlord under this Lease.
6.04. Landlord represents that granting of this Lease is not in
contravention of the ground lease and superior mortgages and superior leases
existing at the date of this Lease, and further represents that as of the date
of the execution and delivery of this Lease, no notices of default under the
ground lease, superior mortgages or superior leases have issued as would subject
this Lease to any adverse proceedings on the part of lessor under the ground
lease or the said mortgagee or mortgagees under the superior mortgages or the
said lessor or lessors under the superior leases.
6.05. If the holder of any superior mortgage, or anyone claiming by,
through or under such holder, shall become the lessee under the ground lease as
a result of foreclosure of the superior mortgage, or by reason of an assignment
of the lessee's interest under the ground lease and the giving of a deed to the
Building in lieu of foreclosure, there shall be no obligation on the part of
such person succeeding to the interest of the lessee under the ground lease to
comply with, observe or perform any obligations as sublessee, tenant or landlord
under any superior lease.
ARTICLE 7
Quiet Enjoyment
7.01. 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 hindrance or molestation by Landlord or by
any other person lawfully claiming the same, subject to the covenants,
agreements, terms, provisions and conditions of this Lease and to the ground
leases and/or underlying or overriding leases and/or grants of terms and/or
mortgages to which this Lease is subject and subordinate, as hereinbefore set
forth.
ARTICLE 8
Assignment, Mortgaging, Subletting
8.01. 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 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.
<PAGE>
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8.02. 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 by 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 deemed a waiver of any of the
provisions of Section 8.01, or the acceptance of the assignee, subtenant or
occupant as tenant; or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to the
assignment, mortgaging, subletting or use or occupancy by others shall not in
any wise be considered to relieve Tenant from obtaining the express written
consent of Landlord to any other or further assignment, mortgaging or subletting
or use or occupancy by others not expressly permitted by this Article.
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 subtenants, but as including also licensees and others claiming
under or through Tenant, immediately or remotely.
8.03. If Tenant shall desire to assign its interest in this Lease,
Tenant shall submit to Landlord a written request for Landlord's consent to such
assignment, which request shall contain or be accompanied by the following
information: (i) the name and address of the proposed assignee; (ii) the terms
and conditions of the proposed assignment including the effective date of the
assignment; (iii) the nature and character of the business of the proposed
assignee and of its proposed use of the Demised Premises; and (iv) current
financial information and any other information Landlord may reasonably and
promptly request with respect to the proposed assignee. Landlord may then, by
notice to such effect given to Tenant within thirty (30) days after receipt of
Tenant's request elect to terminate this Lease effective as of the proposed
effective date of the assignment (the "Termination Date"). Tenant shall then
vacate and surrender the Demised Premises on or before the Termination Date and
the term of this Lease shall end on the Termination Date as if it were the
Expiration Date. If Landlord has not exercised its option to terminate the Lease
pursuant to the preceding sentence, and if in the reasonable judgment of
Landlord, the proposed assignee has a financial standing, is of a character and
engaged in a business such as are in keeping with the standards of Landlord in
those respects for the Building, then Landlord shall not withhold its consent to
the proposed assignment. Tenant shall reimburse Landlord for any reasonable
costs that may be incurred by Landlord in connection with the assignment,
including, without limitation, the cost of making investigations as to the
acceptability of the proposed assignee. If Tenant is a corporation, Tenant shall
have the privilege, without the consent of Landlord, to assign its interest in
this Lease to any corporation which is a successor to Tenant either by merger or
consolidation. No assignment shall be valid unless, within ten (10) days after
the execution thereof, Tenant shall deliver to Landlord (i) a duplicate original
instrument of assignment in form and substance satisfactory to Landlord, duly
executed by Tenant, and (ii) an instrument in form and substance satisfactory to
Landlord, duly executed by the assignee, in which such assignee shall assume
observance and performance of, and agree to be personally bound by, all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed. Anything in this Section 8.03 to the contrary notwithstanding, a
transfer of control of shares of Tenant (if
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Tenant is a corporation or trust) or a transfer of a majority of the total
interest in Tenant (if Tenant is a partnership) shall be deemed an assignment of
this Lease and shall be subject to all of the provisions of this Article,
including, without limitation, the requirement that Tenant obtain Landlord's
prior consent thereto. The transfer of shares of Tenant (if Tenant is a
corporation or trust) for purposes of this Section shall not include the sale of
shares by persons other than those deemed "insiders" within the meaning of the
Securities Exchange Act of 1934, as amended, which sale is effected through the
"over-the-counter market" or through any recognized stock exchange.
8.04. Notwithstanding anything contained in Sections 8.01 and 8.02
hereof, in the event that at any time or from time to time prior to or during
the Term, Tenant desires to sublet all or any part of the Demised Premises,
Tenant (a) shall give written notice to Landlord ("Tenant's Subletting Notice")
specifying the term of the proposed subletting, the area so proposed to be
sublet, the proposed commencement date for said subletting, and the rent and
additional rent payable thereunder, (b) shall be deemed to have granted Landlord
the option to sublet from Tenant such space so proposed to be sublet upon the
covenants, agreements, terms, provisions and conditions hereinafter set forth,
(c) shall not offer such space for subletting to anyone other than Landlord
until thirty (30) days have elapsed after the receipt of such notice by
Landlord. Such option on the part of Landlord to sublet from Tenant such space
so proposed to be sublet shall be exercisable by Landlord in writing during said
period of thirty (30) days referred to in clause (c) of the preceding sentence
and the term of the sublet shall commence on the proposed commencement date of
the proposed subletting as set forth in Tenant's notice.
In the event Landlord exercises Landlord's option to sublet such
space, such sublease by Tenant to Landlord shall be at an annual fixed rent
equal to the lesser of (i) Fixed Rent and Additional Rent as provided in this
Lease for the entire Demised Premises or equal to an equitable apportionment of
such Fixed Rent and Additional Rent if such sublease shall cover less than the
whole of the Demised Premises, or (ii) the rent and additional rent payable
under the proposed sublease, and shall be for the same term as that of the
proposed subletting, and it is hereby expressly agreed that:
(1) The sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this Lease
except such as are not relevant or applicable, and except as is
otherwise expressly set forth to the contrary in this Section;
(2) Such sublease to Landlord shall give Landlord the
unqualified and unrestricted right, without Tenant's permission, to
assign such sublease or any interest therein and/or to sublet the
space covered by such sublease or any part or parts of such space and
to make any and all changes, alterations and improvements in the space
covered by such sublease;
(3) Such sublease to Landlord shall provide that any assignee
or subtenant of Landlord may, at the election of Landlord, be
permitted to make alterations, decorations and installations in such
space or any part thereof and shall also provide in substance that any
such alterations, decorations and installations therein made by any
assignee or subtenant of Landlord may be removed, in whole or in part,
by such assignee or
<PAGE>
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subtenant, at its option, prior to or upon the expiration or other
termination of such sublease provided that such assignee or subtenant,
at its sole expense, shall repair any damage and injury to such space
so sublet caused by such removal; and
(4) Such sublease to Landlord shall also provide that the
parties to such sublease expressly negate any intention that any
estate created under such sublease be merged with any other estate
held by either of said parties. Tenant covenants and agrees (a) that
any such assignment or subletting by the subtenant may be for any
purpose or purposes that Landlord, in Landlord's sole discretion,
shall deem suitable or appropriate, except the conduct of a business
directly competitive to Tenant, (b) that Tenant, at Tenant's sole
expense, shall and will at all times provide and permit reasonably
appropriate means of ingress to and egress from such space so sublet
by Tenant to Landlord, and (c) that at the expiration of the term of
such sublease, Tenant will accept the space covered by such sublease,
in its then existing condition, subject to the obligations of Landlord
to make such repairs thereto as may be necessary to preserve the
premises demised by such sublease in good order and condition.
8.05. In the event Landlord does not exercise its option to so sublet
such space, Landlord covenants not to unreasonably withhold its consent to
Tenant's subletting of the space covered by Tenant's Subletting Notice,
provided, however, that Landlord shall not, in any event, be obligated to
consent to any such proposed subletting unless:
(1) The sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this Lease
except such as are not relevant or applicable pursuant to the terms of
Tenant's Subletting Notice and except that such sublease shall not be
assigned nor the premises demised thereunder further sublet, in whole
or in part, without the prior consent of Landlord;
(2) The aggregate rent and additional rent payable under the
sublease shall in no event be less than, and all other terms and
conditions shall be substantially the same as or more favorable to
Tenant than the corresponding items in Tenant's Subletting Notice;
(3) Tenant shall furnish Landlord with the name and business
address of the proposed subtenant, a counterpart of the proposed
subleasing agreement, and satisfactory information with respect to the
nature and character of the business of the proposed subtenant,
together with current financial information and references reasonably
satisfactory to Landlord;
(4) In the reasonable judgment of Landlord the proposed
subtenant is of a character and engaged in a business such as are in
keeping with the standard of Landlord in those respects for the
Building;
(5) The purposes for which the proposed subtenant intends to
use the portion of the Demised Premises to be sublet to it are uses
expressly permitted by this Lease, and without limiting the generality
of the foregoing, Tenant shall not be
<PAGE>
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permitted to sublet to any company engaged in the business of
manufacturing or selling passenger cars, trucks, or similar vehicles,
major household appliance, diesel engines, locomotives and
earth-moving or off-the-road equipment;
(6) Tenant shall not have (i) advertised or publicized in any
way the availability of all or part of the Demised Premises without
prior notice to and approval by Landlord, (ii) listed nor publicly
advertised the Demised Premises for subletting, whether through a
broker, agent, representative, or otherwise at a rental rate less than
the Fixed Rent and Additional Rent then payable hereunder for such
space; but the provisions of this Subsection shall not be deemed to
prohibit Tenant from negotiating a sublease at a lesser rate of rent
and consummating the same insofar as it may be permitted under the
provisions of this Article;
(7) Such subletting will result in there being no more than
five (5) occupants per floor of the Building, including the Tenant and
all subtenants;
(8) The rental rate for such subletting is no less than the
then going market rental rate (including Fixed Rent and Additional
Rent) for comparable space in the Building (or if none is or has been
currently leased or subleased, then comparable space in a comparable
building in the City of New York); any dispute as to whether the
proposed rental rate for such subletting is less than the said then
going market rental rate shall be determined by informal arbitration
pursuant to Article 32;
(9) Tenant shall reimburse Landlord for any reasonable costs
that may be incurred by Landlord in connection with the said sublease,
including, without limitation, the costs of making investigations as
to the acceptability of a proposed subtenant, and legal costs incurred
in connection with the granting of any requested consent; and
(10) The term of such sublease shall not be less than three (3)
years.
Notwithstanding anything to the contrary in this Article, if Landlord
fails to exercise its option to sublet the space within the thirty (30) day
period referred to in Section 8.04 and Tenant fails to enter into a sublease
with a third party and obtain Landlord's consent, in accordance with this
Article, within ninety (90) days thereafter, Tenant shall again comply with all
the conditions of this Article, as if the notice and option referred to in this
Article had not been given and the option rejected.
8.06. With respect to each and every sublease or subletting authorized
by the provisions of this Article, it is further agreed and understood between
Landlord and Tenant as follows:
(1) The term of such subletting shall commence within thirty
(30) days of the proposed commencement date as stated in Tenant's
notice to Landlord pursuant to Section 8.04;
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(2) No subletting shall be for a term ending later than one day
prior to the Expiration Date and any proposed sublease or any renewal
or extension thereof shall be deemed to be for a term which expires on
a date one day prior to the Expiration Date or earlier termination of
the term of this Lease, notwithstanding any other provision to the
contrary in such sublease; and
(3) Upon the execution of any such sublease as may be
authorized by this Article, Tenant shall promptly deliver to Landlord
a duplicate original of each such sublease.
8.07 If Tenant shall receive any consideration from its assignee,
other than from an assignee for whom Landlord's approval is not required, for or
in connection with the assignment of Tenant's interest in this Lease (including,
but not limited to, sums paid for the sale or rental of Tenant's fixtures or
leasehold improvements, less, in the case of a sale thereof, the then net
unamortized or undepreciated cost thereof determined on the basis of a ten
years' straight line depreciation of same), Tenant shall account to Landlord
therefor and shall pay over to Landlord one-half (1/2) of so much of such
consideration as shall be paid to Tenant by the assignee after deduction
therefrom of the reasonable costs and expenses of Tenant in making such
assignment, such as reasonable brokers' and attorneys' fees. If Tenant shall
sublet all or any portion of the Demised Premises to anyone for rents which for
any period shall exceed the Fixed Rent and Additional Rent (or proportionate
share thereof) payable under this Lease for the same period, Tenant shall pay
Landlord, as Additional Rent hereunder, one-half (1/2) of any rents, additional
charges or other consideration payable under the sublease to Tenant by the
sublessee which is in excess of the proportionate share of the Fixed Rent and
Additional Rent accruing during the term of the sublease in respect to the
subleased portion of the Demised Premises pursuant to the terms hereof. The sums
payable to Landlord upon such subletting shall consist of such excess less
reasonable brokerage commissions, attorneys' fees and disbursements and other
expenses reasonably incurred by Tenant in such subletting and customarily
deducted in the case of subletting similar space in similar buildings in the
City of New York. The sums payable under this Section shall be paid to Landlord
as Additional Rent as and when payable by the sublessee to Tenant.
8.08 Notwithstanding anything to the contrary set forth in this
Article, if Landlord should have space in the Building available for the
proposed subtenant or assignee, as the case may be, the proposed subtenant or
assignee shall not then be a tenant, subtenant or assignee of any space in the
Building, nor shall the proposed subtenant or assignee be a person or entity
with whom Landlord is then negotiating to lease space in the building, unless
such proposed subtenant or assignee was offered the aforesaid space by Landlord
and rejected the same.
8.09. If Landlord shall recover or come into possession of the Demised
Premises before the Expiration Date, Landlord shall have the right (but not the
obligation) to take over any sublease made by Tenant and to succeed to all
rights of Tenant thereunder, Tenant hereby assigning (effective as of the date
of Landlord's succession of Tenant's estate in the Demised Premises) such
subleases as Landlord may elect to take over. Every subletting hereunder shall
be subject to the condition that, from and after the termination of this Lease
or re-entry by Landlord hereunder or other succession by Landlord to Tenant's
estate in the Demised Premises, the subtenant under such sublease
<PAGE>
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shall waive any right to surrender possession or to terminate the sublease and,
at Landlord's election, shall be bound to Landlord for the balance of the term
thereof and shall attorn to and recognize Landlord, as its landlord, under all
of the then executory terms of such sublease, except that Landlord shall not be
(a) liable for any previous act, omission or negligence of Tenant under such
sublease, (b) subject to any counterclaim, defense or offset theretofore
accruing to such subtenant against Tenant, (c) bound by any previous
modification or amendment of such sublease made without Landlord's consent or by
any previous prepayment of more than one month's rent and additional rent unless
paid as provided in the sublease, or (d) obligated to perform any repairs or
other work in the subleased space or the Building beyond Landlord's obligations
under this Lease, and each subtenant shall execute and deliver such instruments
as Landlord may reasonably request to evidence and confirm such attornment.
ARTICLE 9
Compliance with Laws and Requirement of public Authorities
9.01 Tenant shall promptly notify Landlord of any written notice it
receives of the violation of any law or requirement of any federal, state,
municipal or other public authority, and at its expense Tenant shall comply with
all laws and requirements of such public authorities 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.
If Tenant, after giving notice in writing to Landlord, shall have
satisfied Landlord as to Tenant's financial capacity, Tenant, at its sole cost
and expense and, by appropriate proceedings prosecuted diligently and in good
faith, may contest the validity or applicability to the Demised Premises of any
law or requirement of public authority, and Landlord shall cooperate with Tenant
in such proceedings, and Tenant need not comply with such law or requirement
while such contest or proceeding is pending and unresolved, provided that:
(A) Landlord shall not be subject to any liability, civil or
criminal, or to prosecution for a crime or otherwise, nor shall the Building or
Demised Premises or any part thereof be subject to any lien, charge or liability
of any kind or to being condemned or vacated, by reason of noncompliance with
the law or requirement during the period of such contest or proceeding;
(B) Tenant shall defend, indemnify and hold harmless Landlord
against all liability, loss or damage which Landlord shall suffer by reason of
such noncompliance or contest, including, without limitation, reasonable
attorneys' fees, court costs, fines and other expenses reasonably incurred by
Landlord;
(C) Such noncompliance or contest shall not constitute or
result in any violation of any superior lease or superior mortgage, or if such
superior lease and/or superior mortgage shall permit such noncompliance or
contest on condition of the taking of action or furnishing of security by
Landlord, such action shall be taken and such security shall be furnished at the
expense of Tenant; and
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(D) Tenant shall regularly keep Landlord advised as to the
status of such contest or proceedings.
Without limiting the application of Subsection (A) above thereto,
Landlord shall be deemed subject to prosecution for a crime within the meaning
of said Subsection if Landlord, or any officer or agent or employee of Landlord
individually, is charged with a crime of any kind or degree whatever, whether by
service of a summons or otherwise, unless such charge is withdrawn before
Landlord or such officer (as the case may be) is required to plead or answer
thereto. However, Landlord shall not be deemed to be subject to criminal penalty
or prosecution for a crime solely by reason of the existence of a notice of
violation of any of the health, building or labor laws or requirements of public
authorities under any of such laws.
9.02 Where a violation of a law or requirement described in Section
9.01 arises from a cause other than those specified in clauses (i) through (iv)
of said Section 9.01, and where any structural change or other substantial
change to or in connection with the Demised Premises is required by any law,
ordinance, rule, order or regulation, the cost of which as estimated by Landlord
would not exceed six (6) months' Fixed Rent payable under this Lease, Landlord
shall effect such compliance. However, where such cost is estimated as exceeding
that amount equal to six (6) monthly installments of Fixed Rent, Landlord shall
have the option of making such change and paying the cost thereof, or of
terminating this Lease and the Term and estate hereby granted by giving to
Tenant not less than thirty (30) days' prior written notice of such termination;
provided, however, that if within fifteen (15) days after the giving by Landlord
of its notice of termination as aforesaid, Tenant shall give written notice to
Landlord stating that Tenant elects to make such alteration at the expense of
Tenant, then such notice of termination shall be ineffective provided that
Tenant, at Tenant's expense, shall, concurrently with the giving of such notice
to Landlord, execute and deliver to Landlord Tenant's written undertaking, with
a surety and in form and substance satisfactory to Landlord, obligating Tenant
promptly and duly to make such change in a manner satisfactory to Landlord and
to save Landlord harmless from any and all costs, expenses, penalties and/or
liabilities (including, but not limited to, accountants' and attorneys' fees) in
connection therewith or by reason thereof; and Tenant covenants and agrees that,
after so electing to make any such alteration, Tenant will, at Tenant's expense,
and in compliance with all the covenants, agreements, terms, provisions and
conditions of this Lease, make such change and Tenant, at Tenant's expense, will
promptly and duly perform all covenants, conditions and provisions of such
undertaking and that all such covenants, conditions and provisions of such
undertaking shall be deemed to constitute covenants, conditions and provisions
of this Lease to be kept or performed on the part of Tenant with the same force
and effect as if the same had been set forth herein.
In the event that a notice of termination shall be given by Landlord
under the provisions of this Section 9.02 and such notice shall not become
ineffective as hereinbefore provided, this Lease and the Term and estate hereby
granted shall expire as of the date specified therefor in such notice with the
same effect as if that were the Expiration Date, and the Fixed Rent and
Additional Rent hereunder shall be apportioned as of such date of termination.
<PAGE>
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ARTICLE 10
Insurance
10.01 Tenant shall not violate, or permit the violation of, any order,
rule or regulation of the New York Board of Fire Underwriters, 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 then
be in effect (unless Tenant pays the resulting increased amount of premium as
provided in Section 10.02) 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 any liability or obligation under this Section by reason of the
proper use of the Demised Premises for the purposes permitted by Article 2.
10.02 If, by reason of any act or omission on the part of Tenant, the
rate of fire insurance with extended coverage on the Building or equipment or
other property of Landlord shall be higher than it otherwise would be, Tenant
shall reimburse Landlord, on demand, for that part of the premiums for fire
insurance and extended coverage paid by Landlord because of such act or omission
on the part of Tenant, which sum shall be deemed to be Additional Rent and
collectible as such.
10.03 In the event that any dispute should arise between Landlord and
Tenant concerning rates, a schedule or make up of rates for the Building or the
Demised Premises, as the case may be, issued by the New York Fire Insurance
Rating Organization or other similar body making rates for fire insurance and
extended coverage for the premises concerned, shall be 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.
10.04 Tenant shall obtain and keep in full force and effect during the
Term of this Lease at its own cost and expense comprehensive general liability
insurance including contractual liability, such insurance to afford protection
in an amount of not less than $3,000,000 combined single limit per occurrence
for injury or death, and for damage to property, protecting Landlord and 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 on a form reasonably
satisfactory to Landlord by good and solvent insurance companies of recognized
standing, admitted to do business in the State of New York which shall be
reasonably satisfactory to Landlord. Tenant shall pay all premiums and charges
therefor and upon failure to do so Landlord may, but shall not be obligated to,
make such payments, and in such latter event Tenant agrees to pay the amount
thereof to Landlord on demand and said sum shall be deemed to be Additional Rent
and in each instance collectible on the first day of any month following the
date of notice to Tenant in the same manner as though it were Rent originally
reserved hereunder. Tenant will use its best efforts to include in such public
liability insurance policy a provision to the effect that same will be
noncancellable except upon reasonable advance written notice to 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
Landlord during the Term. In addition to the foregoing, upon notice by Landlord,
Tenant shall maintain such
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other insurance, and in such amounts, as shall then be customary for tenants in
first class office buildings in midtown Manhattan. In the event Tenant shall
fail to procure and place such insurance, Landlord may, but shall not be
obligated to, procure and place same, in which event the amount of the premium
paid shall be refunded 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 said
sums were Additional Rent reserved hereunder.
10.05 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 if the assured
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 and shall pay the
insurer's additional charge therefor, such waiver, agreement or permission shall
be included in the policy, or the other party shall be named as an additional
assured therein, and shall contain, if obtainable, agreements by the insurer
that the policy will not be canceled without at least ten (10) days' prior
notice to both assureds and that the act or omissions of one assured will not
invalidate the policy as to the other assured. Any failure by Tenant, if named
as an additional assured, 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 assured, shall be
deemed a default under this Lease.
10.06 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 assured, as provided in Sections 10.04 and
10.05. 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.
10.07 The waiver of subrogation or permission for release referred to
in Section 10.05 shall extend to the agents of each party and its and their
employees and, in the case of Tenant, shall also extend to all other persons and
entities
<PAGE>
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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 such charge).
The releases provided for in Section 10.06 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 10.06 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 10.04, nothing
contained in Sections 10.05 and 10.06 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.
However, each party shall advise the other, upon request, from time to time (but
not more often than once a year) of all of the policies of insurance it is
carrying of any of the kinds referred to in Section 10.05, and if it shall
discontinue any such policy or allow it to lapse, shall notify the other party
thereof with reasonable promptness. The insurance policies referred to in
Sections 10.05 and 10.06 shall be deemed to include policies procured and
maintained by a party for the benefit of its lessor, mortgagee or pledgee.
ARTICLE 11
Rules and Regulation
11.01 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 give notice of 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, the provisions of this Lease shall control.
11.02 Notwithstanding anything to the contrary in any of the Rules
and Regulations set forth in Exhibit "B",
(A) Tenant may bring into and keep in the Demised Premises such
small quantities of inflammable or combustible objects or materials as are
incidental to the use of the Demised Premises for the purposes permitted by
Article 2, but this shall not be deemed to relieve Tenant of responsibility to
comply with all other obligations of this Lease that may be applicable to or
result from the introduction or maintenance of such objects or materials in the
Demised Premises, including but not limited to compliance with the provisions of
Sections 10.01 and 10.02 hereof.
(B) Subject to the provisions of Paragraph 2.02(D), Landlord
shall not unreasonably withhold its consent to the installation, maintenance and
operation by Tenant in the Demised Premises of data processing machines, office
duplicating machines, teletype machines and other business machines and
machinery customarily used in offices in the ordinary course of business,
provided, however, that Tenant shall comply with all other obligations of this
Lease that may be applicable to or result from such installation, maintenance or
operation.
(C) Landlord shall not unreasonably withhold from Tenant
any approval provided for in the Rules and
<PAGE>
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Regulations. Tenant shall have the same right to contest any withholding of
approval under the Rules and Regulations it considers unreasonable as is
provided in Article 30 with respect to consents.
(D) Whenever Landlord shall claim by written notice to Tenant
that Tenant is violating any of the provisions of the Rules and Regulations and
Tenant shall in good faith dispute such claim by written notice given to
Landlord within ten (10) days after service of Landlord's notice of the
violation, the dispute shall be determined by informal arbitration pursuant to
Article 32.
ARTICLE 12
Tenant's Changes
12.01 Tenant may, at any time and from time to time during the Term of
this Lease, at its sole expense, make alterations, additions, installations,
substitutions, improvements, and decorations (hereinafter collectively called
"changes" and, as applied to changes provided for in this Article, "Tenant's
Changes") in and to the Demised Premises, excluding structural changes, 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 of 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 the changes,
Tenant shall be bound by and observe all of the conditions and covenants
contained in the following Section of this Article.
(E) Tenant shall not be permitted to install and make part of
the Demised Premises any materials, fixtures or articles which are subject to
liens, conditional sales contracts or chattel mortgages.
(F) At the Expiration Date, or the date of any earlier
termination of this Lease, Tenant shall upon Landlord's written request restore
the Demised Premises to their condition prior to the making of any changes
permitted by this Article, reasonable wear and tear excepted.
12.02 (A) Before proceeding with any change (exclusive of changes to
items constituting "Tenant's Property" as defined in Article 13) Tenant shall
submit to Landlord plans and specifications (including mechanical, electrical
and plumbing drawings, if applicable) for the work to be done, for Landlord's
written approval, which approval shall not be unreasonably withheld. If Landlord
shall disapprove of any of Tenant's plans, Tenant shall be advised of the
reasons of such disapproval. In any event, Tenant agrees to pay to Landlord, as
Additional Rent,
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the reasonable cost of such review within forty-five (45) days of receipt of a
written demand therefor from Landlord.
(B) If the proposed change requires approval by or notices to
the lessor of a superior lease or the holder of a superior mortgage, no change
shall be proceeded with until such approval has been received, or such notice
has been given, as the case may be, and all applicable conditions and provisions
of said superior lease or superior mortgage with respect to the proposed change
or alteration have been met or complied with at Tenant's expense; and Landlord,
if it approves the change, will request such approval or give such notice, as
the case may be. Any change for which approval has been received shall be
performed strictly in accordance with the approved plans and specifications, and
no amendments or additions to such plans and specifications shall be made
without the prior written consent of Landlord.
(C) After Landlord's written approval has been sent to Tenant
and the approval by or notice to the lessor of a superior lease or the holder of
a superior mortgage has been received or given, as the case may be, Landlord
shall deliver to Tenant a list of approved contractors to construct Tenant's
Changes and Tenant shall designate in writing the contractor it selects to
perform the Tenant's Changes. Tenant shall deliver to Landlord promptly upon
execution thereof all agreements entered into with such contractors and,
promptly upon receipt thereof, copies of all contracts, work orders, amendments,
change orders, invoices, receipts and bills relating to the Tenant's Changes.
Tenant's contractors shall obtain on behalf of Tenant and at Tenant's sole cost
and expense, all necessary governmental permits and certificates for the
commencement and prosecution of Tenant's Changes and for final approval thereof
upon completion. In the event Tenant shall request any changes in the work to be
performed after the submission of the plans referred to in this Article, such
additional changes shall be subject to the same approvals and notices as the
changes initially submitted by Tenant.
(D) Tenant shall pay to Landlord as Additional Rent for
services to be performed by Landlord in connection with Tenant's Changes, a fee
equal to fifteen percent (15%) of the total cost of the Tenant's Changes,
including painting; provided, however, that if Tenant shall only require
painting of the Demised Premises during the Term of this Lease, Landlord's fee
therefor shall be a sum equal to seven and five-tenths percent (7.5%) of the
total cost of such painting.
12.03 All Tenant's Changes shall at all times comply with laws, orders
and regulations of governmental authorities having jurisdiction thereof, and all
rules and regulations of Landlord, and Tenant shall cause Tenant's Changes to be
performed in compliance therewith and with all applicable requirements of
insurance bodies, 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 submitted to Tenant
pursuant to Section 12.02(C). 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 in or about the Building, of which Landlord and its managing
agent shall be named as parties insured, in such limits
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as Landlord may reasonably prescribe, 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 such term is 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
fixture, equipment or other property shall thereupon become the property of
Landlord), unless Landlord shall otherwise expressly consent in writing.
12.04 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
Department of Buildings or any other public authority having or asserting
jurisdiction. However, nothing herein contained shall prevent Tenant from
contesting, in good faith and at its own expense, any such notice of violation
provided the Tenant shall comply with the provisions of Section 9.01. 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, attorneys'
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 ten (10) days of the filing of such lien 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 an 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 an annual rate of interest
specified in Section 41.02 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 Landlord's opinion, create any difficulty with other
contractors or labor engaged by Tenant or Landlord or others or would in any way
disturb harmonious labor relations in the construction, maintenance or operation
of the Building or any part thereof.
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ARTICLE 13
Tenant's Property
13.01 All fixtures, equipment, improvements and appurtenances attached
to or built into the Demised Premises at the commencement of or during the Term,
whether or not by or at the expense of Tenant, shall be and remain a part of 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 counters, screens, grilles, railings, lighting fixtures,
special cabinet work, other business and trade fixtures, and all other machines
and equipment, 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,
without expense to Landlord, and can be removed without permanent structural
damage to or defacement of the Building, and all furniture, furnishings and
other articles of movable personal property owned by Tenant and located in the
Demised Premises (all of which are herein called "Tenant's Property") shall be
and shall remain the property of Tenant and 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 Building resulting from such removal. Any fixtures, equipment or other
property which shall have been installed in the Demised Premises by or for the
account of Tenant and for which Landlord shall have made a contribution or
granted an allowance to Tenant, shall not be deemed to have been installed by or
for the account of Tenant without expense to the Landlord and shall not be
considered as Tenant's Property.
13.03 Except as otherwise provided in Section 12.01(F), at or before
the Expiration Date, or the date of any earlier termination of this Lease, or as
promptly as practicable after such an earlier termination date, Tenant shall
remove, at its expense, from the Demised Premises all of Tenant's Property and
shall repair any damage to the Demised Premises or the Building resulting from
such removal, and shall pay all other costs of such removal.
13.04 Any items of Tenant's Property which shall remain in the Demised
Premises after the Expiration Date or after a period of ten (10) days following
an earlier termination date, may, at the option of 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 or liability whatsoever,
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 Building
arising out of Tenant's failure to remove Tenant's Property pursuant to any
request by Landlord so to do.
ARTICLE 14
Repairs and Maintenance
14.01 Tenant shall take good care of the Demised Premises and the
fixtures and appurtenances therein, but Landlord shall make all repairs thereto,
including structural repairs, as and when needed to preserve them in good
working order and condition. However, 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
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the Building, as shall be required by reason of (i) the performance or existence
of 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; but Tenant shall not be responsible, and
Landlord shall be responsible, for any of such repairs as are required by reason
of Landlord's 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 serving the Demised Premises, in good
working order, condition and repair and shall make all repairs, structural and
otherwise, interior or exterior, 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 21.
14.03 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
the Demised Premises, or in or to the fixtures, equipment or appurtenances of
the Building or the Demises Premises, provided that Landlord shall use due
diligence 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 of the Demised Premises.
ARTICLE 15
Electrical Energy
15.01 Landlord shall furnish to Tenant on a "rent inclusion basis"
alternating electrical energy through the transmission facilities installed by
Landlord in the Building, to be used by Tenant in the Demised Premises in such
reasonable quantities as may be required by Tenant for the operation of lighting
fixtures and office equipment and machinery. The total charge for electrical
energy in the sum of $6,472.50 (the "Electrical Energy Sum") is included in the
Fixed Rent set forth in Section 1.04(A) of this Lease. Except as provided in
Section 15.02(D), the Electrical Energy Sum shall not be reduced below the
amount set forth in this Section 15.01 but may be increased as hereinafter
provided.
15.02 (A) If the cost to Landlord of electricity shall be increased
subsequent to the date of execution of this Lease by any change in Landlord's
electric rate charges, fuel adjustment or service classifications, or by taxes
or charges of any kind imposed thereon, or for any other reason, the Electrical
Energy Sum reserved herein shall be changed in the same proportion to the
increase in the cost of electricity to Landlord.
(B) At any time after the Commencement Date, Landlord shall have
the option, but not the obligation, to have a reputable independent electrical
engineer selected by Landlord make a survey (a "Survey") of the electrical
equipment, usage and
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power load to ascertain if the actual cost to Landlord of current electric
consumption and demand in the Demised Premises exceeds the electrical energy sum
set forth in Section 15.01 (or the Electrical Energy Sum as theretofore
adjusted) and to calculate the increase in the Electrical Energy Sum, if any, to
be made on the basis of the Survey.
(C) Whenever at any time during the Term an adjustment in the
Electrical Energy Sum shall be due by Landlord in accordance with the provisions
of subsection (A) or (B) of this Section, Landlord shall furnish to Tenant a
statement in writing of Landlord's determination of the amount of said
adjustment in Fixed Rent and the basis for the computation of same. The amount
of such adjustment in Fixed Rent, as specified in any such statement of
Landlord, shall become binding upon the parties hereto unless, within thirty
(30) days after Landlord shall have furnished to Tenant such statement, Tenant
notifies Landlord in writing that Tenant disputes the amount of such adjustment
in Fixed Rent so determined by Landlord, in which event the amount of such
adjustment in Fixed Rent shall, unless otherwise mutually agreed upon, be
determined by informal arbitration in accordance with the provisions of Article
32. Pending the resolution of such dispute, Tenant shall pay to Landlord the
amount of such adjustment in Fixed Rent specified in Landlord's statement. Any
such adjustment in Fixed Rent shall become effective as of the effective date of
any increase in the cost to Landlord of electricity, or as of the date of the
making of a Survey.
(D) Landlord, at any time, at its option and upon not less than
thirty (30) days' prior written notice to Tenant, may discontinue the furnishing
of electrical energy to the Demised Premises. In such case, Tenant shall
contract for the supplying of such electrical energy with the public utility
company supplying electrical energy to the Building and Landlord shall permit
its wires, risers, conduits, feeders and switchboards, to the extent available,
suitable and safely capable, to be used for the purpose of supplying such
electrical energy; provided, however, that Tenant, at Tenant's cost and expense,
shall furnish and install at such location in the Building as Landlord shall
designate, and shall maintain and keep in repair, any such additional wires,
risers, conduits, feeders, switchboards and metering equipment as shall be
necessary for the purpose of supplying such electrical energy to Tenant or
measuring Tenant's consumption of electrical energy so supplied to Tenant by
said public utility company. In the event that Landlord shall exercise said
option, the Fixed Rent payable under this Lease (including any adjustment
therein pursuant to the Article) shall, effective as of the date of such
discontinuance of Landlord's furnishing of electrical energy to the Demised
Premises, be reduced by an amount equal to the Electrical Energy Sum (as same
may have theretofore been adjusted in accordance with this Article)
(E) Tenant's use of electrical energy shall not at any time
exceed the capacity of any of the electrical conductors and equipment in or
otherwise serving the Demised Premises. Tenant agrees that Tenant shall not make
any alteration or addition to the wiring, outlets or other components of the
electrical system of the Demised Premises or make any alteration or addition to
the electrical equipment and/or appliances in the Demised Premises (except for
ordinary lighting fixtures, typewriters and similar low current office
equipment), without the prior written consent of Landlord in each instance. In
the event that Tenant shall require additional electrical energy for use in the
Demised Premises and if, in Landlord's sole judgment, Landlord's facilities are
inadequate for such
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additional requirements, and if electrical energy for such additional
requirements is available to Landlord, Landlord, upon written request and at the
sole cost and expense of Tenant, will furnish and install such additional wires,
risers, conduits, feeders and switchboards as may be reasonably required to
supply such additional requirements of Tenant provided (1) that the same shall
be permitted by applicable laws and not in violation of any insurance
regulations or recommendations, (2) that, in Landlord's sole judgment, the same
are necessary and will not cause permanent damage or injury to the Building or
the Demised Premises or cause or create a dangerous or hazardous condition or
entail excessive or unreasonable alterations or repairs or interfere with or
disturb other tenants or occupants of the Building, and (3) that Tenant, at
Tenant's sole expense, concurrently with the making of such written request,
shall execute and deliver to Landlord Tenant's written undertaking, with a
surety and in form and substance satisfactory to Landlord, obligating Tenant to
fully and promptly pay the entire cost and expense of so furnishing and
installing any such additional wires, risers, conduits, feeders and/or
switchboards.
(F) Landlord shall in no way be liable or responsible to Tenant
for any loss or damage or expense which Tenant may sustain or incur if, during
the Term, either the quantity or character of electrical energy is changed or is
no longer available for Tenant's requirements.
(G) Landlord shall in no way be liable for any failure of or
defect in the character or supply of electrical energy furnished to the Demised
Premises.
ARTICLE 16
Heat, Ventilation and Air-Conditioning
16.01. Landlord has installed in the Demised Premises, and Tenant has
inspected and accepted as satisfactory, the Building heating, ventilating and
air-conditioning systems. 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 during regular business hours, but not
before 9:00 A.M. or after 6:00 P.M. on business days (which term is used herein
to mean all days except Saturdays, Sundays and the days observed by the federal
or the New York State government as legal holidays), throughout the year. If
Tenant shall require air-conditioning service or heating service at any other
time (hereinafter called "after hours") Landlord shall furnish after hours
air-conditioning service or heating service upon reasonable advance notice from
Tenant, and Tenant shall pay Landlord's then established charges therefor on
Landlord's demand. If any of the other tenants of the Building shall request and
receive after hours heating or air-conditioning service, pursuant to Landlord's
obligation to provide the same to them, at the same time as Tenant, only that
equitably prorated portion of such charge for such common service shall be
charged to Tenant. If Tenant notifies Landlord reasonably in advance that the
Demised Premises will be open for business on any Lincoln's Birthday, Columbus
Day, Election Day or Veteran's' Day or on a Saturday, Landlord shall then
provide at no additional costs to Tenant heating, ventilating or
air-conditioning services on such holiday from 9:00 A.M. to 6:00 P.M., if
weekdays, and from 9:00 AM. to 12:30 P.M. on Saturdays.
16.02. Landlord will not be responsible for the failure of the
air-conditioning system to perform in accordance with its usual standards of
performance if such failure results
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from the occupancy of the Demised Premises with more than an average of one
person for each 100 square feet or if the Tenant installs and operates machines
and appliances, the installed electrical load of which when combined with the
load of all lighting fixtures exceeds six (6) watts per square foot of floor
area 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. Landlord shall not be required to furnish,
and Tenant shall not be entitled to receive, any air-conditioning during any
period wherein tenant shall be in default in any material provision of this
Lease.
ARTICLE 17
Landlord's Other Services
17.01. Landlord, at its expense, shall provide public elevator
service, passenger and freight, by elevators serving the floor on which the
Demised Premises are situated during regular hours of business days, and shall
have at least one passenger elevator subject to call at all other times. The
elevators, or any of them, 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 Saturday or after hours service
of freight elevators or the loading platform under such circumstances as, in
Landlord's reasonable judgment, will require service or attention by Landlord's
personnel, Tenant shall pay Landlord, on demand, a reasonable charge
attributable to such service or attention.
17.02. Provided that Tenant shall keep the Demised Premises in good
order, Landlord, at its expense, shall cause the Demised Premises, including the
exterior and the interior of the windows thereof (subject to Tenant maintaining
unrestricted access to such windows), to be cleaned on business days, as defined
in Section 16.01, in accordance with the standards set forth in Exhibit "C".
Tenant will not clean, nor require, permit, suffer or allow any window in the
premises to be cleaned from the outside. Tenant shall pay to Landlord on demand
the costs incurred by Landlord for (A) cleaning work in the Demised Premises or
the Building required because of (i) misuse or neglect on the part of Tenant or
its employees or visitors, (ii) use of portions of the Demised Premises for
preparation, service, or consumption of food or beverages, reproducing
operations, private lavatories or toilets or other special purposes requiring
great or more difficult cleaning work than office areas, (iii) unusual quantity
of interior glass surfaces, (iv) non-building standard materials or finishes
installed by
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Tenant or at its request (v) increases in frequency or scope in any of the items
set forth in Exhibit "C" as shall have been requested by Tenant and (B) removal
from the Demised Premises and the Building of (i) so much of any refuse and
rubbish of Tenant as shall exceed that normally accumulated daily in the routine
of ordinary business office occupancy and (ii) all of the refuse and rubbish of
Tenant's machines and the refuse and rubbish of any other eating facilities
requiring special handling (known as "wet garbage"). Landlord and its cleaning
contractor and their employees shall have after hours access to the Demised
Premises and the use of Tenant's light, power and water in the Demised Premises
as may be reasonably required for the purpose of cleaning the Demised Premises.
17.03. Landlord, at its expense, shall furnish adequate hot and cold
water to the floor(s) on which the Demised Premises are situated for drinking,
lavatory, toilet, and ordinary cleaning purposes.
17.04. Landlord shall use its best efforts to keep and maintain the
public areas and the public facilities of the Building clean and in good order
and the sidewalks adjoining the Building in good repair and free of accumulation
of snow and ice or unlawful obstructions.
17.05. Landlord, subject to its prior written approval and at Tenant's
expense, and on Tenant's request, shall maintain listings on the Building
directory of the names of Tenant, its organizational divisions and any other
person or business entities lawfully occupying the Demised Premises or any part
thereof, 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, the size of which shall be determined by
Landlord. The listing of any name other than that of Tenant on the Building
directory or on any of the doors of the Demised Premises shall not be deemed to
vest in the person or entity so listed any right or interest in the Lease or in
the Demised Premises or to constitute the consent of Landlord required under
Article 8, or a waiver thereof.
17.06. 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
of the other services required of Landlord under this Lease, whenever and for so
long as may be necessary, by reason of accidents, emergencies, strikes or 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 difficulty in securing
proper supplies of fuel, steam, water, electricity, labor or supplies or by
reason of any other cause beyond Landlord's reasonable control, including
Governmental restrictions on the use of materials or the use of any of the
Building systems. 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 provisions 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,
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stoppage or suspension of any of the Building systems or services arising out of
the causes set forth in this Section.
ARTICLE 18
Access, Changes in Building Facilities, Name
18.01. 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 any 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
operation, maintenance, decoration and repair, are reserved to Landlord.
18.02. Tenant shall permit Landlord to install, use and maintain
pipes, ducts and conduits within or through the Demised Premises, or through the
walls, columns and ceilings 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, or reduce the floor area thereof by more than two percent
(2%) (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 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.
18.03. 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 Premises, 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 the fee owners,
lessors of superior leases, holders of mortgages, insurance carriers, or
prospective purchasers, mortgagees or lessees of the Land or the Building, and
(ii) for the purpose of making such repairs or changes or doing such repainting
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 all materials
into and store upon the Demised Premises which may be required for such repairs,
changes, repainting 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 times as such entry shall
be required by circumstances of emergency affecting the Demised Premises or the
Building.
18.04. During the period of eighteen (18) months prior to the
Expiration Date, Landlord may exhibit the Demised Premises to prospective
tenants upon the same notice and subject to the same conditions as are provided
in Section 18.03.
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18.05. Landlord reserves the right, 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 or to the street entrances, halls, passages,
elevators, escalators 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 in excess of two (2%) percent without an appropriate
adjustment in Rents.
Landlord reserves the right to make such change or changes of
name for the Building 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
General Motors Building or any subsequent name as selected by Landlord, or (ii)
the postal address approved by the U.S. Post Office.
18.06. 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 normal 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 on which the Demised Premises are located.
ARTICLE 19
Shoring, Notice of Accidents, Etc.
19.01. If an excavation or other substructure work shall be undertaken
or authorized upon land adjacent to the Building or in the vaults beneath the
Building or in subsurface space adjacent to the said vaults, Tenant, without
liability on the part of Landlord therefor, shall afford to the person causing
or authorized to cause such excavation or other substructure work a license to
enter upon the Demised Premises for the purpose of doing such work as such
person shall deem necessary to protect or preserve any of the walls or
structures of the Building or surrounding lands from injury or damage and to
support the same by proper foundations, pinning and/or underpinning, and, except
in case of emergency, if so requested by Tenant such entry shall be accomplished
in the presence of a representative of Tenant, who shall be designated by Tenant
promptly upon Landlord's request. The said license to enter shall be afforded by
Tenant without any claim for damages or indemnity against Landlord and Tenant
shall not be entitled to any diminution or abatement of Rent on account thereof.
19.02. Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of (i) any accident in or about the Demised Premises or the
Building, (ii) all fires in the Demised Premises, (iii) all damages or defects
in the Demised Premises, including the fixtures, equipment and appurtenances
thereof, for the repair of which Landlord might be responsible or which
constitutes Landlord's property, and (iv) all damage to or defects in any parts
or appurtenances of the Building's sanitary, electrical, heating, ventilating,
air-conditioning, elevator and other systems located in or passing through the
Demised Premises.
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ARTICLE 20
Non-Liability and Indemnification
20.01. 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 for any injury or damage to Tenant or to any other
person 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 negligence of Landlord, its
agents or employees without contributory negligence on the part of Tenant, it
being understood that no property, other than such as might normally be brought
upon or kept in the Demised Premises as incident to the reasonable use of the
Demised Premises for the purposes herein permitted, will be brought upon or be
kept in the Demised Premises. Landlord shall not be liable in any event for loss
of, or damage to, any property entrusted to any of Landlord's employees or
agents by Tenant without Landlord's specific written consent. Without affecting
the generality of the foregoing, if Landlord shall consent to the omission or
removal of any part of, or the insertion of any door or other opening in, any
wall separating the Demised Premises from adjoining space leased to another
tenant, then (i) Tenant shall be responsible for all risk of damage to, or loss
or theft of, property arising as a result of such omission or removal or the use
of such door or other opening, or because of the existence thereof, and shall
indemnify and save Landlord harmless from and against any claim, demand or
action for, or on account of, any such loss, theft or damage, and (ii) in the
event of the termination of this Lease or the lease of said other tenant,
Landlord may enter the Demised Premises and Landlord, at Tenant's expense, may
close up such door or other opening by erecting a wall to match the wall
separating the Demised Premises from said adjoining space, and Tenant shall pay
the reasonable cost thereof and Tenant shall not be entitled to any diminution
or abatement of Rent or other compensation by reason thereof provided, however,
that nothing herein contained shall be deemed to vest Tenant with any right or
interest in, or with respect to, said adjoining space, or the use thereof, and
Tenant hereby expressly waives any right to be made a party to, or to be served
with process or other notice under or in connection with any proceeding or
action which may be hereafter be instituted by Landlord for the recovery of the
possession of said adjoining space.
20.02. Tenant shall defend, indemnify and save harmless Landlord and
its agents and employees against and from all liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including reasonable architects'
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:
(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 including, without
limitation, the performance of Tenant's Changes;
(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
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or any part thereof, or vault, passageway or space adjacent thereto; and
(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 unreasonably withhold.
20.03. 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
apprised at all times of the status of such defense. Legal counsel of the
insurer for either party is hereby deemed satisfactory to both parties.
20.04. Except as otherwise expressly provided herein, this Lease and
the obligations of Tenant to pay Rent 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
cause whatsoever beyond Landlord's reasonable control, including, but not
limited to, Acts of God, strikes, labor troubles, governmental preemption in
connection with a national emergency or by reason of any rule, order or
regulation of any department or subdivision thereof of any governmental agency
or by reasons of the conditions of supply and demand which have been or are
affected by war, hostilities or other similar emergency; 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 21.03.
20.05. The provisions of this Article are intended to be cumulative to
and shall not be deemed to supersede, limit or modify any of the other
provisions of this Lease and the provisions of Sections 20.01 and 20.02 are
likewise intended to be cumulative to each other and neither such Section shall
be deemed to limit the other in any respect.
ARTICLE 21
Destruction or Damage
21.01. 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 21.03 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.
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21.02. 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
Tenant, its agents or employees under the provisions of this Lease, the Rents
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.
21.03. In case of substantial damage or destruction of the Demised
Premises, and if Landlord has not completed the making of the required repairs
and restored and rebuilt the Demised Premises and/or access thereto within nine
(9) months from the date of such damage or destruction, and such additional time
after such date (but in no event to exceed six (6) months) as shall equal the
aggregate period Landlord may have been delayed in doing so by adjustment of
insurance, labor trouble, governmental controls, Acts of God, or any other cause
beyond Landlord's reasonable control, Tenant may serve notice on Landlord of its
intention to terminate this Lease, and if within thirty (30) days thereafter
Landlord shall not have completed the making of the required repairs and
restored and rebuilt the Demised Premises, this Lease shall terminate on the
expiration of such thirty (30) day period as if such termination date were the
Expiration Date.
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 in writing 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 21.01, the holder of a superior mortgage or any person
claiming under or through the holder of such superior mortgage takes possession
of the Building through foreclosure or otherwise, such holder 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 hereinbefore set for the expiration of the Term, and 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 21.02. Nothing contained in this
Section 21.03 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.
21.04. 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 commercially reasonable efforts to
<PAGE>
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effect such repair or restoration promptly and in such manner as not
unreasonably to interfere with Tenant's use and occupancy.
21.05. 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.
21.06. 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 Section 227 of the Real Property Law of the State of
New York, providing for such a contingency in the absence of an express
agreement, and any other law of like import, now or hereafter in force, shall
have no application in such case.
21.07. Notwithstanding any of the foregoing provisions of this
Article, 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 Rents provided for in this Article
shall not be effective to the extent of the uncollected insurance proceeds.
ARTICLE 22
Eminent Domain
22.01. 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 and also agrees to execute any and
all further documents that may be required in order to facilitate the collection
thereof by Landlord.
22.02. 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 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
Fixed Rent and Additional Rent provided to be paid by Tenant shall be
apportioned and paid to the date of such taking. For the purposes of this
Article, substantially all of the Land, Building and/or Demised Premises shall
be deemed to have been taken if the remaining portion of such Land, Building or
Demised Premises not so taken cannot reasonably or practicably be repaired or
reconverted so as to permit the use thereof for substantially the same purposes
for which such Land, Building or Demised Premises were used immediately prior to
such taking.
22.03. However, if substantially all of the Land or Building is not
so taken and if only a part of the entire Demised
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Premises shall be so taken, this Lease nevertheless shall continue in full force
and effect, except that Tenant may elect to terminate this Lease if that portion
of the Demised Premises then occupied by Tenant shall be reduced by more than
twenty-five (25%). Tenant shall give notice of such election to Landlord not
later than thirty (30) days after (i) notice of such taking is given by Landlord
to Tenant, or (ii) the date of such taking, whichever occurs later. Upon the
giving of such notice by Tenant this Lease shall terminate on the date of
service of Tenant's notice and Fixed Rent and Additional Rent due and to become
due, shall be prorated and adjusted as of the date of the taking. If Tenant
fails to give such notice upon such partial taking and this Lease continuing in
force as to any part of the Demised Premises not taken, the Rents apportioned to
the part taken shall be prorated and adjusted as of the date of taking and from
such date Fixed Rent shall be reduced to the amount apportioned to the remainder
of the Demised Premises and Additional Rent shall be payable or receivable
pursuant to Articles 4 and 5 according to the rentable areas remaining.
22.04. Notwithstanding the foregoing provisions of this Article and
subject to the interests of any mortgagee or lessor or grantor under any
mortgage or ground or underlying 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.
22.05. If the temporary use or occupancy of all or any part of the
Demised Premises shall be lawfully taken by condemnation or in any other manner
for any public or quasi-public use or purpose during the Term, Tenant shall be
entitled, except as hereinafter set forth, to receive that portion of the award
for such taking which represents compensation for the use and occupancy of the
Demised Premises and, if so awarded, for the taking of Tenant's Property and for
moving expenses, and Landlord shall be entitled to receive that portion which
represents reimbursement for the cost of restoration of the Demised Premises.
This Lease shall be and remain unaffected by such taking and Tenant shall
continue to be responsible for all of its obligations hereunder insofar as such
obligations are not affected by such taking and shall continue to pay in full
Fixed Rent and Additional Rent when due. Notwithstanding the provisions of the
two immediately preceding sentences, any lump sum award received by Tenant as
compensation for temporary use and occupancy of the Demised Premises shall be
delivered forthwith to Landlord to be held by Landlord in trust for the making
of payments by Tenant as provided in this Lease. The rights and interests of
Landlord and Tenant to any award or awards received with respect to a
condemnation for temporary use or occupancy shall be in all other respects
governed by the provisions, limitations and conditions of Article 16.08 of the
ground lease and of any references therein made, including provisions therein
relating to the appointment of a trustee, and in the event of any conflict
between the provisions, limitations and conditions of this Section and those of
the said ground lease, the ground lease shall govern.
22.06. If the temporary use of occupancy of all or any material part
of the Demised Premises shall be lawfully taken by condemnation or in any other
manner as hereinabove described at any time during the last three (3) years of
the Term, either party may terminate this Lease by giving the other written
notice to such effect within sixty (60) days after such taking and this Lease
shall then expire on the effective date stated in such notice as if that were
the Expiration Date but Fixed Rent and
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Additional Rent shall be prorated and adjusted as of the date of such taking. In
the event of such a termination, however, Tenant shall not be entitled to any
award or share thereof made in condemnation, with the exception of any award to
which Tenant shall be entitled pursuant to Section 22.04.
22.07. 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, or in the event
of such taking of all or any part of the Demised Premises 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 parts of the
Building and the Demised Premises to substantially the same condition as they
were 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,
provided that Landlord's liability under this Section shall be limited to the
amount received by Landlord as an award arising out of such taking.
22.08. If the grade of any street upon which the Land, Building or
Demised Premises abuts shall be changed by any competent authority, this Lease
shall nevertheless continue in full force and effect, and Landlord shall be
entitled to collect from such authority the entire award that may be made in
such proceedings. Tenant hereby expressly assigns to Landlord all of its rights,
title and interest in or to every such award and also agrees to execute any and
all further documents that may be required in order to facilitate the collection
thereof by Landlord.
22.09. Should any part of the Demised Premises be taken to effect
compliance with any law or requirement of public authority other than in the
manner hereinabove provided in this Article, then, (i) if such compliance is the
obligation of Tenant under this Lease, Tenant shall not be entitled to any
diminution or abatement of Rents or other compensation from Landlord therefor,
but (ii) if such compliance is the obligation of Landlord under this Lease,
Fixed Rent and Additional Rent hereunder shall be equitably adjusted according
to the reduction in rentable area of the Demised Premises resulting from such
taking.
22.10. In the event that there shall be any dispute between Landlord
and Tenant arising out of the provisions of this Article, such dispute shall be
settled by informal arbitration pursuant to Article 32 hereof.
ARTICLE 23
Surrender
23.01. 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 Landlord broom clean, in good
order, condition and repair except for ordinary wear and tear and damage by fire
or other insured casualty, and Tenant shall remove Tenant's Property subject to
the provisions of Article 13 hereof.
23.02 If at any time during the last month of the Term of this Lease,
Tenant shall have removed all or substantially all of Tenant's property from the
Demised Premises, Landlord may, and Tenant irrevocably grants to Landlord a
license to, immediately enter and alter, renovate and redecorate the Demised
Premises, without diminution or abatement of rent, or incurring liability
<PAGE>
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to Tenant for any compensation, and such acts shall have no effect on this
Lease, except that Tenant shall not be responsible for occurrences in the
Demised Premises after vacating the same if Landlord exercises such license.
23.03 Tenant agrees it shall indemnify and save Landlord harmless
against all costs, claims, loss or liability resulting from delay by Tenant in
surrendering the Demised Premises upon expiration or sooner termination of the
Term of this Lease, including, without limitation, any claims made by any
succeeding tenant founded on such delay. The parties recognize and agree that
the damage to Landlord resulting from any failure by Tenant timely to surrender
the Demised Premises will be substantial, will exceed the amount of monthly rent
theretofore payable hereunder, and will be impossible of accurate measurement.
Tenant therefore agrees that if possession of the Demised Premises is not
surrendered to Landlord within two (2) days after the date of the expiration or
sooner termination of the Term of this Lease, then Tenant will pay Landlord as
liquidated damages for each month and for each portion of any month during which
Tenant holds over in the Demised Premises after expiration or sooner termination
of the Term of this Lease, a sum equal to three (3) times the average Fixed Rent
and Additional Rent which was payable per month under this Lease during the six
(6) month period preceding such expiration or termination of the Term of this
Lease. The aforesaid obligations shall survive the expiration of sooner
termination of the Term of this Lease.
ARTICLE 24
Conditions of Limitation
24.01. This Lease and the Term and 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 or act occurs without the
acquiescence of Tenant, at any time after the event or act continues for thirty
(30) 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 expiration of said five (5) day period this 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 in Article 26.
24.02. This Lease and the Term and estate hereby granted are subject
to the further limitation that
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(A) whenever Tenant shall default in the payment of any
installment of Fixed Rent or Additional Rent, on any day upon which the same
shall be due and payable and such default shall continue for ten (10) days after
Landlord shall have given Tenant notice of such default, 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 (as more particularly described in Section
9.01) 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 herein or the estate hereby granted or any
portion thereof or the unexpired balance of the Term 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 8, 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 at any time thereafter, Landlord may give to Tenant a
notice of intention to end the Term at the expiration of five (5) days from the
date of service of such notice of intention, and upon the expiration of said
five (5) days this 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 in Article 26.
ARTICLE 25
Re-entry by Landlord, Default Provisions
25.01. 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 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 any termination of
this Lease under the provisions of Article 24 or re-entry under this Article or
in the event of the termination of
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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 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 26.
25.02. 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.
25.03. 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 rights 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 statute or otherwise.
25.04. If this Lease shall terminate under the provisions of Article
24, or if Landlord shall re-enter the Demised Premises under the provisions of
this Article, 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
at the time of such termination or re-entry or, at Landlord's option, against
any damages payable by Tenant under Article 26 or pursuant to law.
ARTICLE 26
Damages
26.01. If this Lease is terminated under the provisions of Article 24,
or if Landlord shall re-enter the Demised Premises under the provisions of
Article 25, 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, either
(A) on demand, 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 Fixed Rent and Additional Rent
payable hereunder which would have been payable by Tenant (conclusively
presuming 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 Date, had this Lease not so terminated or had
Landlord not so
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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) sums equal to Fixed Rent and 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 but otherwise upon the terms therefor specified herein
following such termination or such re-entry and until the Expiration Date,
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 received by Landlord from such reletting, 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, 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 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 rents received from
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 reserved upon such reletting shall, prima facie, be the fair and reasonable
rental value of the Demised Premises, or part thereof, so relet during the term
of the reletting. Landlord, however, shall in no event and in no way be
responsible or liable for any failure to relet the Demised Premises or any part
thereof or for failure to collect any rent due upon any such reletting.
26.02. 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 provisions of Article 24, 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 Landlord to prove for and obtain as liquidated
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 in
Section 26.01.
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ARTICLE 27
Waivers
27.01. 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,
(i) to the service of any notice of intention to re-enter, (ii) to 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, or (iii) to any notice and/or delay in levy of execution in case of an
eviction or dispossession of tenant for nonpayment of rent.
27.02. In the event that Tenant is in arrears in payment of Fixed Rent
or Additional Rent or any other sums due hereunder, Tenant waives Tenant's
right, 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 it sees fit, irrespective of and notwithstanding any
designation or request by Tenant as to the items against which any such payments
shall be credited. In the event Landlord commences any summary proceeding or
other action for non-payment of Rent, Tenant covenants and agrees that it will
not interpose any counterclaim of whatsoever nature or description in any such
proceeding.
27.03. 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 or occupancy of the Demised Premises, or any emergency or other statutory
remedy with respect thereto.
ARTICLE 26
No Other Waivers or Modifications
28.01. The failure of either party to insist in 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, or to exercise any
right, remedy or election herein contained, or to perform any act or fail to
perform any act, 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 effect 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 which enforcement of the change, modification,
waiver, release, discharge or termination or effectuation of the abandonment is
sought.
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28.02. The following specific provisions of this Section shall not be
deemed to limit the generality of the foregoing provisions 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 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 of 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 effect 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 at law provided.
(D) If, in connection with obtaining, continuing or renewing
financing for which the Building, Land or the leasehold or any interest therein
represents collateral in whole or in part, a banking, insurance or other lender
shall request reasonable modifications of this Lease as a condition of such
financing, Tenant will not unreasonably withhold, delay or defer its consent
thereto.
ARTICLE 29
Curing Tenant's Defaults
29.01. If Tenant shall default in the performance of any covenant,
agreement, term, provision or condition herein contained, or if Landlord shall
incur any liability, loss, cost or expense on behalf of Tenant or for which
Landlord shall otherwise be entitled to reimbursement by Tenant, Landlord,
without thereby waiving such default, may perform the same for the account and
at the expense of Tenant, [and may apply or retain the whole or any part of the
Security Deposit (hereinafter defined) or present the LC (hereinafter defined)
for payment and apply or retain the whole or any part of the proceeds, thereof,
as the case may be,] without notice in a case of emergency and in any other case
if such default continues after three (3) days from the date of the giving by
Landlord to Tenant of written notice of intention so to do. Bills for any
expense incurred by Landlord in connection with any such performance by Landlord
for the account of Tenant, and bills for all costs, expenses and disbursements,
including (without being limited to) counsel fees, incurred in collecting or
endeavoring to collect Fixed Rent, Additional Rent or other charges 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 (without being
limited to) any such cost, expense and
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disbursement involved in instituting and prosecuting summary proceedings, as
well as bills for any property, material, labor or services provided, furnished
or rendered, or caused to be provided, furnished or rendered, by Landlord to
Tenant including (without being limited to) electric lamps and other equipment,
construction work done for the account of Tenant, water, ice, drinking water,
drinking cups, towel and other services, as well as for any charges for any
additional elevator, heating, air conditioning or cleaning services incurred
under Articles 16 and 17 hereof and any charges for other services incurred by
Tenant under this Lease, may be sent by Landlord to Tenant monthly, or
immediately, at Landlord's option, and shall be due and payable by Tenant in
accordance with the terms of said bills and if not paid when due, the amounts
thereof shall immediately become due and payable as Additional Rent under this
Lease together with interest thereon as provided for in Section 41.02 hereof.
Landlord reserves the right, without liability to Tenant and without
constituting any claim of constructive eviction, to suspend furnishing or
rendering to Tenant any property, material, labor, utility or other service,
wherever Landlord is obligated to furnish or render the same at the expense of
Tenant, in the event that (but only for so long as) Tenant is in arrears in
paying Landlord therefor.
ARTICLE 30
Consents
30.01. It is hereby agreed that the provisions of this Article shall
apply only in cases where either party hereto shall have specifically agreed not
to unreasonably withhold its consent or approval as provided in this Lease.
30.02. Wherever it is provided that consent or approval is not to be
unreasonably withheld, such consent or approval (hereinafter referred to
collectively as "consent") shall also not be unreasonably delayed. If a party
considers that the other party has unreasonably withheld or delayed a consent it
shall so notify the other party within ten (10) days after receipt of notice of
denial of the requested consent or, in case notice of denial is not received,
within twenty (20) days after making its request for the consent, and within ten
(10) days after giving the first mentioned notice may submit the question of
whether the withholding or delaying of such consent is unreasonable to
determination by informal arbitration in the manner provided in Article 32 or
formal arbitration in the manner provided in Article 33, as such aggrieved party
may elect. A consent shall not be deemed to have been unreasonably withheld or
delayed unless the aggrieved party complies with the foregoing procedure and a
final determination to the effect that such consent was unreasonably withheld or
delayed shall have resulted from the arbitration proceeding. In the event of
such determination the requested consent shall be deemed to have been granted;
however, the party who shall have refused or failed to give such consent shall
not have any liability therefor to the other party. The sole remedy for an
unreasonable withholding or delaying of consent by either party shall be as
provided in this Section and no other.
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ARTICLE 31
Notices
31.01. Any notice, statement, demand, request or other communication
required or permitted to be given, rendered or made by either party to the
other, pursuant to this Lease or pursuant to any applicable law or requirement
of public authority, shall be in writing (whether or not so stated elsewhere in
this Lease) and shall be deemed to have been properly given, rendered or made,
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 date hereof, Tenant's address, unless Tenant shall give
notice to the contrary, shall be the Building), and shall be deemed to have been
given, rendered or made on the day so mailed, unless mailed outside of the State
of New York, in which case it shall be deemed to have been given, rendered or
made 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.
31.02. However, notices requesting after hours service pursuant to
Sections 16.01 and 17.01 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.
31.03. Whenever either party shall consist of more than one person or
entity, any notice, statement, demand, or other communication required or
permitted to be given, rendered or made to or by, and any payment to be made to
such party, shall be deemed duly given, rendered, made or paid if addressed to
or by (or in the case of payment by check to the order of) any one of 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.
ARTICLE 32
Informal Arbitration
32.01. The parties hereto shall not have been deemed to have agreed to
determination of any dispute arising out of this Lease by informal arbitration
unless determination in such manner shall have been specifically and
unequivocally provided for in this Lease and in no other case or cases.
32.02. Every dispute between the parties which is specifically
provided in this Lease to be determined by informal arbitration shall be
submitted to the Chairman of the Board of Directors of the Management Division
of the Real Estate Board of New York, Inc., for determination by him or by such
other impartial person or persons as he may designate, and such determination,
when made and rendered to the parties in writing, shall be final and conclusive
on the parties Such submission may be made by either party on notice to the
other and the other party may then present its statement of the matter in
dispute (if different than the first party's statement) to such arbitrator, with
a copy of such statement and upon notice to the first party.
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The expenses of such informal arbitration shall be borne by the parties equally.
Judgment may be entered on the determination and award made on such informal
arbitration in any court of competent jurisdiction and may be enforced in
accordance with the laws of the State of New York.
32.03. If at the time such dispute is to be submitted for informal
arbitration said Chairman is unable or unavailable to act, or the office of said
Chairman shall not exist, the dispute shall be submitted to such officer of the
Real Estate Board of New York, Inc., as shall then be exercising the functions
of said Chairman or functions similar thereto; or if no such officer is then
exercising such functions, the dispute shall be submitted to the President, or
other officer then acting as chief executive officer of the Real Estate Board of
New York, Inc. If, at the time such dispute is to be submitted, the Real Estate
Board of New York, Inc. shall be out of existence, the dispute shall be
submitted to a like officer exercising like functions or authority in any
successor or other organization then devoted to purposes and having standing
similar to said Real Estate Board of New York, Inc.
32.04. If, at the time such dispute is to be submitted, neither the
Real Estate Board of New York, Inc. nor any such successor or similar
organization shall exist, or if at such time the appropriate officer or officers
of the Real Estate Board of New York, Inc. or of such successor or similar
organization contemplated by Section 32.03 shall be unwilling or unable to
accept the submission, or if despite diligent efforts made in good faith by
either party, the arbitrator is not appointed or does not commence hearing the
matter within thirty (30) days after the service of a notice of the submission
on the other party, or if the arbitrator to whom the matter is submitted shall
fail to render his decision to the parties in writing within sixty (60) days
after the service of said notice, then in any such event, either party, if the
event shall not be due to its neglect or other fault, shall have the right to
have the matter in dispute determined by formal arbitration provided in Article
33.
32.05. Notwithstanding anything to the contrary provided elsewhere in
this Lease, either party may elect, in the manner provided in this Section, to
have determined by formal arbitration pursuant to Article 33 any dispute which
would otherwise be determinable by informal arbitration pursuant to the
preceding Sections of this Article. Such election may be exercised by either
party giving the other party a notice (as provided for in Section 33.03)
requesting formal arbitration of the matter in dispute which shall include an
express statement of the election, with express reference to this Section. Such
notice containing such election may be given by the party first requesting a
determination of such matter by arbitration or by the party receiving a notice
of submission to informal arbitration (pursuant to Section 32.02) provided, in
the latter instance, the notice for formal arbitration containing such election
is given within ten (10) days after receipt of the notice of submission to
informal arbitration.
ARTICLE 33
Formal Arbitration
33.01. The parties hereto shall not have been deemed to have agreed to
determination of any dispute arising out of this Lease by formal arbitration
unless determination in such
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manner shall have been specifically and unequivocably provided for in this Lease
and in no other case or cases.
33.02 Every dispute between the parties which is expressly provided in
this Lease to be determined by formal arbitration shall be resolved in the
manner provided in this Article.
33.03. The party requesting formal arbitration shall do so by giving
notice to that effect to the other party, specifying in said notice the name and
address of the person designated to act as an arbitrator on its behalf. Within
ten (10) days after the service of such notice, the other party shall give
notice to the first party specifying the name and address of the person
designated to act as an arbitrator on its behalf. If the second party fails to
notify the first party of the appointment of its arbitrator, as aforesaid,
within the time above specified, the appointment of the second arbitrator shall
be made in the same manner as hereinafter provided for the appointment of a
third arbitrator in a case where the two arbitrators appointed hereunder and the
parties are unable to agree upon such appointment. If, within twenty (20) days
after the second arbitrator is appointed, the two arbitrators shall not have
determined the dispute, they shall together appoint a third arbitrator. In the
event of their being unable to agree upon such appointment within thirty (30)
days after the appointment of the second arbitrator, the third arbitrator shall
be selected by the parties themselves if they can agree thereon within a further
period of ten (10) days. If the parties do not so agree, then either party on
behalf of both and on notice to the other, may request such appointment by the
American Arbitration Association (or any organization successor thereto) in
accordance with its rules then prevailing or if the American Arbitration
Association (or such successor organization) shall fail to appoint said third
arbitrator within ten (10) days after such request is made, then either party
may apply, on notice to the other, to the Supreme Court in the County of New
York (or any other court having jurisdiction and exercising functions similar to
those now exercised by said court) for the appointment of such third arbitrator,
and the other party shall not raise any questions to such court's full power and
jurisdiction to entertain the application and make the appointment. Each
arbitrator chosen or appointed pursuant to this Section shall be a disinterested
person having at least ten (10) years experience in the County of New York in a
calling connected with the dispute.
33.04. The arbitration shall be conducted by the three arbitrators
appointed in accordance with the provisions hereof and, to the extent consistent
with this Article, in accordance with the then prevailing rules of the American
Arbitration Association (or any organization successor thereto in the City and
County of New York). The arbitrators shall have the right to retain and consult
experts and competent authorities skilled in the matters under arbitration. The
arbitrators shall render their decision and award, upon the concurrence of at
least two of their number, within thirty (30) days after the appointment of the
third arbitrator or fifteen (15) days after the final hearing of the
arbitrators, whichever is later. Such decision and award shall be in writing and
counterpart copies thereof shall be delivered to each of the parties. In
rendering such decision and award, the arbitrators shall not add to, subtract
from or otherwise modify the provisions of this Lease. Judgment may be entered
on the determination and award made by arbitrators in any court of competent
jurisdiction and may be enforced in accordance with the laws of the State of New
York.
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33.05. If for any reason whatsoever the written decision and award of
the arbitrators shall not be rendered within the time limits set forth in
Section 33.04, either party may apply to the Supreme Court of the State of New
York or to any other court having jurisdiction and exercising the functions
similar to those now exercised by such court, by action, proceeding or otherwise
(but not by a new arbitration proceeding) as may be proper to determine the
question in dispute consistently with the provisions of this Lease.
33.06. Each party shall pay the fees and expenses of the one of the
two original arbitrators appointed by or for such party and the fees and
expenses of the third arbitrator and all other expenses of the arbitration shall
be borne by the parties equally. However, each party shall bear the expense of
its own counsel, experts and presentation of proof.
33.07. Notwithstanding anything to the contrary elsewhere provided in
this Lease, if the subject matter of a dispute which is provided in this Lease
to be determined by arbitration (whether informal or formal) is one which would
directly affect the liability of an insurer under any of the policies of
insurance referred to in Sections 10.05 and 10.06, and the party which is the
insured under such policy so notifies the other party, then unless such insurer
gives its written consent to the determination of such matter by arbitration
pursuant to the provisions of this Lease, the dispute shall not be determined by
arbitration and the parties shall be left to such other remedies as they may
have.
ARTICLE 34
Estoppel Certificate
34.01. 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 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 as modified and stating
the modifications), certifying the dates to which Fixed Rent and Additional Rent
have been paid, and stating whether or not, to the best knowledge of Tenant,
Landlord is in default in performance of any of its obligations under this
Lease, and, if so, specifying each such default of which Tenant may have
knowledge, it being intended that any such statement delivered pursuant thereto
may be relied upon by any other person with whom Landlord may be dealing.
ARTICLE 35
No Other Representations, Construction, Governing Law
35.01. 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.
35.02. 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,
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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 provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
35.03. This Lease shall be governed in all respects by the laws of the
State of New York.
ARTICLE 36
Parties Bound
36.01. The obligations of this Lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 8 shall operate to vest any rights in any successor or
assignee of Tenant and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 24.
However, the obligations of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in the event of such
transfer said obligations shall thereafter be binding upon each transferee of
the interest of Landlord herein named as such owner or lessee of the Building,
but only with respect to the period ending with a subsequent transfer within the
meaning of this Article, and such transferee, by accepting such interest, shall
be deemed to have assumed such obligations except only as may be expressly
otherwise provided elsewhere in this Lease. A lease of Landlord's entire
interest in the Building as owner or lessee thereof shall be deemed a transfer
within the meaning of this Article 36.
36.02. Tenant shall look solely to the estate and interest of
Landlord, its successors and assigns in, to and under the ground lease and the
Building, or the proceeds thereof, 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.
ARTICLE 37
Certain Definitions and Constructions
37.01. For the purposes of this Lease and all agreements supplemental
to this Lease, unless the context otherwise requires:
(A) (i) The term "ground lease" means a certain Agreement of
Modification of Lease dated July 16, 1965, between The Equitable Life Assurance
Society of the United States, as lessor, and Savoy Fifth Avenue Corporation, as
lessee, and recorded in the Office of the Register of the City of New York, for
the County of New York, in Liber 5344, Cp. 298, the lessor's interest in which
is presently held by Longstreet Associates L.P. and the lessee's interest in
which is presently held by Landlord.
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(ii) The term "mortgage" shall include an indenture of
mortgage and deed of trust to a trustee to secure an issue of bonds, and the
term "mortgagee" shall include such a trustee.
(B) The terms "include", "including" and "such as" shall each be
construed as if followed by the phrase "without being limited to".
(C) The term "obligations of this Lease" and words of like
import, shall mean the covenants to pay Fixed Rent and Additional Rent under
this Lease and all of the other covenants and conditions contained in this
Lease. Any provision in this Lease that one party or the other or both shall do
or not do or shall cause or permit or not cause or permit a particular act,
condition or circumstance shall be deemed to mean that such party so covenants
or both parties so covenant, as the case may be.
(D) The term "Tenant's obligations hereunder", and words of like
import, and the term "Landlord's obligations hereunder", and words of like
import, shall mean the obligations of this Lease which are to be performed or
observed by Tenant, or by Landlord, as the case may be. Reference to
"performance" of either party's obligations under this Lease shall be construed
as "performance and observance". Tenant's obligations hereunder shall be
construed in every instance as conditions as well as covenants.
(E) Reference to Tenant being or not being "in default
hereunder", or words of like import, shall mean that Tenant is in default in the
performance of one or more of Tenant's obligations hereunder, or that Tenant is
not in default in the performance of any of Tenant's obligations hereunder, or
that a condition of the character described in Section 24.01 has occurred and
continues or has not occurred or does not continue, as the case may be.
(F) References to Landlord as having "no liability to Tenant" or
being "without liability to Tenant", shall mean that Tenant is not entitled to
terminate this Lease, or to claim actual or constructive eviction, partial or
total, or to receive any abatement or diminution of Rent, or be relieved in any
manner of any of its other obligations hereunder, or to be compensated for loss
or injury suffered or to enforce any other kind of liability whatsoever against
Landlord under or with respect to this Lease or with respect to Tenant's use or
occupancy of the Demised Premises.
(G) The term "laws and/or requirement of public authorities" and
words of like import shall mean laws and ordinances of any or all of the
federal, state, city, county and borough governments and rules, regulations,
orders and/or directives of any or all departments, subdivisions, bureaus,
agencies or offices thereof, or of any other public or quasi-public authorities,
having jurisdiction over the Building and/or Demised Premises, and/or the
direction of any public officer pursuant to law.
(H) The term "requirements of insurance bodies" and words of like
import shall mean rules, regulations, orders and other requirements of the New
York Board of Fire Underwriters and/or the New York Fire Rating Organization
and/or any other similar body performing the same or similar functions and
having jurisdiction or cognizance of the Building and/or the Demised Premises.
<PAGE>
- 51 -
(I) The term "repair" shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and condition, and the term "untenantable" shall be deemed to include being
inaccessible.
(J) Reference to "termination of this Lease" includes expiration
or earlier termination of the Term or cancellation of this Lease pursuant to any
of the provisions of this Lease or to law. Upon a termination of this Lease, the
Term and estate granted by this Lease shall end at noon of the date of
termination as if such date were the Expiration Date and neither party shall
have any further obligation or liability to the other after such termination (i)
except as shall be expressly provided for in this Lease, or (ii) except for such
obligations as by their nature or under the circumstances can only be, or by the
provisions of this Lease, may be, performed after such termination, and, in any
event, unless expressly otherwise provided in this Lease, any liability for
payment which shall have accrued to or with respect to any period ending at the
time of termination shall survive the termination of this Lease.
(K) The term "in full force and effect" when herein used in
reference to this Lease as a condition to the existence or exercise of a right
on the part of Tenant shall be construed in each instance as including the
further condition that at the time in question no default on the part of Tenant
exists, and no event has occurred which has continued to exist for such period
of time (after the notice, if any, required by this Lease), as would entitle
Landlord in either such instance to terminate this Lease or to dispossess
Tenant.
(L) The term "Tenant" shall mean Tenant herein named or any
assignee or other successor in interest (immediate or remote) of Tenant herein
named, when Tenant herein named or such assignee or other successor in interest,
as the case may be, is in possession of the Demised Premises as owner of the
Tenant's estate and interest granted by this Lease, and also if Tenant is not an
individual or corporation, all of the individuals, firms and/or corporations or
other entities comprising Tenant.
(M) Words and phrases used in the singular shall be deemed to
include the plural and vice versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender.
(N) The rule of "ejusdem generis" shall not be applicable to
limit a general statement following or referable to an enumeration of specific
matters to matters similar to the matters specifically mentioned.
(0) All references in this Lease to numbered Articles, numbered
Sections and Subsections and lettered Exhibits are references to Article and
Sections and Subsections of this Lease, and Exhibits annexed to (and thereby
made part of) this Lease, as the case may be, unless expressly otherwise
designated in the context.
37.02. The various terms which are defined in other Articles of this
Lease or are defined in Exhibits annexed hereto, shall have the meaning
specified in such other Articles and such Exhibits for all purposes of this
Lease and all agreements supplemental thereto, unless the context shall
otherwise require.
37.03. The Article headings in this Lease and the Index prefixed to
this Lease are inserted only as a matter of
<PAGE>
- 52 -
convenience of reference, and are not to be given any effect whatsoever in
construing this Lease.
ARTICLE 38
Vaults, Vault Space. Etc.
38.01. No vaults, vault space or other space 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 other space not within the property line of the Building, which Tenant may
be permitted to use and/or occupy, are to be used and/or occupied under a
license revocable by Landlord at will and on ten (10) days notice to Tenant, and
if any such license be revoked by Landlord, or if the amount of any such vaults,
vault space or other space 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. If any such license shall be revoked by
Landlord, Tenant shall, at its sole cost and expense, do and perform all such
work as may be necessary to comply with any order revoking the same. Any fee,
tax or charge of municipal authorities for any such vault, vault space or other
space shall be paid by Tenant, and Tenant shall only be permitted to use and/or
occupy such space subject to such laws, permits, orders, rules and regulations
as may be imposed by appropriate governmental authorities with respect thereto.
ARTICLE 39
Brokerage
39.01. Tenant represents and warrants that it has dealt only with
Corporate Property Investors ("CPI"), in the negotiation of this Lease and
Tenant does hereby indemnify and agree to hold Landlord harmless of and from any
liability, claim, damage, cost or expense (including, without limitation,
attorneys' fees) arising out of or in connection with claims for commissions
made against Landlord by any broker, finder, or like agent who claims to have
dealt with Tenant in connection with this Lease other than CPI. Landlord will
compensate CPI pursuant to separate agreements between CPI and Landlord.
ARTICLE 40
Failure to Deliver Possession
40.01. If Landlord is unable to give possession of the Demised
Premises on the Commencement Date, because of the holding over or retention of
possession of any tenant, undertenant or occupants, because a certificate of
occupancy has not been procured, or for any other reason, Landlord shall not be
subject to any liability for failure to give possession on said date and the
validity of this Lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the Term, but the Rents payable
hereunder shall be abated (provided Tenant is not responsible for the inability
to obtain possession), for the period of time after the Commencement Date that
Landlord is delayed in delivering possession of Demised
<PAGE>
- 53 -
Premises to Tenant. The provisions of this Article are intended to constitute
"an express provision to the contrary" within the meaning of Section 223-a of
the New York Real Property Law.
ARTICLE 41
Miscellaneous
41.01. This Lease does not constitute an offer to lease the Demised
Premises to Tenant and Tenant shall have no rights with respect to the leasing
of the Demised Premises unless and until Landlord, in its sole and unreviewable
discretion, elects to be bound hereby by executing and unconditionally
delivering to Tenant an original counterpart hereof.
41.02. In every case in which Tenant is required by the terms of this
Lease to pay to Landlord a sum of money, and payment is not made within ten (10)
days after the same shall become due, interest shall be payable on such sum or
so much thereof as shall be unpaid from the date it becomes due until it is
paid. Such interest shall be at an annual rate of interest one percentage (1%)
point higher than the prime lending rate of Chemical Bank, New York, New York.
ARTICLE 42
Tenant's Termination Option
42.01. Tenant shall have the option to cancel and terminate this
Lease, effective as of the last day of any calendar month occurring after
January, 1998 (such date is herein referred to as the "Early Termination Date"),
by written notice ("Tenant's Termination Notice"), delivered to Landlord no
later than three (3) months prior to such Early Termination Date. Upon timely
delivery of Tenant's Termination Notice, this Lease will expire on the Early
Termination Date as if such date were the Expiration Date set forth in the
Lease, and Tenant shall vacate the Demised Premises on or before the Early
Termination Date leaving the same in the condition otherwise required upon the
expiration or sooner termination of this Lease.
42.02. The effectiveness of the foregoing option is expressly
conditioned upon there not being any uncured default by Tenant under this Lease,
beyond notice and the expiration of any applicable cure period, at the time of
the exercise of said option and at the time of termination (unless Landlord, in
its sole discretion, elects to waive such condition).
<PAGE>
- 54 -
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers and their corporate seals to be
hereunto affixed the day and year first above written.
LONGSTREET ASSOCIATES LP.
A New York limited Partnership
By: CPI-767 Corporation, a
General Partner
By: /s/ CPI-767 Corporation
-----------------------------
RSL COM U S A., INC.
By /s/ Itzhak Fisher
-----------------------------
<PAGE>
EXHIBIT "A"
FLOOR PLAN
<PAGE>
EXHIBIT "A"
[FLOOR PLAN]
<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, driveways, entrances, passages, courts, lobby,
esplanade areas, plazas, elevators, vestibules, stairways, corridors or halls
shall not be obstructed or encumbered by any tenant or used for purposes other
than ingress and egress to and from the Demised Premises and Tenant shall not
permit any of its employees, agents or invitees to congregate in any of said
areas No door mat of any kind whatsoever shall be placed or left in any public
hall or outside any entry door of the Demised Premises.
2. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connection with, any window or door of the Demised
Premises, without the prior written consent of Landlord. Such curtains, blinds,
shades or screens must be of a quality, type, design and color, and attached in
the manner, approved by Landlord.
3. No sign, insignia, advertisement, object, notice or other lettering
shall be exhibited, inscribed, painted or affixed by any tenant on any part of
the outside or so as to be visible from the outside of the Demised Premises or
the Building. In the event of the violation of the foregoing by any tenant,
Landlord may remove the same without any liability, and may charge the expenses
incurred in such removal to the tenant or tenants violating this rule. Interior
signs and lettering on doors and directory tablet shall, if and when approved by
Landlord, be inscribed, painted or affixed for each tenant by Landlord at the
expense of such tenant, and shall be of a size, color and style acceptable to
Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect
or admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels, or other articles be placed on the window sills.
5. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed or
constructed, and no sweepings, rubbish, rags, acids or other substances shall be
thrown or deposited therein. All damages resulting from any misuse of the
fixtures shall be repaired at the expense of the tenant who, or whose servants,
employees, agents, visitors or licensees, shall have caused the same.
7. Except with respect to Tenant's Changes to be performed to
initially prepare the Demised Premises for Tenant's occupancy, no tenant shall
mark or in any way deface any part of the Demised Premises or the Building. No
boring, cutting, or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. No tenant shall lay
linoleum, or other similar floor covering, so that the same shall come in direct
contact with the floor of the Demised Premises, and, if linoleum or other
similar floor covering is desired to be used an interlining of builder's
deadening felt shall be first affixed to the floor, by a paste or other
material, soluble in water, the use of cement or other similar adhesive material
being expressly prohibited.
B-1
<PAGE>
8. No bicycles, vehicles, animals, fish or birds or any kind shall be
brought into or kept in or about the premises.
9. No noise, including, but not limited to, music or the playing of
musical instruments, recordings, radio or television which, in the judgment of
Landlord, might disturb other tenants in the Building, shall be made or
permitted by any tenant. Nothing shall be done or permitted in the Demised
Premises by Tenant which would impair or interfere with the use or enjoyment by
any other tenant of any other space in the Building. No tenant shall throw
anything out of the doors, windows or skylights or down the passageways.
10. Tenant, its servants, employees, agents, visitors or licensees,
shall not at any time bring or keep upon the Demised Premises any explosive
fluid, chemical or substance, nor any inflammable or combustible objects or
materials except subject to the provisions of Section 11.02(a) of the foregoing
Lease.
11. Except in those areas designated by Tenant as "security areas",
additional locks or bolts of any kind which shall not be operable by the Grand
Master Key for the Building shall not be placed upon any of the doors or windows
by any tenant, nor shall any changes be made in locks or the mechanism thereof
which shall make such locks inoperable by said Grand Master Key. Each tenant
shall, upon the termination of its tenancy, turn over to Landlord all keys of
stores, offices and toilet rooms, either furnished to, or otherwise procured by,
such tenant and in the event of the loss of any keys furnished by Landlord, such
tenant shall pay to Landlord the cost thereof.
12. All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place during such hours and in such elevators as Landlord
or its agent may determine from time to time. Landlord reserves the right to
inspect all objects and matter to be brought into the Building and to exclude
from the Building all objects and matter which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
Landlord may require any person leaving the Building with any package or other
object or matter to submit a pass, listing such package or object or matter,
from the tenant from whose premises the package or object or matter is being
removed, but the establishment and enforcement of such requirement shall not
impose any responsibility on Landlord for the protection of any tenant against
the removal of property from the premises of such tenant. Landlord shall, in no
way, be liable to Tenant for damages or loss arising from the admission,
exclusion or ejection of any person to or from the Demised Premises or the
Building under the provisions of this Rule 12 or of Rule 16 hereof.
13. Tenant shall not occupy or permit any portion of the Demised
Premises to be occupied as an office for a public stenographer or public typist,
or for the possession, storage, manufacture, or sale or beer, wine or liquor
(except as permitted under Section 2.02(B) of the Lease), narcotics, dope,
tobacco in any form, or as a barber, beauty or manicure shop, or as an
employment bureau. Tenant shall not engage or pay any employees on the Demised
Premises, except those actually working for Tenant on the Demised Premises, nor
advertise for laborers giving an address at the Demised Premises. Tenant shall
not use the Demised Premises or any part thereof, or permit the Demised Premises
or any part thereof to be used, for manufacturing, or for the sale at auction of
merchandise, goods or property of any kind.
14. Tenant shall not obtain, purchase or accept for
B-2
<PAGE>
use in the Demised Premises ice, drinking water, food or beverage (it being
understood that Tenant and its employees shall have the right to have food and
beverages delivered to the Demised Premises by outside services), towel,
barbering, boot blacking, cleaning, floor polishing or other similar services
from any persons not authorized by Landlord in writing to furnish such services,
provided always that the charges for such services by persons authorized by
Landlord are not excessive. Such services shall be furnished only at such hours,
in such places within the Demised Premises, and under such regulations as may be
fixed by Landlord. Tenant shall not purchase or contract for waxing, rug
shampooing, venetian blind washing, furniture polishing, lamp servicing,
cleaning of electric fixtures, removal of garbage or towel service in the
Demised Premises except from contractors, companies or persons approved by the
Landlord.
15. Landlord shall have the right to prohibit any identifying sign by
any tenant which in Landlord's judgment tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Landlord, such tenant shall refrain from or discontinue such advertising,
or identifying sign.
16. Landlord reserves the right to exclude from the Building during
hours other than Business Hours (as defined in the foregoing Lease) all persons
who do not present a pass to the Building signed by Landlord. All persons
entering and/or leaving the Building during hours other than Business Hours may
be required to sign a register. Landlord will furnish passes to persons for whom
any tenant requests same in writing. Each tenant shall be responsible for all
persons for whom such tenant requests such pass and shall be liable to Landlord
for all acts or omissions of such persons.
17. Tenant, before closing and leaving the Demised Premises at any
time, shall see that all lights are turned out. All entrance doors in the
Demised Premises shall be left locked by Tenant when the Demised Premises are
not in use. Entrance doors shall not be left open at any time.
18. Unless Landlord shall furnish electrical energy hereunder as a
service included in the rent, Tenant shall, at Tenant's expense, provide
artificial light and electrical energy for the employees of Landlord and/or
Landlord's contractors while doing janitor service or other cleaning in the
Demised Premises and while making repairs or alterations in the Demised
Premises.
19. The Demised Premises shall not be used for lodging or sleeping
or for any immoral or illegal purposes.
20. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
21. Canvassing, soliciting and peddling in the Building are
prohibited and each tenant shall cooperate to prevent the same.
22. There shall not be used in any space, or in the public halls of
the Building, either by any tenant or by jobbers or any others, in the moving or
delivery or receipt of safes, freight, furniture, packages, boxes, crates,
paper, office material, or any other matter or thing, any hand trucks except
those equipped with rubber tires, side guards and such other safeguards as
Landlord shall require. No hand trucks shall be used in passenger elevators, and
no such passenger elevators
B-3
<PAGE>
shall be used for the moving, delivery or receipt of the aforementioned
articles.
23. Tenant shall not cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the Demised
Premises which would annoy other tenants or create a public or private nuisance.
No cooking shall be done in the Demised Premises except as is expressly
permitted in the foregoing Lease.
24. Tenant shall cooperate with Landlord in obtaining maximum
effectiveness of the cooling system by lowering and closing venetian blinds
and/or drapes and curtains when the sun's rays fall directly on the windows of
the Demised Premises.
25. Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building when, in its judgment, it
deems it necessary or desirable for the reputation, safety, care or appearance
of the Building or the equipment thereof, or the comfort of tenants or others in
the Building. No rescission, alteration or waiver of any rule or regulation in
favor of one tenant shall operate as a rescission, alteration or waiver in favor
of any other tenant.
B-4
<PAGE>
EXHIBIT "C"
CLEANING SPECIFICATIONS
Office Areas - Nightly:
All linoleum, rubber, asphalt tile and other types of flooring (that
may be waxed or treated) to be swept nightly, using approved dust-down
preparation; wash such flooring once a month.
Carpet sweep carpeted areas and rugs four nights each week, and vacuum
clean once each week, moving light furniture other than desks, file cabinets,
etc.
Sweep private stairways; wash as necessary.
Empty and clean wastepaper baskets, ash trays, receptacles, etc; damp
dust as necessary and insert protective paper liners, if provided or required.
Empty and clean all ash trays and screen all sand urns nightly.
Remove wastepaper and waste materials to a designated area in the
Demised Premises, using special janitor carriages. Waste or rubbish bags are
supplied by the building.
Dust and wipe furniture, fixtures, desk equipment, displays,
telephones and window sills with impregnated cloths.
Damp wipe window sill coves where condensation occurs; dust as
necessary.
Dust baseboards, chair rails, trim, louvers, pictures, charts, etc.;
within reach.
Wash drinking fountains and coolers.
Keep locker and service closet rooms in clean and orderly condition.
Lavatories - Nightly:
Sweep and wash flooring with approved germicidal detergent solution,
using spray tank method.
Wash and polish mirrors, powder shelves, bright work, etc., including
flushometers, piping and toilet seat hinges.
Wash both sides of toilet seats; wash basins, bowls and urinals with
approved germicidal detergent solution.
Hand dust and clean partitions, tile walls, dispensers and
receptacles, washing where necessary.
Fill toilet tissue holders (tissue to be furnished by Landlord).
Empty sanitary disposal receptacles.
If directed by Tenant, fill soap dispensers and paper towels
dispensers (soap and paper towels to be furnished by Tenant at Tenant's expense)
Empty paper towels receptacles, and transport wastepaper from the
demised premises.
C-1
<PAGE>
Entrance Lobbies and Plaza - Nightly:
Sweep and wash flooring.
Wash floor mats.
Clean cigarette urns and replace sand or water as necessary.
Properly maintain floors of elevator cars. If carpeted, spots are
removed as possible and shampooed as necessary.
Dust and rub down elevator doors.
Dust and rub down mail chutes, mail depository, etc.
Dust and rub down walls, metal work and saddles in elevator cabs.
Keep escalators in clean and polished condition.
Dust walls up to 12 feet and keep free of fingermarks, smudges, etc.
Office Areas - Periodic Cleaning:
Wipe clear all brass hardware and brass fixtures and other bright work
nightly.
Remove all scuffs and fingermarks from doors. Clean and polish
herculite doors in reception areas.
Hand dust all doors and other ventilating louvers within reach, as
necessary.
On multiple tenancy floors, dust and clean electric fixtures and any
other fittings in public corridors as necessary.
Lavatories - Periodic Cleaning:
Machine scrub flooring with approved germicidal detergent solution as
necessary.
Wash partitions, tile walls and enamel surfaces with approved
germicidal detergent solution not less than once every two weeks - more often if
necessary.
Dust exterior of lighting fixtures once each month.
High dust once each month.
Entrance Lobbies and Plaza - Periodic Cleaning:
Machine scrub plaza and sidewalk areas as often as necessary, using
approved cleansers, rinse with clear water.
Clean lights, globes and fixtures as necessary.
Dust down walls once each month.
Rub down metal and other high level bright work as necessary.
C-2
<PAGE>
Office Areas - High Dusting and Cleaning:
High dust once every three months which includes:
Dust pictures, frames, charts, graphs and similar wall hangings not
reached in nightly cleaning.
Dust vertical surfaces such as walls, partitions, ventilating louvers
and other surfaces not reached in nightly cleaning.
Dust exterior of lighting fixtures.
Dust overhead pipes, sprinklers, etc.
Dust window frames.
General Services - Duties of Porters and Matrons:
Necessary regular porters will be assigned to the building for the
following services:
Service all public and operating space throughout the building.
Check condition of elevator cars during the day.
Dust and rub down all elevator doors, frames, telephone booths,
directory, etc., daily.
Sweep sidewalks and ramp daily
Hose sidewalks each morning, weather permitting.
Remove snow when necessary.
Lay and remove lobby rubber runners as necessary.
Insert toilet tissue in lavatories (tissues to be furnished by
Landlord).
Keep fan rooms, motor rooms and air conditioning rooms in clean
condition.
Check condition of staircases during the day.
Maintain exterior marble; exterior metal work along with metal in
building entrance doors and store front trim. To clean stand-pipes and sprinkler
siamese connections and hose bibs.
Matrons will be assigned to the building in order to service all
ladies rooms during the day. Matron will insert tissue (tissue to be furnished
by Landlord). Matron will also service sanitary napkin coin dispensers.
Window Cleaning:
Clean windows, inside, not less than eight times per annum.
Clean interior glass and a normal amount of partition glass, glass
doors and fan lights approximately once every five weeks.
Clean entrance doors daily.
C-3
<PAGE>
Clean lobby glass daily.
Clean directory glass daily.
Clean mail chute glass as necessary.
C-4
<PAGE>
Exhibit 10.55
AMENDMENT OF LEASE
This Amendment of Lease (this "Agreement"), dated as of the 6th day
of December, 1995, between HUDSON TELEGRAPH ASSOCIATES, a New York limited
partnership with an office c/o Williams Real Estate Co. Inc., 530 Fifth Avenue,
New York, New York 10036 ("Landlord") and INTERNATIONAL TELECOMMUNICATIONS
CORPORATION, a Delaware corporation with an address at 60 Hudson Street, New
York, New York 10013 ("Tenant")
W I T N E S S E T H:
WHEREAS:
A. Landlord and Tenant entered into a lease dated as of September
29, 1995 (the "Existing Lease") pursuant to which Tenant now leases certain
premises on the eleventh (11th) floor (the "01d Premises") in the building known
as 60 Hudson Street, New York, New York (the "Building").
B. Tenant wishes to lease a portion of the ground floor of the
Building, as shown cross-hatched on the floor plan annexed as Exhibit A (the
"Ground Floor Portion") , and a portion of the basement of the Building, as
shown cross-hatched on the floor plan annexed as Exhibit B (the "Basement
Portion"; the Ground Floor Portion and the Basement Portion are hereinafter
collectively called the "New Premises") for the balance of the Term of the
Existing Lease, and Landlord is agreeable thereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter contained, Landlord and Tenant agree that the Existing
Lease is hereby amended as follows:
1. All terms contained in this Agreement shall, for the purposes
hereof, have the same meanings ascribed to them in the Existing Lease unless
otherwise defined herein. As used herein, the term "Lease" shall mean the
Existing Lease as amended by this Agreement.
2. Effective as of the date hereof, the "premises" or "demised
premises" shall be the Old Premises plus the New Premises. Tenant will lease the
New Premises in their "as is" condition and acknowledges that Landlord shall not
be obligated to perform any work whatsoever to the New Premises. Tenant shall,
at Tenant's expense, construct the demising wall separating the Basement Portion
from the rest of the basement as shown on Exhibit B in accordance with the
applicable provisions of the Lease. (The demising wall already exists with
respect to the Ground Floor Portion.) The lease of the New Premises shall be
upon all the terms and conditions contained in the Existing Lease except as
otherwise set forth herein.
<PAGE>
3. Commencing on January 1, 1996, the Fixed Rent under the Lease
shall be increased by $42,350 per annum, for a total of $204,512 per annum; and
effective as of January 1, 2001 the Fixed Rent shall be further increased by
$3,934 per annum (in addition to the increase provided for in Article 41 (B) of
the Existing Lease), for a total of $223,188 per annum.
4. Effective as of January 1, 1996:
(i) Tenant's Proportionate Share (as defined in Article
37(D)of the Lease) shall be increased to 1.11%; and
(ii) The Multiplication Factor (as defined in Article 37(F)
of the Lease) shall be increased to 8883.
5. The Ground Floor Portion shall be used solely for the purpose of
housing a generator and the Basement Portion shall be used solely for the
purpose of housing a fuel tank.
6. Article 42(A) of the Existing Lease is hereby amended by adding
the words "contained in the Old Premises" after "rentable square feet" in the
second line thereof. Electricity consumed in or in connection with the New
Premises shall be measured by Tenant's submeter(s) and billed and paid for as
provided in Article 42 of the Existing Lease as amended hereby.
7. The covenants, agreements, terms and conditions contained in this
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors, and, except as otherwise provided in the Lease, their
respective assigns.
8. Except as amended by this Agreement, the Existing Lease and all
covenants, agreements, terms and conditions thereof shall remain in full force
and effect and the Existing Lease, as so amended, is hereby in all respects
ratified and confirmed.
9. Tenant covenants, represents and warrants that Tenant has had no
dealings or communications with any broker or agent other than Williams Real
Estate Co. Inc. (the "Broker") in connection with the consummation of this
Agreement and Tenant covenants and agrees to indemnify Landlord from and against
all costs, expenses (including reasonable attorneys' fees) and liability for any
commission or other compensation claimed by any broker or agent with whom Tenant
dealt other than the Broker with respect to this Agreement. Landlord agrees to
pay the Broker a commission pursuant to a separate agreement.
10. This Agreement may not be changed orally, but only by a writing
signed by the party against whom enforcement thereof is sought.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
HUDSON TELEGRAPH ASSOCIATES
By: PMFWH Newcorp., Inc., General
Partner
By: /s/ John Deutsch
------------------------------------
John Deutsch, Vice President
INTERNATIONAL TELECOMMUNICATIONS
CORPORATION
By: /s/ Charles M. Piluso
------------------------------------
Name: Charles M. Piluso
Title: President
-3-
<PAGE>
EXHIBIT A
[FLOORPLAN]
<PAGE>
EXHIBIT B
[FLOORPLAN]
<PAGE>
Exhibit 12.1
RSL COMMUNICATIONS, LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro forma Pro forma
for the year for the year
ended ended
December 31, December 31,
For the year ended December 31, 1996(2) 1996(3)
------------------------------------ ------- -------
1994(1) 1995 1996
------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Loss ................. $(3,081) $ (9,402) $(38,240) $(41,277) $(68,330)
Add: Income Tax Provision -- -- 395 395 395
Less: Minority Interest .. -- -- 180 389 389
------- -------- -------- -------- --------
Pre Tax Loss ............. (3,081) (9,402) (37,665) (40,493) (67,546)
------- -------- -------- -------- --------
Add: Fixed Charges
Interest ............... 225 194 11,359 12,092 38,805
Amortization of debt
expense ............... -- -- 275 1,1000 1,1000
------- -------- -------- -------- --------
Total fixed charges ... 225 194 11,634 13,192 39,905
------- -------- -------- -------- --------
$(2,856) $ (9,208) $(26,031) $(27,301) $(27,641)
======= ======== ======== ======== ========
Fixed Charges ............ $ 225 $ 194 $ 11,634 $ 13,192 $ 39,905
======= ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges ................. NA NA NA NA NA
Deficiency of Earnings to
Fixed Charges ........... $ 3,081 $ 9,402 $ 37,665 $ 40,493 $ 67,546
</TABLE>
NOTES
(1) The computation for the year ended December 31, 1994 is that of the
predecessor entity, International Telecommunications Group Ltd.
(2) Computation is prepared on a pro forma basis for the acquisitions.
(3) Computation is prepared on a pro forma basis for the acquisitions and the
issuance of the Senior Notes.
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES OF RSL COMMUNICATIONS, LTD.
STATE OR OTHER
JURISDICTION OF
INCORPORATION
NAME OR ORGANIZATION
---- ---------------
1. RSL Communications PLC United Kingdom
2. International Telecommunications Group, Ltd. Delaware
3. RSL COM U.S.A., Inc. Delaware
4. RSL COM PrimeCall, Inc. Delaware
5. RSL COM Europe, Ltd. United Kingdom
6. RSL COM France S.A. France
7. RSL COM Deutschland GmbH Germany
8. Belnet Nederlands B.V. Netherlands
9. RSL COM Denmark B.V. Netherlands
10. RSL COM UK Ltd. United Kingdom
11. RSL COM Finland OY Finland
12. RSL COM Sweden AB Sweden
13. RSL COM Asia, Ltd. Hong Kong
14. RSL COM Australia Pty Ltd. Australia
15. RSL COM Japan K.K. Japan
<PAGE>
Exhibit 25.1
---------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ______
------------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel:(212)270-2611
(Name, address and telephone number of agent for service)
_______________________________________________________
RSL COMMUNICATIONS, PLC
(Exact name of obligor as specified in its charter)
UNITED KINGDOM N/A
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
CLARENDON HOUSE
CHURCH STREET
HAMILTON HM CX BERMUDA N/A
(Address of principal executive offices) (Zip Code)
------------------------------------------
RSL COMMUNICATIONS LTD. AS GUARANTOR
(Exact name of obligor as specified in its charter)
BERMUDA N/A
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
CLARENDON HOUSE
CHURCH STREET
HAMILTON HM CX BERMUDA N/A
(Address of principal executive offices) (Zip Code)
---------------------------------------------------
12 1/4% SENIOR NOTES DUE 2006
(Title of the indenture securities)
--------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 14th day of March, 1997.
THE CHASE MANHATTAN BANK
By /s/ James D Heaney
---------------------------
James D Heaney
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ..................................... $11,509
Interest-bearing balances ............................. 8,457
Securities:
Held to maturity securities .............................. 3,128
Available for sale securities ............................ 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold .................................... 9,222
Securities purchased under agreements to resell ....... 422
Loans and lease financing receivables:
Loans and leases, net of unearned income ...... $133,935
Less: Allowance for loan and lease losses ..... 2,789
Less: Allocated transfer risk reserve ......... 16
--------
Loans and leases, net of unearned income,
allowance, and reserve ................................ 131,130
Trading Assets ........................................... 49,876
Premises and fixed assets (including capitalized
leases) ............................................... 2,877
Other real estate owned .................................. 290
Investments in unconsolidated subsidiaries and
associated companies .................................. 124
Customer's liability to this bank on acceptances
outstanding ........................................... 2,313
Intangible assets ........................................ 1,316
Other assets ............................................. 11,231
--------
TOTAL ASSETS ............................................. $272,429
========
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices ................................... $87,006
Noninterest-bearing ............................$ 35,783
Interest-bearing ............................... 51,223
--------
In foreign offices, Edge and Agreement
subsidiaries, and IBF's ........................ 73,206
Noninterest-bearing ............................$ 4,347
Interest-bearing ............................... 68,859
Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ............................... 14,980
Securities sold under agreements to repurchase ........ 10,125
Demand notes issued to the U.S. Treasury ................. 1,867
Trading liabilities ...................................... 34,783
Other Borrowed money:
With a remaining maturity of one year or less ......... 14,639
With a remaining maturity of more than one year ....... 425
Mortgage indebtedness and obligations under capitalized
leases ................................................ 40
Bank's liability on acceptances executed and outstanding . 2,267
Subordinated notes and debentures ........................ 5,471
Other liabilities ........................................ 11,343
TOTAL LIABILITIES ........................................ 256,152
--------
Limited-Life Preferred stock and related surplus ......... 550
EQUITY CAPITAL
Common stock ............................................. 1,251
Surplus .................................................. 10,243
Undivided profits and capital reserves ................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities ......................... (309)
Cumulative foreign currency translation adjustments ...... 16
TOTAL EQUITY CAPITAL ..................................... 15,727
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ............................ $272,429
========
I, Joseph L. Sclafani, S.V.P. & Controller of the
above-named bank, do hereby declare that this Report of
Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory
authority and is true to the best of my knowledge and
belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS C. LABRECQUE )
-5-
<PAGE>
Exhibit 99.1
NOTICE OF GUARANTEED DELIVERY
With Respect to
RSL COMMUNICATIONS PLC
12 1/4% Senior Notes due 2006
This form must be used by a holder of the 12 1/4% Senior Notes due 2006
(the "Original Notes") of RSL Communications PLC (the "Company"), who wishes to
tender Original Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in "The Exchange Offer - Guaranteed Delivery Procedures" of
the Prospectus dated _________ __, 1997 (the "Prospectus") and in Instruction 1
to the Letter of Transmittal. Any holder who wishes to tender Original Notes
pursuant to such guaranteed delivery procedures must ensure that the Exchange
Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date
of the Exchange Offer. Capitalized terms not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
To: The Chase Manhattan Bank, Exchange Agent
By Registered or Certified Mail, by Overnight Courier or by Hand:
The Chase Manhattan Bank
450 W. 33rd Street
New York, New York 10001-2697
Attention: Corporate Trust Department
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Original Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 1 of the Letter of Transmittal.
The undersigned hereby tenders the Original Notes listed below:
================================================================================
CERTIFICATE NUMBER(S) (IF KNOWN) AGGREGATE PRINCIPAL
OF ORIGINAL NOTES AMOUNT TENDERED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Name of Tendering Holder: ______________________________________________________
Signature(s): ________________________________________________________________
Name(s) (please print): ______________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________, 1997
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule l7Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal, together with the Original Notes tendered hereby in proper form for
transfer and any other required documents, all by 5:00 p.m., New York City time,
before the fifth business day following the Expiration Date.
- --------------------------------------------------------------------------------
SIGN HERE
Name of firm (please print): ________________________
Authorized Signature: _______________________________
Name (please print): ________________________________
Address: ____________________________________________
____________________________________________
____________________________________________
Telephone Number: ___________________________________
Date: _______________________________________________
- --------------------------------------------------------------------------------
DO NOT SEND TENDERED ORIGINAL NOTES WITH THIS FORM. ACTUAL DELIVERY OF TENDERED
ORIGINAL NOTES MUST BE MADE IN ACCORDANCE WITH, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. Facsimile
transmission is permissible, provided, however, that receipt is confirmed by
telephone and an original is delivered by guaranteed overnight courier. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedure, see the section set forth in
the Prospectus entitled "The Exchange Offer - Guaranteed Delivery Procedures"
and Instruction 1 of the Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the tendered
Original Notes referred to herein, the signature must correspond with the
name(s) written on the face of the tendered Original Notes without alteration or
any change whatsoever.
<PAGE>
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any tendered Original Notes listed, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers, signed as
the name of the registered holder(s) appears on the tendered Original Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, office of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
