<PAGE>
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-23087
STARTEC GLOBAL COMMUNICATIONS CORPORATION
10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
(301) 365-8959
DELAWARE 52-2099559
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
SHARES OUTSTANDING
TITLE OF EACH CLASS: AS OF AUGUST 6, 1999
- -------------------- --------------------
COMMON STOCK, PAR VALUE 9,434,705
$0.01 PER SHARE
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<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 1999 and 1998.................................................... 2
Condensed Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998............................................................... 3
Condensed Consolidated Statements of Cash Flows for the six months
Ended June 30, 1999 and 1998.................................................... 4
Notes to Condensed Consolidated Financial Statements.............................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................ 13
PART II. OTHER INFORMATION AND SIGNATURE........................................................ 14
</TABLE>
1
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Net revenues .......................... $ 61,916 $ 33,462 $ 119,630 $ 63,353
Cost of services ...................... 54,728 28,830 107,382 54,485
--------- --------- --------- ---------
Gross margin ..................... 7,188 4,632 12,248 8,868
General and administrative expenses ... 10,204 4,161 19,993 6,852
Selling and marketing expenses ........ 3,020 1,113 7,176 1,761
Depreciation and amortization ......... 1,863 524 3,238 708
--------- --------- --------- ---------
Loss from operations .................. (7,899) (1,166) (18,159) (453)
Interest expense ...................... (5,324) (2,424) (10,523) (2,577)
Interest income ....................... 1,305 943 2,952 1,302
Equity in loss from affiliates ........ (4) -- (19) --
--------- --------- --------- ---------
Loss before income taxes .............. (11,922) (2,647) (25,749) (1,728)
Income tax provision .................. -- (10) -- (30)
--------- --------- --------- ---------
Net loss .............................. $ (11,922) $ (2,657) $ (25,749) $ (1,758)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and diluted loss per common share $ (1.28) $ (0.30) $ (2.79) $ (0.20)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................. $ 56,051 $ 81,456
Accounts receivable, net of allowance for doubtful accounts of $2,861
and $2,659, respectively ............................................. 47,857 40,370
Accounts receivable, related party ......................................... 442 684
Other current assets ....................................................... 6,947 3,916
--------- ---------
Total current assets ................................................. 111,297 126,426
Property and equipment, net of accumulated depreciation and amortization of
$6,561 and $3,493, respectively ...................................... 67,139 43,525
Restricted cash and pledged securities .................................... 35,306 44,336
Intangibles, net and other long term assets................................ 25,872 11,695
--------- ---------
$ 239,614 $ 225,982
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................... $ 47,090 $ 36,273
Accrued expenses ........................................................... 9,839 6,845
Bank facility .............................................................. 13,223 --
Vendor financing ........................................................... 1,011 1,476
Capital lease obligations .................................................. 266 402
Note payable to individuals and other ...................................... 16 16
--------- ---------
Total current liabilities ....................................... 71,445 45,012
Senior notes ............................................................. 158,128 158,022
Vendor financing, net of current portion ................................. 16,234 7,409
Minority interest ........................................................ 363 --
Capital lease obligations, net of current portion ........................ -- 59
--------- ---------
Total liabilities ............................................... 246,170 210,502
--------- ---------
STOCKHOLDERS' EQUITY(DEFICIT):
Common stock, $0.01 par value; 40,000,000 and 20,000,000 shares authorized,
9,390,215 and 8,964,815 shares issued and outstanding, respectively .. 94 90
Additional paid-in capital ................................................. 43,574 39,632
Unearned compensation ...................................................... (165) (190)
Accumulated deficit ........................................................ (49,801) (24,052)
Accumulated translation adjustment ......................................... (258) --
--------- ---------
Total stockholders' equity(deficit) ............................. (6,556) 15,480
--------- ---------
$ 239,614 $ 225,982
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------------
1999 1998
--------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ............................................................. $ (25,749) $ (1,758)
Adjustments to net loss:
Depreciation and amortization ...................................... 3,238 693
Amortization of deferred debt financing costs and debt
discounts ....................................................... 389 348
Other non-cash adjustments ......................................... (293) 26
Changes in operating assets and liabilities, net of acquisition costs:
Accounts receivable, net ........................................... (5,879) (6,313)
Accounts receivable, related party ................................. 242 (401)
Accounts payable ................................................... 13,369 2,175
Accrued expenses ................................................... 2,611 3,117
Other .............................................................. (4,141) (231)
--------- ---------
Net cash used in operating activities ........................... (16,213) (2,344)
--------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired ................................... (13,057) --
Purchases of property and equipment .................................. (26,295) (5,672)
--------- ---------
Net cash used in investing activities ........................... (39,352) (5,672)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from bank facility .......................................... 13,223 --
Proceeds from vendor financing ....................................... 9,231 --
Proceeds from sale of pledged securities ............................. 9,030 --
Proceeds from Senior Notes and Warrants Offering ..................... -- 160,000
Scheduled repayments of vendor financing ............................. (871) --
Repayments under capital lease obligations ........................... (195) (185)
Payment of debt financing costs ...................................... (258) (5,637)
Investments in pledged securities .................................... -- (52,417)
Net proceeds from issuance of common shares .......................... -- 262
--------- ---------
Net cash provided by financing activities ...................... 30,160 102,023
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... (25,405) 94,007
CASH AND CASH EQUIVALENTS, beginning of the period ................... 81,456 26,114
--------- ---------
CASH AND CASH EQUIVALENTS, end of the period ......................... $ 56,051 $ 120,121
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ........................................................ $ 10,139 $ 63
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Equipment acquired under capital lease ............................... $ -- $ 84
Note payable to individual, converted to common stock ................ -- 44
The Company acquired a 83% ownership interest in Phone Systems and
Network, Inc. In conjunction with the acquisition, liabilities were
assumed as follows:
Fair value of assets acquired, including direct acquisition costs .. 14,641 --
Cash paid for assets ............................................... (6,806) --
Accrued acquisition costs .......................................... (250)
Liabilities assumed including minority interest .................... 3,637 --
Stock issued in connection with acquisition ........................ 3,948 --
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL.
The accompanying condensed consolidated financial statements of Startec
Global Communications Corporation and subsidiaries (the "Company" or
"Startec") have been prepared by the Company without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to
present fairly the financial position of the Company as of June 30, 1999
and December 31, 1998, and the results of operations for the three and six
months ended June 30, 1999 and 1998 and cash flows for the six months ended
June 30, 1999 and 1998. Interim results are not necessarily indicative of
results that may be expected for the entire year. Certain prior period
amounts have been reclassified to conform to current period presentation.
The Company is subject to various risks in connection with the operation of
its business. These risks include, but are not limited to, dependence on
operating agreements with foreign partners, significant foreign and
U.S.-based customers and suppliers, availability of transmission
facilities, U.S. and foreign regulations, international economic and
political instability, dependence on effective billing and information
systems, customer attrition, and rapid technological change. Many of the
Company's competitors are significantly larger and have substantially
greater resources than the Company. If the Company's competitors were to
devote significant additional resources to the provision of international
long-distance services to the Company's target customer base, the Company's
business, financial condition, and results of operations could be
materially adversely affected.
The Company has devoted substantial resources to the buildout of its
network and the development and expansion of its marketing programs. As a
result, the Company has experienced operating losses and negative cash
flows from operations. These losses and negative operating cash flows are
expected to continue for additional periods in the future. There can be no
assurance that the Company's operations will become profitable or will
produce positive cash flows. The Company's capital requirements for the
continued buildout of its network and growth of its customer base are
substantial. The Company intends to fund its operational and capital
requirements until early 2001 using cash on hand and its available credit
facilities. However, there can be no assurance that the Company will not
need additional external financing sooner than currently anticipated, or
that such financing would be available on terms management finds acceptable
or at all. In the event that the Company is unable to obtain such
additional financing, it will be required to limit or curtail its expansion
plans.
2. REORGANIZATION.
In 1998, the Company's board of directors and stockholders approved a
reorganization pursuant to which the Company's corporate structure would be
realigned to that of a publicly traded Delaware holding company
("Reorganization"). In March 1999, pursuant to the reorganization plan, all
of the Company's assets were transferred into a Delaware subsidiary company
("New Parent"), with a subsequent transfer of those assets to multiple
subsidiaries of the New Parent. The Company was then merged with and into
the New Parent with the New Parent then assuming the Company's name. The
merger did not impact the condensed consolidated financial statements of
the Company.
3. EARNINGS (LOSS) PER SHARE.
SFAS No. 128 requires dual presentation of basic and diluted earnings per
share on the face of the statements of operations for all periods
presented. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Weighted average common shares outstanding
consist of the following for the three and six months ending June 30, 1999
and 1998 (in thousands):
5
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding-basic 9,390 8,942 9,222 8,926
Stock option and warrant equivalents ........... -- -- -- --
----- ----- ----- -----
Weighted average common and
equivalent shares outstanding - diluted ... 9,390 8,942 9,222 8,926
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Options and warrants to purchase approximately 1,699,000 shares of common
stock were excluded from the computation of diluted loss per share in 1999
because inclusion of these options would have an anti-dilutive effect on
loss per share.
4. ACQUISITIONS AND INVESTMENTS.
In July 1999, the Company acquired the fixed assets and customers of
Worldwide Telecommunications Company Limited, Infinity Telecommunications
Limited and Pacific Direct, Inc. (collectively "Worldwide Group") for
approximately $200,000 in cash and $790,000 in Startec common stock.
Worldwide Group provides voice and data services to businesses and
individuals in the Hong Kong, China region.
In June 1999, the Company acquired a 15% ownership interest in SigmaNet
Network Corporation ("SigmaNet") for approximately $500,000. SigmaNet
provides Internet services under the name of IAOL including internet access
and a web portal for the Asian Indian community.
In May 1999, the Company entered into an agreement to acquire up to a
49% fully diluted ownership interest in Dialnet Communications Limited
("Dialnet") for up to $1.6 million. Dialnet provides value added voice
and data services in India. The agreement, which became effective July 1999
upon approval by the government of India, provides for an investment
of $1 million payable in equal installments of $500,000 in July 1999 and
March 2000 and a $600,000 convertible loan. The loan, convertible into
common shares of Dialnet in July 2002, extends available credit of $300,000
immediately and an additional $300,000 in March 2000. Per the agreement,
the $1 million investment and additional $300,000 loan, are payable at
the Company's option. As of June 30, 1999, approximately $250,000 is
outstanding under the convertible loan. In July 1999, the Company
invested $500,000 and provided an additional $50,000 under the convertible
loan.
In February 1999, the Company acquired a 64.6% ownership interest in Phone
Systems and Network, Inc. of France ("PSN") for approximately $3.8 million
in cash and 425,000 shares of the Company's Common Stock. The Company
acquired an additional 18.4% ownership interest in the second quarter of
1999 for a total ownership interest of approximately 83%. Total
consideration amounted to approximately $11 million, including acquisition
costs. The Company recognized approximately $8.3 million in intangibles and
other long term assets associated with the acquisition. PSN is a facilities
based provider in France, with switches in both Paris and Switzerland with
additional capacity on a switch located in the United Kingdom. PSN also
provides services on a switchless reseller basis in Belgium. Common shares
of PSN are traded on the Nouveau Marche Exchange in France.
The purchase price of PSN was allocated to the net assets acquired based
upon the estimated fair value of such assets, which resulted in an
allocation to goodwill. The purchase price allocation has been completed on
a preliminary basis and is subject to adjustment should new or additional
facts about the business become known. The Company has accounted for the
acquisition using the purchase method. Accordingly, the results of
operations of the acquired company are included in the accompanying
condensed consolidated statements of operations of the Company, as of the
date of acquisition.
In February 1999, the Company acquired a 20% equity ownership interest in
BCH Holdings, Inc. ("BCH") with operations in Poland, for approximately
$1.2 million. Concurrent with the acquisition, Startec received a $2.5
million note payable from BCH convertible at Startec's option into common
shares equivalent to an additional 28% fully diluted ownership interest of
BCH. BCH is a reseller of international voice and a licensed Internet
service provider in Poland. The investment in BCH and the note payable from
BCH are included in intangibles and other long-term assets in the
accompanying condensed consolidated balance sheet.
5. OPERATING SEGMENTS AND SIGNIFICANT CUSTOMERS AND SUPPLIERS.
The Company classifies its operations into one industry segment: long
distance telecommunications services. Substantially all of the Company's
revenues for each period presented were derived from calls originated
within the United States and terminated outside the United States.
A significant portion of the Company's net revenues is derived from a
limited number of customers. For the six month period
6
<PAGE>
ended June 30, 1999 and 1998, the Company's five largest carrier customers
accounted for approximately 50 percent and 53 percent of net revenues,
respectively. The Company's agreements and arrangements with its carrier
customers generally may be terminated on short notice without penalty.
A significant portion of the Company's cost of services is purchased from a
limited number of suppliers. For the six month period ended June 30, 1999
and 1998, the Company's five largest vendors accounted for approximately 31
percent and 41 percent of cost of sales, respectively.
6. VENDOR AND BANK FINANCING.
In July 1999, the Company entered into a three year vendor financing
facility for up to $5 million with IBM Credit Corp ("IBM Facility"). The
IBM Facility may be used to finance the purchase of IBM hardware and
software from IBM under a capital lease structure. The IBM Facility bears
interest at a variable rate during the term of the lease.
In June 1999, the Company entered into a three year Loan and Security
Agreement with Congress Financial Corporation ("CFC Facility"), a
subsidiary of First Union National Bank for up to $30 million. The CFC
Facility, secured by trade accounts receivable may be used to finance
equipment, undersea cables and the expansion of the Company's facilities.
The CFC Facility bears interest at the prime rate effective on the date of
borrowing. Principal and interest on the CFC Facility are repaid through
collections from trade accounts receivable. There is an unused line fee
equal to 1/4% per annum calculated upon the amount the maximum credit
exceeds the average daily balance of borrowed amounts during the
immediately preceding month payable monthly in arrears.
In May 1999, the Company entered into a vendor financing facility for up to
$20 million with Ascend Credit Corporation ("Ascend Facility"). The Ascend
Facility may be used to finance equipment purchased from Ascend under a
capitalized lease structure.
7. COMPREHENSIVE INCOME
The total of net loss and all other non-owner changes in equity consists
of the following for the three and six months ending June 30, 1999 and
1998 (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ---------------------
1999 1998 1999 1998
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss ... ...................... (11,922) (2,657) (25,749) (1,758)
Other comprehensive income:
Currency translation .............. (258) -- (258) --
---------- --------- --------- ---------
Comprehensive net loss ............ (12,180) (2,657) (26,007) (1,758)
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the financial
statements, related notes, and other detailed information included elsewhere in
this Quarterly Report on Form 10-Q. This report contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are statements other than historical information or
statements of current condition. Some forward-looking statements may be
identified by the use of such terms as "believes," "anticipates," "intends," or
"expects." These forward-looking statements relate to plans, objectives and
expectations of the Company for future operations. In light of the risks and
uncertainties inherent in all such projected operational matters, the inclusion
of forward-looking statements in this report should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved or that any of the Company's operating
expectations will be realized. The Company's revenues and results of operations
are difficult to forecast and could differ materially form those projected in
the forward-looking statements contained in this report as a result of certain
factors including, but not limited to, dependence on operating agreements with
foreign partners, significant foreign and U.S.-based customers and suppliers,
availability of transmission facilities, U.S. and foreign regulations,
international economic and political instability, dependence on effective
billing and information systems, customer attrition, and rapid technological
change. These factors should not be considered exhaustive; the Company
undertakes no obligation to release publicly the results of any future revisions
it may make to forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
OVERVIEW
The Company is a rapidly growing, facilities based international long
distance telecommunications service provider. The Company markets its
services to select ethnic residential communities in North America, Europe,
Asia and to leading international long distance carriers. The Company's
quarterly revenues have increased from $33.5 million for the three months
ended June 30, 1998 to $61.9 million for the three months ended June 30,
1999. The Company reported a net loss for the three months ended June 30,
1999 of $11.9 million, or $1.28 per diluted common share compared to a net
loss of $2.7 million or $0.30 per diluted common share in the three months
ended June 30, 1998. The number of the Company's residential customers
increased from approximately 86,000 customers as of June 30, 1998 to
approximately 200,000 customers as of June 30, 1999.
The Company is expanding its service offerings to ethnic communities by:
(i) deploying ATM/IP telephony on its network; (ii) creating virtual
communities on its Web site, which will offer in-language content and other
value-added services; (iii) offering Internet Access to residential
customers; and (iv) providing co-location and Web hosting facilities at its
main international gateway sites.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
net revenues for the periods indicated.
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ---------------------
1999 1998 1999 1998
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues ...................... 100.0% 100.0% 100.0% 100.0%
Cost of services .................. 88.4 86.2 89.8 86.0
----- ----- ----- -----
Gross margin ................... 11.6 13.8 10.2 14.0
General and administrative expenses 16.5 12.4 16.7 10.8
Selling and marketing expenses .... 4.9 3.3 6.0 2.8
Depreciation and amortization ..... 3.0 1.6 2.7 1.1
----- ----- ----- -----
Loss from operations .............. (12.8) (3.5) (15.2) (0.7)
Interest expense .................. (8.6) (7.2) (8.8) (4.1)
Interest income ................... 2.1 2.8 2.5 2.1
Equity in loss from affiliates .... -- -- -- --
----- ----- ----- -----
Loss before taxes ................. (19.3) (7.9) (21.5) (2.7)
Income tax provision .............. -- -- -- (0.1)
----- ----- ----- -----
Net loss .......................... (19.3)% (7.9)% (21.5)% (2.8)%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
8
<PAGE>
THREE AND SIX MONTH PERIOD ENDED JUNE 30, 1999 COMPARED TO THREE AND SIX MONTH
PERIOD ENDED JUNE 30, 1998
NET REVENUES. Net revenues, consolidated to include the effect of
acquisitions for the three months ended June 30, 1999 increased $28.4
million, or 85%, to $61.9 million from $33.5 million for the three months
ended June 30, 1998. Net revenues for the six months ended June 30, 1999
increased $56.2 million, or 89%, to $119.6 million from $63.4 million over
the same period in 1998. Residential revenue increased by $5.1 million or
39%, to $18.1 million for the three months ended June 30, 1999, from $13
million for the same period in 1998. Residential revenue increased $10.3
million or 43%, to $34.5 million for the year to date 1999. The increase in
residential revenue was due to an increase in residential customers to
approximately 200,000 at June 30, 1999 from approximately 86,000 at June 30,
1998 due to growth in new and existing markets. Carrier revenues for the
three month period ended June 30, 1999 increased $23.4 million, or 114%, to
$43.8 million from $20.5 million for the three months ended June 30, 1998.
For the six month period ended June 30, 1999, carrier revenues increased $46
million or 117%, to $85.1 million. The increase in carrier revenues is due to
the Company's strategy to optimize its capacity on its facilities, which has
resulted in increased sales to new and existing carrier customers.
GROSS MARGIN. Gross margin increased $2.6 million to $7.2 million for
the three months ended June 30, 1999 from $4.6 million for the three months
ended June 30, 1998. Gross margin for the first half of 1999 increased $3.3
million to $12.2 million from $8.9 million in the first half of 1998. Gross
margin as a percentage of net revenues decreased to 11.6% and 10.2% for the
three and six months ended June 30, 1999 from 13.8% and 14% for the three and
six months ended June 30, 1998, respectively. Gross margin was impacted by
the implementation of new operating agreements over the last two to four
quarters and additional transport costs associated with bringing up the
European facilities. Operating agreements initially carry traffic in only one
direction, resulting in higher termination costs. Typically, the Company will
receive traffic from the signatories of these operating agreements two
quarters after initial implementation.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
three months ended June 30, 1999 increased 145% to $10.2 million from $4.2
million for the three months ended June 30, 1998. Year to date general and
administrative expenses increased 192% to $20 million from $6.9 million over the
same period in 1998. As a percentage of net revenues, general and administrative
expenses for the three and six months ended June 30, 1999 increased to 16.5% and
16.7% from 12.4% and 10.8% over the same period in 1998, respectively. The
increase was primarily due to an increase in personnel to 701 at June 30, 1999
from 266 employees at June 30, 1998 as a result of the Company's continued
worldwide development and expansion as well as pre-operating costs associated
with startup operations in Europe and the Company's implementation of its ISP
strategy.
SELLING AND MARKETING. Selling and marketing expenses for the three and
six months ended June 30, 1999 increased to $3 million and $7.2 million from
approximately $1.1 and $1.8 million for the three and six months ended June
30, 1998, respectively. As a percentage of net revenues, selling and
marketing expenses for the three and six month ended June 30, 1999 increased
to 4.9% and 6% from 3.3% and 2.8% for the three and six months ended June 30,
1998, respectively. The increase is primarily due to the Company's efforts to
attract new customers and retain existing customers. Additionally, the
Company has also began sales and marketing efforts related to both the
operations in Europe and the implementation of the Company's ISP strategy.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for
the three and six months ended June 30, 1999 increased to $1.9 million and $3.2
million from approximately $524,000 and $708,000 for the three and six months
ended June 30, 1998, respectively, primarily due to increases in capital
expenditures pursuant to the Company's strategy of expanding its network
infrastructure.
INTEREST EXPENSE. Interest expense for the three and six month period
ended June 30, 1999 increased to $5.3 million and $10.5 million from
approximately $2.4 million and $2.6 million for the three and six months
ended June 30, 1998, respectively, as a result of an offering of Senior Notes
and Warrants ("Senior Notes and Warrants Offering") consummated in May 1998,
and several bank and vendor financing agreements entered into during 1999.
INTEREST INCOME. Interest income for the three and six month period
ended June 30, 1999 increased to $1.3 million and $3 million from
approximately $943,000 and $1.3 million for the three and six months ended
June 30, 1998, respectively. The increase is primarily due to the investment
of the net proceeds from the Senior Notes and Warrants Offering consummated
in May 1998.
NET LOSS. Net loss for the three months ended June 30, 1999 was $11.9
million or $1.28 per diluted common share compared to a net loss of
approximately $2.7 million or $0.30 per diluted common share for the three
months ended June 30, 1998. Year to date net loss was $25.7 million or $2.79
per diluted common share compared to $1.8 million or $0.20 per diluted share
over the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company reported a decrease in cash and cash equivalents of $25.4
million during the six months ended June 30, 1999. This decrease is primarily
due to expanding capital and operating requirements including the acquisition of
a 83% ownership interest of
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<PAGE>
Phone Systems and Network, Inc. ("PSN") of France in February, 1999, the
acquisition of a 20% equity ownership interest in BCH Holding Company, Inc. in
February, 1999, and a payment towards the purchase of Global GmbH of Germany.
Cash used in operations increased $13.9 million to $16.2 million principally due
to cash requirements for the expansion of operations partially offset by changes
in operating accounts.
As a result of completing the Senior Notes and Warrants Offering in 1998
and the Company's expansion, the Company expects that it will incur negative
EBITDA and significant operating and net losses on an annual basis for the next
several years, as it incurs additional costs associated with the development and
expansion of its marketing programs and its entry into new markets, the
introduction of new telecommunications services, and as a result of the interest
expense associated with its financing activities. Approximately $52 million of
the net proceeds of the Senior Notes was used to purchase certain pledged
securities, which will assure holders of the Senior Notes that they will receive
all scheduled cash interest payments through November 2001. The Company may be
required to obtain additional financing in order to pay interest in the Senior
Notes after November 2001 and to repay the Senior Notes at their maturity.
Pledged securities totaled $35.3 million at June 30, 1999.
During 1998, the Company advanced an aggregate of approximately $1.4
million to certain of its employees and officers. The secured loans bear
interest at a rate of 7.87% per year, and are due and payable on December 31,
1999. The loans are included in other current assets in the accompanying
condensed consolidated balance sheets.
Cash used in investing activities was $39.4 million in the first half of
1999 compared to $5.7 million in the same period in 1998. Cash used in
investing activities through the second quarter of 1999 includes capital
expenditures of $13.1 million relating to the continued expansion of the
Company's network including the completion of the installation of a new
Nortel GSP international gateway switch and Internet Protocol gateway in
Miami, Florida and the purchase of fiber optic cables and Indefeasible Rights
of Usage ("IRUs").
In July 1999, the Company acquired the fixed assets and customers of
Worldwide Telecommunications Company Limited, Infinity Telecommunications
Limited and Pacific Direct, Inc. (collectively "Worldwide Group") for
approximately $200,000 in cash and $790,000 in Startec common stock. Worldwide
Group provides voice and data services to businesses and individuals in the Hong
Kong, China region.
In June 1999, the Company acquired a 15% ownership interest in SigmaNet
Network Corporation ("SigmaNet") for approximately $500,000. SigmaNet provides
Internet services under the name of IAOL including internet access and a web
portal for the Asian Indian community.
In May 1999, the Company entered into an agreement to acquire up to a
49% fully diluted ownership interest in Dialnet Communications Limited
("Dialnet") for up to $1.6 million. Dialnet provides value added voice and
data services in India. The agreement, which became effective July 1999 upon
approval by the government of India provides for an investment of $1 million
payable in equal installments of $500,000 in July 1999 and March 2000 and a
$600,000 convertible loan. The loan, convertible into common shares of
Dialnet in July 2002, extends available credit of $300,000 immediately and an
additional $300,000 in March 2000. Per the agreement, the $1 million
investment and additional $300,000 loan, are payable at the Company's option.
As of June 30, 1999, approximately $250,000 is outstanding under the
convertible loan. In July 1999, the Company invested $500,000 and provided an
additional $50,000 under the convertible loan.
In February 1999, the Company acquired a 64.6% ownership interest in Phone
Systems and Network, Inc. of France ("PSN") for approximately $3.8 million in
cash and 425,000 shares of the Company's Common Stock. The Company acquired an
additional 18.4% ownership interest through a tender offer for a total ownership
interest of approximately 83%. Total consideration amounted to approximately $11
million, including acquisition costs. The Company recognized approximately $8.3
million in intangibles and other long term assets associated with the
acquisition. PSN is a facilities based provider in France, with switches in both
Paris and Switzerland with additional capacity on a switch located in the United
Kingdom. PSN also provides services on a switchless reseller basis in Belgium.
Common shares of PSN are traded on the Nouveau Marche Exchange in France.
In February 1999, the Company acquired a 20% equity ownership interest
in BCH Holding Company, Inc. ("BCH") with operations in Poland, for
approximately $1.2 million. Concurrent with the acquisition, Startec received
a $2.5 million note payable from BCH convertible at Startec's option into
common shares equivalent to an additional 28% fully diluted ownership
interest of BCH. BCH is a reseller of international voice and a licensed
Internet service provider in Poland. The investment in BCH and the note
payable from BCH are included in intangibles and other long-term assets in
the accompanying condensed consolidated balance sheet.
In December 1998, the Company acquired Global Communications GmbH of
Germany ("Global") for $5.4 million. Global has a Class IV nationwide
telecommunications license for Germany, an interconnection agreement with
Deutsche Telekom and a Siemens EWSD switch located in Dusseldorf.
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<PAGE>
In November 1998, the Company acquired PCI Communications, Inc. ("PCI") for
$2.65 million. PCI is a provider of voice and data services located in the
Pacific Rim island of Guam. PCI has signatory status on the TPC-5,
Guam-Philippines and China-U.S. cables. The acquisition accelerates the
Company's network deployment in the Asia-Pacific region and will also allow
Startec to access a U.S. based satellite line of sight that extends from
Southeast Asia to Central Europe.
The Company currently owns capacity on 13 undersea fiber optic cables,
located in the Atlantic, Pacific and Indian Oceans, through IRUs and through
signatory ownership. The Company also purchased capacity on fiber optic cable
from New York to Los Angeles in the first half of 1999 for $2.8 million.
Securing ownership interests in cable systems allows the Company to manage
transmission capacity as well as transmission costs. Additionally, the
Company has signed a total of 50 international operating agreements.
Approximately 30 of these agreements have been implemented. International
operating agreements increase the Company's flexibility for terminating
international calls by providing it with multiple termination routes.
Cash provided by financing activities was approximately $30.2 million for
the first half of 1999 compared to approximately $102 million in the first half
of 1998. Cash used in financing activities primarily relates to the scheduled
repayments of vendor financing and capital leases partially offset by a vendor
financing draw.
In July 1999, the Company entered into a three year vendor financing
facility for up to $5 million with IBM Credit Corp ("IBM Facility"). The IBM
Facility may be used to finance the purchase of IBM hardware and software from
IBM under a capital lease structure. The IBM Facility bears interest at a
variable rate during the term of the lease.
In June 1999, the Company entered into a three year Loan and Security
Agreement with Congress Financial Corporation ("CFC Facility"), a subsidiary
of First Union Bank for up to $30 million. The CFC Facility, secured by
trade accounts receivable may be used to finance equipment, undersea cables
and the expansion of the Company's facilities. The CFC Facility bears
interest at the prime rate effective on the date of borrowing. Principal and
interest on the CFC Facility are repaid through collections from trade
accounts receivable. There is an unused line fee equal to 1/4% per annum
calculated upon the amount the maximum credit exceeds the average daily
balance of borrowed amounts during the immediately preceding month payable
monthly in arrears. As of June 30, 1999, approximately $13.2 million bearing
interest at 7.5% was outstanding.
In April 1999, the Company entered into a vendor financing facility for
up to $20 million with Ascend Credit Corporation ("Ascend Facility"). The Ascend
Facility may be used to finance equipment purchased from Ascend under a capital
lease structure.
In December 1998, Startec entered into a credit facility for up to $35
million with NTFC Capital Corporation ("NTFC Facility"), a financing arm of
GE Capital. The line of credit is flexible and may be used to finance
switches, associated telecommunications equipment, undersea fiber optic
cables, and the expansion of facilities in the Company's targeted marketing
areas. Each borrowing under the NTFC Facility bears interest at a fixed rate
equal to the average yield to maturity of the five-year Treasury Note plus
the Rate Adjustment (as defined in the agreement). Individual borrowings
under the NTFC Facility are amortized over 60 months from the date of advance
with a final maturity of all outstanding amounts of January 2004. As of June
30, 1999, approximately $17.2 million was outstanding. Principal and
interest payments of approximately $379,000 are due monthly in arrears.
In May 1998, the Company issued $160 million of 12% Senior Notes yielding
net proceeds of approximately $155 million, of which approximately $52.4 million
was used to purchase securities which are pledged and restricted for use as the
first six interest payments due on the Senior Notes. As part of the offering,
the Company issued warrants to purchase 200,226 shares of common stock. The
warrants are exercisable subsequent to November 1998 at an exercise price of
$24.20 per share. The Company intends to apply approximately $102 million to
fund capital expenditures through the end of the first quarter of 2000 to expand
and develop the Company's network, including the purchase and installation of
switches and related network equipment (including software and hardware upgrades
for current equipment), the acquisition of fiber optic cable facilities, and
investments in and the acquisition of satellite earth stations. The Senior Notes
are unsecured and require semi-annual interest payments which began in November
1998.
The implementation of the Company's strategic plan, including the
development and expansion of its network facilities, expansion of its
marketing programs, and funding of operating losses and working capital
needs, will require significant investment. The Company expects that the net
proceeds of the Senior Notes and Warrants Offering and the bank and vendor
financing agreements together with cash on hand and cash flow from
operations, will provide the Company with sufficient capital to fund
currently planned capital expenditures and anticipated operating losses
until early 2001. There can be no assurance that the Company will not need
additional financing sooner than currently anticipated. The need for
additional financing depends on a variety of factors, including the rate and
extent of the Company's expansion and new markets, the cost of an investment
in additional switching and transmission facilities and ownership rights in
fiber optic cable, the incurrence of costs to support the introduction of
additional or enhanced services, and increased sales and marketing expenses.
In addition, the Company may need additional financing to fund unanticipated
working capital needs or to take advantage of unanticipated business
opportunities, including acquisitions, investments or strategic alliances.
The amount of the Company's actual future capital requirements also will
depend upon many factors that are not within the Company's control, including
competitive conditions and regulatory or other government actions. In the
event that the
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<PAGE>
Company's plans or assumptions change or prove to be inaccurate or the Company's
capital resources prove to be insufficient to fund the Company's growth and
operations, then some or all of the Company's development and expansion plans
could be delayed or abandoned, or the Company may be required to seek additional
financing or to sell assets, to the extent permitted by the terms of the Senior
Notes.
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 obtain additional financing or, if obtained, that it will be able to
do so on a timely basis or on terms favorable to the Company. If the Company is
able to raise additional funds through the incurrence of debt, it would likely
become subject to additional restrictive financial covenants. In the event that
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 expansion, which could adversely affect the Company's
business, financial condition and results of operations, its ability to compete
and its ability to meet its obligations under the Senior Notes.
YEAR 2000 COMPLIANCE
Many of the world's computer systems (including those in non-information
technology equipment and systems) currently record years in a two-digit
format. If not addressed, such computer systems will be unable to properly
interpret dates beyond the year 1999, which could lead to business
disruptions in the U.S. and internationally (the "Y2K" issue). A number of
the Company's technology systems are affected by the Y2K issue. To ensure
that the Company will be Y2K compliant before the new millennium, the Company
formed a Y2K compliance team in the fourth quarter of 1997 and allocated
corporate resources to determine the extent which the Y2K issue affected the
Company and to formulate a Y2K compliance plan. Since then, the Company has
been reviewing its embedded technology and infrastructure equipment, as well
as non-embedded technology equipment to identify those that contain two-digit
year codes, and is in the process of upgrading its infrastructure and
corporate facilities to achieve Y2K compliance. In addition, the Company is
actively working with its suppliers, vendors and customers to assess their
compliance and remediation efforts and the Company's exposure to Y2K problems
that may be caused by the failure of such suppliers, vendors and customers to
become Y2K compliant in a timely manner. The Company is proceeding on a
schedule which it believes will allow it to be Y2K compliant by the end of
October 1999.
The Company is focusing on three major areas of concern for the Y2K issue:
embedded technology and infrastructure equipment, non-embedded technology
equipment and third party suppliers compliance. The Y2K compliance team created
a five stage process for becoming Y2K compliant. The five process stages are (1)
compiling a complete inventory of all date sensitive technology equipment; (2)
prioritizing systems affected based on revenues, strategic issues, and risk
exposure; (3) performing modification of affected systems; (4) completing
testing of modified systems; and (5) performing implementation of modified
systems. The Company has completed the inventory of its date sensitive
technology equipment and is in various stages of prioritizing and testing a
number of the affected systems.
EMBEDDED TECHNOLOGY AND INFRASTRUCTURE EQUIPMENT. The embedded
technology and infrastructure equipment area of concern consists primarily of
switches, POPs, fiber optic cables and various platforms. Much of this
equipment is purchased from third party vendors and has been certified by the
vendor to be Y2K compliant. The certified pieces of equipment, such as many
of the switches need only to be individually tested by the vendor and/or the
Company to ensure compliance. Much of the infrastructure equipment contains
both embedded and non-embedded technology requiring duplicative efforts.
Portions of this equipment, such as the Magellan platform, have had their
non-embedded technology certified as compliant while the embedded technology
is non-compliant. All embedded technology systems and infrastructure
equipment are scheduled to be Y2K compliant by the end of the third quarter
of 1999. In addition, in order to protect against the acquisition of
additional non-compliant products, the Company now requires suppliers to
represent and warrant that products sold or licensed to the Company are Y2K
compliant. However, there can be no assurance of the accuracy or completeness
of any such representations made to the Company.
NON-EMBEDDED TECHNOLOGY EQUIPMENT. Non-embedded technology systems include
predominately applications software and interfacing software. Much of this
equipment has previously been upgraded to Y2K compliance through software
upgrades and the purchase of new systems. Specific areas of concern for
non-embedded technology include the software monitoring and managing the
Company's call center and customer care database as well as network support.
Expenditures regarding non-embedded technology are not expected to be material.
Nonetheless, the Company is in the process of prioritizing those systems that
are not Y2K compliant and upgrading or replacing non-compliant systems. All
non-embedded technology systems are scheduled to be Y2K compliant by the end of
August 1999.
ACQUISITIONS. The Company is rapidly expanding through increased capital
expenditures and acquisitions of companies. Upon acquisition, acquired
companies become subject to the five step process of becoming Y2K compliant
as discussed above. Time lines for dates of completion of the Company's Y2K
compliance process are developed individually for each acquisition.
Currently, all companies that have been acquired by the Company to date are
on schedule to be Y2K compliant by December 1999, however, there can be no
assurance that all acquired companies will be Y2K compliant by 2000.
12
<PAGE>
THIRD PARTY SUPPLIERS. The Company is currently communicating with its
critical suppliers, vendors and customers about their plans and progress in
addressing the Y2K issue. Detailed evaluations of the most critical third
parties have been initiated. The Company is also in the process of evaluating
and prioritizing the environments in which the Company operates. Many of the
Company's residential and commercial markets include areas of emerging
economies where the Y2K compliance issue does not appear to be a priority.
The Company plans to monitor progress made in these areas to mitigate any
future exposure, however, the Company has limited, if any, control over the
progress made by these third parties, and therefore, is unable to predict the
potential effect on the Company's operations if the third parties in these
foreign markets fail to address the Y2K issue. These evaluations will be
followed by the development of contingency plans, which commenced in the
second quarter of 1999, with completion expected by October 1999.
RISK AND CONTINGENCY PLAN. There are many risks associated with the Y2K
issue, including the possibility of a failure of the Company's routing and
compression equipment, computer, and non-information technology systems. Such
failures could have a material adverse effect upon the Company and may cause
systems malfunctions, incorrect or incomplete transaction processing, the
inability to reconcile accounting books and records, the inability of the
Company to manage its business as well as potentially losing customers and
increasing risk associated with litigation. In addition, even if the Company
successfully becomes Y2K compliant, it can be materially and adversely
affected by failures of third parties to become Y2K compliant. The failure of
third parties with which the Company has financial or operational
relationships such as LECs, carriers, cable suppliers, billing agents,
satellite facilities, equipment suppliers, financial institutions, payroll
contractors, regulatory agencies and utility companies, to become Y2K
compliant in a timely manner could result in material adverse effects on the
Company's results of operations. The Company is currently working diligently
to become Y2K compliant by the end of October 1999. However, there can be no
assurance that the Company will be successful in taking corrective action in
a timely manner. The Company has started to develop contingency plans with
regard to its key technology systems, although there can be no assurance that
these contingency plans will successfully avoid a service disruption. The
Company intends to document Y2K contingency plans as part of its Y2K risk
mitigation efforts by September 1999.
COSTS. Total costs incurred up to June 30, 1999 specifically associated
with becoming Y2K compliant have been less than $500,000. The total estimated
specific costs of becoming Y2K compliant is estimated to be less than $650,000.
These costs will be included in the Y2K compliance costs once the specific Y2K
components can be identified and allocated. Costs associated with the
identification and testing of third party compliance will also be included once
such costs can be identified.
Readers are cautioned that certain of the statements made herein with
respect to the Y2K issue are forward-looking statements. These statements, which
include statements concerning the Company's expectations about future costs and
timely completion of its Y2K modifications are subject to uncertainties that
could cause actual results to differ materially from what has been discussed
above. Factors that could influence the amount of future costs and the effective
timing of remediation efforts include the success of the Company in identifying
embedded technology and infrastructure equipment as well as non-embedded
equipment that contain two-digit year codes, the nature and amount of
programming and testing required to upgrade or replace each of the affected
systems and equipment, the nature and amount of testing, verification, the rate
and magnitude of related labor costs, and the success of the Company's
suppliers, in addressing the Y2K issue.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including changes in interest
rates, and to foreign currency exchange rate risks. The Company does not hold
any financial instruments for trading purposes. The Company believes that its
primary market risk exposure relates the effects that changes in interest
rates have on its investments and those portions of its outstanding
indebtedness that do not have fixed rates of interest. In this regard,
changes in interest rates affect the interest earned on the Company's
investments in cash equivalents, which consist primarily of demand deposits
and money market accounts, and U.S. Government obligations which have been
purchased by the Company and pledged to make certain interest payments on the
Senior Notes. In addition, changes in interest rates impact the fair value of
the Company's long-term debt obligations (including the Senior Notes). As of
June 30, 1999, the fair value of the Senior Notes was approximately $137.6
million and the fair value of the securities pledged to make certain interest
payments on the Senior Notes was approximately $35.3 million. Changes in
interest rates also affect the Company's borrowings under its other financing
facilities with NTFC and Congress Financial Corporation. The NTFC facility
provides that each borrowing under the facility bears interest at a fixed
rate equal to the average yield to maturity of the five-year Treasury Note
plus an agreed-upon rate adjustment. The CFC Facility provides that each
borrowing under the CFC Facility bears interest at the prime rate effective
on the date of borrowing.
The Company's foreign operations to date have not been material, and
therefore any foreign exchange rate fluctuations relating to the Company's
results of foreign operations have also not been material. The Company has not
entered into foreign currency exchange forward contracts or other derivative
arrangements to manage risks associated with foreign exchange rate fluctuations.
Foreign exchange rate fluctuations exposure may increase in the future as the
size and scope of the Company's foreign operations increases.
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PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time the subject of, or involved in,
legal proceedings. Management believes that any liability or loss
resulting from such matters will not have a material adverse
effect on the financial position or results of operations of the
Company.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on June
17, 1999, the stockholders of the Company renewed the term of
one director and elected a new director. Mr. Prabhav V.
Maniyar's term as director of the Company was renewed at the
meeting, and Mr. Sudhakar Shenoy was elected as a new director
to replace Mr. Vijay Srinivas, who resigned effective as of June
17, 1999. The voting results were as follows: The vote renewing
Mr. Maniyar's term as director of the Company was 7,854,378
shares in favor and 18,287 witheld. The vote electing
Mr. Sudhakar Shenoy was 7,854,135 in favor and 18,530 witheld.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.50 Purchase and License Agreement between Ascend
Communications Inc. and Startec Global Operating Company
dated as of May 5, 1999.
10.51 Term Lease Master Agreement between IBM Corporation
and Startec Global Operating Company dated as of June 22,
1999.
10.52 Loan and Security Agreement between Congress Financial
Corporation and Startec Global Operating Company dated
as of June 29, 1999.
10.53 Lease Agreement between the Rector, Church Wardens and
Vestrymen of Trinity Church in the City of New York
and the Company dated as of April 23, 1999.
27.1 Financial Data Schedule
b. Reports on Form 8-K:
None.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized on the
16th day of August, 1999.
STARTEC GLOBAL COMMUNICATIONS CORPORATION
By /s/ Prabhav V. Maniyar
-----------------------------------------
Senior Vice President, Chief Financial
Officer, Secretary and Director
(Principal Financial and Accounting Officer)
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EXHIBIT 10.50
[LOGO]
PURCHASE AND LICENSE AGREEMENT
BETWEEN
ASCEND COMMUNICATIONS, INC.
AND
STARTEC GLOBAL OPERATING COMPANY
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, California 94502
USA
EXHIBITS(S):
Exhibit A: Master Lease Agreement and Lease Schedules
Exhibit B: Initial Startec Purchase Order
Exhibit C: Term Sheet
Exhibit D: Advantage Plus Service Agreement
Tel: (510) 769-6001 Fax: (510) 747-2300
1
<PAGE>
PURCHASE AND LICENSE AGREEMENT
------------------------------
THIS AGREEMENT is made effective as of the date written below by and between
Ascend Communications, Inc. ("Ascend"), a Delaware corporation having a
principal place of business at One Ascend Plaza, 1701 Harbor Bay Parkway,
Alameda, CA 94502, USA, and Startec Global Operating Company ("Buyer") a
_________________________ corporation having a principal place of business at
10411 Moror City Dr. Bethesda, MD 20817.
Recitals of Fact
- ----------------
1. Ascend sells and licenses various hardware and software products (the
"Products").
2. Buyer desires to purchase and license Products from Ascend during the
term of this Agreement for its internal use only.
NOW, THEREFORE, in consideration of their mutual promises and obligations
contained in this Agreement, the parties agree as follows:
1. TERM
----
This Agreement shall become effective as of the date written below and
shall continue for a period of twelve (12) months, after which it shall
renew automatically for successive twelve (12) month additional terms,
unless otherwise terminated pursuant to the terms hereof.
2. PURCHASE
--------
2.1 Buyer shall order and lease Products from Ascend pursuant to the terms
and conditions of:
(a) the Master Lease Agreement and each Lease Schedule executed by the
parties pursuant to the Master Lease Agreement (collectively,
the "MLA"), attached as Exhibit A hereto; each such Lease Schedule is
hereby incorporated into and made a part of this Agreement;
(b) Buyer's initial purchase order, attached as Exhibit B hereto, and all
purchase orders subsequently issued by Buyer for Products hereunder;
all such purchase orders are hereby incorporated into and made a part
of this Agreement; and
(c) The term sheet executed by the parties attached hereto as Exhibit C.
2
<PAGE>
Upon the exercise by Buyer of its option to purchase such Products, as
provided in the MLA, the terms and conditions of this Agreement shall
supersede the MLA and shall govern the purchase of the Products.
During the term of this Agreement, Ascend shall sell to Buyer and Buyer
shall purchase from Ascend Products at pricing listed in Ascend's
then-current price list applicable to each such Product, as amended from
time to time, less any applicable discounts. Buyer's wholly-owned
divisions and subsidiaries, may order Products under this Agreement when
an order of Buyer's such divisions and subsidiaries references this
Agreement and includes a statement agreeing to be bound by the terms and
conditions contained herein.
2.2 Shipments of the Products shall be made only against written purchase
orders issued by Buyer. At a minimum, each purchase order shall specify
the following items:
a. A complete list of the Products covered by the purchase order,
specifying the quantity, model number and description of each;
b. The price of each Product, any applicable discounts, and any
additional charges and costs;
c. The billing address, the destination to which the Products will be
delivered, and the requested delivery date; and
d. The signature of Buyer's employee or agent who possesses the
authority to place such an order.
2.3 Ascend shall acknowledge Buyer's purchase orders in writing within ten
(10) days after receipt. Ascend's acknowledgment shall note any
exceptions regarding matters such as the items ordered, configuration,
and Product pricing. Ascend shall also confirm the requested delivery
date or offer an alternative delivery date. In no event shall any order
be binding on Ascend until Buyer's order and Ascend's acknowledgment are
in agreement as to the items ordered, configuration, pricing, delivery
dates, and all other material terms.
2.4 No purchase order, acknowledgment form, or other ordering document or
communication from either party shall vary the terms and conditions on
this Agreement unless both parties expressly agree in writing. In the
event of any conflict between the terms and conditions of this Agreement
and those of any purchase order acknowledgment form or other ordering
document or communication, the terms and conditions of this Agreement
shall prevail.
3. DELIVERY
--------
3
<PAGE>
3.1 All deliveries of the Products purchased pursuant to this Agreement will
be made F.O.B. Ascend's facility. Unless Buyer has otherwise notified
Ascend in writing, Ascend shall select a freight forwarder to be used for
shipment of the Products to Buyer. All Products will be packaged for
shipment in accordance with standard industry practices. All
transportation, shipping, and insurance costs shall be charged to Buyer's
account.
3.2 Risk of loss and title ( title to software Products) shall pass
to Buyer at the point of delivery to the common carrier at Ascend's
facility.
3.3 Ascend shall use reasonable efforts to ship the Products on the shipment
date requested in Buyer's purchase order. Ascend shall not be liable for
any loss, expense or damage incurred by Buyer if Ascend fails to meet the
specified delivery date. Ascend reserves the right to allocate shipment
of Products among its purchasers and to make partial shipments.
3.4 All shipments with destinations outside of the US shall be subject to
Ascend's determination that such shipments are in compliance with all
applicable export and import regulations. Buyer will be solely
responsible for (i) obtaining any license that may be required to import
the Products into its country, (ii) clearing the Products through local
customs upon their arrival to Buyer's country and (iii) paying all
customs duties, taxes and other charges assessed on such importations in
such country. In no event shall Ascend's delay in shipping or refusal
to ship due to export or import issues be deemed a default hereunder.
4. RESCHEDULING AND CANCELLATION OF ORDERS
4.1 Upon at least thirty (30) days prior written notice to Ascend, Buyer may
reschedule the delivery of any Products scheduled for shipment by up to
ninety (90) days at no charge. Orders may, however, be rescheduled only
once. Buyer's request to reschedule any delivery with less than thirty
(30) days' prior written notice to Ascend shall be at the sole discretion
of Ascend.
4.2 Upon at least sixty (60) days' written notice to Ascend prior to the
originally-scheduled shipment date of Products under this Agreement,
Buyer may cancel any shipment of the Products without charge. The
following cancellation charges shall apply to any cancellations made by
Buyer less than sixty (60) days prior to shipment as liquidated damages
and not as a penalty based on the number of days prior to the scheduled
delivery that written notice of cancellation is received by Ascend:
<TABLE>
<CAPTION>
DAYS NOTICE CHARGE
----------- ------
(% of canceled order)
<S> <C>
Greater than 60 days 0%
31-60 days 5%
0-30 days 10%
</TABLE>
4
<PAGE>
5. PRICES
5.1 During the term of this Agreement, Buyer shall be entitled to purchase
the Products at the prices set forth in Ascend's then-current Price List
applicable to each particular Product, less any applicable discounts
based on annual purchase volume listed in EXHIBIT A. All prices set
forth in Ascend's Price List are exclusive of any applicable value added,
excise, sales, use or consumption taxes, customs duties or other
governmental charges.
5.2 (a) In the event of a Ascend price increase, all Products ordered on or
after the effective date of such price increase shall be filled at the
new higher price. Ascend shall, however, honor all written and accepted
Buyer purchase orders for the Products received by Ascend prior to the
price increase announcement at the prices in effect as of the date the
order was received, but only if Buyer requests Ascend to ship the
Products within ninety (90) days after the effective date of the price
increase.
(b) In the event of a Ascend price decrease, all products ordered on or
after the effective date of such price decrease shall be filled at the
new lower price.
6. PAYMENT
6.1 Ascend shall invoice Buyer upon shipment of the Products. Buyer shall
pay all invoices in US dollars within thirty (30) days of receipt. Unless
otherwise directed by Ascend, all such invoices will be payable by wire
transfer, to the following account, in United States dollars:
Wells Fargo Bank
1 Kaiser Plaza
8th Floor
Oakland, CA 94612
Account: 4103 134 193
Routing: 121 000 248
Account Name: Ascend Communications, Inc.
In the event that Buyer fails to make any payment when due, Ascend may
withhold further shipments until such time as the past-due payment is
made, and may require that subsequent orders be paid in full prior to
shipment.
6.2 Ascend reserves the right to impose a late payment charge of one and
one-half percent (1 1/2%) per month, or the maximum allowed by law, for
each month that any payment is late, including the month in which the
payment was due and not paid. Buyer shall also pay Ascend's costs of
collecting any amounts that are overdue including, but not limited to,
reasonable collection and attorneys' fees.
5
<PAGE>
6.3 Buyer shall pay all municipal, state, county or federal taxes including,
but not limited to sales, use, excise, value added or other taxes which
may be levied upon the sale, license or transfer, ownership or
installation of the Products.
7. CHANGES/AVAILABILITY OF PRODUCTS
7.1 Ascend shall promptly inform Buyer as soon as is reasonably practicable
after Ascend schedules discontinuance of production or modification of
any hardware Product. Ascend, in its sole discretion, may modify its
price list at any time. Ascend agrees to offer spare parts for any
discontinued product for a period of ninety (90) days following the
announcement of any discontinuance.
7.2 At any time prior to delivery, Ascend may make changes in the Products in
whole or in part to be supplied to the Buyer hereunder to include
electrical or mechanical design refinements that Ascend deems
appropriate, or as required by law or concerns of safety, without
obligation to modify or change any Product previously delivered or to
supply Products in accordance with earlier specifications.
8. LICENSE OF SOFTWARE PRODUCTS AND FIRMWARE
8.1 Subject to the provisions of this Section, Ascend grants to Buyer a
nonexclusive, nontransferable license to use the object code form of the
software Products solely for Buyer's internal business purposes on or in
conjunction with the Product with which it was originally delivered.
8.2 Subject only to the licenses specifically granted herein, Ascend is the
sole owner of all rights, title and interest, including all copyrights,
patents, trademarks, industrial designs, trade names, trade secrets and
other intellectual property rights in he software Products. The software
Products are copyrighted and Buyer is only authorized to reproduce one
copy of the software Products solely for back-up purposes. Buyer is
hereby prohibited from otherwise copying or translating, modifying or
adapting the software Products or, incorporating in whole or any part in
any other product or creating derivative works based on all or any part
of the Products. Buyer is not authorized to license others to reproduce
any copies of the software Products, except as expressly provided in this
Agreement. Buyer agrees to ensure that all copyright, trademark and
other proprietary notices of Ascend affixed to or displayed on the
software Products will not be removed or modified. Buyer shall not
decompile, disassemble or reverse engineer, the software Products or any
component thereof, except as may be permitted by applicable law in which
case Buyer must notify Ascend in writing and Ascend may provide review
and assistance.
6
<PAGE>
8.3 The rights and licenses granted to Buyer with respect to any software
Product furnished by Ascend may not be sold, licensed, sublicensed,
rented, assigned or otherwise transferred to another party without the
prior written consent of Ascend.
8.4 Upon the effective date of a termination of this Agreement by Ascend
for Buyer's breach or for any other reason, the license granted to
Buyer under this Agreement shall terminate and Buyer shall immediately
discontinue use of the software and all copies and documentation
thereof and return all copies and documentation to Ascend.
8.5 US Government Restricted Rights. Notice - Distribution and use of
products including computer programs and any related documentation and
derivative works thereof, to and by the United States Government, are
subject to the Restricted Rights provisions of FAR 52227-19, paragraph
(c)(2) as applicable, except for purchases by agencies of the
Department of Defense (DOD). If the Software is acquired under the
terms of a Department of Defense or civilian agency contract, the
Software is "commercial item" as that term is defined at 48 C.F.R.
2.101 (Oct. 1995), consisting of "commercial computer software" and
"commercial computer software documentation" as such terms are used
in 48 C.F.R. 12.212 of the Federal Acquisition Regulations and its
successors and 48 C.F.R. 227.7202-1 through 227.7202-4 (June 1995) of
the DoD FAR Supplement and its successors. All U.S. Government end
users acquire the Software with only those rights set forth in this
Agreement. Manufacturer is Ascend Communications, Inc., One Ascend
Plaza, 1701 Harbor Bay Parkway, Alameda, CA 94502, USA. Unpublished -
rights reserved under the copyright laws of the United States.
9. SUPPORT
Buyer may elect to purchase maintenance or support services from
Ascend in connection with the Products pursuant to Ascend's standard
terms and conditions and then-current programs. The provision of all
such maintenance and support services shall be governed by the
applicable agreement entered into between the parties.
10. LIMITED WARRANTY
Product Warranty: Product hardware and media are warranted to be free
from defects in material and workmanship during the Warranty Period
(as defined below). Product hardware and software is warranted to
conform substantially to Ascend's then current (as of the date of
Ascend's product shipment) published user documentation during the
Warranty Period. The Warranty Period is twelve (12) months for
Product hardware ninety (90) days for Product software, and thirty
(30) days for media. Product support beyond these periods may be
available at additional cost.
10.2 Warranty Claims: Ascend shall incur no liability under this warranty
if the end user fails to provide Ascend with notice of the alleged
defect during the applicable Warranty Period and within thirty (30)
days of its discovery. After receiving such notice, Ascend's
7
<PAGE>
Technical Assistance Center ("TAC") will notify the purchaser of its
designation of one of the following problem resolution methods:
Return to Factory: The allegedly defective goods must be returned to
Ascend within thirty (30) days of TAC'S notice and in accordance with
Ascend's Return to Factory repair procedures.
Other: TAC will use commercially reasonable efforts to repair,
correct or workaround the problem by means of telephone support,
including patches, corrective software releases or other means
reasonably determined by Ascend.
Ascend shall incur no liability under this warranty if Ascend's tests
disclose that the alleged defect is due to causes not within Ascend's
reasonable control, including alteration or abuse of the goods. Under
the Return to Factory alternative, if a Product is determined not to be
defective or to have a defect due to causes not within Ascend's
reasonable control, Ascend's then current processing charge will apply.
10.3 Ascend's Liability: Ascend's liability, and end user's sole and
exclusive remedy, shall be limited to the express remedies set forth in
this Ascend Product Warranty.
104. Disclaimer of Warranties: ASCEND MAKES NO OTHER WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, REGARDING PRODUCTS. ALL OTHER WARRANTIES AS TO
THE QUALITY, CONDITION, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR NONINFRINGEMENT ARE EXPRESSLY DISCLAIMED.
10.5 Limitation of Liability: ASCEND SHALL NOT BE RESPONSIBLE FOR DIRECT
DAMAGES IN EXCESS OF THE PURCHASE PRICE PAID BY THE END USER OR FOR
ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE DAMAGE, INCLUDING,
BUT NOT LIMITED TO, LOSS OF PROFITS OR DAMAGES TO BUSINESS OR BUSINESS
RELATIONS, WHETHER OR NOT ADVISED IN ADVANCE OF THE POSSIBILITY OF
SUCH DAMAGES THE FOREGOING LIMITATIONS SHALL APPLY NOTWITHSTANDING THE
FAILURE OF ANY EXCLUSIVE REMEDIES.
10.6 Warranty Repair (Return to Factory): If TAC designates Return to Factory
as the appropriate problem resolution method, the following provisions
apply,
(a) During the first ninety (90) days of the warranty period, Ascend
may at its option provide an advance replacement of a defective Product.
Ascend will repair or replace defective Product hardware covered under
warranty within ten (10) business days of receipt of the Product. The
warranty period for the replaced product shall be ninety (90) days or the
remainder of the warranty period of the original unit, whichever is
greater. Ascend will ship surface freight. Expedized freight is at end
user's expense.
8
<PAGE>
(b) The end user must return the defective Product to Ascend within
fourteen (14) days after the request for replacement. If the defective
Product is not returned within this time period, Ascend will bill the
end user for the Product at list price.
10.7 Out-of-Warranty Repair (Hardware): Ascend will either repair or, at its
option, replace defective Product hardware not covered under warranty
within ten (10) working days of its receipt. Repair charges are
available from the Repair Facility upon request. The warranty on a
serviced Product is thirty (30) days from the date of shipment of the
serviced unit. Out-of-warranty repair charges are based upon the prices
in effect at the time of return.
10.8 Ascend hereby agrees to indemnify, protect and hold Buyer and its
affiliates harmless from and against any claims, losses, damages, costs,
liabilities, obligations and expenses, including reasonable fees and
expenses of counsel, arising from or relating to, directly or indirectly
any breach by Ascend of any of its warranties hereunder; provided,
however, that Ascend's liability under this Section 10.8 shall be
limited to the price actually paid by Buyer for the affected Products.
11. INTELLECTUAL PROPERTY RIGHTS
Except as described in this Agreement, Ascend does not grant and Buyer
acknowledges that it shall have no right, license or interest in any of
the patents, copyrights, trademarks, or trade secrets owned, used or
claimed now or in the future by Ascend. All applicable rights to such
patents, copyrights, trademarks, and trade secrets are and will remain
the exclusive property of Ascend. Subject to the rights expressly granted
to Buyer by this Agreement, title to and ownership of the intellectual
property rights contained in the Products or any part of the Products or
Ascend's confidential information shall remain Ascend's property.
12. PATENT AND COPYRIGHT INDEMNIFICATION
12.1 Ascend agrees to indemnify and hold buyer harmless from and against all
valid claims and judicial or governmental determinations that the
Products as delivered by Ascend under this Agreement infringe or
misappropriate any United States patent rights, copyrights, trade
secrets, or trademarks. Ascend shall assume the defense of any such claim
of infringement or misappropriation brought against Buyer in the United
States by counsel retained at Ascend's own expense, provided that Buyer
promptly notifies Ascend in writing of such claim or the commencement of
any such suit, action, proceeding or threat covered by this Section.
Ascend shall maintain sole and exclusive control of the defense and/or
settlement of any such claim and Buyer shall cooperate in the defense of
such claim.
9
<PAGE>
12.2 In the event that the use or sale of all or any portion of the
Products is enjoined, or, in Ascend's judgment, may be enjoined as a
result of a suit based on alleged infringement or misappropriation of
the third party intellectual property rights, Ascend agrees to either
(i) procure for Buyer the right to continue to use the Product, or
(ii) replace or modify the infringing or misappropriating Product so
that it becomes non-infringing. In the event that the foregoing
alternatives cannot be reasonably accomplished by Ascend, Ascend shall
direct Buyer to return the Product to Ascend and upon receipt of the
Product(s), Ascend shall reimburse Buyer for the price originally paid
by Buyer as depreciated by an equal annual amount over the lifetime of
the Product. Upon Ascend's fulfillment of the alternatives set out in
this Section, Ascend shall be relieved of any further obligation or
liability to Buyer as a result of any such infringement or
misappropriation.
12.3 Regardless of any other provisions of this Agreement, this Section
shall not apply (i) to any designs, specifications or modifications
originating with or requested by Buyer, or (ii) to the combination
of any Product with other equipment, software or products not
supplied by Ascend if such infringement or misappropriation would
not have occurred but for such combination, or (iii) Buyer's failure
to install an update provided at no additional charge, where the
update would have avoided the infringement claim. Buyer shall
indemnify and hold Ascend harmless against all claims that Buyer's
designs, specifications, modifications or combinations of Products
with other equipment infringes or misappropriates any third party's
patent rights, copyrights, trade secrets, trademarks or other
intellectual property rights.
12.4 THIS SECTION STATES ASCEND'S ENTIRE LIABILITY TO BUYER AND BUYER'S
SOLE REMEDY FOR ANY INFRINGEMENT OR MISAPPROPRIATION OF ANY PATENT
RIGHTS, COPYRIGHTS, TRADE SECRETS, TRADEMARKS OR OTHER INTELLECTUAL
PROPERTY RIGHTS.
13. GENERAL INDEMNITY
-----------------
Buyer agrees to indemnify and hold Ascend harmless from and against
any claims, damages and liabilities, including reasonable attorney's
fees, asserted by any person or entity resulting directly or indirectly
from (i) any breach by Buyer of this Agreement, and (ii) from any
negligent act or omission of Buyer, provided, however, that Buyer shall
not be liable for that portion of liabilities which are caused by the
sole negligence of Ascend.
14. LIMITATION OF LIABILITY
-----------------------
EXCEPT AS PROVIDED HEREIN OR IN SECTION 12, ASCEND'S MAXIMUM
LIABILITY UNDER THIS AGREEMENT ARISING OUT OF THE MANUFACTURE,
10
<PAGE>
SALE, SUPPLY, SERVICE OR SUPPORT OF PRODUCTS OR THEIR USE, WHETHER
BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT
LIABILITY OR OTHERWISE, SHALL NOT EXCEED THE PRICE BUYER PAID FOR
THE PRODUCT OR SUPPORT THAT GAVE RISE TO THE LIABILITY. IN NO EVENT
SHALL ASCEND BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL, EXEMPLARY PUNITIVE DAMAGES OR LOST PROFITS, WHETHER
FORESEEABLE OR UNFORESEEABLE, OF ANY KIND WHATSOEVER (INCLUDING
WITHOUT LIMITATION, LOST PROFITS, LOSS OF GOODWILL, LOSS OR DAMAGED
DATA OR SOFTWARE, LOSS OF USE OF THE PRODUCTS, DOWNTIME OR COSTS OF
SUBSTITUTE PRODUCTS OR EQUIPMENT) ARISING FROM ASCEND'S SALE AND
DELIVERY OF THE PRODUCTS OR ANY OTHER ACT OF ASCEND IN CONNECTION
WITH THIS AGREEMENT, EVEN IF ASCEND HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. NO LIMITATION AS TO DAMAGES FOR
PERSONAL INJURY IS HEREBY INTENDED. SOME STATES DO NOT ALLOW THE
EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES AND
THE ABOVE EXCLUSION OR LIMITATION MAY NOT APPLY.
15. CONFIDENTIALITY
---------------
15.1 For purposes of this Agreement, "Confidential Information" shall
mean all information (i) identified in written or oral format by the
disclosing party as confidential, trade secret or proprietary
information and, if disclosed orally, summarized in written format
within thirty (30) days of disclosure, or (ii) the receiving party
knows or has reason to know is confidential, trade secret or
proprietary information of the Disclosing Party.
15.2 Notwithstanding the foregoing, "Confidential Information" shall NOT
include any information which the receiving party can show: (a) is now
or subsequently becomes legally and publicly available without breach
of this Agreement by the receiving party, (b) was rightfully in the
possession of the receiving party without any obligation of
confidentiality prior to receiving it from the disclosing party,
(c) was rightfully obtained by the receiving party from a source other
than the disclosing party without any obligation of confidentiality,
(d) was developed by or for the receiving party independently and
without reference to any Confidential Information and such independent
development can be shown by documentary evidence, or (e) is disclosed
pursuant to an order of a court or governmental agency as so required
by such order, provided that the receiving party shall first notify
the disclosing party of such order and afford the disclosing party the
opportunity to seek a protective order relating to such disclosure.
15.3 Buyer agrees not to use such Confidential Information except in its
performance under this Agreement. In addition, Buyer shall treat and
protect such information in the same manner as it treats its own
information of like character, but with not less than reasonable
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<PAGE>
care. Buyer agrees to take appropriate measures by instruction and
written agreement prior to disclosure of Confidential Information to
its employees to prevent unauthorized use or disclosure. The
obligations of this Section with regard to Confidential Information
shall continue for a period of five (5) years after termination or
expiration of this Agreement. Confidential Information must be
returned by the receiving party upon termination or expiration of this
Agreement.
15.4 In the event of a breach of any of the foregoing provisions, Buyer
agrees that the harm suffered by Ascend would not be compensable by
monetary damages alone and, accordingly, that Ascend shall, in addition
to other available legal or equitable remedies, be entitled to an
injunction against such breach.
16. TERMINATION
-----------
16.1 Either party may terminate this Agreement at any time, with or
without cause, upon ninety (90) days prior written notice to the other
party.
16.2 If Buyer is in breach of this Agreement, Ascend shall give Buyer
thirty (30) days' prior written notice to cure such breach. If such
breach has not been cured to Ascend's satisfaction within such thirty
(30) day period, then this Agreement shall automatically terminate at
the end of said thirty (30) day period without further notice to Buyer.
If Buyer is in breach of the Section entitled License of Software
Products and Firmware, Ascend shall have the right to immediately
terminate this Agreement.
16.3 This Agreement may be terminated for cause by either party in the
event that the other party: (i) shall become insolvent; (ii) commits
an act of bankruptcy; (iii) seeks an arrangement or compromise with
its creditors under any statute or otherwise; (iv) is subject to a
proceeding in bankruptcy, receivership, liquidation or insolvency
and same is not dismissed within thirty (30) days; (v) makes an
assignment for the benefit of the creditors; (vi) admits in writing
its inability to pay its debts as they mature; or (vii) ceases to
function as a going concern or to conduct its operations in the
normal course of business. In addition, Ascend may immediately
terminate this Agreement if there is a change in the controlling
ownership of Buyer.
16.4 If Buyer defaults under this Agreement, Ascend shall have the right
to take any or all of the following actions: (i) declare this
Agreement to be in default and all amounts payable under this
Agreement shall become immediately due and payable; (ii) suspend
delivery to Buyer until the default is cured by Buyer; (iii) proceed
by court action to enforce performance and/or recover damages and/or
(iv) terminate this Agreement. If Ascend continues to make shipments
after Buyer's default, Ascend's action shall not constitute a waiver
of any rights or remedies, or affect Ascend's legal remedies under
this Agreement.
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16.5 The termination or expiration of this Agreement shall in no case
relieve either party from its obligation to pay to the other any
sums accrued under this Agreement prior to such termination or
expiration.
17. GENERAL
17.1 ENTIRE AGREEMENT; AMENDMENT; AUTHORIZED PERSONNEL. This Agreement
supersedes all prior and contemporaneous agreements,
representations, warranties and understandings and contains the
entire Agreement between the parties. No amendment, modification,
termination, or waiver of any provision of this Agreement or consent
to any departure from this Agreement shall be effective unless it is
in writing and signed by a duly authorized representative of each
party. No failure or delay on the part of Ascend in exercising any
right or remedy under this Agreement shall operate as a waiver of
such right or remedy.
17.2 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, but
neither party shall have the right to assign or otherwise transfer its
rights under this Agreement without receiving the express prior written
consent of the other party. Ascend may, however, assign this Agreement
in the event of a sale of all or substantially all of Ascend's assets or
stock to which assignment the Buyer consents in advance.
17.3 NOTICES. All notices, requests, demands, and other communications
provided for under this Agreement shall be in writing and in English to
be sent by registered or certified mail, postage prepaid, to the
receiving party at its address as set forth in this Agreement or to any
other address that the receiving party may have provided to the sending
party in writing. When feasible, any such notice, request, demand or
other communication shall also be transmitted by facsimile as follows or
to such other facsimile number as provided by the receiving party in
writing:
- Buyer's Facsimile Number: 301-365-1744
-------------------
- Ascend's Facsimile Number: (978) 692-1221 ATTN: General Counsel
Any notice, request, demand or other communication sent by facsimile
will be deemed to have been received on the day it is sent. Any notice,
request, demand or other communication sent by registered or certified
mail will be deemed to have been received on the seventh (7th) business
day after its date of posting, unless it is sent by facsimile prior to
such seventh (7th) business day.
17.4 GOVERNING LAW. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the
State of California. All actions or proceedings relating to
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<PAGE>
this Agreement shall be maintained in a court located in Alameda County,
State of California, and the parties hereto consent to the jurisdiction
of said court and waive any objection to such venue. The United Nations
Convention on Contracts for the International Sale of Goods is
specifically excluded from application to this Agreement.
17.5 LEGAL ACTION. No action, regardless of form, arising out of the
transactions under this Agreement, except regarding money due to Ascend
from Buyer, may be brought by either party more than two (2) years after
the cause of action accrues.
17.6 COUNTERPARTS; SEVERABILITY; AND HEADINGS. This Agreement may be
executed in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument. The provisions of
this Agreement are declared to be severable. In the event that any
provision contained in this Agreement shall be held to be unenforceable
or invalid, the remaining provisions shall be given full effect, and the
parties agree to negotiate, in good faith, a substitute valid provision
which most nearly approximates the parties' intent. The failure of
either party in any one or more instances to enforce any of the terms of
this Agreement shall not be construed as a waiver of future enforcement
of that or any other term. Headings in this Agreement are included for
reference only and shall not constitute a part of this Agreement for any
other purpose.
17.7 FORCE MAJEURE. Neither party shall be held responsible for any delays
or failure in performance (except for the payment of money) caused in
whole or in part by fires, strikes, floods, embargoes, labor disputes,
delays or failures of subcontractors, acts of sabotage, riots,
accidents, delays of carriers, voluntary or mandatory compliance with
any governmental act, regulation or request, acts of God or by public
enemy, or any other causes beyond the party's reasonable control. If
such contingency shall occur, the defaulting party may elect to either
(a) suspend this Agreement for the duration of the delaying cause, or
(b) extend the duration of this Agreement by the length of time the
contingency endured.
17.8 SURVIVAL. The parties agree that the provisions of the following
Sections shall survive the expiration or earlier termination of this
Agreement for any reason: License of Software Products and Firmware,
Patent and Copyright Indemnification, Limitation of Liability, and
Confidentiality.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate by their duly authorized representatives as of the effective date
written below.
ASCEND COMMUNICATIONS, INC. STARTEC GLOBAL OPERATING COMPANY
By: /s/ Illegible By: /s/ Illegible
--------------------------------- -----------------------------
Name: Annette Seveneus Name: Prabhav Maniyar
------------------------------- ---------------------------
Title: Assistant Treasurer Title: Chief Financial Officer
------------------------------ --------------------------
Effective Date: May 5, 1999 Date: May 5, 1999
--------------------- ---------------------------
EXHIBIT(S):
Exhibit A: Master Lease Agreement and Lease Schedules
Exhibit B: Initial Purchase Order
Exhibit C: Term Sheet
Exhibit D: Advantage Plus Service Agreement
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EXHIBIT A
to
ASCEND PURCHASE AND LICENSE AGREEMENT
MASTER LEASE AGREEMENT AND LEASE SCHEDULES
------------------------------------------
MASTER LEASE AGREEMENT
No. A
------
This Master Lease Agreement (the "MLA") is entered into by and
between Ascend Credit Corporation ("Lessor"), having its principal
place of business at 1701 Harbor Bay Parkway, Alameda, CA 94502
and Startee Global
---------------------------------------------------------
Operating Company ("Lessee"),
- ---------------------------------------------------
having its principal place of business at 10411
------------------------
Motor City Dr. Bethesda, MD 20817
- -----------------------------------------------------------------
- -------.
1. LEASE AGREEMENT. Lessor agrees to lease to Lessee, and Lessee agrees
to lease from Lessor, the equipment (the "Equipment") referenced in each of
the Schedules (the "Schedule" or "Schedules") which incorporate this MLA
therein (the "Lease").
2. TERM. Each Lease shall be effective upon the execution of the MLA and
the related Schedule by the Lessor and the Lessee. The lease term (the "Lease
Term") of the Equipment referenced in each of the Schedules shall commence on
the rent commencement date specified in each Schedule (the "Rent Commencement
Date"). The Rent Commencement Date shall be the date 30 days from the date
that the Equipment is shipped by the lessor or other third-party supplier
("Supplier) as evidenced by a shipping document provided by the Supplier
related to the Equipment (the "Shipping Document"). Lessor will provide
lessee with a copy of the Shipping Document evidencing the Ship Date.
3. RENT. The rent (the "Rent") for the Equipment referenced in any
Schedule shall be as stated in such Schedule and shall be payable according
to the provisions of such Schedule. If any amount payable under a Schedule is
not received by Lessor within 10 days of the due date, Lessee agrees to pay
an Overdue Charge, as defined herein, with respect to such amount.
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4. SELECTION AND ASSIGNMENT. Lessee will select the type, quantity and
Supplier of each item of Equipment designated in a Schedule, and Lessee
hereby assigns to Lessor all of its right, title and interest in and to the
related equipment purchase order, a copy of which has been provided to Lessor
by Lessee (the "Agreement"). The Agreement may be amended with the consent of
Lessor. Any such assignment with respect to Equipment shall become binding
upon Lessor when Lessor and Lessee have entered into a Lease with respect to
such Equipment and as of the Rent Commencement Date referenced in such Lease.
Upon such an assignment becoming effective, Lessor shall be obligated to
purchase the Equipment from the Supplier in accordance with the provisions of
the Agreement. It is expressly agreed that Lessee shall at all times remain
liable to Supplier under the Agreement to perform all duties and obligations
of Lessee thereunder, except for the obligation to purchase the Equipment to
the extent expressly assumed by the Lessor hereunder, and that the Lessee
shall be entitled to the same rights of the purchaser of the Equipment under
the Agreement, except such right, title and interest in the Equipment
retained exclusively by the Lessor as owner of the Equipment. Lessor shall
have no liability for a Supplier's failure to meet the terms and conditions
of the Agreement.
5. DELIVERY AND INSTALLATION. Lessee shall be responsible for payment of
all transportation, packing, installation, testing and other charges
associated with the delivery, installation or use of any Equipment which are
not included in the Agreement with respect to such Equipment.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE EQUIPMENT, ITS
MERCHANTABILITY, OR ITS FITNESS FOR A PARTICULAR PURPOSE. LESSOR SHALL NOT BE
LIABLE TO LESSEE OR ANY OTHER PERSON FOR DIRECT, INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM LESSEE'S USE OF THE
EQUIPMENT, OR FOR DAMAGES BASED ON STRICT OR ABSOLUTE TORT LIABILITY OR
LESSOR'S PASSIVE NEGLIGENCE. LESSEE HEREBY ACKNOWLEDGES THAT ANY
MANUFACTURER'S OR SUPPLIER'S WARRANTIES WITH RESPECT TO THE EQUIPMENT ARE FOR
THE BENEFIT OF BOTH LESSOR AND LESSEE. NOTWITHSTANDING THE FOREGOING,
LESSEE'S OBLIGATIONS TO PAY EACH RENT PAYMENT DUE, OR OTHERWISE PERFORM ITS
OBLIGATIONS, UNDER THIS LEASE ARE ABSOLUTE AND UNCONDITIONAL.
7. TITLE TO AND LOCATION OF EQUIPMENT. Lessor shall retain title to each
item of Equipment. Lessee, at its expense, shall protect Lessor's title and
keep the Equipment free from all claims, liens (other than liens and claims
created by Lessor's own actions and pledges, voluntary or otherwise),
encumbrances and legal processes. The Equipment is personal property and is
not to be regarded as part of the real estate on which it may be situated. If
requested by Lessor, Lessee will, on a best efforts basis and at Lessee's
expense, furnish a landlord or mortgagee waiver with respect to the
Equipment. The Equipment shall not be removed from the location specified in
the Schedule without the written consent of Lessor. Lessee shall, upon
Lessor's request, affix and maintain plates, tags or other identifying
labels, showing Lessor's ownership of the Equipment in a prominent position
on the Equipment.
18
<PAGE>
8. USE OF EQUIPMENT, INSPECTION AND REPORTS. The use of the Equipment by
Lessee shall conform with all applicable laws, insurance policies, and
warranties of the manufacturer or Supplier of the Equipment. Lessor shall
have the right to inspect the Equipment at the premises where the Equipment
is located. Lessee shall notify Lessor promptly of any claims, liens,
encumbrances or legal processes with respect to the Equipment.
9. FURTHER ASSURANCES. Lessee shall execute and deliver to Lessor such
instruments as Lessor deems reasonably necessary to enforce Lessor's rights
hereunder. Lessor is authorized to file financing statements signed only by
the Lessor in accordance with the Uniform Commercial Code, or financing
statements signed by Lessor as Lessee's attorney-in-fact.
10. MAINTENANCE AND REPAIRS. Lessee shall, at its expense, maintain each
item of Equipment in good condition, normal wear and tear excepted. Lessee
shall be permitted to make any addition, alteration, or attachment to the
Equipment without Lessor's prior written consent, unless such addition,
alteration, or attachment cannot be removed upon the termination of the Lease.
Lessee shall make no repair, addition, alteration or attachment to the
Equipment which interferes with the normal operation or maintenance thereof
or creates a safety hazard. The creation of a mechanic's or materialman's
lien shall be allowed provided that such mechanic's or materialman's lien is
promptly cleared.
11. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to
perform any of its material obligations under a Lease, Lessor may perform any
act or make any payment which Lessor deems reasonably necessary for the
maintenance and preservation of the Equipment subject thereto and Lessor's
title thereto. All sums so paid by Lessor (together with all related Overdue
Charges), and reasonable attorneys' fees incurred by Lessor in connection
therewith shall be additional rent payable to Lessor on demand. The
performance of any such act or the making of any such payment by Lessor shall
not be deemed a waiver or release of any obligation or default on the part of
Lessee.
12. INDEMNIFICATION. Lessee assumes liability for, and hereby agrees to
indemnify, protect and hold harmless, Lessor, and its agents, employees,
officers, directors, partners and successors and assigns, from and against,
all liabilities, obligations, losses, damages, injuries, claims, demands,
penalties, actions, costs and expenses, including, without limitation,
reasonable attorneys' fees, arising out of the physical injury or damage to
the property arising from the use or operation of any item of Equipment, or
any failure on the part of Lessee to perform or comply with any of its
obligations under a Lease, excluding, however, any of the foregoing which
result from the gross negligence or willful misconduct of Lessor or its
affiliates. Such indemnities and assumptions of liabilities and obligations
shall continue in full force and effect, notwithstanding the expiration or
other termination of such Lease, until the expiration of the applicable
statute of limitations. Nothing contained in any Lease shall authorize Lessee
to operate the Equipment subject thereto so as to incur or impose any
liability on, or obligation for or on behalf of Lessor.
13. NO OFF-SET. All Rents shall be paid by Lessee irrespective of any
off-set, counterclaim, recoupment, defense or other right which Lessee may
have against Lessor, the manufacturer or Supplier of the Equipment or any
other party.
19
<PAGE>
14. ASSIGNMENT BY LESSEE. Lessee shall not, without Lessor's prior
written consent, (which shall not be unreasonably withheld) (a) sell, assign,
transfer, pledge, hypothecate, or otherwise dispose of, encumber or suffer to
exist a lien upon or against, any of the Equipment or any Lease or any
interest herein, by operation of law or otherwise, or (b) sublease or lend
any of the Equipment or permit any of the Equipment to be used by anyone
other than Lessee; provided, however, that, notwithstanding the foregoing,
Lessee may assign, upon written notice to Lessor, any of the equipment or any
Lease, or any interest therein, to any person or entity (i) at least 50% of
the outstanding voting capital stock or equity interest of which is owned or
controlled by Lessee, (unless, by operation of a "supermajority" provision in
such entity's governing documents, Lessee does not, in fact, control the
day-to-day management and affairs or such entity) or (ii) with respect to
which the Lessee controls the day-to-day management and affairs by contract,
representation on the board of directors (or similar body), or otherwise.
15. ASSIGNMENT BY LESSOR. Lessor may assign, sell or encumber its
interest in any of the Equipment and any Lease upon not less than 30 days'
notice to Lessee. Upon Lessor's written consent, Lessee shall pay directly
to the assignee of any such interest or Rent and other sums due under an
assigned Lease. THE RIGHTS OF ANY SUCH ASSIGNEE SHALL NOT BE SUBJECT TO ANY
ABATEMENT, DEDUCTION, OFFSET, COUNTERCLAIM, RECOUPMENT, DEFENSE OR OTHER
RIGHT WHICH LESSEE MAY HAVE AGAINST LESSOR OR ANY OTHER PERSON OR ENTITY.
Notwithstanding the foregoing, any such assignment (a) shall be subject to
Lessee's right to possess and use the Equipment subject to a Lease so long as
Lessee is not in default thereunder, and (b) shall not release any of
Lessor's obligations hereunder.
16. RETURN OF EQUIPMENT. Unless Lessee has exercised its option as
outlined in Section 7 of the Lease Schedule Agreement to renew a lease or
purchase the Equipment subject thereto, upon expiration of the then current
Lease Term of such Lease, Lessee shall, at its expense, cause such Equipment
to be removed, disassembled, and placed in the same condition as when
delivered to Lessee (reasonable wear and tear excepted) and properly crate
such Equipment for shipment and deliver it to a common carrier designated by
Lessor. Lessee will ship such Equipment F.O.B. destination, to any address
specified in writing by Lessor within the continental United States. All
additions, attachments, alterations and repairs made or placed upon any of
the Equipment shall become part of such Equipment and shall be the property
of Lessor.
20
<PAGE>
17. EVENTS OF DEFAULT. The occurrence of any of the following shall be
deemed to constitute an Event of Default hereunder. (a) Lessee fails to pay
Rent, any other amount it is obligated to pay under a Lease or any other
amount it is obligated to pay to Lessor and does not cure such failure within
10 days of such amount becoming due; (b) Lessee fails to perform or observe
any obligation or covenant to be performed or observed by Lessee hereunder or
under any Schedule, including, without limitation, supplying all requested
documentation, and does not cure such failure within 10 days of receiving
written notice thereof from Lessor, (c) any representation or warranty made
or furnished by Lessee to Lessor in this MLA is proven to have been false in
any material respect when made; (d) the attempted sale or encumbrance by
Lessee of the Equipment, or the making of any levy, seizure or attachment
thereof or thereon, unless otherwise permitted by this MLA or consented to in
writing by Lessor; or (e) the dissolution, termination of existence,
discontinuance of business, insolvency, or appointment of a receiver of any
part of the property of Lessee, assignment by Lessee for the benefit of
creditors, or the commencement of proceedings under any bankruptcy,
reorganization or arrangement laws by or against Lessee.
18. REMEDIES OF LESSOR. At any time after the occurrence of any Event of
Default, Lessor may exercise one or more of the following remedies: (a)
Lessor may terminate any or all of the Leases with respect to any or all
items of Equipment subject thereto; (b) Lessor may recover from Lessee all
Rent and other amounts then due and to become due under any or all of the
Leases; (c) Lessor may take possession of any or all items of Equipment,
wherever the same may be located, without demand or notice, without any court
order or other process of law and without liability to Lessee for any damages
occasioned by such taking of possession, and any such taking of possession
shall not constitute a termination of any Lease; (d) Lessor may demand that
Lessee return any or all items of Equipment to Lessor in accordance with
Paragraph 16; and (e) Lessor may pursue any other remedy available at law or
in equity, including, without limitation, seeking damages, specific
performance or an injunction.
Upon repossession or return of any item of the Equipment, Lessor shall
sell, lease or otherwise dispose of such item in a commercially reasonable
manner, with or without notice and on public or private bid, and apply the
net proceeds thereof (after deducting the estimated fair market value of such
item at the expiration of the term of the applicable Lease, in the case of a
sale, or the rents due for any period beyond the scheduled expiration of such
Lease, in the case of any subsequent lease of such item, and all expenses
including, without limitation, reasonable attorneys' fees, incurred in
connection therewith towards the Rent and other amounts due under such Lease,
with any excess net proceeds to be retained by Lessor.
Each of the remedies under this Lease shall be cumulative, and not
exclusive, and in addition to any other remedy referred to herein or
otherwise available to Lessor in law or in equity. Any repossession or
subsequent sale or lease by Lessor of any item of Equipment shall not bar an
action for a deficiency as herein provided, and the bringing of an action the
entry of judgment against Lessee shall not bar lessor's right to repossess
any or all items of Equipment.
21
<PAGE>
19. CREDIT AND FINANCIAL INFORMATION. Lessee shall provide to Lessor
from time to time additional information regarding operating performance or
projected performance, at Lessor's request.
20. INSURANCE. As of the date that risk of loss for the Equipment passes
from the Supplier to the Lessee under the terms of the Agreement, Lessee
shall obtain and maintain through the end of the Lease Term of each Lease
(and any renewal or extension thereof), at its own expense, property damage
and personal liability insurance and insurance against loss or damage to the
Equipment, including, without limitation, loss by fire (with extended
coverage), theft and such other risks of loss as are customarily insured
against with respect to the types of Equipment leased hereunder and by the
types of businesses in which such equipment will be used by Lessee. Such
insurance shall be in such amounts, with such deductibles, in such form and
with such insurers as shall be satisfactory to Lessor; provided, however,
that the amount of the insurance against loss or damage to the Equipment
shall not be less than the greater of the fair market value of such Equipment
on the date of loss or the amount of unpaid Rent payable hereunder. Each
insurance policy shall name Lessee as an insured and Lessor as an additional
insured or loss payee, and shall contain a clause requiring the insurer to
give lessor at least 30 days prior written notice of any alteration in the
terms of such policy or of the cancellation thereof. Lessee shall furnish to
Lessor a certificate of insurance or other evidence satisfactory to Lessor
that such insurance coverage is in effect; provided, however, that Lessor
shall be under no duty either to ascertain the existence of or to examine
such insurance policy or to advise Lessee in the event such insurance
coverage shall not comply with the requirements hereof. Lessee shall give
Lessor prompt notice of any damage to, or loss of, any of the Equipment, or
any part thereof, or any personal injury or property damage occasioned by the
use of any of the Equipment.
21. TAXES. Lessee hereby assumes liability for, and shall pay when due,
and, on a net after-tax basis, shall indemnify, protect and hold harmless
Lessor against all fees, taxes and governmental charges (including, without
limitation, interest and penalties) of any nature imposed on or in any way
relating to Lessor, Lessee, any item of Equipment or any Lease, except state
and local taxes on or measured by Lessor's net income (other than any such
tax which is in substitution for or relieves Lessee from the payment of taxes
it would otherwise be obligated to pay or reimburse to Lessor as herein
provided) and federal taxes on Lessor's net income. Lessee shall, at its
expense, file when due with the appropriate authorities any and all tax and
similar returns, and reports required to be filed with respect thereto, for
which it has indemnified Lessor hereunder or, if requested by Lessor, notify
Lessor of all such requirements and furnish Lessor with all information
required for Lessor to effect such filings. Any fees, taxes or other charges
paid by Lessor upon failure of Lessee to make such payments shall, at
Lessor's option, become immediately due from Lessee to Lessor and shall be
subject to the Overdue Charge from the date paid by Lessor until the date
reimbursed by Lessee.
22. SEVERABILITY. If any provision of any Lease is held to be invalid by
a court of competent jurisdiction, such invalidity shall not affect the other
provisions of such Lease or any provision of any other Lease.
23. NOTICES. All notices hereunder shall be in writing and shall be
deemed given when sent by certified mail; postage prepaid, return receipt
requested, addressed to the
22
<PAGE>
party to which it is being sent at its address set forth herein or to such
other address as such party may designate in writing to the other party.
24. AMENDMENTS, WAIVERS AND EXTENSIONS. This MLA and each Schedule
constitute the entire agreement between Lessor and Lessee with respect to the
lease of the Equipment subject to such Schedule, and supersede all previous
communications, understandings, and agreements, whether oral or written,
between the parties with respect to such subject matter. No provision of any
Lease may be changed, waived, amended or terminated except by a written
agreement, specifying such change, waiver, amendment or termination, signed
by both Lessee and Lessor, except that Lessor may insert, on the appropriate
schedule, the serial number of Equipment, after delivery of such Equipment
and the Rent Commencement Date for the Equipment. No waiver by Lessor of any
Event of Default shall be construed as a waiver of any future Event of
Default or any other Event of Default. At the expiration of the Lease Term
with respect to a Lease, upon notice given by Lessee at least ninety (90)
days prior thereto, (a) such Lease shall be renewed or the Equipment subject
thereto shall be purchased under the terms and conditions set forth herein
for a term and rent amount or purchase price, as the case may be, to be
agreed upon, or (b) if no such agreement is reached prior to the expiration
of such Lease Term or such notice specifies that Lessee intends to return the
Equipment, then Lessee shall return the Equipment to Lessor in the manner
prescribed in Paragraph 16 of this MLA. In the absence of Lessor's timely
receipt of the notice contemplated by the preceding sentence, the Lease shall
be automatically extended, on a month-to-month basis, until terminated (upon
notice by either party given at least ninety (90) days prior to the end of
the month on which the termination is to be effective) or until renewed or
the Equipment subject thereto is purchased by agreement of the parties.
Unless otherwise agreed, Lessee shall continue to pay Rent for each month
following such Lease Term until the Equipment subject to such Lease is
returned pursuant to Paragraph 16 of this MLA.
25. CONSTRUCTION. This MLA shall be governed by and construed in
accordance with the internal laws, but not the choice of laws provisions, of
the State of California. The titles of the sections of this MLA are for
convenience only and shall not define or limit any of the terms or provisions
hereof. Time is of the essence in each of the provisions hereof.
26. PARTIES. This MLA shall be binding upon, and inure to the benefit
of, the permitted assigns, representatives and successors of the Lessor and
Lessee. If there is more than one Lessee named in this MLA, the liability of
each shall be joint and several.
27. COUNTERPARTS. Each Lease may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
28. OVERDUE CHARGE. Overdue Charge shall mean an amount equal to 2%
per month of any payment under a Lease which is past due, including without
limitation, any amounts not included in any payment of Rent hereunder, or the
highest charge permitted by law, whichever is lower.
The person executing this MLA on behalf of Lessee hereby certifies that he or
she has read, and is duly authorized to execute, this MLA
23
<PAGE>
Accepted by:
Ascend Credit Corporation
LESSEE: Startec Global Operating Company
----------------------------------------------------------
BY: BY:
---------------------------------- -------------------------------------
NAME: Annette Seveneus NAME: /s/ Prabhav Maniyar
-------------------------------- -----------------------------------
TITLE: Assistant Treasurer TITLE: Chief Financial Officer
-------------------------------- -----------------------------------
DATE: May 5, 1999 DATE: May 5, 1999
-------------------------------- -----------------------------------
24
<PAGE>
LEASE-TO-OWN SCHEDULE No.
--------------
This Schedule and its supplements incorporate by this reference the terms and
conditions of the Master Lease Agreement, Number A , between
-------------------
Ascend Credit Corporation (Lessor) and Startec Global
---------------------------------------
Operating Company (Lessee)
- ------------------------------------------------------------------------------
1. SUPPLIER:
-----------------------------------------------------------------
Ascend Communications, Inc.
- -------------------------------------------------------------------------------
- ------------------------------------.
2. LOCATION OF EQUIPMENT: TBD
-------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------.
3. EQUIPMENT VALUE: $ TBD
------------------------------------------------------------
- -------------------------------------------------------------(exclusive of sales
and/or use taxes).
4. LEASE TERM: The Lease Term of the Equipment described in this Schedule
shall begin on the Rent Commencement Date referenced below in Paragraph 6 and
its
25
<PAGE>
expiration date shall be months after such Rent Commencement
-----------------
Date.
5. RENT: $ TBD per month (exclusive of sales and/or use taxes)
-----------------
due and payable at the Rent Commencement Dates and on the same date of each
succeeding month of the Lease Term. The advance Rent payment shall be $
------
. This amount includes $
- ----------------------------- --------------------------
for the first month, and $ for the last
---------------------------------
month(s), of the Lease Term.
- -------------------------
6. RENT COMMENCEMENT DATE: TBD
---------------------------------------------------
7. PURCHASE OPTION: Lessee shall be required to purchase the Equipment for
one dollar ($1.00). The purchase price shall be payable upon the expiration
date of the Lease Term. Lessee shall be responsible for all applicable sales
and/or use taxes on the Equipment. Upon payment of the purchase price,
Lessor shall execute and deliver to Lessee such documents as Lessee may
reasonably request in order to vest in Lessee all right, title and interest
in the Equipment. Provided Lessee is not in default under the Master Lease
Agreement or any Lease Schedule Agreement (the "Schedule"). Lessee may at
any time upon ninety (90) days written notice (the "Notice") to Lessor,
pre-pay the Schedule with respect to all of the Equipment on the Schedule.
The pre-payment will be effective on the first Rent payment date following
the expiration of the ninety (90) day notice period (the "Pre-payment Date").
Lessee will, on the Pre-payment Date pay to Lessor or Lessor's assignee, as
the case may be, the Pre-Payment Value. The Pre-payment Value shall be equal
to the present value of the remaining unpaid Rent payments, discounted at a
rate equal to the yield to maturity for United States Treasury obligations
(as published in the Wall Street Journal as of the Rent Commencement Date)
with a like-term maturity to the Schedule plus fifty (50) basis points,
together with all other amounts then due and owing. Upon payment of the
Pre-payment Value, Lessee will not be obligated to pay any further Rent, and
all other terms will remain in full force and effect.
8. DESCRIPTION OF EQUIPMENT: See Schedule A which is attached hereto and
made a part hereof by this reference.
26
<PAGE>
The person executing this Schedule on behalf of Lessee hereby certifies that
he or she has read, and is duly authorized to execute, this Schedule
Accepted by:
Ascend Credit Corporation
LESSEE: Startec Global Operating Company
-----------------------------------------------------------
- ------
BY:
-------------------------------------------------------------------------
- ------------------- BY: DRAFT
-----------------------------------------------------
- --------------------------
NAME:
-------------------------------------------------------------------------
NAME:
- ------------ -----------------------------------------------------------
27
<PAGE>
- -----------------------------------------
Print
Print
TITLE:
-------------------------------------------------------------------------
TITLE:
- ----------------------------------- -------------------------------------
DATE:
--------------------------------------------------------------------------
DATE:
- -------------------------- ----------------------------------------------
- --------------------------------------
28
<PAGE>
IBM CREDIT CORPORATION
TERM LEASE MASTER AGREEMENT
<TABLE>
<S> <C> <C>
Name and Address of Lessee: STARTEC GLOBAL OPERATING CO Agreement No.: 8414108
10411 MOTOR CITY DR
BETHESDA, MD 20817-1008
Branch Office No.: SNU
Branch Office Address: IBM CORPORATION Customer No.: 8414109
4111 NOTHSIDE PKWY
ATLANTA, GA 30327
</TABLE>
The Lesser under this Term Lease Master Agreement ("Agreement") is a) IBM
Credit Corporation, a subsidiary of International Business Machines
Corporation ("IBM"); b) a partnership in which IBM Credit Corporation is a
partner; or c) a business enterprise for which IBM Credit Corporation is
acting as agent ("Lessor"). The "Lessee" is the business entity indicated on
the signature line below. Any Parent, Subsidiary or Affiliate of Lessee may
enter into a Lease and/or Financing Transaction (each as defined below) under
this Agreement by signing a Term Lease Supplement. ("Supplement") referencing
this Agreement and so will be bound to the terms and conditions of this
Agreement as Lessee. For the purposes of this Agreement, "Parent" shall mean
a business entity that owns or controls a majority interest of Lessee;
"Subsidiary" shall mean a business entry a majority interest of which is
owned or controlled by Lessee; and "Affiliate" shall mean a business entity
under common majority control with Lessee. A Lease or Financing Transaction
under this Agreement shall be effective when a Supplement listing equipment
to be leased ("Equipment") and software program licenses, maintenance,
services, and other one-time charges to be financed ("Financed Items") is
signed by both parties. Equipment includes any internal programming that is
integral to the Equipment's functioning ("Licensed Internal Code"). Lessee
may acquire Equipment and Financed Items from IBM, Lessor, or any other
manufacturer, vendor or provider ("Lessee's Supplier"). The terms of (a) the
Supplement; (b) any applicable attachments; and (c) this Agreement each as
may be amended by addenda, shall constitute the lease for the Equipment
("Lease") and Financing Transaction for the Financed Items ("Financing
Transaction") listed in the applicable Supplement. Some Leases or Financing
Transactions may have additional terms that will be specified in attachments
or addenda. Terms in a Supplement and related attachments or addenda will
apply only to the Lease and/or Financing Transaction represented by that
Supplement. The headings of the Paragraphs are inserted for convenience only.
1. OPTIONS. Each Supplement shall constitute a single Lease and/or
Financing Transaction but for each line item listed there will be a Lease or
Financing Transaction option indicated. The various options are described in
the "Option Codes" table on the Supplement.
2. CREDIT REVIEW. For each Lease or Financing Transaction, Lessee
consents to a reasonable credit review by Lessor.
3. AGREEMENT TERM. This Agreement shall be effective when signed by
both parties and may be terminated by either party upon one (1) month prior
written notice. Each Lease or Financing Transaction then in effect, however,
shall remain subject to the terms and conditions of this Agreement until its
expiration or termination.
4. LESSOR CHANGES. Lessor may, with at least three (3) months prior
written notice to Leasee, change the terms of this Agreement. Such changes
will apply only to Leases and Financing Transactions that begin after the
effective date specified in the notice, and only if Lessee does not notify
Lessor that it does not agree to the changes.
5. SURVIVAL OF OBLIGATIONS. Lessor's and Lessee's obligations under this
Agreement, which by their nature would continue beyond the expiration or
termination of a Lease or Financing Transaction, will survive the expiration
or termination of a Lease or Financing Transaction.
6. SELECTION AND USE OF EQUIPMENT, PROGRAMMING AND LICENSED PROGRAM
MATERIALS. Lessee agree that it did not rely on the Lessor, nor is the Lessor
responsible, for the selection, use of, and results obtained from the
Equipment or Financed items. Nothing in the Agreement is intended to limit
any rights Lessee may have with respect to Lessee's Supplier or the Equipment
manufacturer.
7. ASSIGNMENT TO LESSOR. Lessee assigns to Lessor, effective upon
Lessor signing the Supplement, its right to purchase from and its obligation
to pay its Supplier. All other rights and obligations as defined in the
agreement between Lessee and Lessee's Supplier governing the purchase of the
Equipment ("Purchase Agreement") shall remain with Lessee. Lessee represents
that it has reviewed and approved the Purchase Agreement. Lessor will not
modify or rescind the Purchase Agreement.
8. LEASE NOT CANCELLABLE; LESSEE'S OBLIGATIONS ABSOLUTE. Once the Term
of any Lease or Financing Transaction has begun as described in Paragraphs 13
and 14, Lessee's commitments herunder become irrevocable and independent of
acceptance of the Equipment. Lessee's obligation to pay all Rent and other
amounts required to be paid by Lessee under this Agreement is absolute and
unconditional and shall not be affected by any right of set-off or defense of
any kind whatsoever, including any failure of the Equipment or a Financed
Item to perform, or any representations by Lessee's Supplier. Lessee shall
make any claim solely against Lessee's Supplier, the Equipment manufacturer
or other third party if the Equipment or a Financed Item is unsatisfactory
for any reason.
9. WARRANTIES. Lessor passes through to Lessee, to the extent
permitted, all applicable warranties made available by Lessee's Sup-
THIS AGREEMENT, AND ANY APPLICABLE SUPPLEMENT, ATTACHMENTS OR ADDENDA ARE
THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT REGARDING EACH LEASE OR
FINANCING TRANSACTION. THESE DOCUMENTS SUPERSEDE ANY PRIOR ORAL OR WRITTEN
COMMUNICATIONS BETWEEN THE PARTIES. IF THERE IS A CONFLICT OF TERMS AMONG THE
DOCUMENTS, THE ORDER OF PRECEDENCE WILL BE AS FOLLOWS: (A) ATTACHMENTS OR
ADDENDA TO A SUPPLEMENT, (B) SUPPLEMENT, (C) ATTACHMENTS OR ADDENDA TO THIS
AGREEMENT, (D) THIS AGREEMENT. DELIVERY OF AN EXECUTED COPY OF ANY OF THESE
DOCUMENTS BY FACSIMILE OR ANY OTHER RELIABLE MEANS SMALL BE DEEMED TO BE AS
EFFECTIVE FOR ALL PURPOSES AS DELIVERY OF A MANUALLY EXECUTED COPY. LESSEE
ACKNOWLEDGES THAT LESSOR MAY MAINTAIN A COPY OF THE DOCUMENTS IN ELECTRONIC
FORM AND AGREES THAT A COPY REPRODUCED FROM SUCH ELECTRONIC FORM OR ANY OTHER
RELIABLE MEANS (FOR EXAMPLE, PHOTOCOPY, IMAGE OR FACSIMILE) SHALL IN ALL
RESPECTS BE CONSIDERED EQUIVALENT TO AN ORIGINAL. IF INDICATED HERE, THE
FOLLOWING ATTACHMENTS SHALL APPLY TO AND BE INCORPORATED BY REFERENCE IN THIS
AGREEMENT:
- -------------------------------------------------------
- -------------------------------------------------------
Accepted by:
IBM CREDIT CORPORATION
By:
----------------------------------------------------
Authorized Signature
----------------------------------------------------
Lessee may not modify or change the terms of this agreement without the
Lessor's prior written consent. /_____________/
Lessee Initial
LEASEE: STARTEC GLOBAL OPERATING CO
By:
-------------------------------
Authorized Signature
- ------------------------------------
<PAGE>
Supplier and/or by the Equipment manufacturer in the Purchase Agreement.
Lessor represents and warrants that neither Lessor, nor anyone acting or
claiming through Lessor, by assignment or otherwise, will interfere with
Lessee's quiet enjoyment of the Equipment so long as no event of default by
Lessee or anyone acting or claiming through Lessee shall have occurred and be
continuing. During the Term of the Lease, Lessor assigns to Lessee all the
rights that Lessor may have to be defended by Lessee's Supplier and/or by the
Equipment manufacturer under any patent and copyright provisions in the
Purchase Agreement. EXCEPT AS EXPRESSLY PROVIDED ABOVE, LESSOR MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. AS TO LESSOR, LESSEE LEASES THE EQUIPMENT AND TAKES ANY
FINANCED ITEM "AS IS". IN NO EVENT SHALL LESSOR HAVE ANY LIABILITY FOR, NOR
SHALL LESSEE HAVE ANY REMEDY AGAINST LESSOR FOR, CONSEQUENTIAL DAMAGES, ANY
LOSS OF PROFITS OR SAVINGS, LOSS OF USE, OR ANY OTHER COMMERCIAL LOSS. This
shall in no way affect Lessee's rights and remedies against Lessee's Supplier
and/or the Equipment manufacturer.
10. LESSEE AUTHORIZATION. Lessee is authorized to act on Lessor's behalf
concerning delivery and installation of the Equipment and any warranty
service for the Equipment, including any programming services. Lessor
represents and warrants that it has the right to grant the authorization and
rights to Lessee referred to in this Paragraph.
11. DELIVERY AND INSTALLATION. Lessee is responsible for the delivery,
installation and acceptance of the Equipment and any Financed Item and shall
pay any delivery and installation charges not paid by Lessee's Supplier.
Lessor shall not be liable for any delay in, or failure of, delivery of the
Equipment or Financed Items unless provided by Lessor.
12. USED EQUIPMENT LEASES. For used Equipment supplied by Lessor, the
following provisions apply. The Equipment is subject to prior disposition at
any time prior to Lessor's acceptance of a signed Supplement. The Equipment is
provided "as is", without any warranty whatsoever by Lessor, in accordance
with Paragraph 9. However, provided that the Equipment is unmodified since
the date of delivery; has been manufactured and assembled by or for IBM; and
has been installed and maintained by IBM, Lessor guarantees Lessee's
satisfaction with the quality of the Equipment for three (3) months following
the "Release Date" indicated on the face of the Supplement. If Lessee is
dissatisfied with the Equipment for any reason, Lessee may notify Lessor
within three (3) months of the Release Date and, at Lessor's option, the
Equipment will either be (a) replaced with equivalent Equipment or (b)
returned to Lessor and the Lease terminated and any Rent payments made to
Lessor refunded to Lessee. If Lessee cancels its commitment to Lease the
Equipment after Lessor signs the applicable Supplement but before the
Equipment is delivered and accepted by Lessee, then Lessee shall be liable to
Lessor for three (3) months Rent as liquidated damages. Lessor shall bear the
risk of loss or damage to the Equipment during transit from the pick-up
location to Lessee's location, provided the Equipment is transported by a
carrier designated by Lessor.
13. RENT COMMENCEMENT DATE. Unless otherwise stated on the applicable
Supplement, the Rent Commencement Date shall be (a) for Equipment supplied by
IBM, the day following the date of installation of the Equipment as provided
for in the Purchase Agreement; (b) for Equipment supplied by Lessor, the
earlier of the date of installation or fourteen (14) days after the Release
Date as specified in the Supplement; (c) for Equipment supplied by Lessee's
Supplier, the date Lessee designates on a certificate of acceptance; or, (d)
for Financed items, the date Lessor makes funds available to Lessee or
Lessee's Supplier.
14. LEASE TERM. The Lease or Financing Transaction shall be effective
when the Supplement is signed by both parties. The initial Term of the Lease
or Financing Transaction shall begin on the Rent Commencement Date and shall
expire at the end of the number of months specified as "Term" in the
Supplement. Except for Equipment supplied by Lessor, if Lessee cancels its
order with Lessee's Supplier prior to installation or discontinues any
Financed Item prior to the date Lessor makes funds available, the Lease or
Financing Transaction with respect to that item shall terminate without
penalty.
15. RATE PROTECTION. The Rates stated on the Supplement are not subject
to change provided the Supplement is signed and returned to Lessor by the
date indicated on the Supplement and the Equipment is installed by the end of
the month of the Estimated Commencement Date stated on the Supplement.
16. RENT. During the initial Term, Lessor shall invoice and Lessee shall
pay Rent for each Payment Period as specified in the Supplement. Lessee's
obligation to pay shall begin on the Rent Commencement Date. When the Rent
Commencement Date is not on the first day of a calendar month and/or when the
initial Term does not expire on the last day of a calendar month, the
applicable Rent for the first and last payment will be prorated on the basis
of 30-day months.
17. RENEWAL. Lessee may, upon at least one (1) month prior written notice
to Lessor, renew the Lease with respect to any one item of Equipment,
provided Lessee is not then in default. Lessor shall offer a renewal Term of
one (1) year but may, if requested, offer different renewal Terms. For
Equipment line items with a fair market value end-of-Lease renewal option,
the renewal Rent shall be the projected fair market rental value of the
Equipment as of the commencement of such renewal Term. For Equipment line
items with a prestated end-of-Lease renewal option, the renewal Rent shall be
one-half of the prestated Purchase Percent multiplied by the Unit Purchase
Price stated in the Supplement and such renewal Rent payments will be annual
and payable in advance.
18. PURCHASE OF EQUIPMENT. Lessee may, upon at least one (1) month prior
written notice to Lessor, purchase any line item of Equipment upon expiration
of the Lease provided Lessee is not then in default. For Equipment line items
with a fair market value end-of-Lease purchase option, the purchase price
shall be the projected fair market sales value of the Equipment as of such
expiration date. For Equipment line items with a prestated purchase option,
the purchase price shall be specified in the Supplement if the Lessee
purchases any Equipment. Lessee shall, on or before the date of purchase, pay
(a) the purchase price, (b) any applicable taxes, (c) all Rent due through
the day preceding the date of purchase, and (d) any other amounts due under
the Lease. Lessor shall, on the date of purchase, transfer to Lessee by bill
of sale provided upon Lessee's request, without recourse or warranty of any
kind, express or implied, all of Lessor's right, title and interest in and to
such Equipment on an "AS IS, WHERE IS" basis, except that Lessor shall
warrant title free and clear of all items and encumbrances created by or
through Lessor.
19. OPTIONAL EXTENSION. If, at the expiration of the Term, Lessee has
not elected to renew the Lease, purchase or return the Equipment in
accordance with Paragraph 25, and as long as Lessee is not in default under
the Lease, the Lease will be extended for each unreturned item of Equipment
unless (a) Lessee notifies Lessor in writing, not less than one (1) month
prior to Lease expiration, that Lessee does not want the extension, or (b)
the Equipment is returned to and received by Lessor within fourteen (14)
days after the expiration of the Term. The extension will be under the same
terms and conditions then in effect, including current Rent (but for
Equipment line items with a fair market value purchase option, not less than
fair market rental value as determined by Lessor at the expiration of the
Term) and will continue on a day-to-day basis until the earlier of
termination by either party upon one (1) month prior written notice, or six
(6) years after expiration of the initial Term. For purposes of this
Paragraph, current Rent shall be calculated as the sum of the Lease payments
over the initial Term divided by the initial Term of the Lease.
20. INSPECTION; MARKING; FINANCING STATEMENT. Upon reasonable advance
request, Lessee agrees to allow Lessor to inspect the Equipment and its
maintenance records during Lessee's normal business hours, subject to
Lessee's reasonable security procedures. Lessee will affix to the Equipment
any identifying labels supplied by Lessor indicating ownership. The filing of
any Uniform Commercial Code financing statements in connection with a Lease
or Financing Transaction shall be governed by the terms and conditions of the
applicable Supplement and any Supplement addendum.
21. EQUIPMENT USE. Lessee agrees that Equipment will be used for
business purposes and not primarily for personal, family or household
purposes and that it will be used in accordance with applicable laws and
regulations.
22. MAINTENANCE. Lessee shall, at its expense, on its own or through
third parties, keep the Equipment in a suitable environment as specified by
the Equipment manufacturer, and in good condition and working order, ordinary
wear and tear excepted.
23. ALTERATIONS; MODIFICATIONS; PARTS. For the purposes of this
Agreement, a "Part" is any component or element of the Equipment, a
"Modification" is any upgrade, feature or other change to the Equipment which
is or has been offered for sale by the Equipment manufacturer and which
contains no Part which has been changed or altered since its original
manufacture; an "Alteration" is any change to the Equipment which is not a
Modification. Lessee may modify or alter the Equipment only upon prior
written notice to Lessor. Lessee may obtain new or used Alterations or
Modifications from any supplier and may finance them with sources other than
Lessor provided no security interest is created that encumbers or conflicts
with Lessor's ownership of the Equipment. Any Lessor-owned Parts that Lessee
removes shall remain Lessor's property and Lessee shall not make such Parts
available for sale, transfer, exchange or other disposition without Lessor's
prior written consent.
Before returning the Equipment to Lessor, Lessee agrees to remove any
Alteration and may remove any Modification not owned by Lessor. If removed,
Lessee agrees to, at its expense, restore the Equipment to its original
condition using the removed Parts, normal wear and tear excepted. If Lessor
had previously consented to the disposition of removed Parts, the restoration
must be with Parts Lessor owns or supplies, or those supplied by a source
approved by Lessor. If not removed, such Modifications shall become the
property of Lessor, without charge, free of any items or encumbrances.
<PAGE>
Changes or additions made to items of Equipment in connection with
maintenance or warranty services, including engineering changes, utilizing
manufacturer's genuine parts, are exempt from the terms of this Paragraph,
and any Parts installed in connection with such services shall become the
property of Lessor.
24. LEASES FOR MODIFICATIONS. At Lessee's request, and subject to
satisfactory credit review, Lessor will lease or finance new Modifications,
used Modifications from Lessor's inventory, and Financed items associated
with the Modifications. Leases for Modifications will be at then current
terms and conditions and must be coterminous with the underlying Equipment
Lease.
25. RETURN OF EQUIPMENT. Lessee will return the Equipment to Lessor
upon expiration or termination of the Lease. Upon return, the Equipment must
be in good condition and working order, normal wear and tear excepted and
qualified for the manufacturer's maintenance service, if available. Lessee
will return the Equipment to the nearest IBM Credit consolidation and
refurbishment center for that type of Equipment located in the contiguous
United States. Unless otherwise agreed, Lessee is responsible for: a)
deinstallation, packing and return of the Equipment and any associated costs
and b) any cost to qualify the Equipment for the manufacturer's maintenance
service, or, if not available, the cost to return the Equipment to good
working condition. The return of the Equipment shall constitute a full
release by Lessee of any leasehold rights or possessory interest in the
Equipment.
26. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessor will maintain, at its
own expense, insurance covering loss of or damage to the Equipment (excluding
any Modifications or Alterations not subject to a Lease under this Agreement)
with a $5,000 deductible per occurrence. If any item of Equipment shall be
lost, stolen, destroyed or irreparably damaged for any cause whatsoever
("Casualty Loss") before the Rent Commencement Date, the Lease with respect
to that item shall terminate. If any item of Equipment suffers Casualty Loss,
or shall be otherwise damaged, on or after the Rent Commencement Date, Lessee
shall promptly inform Lessor. To claim a Casualty Loss Lessee must file a
police or fire department report or other appropriate documentation
substantiating the Casualty Loss. If Lessor determines that the item can be
economically repaired, Lessee shall place the item in good condition and
working order and Lessor will promptly reimburse Lessee the reasonable cost
of such repair, less the deductible. If not so reparable, Lessee shall pay
Lessor or Lesser of $5,000 or the fair market sales value of the Equipment
immediately prior to the Casualty Loss. Upon Lessor's receipt of payment the
Lease with respect to that item shall terminate and Lessee's obligation to
pay Rent for the Equipment will be deemed to have ceased as of the date of
the Casualty Loss. For purposes of this Paragraph, Lessor will consider the
manufacturer's charge for such repair to be the reasonable cost of repair.
27. TAXES. Lessee shall promptly reimburse Lessor, as additional Rent,
for all taxes, charges, and fees levied by any governmental body or agency
upon or in connection with this Agreement, excluding, however, all taxes on
or measured by the net income of Lessor.
28. LESSOR'S PAYMENT. If Lessee fails to pay taxes as required under
this Agreement, discharge any items or encumbrances on the Equipment (other
than those created by or through Lessor), or otherwise fails to perform any
other provision Lessee is required to perform under this Agreement, Lessor
shall have the right to act in Lessee's stead so as to protect Lessor's
interests, in which case, Lessee shall pay Lessor one cost thereof.
29. TAX INDEMNIFICATION. Solely for Leases entered into on the basis
that Lessor is the owner of the Equipment for tax purposes, Lessor and Lessee
agree that Lessor shall be entitled to certain federal and state tax benefits
available to an owner of Equipment, including, under the Internal Revenue
Code of 1986, as amended (the "Code"), the maximum Modified Accelerated Cost
Recovery System deductions for 5-year property and deductions for interest
expense incurred to finance the purchase of the Equipment ("Tax Benefits").
Lessee represents and warrants that (a) at no time will Lessee take or omit
to take any action which would result in a loss, reduction, disallowance,
recapture or other unavailability ("Loss") to Lessor (or the consolidated
group with which Lessor files tax returns) of the Tax Benefits, and (b)
Lessee will take no position inconsistent with the assumption that Lessor is
the owner of the Equipment for federal income tax purposes. Upon Lessor's
written notice to Lessee that a Loss of Tax Benefits has occurred, Lessee
shall reimburse Lessor an amount that shall make Lessor's after-tax rate of
return and cash flows ("Financial Returns") over the Term of the Lease equal
to the expected Financial Returns that would have been otherwise available.
Lessee shall have no obligation to reimburse Lessor for a Loss of Tax
Benefits resulting from (i) a determination that a Lease does not constitute
a true lease for federal income tax purposes, provided such determination is
not the result of an act of Lessee, or (ii) a change in the tax law after the
applicable Rent Commencement Date.
30. GENERAL INDEMNITY. Each Lease under this Agreement is a net lease.
Lessee indemnifies Lessor against any third party claims whatsoever which
arise in connection with this Agreement or Lessee's possession and use of the
Equipment or a financed term hereunder including all related reasonable costs
and expenses, and legal fees incurred by Lessor. Lessee shall not be liable
for any claim resulting from the sole negligence or willful misconduct of
Lessor. Lessee agrees that upon written notice by Lessor of the assertion of
any claim, Lessee shall assume full responsibility for the defense of such
claim. Lessor shall cooperate as may be reasonably required in such defense.
31. LIABILITY INSURANCE. Lessee shall obtain and maintain commercial
general liability insurance, in the amount of at least $1,000,000 or more for
each occurrence, with an insurer having a "Best Policyholders' rating of B+
or better. The policy shall name Lessor as an additional insured as Lessor's
interests may appear and shall contain a clause requiring the insurer to give
Lessor at least one (1) month prior written notice of the cancellation, or
any material alteration in the terms of the policy. Lessee shall furnish to
Lessor, upon request, evidence that such insurance coverage is in effect.
32. SUBLEASE AND RELOCATION OF EQUIPMENT; ASSIGNMENT BY LESSEE. Upon
one (1) month prior written notice to Lessor, Lessee may relocate the
Equipment to another of its business locations provided that Lessee remains
the end user of the Equipment. Any other relocation requires Lessor's prior
written consent. Upon Lessor's prior written consent, which will not be
unreasonably withheld, Lessee may sublease the Equipment to another end user.
No sublease or relocation shall relieve Lessee of its obligations under the
Lease and Lessee will be responsible for all costs and expenses associated
with any relocation or sublease of the Equipment, including additional taxes
or any Tax Loss incurred by Lessor. In no event shall Lessee remove or allow
the Equipment to be removed from the United States. LESSEE SHALL NOT ASSIGN,
TRANSFER OR OTHERWISE DISPOSE OF ANY LEASE OR FINANCING TRANSACTION, ANY
EQUIPMENT, OR ANY INTEREST THEREIN, OR CREATE OR SUFFER ANY LEVY, LIEN OR
ENCUMBRANCE THEREOF EXCEPT THOSE CREATED BY OR THROUGH LESSOR.
33. ASSIGNMENT BY LESSOR. Lessee acknowledges and understands that the
terms and conditions of the Leases and Financing Transactions have been fixed
to enable Lessor to sell and assign its interest or grant a security interest
or interests in the Leases and Financing Transactions and the Equipment,
individually or together, in whole or in part, for the purpose of securing
loans to Lessor or otherwise. Lessee shall not assert against any such
assignee any setoff, defense or counterclaim that Lessee may have against
Lessor or any other person. Lessor shall not be relieved of its obligations
hereunder as a result of any such assignment unless Lessee expressly consents
thereto, nor shall any rights or obligations of Lessee be changed except as
described herein.
34. FINANCING. Any one-time charge (indicated on the Supplement as the
"Amount Financed") for a Financed item will be paid by Lessor to Lessee's
Supplier or directly to Lessee. Any other charges which may be owned or due
to Lessee's Supplier shall be paid directly to Lessee's Supplier by Lessee.
Lessee's obligation to pay Rent for the Financed item shall not be affected
by any discontinuance, return or destruction of any Financed Item on or after
the date Lessor makes funds available. If Lessee discontinues any of the
Financed Items in accordance with the terms of the applicable agreement with
Lessee's Supplier prior to the date Lessor makes funds available, then the
Financing Transaction with respect to the affected one-time charge shall be
cancelled.
35. FINANCING PREPAYMENT. (DOES NOT APPLY FOR ITEMS OF EQUIPMENT).
Lessee may terminate a Financing Transaction (but not a Lease with respect to
an Item or Equipment) by prepaying its remaining Rent. Lessee shall provide
Lessor with at least one (1) month prior written notice of the intended
prepayment date. Lessor may, depending on market conditions at the time,
reduce the remaining Rent to reflect such prepayment and shall advise the
Lessee of the balance to be paid. If prior to Lease expiration, Lessee
purchases Equipment on Lease or if a Lease is terminated, Lessee shall at the
same time prepay any related line items of Financing Transactions.
36. DELINQUENT PAYMENTS. If any amount to be paid to Lessor is not
paid on or before its due date, Lessee shall pay Lessor two percent (2%) of
the unpaid amount for each month or part thereof from the due date until the
date paid or, if less, the maximum allowed by law.
37. DEFAULT; NO WAIVER. Lessee shall be in default under this
Agreement upon the occurrence of any of the following events: (a) Lessee
fails to pay any amount when due under this Agreement and such failure shall
continue for a period of seven (7) days after the due date; (b) Lessee
subleases, relocates, assigns or makes any transfer in violation of the terms
of this Agreement; (c) Lessee fails to perform any other obligations or
violates any of its covenants or representations under a Lease or Financing
Transaction, or Lessee fails to perform any of its obligations under any
other agreement it may have with Lessor, and such failure or breach shall
continue for a period of fifteen (15) days after written notice is received
by Lessee from Lessor; (d) Lessee or any guarantor at Lessee's obligations
under this Agreement makes a misrepresentation in any application for credit
or other financial data required to be provided by Lessee in connection with
a Lease of financing Transaction; (e) Lessee or a guarantor makes an
assignment for the benefit of creditors, or consents to appointment of a
trustee.
<PAGE>
or receiver, or if either shall be appointed for Lessee or a guarantor or for
a substantial part of its property without its consent; (f) any petition or
proceeding is filed by or against Lessee or a guarantor under any Federal or
State bankruptcy or insolvency code or similar law, and if such petition is
involuntary, it is not dismissed within sixty (60) days after filing thereof;
(g) Lessee or a guarantor sells or disposes of all or substantially all of
its assets (and Lessor does not consent to the same) or ceases doing
business; or (h) a guarantor or the provider of any other credit enhancement
under this Agreement breaches, terminates without Lessor's consent or contests
any guaranty or other credit enhancement document of which Lessor is a
beneficiary.
Lessor shall be in default under this Agreement upon the occurrence of any
of the following events: (I) Lessor breaches Lessee's right of quiet
enjoyment (except in an instance where Lessee is in default under the
applicable Lease or Financing Transaction), and Lessor is unable to remedy
such breach within fifteen (15) days of Lessee's written to Lessor thereof;
(ii) Lessor fails to perform any other provisions or violates any of its
covenants or representations under a Lease or Financing Transaction and such
failure or breach shall continue for a period of fifteen (15) days after
written notice is received by Lessor from Lessee; (III) Lessor makes an
assignment for the benefit of creditors or consents to the appointment of a
trustee or receiver, or if either shall be appointed for Lessor or for a
substantial part of its property without its consent; or (iv) any petition or
proceeding is filed by or against Lessor under any Federal or State
bankruptcy or insolvency code or similar law and, if such petition is
involuntary, it is not dismissed within sixty (60) days after filing
thereof.
Any failure of either party to require strict performance by the other
party or any waiver by either party of any provision in a Lease, Financing
Transaction or this Agreement shall not be construed as a consent or waiver
of any other breach of the same or any other provision.
38. REMEDIES. If Lessee is in default under this Agreement, all amounts due
and to decome due under each Lease and Financing Transaction shall be
immediately due and payable, without further notice from Lessor, and Lessor
shall have the right in its sole discretion, to exercise any one or more of
the following remedies in order to protect its interests, reasonably expected
profits and economic benefits under this Agreement. Lessor may (a) declare
any Lease or Financing Transaction entered into pursuant to this Agreement
to be in default; (b) terminate in whole or in part any Lease or Financing
Transaction; (c) recover from Lessee any or all amounts then due and to
become due; (d) take possession of any or all items of Equipment, wherever
located, without demand or notice, without any court order or other process
of law, in accordance with Lessee's reasonable security procedures; and (e)
demand that Lessee return any or all such items of Equipment to Lessor in
accordance with Paragraph 25 and, for each day that Lessee shall fail to
return any item of Equipment, Lessor may demand an amount equal to the
current Rent, prorated on the basis of a 30-day month. Upon repossession or
return of any item of Equipment, Lessor shall sell, lease or
otherwise dispose of such item in a commercially reasonable manner, with or
without notice and on public or private bid, and apply the net proceeds
thereof towards the amounts due under the Lease but only after deducting (I)
in the case of sale, the estimated fair market sales value of such item as
of the schedules expiration of the Lease; or (II) in the case of any
replacement lease, the rent due for any period beyond the scheduled
expiration of the Lease for such item; and (III) in either case, all
reasonable and necessary expenses, including reasonable legal fees, incurred
in connection therewith. Any excess net proceeds are to retained by Lessor.
Lessor may pursue any other remedy available at law or in equity. No right or
remedy is exclusive of any other provided herein or permitted by law or
equity; all such rights and remedies shall be cumulative and may be enforced
concurrently or individually.
If Lessor is in default under this Agreement, Lessee's exclusive and sole
remedy shall be (x) to terminate the applicable Lease or Financing Transaction
and return the applicable items of Equipment to Lessor, and (y) to recover
damages arising out of such default from Lessor, and all reasonable and
necessary expenses, including reasonable legal fees, incurred in connection
therewith.
39. LESSOR'S EXPENSES. Lessee shall pay Lessor all reasonable costs and
expenses, including reasonable legal and collection fees, incurred by Lessor
in enforcing the terms, conditions or provisions of this Agreement.
40. OWNERSHIP; PERSONAL PROPERTY; LICENSED PROGRAM MATERIALS. The
Equipment under Lease is and shall be the property of Lessor. Lessee shall
have no right, title or interest therein except as set forth in the Lease.
The Equipment is, and shall at all times be and remain, personal property and
shall not become a fixture or realty. Licensed programs that Lessee acquires
and finances with Lessor remain the property of their licensor. Ownership of
licensed programs is governed by the license agreement between the licensor
and Lessee, and is not affected by this Agreement.
41. NOTICES; ADMINISTRATION. Service of all motives under the Agreement
shall be sufficient if delivered personally or mailed to Lessee at its
address specified in the Supplement or to IBM Credit Corporation as Lessor
in care of the IBM location specified in the Supplement or invoice. Notices
by mail will be effective on receipt or three (3) days after being deposited
in the United States mail, duly addressed and with postage prepaid, whichever
is earlier. Notices of default will be sent certified mail, or registered
mail, or delivered in person and will be effective when received by the
party. Notices, consents and approvals from or by Lessor will be given by
the party or on its behalf by IBM and all payments will be made to IBM until
Lessor notifies Lessee otherwise.
42. LESSEE REPRESENTATION. Lessee represents and warrants that, as of the
date it enters into any Lease or Financing Transaction under this Agreement;
(a) Lessee is a legal entity, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and in each
jurisdiction where Equipment and Financed items will be located, with full
power to enter into this Agreement and any transactions contemplated herein;
(b) this Agreement and any Lease or Financing Transaction hereunder have been
duly authorized and executed by Lessee and constitute valid, legal, and
binding agreements, enforceable in accordance with their terms; (c) the
execution and performance by Lessee of its obligations under this Agreement
and any Lease or Financing Transaction will not violate any judgment, order,
law or governmental regulation affecting Lessee or any provision of Lessee's
documents of organization, or result in a breach or default of any
instrument or agreement to which Lesee is a party or to which Lessee may be
bound.
43. GENERAL. Lessee agrees to take such further action and to execute
such additional documents, instruments and financing statements as Lessor shall
reasonably request to complete any Lease or Financing Transaction under this
Agreement or to protect Lessor's interest in the Equipment or Financed Items.
This agreement may be executed in any number of counterparts, each of
which shall constitute an original, but all of which together shall constitute
but one and the same document.
44. APPLICABLE LAW; SEVERABILITY. This Agreement will be governed by and
construed in accordance with the laws of the State of New York. If any
provision of this Agreement is held to be invalid or unenforceable, all
other provisions shall remain in effect.
<PAGE>
North Castle Drive
IBM CREDIT CORPORATION Armonk, NY 10504-1785
914/765-1900
www.financing.ibm.com
- -------------------------------------------------------------------------------
ADDENDUM TO TERM LEASE MASTER AGREEMENT
Enterprise No. 8515451 Term Lease Master Agreement No. 8414109
-------
Customer No. 8414109 Addendum No. 52250699
Lessor and STARTEC GLOBAL OPERATING CO (Lessee) agree that the Term Lease
Master Agreement between the parties is hereby modified as follows:
A Paragraph 32 - Sublease and Relocation of Equipment; Assignment by
Lessee - at the end of the paragraph add the following:
"Notwithstanding anything to the contrary in this Paragraph, Lessee may
relocate the Equipment without consent from or notice to Lessor provided
such Equipment is specifically designed and designated as portable, any
relocation is the result of temporary trips taken in the ordinary course
of business and the Equipment is returned to the original Equipment
Location."
Prepared by: J CODY
June 16, 1999
Accepted by:
IBM Credit Corporation STARTEC GLOBAL OPERATING CO
For or as Lessor:
by ___________________________ by
-------------------
Authorized Signature Authorized Signature
___________________________
-------------------------
Name (Type or Print) Date Name (Type or Print) Date
S2250699/BP6
This Addendum is valid if accepted by STARTEC GLOBAL OPERATING CO and IBM
Credit Corporation no later that July 28, 1999.
- -------------------------------------------------------------------------------
NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED
Addendum No. S2250699
1
<PAGE>
Exhibit 10.52
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
STARTEC GLOBAL OPERATING COMPANY
as Borrower
Dated: As of June 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS.....................................................................................1
SECTION 2. CREDIT FACILITIES..............................................................................18
2.1 Loans..........................................................................................18
2.2 Letter of Credit Accommodations................................................................18
2.3 Maximum Credit.................................................................................20
2.4 Availability Reserves..........................................................................20
SECTION 3. INTEREST AND FEES..............................................................................21
3.1 Interest.......................................................................................21
3.2 Closing Fee....................................................................................21
3.3 Unused Line Fee................................................................................21
SECTION 4. CONDITIONS PRECEDENT...........................................................................21
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations......................21
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations..........................23
SECTION 5. GRANT OF SECURITY INTEREST.....................................................................24
SECTION 6. COLLECTION AND ADMINISTRATION..................................................................26
6.1 Borrower's Loan Account........................................................................26
6.2 Statements.....................................................................................26
6.3 Collection of Accounts.........................................................................26
6.4 Payments.......................................................................................27
6.5 Mandatory Prepayments..........................................................................28
6.6 Authorization to Make Loans....................................................................28
6.7 Use of Proceeds................................................................................28
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................................................29
7.1 Collateral Reporting...........................................................................29
7.2 Accounts Covenants.............................................................................30
7.3 Equipment Covenants............................................................................32
7.4 Power of Attorney..............................................................................32
7.5 Right to Cure..................................................................................33
7.6 Access to Premises.............................................................................33
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................33
8.1 Corporate Existence, Power and Authority; Subsidiaries.........................................34
8.2 Financial Statements; No Material Adverse Change...............................................34
(i)
<PAGE>
8.3 Principal Place of Business; Collateral Locations..............................................34
8.4 Priority of Liens; Title to Properties.........................................................34
8.5 Tax Returns....................................................................................35
8.6 Litigation.....................................................................................35
8.7 Compliance with Other Agreements and Applicable Laws...........................................35
8.8 Carrier Service Agreements.....................................................................36
8.9 Billing Processor Agreements...................................................................36
8.10 Governmental Authorizations....................................................................37
8.11 No Regulatory Event............................................................................37
8.12 Trade Relations................................................................................37
8.13 Material Contracts.............................................................................37
8.14 Bank Accounts..................................................................................38
8.15 Intellectual Property..........................................................................38
8.16 Solvency.......................................................................................38
8.17 Accuracy and Completeness of Information.......................................................39
8.18 Survival of Warranties; Cumulative.............................................................39
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................39
9.1 Maintenance of Existence.......................................................................39
9.2 New Collateral Locations.......................................................................39
9.3 Compliance with Laws, Regulations, Etc.........................................................40
9.4 Payment of Taxes and Claims....................................................................40
9.5 Insurance......................................................................................40
9.6 Financial Statements and Other Information.....................................................41
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc........................................42
9.8 Encumbrances...................................................................................43
9.9 Indebtedness...................................................................................43
9.10 Loans, Investments, Guarantees, Etc............................................................45
9.11 Dividends and Redemptions......................................................................47
9.12 Transactions with Affiliates...................................................................48
9.13 Additional Bank Accounts.......................................................................48
9.14 Financial Covenants............................................................................48
9.15 Minimum Cash Balance...........................................................................48
9.16 Changes in Business............................................................................48
9.17 Carrier Service Agreements.....................................................................49
9.18 Billing Processor Agreements...................................................................50
9.19 End of Fiscal Years; Fiscal Quarters...........................................................50
9.20 Year 2000 Compliance...........................................................................51
9.21 Costs and Expenses.............................................................................51
9.22 Further Assurances.............................................................................51
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................................52
10.1 Events of Default..............................................................................52
(ii)
<PAGE>
10.2 Remedies.......................................................................................54
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS.................................................................
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..........................56
11.2 Waiver of Notices..............................................................................57
11.3 Amendments and Waivers.........................................................................57
11.4 Waiver of Counterclaims........................................................................57
11.5 Indemnification................................................................................57
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS...............................................................58
12.1 Term...........................................................................................58
12.2 Notices........................................................................................59
12.3 Partial Invalidity.............................................................................60
12.5 Successors.....................................................................................60
12.6 Entire Agreement...............................................................................61
</TABLE>
(iii)
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A Information Certificate for Borrower
Exhibit B Certificate for Acquisitions
Schedule 1.52 Permitted Holders
Schedule 7.2(a) Description of Policies on Giving Credits,
Discounts or Allowances
Schedule 6.6 List of Persons Authorized to Request Loans
Schedule 8.1 Subsidiaries
Schedule 8.3 List of Locations
Schedule 8.6 Litigation
Schedule 8.4 Existing Liens
Schedule 8.7 FCC and Other Licenses
Schedule 8.8 Carrier Service Agreements
Schedule 8.9 Billing Processor Agreements
Schedule 8.10 Governmental Filings with respect to Financing
Schedule 8.13 Material Contracts
Schedule 8.14 Bank Accounts
Schedule 8.15 Intellectual Property
Schedule 9.9(c) Financial Covenants
Schedule 9.9(d) Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
Schedule 9.16 Assets of Parent for which Consents to Transfer are to be Obtained
</TABLE>
(i)
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated as of June 29, 1999 is entered
into by and between Congress Financial Corporation, a Delaware corporation
("Lender") and Startec Global Operating Company, a Delaware corporation
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured. Any accounting term used herein unless otherwise defined in this
Agreement shall have the meanings customarily given to such term in accordance
with GAAP. For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Account Debtor" shall mean each debtor or obligor in any way
obligated on or in connection with any Receivable.
<PAGE>
1.2 "Accounts" shall mean all present and future rights of Borrower to
payment for services rendered or goods sold or leased, whether or not evidenced
by instruments or chattel paper, and whether or not earned by performance (and
including, without limitation, Retail Accounts and Carrier Accounts).
1.3 "Affiliate" shall mean, with respect to a specified Person, any
other Person (a) which directly or indirectly through one or more Persons
controls, or is controlled by, or is under common control with, such specified
Person; (b) which beneficially owns ten percent (10%) or more of the Voting
Stock or other equity interest of such specified Person; or (c) of which ten
percent (10%) or more of the Voting Stock or other equity interest is
beneficially owned or held by such specified Person or a Subsidiary of such
specified Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") when used with respect to any specified Person shall mean the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by agreement or
otherwise.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may in good faith from time to time
establish and revise in good faith reducing the amount of Loans and Letter of
Credit Accommodations which would otherwise be available to Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Lender, do or may adversely
affect either (i) the Collateral or any other property which is security for the
Obligations or its value, (ii) the assets or business of Borrower or any Obligor
or (iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) to reflect amounts payable as royalties or other fees
in respect of licenses or other agreements to use Intellectual Property owned by
third parties or (e) to reflect amounts payable to any Billing Processor, or (f)
to reflect amounts payable to any Carrier whose switching or transmission
facilities are being used to handle the origination of calls from Retail
Customers or (g) in respect of any state of facts which Lender determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default. The term "Availability Reserves"
as used herein shall also include, in addition and without limitation, the
Special Availability Reserve, EXCEPT THAT for purposes of establishing the
amount of the Special Availability Reserve, such Special Availability Reserve
shall not be included in the Availability Reserves.
1.5 "Billing Processor" shall mean any servicing or processing agent or
intermediary who facilitates, services, processes or manages the credit
authorization, billing transfer and/or payment procedures with respect to any
services provided by Borrower to its Retail Customers through a Carrier or
otherwise, including, but not limited to, Billing Concepts, Inc.
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<PAGE>
1.6 "Billing Processor Acknowledgments" shall mean, individually and
collectively, agreements in form and substance satisfactory to Lender, by any
Billing Processor (including Billing Concepts, Inc.) in favor of Lender
acknowledging Lender's first priority security interest in all amounts at any
time payable by such Billing Processor to Borrower, confirming that such Billing
Processor has no rights or interests in or to any Accounts or other amounts
payable by such Billing Processor to Borrower (except as Lender may otherwise
specifically agree in writing) and is acting solely as an agent on behalf of
Borrower and agreeing to transfer all such amounts to the Blocked Accounts and
such related matters as Lender may require, as the same may from time to time
exist or be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.7 "Billing Processor Agreements" shall mean all agreements (other
than Billing Processor Acknowledgments) now existing or hereafter entered into
by Borrower with any Billing Processor, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced,
including without limitation, the agreements listed on Schedule 8.9 hereto.
1.8 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.9 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) the lesser of:
(i) the amount equal to: (A) the sum of: (1) eighty-five
(85%) percent of the Net Amount of Eligible Carrier Accounts, PLUS (2) eighty
(80%) percent of the Net Amount of Eligible Retail Accounts, MINUS (B) any
Availability Reserves (other than the Special Availability Reserves),
(ii) the aggregate amount of the actual cash receipts from
payments on Accounts received by
Borrower during the immediately preceding sixty (60) day period, or
(iii) the Maximum Credit,
MINUS
(b) the Special Availability Reserve.
1.10 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York, or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business.
1.11 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such
3
<PAGE>
Person as lessee which in accordance with GAAP is required to be reflected as a
liability on the balance sheet of such Person.
1.12 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock, partnership interests or limited liability
company interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.13 "Carrier Accounts" shall mean Accounts owing by Carriers arising
from the sale by Borrower to such Carriers of telecommunication services
pursuant to the Carrier Service Agreements or otherwise.
1.14 "Carriers" shall mean, collectively, telecommunication
interexchange carriers or other providers of telecommunications long distance
services and local exchange companies or other providers of local
telecommunications service, sometimes being referred to herein individually as a
"Carrier".
1.15 "Carrier Service Agreements" shall mean, collectively, the
agreements between Borrower and certain Carriers in the ordinary course of the
business of Borrower as currently conducted providing for the purchase by
Borrower from such Carrier, or the sale by Borrower to such Carrier, of
telecommunication services, sometimes being referred to herein individually as a
"Carrier Service Agreement".
1.16 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America or any State thereof or any agency or instrumentality of the United
States of America or any State thereof; PROVIDED, THAT, the full faith and
credit of the United States of America or any State thereof is pledged in
support thereof; (b) certificates of deposit or bankers' acceptances with a
maturity of one hundred eighty (180) days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $200,000,000; (c) commercial
paper (including variable rate demand notes) with a maturity of one hundred
eighty (180) days or less issued by a corporation (except an Affiliate of
Borrower) organized under the laws of any State of the United States of America
or the District of Columbia and rated at least A-1 by Standard & Poor's Ratings
Service, a division of The McGraw-Hill Companies, Inc., or at least P-1 by
Moody's Investors Service, Inc.; (d) repurchase obligations with a term of not
more than thirty (30) days for underlying securities of the types described in
clause (a) above entered into with any financial institution having combined
capital and surplus and undivided profits of not less than $200,000,000; (e)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit to the United States of America, in each case maturing within
one hundred eighty (180) days or less
4
<PAGE>
from the date of acquisition; PROVIDED, THAT, the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets in
securities of the types described in clauses (a) through (e) above.
1.17 "CDRs" shall mean the call detail records arising from the use by
Retail Customers of the telecommunication services of Borrower, constituting
computer readable records containing the billing data for such use of the
telecommunication services in the Bellcore EMI (exchange message interface)
format which each LEC used by such Retail Customers has the capability of
processing through its billing and collection systems.
1.18 "Change of Control" shall mean the acquisition by any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act), except for
one or more Permitted Holders, of beneficial ownership, directly or indirectly,
of fifty percent (50%) or more of the voting power of the total outstanding
Voting Stock of Borrower or Parent or the ability or right to control the
election of at least a majority of the Board of Directors of Borrower or Parent.
1.19 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.20 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.21 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Lender, from any lessor of premises to
Borrower, or any other person to whom any Collateral is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other person, INTER ALIA, acknowledges the
security interest of Lender in such Collateral, agrees to waive any and all
claims such lessor, consignee or other person may, at any time, have against
such Collateral, whether for processing, storage or otherwise, and agrees to
permit Lender access to, and the right to remain on, the premises of such
lessor, consignee or other person so as to exercise Lender's rights and remedies
and otherwise deal with such Collateral.
1.22 "Communications Act" shall mean the Communications Act of 1934, as
the same now exists or may from time to time hereafter be amended (and including
as amended pursuant to the Telecommunications Act of 1996), modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.23 "Communications Laws" shall mean the Communications Act and any
similar or successor Federal statute and any applicable State or foreign law
governing the provision of telecommunications services, as the same now exist or
may from time to time hereafter be
5
<PAGE>
amended, modified, recodified or supplemented, together with all rules,
regulations and interpretation thereunder or related thereto.
1.24 "Dilution" shall mean, as to any Person for any period, the
fraction, expressed as a percentage, the numerator of which is the aggregate
amount of the reductions in the amount of the Accounts of such Person for such
period (other than as a result of cash payments thereof) and the denominator of
which is the aggregate dollar amount of the sales of such Person for such
period.
1.25 "Eligible Accounts" shall mean, collectively, Eligible Carrier
Accounts and Eligible Retail Accounts.
1.26 "Eligible Carrier Accounts" shall mean Carrier Accounts created by
Borrower in the ordinary course of business which are and continue to be
acceptable to Lender in the exercise of its reasonable judgment in good faith
based on the criteria set forth below. In general, Carrier Accounts shall be
Eligible Carrier Accounts if:
(a) such Accounts arise from the actual and BONA FIDE sale by
Borrower in the ordinary course of its business of its international long
distance services to a Carrier which transactions are completed in accordance
with the terms and provisions contained in the Carrier Services Agreement of
Borrower with such Carrier and any documents related thereto;
(b) such Accounts are not unpaid more than forty-five (45) days
after the date of the original invoice for them;
(c) such Accounts comply with the provisions contained in Section
7.2(c) of this Agreement;
(d) the chief executive office and principal place of business of
the Carrier which is the Account Debtor with respect to such Accounts is located
in the United States of America or Canada, or at Lender's option, if the chief
executive office and principal place of business of the carrier which is the
Account Debtor with respect to such Accounts is located other than in the United
States of America or Canada, such Account is otherwise acceptable in all
respects to Lender (subject to such advance percentage or other limitations and
conditions with respect thereto as Lender may from time to time determine);
(e) the Carrier with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts,
other than transactions in the ordinary course of business for amounts owing by
Borrower to such Carrier which have been considered in the calculation of the
Net Amount of Eligible Carrier Accounts;
6
<PAGE>
(f) there are no facts, events or occurrences which would be
reasonably likely to impair the validity, enforceability or collectability of
such Accounts or reduce the amount payable or delay payment thereunder;
(g) such Accounts are subject to the first priority, valid and
perfected security interest of Lender;
(h) neither the Account Debtor nor any officer or employee of the
Account Debtor with respect to such Accounts is an officer, employee or agent or
other Affiliate of Borrower or Parent;
(i) the Carrier with respect to such Accounts is not any foreign
government, or any corporation or other entity owned or controlled by any
foreign government or any political subdivision, department, agency, or
instrumentality thereof or other Governmental Authority;
(j) there are no proceedings or actions which are threatened or
pending against the Carriers with respect to such Accounts which might result in
any material adverse change in any such Carrier's financial condition in the
good faith determination of Lender;
(k) such Accounts owing by a single Carrier or its Affiliates
(other than MCI Worldcom, Inc.) do not constitute more than thirty-five percent
(35%) of all otherwise Eligible Carrier Accounts or in the case of Accounts
owing by MCI Worldcom, Inc. or its Affiliates do not constitute more than fifty
percent (50%) of all otherwise Eligible Accounts (but in each case the portion
of the Accounts not in excess of the applicable percentage may be deemed
Eligible Carrier Accounts);
(l) such Accounts are not owed by a Carrier who has Accounts
unpaid more than forty-five (45) days after the original invoice date for them,
which constitute more than fifty (50%) percent of the total Accounts of such
Carrier;
(m) such Accounts have been billed by Borrower directly to the
Carrier obligated thereon;
(n) the Carrier Service Agreement with the Carrier obligated in
respect of such Accounts shall be in full force and effect and no party thereto
shall have sent any notice of its intent to terminate or suspend such agreement
and such agreement shall constitute the valid, binding and enforceable
obligations of the parties thereto;
(o) no material default or event of default has occurred under
the Carrier Service Agreement of Borrower with the Carrier obligated in respect
of such Accounts and such Carrier has not sent any notice of a default
thereunder or of its intention to cease or suspend payments in respect of
Accounts;
7
<PAGE>
(p) procedures for evaluating the creditworthiness of the
Carrier, as from time to time established by Borrower (and at all times
acceptable to Lender in its good faith judgment), have been diligently and
properly completed as to such Accounts, and the Carrier with respect to such
Accounts are eligible for credit in the amount and on the terms set forth in the
Carrier Service Agreement with respect to such Accounts pursuant to the criteria
from time to time established by Borrower (and at all times acceptable to Lender
in its good faith judgment);
(q) such Accounts are owed by Carriers whose total indebtedness
to Borrower does not exceed the credit limit with respect to such Carriers as
determined by Borrower from time to time and as is reasonably acceptable to
Lender (but the portion of the Accounts not in excess of such credit limit may
be deemed Eligible Carrier Accounts); and
(r) such Accounts are owed by Carriers deemed creditworthy at all
times by Lender, as determined in good faith by Lender.
General criteria for Eligible Carrier Accounts may be established and revised
from time to time by Lender in good faith. Any Carrier Accounts which are not
Eligible Carrier Accounts shall nevertheless be part of the Collateral. Any
Eligible Carrier Accounts arising after the end of any month, but prior to the
date of the issuance of the invoices for the Carrier Accounts arising during
such month shall not be Eligible Carrier Accounts until the date that the
invoices for such Carrier Accounts have been issued.
1.27 "Eligible Retail Accounts" shall mean Retail Accounts created by
Borrower in the ordinary course of business which are and continue to be
acceptable to Lender in the exercise of its reasonable judgment in good faith
based on the criteria set forth below. In general, Retail Accounts shall be
Eligible Retail Accounts if:
(a) such Accounts arise from the actual and BONA FIDE provision
of telecommunication services by Borrower to a Retail Customer in the ordinary
course of the business of Borrower which transactions are completed in
accordance with the terms and provisions contained in any documents binding on
Borrower or the other party or parties related thereto (including the Retail
Customer, the Billing Processor and the LEC with respect thereto);
(b) as to Accounts owing by a single individual Retail Customer,
the amount outstanding at any one time does not exceed $1,000 and as to Accounts
owing by a single business Retail Customer, the amount outstanding at any one
time does not exceed $10,000;
(c) such Accounts are not unpaid more than ninety (90) days after
the date of the delivery by Borrower to the Billing Processor of the CDRs (in
their initial format) which are the basis for such Accounts;
(d) the invoice or billing statement for such Accounts has been
issued no later than forty-five (45) days after the end of the applicable
billing cycle (which billing cycle is and shall be thirty (30) days) giving rise
to such Accounts and no later than forty (40) days after the date of
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<PAGE>
the delivery by Borrower to the Billing Processor of the CDRs (in their initial
format) which are the basis for such Accounts;
(e) the billing and collection arrangements for the Retail
Customers obligated on such Accounts are subject to an agreement between the
Billing Processor used by Borrower and the applicable LEC which is the LEC for
such Retail Customers for billing and collection of payments with respect to
such Retail Customers and such agreements between the Billing Processor and the
LEC are in full force and effect and there is no default or event of default
thereunder;
(f) the amount of such Account has been accepted and billed to
the appropriate LEC by the Billing Processor handling such Account;
(g) all procedures required by the Billing Processor handling
such Accounts and the applicable LEC in respect of such Retail Accounts shall
have been followed and all applications or other documents required for the
approval of the Retail Customer of Borrower for the purchase of services giving
rise to such Retail Accounts shall have been taken and properly completed;
(h) the CDRs giving rise to such Accounts have been sent to the
Billing Processor in the format required under the terms of the Billing
Processor Agreement of Borrower with the Billing Processor and as otherwise
required thereunder and constitute Valid EMI Billing Records;
(i) such Retail Accounts comply with the applicable terms and
conditions contained in Section 7.2 of the Loan Agreement;
(j) the Retail Customer has not asserted a counterclaim, defense
or dispute (other than in the ordinary course of business to the extent that the
aggregate amounts involved for all Retail Customers are less than five percent
(5%) of all otherwise Eligible Retail Accounts, which amounts shall reduce the
amounts of Eligible Accounts and so long as the aggregate amounts subject to
disputes shall have been reported to Lender) and the Retail Customer does not
have, and does not engage in transactions with Borrower which may give rise to,
any right of setoff against such Accounts;
(k) there are no facts, events or occurrences which would (i)
impair the validity, enforceability or collectability of such Retail Accounts or
(ii) reduce the amount payable or delay payment thereunder, other than
reductions in the ordinary course of the business of Borrower in accordance with
the terms of the applicable Billing Processor Agreement;
(l) such Retail Accounts are subject to the first priority, valid
and perfected security interest of Lender;
9
<PAGE>
(m) the Retail Customer obligated on such Accounts has a valid
phone connection through the LEC receiving the CDR giving rise to such Accounts;
(n) the LEC used by the Retail Customer has not rejected the CDR
submitted to it by the Billing Processor on behalf of Borrower for the services
provided by Borrower to such Retail Customer giving rise to such Accounts;
(o) such Retail Customer and his or her use of the LEC or the
services provided by Borrower have not been blocked from the use of such
telecommunication services or the use by Retail Customer of such services has
not otherwise been suspended or discontinued;
(p) Lender shall have received, in form and substance
satisfactory to Lender, a Billing Processor Acknowledgment, duly authorized,
executed and delivered by the Billing Processor handling the billing and
collection of such Accounts, and such agreement shall be in full force and
effect and the Billing Processor shall be in compliance with the terms thereof;
(q) the Retail Customer obligated on such Accounts has a valid
and operating originating call number issued by the appropriate LEC registered
with Borrower and does not have more than three (3) such numbers;
(r) there are no proceedings or actions which are threatened or
pending against the Retail Customer with respect to such Accounts which would
have a reasonable likelihood of resulting in any material adverse change to the
ability of such Retail Customer to make payment of the Accounts owing by it;
(s) the Billing Processor handling the billing and collection of
such Accounts shall be deemed creditworthy at all times by Lender;
(t) such Account is not owing in connection with the settlement
of any bad debt reserve with respect to Retail Accounts established by the
applicable Billing Processor or LEC;
(u) no default or event of default has occurred under the Billing
Processor Agreement which default gives the Billing Processor the right to cease
or suspend payments to Borrower and no event shall have occurred which gives the
Billing Processor the right to reduce the amounts otherwise payable to Borrower,
other than for then current processing fees, inquiry fees or other reasonable
and customary fees of the Billing Processor or applicable LEC consistent with
the current practices of the Billing Processor as of the date hereof and any bad
debt reserve established by the Billing Processor in accordance with its current
practices as of the date hereof, PROVIDED, THAT, (i) such fees and reserves have
been reported to Lender, (ii) the Billing Processor Agreement is otherwise in
full force and effect, and (iii) such fees and reserves have been considered in
the calculation of the Net Amount of Eligible Retail Accounts; and
(v) if the Retail Customer is in an area that does not have
direct access from the LEC to switching and transmission facilities owned or
leased by Borrower, then the agreement of
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Borrower with the Carrier whose facilities are being used by the LEC to
ultimately switch the call to the facilities of Borrower shall be in full force
and effect;
(w) the LEC receiving the CDR and/or related information arising
from the use of the services of Borrower for such Accounts is the LEC for the
Retail Customer obligated on such Account;
(x) the Accounts are not deemed bad debt accounts by the LEC for
the Retail Customer who is obligated on such Accounts;
(y) the amount of such Accounts owing by Retail Customer do not
exceed the discretionary limits of the applicable LEC for such customer;
(z) Borrower has the proper Licenses necessary to bill and
collect on such Accounts, which Licenses are specifically identified in Schedule
8.7 as required for such purpose;
(aa) the Accounts do not arise from telecommunication services
that originate and terminate in the same state in the United States of America;
(bb) the CDRs with respect to such Account have been generated by
Borrower and transmitted in accordance with its current practices as of the date
hereof (which generally will be within three (3) Business Days) to the Billing
Processor and transmitted by the Billing Processor to the applicable LEC in
accordance with the terms of the agreement of the Billing Processor with such
LEC;
(cc) the Billing Processor has not sent any notice of default
and/or of its intention to cease or suspend payments to Borrower in respect of
such Retail Accounts.
General criteria for Eligible Retail Accounts may be established and revised
from time to time by Lender in good faith. Any Retail Accounts which are not
Eligible Retail Accounts shall nevertheless be part of the Collateral.
1.28 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.29 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.30 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the Borrowing Base, MINUS (b) the
sum of: (i) the amount of all then
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outstanding and unpaid Obligations, plus (ii) the aggregate amount of all then
outstanding and unpaid trade payables and other obligations (including
obligations to lessors and licensors) of Borrower which are more than sixty (60)
days past due as of such time, plus (iii) the amount of checks issued by
Borrower to pay trade payables, but not yet sent.
1.31 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
the same now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder.
1.32 "FCC" shall mean the Federal Communications Commission of the
United States of America, and any successor, in whole or in part, to its
jurisdiction.
1.33 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.34 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.14 and Schedule 9.9(c) hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.35 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.36 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any
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indebtedness described in this definition of another Person, including, without
limitation, any such indebtedness, directly or indirectly guaranteed, or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker's acceptances or similar
documents or instruments issued for such Person's account; and (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time.
1.37 "Information Certificate" shall mean the Information Certificates
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower and its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.38 "Intellectual Property" shall mean Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, trade names, trade styles, patent and trademark applications and
licenses and right thereunder, and other rights under any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill; customer and other lists in
whatever form maintained; and trade secret rights, copyright rights, rights in
works of authorship, and contract rights relating to computer software programs,
in whatever form created or maintained.
1.39 "Interest Rate" shall mean the Prime Rate per annum, PROVIDED,
THAT, notwithstanding anything to the contrary contained herein, the Interest
Rate shall mean the rate of two percent (2%) per annum in excess of the Prime
Rate, at Lender's option, after prior notice, (a) for the period from and after
the date of the occurrence of any Event of Default, and for so long as such
Event of Default is continuing (and it shall be deemed an Event of Default for
purposes hereof in the event Lender does not receive final payment and
satisfaction in full of all of the Obligations on the date of termination or
non-renewal hereof) and (b) on that portion of the Loans at any time outstanding
that are in excess of the amounts available to Borrower under Section 2 (whether
or not such excess(es) arise or are made with or without Lender's knowledge or
consent and whether made before or after an Event of Default).
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1.40 "LEC" shall mean a Carrier which is a local exchange carrier or a
regional Bell operating company providing local telecommunication services to
retail customers in the ordinary course of its business.
1.41 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or any Obligor
or (b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrower of its obligations to such
issuer.
1.42 "Licenses" shall mean all approvals, authorizations, licenses,
filings, registrations, consents, permits, exemptions, registrations,
qualifications, designations, declarations, or other actions or undertakings now
or hereafter made by, to or in respect of any Governmental Authority, including,
without limitation, any certificates of public convenience and all grants,
approvals, licenses, filings and registrations from or to the FCC or any PUC or
under any Communications Law necessary in order to enable Borrower to own and
operate its business and assets as currently conducted or proposed to be
conducted.
1.43 "Loans" shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower on a revolving basis (involving advances, repayments
and readvances) as set forth in Section 2.1 hereof.
1.44 "Material Adverse Effect" shall mean any fact, condition or
circumstance that has or would reasonably be expected to have a material adverse
effect on (a) the condition (financial or otherwise), business, performance,
operations or assets of Borrower; (b) the legality, validity or enforceability
of this Agreement or any of the other Financing Agreements; (c) the legality,
validity, enforceability, perfection or priority of the security interests and
liens of Lender upon the Collateral or any other assets which are security for
the Obligations; (d) the Collateral or any other property which is security for
the Obligations, or the value of the Collateral or such other property; (e) the
ability of Borrower to repay the Obligations or of Borrower to perform its
obligations under this Agreement or any of the other Financing Agreements; or
(f) the ability of Lender to enforce the Obligations or realize upon the
Collateral or otherwise with respect to the rights and remedies of Lender under
this Agreement or any of the other Financing Agreements.
1.45 "Material Contracts" shall mean any written contract (other than
the Financing Agreements) to which Borrower or Parent is a party, as to which
the breach, nonperformance, cancellation or failure to renew by any party
thereto would have a Material Adverse Effect.
1.46 "Maximum Credit" shall mean the amount of $30,000,000.
1.47 "Net Amount of Eligible Carrier Accounts" shall mean the gross
amount of Eligible Carrier Accounts less (a) sales, excise or similar taxes
included in the amount thereof; (b) discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto; and (c) the aggregate amounts then owing
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by Borrower to any Carrier who is also obligated on any Accounts, whether
accrued or then due and owing.
1.48 "Net Amount of Eligible Retail Accounts" shall mean the gross
amount of Eligible Retail Accounts less (a) amounts owing in respect of the
Universal Service Fund charges as required under applicable Communications Laws,
and sales, excise or similar taxes included in the amount of such Accounts, (b)
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto (other
than in the ordinary course of business up to an aggregate amount for all such
discounts, claims, credits or allowances of $250,000 at any time outstanding),
(c) the bad debt reserve withheld by the Billing Processor handling such
Accounts, (d) the amount of any processing fees, inquiry fees or other fees of
the applicable Billing Processor or LEC and any unbilled deductions of the
applicable LEC.
1.49 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or any of the other Financing Agreements, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
1.50 "Parent" shall mean Startec Global Communications Corporation, a
Delaware corporation, and its successors and assigns.
1.51 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.52 "Permitted Holders" shall mean the persons listed on Schedule 1.52
hereto and their respective successors and assigns.
1.53 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.54 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
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1.55 "PUCs" shall mean, collectively, the public utilities commissions
for any State or any other jurisdiction in which Borrower operates its
telecommunications business or any successor agency, and any successor, in whole
or in part, to its functions or jurisdictions, sometimes being referred to
herein individually as a "PUC".
1.56 "Receivables" shall mean all present and future: (a) Accounts; (b)
amounts at any time payable to Borrower in respect of the sale by Borrower of
any Account; (c) interest, fees, late charges, penalties, collection fees and
other amounts due or to become due or otherwise payable in connection with any
Account; (d) letters of credit, indemnities, guarantees, security or other
deposits and proceeds thereof issued payable to Borrower or otherwise in favor
of or delivered to or for the benefit of Borrower in connection with any
Account; (e) rights of Borrower to payment arising from or in connection with
any loans, advances or other financial accommodations made or provided by
Borrower to or for the benefit of any other Person with the proceeds of any of
the Loans or in connection with any Letter of Credit Accommodation; (f) tax
refunds and tax claims; and (g) other contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing to
Borrower arising from or pursuant to any Accounts or any of the other items
described in this Section 1.56 or otherwise associated with any Accounts
(including, without limitation, choses in action and causes of action).
1.57 "Records" shall mean all of Borrower's present and future books
and records of every kind or nature in any way relating to any Receivables or
other Collateral (including, without limitation, all CDRs in any format and
however constituted), reports or records from or generated by any Billing
Processor, or otherwise relating to the arrangements of Borrower with any
Billing Processor, reports or records from or generated by any LEC or other
Carrier or otherwise relating to the arrangements of Borrower with any LEC or
other Carrier, purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any Account Debtor),
together with the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of Borrower with respect to the foregoing
maintained with or by any Billing Processor or any other person).
1.58 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate.
1.59 "Regulatory Event" shall mean any of the following events: (a)
Lender becomes subject to regulation as a "carrier", a "telephone company", a
"common carrier", a "public utility" or otherwise under any applicable law or
governmental regulation, Federal, State or local, solely as result of the
transactions contemplated by this Agreement and the other Financing Agreements,
or (b) Borrower becomes subject to a statute or regulation by any Governmental
Authority different from the statutes or regulations existing as of the date
hereof and that could have a Material Adverse Effect, or (c) the FCC or any PUC
issues an order or other statement revoking, denying or refusing to renew, or
recommending the revocation, denial or non-renewal of, any material License
(except for any such order or statement that is being appealed or
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contested in good faith by Borrower by appropriate proceedings diligently
pursued and available to Borrower, so long as during such appeal or contest,
Borrower may continue to receive the benefit of, and operate pursuant to, such
License).
1.60 "Renewal Date" shall the meaning set forth in Section 12.1 hereof.
1.61 "Retail Accounts" shall mean Accounts arising from Borrower
providing international, interstate or intrastate telecommunication services to
Retail Customers.
1.62 "Retail Customers" shall mean any Person (other than a Carrier)
that subscribes to or uses the telecommunication services offered by Borrower.
1.63 "Special Availability Reserve" shall mean, at any time, the
Availability Reserve in an amount equal to fifteen percent (15%) of the
Borrowing Base at such time (calculated based on the amount of Loans and Letter
of Credit Accommodations available without any reduction for the amount of any
outstanding Loans or Letter of Credit Accommodations).
1.64 "Subordinated Indebtedness" shall mean Indebtedness of Borrower
for money borrowed for the use of Borrower, which Indebtedness is subject to,
and subordinate in right of payment to, the right of Lender to receive the prior
final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Lender.
1.65 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited or general partnership, trust, association or
other business entity of which an aggregate of at least a majority of the
outstanding Capital Stock or other interests entitled to vote in the election of
the board of directors of such corporation (irrespective of whether, at the
time, Capital Stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency),
managers, trustees or other controlling persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or indirectly, owned
by such Person and/or one or more subsidiaries of such Person.
1.66 "Telecommunication Assets" shall mean, with respect to any Person,
equipment and other properties or assets (whether tangible or intangible) used
in the telecommunications business, including, without limitation, rights with
respect to indefeasible rights of use (which is the right to use a
telecommunications system, usually an undersea cable, with most of the rights
and duties of ownership, but without the right to control or manage the facility
and depending upon the particular agreement, without any right to salvage or
duty to dispose of the system's cable at the end of its useful life), minimum
assignable ownership units (which is capacity on a telecommunications system,
usually an undersea fiber optic cable, acquired on an ownership basis) or
minimum investment units (or similar interests) in fiber optic cable and
international or domestic telecommunications switches or other transmission
facilities, including monitoring and related administrative support facilities
(or Capital Stock of a Person that becomes a Subsidiary, the assets of which
consist primarily of any such Telecommunications Assets), in each case
purchased, or acquired through a Capital Lease, by Borrower.
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1.67 "Uniform Commercial Code" or "UCC" shall mean the Uniform
Commercial Code as from time to time in effect in the State of New York, as the
same now exists or may hereafter be amended, modified, recodified or
supplemented.
1.68 "Valid EMI Billing Records" shall mean CDRs that pass the Billing
Processor's edits and screens.
1.69 "Voting Stock" shall mean with respect to any Person, one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect members of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency.
SECTION 2. CREDIT FACILITIES
2.1 LOANS.
(a Subject to and upon the terms and conditions contained
herein, Lender agrees to make Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the Borrowing Base at such
time.
(b Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, reduce the lending formula
with respect to Eligible Accounts to the extent that Lender determines in
good faith that (i) the general creditworthiness of Account Debtors has
declined or (ii) the Dilution for any period has increased. The amount of any
reduction in any lending formula by Lender pursuant to this Section 2.1(b)
shall have a reasonable relationship to the matter which is the basis for
such reduction in the good faith determination of Lender. To the extent an
Availability Reserve shall have been established which is sufficient to
address any event, condition or matter in a manner satisfactory to Lender in
its good faith determination, Lender shall not exercise its rights under this
Section 2.1(b) to reduce the lending formulas to address such event,
condition or matter. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts or in establishing Availability
Reserves.
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms
and conditions acceptable to Lender and the issuer thereof. Any payments made
by Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrower
pursuant to this Section 2.
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(b In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to
one-half percent (1/2%) per annum on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month,
except that Borrower shall pay to Lender such letter of credit fee, at
Lender's option, without notice, at a rate equal to two and one-half percent
(2 1/2%) per annum on such daily outstanding for the period from and after
the date of the occurrence of an Event of Default for so long as such Event
of Default is continuing (and it shall be deemed an Event of Default for
purposes hereof in the event Lender does not receive final payment and
satisfaction in full of all of the Obligations on the date of termination or
non-renewal hereof). Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or
non-renewal of this Agreement.
(c No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Loans available to Borrower (subject to the Maximum
Credit and any Availability Reserves) are equal to or greater than an amount
equal to one hundred percent (100%) of the face amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, an
Availability Reserve shall be established in the applicable amount set forth
in this Section 2.2(c).
(d The aggregate amount of all outstanding Letter of Credit
Accommodations and all other commitments and obligations made or incurred by
Lender in connection therewith shall not at any time exceed $5,000,000,
except as Lender may otherwise agree.
(e Borrower shall indemnify and hold Lender harmless from
and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating
thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation except for losses, claims, damages,
liabilities, costs and expenses as a result of the gross negligence or
willful misconduct of Lender as determined pursuant to a final non-appealable
order of a court of competent jurisdiction. Borrower assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or
beneficiary shall be deemed Borrower's agent. Borrower assumes all risks for,
and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit Accommodations
or any documents, drafts or acceptances thereunder. Borrower hereby releases
and holds Lender harmless from and against any acts, waivers, errors, delays
or omissions, whether caused by Borrower, by any issuer or correspondent or
otherwise with respect to or relating to any Letter of Credit Accommodation
except for losses, claims, damages, liabilities, costs and expenses as a
result of the gross negligence or willful misconduct of Lender as determined
pursuant to a final non-appealable
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order of a court of competent jurisdiction. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter
of Credit Accommodation provided by an issuer other than Lender unless Lender
has duly executed and delivered to such issuer the application or a guarantee
or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made in good
faith by Lender, or any other issuer or correspondent under or in connection
with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrower. Lender shall have the sole
and exclusive right and authority to, and Borrower shall not: (i) at any time
an Event of Default exists or has occurred and is continuing or has occurred
and is continuing, (A) approve or resolve any questions of non-compliance of
documents, (B) give any instructions as to acceptance or rejection of any
documents or goods or (C) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders, and (ii) at all times, (A)
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters
of credit included in the Collateral. Lender may take such actions either in
its own name or in Borrower's name.
(g Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall
be deemed to have been granted or undertaken by Borrower to Lender. Any
duties or obligations undertaken by Lender to any issuer or correspondent in
any application for any Letter of Credit Accommodation, or any other
agreement by Lender in favor of any issuer or correspondent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrower to Lender and to apply in all respects to Borrower.
2.3 MAXIMUM CREDIT. The aggregate amount of the Loans and Letter of
Credit Accommodations outstanding at any time shall not exceed the Maximum
Credit, except as Lender may otherwise agree.
2.4 AVAILABILITY RESERVES. All Loans otherwise available to Borrower
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves in a manner consistent with the terms
set forth in the definition of such term.
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SECTION 3. INTEREST AND FEES
3.1 INTEREST.
(a Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or
non-renewal hereof shall be payable on demand.
(b Interest shall be payable by Borrower to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed. The Interest Rate on the Loans shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
first day of the month after any change in such Prime Rate is announced based
on the Prime Rate in effect on the last day of the month in which any such
change occurs. In no event shall charges constituting interest payable by
Borrower to Lender exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
3.2 CLOSING FEE. Borrower shall pay to Lender as a closing fee the
amount of $150,000, which shall be fully earned and payable as of the date
hereof.
3.3 UNUSED LINE FEE. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one-quarter percent (1/4%) per annum calculated upon
the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have reasonably requested
in connection therewith, such documents where requested by Lender or its
counsel to be certified by appropriate corporate officers or governmental
authorities;
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(b no material adverse change shall have occurred in the
assets or business of Borrower or Parent since the date of Lender's latest
field examination and no change or event shall have occurred which would
impair the ability of Borrower or Parent to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce the Obligations or realize upon the Collateral;
(c Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may
require to determine the amount of Loans available to Borrower (including,
without limitation, current roll-forwards of Accounts through the date of
closing in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which each case shall be satisfactory to Lender,
not more than five (5) Business Days prior to the date hereof;
(d Lender shall have received, in form and substance
satisfactory to Lender, the Billing Processor Acknowledgments, duly
authorized, executed and delivered by the Billing Processors and Borrower;
(e Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem reasonably necessary or
desirable in order to permit, protect and perfect its security interests in
and liens upon the Collateral or to effectuate the provisions or purposes of
this Agreement and the other Financing Agreements, including, without
limitation, (i) Collateral Access Agreements by owners and lessors of leased
premises of Borrower and (ii) agreements from licensors of trademarks and
other Intellectual Property to Borrower permitting Lender to use the
trademarks and other Intellectual Property licensed by such parties to
Borrower to exercise the rights and remedies of Lender and otherwise deal
with the Collateral;
(f Lender shall have received, in form and substance
satisfactory to Lender, all agreements with the depository banks and Borrower
with respect to the Blocked Accounts as Lender may require pursuant to
Section 6.3 hereof, duly authorized, executed and delivered by such
depository banks and Borrower;
(g the Excess Availability as determined by Lender, as of
the date hereof, shall be not less than $15,000,000 after giving effect to
the initial Loans made or to be made and Letter of Credit Accommodations
issued or to be issued in connection with the initial transactions hereunder;
(h Lender shall have received, in form and substance
satisfactory to Lender, UCC-3 termination statements for all existing UCC-1
financing statements between First Union National Bank, as secured party or
Signet Bank, as secured party, and Borrower or Parent (or its predecessor),
as debtor, duly authorized, executed and delivered by such secured parties;
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(i Lender shall have received evidence, in form and
substance satisfactory to Lender, that all Intellectual Property used by or
in connection with the business of Borrower which may have been owned by
Parent or any of its other Affiliates has been validly and effectively
transferred and assigned to Borrower and that Borrower has taken all actions
available to it as to any Intellectual Property registered with any
Governmental Authority, to cause such transfer and assignment to be reflected
in the records of such Governmental Authority;
(j Lender shall have received evidence, in form and
substance satisfactory to it, that the accounts with a bank or any other
financial institution in which the amounts required to be owned and held by
Borrower under Section 9.15 hereof are in the sole name of Borrower and the
balance of the cash or Cash Equilvalents held therein which satisfies the
requirements set forth in Section 9.15 equals or exceed $20,000,000;
(k Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as additional insured
(but without any liability for premiums) as to the general liability policies
of Borrower and as loss payee as to business interruption insurance with
respect to Accounts;
(l Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower and
Parent with respect to the Financing Agreements and such other matters as
Lender may request; and
(m the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and
delivered to Lender, in form and substance satisfactory to Lender.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a all representations and warranties contained herein and
in the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties
had been made on and as of the date of the making of each such Loan or
providing each such Letter of Credit Accommodation and after giving effect
thereto, except to the extent that such representations and warranties
expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate in all
material respects on and as of such earlier date);
(b no Regulatory Event shall exist or have occurred and be
continuing or exist or occur after giving effect to such Loan or Letter of
Credit Accommodation and no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or
before any
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arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit,
restrain or otherwise affect (A) the making of the Loans or providing the Letter
of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or could have a Material Adverse Effect; and
(c no Event of Default and no act, condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 To secure payment and performance of all Obligations, Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, together
with any other assets and property subject to the security interests or liens of
Lender to secure the Obligations, the "Collateral"):
(a Receivables;
(b all other present and future contract rights and general
intangibles arising out of or used in connection with any of the Receivables,
including, without limitation, any of the following used in connection with
the Receivables: (i) registered and unregistered patents and patent rights,
(ii) copyrights, works which are the subject matter of copyrights, software
and other general intangibles in each case relating to billing and call data
collection and storage systems and related information systems (including
source codes, object codes and all other embodiments of computer programming
information) and contract rights relating to software programs; (iii)
contract rights with any third party billing company that is involved with
the billing and collection of Receivables (including, without limitation, any
Billing Processor) and with any other telecommunication carriers or service
providers involved in the billing and collection of Receivables; (iv)
contract rights with any Carriers under Carrier Agreements; (v contract
rights with any Carriers providing access for Retail Customers to the network
of Borrower; (vi) all extensions, renewals, reissues, divisions,
continuations, and infringement of any of the foregoing; (vii) all choses in
action and causes of action with respect to any of the foregoing; (viii)
drawings, designs, manuals and operating standards relating to the billing
and collection of the Receivables; (ix) goodwill; (x) customer and other
lists in whatever form maintained, including lists of Retail Customers and
Carriers (PROVIDED, THAT, the foregoing shall not be construed to include any
licenses or permits issued to or held by Borrower by the FCC or any PUCs or
any of the proprietary routing software of Borrower or the rights of Borrower
to the use of the switching and transmission facilities of other
telecommunications carriers, including its operating agreements with foreign
carriers or foreign Postal, Telephone and Telegraph Companies or other
foreign governmental authorities or any international resale agreements);
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(c (i) all present and future monies, investment property,
credit balances, deposits, deposit accounts, documents, instruments and other
property of Borrower now or hereafter held or received by or in transit to
Lender (or its Affiliates in the Blocked Accounts or otherwise in connection
with the collection of the Receivables or any other Collateral), whether for
safekeeping, pledge, custody, transmission, collection or otherwise, (ii) all
present and future monies, investment property, credit balances and deposits
at any bank or other financial institution either (A) constituting proceeds
of Receivables or any of the other Collateral or (B0 constituting proceeds of
loans, advances or other financial accommodations made or provided by Lender
to or for the benefit of Borrower or (C) constituting proceeds of loans,
advances or other financial accommodations made or provided by Borrower to or
for the benefit of any Affiliate with proceeds of loans, advances or other
financial accommodations at any time made or provided by Lender or (D) held
or deposited in or delivered to any deposit account or other account used in
connection with the collection of Receivables or any of the other Collateral
or containing proceeds of the Receivables or any of the other Collateral, or
containing proceeds of loans, advances or other financial accommodations at
any time made or provided by Lender to or for the benefit of Borrower or its
Affiliates, or proceeds of loans, advances or other financial accommodations
made or provided by Borrower to or for the benefit of any affiliate with
proceeds of the loans, advances or other financial accommodations at any time
made or provided to Borrower by Lender and (E) all right, title and interest
of Borrower in or to any deposit account or other account maintained at any
bank or other financial institution either (1) used in connection with the
collection of the Receivables or any of the other Collateral, or (2)
containing proceeds of the Receivables or any the other Collateral, or (3)
containing proceeds of loans, advances or other financial accommodations made
or provided by Lender to or for the benefit of Borrower or any of its
Affiliates, or (4) containing proceeds of loans, advances or other financial
accommodations made or provided by Borrower to or for the benefit of any
Affiliate with proceeds of the loans, advances or other financial
accommodations at any time made or provided to Borrower by Lender;
(d all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Receivables or any of
the other Collateral, including, without limitation, (i rights and remedies
under or relating to guarantees, contracts of suretyship, indemnities,
letters of credit and credit and other insurance related to the Receivables
or any of the other Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods described in invoices, documents,
contracts or instruments, with respect to, or otherwise representing or
evidencing Receivables or other Collateral, including, without limitation,
returned, repossessed and reclaimed goods, and (iv) deposits by and property
of account debtors or other persons securing the obligations of account
debtors;
(e Records; and
(f all Products and Proceeds (as such terms are defined,
respectively, in the Uniform Commercial Code) of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the foregoing.
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5.2 Notwithstanding anything to the contrary set forth in Section 5.1
above, the types or items of Collateral described in such Section shall not
include any rights or interests in any contract, lease, permit, license, charter
or license agreement covering real or personal property, as such, if under the
terms of such contract, lease, permit, license, charter or license agreement, or
applicable law with respect thereto, the valid grant of a security interest or
lien therein to Lender is prohibited and such prohibition has not been or is not
waived or the consent of the other party to such contract, lease, permit,
license, charter or license agreement has not been or is not otherwise obtained
or under applicable law such prohibition cannot be waived; PROVIDED, THAT, the
foregoing exclusion shall in no way be construed (a) to apply if any such
prohibition is unenforceable under Section 9-318(4) of the UCC or other
applicable law or (b) so as to limit, impair or otherwise affect Lender's
unconditional continuing security interests in and liens upon any rights or
interests of Borrower in or to monies due or to become due under any such
contract, lease, permit, license, charter or license agreement (including any
Accounts).
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 BORROWER'S LOAN ACCOUNT. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 STATEMENTS. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within forty-five (45) days after the date such statement has been given by
Lender. Until such time as Lender shall have rendered to Borrower a written
statement as provided above, the balance in Borrower's loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrower.
6.3 COLLECTION OF ACCOUNTS.
(a Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable
to Lender into which Borrower shall promptly deposit and direct its Account
Debtors to directly remit all payments on Receivables and all payments
constituting proceeds of other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form
and substance satisfactory to Lender, providing
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that all items received or deposited in the Blocked Accounts constitute
Collateral with respect to which Borrower has granted to Lender a first priority
perfected security interest, that the depository bank has no lien upon, or right
to setoff against, the Blocked Accounts, the items received for deposit therein,
or the funds from time to time on deposit therein and that the depository bank
will wire, or otherwise transfer, in immediately available funds, on a daily
basis, all funds received or deposited into the Blocked Accounts to such bank
account of Lender as Lender may from time to time designate for such purpose
("Payment Account").
(b For purposes of calculating the amount of the Loans
available to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next Business
Day. For the purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Lender in the Payment Account
provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time
to time and within sufficient time to credit Borrower's loan account on such
day, and if not, then on the next Business Day.
(c Borrower and its Subsidiaries or other Affiliates shall,
acting as trustee for Lender, receive, subject to the first priority
perfected security interest of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the
Blocked Accounts, or remit the same or cause the same to be remitted, in
kind, to Lender. In no event shall the same be commingled with Borrower's own
funds (except that to the extent Lender may remit any such proceeds to
Borrower, such proceeds may be commingled with Borrower's own funds).
Borrower agrees to reimburse Lender on demand for any amounts paid by Lender
to any bank at which a Blocked Account is established or any other bank or
person involved in the transfer of funds to or from the Blocked Accounts
arising out of Lender's payments to or indemnification of such bank or
person. The obligation of Borrower to reimburse Lender for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 PAYMENTS. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines, PROVIDED, THAT, all such
payments shall be applied to Obligations which are then due and payable before
being applied to pay any Obligations which are not then due and payable. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower.
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Borrower shall make all payments to Lender on the Obligations free and clear of,
and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 MANDATORY PREPAYMENTS. In the event that the outstanding amount of
any component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodation exceed the Borrowing Base, or the aggregate
amount of the outstanding Letter of Credit Accommodation exceeds the sublimit
set forth in Section 2.2(d) hereof or the aggregate amount of the Loans and the
Letter of Credit Accommodations outstanding at any time shall exceed the Maximum
Credit, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender, the entire amount of any such excess(es) for which
payment is demanded or in the case of Letter of Credit Accommodations, provide
cash collateral to Lender in such amount.
6.6 AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an authorized officer of
Borrower or other authorized person or, at the discretion of Lender, if such
Loans are necessary to satisfy any Obligations. A list of such authorized
officers and other authorized persons of Borrower is set forth on Schedule 6.6
hereto. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a Business Day) and the
amount of the requested Loan. Requests received after 11:00 a.m. New York City
time on any day shall be deemed to have been made as of the opening of business
on the immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
6.7 USE OF PROCEEDS. Borrower shall use the proceeds of Loans made or
Letter of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof only for the cost (including the cost of design, development,
construction, acquisition, licensing, installation or integration) of
Telecommunication Assets and including costs, expenses and fees in
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connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 COLLATERAL REPORTING.
(a Borrower shall provide Lender with the following documents
in a form and in such detail as is reasonably satisfactory to Lender:
(i on a weekly basis, as soon as available, but in any
event no later than the third (3rd) Business Day of each week: (A) the amount
of the Eligible Accounts by category; (B0 the weekly repayment report
generated by the Billing Processor and provided to Borrower in accordance
with the current practices of the Billing Processor and Borrower as of the
date hereof; (C0 the amount of the bad debt reserve established by the
Billing Processors; (D) the amount of the processing fees, inquiry fees and
other fees of the applicable Billing Processors or LEC outstanding and unpaid
as of the end of the immediately preceding week; (E) the amount of the
unrestricted cash or Cash Equivalents of Borrower which satisfy the
requirements of Section 9.15 hereof as of the last day of the immediately
preceding week; (F) the load report (including (1) transmitted dollar, calls
and minutes by day, (2) rejected dollars, calls and minutes by reason, (30
total billable call records by dollar, by call, by minutes, by LEC and by
call type); and (G) so long as Excess Availability is equal to or greater
than $15,000,000 (with Excess Availability calculated for this purpose
without regard to any past due trade payables) and no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred and be
continuing, (1) the aggregate amounts accrued and owing by Borrower to
Carriers who are Account Debtors and (2) if and to the extent any unbilled
Accounts may be included as Eligible Accounts, a report of carrier revenue,
minutes and minute dollars PROVIDED, THAT, in the event Excess Availability
is at any time less than $15,000,000 (with Excess Availability calculated for
this purpose without regard to any past due trade payables) or an Event of
Default (or act, condition or event which with notice or passage of time or
both would constitute an Event of Default) shall exist or have occurred and
be continuing, upon Lender's request, Borrower shall provide such information
described in clauses (G)(1) and (G)(2) above to Lender on a daily basis,
together with such other information with respect to Carrier Accounts and
amounts payable to any of the Carriers as Lender may determine;
(ii on a monthly basis as soon as available, but in
any event no later than the tenth (10th) day of each month, or more
frequently as Lender may request, (A) detailed monthly roll-forwards of
Carrier Accounts and accounts payable to other Carriers, (B) agings of
accounts
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payable, (C) agings of accounts receivable (including indicating the date of the
delivery by Borrower to the Billing Processor of the CDRs which are the basis
for the Accounts), (D) the amount of USF charges paid and accrued during the
immediately preceding month, (E) a list of new Carrier Services Agreement
entered into by Borrower during the immediately preceding month and a list of
any Carrier Services Agreements terminated during the immediately preceding
month, and (F) a report of loans, capital contributions or other investments
made by Borrower or its Subsidiaries after the date hereof to or in any Person
and any payments in respect thereof received in each case during the immediately
preceding month, including identifying the date of the loan, capital
contribution or other investment, the person to or in whom such loan, capital
contribution or investment was made, the amounts thereof and such other
information as Lender may in good faith request with respect thereto;
(iii upon Lender's reasonable request, copies of deposit
slips and bank statements;
(iv such other reports as to the Collateral as Lender
shall reasonably request from time to time.
(b If any of Borrower's records or reports of the Collateral
are prepared or maintained by an accounting service, contractor, shipper or
other agent (including any sales agent), Borrower hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing and is continuing.
7.2 ACCOUNTS COVENANTS.
(a Without limiting any other obligation of Borrower to
deliver any information to Lender, Borrower shall notify Lender promptly of:
(i) the assertion of any claims, offsets, defenses or counterclaims by any
Carrier or Billing Processor (other than claims, offsets or defenses in the
ordinary course of business by a single Carrier or Billing Processor
involving less than $500,000) or any disputes with any Carrier or Billing
Processor, or any settlement, adjustment or compromise thereof, in any single
case involving more than $250,000, (ii) all material adverse information
relating to the financial condition of any Carrier or Billing Processor and
(iii) any event or circumstance which, in Borrower's reasonable good faith
judgment, would cause Lender in good faith to consider any then existing
Accounts as no longer constituting Eligible Accounts. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted
to any Account Debtor without Lender's consent, except in the ordinary course
of Borrower's business in accordance with practices and policies described on
Schedule 7.2(a) hereto. So long as no Event of Default exists or has occurred
and is continuing, Borrower shall have the exclusive right to settle, adjust
or compromise any claim, offset, counterclaim or dispute with any Account
Debtor. At any time that an Event of Default exists or has occurred and is
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with Account
Debtors or grant
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any credits, discounts or allowances. Any LEC used by a Retail Customer will
terminate or suspend service to such Retail Customer if such Retail Customer
fails to make any payment to Borrower in respect of the Account owing by such
Retail Customer within sixty (60) days after the end of the billing period in
which the use of the telecommunications services of Borrower by such Retail
Customer giving rise to such Account occurred.
(b With respect to each Account: (i) the amounts shown on
any invoice delivered to Lender or schedule thereof delivered to Lender shall
be true and complete, (ii) no payments shall be made thereon except payments
immediately made to a Blocked Account or delivered to Lender pursuant to the
terms of this Agreement, (iii) no credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any Account Debtor
except as reported to Lender in accordance with this Agreement and except for
credits, discounts, allowances or extensions made or given in the ordinary
course of Borrower's business in accordance with practices and policies
described on Schedule 7.2(a) hereto, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the
terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable Federal, State or foreign laws or regulations
(including all Communications Laws) applicable to Borrower, all documentation
relating thereto will be legally sufficient under such laws and regulations
and all such documentation will be legally enforceable in accordance with its
terms.
(c Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by
mail, telephone, facsimile transmission or otherwise.
(d Borrower shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to
Borrower, all chattel paper and instruments arising from any Receivable or
otherwise constituting Collateral in amounts in excess of $50,000 prior to
the occurrence of an Event of Default and in any amount at any time on or
after the occurrence of an Event of Default which Borrower now owns or may at
any time acquire immediately upon Borrower's receipt thereof, except as
Lender may otherwise agree.
(e Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing after prior notice to Borrower, (i)
notify any or all Account Debtors that the Accounts have been assigned to
Lender and that Lender has a security interest therein and Lender may direct
any or all Accounts Debtors to make payment of Accounts directly to Lender,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit or otherwise, and upon any terms or conditions, any and all Accounts
or other obligations included in the Collateral and thereby discharge or
release the Account Debtor or any other party or parties in any way liable
for payment thereof without affecting any of the Obligations, (iii) demand,
collect or enforce payment of any Accounts or such other obligations, but
without any duty to do so, and Lender shall not be liable for its failure to
collect or enforce the payment thereof nor for the negligence of its agents
or attorneys with respect thereto and (iv) take whatever other action Lender
may deem necessary or desirable for the protection of its interests. At any
time that an
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Event of Default exists or has occurred and is continuing and is continuing, at
Lender's request, all invoices and statements sent to any Account Debtor shall
state that the Accounts and such other obligations have been assigned to Lender
and are payable directly and only to Lender and Borrower shall deliver to Lender
such originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 EQUIPMENT COVENANTS. With respect to the Equipment: (a) Borrower
shall keep the Equipment in good order, repair, running and merchantable
condition (ordinary wear and tear excepted and except where the failure to keep
the Equipment in such condition does not have or would not have a reasonable
likelihood of having a Material Adverse Effect); (b) Borrower shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; and (c)
the Equipment is and shall be used in Borrower's business.
7.4 POWER OF ATTORNEY.
(a) Borrower hereby irrevocably designates and appoints Lender
(and all persons designated by Lender in writing) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to:
(i) at any time an Event of Default exists or has
occurred and is continuing, (A) demand payment on Receivables or other proceeds
of other Collateral, (B) enforce payment of Receivables by legal proceedings or
otherwise, (C) exercise all of Borrower's rights and remedies to collect any
Receivables or other Collateral, (D) sell or assign any Receivables upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(E) settle, adjust, compromise, extend or renew any Receivables, (F) discharge
and release any Receivables, (G) prepare, file and sign Borrower's name on any
proof of claim in bankruptcy or other similar document against an Account
Debtor, (H) notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Lender, and open and
dispose of all mail addressed to Borrower, and (I) do all acts and things which
are necessary, in Lender's good faith determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements; and
(ii) at any time to (A) take control in any manner of any
item of payment or proceeds in respect of any Receivables or other Collateral
received in or for deposit in the Blocked Accounts or otherwise received by
Lender, (B) have access to any lockbox or postal box into which payments are
received on Receivables or other Collateral, (C) endorse Borrower's name upon
any items of payment or proceeds in respect of any Receivables or other
Collateral and deposit the same in the Lender's account for application to the
Obligations, (D) endorse Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Receivable
or any goods pertaining thereto or any other Collateral, (E) sign Borrower's
name on any verification of Receivables and notices thereof to Account Debtors
and (F) execute in Borrower's name and file any UCC financing statements or
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amendments thereto, PROVIDED, THAT, such financing statements shall not apply to
any assets as collateral, other than the Collateral.
(b) Borrower hereby releases Lender and its officers, employees
and designees from any liabilities arising from any act or acts under this power
of attorney and in furtherance thereof, whether of omission or commission,
except as a result of Lender's own gross negligence or wilful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
7.5 RIGHT TO CURE. Lender may, at its option, (a) upon notice to
Borrower, cure any default by Borrower under any material agreement with a third
party which affects any Collateral, the value of such Collateral or the ability
of Lender to collect, sell or otherwise dispose of such Collateral or the rights
and remedies of Lender therein or the ability of Borrower to perform its
obligations hereunder or under the other Financing Agreements, (b) pay or bond
on appeal any judgment entered against Borrower, (c) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing with
respect to the Collateral and (d) pay any amount, incur any expense or perform
any act which, in Lender's reasonable judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the Obligations
and charge Borrower's account therefor, such amounts to be repayable by Borrower
on demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.6 ACCESS TO PREMISES. From time to time as reasonably requested by
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have such access to all of Borrower's and Parent's premises during normal
business hours and after reasonable prior notice to Borrower, or at any time and
without notice to Borrower if an Event of Default exists or has occurred and is
continuing, as Lender determines is needed for the purposes of inspecting,
verifying and auditing the Collateral and all of Borrower's and Parent's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
reasonably request, and (c) Lender or its designee may use during normal
business hours such of Borrower's or Parent's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of
Receivables and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
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8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and are duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, where the failure to so qualify would have a Material Adverse Effect.
The execution, delivery and performance of this Agreement, the other Financing
Agreements to which it is a party and the transactions contemplated hereunder
and thereunder are all within Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any material indenture, agreement or undertaking to which Borrower is a party or
by which Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Borrower and Parent do not have any Subsidiaries except as
set forth on Schedule 8.1 hereto.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial
statements relating to Borrower and Parent which have been or may hereafter be
delivered by Borrower or Parent to Lender have been prepared in accordance with
GAAP and fairly present the financial condition and the results of operation of
Borrower and Parent as at the dates and for the periods set forth therein
(except for interim statements which are subject to year-end adjustments and may
lack footnotes). Except as disclosed in any interim financial statements
furnished by Borrower or Parent to Lender prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of Borrower and Parent, since the date of
the most recent audited financial statements furnished by Borrower and Parent to
Lender prior to the date of this Agreement.
8.3 PRINCIPAL PLACE OF BUSINESS; COLLATERAL LOCATIONS. The principal
place of business of Borrower and the Records of Borrower concerning Receivables
are located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in Schedule 8.3 hereto, subject to the rights of Borrower to establish
new locations in accordance with Section 9.2 below. Schedule 8.3 hereto
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral to the extent the security interests may be perfected
under the UCC, subject only to the liens indicated on Schedule 8.4 hereto and
the other liens permitted under Section 9.8 hereof. Borrower has good and
merchantable title to all of its properties and assets subject to no liens,
mortgages, pledges,
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security interests, encumbrances or charges of any kind, except those granted to
Lender and such others as are specifically listed on Schedule 8.4 hereto or
arising after the date hereof and permitted hereunder.
8.5 TAX RETURNS. Borrower and Parent have filed, or caused to be filed,
in a timely manner all tax returns, reports and declarations which are required
to be filed by it. All information in such tax returns, reports and declarations
is complete and accurate in all material respects. Borrower and Parent have paid
or caused to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and Parent and with respect to which adequate reserves
have been set aside on its books. Adequate provision has been made for the
payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
8.6 LITIGATION. Except as set forth on Schedule 8.6 hereto, there is no
present investigation by any Governmental Authority pending, or to the best of
Borrower's knowledge threatened, against or affecting Borrower or Parent, or its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or Parent, or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against Borrower would have a Material Adverse Effect.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.
(a) Borrower is not in default in any respect under, or in
violation in any respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound, in each case where such default or violation has or
would have a Material Adverse Effect. Borrower and Parent are in compliance in
all respects with the requirements of all applicable laws, rules, regulations
and orders of any Governmental Authority relating to its business, in each case
where the failure to comply would have a Material Adverse Effect.
(b) Borrower has obtained all material Licenses required for the
lawful conduct of its respective business, including all Licenses required by
the FCC, any PUC or under or pursuant to any Communications Laws. Schedule 8.7
hereto sets forth all of the Licenses issued to or held by Borrower or any of
its Affiliates as of the date hereof by any Federal, State, local or foreign
Governmental Authority and any applications pending by Borrower or any of its
Affiliates with such Federal, State, local or foreign Governmental Authority.
The Licenses constitute all permits, licenses, approvals, consents,
certificates, orders or authorizations necessary for Borrower to own and operate
its business as presently conducted or proposed to be conducted where the
failure to have any of the same would result in a Material Adverse Effect. All
of the Licenses are valid and subsisting and in full force and effect and are
not subject to any further administrative or judicial review and are therefore
final. There are no pending, or to the
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best of Borrower's knowledge, threatened investigations, actions or proceedings
as a result of the practices of Borrower or any of its Affiliates pursuant to
any violations of or failure to comply with any Communications Laws. There are
no actions, claims or proceedings pending or threatened that seek the
revocation, cancellation, suspension or modification of any of the Licenses.
Lender will not, by reason of the execution, delivery and performance of this
Agreement or any of the other Financing Agreements, be subject to the regulation
or control of either the FCC or any PUC. Without limiting the generality of the
foregoing, under the terms of applicable Communications Law or other applicable
laws and regulations, Borrower may own and operate its business pursuant to (i)
the License originally issued to Parent under Section 214 of the Communication
Act which has been validly and effectively transferred by Parent to Borrower
prior to the date hereof and (ii) the authorizations and approvals of the PUCs
issued to and held by Startec Global Licensing Company. Lender is not required
to have any of the Licenses in order to exercise any of its rights or remedies
hereunder.
8.8 CARRIER SERVICE AGREEMENTS. Set forth in Schedule 8.8 hereto is a
correct and complete list of all of the Carrier Service Agreements in effect on
the date hereof that were the basis for one percent (1%) or more of the revenues
of Borrower during the first calendar quarter of 1999, which relate to or give
rise to any Receivables or otherwise constitute Material Contracts. The Carrier
Service Agreements constitute all of such agreements necessary for Borrower to
operate its business as presently conducted or proposed to be conducted and no
Carrier Accounts of Borrower arise from the use by customers of
telecommunication services, other than those which use services of a Carrier
(but not including for this purpose any LEC) with whom Borrower has a valid and
enforceable Carrier Service Agreement set forth on Schedule 8.8 hereto or with
whom Borrower has entered into a Carrier Service Agreement in accordance with
Section 9.17 hereof. Each of such Carrier Service Agreements constitutes the
legal, valid and binding obligations of Borrower and to the best of Borrower's
knowledge, the other parties thereto, enforceable in accordance with their
respective terms and are in full force and effect, EXCEPT as to the Carrier
Service Agreements identified on Schedule 9.16 hereto for which the consent to
the transfer of such Carrier Service Agreement from Parent to Borrower has not
yet been obtained. No event of default, or act, condition or event which with
notice or passage of time or both, would constitute an event of default under
any of such Carrier Service Agreements exists or has occurred and is continuing,
and Borrower and the other parties thereto have complied with (or waived in
writing compliance with) all of the terms and conditions of the Carrier Service
Agreements to the extent necessary for Borrower to be entitled to receive all
payments thereunder.
8.9 BILLING PROCESSOR AGREEMENTS. Set forth in Schedule 8.9 hereto is a
correct and complete list of all Billing Processor Agreements in effect on the
date hereof. Under the terms of such agreements, the Billing Processor is to
remit payments to Borrower no less frequently than once each week or as
otherwise provided therein and specified on Schedule 8.9 hereto. No Billing
Processor has any security interest, lien, encumbrance or other claim in or to
any of the Accounts (except to the extent of the rights of set off against
Receivables of the Billing Processor for LEC processing fees, unbillable
amounts, reserves for uncollectible amounts and similar charges and the security
interest of Billing Concepts, Inc. permitted under Section 9.8 hereof).
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The Billing Processor is acting solely as an agent on behalf of Borrower for the
purpose of billing and collecting Retail Accounts from the applicable LEC of the
Retail Customer obligated on such Accounts and the arrangements of Borrower with
the Billing Processor does not involve the purchase and sale by Borrower of
Receivables to the Billing Processor. The Billing Processor Agreements
constitute all of such agreements necessary for Borrower to operate its business
as presently conducted or proposed to be conducted and no Retail Accounts of
Borrower arise from the use by Retail Customers of telecommunication services,
other than those which are subject to the Billing Processor Agreements with
Billing Processors with whom Borrower has a valid and enforceable Billing
Processor Agreement set forth on Schedule 8.9 hereto or with whom Borrower has
entered into a Billing Processor Agreement in accordance with Section 9.18
hereof. Each of the Billing Processor Agreements constitutes the legal, valid
and binding obligations of Borrower and to the best of Borrower's knowledge, the
other parties thereto, enforceable in accordance with their respective terms and
are in full force and effect. No event of default, or act, condition or event
which with notice or passage of time or both, would constitute an event of
default under any of the Billing Processor Agreements exists or has occurred and
is continuing, and Borrower and the other parties thereto have complied with (or
waived in writing compliance with) all of the terms and conditions of the
Billing Processor Agreements to the extent necessary for Borrower to be entitled
to receive all payments thereunder. Borrower has delivered, or caused to be
delivered to Lender, true, correct and complete copies of all of the Billing
Processor Agreements.
8.10 GOVERNMENTAL AUTHORIZATIONS. Except as set forth on Schedule 8.10
hereto, no authorizations, consent, approval, license, exemption or other action
by, and no registration, qualification, designation, declaration or filing with,
any Governmental Authority (other than the filing of UCC financing statements
and continuation statements) is or will be necessary in connection with
execution and delivery of this Agreement or any of the other Financing
Agreements by Borrower, consummation of the transactions herein or therein
contemplated, or performance of or compliance by Borrower with the terms and
conditions hereof or thereof. The failure to file any notice or other
information with any Governmental Authority as set forth on Schedule 8.10 hereto
shall not have any Material Adverse Effect.
8.11 NO REGULATORY EVENT. No Regulatory Event has occurred and is
continuing.
8.12 TRADE RELATIONS. There exists no actual or, to the best of
Borrower's knowledge, threatened termination, cancellation or limitation of the
business relationship between Borrower and any Carrier, any labor organizations,
any material customer or any group thereof whose agreements with Borrower are
material to the business of Borrower, or with any material supplier, and there
exists no present condition or state of facts or circumstances which would have
a Material Adverse Effect or prevent Borrower from conducting its business after
the consummation of the transaction contemplated by this Agreement.
8.13 MATERIAL CONTRACTS. All of the Material Contracts of Borrower are
set forth on Schedule 8.13 hereto. Borrower has made available to Lender true,
correct and complete copies of such Material Contracts on or before the date
hereof. Borrower is not in material breach of or
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in default under any Material Contract. All right, title and interest in any of
the Material Contracts to which Parent was the original party have been validly
assigned and transferred to Borrower (and any and all consents required in
connection therewith have been obtained and are in full force and effect) and
Borrower is entitled to all rights and benefits under or arising pursuant to
such Material Contracts (including, without limitation, any Billing Processor
Agreement), except as otherwise indicated on Schedule 8.13.
8.14 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.14 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.15 INTELLECTUAL PROPERTY. Schedule 8.15 sets forth all of the
agreements or other arrangements of Borrower pursuant to which Borrower or
Parent has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of Borrower and Parent as in effect on the date hereof.
Schedule 8.15 also sets forth all trademarks, patents and copyrights of Borrower
which are registered with the U.S. Patent and Trademark Office or any other
Governmental Authority. No trademark, service-mark, logo or other Intellectual
Property at any time used by Borrower which is owned by another person or owned
by Borrower subject to any security interest, lien, collateral assignment,
pledge or other encumbrance in favor of any person other than Lender is used in
connection with the billing or collection of the Receivables or any other
Collateral or otherwise in connection therewith. The only registered trademark
or other Intellectual Property registered with any Governmental Authority used
by Borrower in connection with the billing and collection of Receivables is the
trademark "Startec" as described on Schedule 8.15 hereto. No software or other
Intellectual Property owned and used by Borrower in the billing and collection
of Receivables or other Collateral is of the type that may be subject to
registration as a copyright with the U.S. Copyright Office. Borrower owns or
licenses all Intellectual Property and other rights with respect thereto, which
are necessary for the operation of its business as presently conducted or
proposed to be conducted. To the best of the knowledge of Borrower, no product,
process, method, substance, part or other Intellectual Property or goods bearing
or using any Intellectual Property presently contemplated to be sold by or
employed by Borrower infringes any patent, trademark, service-mark, tradename,
copyright, license or other Intellectual Property owned by any other Person and
no claim or litigation is pending or threatened against or affecting Borrower
contesting its right to sell or use any such product, process, method,
substance, part or other Intellectual Property.
8.16 SOLVENCY. Borrower is solvent and will continue to be solvent
after the creation of the Obligations, the security interests of Lender and the
other transactions contemplated hereunder, is able to pay its debts as they
mature and has (and has reason to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business and all
businesses in which it is about to engage.
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8.17 ACCURACY AND COMPLETENESS OF INFORMATION. All written information
(other than financial projections, including summaries and analyses with respect
thereto or otherwise with respect to the future performance of Borrower
furnished by or on behalf of Borrower or Parent to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate and any Schedule hereto is true and correct in all material respects
on the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
Any financial projections, including summaries and analyses with respect thereto
or otherwise with respect to the future performance of Borrower (and including
all assumptions) represent the reasonable, good faith opinion of Borrower,
Parent and their management as to the subject matter thereof, and where
applicable have been prepared in accordance with guidelines of the American
Institute of Certified Public Accountants. No event or circumstance has occurred
which has had or would reasonably be expected to have a Material Adverse Effect,
which has not been fully and accurately disclosed to Lender in writing.
8.18 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder (except to the extent that such
representations and warranties expressly relate solely to an earlier date, in
which case such representations and warranties shall have been true and correct
in all material respects as of such earlier date) and shall be conclusively
presumed to have been relied on by Lender regardless of any investigation made
or information possessed by Lender. The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which Borrower shall now or hereafter give, or cause to be given, to
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE. Borrower shall (a) at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and (b) maintain in full force and effect all
Intellectual Property, Licenses, and other licenses, approvals, authorizations,
leases and contracts necessary to carry on the business as presently or proposed
to be conducted where the failure to maintain the same has or would have a
Material Adverse Effect. Borrower shall give Lender thirty (30) days prior
written notice of any proposed change in its corporate name, which notice shall
set forth the new name and Borrower shall deliver to Lender a copy of the
amendment to the Certificate of Incorporation of Borrower providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
of Borrower as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. Borrower may open any new location within
the United States and Canada at which Collateral in any form is held or
maintained, provided Borrower (a) gives Lender five(5) days prior written notice
of the intended opening of any such new location
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and (b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including UCC financing statements.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC. Borrower shall, and shall
cause any Subsidiary to, at all times, comply in all material respects with all
orders, laws, rules, regulations and material Licenses applicable to it and duly
observe all requirements of any Federal, State local or foreign Governmental
Authority.
9.4 PAYMENT OF TAXES AND CLAIMS. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, PROVIDED,
THAT, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 INSURANCE. Borrower shall, and shall cause any Subsidiary to, at
all times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be reasonably satisfactory
to Lender as to form, amount and insurer. Borrower shall furnish certificates,
policies or endorsements to Lender as Lender shall require as proof of such
insurance, and, if Borrower fails to do so, Lender is authorized, but not
required, to obtain such insurance at the expense of Borrower. All policies
shall provide for at least ten (10) days prior written notice to Lender of any
cancellation or reduction of coverage as a result of the failure to pay premiums
when due and thirty (30) days prior written notice to Lender of any cancellation
or reduction of coverage for any other reason and that Lender may act as
attorney for Borrower in obtaining (in the event Borrower fails to do so), and
at any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance. Borrower shall cause
Lender to be named as an additional insured (but without any liability for any
premiums) under the general liability policies applicable to Borrower and loss
payee as to business interruption insurance to the extent that such insurance
covers losses as to Accounts pursuant to such interruption. Such lender's loss
payable endorsements shall specify that the proceeds of such insurance shall be
payable to Lender as its interests may appear and further specify that Lender
shall be paid regardless of any act or omission by Borrower or any of its
Affiliates. At its option, Lender may apply any
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insurance proceeds received by Lender to payment of the Obligations in such
order and manner as is provided in Section 6.4 hereof or hold such proceeds as
cash collateral for the Obligations.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Borrower shall, and shall cause any Subsidiary to, keep
proper books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP and Borrower shall furnish
or cause to be furnished to Lender: (i) within thirty (30) days after the end of
each fiscal month, monthly unaudited consolidated financial statements of
Borrower and its Subsidiaries (including in each case balance sheets, statements
of income and loss, statements of cash flow, and statements of shareholders'
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its Subsidiaries as of the end of
and through such fiscal month, (ii) within forty-five (45) days after the end of
each fiscal quarter, quarterly unaudited consolidated financial statements and
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Parent and its
Subsidiaries as of the end of and through such fiscal quarter, PROVIDED, THAT,
the delivery of the Parent's Form 10-Q filed with the Securities and Exchange
Commission that complies in all material respects with the requirements of Form
10-Q shall be deemed to satisfy the obligation to provide consolidated financial
statements under this section 9.6(a)(ii) for such fiscal quarter and (iii)
within ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and unaudited consolidating financial statements of Parent
and its Subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrower
and its Subsidiaries as of the end of and for such fiscal year, together with
the unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrower and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrower and its Subsidiaries as of the end of and
for the fiscal year then ended, PROVIDED, THAT, the delivery of the Parent's
Form 10-K filed with the Securities and Exchange Commission that complies in all
material respects with the requirements of Form 10-K shall be deemed to satisfy
the obligations to provide consolidated financial statements under this Section
9.6(a)(iii) for such fiscal year.
(b) Borrower shall promptly notify Lender in writing of (i) the
details of any loss, damage, investigation, action, suit, proceeding or claim
relating to any Collateral or which does or would have a reasonable likelihood
of having a Material Adverse Effect, (ii) the existence of any condition or
event which constitutes an Event of Default or any act, condition or event which
with the notice or passage of time or notice or both would constitute an Event
of Default, (iii) the termination or amendment of any Material Contract of
Borrower or entering into any new Material Contract (in which event Borrower
shall provide Lender with a copy of such Material
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Contract), (iv) any order, judgment or decree in excess of $500,000 (after
reasonably expected insurance and indemnity recovery) that is entered against
Borrower or Parent or any of their respective properties or assets, or (v) the
receipt by Borrower or Parent of any notification of a material violation of any
laws or regulations or Licenses (including, without limitation, any
Communications Laws) from any Governmental Authority.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender (i) copies of all reports which
Borrower or Parent sends to its stockholders generally and copies of all reports
and registration statements which Borrower or Parent files with the Securities
and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc. or the FCC or any material filing with
any other Governmental Authority, and (ii) copies of any management letters and
reports by independent certified public accountants to Borrower.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the businesses of Borrower and Parent, as Lender may, from time
to time, reasonably request. Lender is hereby authorized to deliver a copy of
any financial statement or any other information relating to the business of
Borrower and Parent, or any Subsidiary, to any court or other Governmental
Authority as required by applicable law or to any participant or assignee or
prospective participant or assignee, PROVIDED, THAT, any such participant or
assignee or prospective participant or assignee shall treat such information as
confidential to the extent required under Section 12.4 hereof. Borrower hereby
irrevocably authorizes all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and Parent
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrower or Parent and to disclose to Lender, upon reasonable
Lender's request, such information as they may have regarding the business of
Borrower, Parent and any Subsidiary. Lender shall only obtain copies of the
financial statements of Borrower and Parent, or reports or management letters,
from such accountants and auditors pursuant to such authorization in the event
that Borrower does not provide the financial statements of Borrower and Parent,
or reports or management letters, to Lender as required hereunder. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender six (6) months after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly, (a)
enter into or become the subject of any merger, or consolidation (except to the
extent such merger or consolidation may be permitted under Section 9.10(d)
hereof), or wind up, liquidate or dissolve or adopt a plan by the stockholders
relating to the winding up, liquidation or dissolution of the business of
Borrower or (b) convey, sell, lease, transfer or otherwise dispose of, in one or
a series of transactions, (i) any of the Collateral or (ii) all or substantially
all of Borrower's assets or (iii) any assets necessary or material to the
business of Borrower as currently conducted, except as to sales otherwise
prohibited by this clause (iii) to the extent of sales or exchanges of Equipment
and related software and other related assets from time to time in the ordinary
course of the business of
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Borrower, so long as in the case of sales thereof, the proceeds of such sales
are promptly used to purchase Equipment and related software and other related
assets (or Borrower obtains financing, the proceeds of which are used) to
replace the Equipment so sold; or (c) agree to any of the foregoing.
9.8 ENCUMBRANCES. Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of the Collateral, EXCEPT:
(a) liens and security interests of Lender; and
(b) the security interests in and liens of Billing Concepts, Inc.
upon (i) all amounts paid, and all amounts owing, by each LEC to Billing
Concepts, Inc. on accounts for Borrower's Valid EMI Billing Records; (ii) all
accounts owing from a Retail Customer to Borrower arising from services which
give rise to Borrower's Valid EMI Billing Records; (iii) all amounts deposited
by Borrower with Billing Concepts, Inc. pursuant to Section 13(b) of the One
Plus Billing and Information Management Services Agreement, dated March 1, 1999,
between Borrower (as assignee of Parent) and Billing Concepts, Inc. (as in
effect on the date hereof) and (iv) all amounts owing and all amounts to be
owing from Billing Concepts, Inc. to Borrower, PROVIDED, THAT, (A) in no event
shall such security interests and liens of Billing Concepts, Inc. secure
Indebtedness of Borrower to Billing Concepts, Inc. other than (1) the processing
fees payable by Borrower to Billing Concepts, Inc., (2) the fee payable by
Borrower to Billing Concepts, Inc. for each customer service inquiry,
investigation or rebate handled by Billing Concepts, Inc. on behalf of Borrower,
(3) the contractual fees of Billing Concepts, Inc. with each LEC to the extent
Billing Concepts, Inc. makes payment of such fees to the applicable LEC on
behalf of Borrower, (4) any post-billing adjustments or credits refunded by
Billing Concepts, Inc. on behalf of Borrower to Retail Customers pursuant to
Billing Concepts, Inc. customer service inquiry and investigation activities in
accordance with the terms of the Billing Processor Agreement between Borrower
and Billing Concepts, Inc. as in effect on the date hereof and (5) amounts owing
by Borrower to Billing Concepts, Inc. as a result of amounts that are billed to
a Retail Customer's account for Valid EMI Billing Records but are not collected
due to the Retail Customer receiving a post-billing adjustment credit or the
Retail Customer failing to pay its bill to the LEC, to the extent such amounts
have previously been paid by Billing Concepts, Inc. to Borrower; in each case as
to amounts described in clauses (1), (2), (3), (4) and (5) as set forth in the
Billing Processor Agreement between Borrower and Billing Concepts, Inc. as in
effect on the date hereof or as amended to reduce any such amounts and (B)
Lender shall have received the Billing Processor Acknowledgment duly authorized,
executed and delivered by Billing Concepts, Inc. which shall be in full force
and effect and Billing Concepts, Inc. shall be in compliance with the terms
thereof.
9.9 INDEBTEDNESS. Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any Indebtedness, EXCEPT:
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(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases)
arising after the date hereof provided that the security interest to secure such
Indebtedness does not apply to any property of Borrower other than the property
acquired with the proceeds thereof and the Indebtedness secured thereby does not
exceed the cost of the property so acquired;
(c) so long as on the date of incurring such Indebtedness and
after giving effect thereto, no Event of Default or act, condition or event
which with notice or passage of time would constitute an Event of Default shall
exist or have occurred and be continuing, and so long as, as on the date of
incurring such Indebtedness and after giving effect thereto, Borrower shall be
in compliance with the financial covenants set forth in Schedule 9.9(c) hereto:
(i) unsecured Subordinated Indebtedness arising after the
date hereof, PROVIDED, THAT, Lender shall have received, in form and substance
satisfactory to Lender, a subordination agreement providing for the terms of the
subordination in right of payment of such Indebtedness of Borrower to the prior
final payment and satisfaction in full of all of the Obligations, duly
authorized, executed and delivered by such person and Borrower,
(ii) unsecured Indebtedness arising after the date hereof
which is not subordinated in right of payment to the right of Lender to receive
the payment of the Obligations, with the prior written consent of Lender,
(iii) without the prior written consent of Lender,
unsecured Indebtedness arising after the date hereof which is not subordinated
in right of payment to the right of Lender to receive the payment of the
Obligations, PROVIDED, THAT, (A) only interest in respect of such Indebtedness
shall be payable on or prior to the date which is one hundred eighty (180) days
after the end of the then current term of the financing arrangements provided
for herein, and (B) the covenants, terms and conditions related thereto shall be
no less favorable, from Lender's perspective, than the covenants, terms and
conditions contained in the 12% Senior Notes due 2008 issued by Parent and the
Indenture, dated as of May 21, 1998, between First Union National Bank in its
capacity as trustee and Parent (as each is in effect on the date hereof),
including, without limitation, conditions, prohibitions or restrictions with
respect to Subsidiaries making loans or distributing cash dividends to Borrower
or Parent or limiting redemptions prior to maturity and upon the request of
Borrower, Lender shall confirm to Borrower its determination as to whether the
covenants, terms and conditions of such new Indebtedness are more or less
favorable;
(d) the Indebtedness existing as of the date hereof set forth on
Schedule 9.9(d) hereto; provided, THAT, (i) Borrower may only make regularly
scheduled payments of principal and interest in respect of such Indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such Indebtedness as in effect on the date hereof, (ii) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such Indebtedness or any agreement, document or instrument related thereto as in
effect on the
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date hereof, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any person, or form or
acquire any Subsidiaries, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the Indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
EXCEPT:
(a) the endorsement of instruments for collection or deposit in
the ordinary course of business;
(b) investments in cash or Cash Equivalents;
(c) loans, capital contributions or other equity investments
involving the purchase, directly or indirectly, or involving the ownership or
control, directly or indirectly, of fifty percent (50%) or less of the Capital
Stock of any such Person, in each case in cash or other immediately available
funds by Borrower after the date hereof to or in any Person, PROVIDED, THAT, as
to any such loan, capital contributions or other equity investment, each of the
following conditions is satisfied: (i) as of the date of any such loan, capital
contribution or other equity investment and after giving effect thereto,
Borrower shall be in compliance with the financial covenants set forth in
Schedule 9.9(c) hereof based on the most recent financial statements or Borrower
received by Lender in accordance with Section 9.6 hereof, (ii) the Person
receiving such loan, capital contribution or other investment shall be engaged
in any business which is reasonably related, ancillary or complementary to the
business of Borrower as conducted on the date hereof and (iii) as of the date of
such loan, capital contribution or other investment and after giving effect
thereto, no Event of Default, or act, condition or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred and be continuing;
(d) the formation or acquisition of any Subsidiary or the
purchase of more than fifty percent (50%) of the Capital Stock of any Person, or
all or a substantial part of the assets or property of any Person or the merger
or consolidation of Borrower with any Person, PROVIDED, THAT, as to any such
transaction, each of the following conditions is satisfied: (i) as of the date
of any such transaction and after giving effect thereto, Borrower shall be in
compliance with the financial covenants set forth in Section 9.9(c) hereof based
on the most recent financial statements of Borrower received by Lender in
accordance with Section 9.6 hereof, (ii) the Subsidiary formed or acquired or
the person whose Capital Stock is purchased or the assets purchased or with whom
Borrower has merged or consolidated, as the case may be, shall be engaged in any
business which is reasonably related, ancillary or complementary to the business
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of Borrower as conducted on the date hereof, (iii) in the case of the purchase
by Borrower of all or a substantial part of the assets or property of any Person
or the merger or consolidation of Borrower, (A) in no event shall any Accounts
acquired by Borrower pursuant to such acquisition or merger or consolidation be
deemed Eligible Accounts unless and until Lender shall have conducted a field
examination with respect to the assets to be acquired and so long as the results
thereof are satisfactory, and then only to the extent the criteria for Eligible
Accounts set forth herein are satisfied with respect thereto (and subject to
such other advance percentage with respect thereto, as Lender may determine) and
(B) upon the request of Lender, the Accounts acquired by Borrower pursuant to
such acquisition or merger or consolidation can and shall be at all times after
such acquisition or merger or consolidation be separately identified and
reported to Lender in a manner satisfactory to Lender, (iv) in the case of any
merger or consolidation, (A) Borrower shall be the surviving corporation and (B)
Borrower shall immediately upon the effectiveness of the merger or consolidation
expressly confirm in writing pursuant to an agreement, in form and substance
satisfactory to Lender, its continuing liability in respect of the Obligations
and Financing Agreements and (C) any Obligor shall ratify and confirm, in form
and substance satisfactory to Lender, that its guarantee of the Obligations
shall apply to the Obligations of Borrower as the surviving corporation, (v)
upon the effective date of such transaction, Lender shall have received a
certificate duly executed and delivered by Borrower substantially in the form of
Exhibit B hereto with respect to the transaction and the representations and
warranties contained therein shall be true, correct and complete, (vi) as of the
date of any such transaction and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default, shall exist or have occurred and be
continuing, (vii) promptly upon Lender's request, Borrower shall deliver, or
cause to be delivered to Lender, true, correct and complete copies of all
agreements, documents and instruments relating to such transaction, and (viii)
promptly upon Lender's request, Borrower shall execute and deliver, or cause to
be executed and delivered, to Lender such agreements, documents and instruments
in connection with such transaction as Lender may request, if any, including,
without limitation, UCC financing statements, Collateral Access Agreements and
any amendments or supplements hereto;
(e) stock or other securities issued to Borrower by any Person
(or the representative of such Person) in respect of Indebtedness of such Person
owing to Borrower or Parent in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person;
(f) obligations of Account Debtors to Borrower arising from
Accounts which are past due evidenced by a promissory note made by such Account
Debtor payable to Borrower; PROVIDED, THAT, promptly upon the receipt of the
original of any such promissory note by Borrower in an amount in excess of
$50,000 at any time prior to an Event of Default or in any amount at any time an
Event of Default exists or has occurred and is continuing, such promissory note
shall be indorsed to the order of Lender by Borrower and promptly delivered to
Lender as so indorsed;
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(g) loans and advances by Borrower to employees of Borrower or
its Affiliates (other than as otherwise expressly permitted above) made after
the date hereof not to exceed in the aggregate for all such loans and advances
the principal amount of $1,500,000, PROVIDED, THAT, as of the date of any such
loan or advance and after giving effect thereto, no Event of Default or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred and be continuing;
(h) the loans, advances and guarantees set forth on Schedule 9.10
hereto; PROVIDED, THAT, as to such loans, advances and guarantees, (i) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the
material terms of such loans, advances or guarantees or any agreement, document
or instrument related thereto, except that Borrower may, after prior written
notice to Lender, amend, modify, alter or change the terms thereof so as to
shorten the maturity date thereof or accelerate the timing, or increase the
amount of any payments in respect thereof, or to increase the interest rate or
any fees in connection therewith, or (B) as to such guarantees, redeem, retire,
defease, purchase or otherwise acquire the obligations arising pursuant to such
guarantees, or set aside or otherwise deposit or invest any sums for such
purpose, and (ii) Borrower shall furnish to Lender all notices or demands in
connection with such loans, advances or guarantees or other Indebtedness subject
to such guarantees either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 DIVIDENDS AND REDEMPTIONS. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of Capital Stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, EXCEPT THAT, Borrower may repurchase
up to an aggregate amount of fifteen percent (15%) of the outstanding shares of
common stock of Parent as of the date of this Agreement for the purpose of
acquiring shares of common stock to reissue pursuant to the exercise of employee
stock options, PROVIDED, THAT, as to any such repurchase, each of the following
conditions is satisfied: (a) as of the date of any payment in connection with
such repurchase, and after giving effect thereto, no Event of Default or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred and be continuing; (b) as of
the date of any payment in connection with such repurchase and after giving
effect thereto, Borrower shall be in compliance with the financial covenants set
forth on Schedule 9.9(c) hereto based on the most recent financial statements of
Borrower received by Lender in accordance with Section 9.6 hereof; and (c) as of
the date of any payment in connection with such repurchase, Lender shall have
received a certificate duly executed by the chief financial officer of Borrower
setting forth in detail the calculation supporting Borrower's compliance with
the financial covenants set forth on Schedule 9.9(c) hereto, stating that there
has been no event, condition or circumstance which would have a Material Adverse
Effect since the date of the latest financial statements delivered to Lender
pursuant to Section 9.6 hereof and stating that no Event of Default, or act,
condition or
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event which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred and be continuing and be continuing as of
the date of any payment in connection with such repurchase and after giving
effect thereto.
9.12 TRANSACTIONS WITH AFFILIATES. Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly, (a) purchase, acquire or lease
any property from, or sell, transfer or lease any property to, any officer,
director, agent or other person that is an Affiliate of Borrower or except in
the ordinary course of and pursuant to the reasonable requirements of Borrower's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to Borrower, such Subsidiary than Borrower, Parent or Subsidiary would
obtain in a comparable arm's length transaction with an unaffiliated person or
(b) make any payments of management, consulting or other fees for management or
similar services, or of any Indebtedness owing to any officer, employee,
shareholder, director or any other Affiliate of Borrower EXCEPT (i) reasonable
compensation to officers, employees, consultants and directors for services
rendered to Borrower or Parent or Subsidiary in the ordinary course of business,
(ii) Borrower may make payments to Parent for actual and necessary reasonable
out-of-pocket administrative and operating expenses of Parent for the business
of Parent as presently conducted in the ordinary course of business, and for
actual and necessary reasonable out-of-pocket legal and accounting, insurance,
marketing, payroll and similar types of services paid for by Parent on behalf of
Borrower in the ordinary course of its business or as the same may be directly
attributable to Borrower or Parent; PROVIDED, THAT, (A) Parent shall not conduct
any business except as permitted under Section 9.16 hereof and (B) Parent shall
not own or hold any assets or properties, except as permitted under Section 9.16
hereof.
9.13 ADDITIONAL BANK ACCOUNTS. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.14 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b) as to any other accounts used by Borrower, after prior
written notice to Lender.
9.14 FINANCIAL COVENANTS. Borrower shall, at all times, comply with the
covenants set forth on Schedule 9.9(c) hereof.
9.15 MINIMUM CASH BALANCE. Borrower shall, at all times, have legal and
valid, direct and beneficial ownership of cash or Cash Equivalents of not less
than $20,000,000, held by Borrower without restriction as to its availability or
use, which cash or Cash Equivalents shall be free and clear of all security
interests, liens, pledges, claims or other encumbrances and shall be available
to Borrower for working capital.
9.16 CHANGES IN BUSINESS.
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(a) Parent and its Subsidiaries shall not engage in any business
other than the businesses of Parent and its Subsidiaries on the date hereof and
any businesses reasonably related, ancillary or complementary to the businesses
in which Parent and its Subsidiaries are engaged on the date hereof.
(b) Parent shall not engage in any business other than its
ownership of the Capital Stock of Borrower and any Subsidiaries of Parent to the
extent permitted hereunder, PROVIDED, THAT, any Subsidiaries of Parent shall be
engaged solely in the same businesses of Parent and its Subsidiaries on the date
hereof and any businesses reasonably related, ancillary or complementary to the
businesses in which Parent and its Subsidiaries are engaged on the date hereof.
Parent shall act as a holding company which shall not directly engage in or
conduct any business, and Parent shall have no significant assets other than its
ownership of the Capital Stock of Borrower and any Subsidiaries of Parent to the
extent permitted hereunder and except to the extent that the material assets of
Parent set forth on Schedule 9.16 hereto have, as of the date hereof, only been
transferred and assigned by Parent to Borrower subject to the receipt by
Borrower of the consent to such transfer and assignment by the other party
thereto. Borrower shall cause Parent to obtain the requisite consents in order
to validly transfer and assign all of the material assets set forth on Schedule
9.16 hereto as soon as possible, but in no event by later than sixty (60) days
after the date hereof. The assets of Parent set forth on Schedule 9.16
constitute all of the assets of Parent used in or related to the operation of
the business of Borrower.
(c) Startec Global Licensing Company shall not engage in any
business other than to hold certain licences issued by PUCs allowing it to
operate solely to provide telecommunication services within the State that has
issued such license and to have certain accounts receivable owing to it arising
pursuant to intrastate telecommunication services provided by it to retail
customers and assets directly related thereto and to charge reasonable fees in
connection with the licenses held by it.
9.17 CARRIER SERVICE AGREEMENTS. Borrower and Parent shall (a) promptly
and faithfully observe and perform all of the terms, covenants, conditions and
provisions of any Carrier Service Agreement that is the basis for one (1%)
percent or more of the revenues of Borrower in the immediately preceding month
to be observed and performed by it, where the failure to so observe or perform
gives any other party to such Carrier Service Agreement the right or option to
terminate or suspend or otherwise prevent the use by Borrower of the services
subject to such Carrier Service Agreement or cease any payment to Borrower or
Parent thereunder or would have a Material Adverse Effect, (b) not do, permit,
suffer or refrain from doing anything, as a result of which there could be an
event of default under or breach of any of the terms of any such Carrier Service
Agreement where such event of default or breach would have or would reasonably
be expected to have a Material Adverse Effect, (c) not cancel, terminate,
surrender, modify, amend, waive or release any such Carrier Service Agreement or
any term, provision or right of Borrower thereunder, or consent to or permit to
occur any of the foregoing; EXCEPT THAT Borrower may cancel, terminate,
surrender or release any Carrier Service Agreement in the ordinary course of the
business of Borrower, (d) give Lender immediate written notice of any breach of
any material obligation, or any event of default, by any party under any such
Carrier
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Service Agreement, which gives any other party to such Carrier Service Agreement
the right or option to terminate or suspend or otherwise prevent the use by
Borrower or Parent of the services subject to such Carrier Service Agreement or
any payments to Borrower and deliver to Lender (promptly upon the receipt
thereof by Borrower in the case of a notice to the Borrower, and concurrently
with the sending thereof in the case of a notice from Borrower), a copy of each
notice of default or other notice received or delivered by Borrower in
connection with any Carrier Service Agreement which relates to the right of
Borrower to continue to use the services subject to such Carrier Service
Agreement or to receive any payments thereunder, and (e) furnish to Lender,
promptly upon the request of Lender, such information and evidence as Lender may
require from time to time concerning the observance, performance and compliance
by Borrower or Parent or the other party or parties thereto with the terms,
covenants or provisions of the Carrier Service Agreements.
9.18 BILLING PROCESSOR AGREEMENTS. Borrower and Parent shall (a)
promptly and faithfully observe and perform all of the terms, covenants,
conditions and provisions of any Billing Processor Agreements to be observed and
performed by it at the times set forth therein, if any, where the failure to so
observe or perform gives any other party to such Billing Processor Agreement the
right or option to terminate or suspend providing the services to Borrower to be
provided thereunder or would have a Material Adverse Effect; (b) not do, permit,
suffer or refrain from doing anything, as a result of which there would
reasonably be expected to be an event of default under or breach of any of the
terms of any Billing Processor Agreement, (c) at all times, maintain in full
force and effect the Billing Processor Agreements and not terminate, cancel,
surrender, modify, amend, waive or release any Billing Processor Agreement, or
consent to or permit to occur any of the foregoing; EXCEPT, THAT, Borrower may
terminate or cancel any Billing Processor Agreement in the ordinary course of
the business of Borrower; PROVIDED, THAT, Borrower shall give Lender not less
than thirty (30) days prior written notice of its intention to so terminate or
cancel any Billing Processor Agreement; (d) not enter into any new Billing
Processor Agreement with any new Billing Processor unless (i) Lender shall have
received not less than thirty (30) days prior written notice of the intention of
Borrower to enter into such agreement (together with such other information with
respect thereto as Lender may reasonably request) and (ii) Borrower delivers, or
causes to be delivered to Lender, a Billing Processor Acknowledgment in favor of
Lender, duly authorized, executed and delivered by such Billing Processor; (e)
give Lender immediate written notice of any Billing Processor Agreement entered
into by Borrower after the date hereof, together with a true, correct and
complete copy thereof and such other information with respect thereto as Lender
may reasonably request; and (f) furnish to Lender, promptly upon the request of
Lender, such information and evidence as Lender may reasonably request from time
to time concerning the observance, performance and compliance by Borrower or
Parent or the other party or parties thereto with the terms, covenants or
provisions of the Billing Processor Agreements.
9.19 END OF FISCAL YEARS; FISCAL QUARTERS. Borrower and Parent shall,
for financial reporting purposes, cause its, and each of its Subsidiaries' (a)
fiscal years to end on December 31 of each year and (b) fiscal quarters to end
on March 31, June 30, September 30 and December 31 of each year.
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9.20 YEAR 2000 COMPLIANCE. Borrower shall, and shall cause any
Subsidiary to, take all action which may be required so that its computer-based
information systems, including, without limitation, all of its material
proprietary computer hardware and software and all material computer hardware
and software leased or licensed from third parties (and whether supplied by
others or with which Borrower's or Parent's systems interface) are able to
operate effectively and correctly process data using dates on or after January
1, 2000. Compliance with the foregoing shall mean that the systems will operate
and correctly process data without human intervention such that (a) there is
correct century recognition, (b) calculations properly accommodate same century
and multi-century formulas and date values, (c) all leap years shall be
calculated correctly and (d) the information systems shall otherwise comply with
applicable industry standards and regulatory guidelines regarding the change of
the century and year 2000 compliance.
9.21 COSTS AND EXPENSES. Borrower shall pay to Lender on demand all
reasonable costs, expenses, filing fees and taxes (other than income taxes of
Lender or its Affiliates) paid or payable in connection with the preparation,
negotiation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (UCC financing statements filings; (b) costs and
expenses and fees for insurance premiums, assessments, appraisal fees and search
fees, costs and expenses of remitting loan proceeds, collecting checks and other
items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (c)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (d) reasonable costs and expenses of preserving
and protecting the Collateral; (e) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all reasonable out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Lender during the course of periodic field examinations of
the Collateral and Borrower's and Parent's operations, plus a per diem charge at
the rate of $650 per person per day for Lender's examiners in the field and
office, PROVIDED, THAT, prior to an Event of Default, Borrower shall not be
required to pay such per diem charge for Lender's examiners for more than four
(4) field examinations in any twelve (12) month period; and (g) the reasonable
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.22 FURTHER ASSURANCES. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments (including UCC financing statements), and do or cause to be done
such further acts as may be necessary or proper to
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evidence, perfect, maintain and enforce the security interests and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any of the other Financing Agreements. Lender may at any
time and from time to time request a certificate from an officer of Borrower
representing that all conditions precedent to the making of Loans and providing
Letter of Credit Accommodations contained herein are satisfied. In the event of
such request by Lender, Lender may, at its option, cease to make any further
Loans or provide any further Letter of Credit Accommodations until Lender has
received such certificate and, in addition, Lender has determined that such
conditions are satisfied. Where permitted by law, Borrower hereby authorizes
Lender to execute and file one or more UCC financing statements signed only by
Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay any of the Obligations within three
(3) Business Days after the same becomes due and payable or (ii) Borrower fails
to perform any of the covenants contained in Sections 9.1, 9.2, 9.3, 9.4, 9.6,
9.13, 9.14, 9.17, 9.18, 9.20 and 9.21 of this Agreement and such failure shall
continue for fifteen (15) days; PROVIDED, THAT, such fifteen (15) day period
shall not apply in the case of: (A) any failure to observe any such covenant
which is not capable of being cured at all or within such fifteen (15) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach of Borrower of any such covenant or (iii)
Borrower fails to perform any of the terms, covenants, conditions or provisions
contained in this Agreement or any of the other Financing Agreements other than
those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any judgment for the payment of money is rendered against
Borrower in excess of $500,000 in any one case or in excess of $750,000 in the
aggregate (other than judgments fully covered by insurance (subject to standard
deductible provisions of such policies) where the insurer has admitted in
writing that it is responsible to pay all amounts in connection with such
judgment or defend any action resulting in such judgment and make payment to
Borrower if Borrower is required to make any payment in respect of such
judgment) and shall remain undischarged or unvacated for a period in excess of
forty-five (45) days or execution shall at any time not be effectively stayed,
or any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any of their assets;
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(d) Borrower dissolves or suspends or discontinues doing
business;
(e) Borrower makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a meeting of its creditors or
principal creditors;
(f) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Collateral or all or any material
part of its properties and such petition or application is not dismissed within
thirty (30) days after the date of its filing or Borrower shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or for any Collateral or all or any material
part of its property; or
(h) any default by Borrower under any agreement, document or
instrument relating to any Indebtedness for borrowed money owing to any person
other than Lender, or any capitalized lease obligations, contingent Indebtedness
in connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lender, in any case in an amount in
excess of $500,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrower under any
Material Contract or any material lease, License or other obligation to any
person other than Lender, which default continues for more than the applicable
cure period, if any, with respect thereto;
(i) any Billing Processor shall send notice to Borrower that it
is ceasing to make or suspending payments to Borrower of amounts due or to
become due to Borrower or shall cease or suspend such payments, or shall send
notice to Borrower that it is terminating its arrangements with Borrower or such
arrangements shall terminate as a result of any event of default under such
arrangements, which continues for more than the applicable cure period, if any,
with respect thereto, unless Borrower shall have entered into arrangements with
another Billing Processor to provide comparable or better service, within
forty-five (45) days after the date of any such notice;
(j) any Change of Control;
(k) the indictment by any Governmental Authority, or as Lender
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of which Borrower or Lender receives notice, of Borrower
under any criminal statute, or commencement of criminal or civil proceedings
against Borrower, pursuant to which statute or proceedings the
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penalties or remedies sought or available include forfeiture of (i) any of the
Collateral or (ii) any other property of Borrower which is necessary or material
to the conduct of its business;
(l) any Regulatory Event;
(m) there shall be any Material Adverse Effect; or
(n) there shall be an event of default under any of the other
Financing Agreements.
10.2 REMEDIES.
(a) At any time an Event of Default exists or has occurred and is
continuing and is continuing, Lender shall have all rights and remedies provided
in this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by Borrower except as such notice or consent is expressly provided for
hereunder or required by applicable law. All rights, remedies and powers granted
to Lender hereunder, under any of the other Financing Agreements, the UCC or
other applicable law, are cumulative, not exclusive and enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing and is continuing, Lender may,
in its discretion and without limitation, (i) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender (PROVIDED, THAT, upon
the occurrence of any Event of Default described in Sections 10.1(f) and
10.1(g), all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii) require
Borrower, at Borrower's expense, to assemble and make available to Lender any
part or all of the Collateral at any place and time designated by Lender, (iv)
collect, foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale, foreclosure
or other disposition thereof or for any other purpose, (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including entering into contracts with respect thereto, public or private sales
at any exchange, broker's board, at any office of Lender or elsewhere) at such
prices or terms as Lender may deem reasonable, for cash, upon credit or for
future delivery, with the Lender having the right to purchase the whole or any
part of the Collateral at any such public sale, all of the foregoing being free
from any right or equity of redemption of Borrower, which right or equity of
redemption is hereby expressly waived and released by Borrower and/or (vii)
terminate this Agreement. In addition and not in limitation of
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the foregoing, at any time an Event of Default exists or has occurred and is
continuing and is continuing, upon Lender's request, Borrower will either
furnish cash collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Lender for the Letter of Credit Accommodations, as Lender may specify. If any
of the Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until payment
therefor is finally collected by Lender. If notice of disposition of Collateral
is required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) Without limiting any other rights or remedies, at any time an
Event of Default exists or has occurred and is continuing and is continuing, for
the purpose of enabling Lender to exercise rights and remedies hereunder,
Borrower hereby grants to Lender, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Borrower) to use, assign, license or sublicense any of the
trademarks, service marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by Borrower, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof.
(d) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(e) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
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11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York in New
York County and the United States District Court for the Southern District of
New York and waive any objection based on venue or FORUM NON CONVENIENS with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
ten (10) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon Borrower in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service,
Borrower shall appear in answer to such process, failing which Borrower shall be
deemed in default and judgment may be entered by Lender against Borrower for the
amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
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(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 WAIVER OF NOTICES. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 INDEMNIFICATION. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel, except for any losses, claims, damages, liabilities, costs or expenses
resulting from Lender's gross negligence or willful misconduct as determined
pursuant
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to a final non-appealable order of a court of competent jurisdiction. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; PROVIDED, THAT,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and
unpaid Obligations and shall furnish cash collateral to Lender in such amounts
as Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final payment. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrower for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrower to the bank account designated by Lender are received in such bank
account later than 11:00 a.m., New York City time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of their respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
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(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C>
(i) Two (2%) percent of the From the date hereof to and including
Maximum Credit June 29, 2001
(ii) One (1%) percent of the From June 30, 2001 to and including
Maximum Credit June 27, 2002.
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations.
(d) Notwithstanding anything to the contrary contained in Section
12.1(c) in the event of termination of this Agreement at the request of Borrower
at any time after the first anniversary of the date hereof, Borrower shall not
be required to pay to Lender the early termination fee otherwise payable by
Borrower to Lender pursuant to Section 12.1(c) above, if each of the following
conditions is satisfied as determined by Lender: (i) Lender shall have received
not less than fifteen (15) days prior written notice of the intention of
Borrower to so terminate this Agreement, (ii) Lender shall have received the
written request of Borrower to amend this Agreement to increase the Maximum
Credit by more than $5,000,000 and Lender shall have received all information
required by Lender in order to consider such request from Borrower, (iii) the
aggregate amount of the Eligible Accounts for each of the sixty (60) days prior
to the date of such request from Borrower shall have resulted in a Borrowing
Base equal to or greater than the amount of the Maximum Credit requested by
Borrower on each of such sixty (60) days, (iv) Lender shall have received a
commitment letter from a bank or other financial institution addressed to
Borrower, duly authorized, executed and delivered by such bank or other
financial institution and Borrower setting forth the terms and conditions of a
secured revolving credit facility to be provided by such financial institution
to Borrower the proceeds of which are to be used by Borrower for working capital
purposes, (v) Lender shall have notified Borrower in writing that it is
unwilling to amend the Maximum Credit, (vi) within thirty (30) days after the
date of written notice to Borrower from Lender that Lender would not agree to
such increase in the Maximum Credit, this Agreement shall be terminated and
Lender shall have received full and final repayment of all of the Obligations
and the cash collateral as provided in Section 12.1(a) above, and (vii) no Event
of Default, or act, condition or event which with notice or passage of time
would constitute an Event of Default, shall exist or have occurred and be
continuing and be continuing.
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12.2 NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 PARTIAL INVALIDITY. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 CONFIDENTIALITY.
(a) Lender shall use all reasonable efforts to keep confidential,
in accordance with its customary procedures for handling confidential
information and safe and sound lending practices, any non-public information
supplied to it by Borrower pursuant to this Agreement which is clearly and
conspicuously marked as confidential at the same time such information is
furnished by Borrower to Lender, PROVIDED, THAT, nothing contained herein shall
limit the disclosure of any such information: (i) to the extent required by
statute, rule, regulation, subpoena or court order, (ii) to bank examiners and
other regulators, auditors and/or accountants, (iii) in connection with any
litigation to which Lender is a party, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee shall have first
agreed in writing to treat such information as confidential in accordance with
this Section 12.4, or (v) to counsel for Lender or any participant or assignee
(or prospective participant or assignee).
(b) In no event shall this Section 12.4 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrower or any
third party without breach of this Section 12.4 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
becomes available to Lender on a non-confidential basis from person other than
Borrower, (iii) require Lender to return any materials furnished by Borrower to
Lender or (iv) prevent Lender from responding to routine informational requests
in accordance with the CODE OF ETHICS FOR THE EXCHANGE OF CREDIT INFORMATION
promulgated by The Robert Morris Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Lender under this Section 12.4 shall supersede and replace the obligations of
Lender under any confidentiality letter signed prior to the date hereof.
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<PAGE>
12.5 SUCCESSORS. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its Obligations under
this Agreement and the other Financing Agreements (a) to any of its present and
future Subsidiaries or Affiliates that are in the business of making loans or
otherwise have arrangements for the making of loans or (b) to the extent of the
interests of participants as provided herein, or (c) upon the merger,
consolidation, sale, transfer or other disposition of all of any substantial
portion of its business, loan portfolio or other assets or (d) at any time an
Event of Default shall exist or have occurred and be continuing or (e) with the
consent of Borrower, which shall not be unreasonable withheld, delayed or
conditioned. In addition, Lender may, after prior notice to Borrower, sell
participations in any part of the Loans and related rights hereunder to another
financial institution or other person. In connection with seeking any
prospective participant, Lender shall, prior to the distribution of any
financial projections of Borrower, or Parent, or any of their Affiliates,
provided to it by Borrower confirm that such information represents the most
recent good faith estimate of management of Borrower of the subject matter
thereof. Borrower shall cooperate with Lender in seeking prospective
participants. Lender will not deliver to a prospective participant the then
current quarter monthly financial statements received by Lender from Borrower
without the consent of Borrower.
12.6 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
61
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION STARTEC GLOBAL OPERATING COMPANY
By: Dan Kott By: Subhash Pai
---------------------------- -----------------------------
Title: Vice President Title: Vice President
------------------------ --------------------------
Address: Chief Executive Office:
- -------- -----------------------
1133 Avenue of the Americas 10411 Motor City Drive
New York, New York 10036 Bethesda, Maryland 20817
ACKNOWLEDGED AND AGREED
as to those provisions which refer
to the undersigned:
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
By: Subhash Pai
--------------------------
Title: Vice President
-----------------------
Chief Executive Office:
- -----------------------
10411 Motor City Drive
Bethesda, Maryland 20817
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<PAGE>
Exhibit 10.53
THIS LEASE made this 23rd day of April, 1999
LANDLORD
between The Rector, Church Wardens and Vestrymen of Trinity Church in the city
of New York, a religious corporation (hereafter referred as as "the Landlord"),
having its offices at 74 Trinity Place, Borough of Manhattan, City, County and
State of New York, and
STARTEC GLOBAL COMMUNICATIONS CORPORATION
TENANT
(hereafter referred to as "the Tenant"), a Maryland corporation,
having its place of business at 10411 Motor City Drive, Bethesda, Maryland
20817.
Witnesseth:
GRANT PREMISES
That the Landlord hereby lets and leases to the Tenant, and the Tenant
hereby takes and hires from the Landlord, the following described space: a
portion of the 5th floor as hatched in red on the diagram attached hereto and
made part of this lease and marked Exhibit "A".
TERM
(such space is hereafter referred to as "the premises") in the building known
by street number as No. 225 Varick Street in the Borough of Manhattan, City,
County and State of New York (hereafter referred to as "the building"), with
the privilege to the Tenant of using (subject to such rules and regulations
as the Landlord shall from time to time prescribe) the necessary entrances
and appurtenances to the premises, reserving to the Landlord all other
portions of the building not herein specifically demised, for a term to
commence on the first day of April, 1999, at noon, Standard Time, and to
expire on the thirty-first day of March, 2009, at noon, Standard Time (or
until such term shall sooner cease and
RENT
expire or be terminated as hereafter provided), at the rent at the annual
rate or rates as follows: TWO HUNDRED EIGHTY-NINE THOUSAND SEVEN HUNDRED AND
NO/100 ($289,700.00) Dollars,
ADDITIONAL RENT
payable at the offices of the Landlord in equal monthly payments of
$24,141.67 each or if more than one annual rate is specified above, then in
installments equal to 1/12th of the rent at the annual rates as above
prescribed for the respective periods in which they are payable, in advance
without demand therefor an installment equal to the amount of the rent
payable under this lease for the first month of the term for which rent is
payable upon the execution hereof by the Tenant, and thereafter, on the first
day of each month during said term, in lawful money of the United States,
plus (i) when due or demanded, such items as shall be provided hereafter
are payable by the Tenant as additional rent, and (ii), should the Tenant at
the commencement of the term of this lease be in default in the payment of
rent to the Landlord pursuant to the terms of any prior lease with the
Landlord, or with a predecessor in interest of the Landlord, the amount of
such arrears, which the Landlord may at its option and without notice thereof
to the Tenant, add to any monthly installments of rent due under this lease.
COVENANTS AND CONDITIONS
THE ABOVE LETTING IS UPON THE FOLLOWING COVENANTS AND CONDITIONS, each
and every one of which the Tenant covenants and agrees with the Landlord to
keep and perform, and the Tenant agrees that the covenants herein contained
on the part of the Tenant to be performed, shall be deemed conditional
limitations, as well as covenants and conditions:
(1)
<PAGE>
FIRST: (a) The Tenant shall use the premises only for executive
and general offices and telecommunications switching center.
(b) If any portion of the premises consists of basement space, such
portion shall be used only for storage purposes.
(c) No auction sale and no other sale of all or substantially all of the
Tenant's property, stock, fixtures and machinery, except a sale made in
connection with an assignment of this lease to another tenant for which the
Landlord's consent shall have been obtained shall be held at the premises
unless the provisions of Article TWENTY-NINTH (b) of this lease shall have
been complied with.
RENT
SECOND: (a) The Tenant shall pay the rent and additional rent as
provided in this lease.
(b) If any installment or installments of rent or additional rent or any
service charge shall not be paid within ten (10) days following the date on
which the same shall be due and payable pursuant to this lease then in
addition to, and without waiving or releasing, any other rights and remedies
of the Landlord, the Tenant shall pay to the Landlord a late charge of one
and one-half (1 1/2%) percent per month computed (on the basis of a 30-day
month) from the date on which each such installment became due and payable to
the date of payment of the installment on the amount of each such installment
or installments, as liquidated damages for Tenant's failure to make prompt
payment, and the same may be collected on demand or as additional rent in
accordance with the provisions of Article TWENTY-FIFTH of this lease.
REPAIRS MACHINERY CLEANING AND WASTE
THIRD: (a) The Tenant shall take good care of the premises and the
fixtures, appurtenances, equipment and facilities therein and shall make, as
and when needed, all repairs in and about the premises required to keep them
in good order and condition; such repairs to be equal in quality to the
original work provided that the Tenant shall not be obligated for structural
or exterior repairs to the building or for repairs to the systems and
facilities of the building for the use or service of tenants generally,
(Landlord hereby agreeing to make such repairs as are necessary in order to
keep the building and its common systems and equipment (including the
bathrooms on the floor) in reasonable working order in accordance with the
Landlord's building standards (the Tenant hereby agreeing that the Landlord
shall have no liability for any inconvenience, annoyance, interruption or
injury to business arising from the Landlord's making of any such repairs)
and Landlord further agreeing to clean the bathrooms on the floor and provide
bathroom supplies), other than fixtures, appurtenances, equipment and
facilities in the premises, except where structural or exterior repairs or
repairs to such systems and facilities are made necessary by reason of one or
more of the occurrences described below in clauses (i) through (iv) of this
Article THIRD (a). Should the Tenant fail to repair any condition in or about
the premises or the fixtures, appurtenances, equipment and facilities therein
which is of such a nature that its neglect would result in damage or danger
to the building, its fixtures, appurtenances, facilities and equipment, or to
its occupants (of which nature the Landlord shall be the judge) or, in the
case of repairs of any other nature, should the Tenant have failed to make
the required repairs or to have begun in good faith, the work necessary to
make them within five days after notice from the Landlord of the condition
requiring repair, the Landlord may, in either such case, immediately enter
the premises and make the required repairs at the expense of the Tenant. The
Landlord may make, at the expense of the Tenant (with credit to the Tenant
for any sums reimbursed by Landlord's insurance) any repairs to the building
or to its fixtures, appurtenances, facilities or equipment, whether of a
structural or any other nature, which are required by reason of damage or
injury due (i) to the negligence or the improper acts of the Tenant or its
employees, agents, licenses or visitors; (ii) to the moving, into or out of
the building, of property being delivered to or taken from the premises;
(iii) to the installation, repair or removal of the property of the Tenant in
the premises; or (iv) to the faulty operation of any machinery, equipment, or
facility installed in the premises by or for the Tenant. The Tenant will pay
the reasonable cost of any repairs made by the Landlord pursuant to this
paragraph upon presentation of bills, therefor, or the Landlord may, at its
option, add such amounts to any installment or installments of rent due under
this lease and collect the same as additional rent. The liability of the
Tenant under this Article Third shall survive the expiration or other
termination of this lease.
MACHINERY
(b) If the Tenant shall install or maintain machinery or manufacturing
equipment of any description in the premises, the operation of which produces
noise or vibration which is transmitted beyond the premises and the Landlord
deems it necessary that the noise or vibration of such machinery or equipment
be diminished, eliminated, prevented or confined to the premises, the
Landlord may give written notice to the Tenant, requiring that the Tenant
provide and install rubber or other approved settings for absorbing,
preventing or decreasing the noise or vibration of such machinery or
equipment within fifteen days. The judgment of the Landlord of the necessity
of such installation shall be conclusive, and the installation shall be made
in such manner and of such material as the Landlord may direct. Should the
Tenant fail to comply with such request within fifteen days, the Landlord may
do the work necessary to absorb, prevent or decrease the noise or vibration
of such machinery or equipment and the Tenant will pay to the Landlord the
cost of such work upon demand or such cost may, at the option of the
Landlord, be added to any installment or installments of rent under this
lease and shall be payable by the Tenant as additional rent. The Landlord
agrees that this, or a substantially similar, provision shall be included in
all future leases affecting the fourth, fifth and sixth floors of this
building and that the Landlord shall take reasonable efforts (without,
however, being obligated to expend any money in excess of $1,000.00 or
initiate any legal proceedings) to enforce such provision in the event that
any such noise or vibration disturbs the operation of the Tenant's equipment.
CLEANING AND WASTE
(c) The premises shall be kept clean and in order by the Tenant, at the
Tenant's expense, and to the satisfaction of the Landlord. The Tenant shall,
as its own expense, clean the interior surfaces of the windows at such times
as the windows become dirty to a degree which, in the judgment of the
Landlord, adversely affects the appearance of the building or the premises
(the Landlord hereby agreeing to wash the exterior of the windows once prior
to the commencement of rent payment by the Tenant and otherwise in accordance
with the Landlord's schedule of window cleaning for this building). Such
window cleaning shall be done in a manner which complies with the
requirements of this lease and all applicable laws and regulations. The
Tenant shall, at its own expense, remove from the building any and all
rubbish, refuse and waste originating in the premises of the Tenant or cause
the same to be removed (provided that the Tenant places the same neatly at
the freight elevator serving the floor on which the premises are located, the
Landlord, at the Tenant's request and at the Landlord's then current rates
(which rates are currently $1,000 per year) will (once per business day after
business hours) remove ordinary office quality refuse from the floor.) The
removal of such refuse, rubbish and waste shall be subject to such rules and
regulations as to time and manner of removal as, in the judgment of the
Landlord, are necessary for the proper operation of the building. In the
event that the Tenant shall fail to clean the windows or remove its refuse,
rubbish and waste, such cleaning or removal may be done by the Landlord, and
the Tenant shall pay to the Landlord the cost of the cleaning of the windows
or the removal of any of the Tenant's refuse, rubbish and waste from the
building. Bills for the same shall be rendered by the Landlord to the Tenant
at such times as the Landlord may elect and shall be due and payable when
rendered, and the amount of such bills shall be deemed to be, and be paid as,
additional rent. Should the Landlord clean the windows or remove the rubbish
of the Tenant and of other tenants, the cost of such cleaning or removal
shall be apportioned as between the Tenant and such other tenants
respectively on the basis of the number of windows or the respective
approximate quantities of such rubbish and waste as the case may be. The
Landlord's apportionment of such respective quantities shall be conclusive on
the parties.
(2)
<PAGE>
ALTERATIONS AND FIXTURES
FOURTH: (a) The Tenant shall not make any alteration, decoration,
addition or improvement in or upon the premises, nor incur any expense
therefor, without having first obtained the written consent of the Landlord
therefor. If the Tenant shall desire to make alterations, decorations,
additions or improvements to fit out the premises for the Tenant's use which
will not adversely affect the structure of the building or the operation of
any of the systems or facilities of the building for the use of all tenants
or violate the requirements of government hereafter referred to and if the
Tenant shall furnish the Landlord with the Tenant's plans and specifications
for the proposed alteration, decoration, addition or improvement in
sufficient detail to permit the Landlord to determine that the same will
comply with the requirements of this subdivision (a), the Landlord's approval
will not be unreasonably withheld or delayed. Whenever any alterations,
decorations, additions or improvements of the premises are made by the
Tenant, the Tenant shall not, knowingly, employ or permit to be employed
therein any labor which, will cause strikes or labor troubles with other
employees in the building employed by the Landlord or its contractors. All
alterations, decorations, additions or improvements shall be made and
installed in a good and workmanlike manner and shall comply with all
requirements, by law, regulation or rule, of the Federal, State and City
Governments and all subdivisions and agencies thereof, and with the
requirements of the New York Fire Insurance Exchange, New York Board of Fire
Underwriters and all other bodies exercising similar functions, and shall
conform to any particular reasonable requirements of the Landlord expressed
in its consent for the making of any such alterations, decorations,
additions, and improvements. Any such work once begun shall be completed with
all reasonable dispatch, but shall be done at such time and in such manner as
not to interfere with the occupancy of any other tenant or the progress of
any work being performed by or on account of the Landlord. If requested to do
so by the Tenant in connection with the Landlord's approval of any
alteration, decoration, addition or improvement, the Landlord will advise the
Tenant whether the alteration, decoration, addition or improvement will be
required to be removed by the Tenant at the expiration or earlier termination
of this lease or may remain upon the premises to become the property of the
Landlord. In no such advice is given by the Landlord, the provision of
subdivision (b) of this Article shall apply.
(b) All alterations, decorations, additions or improvements, which may
be made or installed in or upon the premises (whether made during or prior to
the term of this lease or during the term of any prior lease of the premises
by the Landlord, the Tenant or any previous tenant), except the furniture,
trade fixtures, stock in trade, and like personal property of the Tenant,
shall be conclusively deemed to be part of the freehold and the property of
the Landlord, and shall remain upon the premises, and, upon the expiration or
any termination of the term of this lease, shall be surrendered therewith as
a part thereof, unless the Landlord shall, prior to the expiration or
termination of the term, notify the Tenant that any or all of such
alterations, decorations, additions or improvements shall be removed, in
which event, the Tenant shall remove the same in accord with the Landlord's
notice at its own cost and expense at or prior to the expiration or
termination of the term. The Tenant, at or prior to the expiration or any
termination of the term of this lease shall, at its own expense, remove all
its furniture, trade fixtures, stock in trade and like personal property. The
Tenant shall restore and repair, at its own cost and expense, any damage or
disfigurement of the premises occasioned by any such removals or remaining
after such removals, so as to leave the premises in good order and condition
or, the Landlord, at its option, may do such restoration and repair and the
Tenant will pay the cost thereof upon demand. If any furniture, trade
fixtures, stock in trade or other personal property of the Tenant shall not
be removed at the expiration or any termination of this lease, the Landlord,
at the Landlord's option, may treat the same as having been irrevocably
abandoned, in which the Tenant shall have no further right, title or interest
therein and the Landlord may remove the same from the premises, disposing of
them in any way which the Landlord sees fit to do, and the Tenant shall, on
demand, pay to the Landlord the expense incurred by the Landlord for the
removal thereof, as well as the cost of any restoration of the premises above
provided. The Tenant's obligations under this subdivision (b) of this Article
Fourth shall survive the expiration of this lease.
(c) The Landlord may at any time during the term of this lease, change
the arrangement or location of the entrances or passageways, doors and
doorways, and the corridors, elevators, stairs, toilets or other parts of the
building used by the public or in common by the Tenant and other tenants
(including, without limitation, the conversion of elevators from a manually
operated to an automatic self-service basis) and may alter the staffing of
the building and the scale and manner of the operation thereof, provided that
the services to which the Tenant is entitled as specified in this lease are
not diminished and access to the premises is not materially impaired and may
alter the facilities, fixtures, appurtenances and equipment of the building
as it may deem the same advisable, or as it may be required so to do by any
governmental authority, law, rule or regulation. The Landlord may, after
reasonable notice, change the name, street number or designation by which the
building is commonly known.
COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
FIFTH: The Tenant shall promptly comply, at the Tenant's own expense,
with all laws, ordinances, regulations and requirements of the City, State
and Federal Government, and all subdivisions and agencies thereof, and the
New York Fire Insurance Exchange, the New York Board of Fire Underwriters,
and of any fire insurance rating organization, and of all other departments,
bureaus, officials, boards and commissions with regard to the premises or the
use thereof by the Tenant, and (if the premises are situated on the ground
floor) the sidewalks adjoining the same in so far as such compliance is made
necessary by the Tenant's use of the sidewalks, provided that the Tenant
shall not be required to make alterations or additions to the premises,
except where the same are required by reason of the particular manner of the
Tenant's use of the premises (as distinguished from mere use and occupancy),
the manner in which its business is carried on in the premises or a failure
on the part of the Tenant to conform to the provisions of this lease. The
Tenant will not permit the maintenance of any nuisance upon the premises or
permit its employees, licensees or visitors to do any illegal act therein, or
in and about the building after notice thereof from the Landlord. If any such
law, ordinance, regulation or requirement shall not be complied with by the
Tenant, within ten (10) business days following notice to Tenant from
Landlord demanding compliance (or such earlier date as may be necessary in
the circumstances) or if compliance is not possible within such period, then
if Tenant shall not have commenced compliance within such period and
diligently proceeds to completion, then the Landlord may, at its option,
enter upon the premises to comply therewith, and should any fine or penalty
be imposed for failure to comply therewith or by reason of any such illegal
act (which, unless the imposition of the same shall otherwise affect
(including the payment of additional costs) the Landlord's ownership or
operation of the building, fine or penalty the Tenant shall not have paid or
protested (to the extent permitted by, and in accordance with, all applicable
laws) within ten (10) days after notice of the imposition of the same), the
Tenant agrees that the Landlord may, at its option, pay such fine or penalty,
which the Tenant agrees to repay to the Landlord, with interest from the date
of payment, as additional rent.
(3)
<PAGE>
COMPLIANCE WITH LANDLORD'S RULES
SIXTH: The Tenant and the Tenant's employees, and any other persons
subject to the control of the Tenant, shall well and faithfully observe all
the rules and regulations annexed hereto, and also any and all reasonable
rules and regulations affecting the premises, the building or the equipment,
appurtenances, facilities and services thereof, hereafter promulgated by the
Landlord. The Landlord may at any time, and from time to time, reasonably
prescribe and regulate the placing of safes, machinery, quantities of
merchandise and other things, and reasonably regulate which elevator and
entrance shall be used by the Tenant's employees, and for the Tenant's
shipping; and may make such other and further reasonable rules and
regulations as in its judgment may, from time to time, be needed or desirable
for the safety, care or cleanliness of the building and for the preservation
of good order therein.
CARE OF SIDEWALKS
EIGHTH: If the premises, or any part thereof, consist of a first floor
or any part thereof, the Tenant shall, at the Tenant's own expense, keep the
sidewalk, gutter and curb in front thereof free from snow and ice, and in a
cleanly condition.
LANDLORD'S ACCESS TO THE PREMISES
NINTH: (a) The Tenant shall, without in any way affecting the Tenant's
obligations hereunder, and without constituting any eviction, permit the
Landlord and its agents upon reasonable notice, except (the circumstances
constituting the same being determined in the Landlord's reasonable judgment)
in an emergency; (i) at all reasonable hours, to enter the premises and have
access thereto, for the purpose of nspecting or examining them and to show
them to other persons and if requested by Tenant, an employee of Tenant shall
be permitted to accompany those persons entering the premises; (ii) to enter
the premises to make repairs and alterations, and to do any work on the
premises and any work in connection with excavation or construction on any
adjoining premises or property (including, but not limited to, the shoring up
of the building) and if requested by Tenant, an employee of Tenant shall be
permitted to accompany those persons entering the premises and to take in any
of the foregoing instances, any space needed therefor. The Tenant shall
permit the Landlord to erect and maintain ducts, pipes and conduits in and
through the premises. In the exercise of the rights of the Landlord reserved
under clause (ii) or under the next preceding sentence of this subdivision
(a) of Article NINTH the Landlord will do so in a manner which minimizes the
interference with the Tenant's use of the premises so far as practicable and
where ducts, pipes or conduits are to be erected through the premises will
locate them along walls or ceilings wherever practicable.
(b) In the event the Tenant shall be removed by summary proceedings or
in the event that, during the last month of the term, the Tenant shall have
removed all or substantially all of the Tenant's property therefrom, the
Landlord may immediately enter into and upon said premises for the purpose of
decorating, renovating or otherwise preparing same for a new tenant, without
thereby causing any abatement of rent or liability on the Landlord's part for
other compensation, and such acts shall have no effect upon this lease.
(c) If the Tenant or an officer or authorized employee of the Tenant
shall not be personality present to open and permit an entry into said
premises, at any time in an emergency (the circumstances constituting the
same being determined in the Landlord's reasonable judgment), when for any
reason an entry therein shall be necessary or permissible hereunder, the
Landlord or the Landlord's agents, may enter the same by a master key, or may
forcibly enter the same without rendering the Landlord or such agents liable
therefor (if during such entry the Landlord shall accord reasonable care to
the Tenant's property) and without in any manner affecting the obligations
and covenants of this lease and in no event shall any such entry by the
Landlord or its agents be deemed an acceptance of a surrender of this lease,
either expressed or implied, nor a waiver by the Landlord of any covenant of
this lease on the part of the Tenant to be performed.
ELECTRIC CURRENT LIVE STEAM
TENTH: (a) (re-written): Electric current is to be supplied by the
Landlord. The Tenant covenants and agrees to purchase the Tenant's
requirements therefor at the premises from the Landlord or the Landlord's
designated agent at (i), 105% of the rates set forth in the rate schedule of
Consolidated Edison Company of New York, Inc. applicable to the building (or
the conjunctional group in which the building is included), plus (ii) a rate
adjustment amount equal to all sales, use and gross receipt taxes and other
governmental charges or levies, generally applicable to the purchase and sale
of electricity in New York City (and without regard to whether the Landlord
is exempt from paying or collecting any such tax, charge or levy); provided,
however, that if such rate schedule includes any adjustment for time-of-day
for either demand or consumption, the rate applicable to the Tenant's demand
for and consumption of electricity, shall be that specified for the peak
period unless, at Tenant's expense, Tenant installs time-of-day meters, in
which case Landlord shall charge on that basis. The calculation of the rate
shall include the effect of all direct and indirect charges which affect the
cost of the electricity, including without limitation, consumption charges,
demand charges and fuel cost escalation charges. All amounts payable with
respect to electricity constitute additional rent under this lease.
If the Tenant is not utilizing the full electrical capacity to the
premises, the Landlord shall have the right to make such excess capacity
available to other occupants of the building. If (i) Tenant is not utilizing
the full electrical capacity to the premises because Tenant is using the
premises for a type of use (e.g., office use) different than that anticipated
as of the date of this Lease., or (ii) Tenant has not used a quantifiable
portion of the electrical capacity to the premises for a period of more than
twelve (12) months, then, in either such event, Landlord, after written
notice to Tenant, shall have the right to make such portion of the electrical
capacity to the premises as Tenant is not reasonably anticipated to require
during the remaining term of the Lease (the "Excess Capacity") available to
other occupants of the Building. Upon Tenant's receipt of Landlord's notice,
the parties, acting reasonably, shall attempt to agree upon the Excess
Capacity. If the parties are unable to agree upon the Excess Capacity within
fifteen (15) days after Tenant's receipt of Landlord's notice, then they
shall mutually appoint an independent engineer to determine the Excess
Capacity (based upon his review of the records of Tenant's electrical
consumption and discussions with Landlord and Tenant), and such engineer's
determinations shall be binding on the parties. Landlord and Tenant shall
each pay one-half of the fee of the appointed engineer.
(b) Where more than one meter measures the service of the Tenant in the
building, the service rendered through each meter may be computed and billed
separately in accord with the rates herein provided for. No current shall be
furnished until the equipment of the Tenant has been approved by the proper
authorities, and after such approval, no changes shall be made in such
equipment without the written consent of the Landlord which consent shall not
be unreasonably withheld, conditioned or delayed. The Tenant shall pay, upon
demand, the bills for electric current furnished and the use of meters; the
Landlord and its agent reserving the right, without releasing the Tenant from
any liability, and without constituting any eviction, and without any
liability on the Landlord's part, to cut off such electric current after five
days' notice for non-payment of any such bill or bills. The Tenant shall
comply with such rules, regulations and contract provisions as are
customarily prescribed by public service corporations supplying such
services, for consumption similar to that of the Tenant.
(c) The Landlord may discontinue the supply of electric current under
subdivision (a) at any time on sixty (60) days' notice to the Tenant without
being liable to the Tenant therefor or without in any way affecting this
lease or the liability of the Tenant hereunder or causing the diminution of
rent (except that the Landlord shall use reasonable efforts (without,
however, being obligated to expend any money in excess of $1,000.00 or
institute any legal proceedings) so that there is no interruption in the
supply of electrical current to the premises), and the same shall not be
deemed to be a lessening or diminution of services within the meaning of any
law, rule, or regulation now or hereafter enacted, promulgated, or issued.
Should the Landlord give such notice of discontinuance, the Tenant shall make
the Tenant's own arrangements to receive such service direct from such public
utility corporation serving the building and the Landlord shall permit the
Landlord's wires, conduits and meters, to the extent to which they are safely
available for such use and to the extent to which they may be used under any
applicable governmental regulations or the regulations of such public
utility, to be used for the purpose. Should any additional or other wiring,
conduits, meters or any other or
(4)
<PAGE>
different distribution equipment be required in order to permit the Tenant to
receive such service directly from the public utility, the same will be
installed, as the Landlord shall elect, either by the Landlord, at the sole
cost and expense of the Tenant, or by the Tenant at the Tenant's sole cost
and expense. In the case of central distribution equipment which is used in
connection with the distribution of metering of current supplied to the
Tenant and other tenants of the building, and which is required to be
installed under governmental regulations or the regulations of such utility,
the cost of installation thereof will be prorated among the several tenants,
serviced through the distribution facility in the proportion which their
average consumption of electric current over the next preceding period of not
less than six month's duration bears to the total consumption of electric
current by all tenants during such period, and the Tenant shall pay to the
Landlord the Tenant's share of such cost of installation, apportioned as
above, within five (5) days following receipt of a statement showing the cost
of the distribution equipment and the manner in which the cost has been
allocated to the Tenant. Should the supply of electric current by the
Landlord be discontinued, but not as a result of the Landlord's election to
discontinue the supply of current, then the Tenant shall, at the Tenant's
expense, install all wiring, meeting and distribution facilities which are
required in order to permit the Tenant to purchase the Tenant's requirements
for electric current for the premises from such utility and shall discontinue
the use of the Landlord's electric wires, cables, meters and distribution
facilities. All such facilities installed by the Tenant shall be installed in
a workmanlike way which complies with applicable governmental regulations and
the regulations of the public utility. The Landlord will in any such case
permit any pipe-chases or channels available in the building to be used by
the Tenant for the Tenant's cables and conduits, to the extent that the same
may be available and may be safely used for the purpose.
(d) The Landlord shall not in any way be liable or responsible to the
Tenant for any loss or damage or expense which the Tenant may sustain or
incur if either the quantity or character of electric service is changed or
is no longer available or suitable for the Tenant's requirements (unless
caused by the negligence or willful misconduct of the Landlord, its agents or
employees), nor shall the Landlord be in any way responsible for any
interruption of service due to breakdowns, repairs, malfunction of electrical
equipment (unless caused by the negligence or willful misconduct of the
Landlord, its agents or employees), or any other cause relating to electrical
service which is beyond the Landlord's reasonable control; it being agreed
that in no circumstance shall the Landlord be liable for any incidental or
consequential damages to the Tenant.
(c) If there be any facilities for the supply of live steam in the
building, such steam shall be supplied to the Tenant only if separate
agreements are made therefor and pursuant to such arrangements. In the event
that such separate agreements shall be made, the appropriate provisions of
this Article TENTH shall be applicable thereto.
CONDEMNATION AND DEMOLITION
ELEVENTH: (a) If the premises or any part thereof, shall be taken or
condemned for any public or quasi public use, this lease and the term hereby
granted shall terminate on the date when title to the premises or such part
shall be actually taken for such public or quasi public use. If any other
part of the building shall be so taken and such taking shall, in the judgment
of the Landlord, make the operation of the building impractical, unprofitable
or uneconomical (even though no part of the premises be taken), the Landlord
may, at its option, give to the Tenant, at any time after the vesting of
title and prior to the actual taking of possession, thirty (30) days' notice
of intention to terminate this lease, and upon the date designated in such
notice, this lease and the term hereby granted shall terminate. In no event
shall any condemnation award be apportioned, and the Tenant hereby assigns to
the Landlord all right and claim to any part of such award, but the rent, and
all other sums payable by the Tenant, shall be apportioned as of the date of
any such termination of this lease, provided that nothing contained in the
foregoing portion of this Article ELEVENTH shall be deemed to prevent the
Tenant's making claim for and retaining an award for the damage to or loss of
value of its trade fixtures and such of the installations made by the Tenant
as remain the Tenant's property or from making claim for and retaining any
award which may be made to the Tenant for the Tenant's moving expenses if,
and to the extent that, the award to be claimed and retained by the Tenant is
independent of and does not result in a diminution of the award to the
Landlord for the taking of the land, building and the Landlord's other
property.
(b) If the Landlord shall desire to demolish the building wherein the
premises are located, the Landlord shall have the right and option to
terminate the term of this lease at any time during the term thereof upon
giving to the Tenant not less than six months' notice of the Landlord's
election to terminate this lease and of the date, which shall be the last day
of a calendar month, not less than 270 days following the date of the
Landlord's notice of election to terminate, on which Landlord elects that
this lease shall terminate and come to an end, together with an affidavit,
sworn to by an officer of the Landlord, if the Landlord at such time is a
corporation, or by a general partner of the Landlord, if the Landlord at such
time is a partnership, or by the Landlord, if the Landlord at such time is an
individual, to the effect that the Landlord, its successor in interest or a
lessee intends to demolish the building containing the premises and to erect
a different building in lieu thereof. If such notice and affidavit are given
to the Tenant, then this lease shall terminate and come to an end on the date
of termination specified in the Landlord's notice, as if that date were the
date originally fixed for the termination of the term of this lease, and on
such date the Tenant shall quit, vacate and surrender up the premises in
accord with the provisions of this lease relating to surrender at the
expiration of the term. Notwithstanding the foregoing to the contrary, the
Landlord agrees that it shall not exercise its option under this Article
ELEVENTH (b) prior to the fifth (5th) anniversary of the commencement date of
this lease. In the event that Landlord exercises its option under this
Article ELEVENTH (b) at any time after the fifth (5th) anniversary of the
commencement date of this lease and prior to February 28, 2009, then,
provided that Tenant complies with all of the terms and conditions of this
lease, including the payment of all rent and additional rent through the
termination date, and vacates the premises on or before the termination date,
then, within thirty days following Tenant's vacating of the premises,
Landlord shall pay to Tenant the unamortized cost of the initial alterations
and improvements in the premises made by Tenant at Tenant's expense
(excluding moveable furnishings and machinery and equipment, including
telephone equipment), as calculated in accord with the provisions of the
following sentence. The expression "unamortized cost" with reference to
alterations and improvements in the premises made by Tenant at Tenant's
expense shall mean a sum equal to the total of Tenant's out-of-pocket
expenditures for alterations and improvements in the premises (excluding
items of moveable furnishings, machinery and equipment, including telephone
equipment), multiplied by a fraction, of which (i) the numerator shall be the
number of full months from the termination date specified in Landlord's
notice to the original expiration date of the lease and (ii) the denominator
is 120. No part of the cost of the initial alterations and improvements
reimbursed to Tenant by Landlord pursuant to the Work Sheet or otherwise
shall be considered part of Tenant's out-of-pocket expenditures. In order to
have the benefit of this provision, Tenant shall supply to Landlord, no later
than December 31, 1999, time being of the essence, a breakdown of all
expenditures for which Tenant would seek reimbursement pursuant to this
paragraph. Tenant shall not be entitled to any payment pursuant to this
paragraph if this lease terminates other than by reason of Landlord exercise
of its option under this Article Eleventh(b).
MECHANIC'S LIENS
TWELFTH: The Tenant will not permit, during the term hereby granted, any
mechanic's or other lien or order for payment of work, labor, services, or
materials furnished or to be furnished to Tenant to attach to or affect the
premises or any portion thereof, and agrees that no such lien or order shall
under any circumstances attach to or affect the fee, leasehold or other
estate of the Landlord herein, or the building. The Tenant's obligation to
keep the premises in repair, and its right to make alterations therein, if
any, shall not be construed as the consent of the Landlord to the furnishing
of any such work, labor or materials within the meaning of any present or
future lien law. Notice is hereby given that the Tenant has no power,
authority or right to do any act or to make any contract which may create, or
be the foundation for, any lien upon the fee or leasehold estate of the
Landlord in the premises or upon the land or buildings of which they are a
part or the improvements now erected or hereafter to be erected upon the
premises or the land or building of which the premises are a part; and if any
such mechanic's or other lien or order shall be filed against the premises or
the land or building of which the premises are a part, the Tenant shall,
within ten (10) days after receipt of notice of the filing thereof
discharge said lien or order by payment, deposit or by bond fixed in a proper
proceeding according to law. If the Tenant shall fail to take such action, or
shall not cause such lien or order to be discharged within ten (10) days
receipt of notice of the filing thereof, the Landlord may pay the amount of
such lien or discharge the same by deposit or by bond or in any other manner
according to law, and pay any judgment recovered in any action to establish
or foreclose such lien or order, and any amount so paid, together with the
expenses incurred by the Landlord, including all attorneys' fees and
disbursements incurred in any defense of any such action, bonding or other
proceeding, shall be deemed additional rent.
(5)
<PAGE>
SUBORDINATION
THIRTEENTH: This lease, and all the rights of the Tenant hereunder, are
and shall be subject and subordinate to any and all mortgages now or hereafter
liens either in whole or in part on the building, or the land on which it
stands, and also to any and all other mortgages covering other lands or lands
and buildings, which may now or hereafter be consolidated with any mortgage
or mortgages upon the building and the land on which it stands or which may
be consolidated and spread to cover the building and such land and any other
lands or lands and buildings, and any extension, renewal or modification of
any such mortgages, and to any and all underlying leases on record, or
hereafter to be recorded, against the building or the land on which it
stands, and any extensions, renewals or modifications thereof.
(SIC) The Landlord agrees to use its best efforts to obtain from each
mortgagee or from each lessor of any underlying lease, an agreement to the
effect that, so long as the Tenant shall not be in default under the terms of
this lease, the Tenant shall not be made party to any proceeding to foreclose
the mortgage or to terminate the underlying lease; and the Tenant's
possession of the premises under the terms of this lease, shall not be
terminated or disturbed as a result of the foreclosure of any mortgage or
termination of any underlying lease. The Tenant agrees it will execute any
agreement consistent with the foregoing provisions which may be required to
confirm the subordination of this lease subject to the non-disturbance
provisions above outlined. In any such agreement the Tenant shall agree that,
in the event that the mortgagee shall succeed to the rights of the Landlord
herein named, or if any Landlord of any underlying lease shall succeed to the
position of the Landlord under this lease, then the Tenant will recognize
such successor Landlord as the Landlord of this lease and pay the rent and
attorn to and perform the provisions of this lease for the benefit of any
such successor Landlord.
CERTIFICATE OF OCCUPANCY
FOURTEENTH: The Tenant shall immediately discontinue any use of the
demised premises, which may, at any time, be claimed or declared by the City
or State of New York or other governmental authority to be in violation of or
contrary to the certificate of occupancy of the building, or by reason of
which any attempt may be made to penalize the Landlord or require the
Landlord to secure any certificate of occupancy other than the one, if any,
now issued for the building.
VAULTS
FIFTEENTH: Notwithstanding anything herein contained, or shown on any
sketch, plan or schedule hereto attached, to the contrary, if any vault space
forms a part of the premises, or adjoins the same, or any part or portion of
the herein demised premises is not within the property line of the building
or premises, and if the use of the said space shall hereafter be prevented or
curtailed by exercise of any governmental authority, the Tenant shall have no
claim whatever upon the Landlord for the loss of such space, by any abatement
of the rent, or otherwise, and the Landlord's covenant of quiet enjoyment
hereinafter contained, shall not be deemed to apply to any such space. The
Landlord makes no representation as to the location of the property line of
the building. The Tenant shall reimburse the Landlord for the vault charge or
tax, if any, imposed by the City of New York and respect of any such vault
space.
LIQUORS
SIXTEENTH: Neither the Tenant nor any occupant of the premises or of
any part thereof, shall at any time during the continuance of the term, sell,
traffic in, expose for sale, dispense or give away, upon any part of the
premises, any strong or spirituous liquor, wine, ale or beer, or take or have
a license for such sale.
FIRE AND FIRE INSURANCE
SEVENTEENTH: (a) If the premises shall be damaged by fire, action of
the elements or other casualty or cause which is within the risks covered by
standard fire and extended coverage insurance, the Tenant shall give
immediate notice thereof to the Landlord, and said damage (unless the same
shall be due to the negligence or other fault of the Tenant or its employees)
shall be repaired by the Landlord, at the Landlord's expense, with all
reasonable speed, making due allowance for delay due to labor troubles,
settlement of loss and other causes beyond the control of the Landlord, and
the Tenant shall, in every reasonable way, facilitate the making of such
repairs, and the rent shall be suspended during such period as the premises
shall have been rendered wholly, untenantable and, in the event that the
premises are rendered partially untenantable, the rent shall be abated during
such period, in the proportion which the area of the premises which is
rendered untenantable bears to the area of the whole premises, but no damage
to the premises or the building by fire, or other cause, however extensive,
shall terminate this lease, or give the Tenant the right to quit and
surrender the premises, or impair any obligations of the Tenant hereunder,
except with respect to the payment of rent (and with respect thereto to the
extent above provided) and except that (i) if the damage shall be so
extensive that the Landlord shall determine to demolish or substantially
alter the building, the Landlord may at any time within sixty (60) days
following the occurrence of the damage give to the Tenant 30 days' notice of
intention to terminate this lease; (ii) if the damage to the premises is
substantial so that the whole or substantially the whole of the premises is
rendered untenantable by the Tenant and the Landlord does not within 60 days
following the occurrence of the damage notify the Tenant of the Landlord's
intention to repair the damage to the premises so that the premises are again
useable by the Tenant within a period of not more than 120 days following the
occurrence of the damage (or if the Landlord does not, in fact, substantially
complete the repairs within 150 days following the occurrence of the damage)
subject to delays due to causes of the kinds described in Article
THIRTY-FOURTH of this lease, the Tenant may cancel this lease by notice given
within 10 days following the expiration of the said 60-day period for the
Landlord's notice of election to repair; and (iii) in the event of the
occurrence of damage to the premises of the degree described above in clause
(ii) of this paragraph (a), the Landlord may also elect to terminate this
lease by notice of election to do so given within 60 days following the
occurrence of the damage. If notice of election to terminate this lease shall
be given as above provided, then, upon the date for termination designated in
any such notice this lease and the term hereby granted shall terminate and
the rent shall be apportioned as of the date of the damage or as of such
later date as the Tenant may actually surrender possession. Nothing herein
contained shall be deemed to obligate the Landlord to restore the Tenant's
trade fixtures, stocks, furnishings or other property remaining the property
of the Tenant.
(b) The Tenant shall conduct its business and use the premises in such a
manner as shall make and keep the rate of insurance upon the entire building
as low as such rate can be made and kept, and so as not to increase the rate
of insurance applicable to the property of other tenants, and the Tenant
shall install and maintain all its furniture, fixtures, equipment, stocks and
materials in such a manner as to accomplish the foregoing purposes. the
Tenant further agrees not to permit any act to be done or anything brought
into or kept upon the premises which will void or avoid the insurer's
liability under any contract of fire insurance on the building or its
contents. Should the fire insurance rate on the building be increased beyond
the present rate, by reason of the Tenant's occupancy or character of its
business, or the Tenant's failure to comply with the terms hereof, the Tenant
agrees to pay to the Landlord, on demand, the additional cost of such
insurance, or, at the option of the Landlord, the same may be added to any
installment of rent and be payable as additional rent. The schedule of the
makeup of a rate issued by an authorized rating organization shall be
conclusive evidence of the facts therein stated and of the items in the rate
applicable to the premises.
(6)
<PAGE>
(c) The Landlord, as to the premises, and the Tenant, as to the
improvements made therein at the Tenant's expense and all of the Tenant's
stock, trade fixtures and other property in the premises, hereby release one
another from all liability for any loss or damage caused by fire or any of
the risks enumerated in standard extended coverage insurance. This release
is conditioned upon the inclusion in their respective policies of insurance
of a provision stating that such release shall not adversely affect said
policies or prejudice any right of the insured to recover thereunder. The
Landlord Tenant agree that their respective insurance policies will include
the aforesaid provision so long as the same is obtainable without extra cost
or if extra cost be charged, so long as the party for whose benefit the
clause is obtainable without extra cost. If extra cost shall be chargeable
therefor the party so affected shall advise the other thereof, of the amount
of the extra cost and the other party at its election may pay the same or
decline to so pay in which event the release from liability given to said
party by this Article SEVENTEENTH (c) shall be deemed to be withdrawn and of
no force and effect.
CHANGE IN USE OF PREMISES, SUBLETTING AND ASSIGNMENT
EIGHTEENTH (re-written): (a) The use to be made of the premises by the
Tenant and the identity of the Tenant being among the inducements to the
making of this lease by the Landlord, the Tenant shall not, except in
accordance with the terms of this Article, (i) use or permit the premises or
any part thereof to be used for any purposes other than those specified in
the lease, (ii) sublet or underlet the premises or any part thereof, (iii)
permit the premises or any part thereof to be occupied by anyone other than
the Tenant or its officers or employees, (iv) mortgage or encumber this lease
or any interest therein, (v) assign or transfer, by operation of law or
otherwise, this lease or any interest therein.
(b) The Tenant shall not, without having first obtained the Landlord's
prior written consent thereto, (i) use or permit the premises or any part
thereof to be used for any purposes other than those specified in the lease,
or (ii) mortgage or encumber this lease or any interest therein. Landlord
shall not unreasonably withhold, delay or condition its consent to a change
in the permitted use provided that the new use does not conflict with the
certificate of occupancy of the building and provided further that such use
does not generate noise, vibrations or odors which are transmitted beyond the
premises or result in a significant increase in the number of persons
occupying the premises.
(c) The Tenant shall not, except in accordance with the provisions of
paragraphs (d) through (l) of this Article, (i) assign or transfer, by
operation of law or otherwise, this lease or any part therein, (ii) sublet or
underlet the premises or any part thereof, or (iii) permit the premises or
any part thereof to be occupied by anyone other than the Tenant or its
officers or employees.
(d) If the Tenant shall desire to assign this lease or to sublet the
whole or any part of the premises or to permit the premises to be occupied by
any person other than the Tenant, the Tenant will notify the Landlord as to
(i) the action which the Tenant proposes; (ii) the portion of the premises
with respect to which the Tenant proposes to take such action (the "Affected
Premises"); (iii) the name and business address of the proposed assignee,
sublessee or occupant (the "Proposed Undertenant"); (iv) the name and
resident address of an officer and a principal stockholder of the Proposed
Undertenant, if a corporation is involved (unless a publicly-held company),
or the names and residence addresses of the managing partner thereof if a
partnership or joint venture is involved; (v) the information, in reasonable
detail, as to the Proposed Undertenant which is required to permit the
Landlord to make the determinations described in paragraph (h) below; (vi)
the terms upon which the Tenant proposes to assign this lease or sublet the
premises or permit the premises to be occupied by the Proposed Undertenant
(including the terms under which any conditions, alterations or decorations
are to be made to the Affected Premises and the terms on which the Proposed
Undertenant is to buy or lease any fixtures, leasehold improvements,
equipment, furniture, furnishings or other personal property from the
Tenant); and (vii) the name and address of any real estate broker or other
person to whom a commission may be owed by any person in connection with such
assignment, subleasing or occupation. (The Tenant's notice of desire to
assign, sublease or permit occupancy of the Affected Premises by others, with
the information prescribed above is hereafter referred to as a "Tenant's
Subleasing Notice").
(e) By written notice executed by the Landlord and delivered to the
Tenant within thirty (30) days following receipt of the Tenant's Subleasing
Notice (for the purposes hereof such notice shall not be deemed to have been
received by the Landlord until all of the information required by paragraph
(d) above shall have been furnished to the Landlord), the Landlord shall have
the absolute right to select one of the alternatives set forth in paragraphs
(f), (g) or (h) below.
(f) In the event of a proposed assignment of this lease or the subleasing
or occupation of the entire premises subject to this lease for the then
remaining balance of the term of this lease, (i) the Landlord may elect to
require the Tenant to surrender the premises to the Landlord and terminate
this lease with respect to the premises on the last day of the second
complete calendar month following the Tenant's Subleasing Notice and comply
with the provisions of this lease respecting surrender at the end of the term
not later than such date or (ii) the Landlord may gives its consent to any
such assignment, sublease or occupation. Any subletting or occupancy by a
third party as a consequence of which 25% or less in an area of the Premises
shall remain in occupancy by the Tenant herein named may, at the Landlord's
option, be considered a subleasing of the whole of the Premises. In the event
that the Landlord elects to terminate this lease as set for in (i) above at
any time during the initial term of the lease, then, in such circumstance the
Landlord shall pay to the Tenant the unamortized cost of the initial
alterations and improvements made in the Premises at the Tenant's expense
(excluding moveable furnishings and machinery and equipment, including
telephone equipment) as calculated in accordance with provisions set forth in
Article Eleventh (b) of this lease.
(g) In the event of a proposed subleasing or occupation of less than the
entire premises subject to this lease or the entire premises for less than
the then remaining balance of the term of this lease, (i) the Landlord may
elect to require the Tenant to surrender to the Landlord and vacate the
Affected Premises not later than the date upon which the proposed subleasing
or occupation is proposed to commence and comply on such date with the
provisions of this lease as to surrender at the expiration of the term with
respect to the Affected Premises, and Tenant shall, at it's expense, erect
the partitioning required to separate the Affected Premises from the
remainder of the premises, create any doors required to provide an
independent means of access to the Affected Premises from elevators and
lavatories and to segregate the wiring and meters and electric facilities, so
that the Affected Premises may be used as a unit for commercial purposes,
separate from the remainder of the premises remaining in occupation of the
Tenant in which event the rent and all additional rent payable under this
lease shall be reduced proportionately with the diminution in the area of the
premises upon surrender of the Affected Premises or (ii) the the Landlord may
give its consent to any such sublease or occupation. In the event that the
Landlord elected to recapture the Affected Premises as set forth in (i)
above, then in such circumstance the Landlord shall pay to the Tenant a
fraction (as hereinafter set forth) of the unamortized cost of the initial
alterations and improvements made in the Premises at the Tenant's expense
(excluding moveable furnishings and machinery and equipment, including
telephone equipment) as calculated in accordance with the provisions set
forth in Article Eleventh (b) of this lease. The numerator of such fraction
shall be the rentable square foot area of the Affected Premises and the
denominator of such fraction shall be the rentable square foot area of the
entire Premises, unless either Landlord or Tenant notifies the other, in
writing, that it believes that the Affected Premises is significantly more
improved, or less improved, than the remainder of the Premises. In such
event, the parties, acting reasonably, shall attempt to agree upon the
appropriate fraction. If the parties are unable to agree upon the appropriate
fraction within fifteen (15) days after the date of Landlord's or Tenant's
notice, then they shall mutually appoint an independent engineer to determine
the appropriate fraction, and such engineer's determination shall be binding
on the parties. Landlord and Tenant shall each pay one-half of the fee of the
appointed engineer.
<PAGE>
(h) In the case of an assignment, the Landlord shall be under no
obligation to consent thereto or to select one of the alternatives set forth
in paragraph (f) above, unless the Landlord's investigation of the financial
standing of the proposed assignee discloses that there is no reason to doubt
the financial ability of the assignee to carry out its obligations under this
lease for the balance of the term and the Landlord's investigation of the
manner in which the proposed assignee conducts its business indicates that
the assignee will conduct its business in the premises in conformity with the
requirements of this lease or that there will be no interference with the
orderly conduct of their business and the enjoyment of their premises by
other tenants in the building. In the case of a sublease or occupation, the
Landlord shall be under no obligation to consent thereto or select one of the
alternatives set forth in paragraph (f) or (g) above, as the case may be,
unless the Landlord's investigation of the nature of the business of the
proposed sublessee or occupant or the manner in which the proposed sublessee
or occupant will conduct such business indicates that there is no reason to
doubt that such business will be conducted in conformity with the
requirements of this lease and that the use of the premises by the proposed
sublessee or occupant will not result in damage to or deterioration of the
premises or the building, or interfere with the orderly conduct of their
businesses and the enjoyment of their premises by other tenants in the
building. The Landlord shall be under no obligation to consent to any
assignment of this lease or any subletting or occupation of the premises to
or by any person other than the Tenant unless the criteria set forth in this
paragraph are, in Landlord's reasonable judgment, satisfied.
(i) If the Landlord's Subleasing Notice shall be to the effect that the
Landlord elects that the Affected Premises be surrendered, then the Affected
Premises shall be surrendered in accordance with clause (i) of paragraph (f)
or (g) above, as the case may be, and any work required to be done to
separate the Affected Premises from the remainder shall be commenced promptly
following the Tenant's receipt of the Landlord's Subleasing Notice and
carried on with diligence and continuity.
(j) No consent given by the Landlord shall be deemed to permit any act
except the act to which it specifically refers, or to render unnecessary any
subsequent consent, and any assignment or subletting of the premises shall
not relieve the Tenant or any mesne assignee from any obligations, duty or
covenant under this lease, and in all cases a violation of any of the
covenants or duties or obligations under this lease, and in all cases a
violation of any of the covenants or duties or obligations under this lease
by a subtenant or assignee shall, in addition, be deemed to be the act of the
Tenant herein. No assignment, transfer, mortgage,
<PAGE>
encumbrance, subletting or arrangement in respect of the occupancy of the
premises shall create any right in the assignee, transferee, mortgagee,
subtenant or occupant, unless the consent of the Landlord shall first have
been obtained, and unless, if an assignment is involved, the transferee or
assignee shall have delivered an agreement duly executed by the assignee or
transferee wherein the assignee or transferee assumes and agrees to pay or
otherwise keep and perform the obligations of the Tenant in this lease or, if
a sublease is involved wherein the sublessee agrees that any act or omission
by the sublessee which, if performed or omitted by the Tenant under this
lease would be a default thereunder shall also be a default under the
provisions of the sublease. Any assignee by accepting an assignment shall
nevertheless be conclusively deemed to have assumed this lease and all
obligations already accrued or to accrue thereunder and further to have
agreed to fully and duly perform all the Tenant's covenants herein contained.
If the Tenant shall, at any time, be in default in the payment of rent, the
Landlord shall have the right to collect rent from any assignee, undertenant
or occupant, and credit the same to the account of the Tenant, and no such
collection shall constitute a waiver of the foregoing covenant or the
acceptance of anyone other than the Tenant, as Tenant or shall otherwise
release, impair or otherwise affect any obligation of the Tenant under this
lease. Immediately following the execution and delivery of any assignment of
this lease or any subleasing of the premises or an agreement as to the
occupancy thereof, the Tenant will furnish a duplicate of the instrument in
question to the Landlord.
(k) Subject to paragraphs (j) and (l) of this Article and to continued
compliance with Article FIRST of this Lease, the Tenant is authorized to
sublease portions of the premises to a subsidiary corporation or corporations
or to a corporation affiliated with the Tenant, without compliance with the
provisions of paragraph (c) through (g), m(ii) through m(iv) and (o) of this
Article. A subsidiary corporation shall mean and include a corporation of
which the Tenant owns and holds at least a majority of each class of stock
which is authorized to vote at the time when the sublease is executed. An
affiliated corporation shall mean and include a corporation which is owned
and controlled by the corporation which owns and controls the Tenant by
ownership of at least a majority of each such class of stock. Before making
any sublease to any such subsidiary or affiliated corporation, the Tenant
shall certify to the Landlord the manner in which such subsidiary or
affiliated corporation is related to and controlled by the Tenant and the
purposes for which the subleased premises will be used. Notwithstanding the
foregoing, this lease may be assigned to a purchaser of all of Tenant's
stock or all, or substantially all, of Tenant's assets, or to a company with
which Tenant merges or consolidates, without compliance with the provisions
of paragraphs (c) through (h), m(ii) through m(iv) and (o) of this Article,
so long as the net worth of the surviving corporation is at least equal to
the Tenant's net worth immediately before the acquisition, merger or
consolidation and Tenant gives Landlord prompt written notice of such
assignment.
(1) Anything herein to the contrary notwithstanding, the Tenant may not
assign this lease or sublet or permit the occupancy by any other party of all
or any part of the demised premises at any time when the Tenant has not paid
any rent and additional rent when it is payable. The Tenant shall furnish
the Landlord with a counterpart (which may be a conformed or reproduced copy)
of each sublease, assignment or agreement of occupancy made hereunder within
ten days after the date of its execution. Tenant shall remain fully liable
for the performance of all of Tenant's obligations hereunder notwithstanding
anything provided for herein, and without limiting the generality of the
foregoing, shall remain fully responsible and liable to Landlord for all acts
and omissions of any subtenant, assignee or occupant or anyone claiming under
or through any such person which shall be in violation of any of the
obligations of this lease and any such violation shall be deemed to be a
violation by Tenant. Tenant shall pay Landlord on demand any expense which
Landlord any reasonably be required to incur in acting upon any request for
consent pursuant to this Article.
(m) Notwithstanding anything else in this Article, the Landlord shall
have the right to condition its consent to any proposed sublease of all or a
portion of the premises on the following:
(i) The Tenant shall not be in default in the payment of rent or the
performance of any other of its obligations under this lease.
(ii) The Tenant shall have delivered to the Landlord a Tenant's
Subleasing Notice as required by Subparagraph (d) above.
(iii) The Tenant shall have complied with the provisions of
paragraphs (j) and (l) of this Article.
(iv) The Tenant shall grant the Landlord a security interest in the
sublease and the rents payable thereunder and shall take all
necessary steps required to perfect such security interest.
<PAGE>
(v) The sublease shall include a provision to the effect
that if the Landlord shall notify the sublessee that the
Tenant is in default in the payment of rent or the
performance of its other obligations under this lease
the sublessee shall, if so requested by the Landlord pay
all rent and other amounts due under the sublease
directly to the Landlord.
(n) At the request of the Landlord, the Tenant will furnish to the
Landlord, within twenty days of receipt of a request therefor, a certificate
executed in the name and on behalf of the Tenant, confirming that, except as
previously consented to in writing by the Landlord or a otherwise
specifically set forth in such certificate, and excluding the arrangements
described in paragraph (p) of this Article, the Tenant has not (i) used or
permitted the premises or any part thereof to be used for any purposes other
than those specified in this lease, (ii) mortgaged or encumbered this lease
or any interest therin, (iii) assigned or transferred, by operation of law or
otherwise, this lease or any interest therin, (iv) sublet or underlet the
premises or any part thereof, or (v) above which the Landlord has not
previously consented to in writing, the Landlord in its sole discretion, may
either consent thereto (which consent may be subject to any conditions
specified by the Landlord) or exercise the rights and remedies available to
the Landlord under the terms of this lease.
(o) In the event the Tenant obtains the consent of the Landlord pursuant
to paragraph (f) or (g) above and sublets or assigns all or a portion of the
premises, the Tenant shall pay to the Landlord, monthly, as additional rent,
one hundred (100%) percent of all Subleasing Profit (as hereinafter defined).
"Subleasing Profit" shall mean all consideration received by the Tenant,
less (i) the rent and additional rent payable by the Tenant under this lease
for the period in question (exclusive of any amount payable by the Tenant
under this subparagraph (o)), (ii) any brokerage commission (not exceeding
110 of those set forth in Landlord's brokerage commission schedule as
published from time to time) and reasonable legal fees paid by the Tenant in
connection with such subletting and assignment, (iii) the cost of demising
and improving the premises for subtenant or assignee, (iv) any amounts paid
by Tenant to subtenant or assignee as a cash or rental concession and (v) any
amounts paid to the Tenant by its subtenant or assignee solely with respect
to the Tenant's telecommunications equipment and installations ("Equipment
Fees"); it being agreed that if subleasing rent collected by the Tenant
("Subleasing Rent") shall, in the event of dispute, be
<PAGE>
less than the fair market rental value of the premises (which fair market
rental value shall be determined in a manner similar to that set forth in
paragraphs (ii), (iii) and (iv) of Article FORTY-FOURTH of this lease) then,
in such circumstance, the deduction for Equipment Fees which is used in
computing Subleasing Profits shall be reduced by an amount equal to the
lesser or (y) the difference between the fair market rental value of the
premises and the Subleasing Rent, and (z) the Equipment Fees.
(p) Notwithstanding anything to the contrary in this Article, Tenant
may, from time to time, allow other telecommunications providers ("Other
Providers") to use portions of the capacity of Tenant's telecommunications
equipment ("Other Provider Equipment") belonging to such Other Providers
(Tenant hereby agreeing that in all such circumstances such Other Providers
shall only pay fees to Tenant based on access to such equipment and not on
the renting of, and there shall be no separate demising of, any floor area),
provided that, Tenant notifies Landlord, in advance, of the name and address
of each Other Provider to the extent that any such Other Provider physically
occupies any portion of the Premises or that Landlord, in the ordinary course
of conducting Landlord's business and Landlord has need to know such
information. All of the Tenant's agreements with such Other Providers shall
remain subject and subordinate to the terms of this lease and in all such
circumstances, the Tenant shall remain fully liable under the terms of this
lease for all the actions of each Other Provider.
<PAGE>
WAIVER AND SURRENDER; REMEDIES CUMULATIVE
NINETEENTH: No consent or waiver of any provision hereof or acceptance
of any surrender shall be implied from any act or forbearance by the Landlord
or Tenant. No agreement purporting to accept a surrender of this lease, or
to modify, alter, amend or waive any term or provision thereof, shall have
any effect or validity whatever, unless the same shall be in writing, and
executed by the Landlord and by the Tenant, and be duly delivered, nor shall
the delivery of any keys to anyone have any legal effect, any rule or
provision of law to the contrary notwithstanding. Any consent, waiver or
acceptance of surrender in writing, and properly executed and delivered as
aforesaid, shall be limited to the special instance for which it is given,
and no superintendent or employee, other than an officer of the Landlord or
of its managing agent, and no renting representative shall have any authority
to accept a surrender of the premises, or to make any agreement or
modification of this lease, or any of the terms and provisions hereof. No
provision of any lease made by the Landlord to any other tenant of the
building shall be taken into consideration in any manner whatever in
determining the rights of the Tenant herein. No payment by the Tenant or
receipt by the Landlord of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the stipulated
rent, nor shall any endorsement on any check, nor any letter accompanying any
such payment of rent be deemed an accord and satisfaction (unless an
agreement to accept a lesser amount be signed by the Landlord), but the
Landlord may accept such payment without prejudice to the Landlord's full
right to recover the balance of such rent and to institute summary
proceedings therefor. The receipt by the Landlord of any rent, or additional
rent or of any other sum of money which may be payable under this lease, or
of any portion thereof, shall not be deemed a waiver of the right of the
Landlord to enforce the payment of any sum of any kind previously due or
which may thereafter become due under this lease, or of the right to forfeit
this lease by such remedies as may be appropriate, or to terminate this lease
or to exercise any of the rights and remedies reserved to the Landlord
hereunder, and the failure of either party to enforce any covenant or
condition (although the other party shall have repeatedly or continuously
broken the same without objection from the such party) shall not estop the such
party at any time from taking any action with respect to such breach which
may be authorized by this lease, or by law, or from enforcing said covenant
or any other covenant or condition on the occasion of any subsequent breach
or default. In the event of any continuing or threatened breach by the
Tenant, the Landlord shall have the right of injunction. The various rights,
remedies, powers and elections of the Landlord and of the Tenant, as provided
in this lease or created by law, are cumulative, and none of them shall be
deemed to be exclusive of the others, or of such other rights, remedies,
powers or elections as are now or may hereafter be conferred upon the
Landlord or the Tenant by law.
REPRESENTATIONS AS TO PREMISES, CERTIFICATE OF OCCUPANCY AND USE
TWENTIETH: The Tenant represents to the Landlord that the Tenant has
made, or caused to be made, a careful inspection of the premises and that the
Tenant has made an examination of the certificate of occupancy of the
building and that the area and present condition of the premises are in all
respects satisfactory to the Tenant, except (if at all) as may herein
otherwise be expressly stated in the memorandum of repairs or decorations to
be done by the Landlord attached to this lease, and that the Tenant has
determined that the use of the premises, as set forth in this lease, is
consistent with the uses permitted under the certificate of occupancy. The
Tenant acknowledges that no representations or promises have been made by the
Landlord or the Landlord's agents with respect to the premises or the
building or the certificate of occupancy thereof, except as in this lease set
forth. The statements contained in this lease regarding the use of the
premises by the Tenant shall not be deemed a representation or warranty by
the Landlord that such use is lawful or permitted by the certificate of
occupancy of the building.
(7)
<PAGE>
LIMITATION OF LANDLORD'S LIABILITY
TWENTY-FIRST: (a) The Tenant shall make no claim upon the Landlord for
abatement of rent, constructive eviction, rescission, or otherwise, and the
Landlord shall be exempt from all liability, except for injuries to the
Tenant's person or property which are due to the negligence of or willful
misconduct of the Landlord, its agents, servants or employees or contractors,
for or on account of any annoyance, inconvenience, interference with
business, or other damage, caused by: (i) any interruption, malfunction or
curtailment of the operation of the elevator service, heating plant,
sprinkler system, gas, water, sewer or steam supply, plumbing, machinery,
electric equipment or other appurtenances, facilities, equipment and
conveniences in the building, whether such interruption, malfunction or
curtailment be due to breakdowns, or repairs, or strikes or inability to
obtain electricity, fuel or water due to any such cause or any other cause
beyond the Landlord's control; (ii) any work of repair, alteration or
replacement done by or on behalf of the Landlord or the Tenant, pursuant to
the provisions of this lease; (iii) any water, rain, snow, steam, gas,
electricity or other element, which may enter, flow from or into the premises
or any part of the building, or any noise or vibration audible in, or
transmitted to the premises; (iv) any vermin; (v) any falling paint, plaster
or cement; (vi) any interference with light or with other easements or
incorporeal hereditaments; (vii) any latent defect or deterioration in the
building or the appurtenances thereof, whether or not the Landlord shall have
been notified of any condition allegedly causing same; (viii) any zoning
ordinance or other acts of governmental or public authority now or hereafter
in force; and (ix) any act or omission of any other occupant of the building
or other person temporarily therein. Intentional deleted prior to execution.
The Tenant will not hold the Landlord liable for any loss or theft of, or
damage to, any property in the premises done or caused by any employee,
servant or agent of the Landlord who is invited into the premises by the
Tenant, nor for the loss, damage or theft of any property stored or left in
the basement or in any other part of the building, which is not enclosed
within the premises or of any property, left with any employee of the
Landlord, not withstanding such theft, loss or damage may occur through
carelessness or negligence of the Landlord's employees; and the Tenant agrees
that any employee in entering the premises at the invitation of the Tenant or
accepting custody of property shall be then deemed agent of the Tenant or
other person at whose instance he may be acting, and not agent of the
Landlord. Employees are not permitted to receive or accept packages or
property for account of Tenants. Storerooms or storage space for personal
property (if provided) are provided gratuitously by the Landlord, and the use
of same shall be at the Tenant's risk and the Tenant will not hold the
Landlord liable for any loss of or damage to person or property therein or
thereby. Nothing in this lease contained shall impose any obligation upon the
Landlord with respect to any real property other than the building, whether
said other real property be owned by the Landlord or otherwise, or shall in
any way limit the Landlord's right to build upon or otherwise use said other
real property in such manner as the Landlord may see fit. The Tenant shall
make no claim upon the Landlord for abatement of rent, constructive eviction
or rescission, and the Landlord shall have no liability by reason of the
Landlord's failure to enforce the provisions of the lease to any other tenant
against such other tenant. Intentional deleted prior to execution.
(b) Any right and authority reserved by and granted to the Landlord under
this lease, to enter upon and make repairs in the premises shall not be taken
as obligating the Landlord to inspect and to repair the premises and the
Landlord hereby assumes no responsibility or liability for the care,
inspection, maintenance, supervision, alteration or repair of the premises
except as herein specifically provided. The Tenant assumes possession and
control of the premises except as herein specifically provided. The Tenant
assumes possession and control of the premises except as herein specifically
provided. The Tenant assumes possession and control of the premises and
exclusively the whole duty of care and repair thereof, except as herein
specifically provided, and the duty of care, if any, owed by the Tenant to
the persons on the sidewalks or in the corridors of the building.
INDEMNITY BY TENANT
TWENTY-SECOND: The Tenant hereby indemnifies and agrees forever to save
harmless the Landlord against any and all liabilities, penalties, claims,
damages, expenses (including attorneys' and counsel fees) or judgments,
arising from injury to person or property of any kind, occasioned wholly or
in part by the Tenant's failure to perform or abide by any of the covenants
of this lease or occasioned wholly or in part by any negligent act or acts,
negligent omissions or intentional misconduct of the Tenant, or of the
employees, customers, agents, assigns or under-tenants of the Tenant.
NOTICES
TWENTY-THIRD: Any notice which is to be given by either party to the
other pursuant to this lease shall be in writing and shall be given as
follows: (a) if such notice is to be given by the Landlord to the Tenant,
such notice shall be given by registered or certified mail, by depositing the
notice, enclosed in an envelope addressed to the Tenant at 10411 Motor City
Drive, Bethesda, Maryland 20817, Attn: Mr. John Silverage (with a copy of all
default notices sent in the same manner to Rebecca Oshoway, Esq., Shulman,
Rogers, Gandal, Pordy & Ecker, AA., 11921 Rockville Pike, third floor,
Rockville, Maryland 20852-2743), in any United States Post Office, postage
and registry or certification fees prepaid; (b) if such notice is to be given
by the Tenant to the Landlord, the notice shall be given by registered or
certified mail, by depositing the notice, enclosed in an envelope, addressed
to the Landlord at 74 Trinity Place, New York, N.Y., or at such other place
as the Landlord shall hereafter designate in writing, in any United States
Post Office, postage and registry or certification fees prepaid. Any notice
shall be deemed to have been given on the date when the same is delivered as
above provided or, if given by mail, 3 business days after the date when it
is deposited as above provided in the United States Post Office.
(8)
<PAGE>
INSOLVENCY
TWENTY-FOURTH: If, at any time after the execution and delivery of this
lease, The tenant shall be adjudicated a bankrupt, or if the Tenant shall
make any assignment for the benefit of creditors, or attempt to take the
benefit of any insolvency law, or if a petition or answer to reorganize the
Tenant shall be approved by any court or judge, or if a petition or answer
for a composition or extension shall be filed by the Tenant, or if a receiver
or trustee shall be appointed for the Tenant's property, or if the Tenant's
interest in this lease shall be attached or levied upon or shall evolve upon
or pass to any party other than the Tenant except pursuant to an assignment
approved by Landlord in accordance with this lease (whether such event occurs
prior or subsequent to the commencement of the term or Tenant's entry into
possession) such event shall be conclusively deemed a default hereunder, and
the Landlord shall have the right to terminate this lease in the manner
hereinafter provided, as if such event were a breach by the Tenant of one of
the covenants of this lease. In the event of such termination, the Tenant or
any person claiming under, by or through the Tenant, by virtue of any statute
or of an order of any court, shall not be entitled to possession or to remain
in possession of the demised premises but shall forthwith quit and surrender
same. Exclusive of and in addition to any other rights or remedies the
Landlord may have through any other portion or provision of this lease or by
virtue of any rule of law or statute, said Landlord may keep and retain, as
liquidated damages, any rent, security, deposit or other moneys or
consideration received by the Landlord from the Tenant, or others on behalf
of the Tenant. Also, in the event of termination of this lease as aforesaid,
the Landlord shall be entitled, as and for liquidated damages from the Tenant
for breach of the unexpired term of this lease, to an amount equal to the
difference between the rental value of the remainder of the term at the time
of termination and the actual rent reserved, both discounted to present worth
at the rate of four per cent (4%) per annum. If at any time within a
reasonable period following the date of the termination of the lease, as
aforesaid, the premises should be re-rented by the Landlord, the rent
realized by any re-letting shall be deemed PRIMA FACIE to be the rental
value. In the event of the occurrence of any of the above-mentioned events of
default occasioned solely through the invocation by the Tenant or by third
parties of the laws of the State of New York, judicial or statutory, as
distinguished from the invocation of Federal laws relating to bankruptcy,
reorganization, or otherwise, the Landlord, in addition to the foregoing, may
accelerate the full amount of rent reserved for the remainder of the lease,
and the same shall forthwith become due and payable to the Landlord. Nothing
herein provided shall be deemed to prevent or restrict the Landlord from
proving and receiving as liquidated damages herein the maximum permitted by
any rule of law or statute prevailing when such damages are to be proved,
whether they be greater or less than those referred to above.
REMEDIES OF THE LANDLORD ON DEFAULT PERFORMANCE BY THE LANDLORD
TWENTY-FIFTH: (a) If the Tenant shall default in the full and due
performance of any covenant of this lease, the Landlord shall have the right,
upon ten (10) business days' notice to the Tenant (unless a shorter period of
notice or provision for the performance of such work without notice is
elsewhere established) and the failure by Tenant to cure within such period
(or if cure is not possible within such period, failure to commence cure
within such period and diligently proceed until cure is complete), to perform
the same for the account of the Tenant, and in such event all workmen
employed by the Landlord shall be deemed the agents of the Tenant, and any
reasonable payment made, and expense incurred, by the Landlord in this
connection, shall forthwith become due and payable by the Tenant to the
Landlord. If the Landlord is compelled to incur any expenses, including
reasonable attorneys' fees in instituting, prosecuting or defending any
action or proceeding instituted by reason of any default of the Tenant
hereunder, the sum or sums so paid by the Landlord with all interest, costs
and damages, shall be deemed immediately due to the Landlord upon demand. Any
and all sums payable by the Tenant to the Landlord shall bear interest at the
rate of six per centum (6%) per annum from the due date to the date of actual
payment, and any and all such sums (except the rent hereinabove expressly
reserved) shall be deemed to be additional rent for the period prior to such
due date, and the Landlord shall have the same remedies for default in the
payment of such additional rent as for default in the payment of the rent
expressly reserved.
PERFORMANCE BY THE LANDLORD NOT AN EXCLUSIVE REMEDY
(b) In the event that under the provisions of this lease the Landlord
shall have the privilege of performing any covenant in respect of which the
Tenant may be in default and of recovering the expenses so involved from the
Tenant as additional rent or otherwise, such remedy shall not be the
exclusive remedy of the Landlord but the Landlord may, at its option, treat
such default as a breach of substantial obligation of this lease and shall
have all the other remedies in respect thereof provided in this or any other
Article of this lease.
DISPOSSESS TERMINATION OF LEASE
(c) If the Tenant shall violate or default in the full and due
performance of any covenant, provision or condition of this lease (other than
the covenant to pay the rent or any additional rent), or any covenant,
provision or condition of any other lease under which the Tenant is a tenant
in the building, or if any of the events specified in the Article of this
lease numbered Twenty-fourth and headed "Insolvency" shall occur, or if the
conduct of the Tenant or any occupant of the premises shall reasonably be
deemed objectionable by the Landlord or the Landlord's managing agent, the
Landlord will give to the Tenant ten days' notice of such violation, default
or misconduct. In the event that (i) the Tenant shall default in the payment
of the rent or of any additional rent, after five (5) days notice from the
Landlord (it being agreed that if the Tenant is delinquent in the payment of
any rent or additional rent more than three (3) times over the term of this
lease, the Tenant's right to such five (5) days notice shall thereafter be
deemed waived), or (iii) in the event that the Tenant, after notice thereof
as above provided, shall fail to stop any violation or fully cure or remedy
any default or terminate any misconduct under this lease (or in the event
that the default is of a nature such that the steps required to cure or
remedy the same fully cannot reasonably be completed within ten days, then if
the Tenant shall not have commenced and have diligently and continuously
prosecuted the steps necessary to cure or remedy such default) the Landlord
may give to the Tenant ten (10) days' notice of its intention to terminate
this lease, and, in such event, on the tenth day following the giving such
notice this lease and the term hereby granted shall terminate and expire as
fully and completely as if that day were the date herein expressly fixed for
the expiration of the term, and the Tenant shall thereupon quit and surrender
the premises into the possession of the Landlord, but the Tenant shall
nevertheless remain liable for deficiency in future rent and for any other
defaults hereunder, as hereinafter provided. If the Tenant shall default in
the payment of the rent, or any additional rent herein
(9)
<PAGE>
mentioned, or of any part of either beyond any grace and notice period set
forth above, or if this lease shall be terminated by the notice last above
provided for, the Landlord may immediately, or at any time thereafter,
re-enter the premises and remove all persons and property therefrom, either
by summary dispossess proceedings, or by any suitable action or proceeding at
law, or by force, or otherwise, without being liable to indictment,
prosecution or damages therefor, and re-possess and enjoy the premises,
together with all additions, alterations, installations and improvements, and
no entry by the Landlord shall be deemed an acceptance of surrender. Upon any
such re-entry, the Landlord may re-let the premises or any part or parts
thereof, and for such term or terms as to the Landlord may seem wise, even
though the same extend beyond the date herein expressly fixed for the
expiration of the term. Any such re-letting shall, at the Landlord's option,
be either for the Landlord's own account, or as the agent for the Tenant. If
the Landlord shall re-let as the agent of the Tenant, the Landlord shall
receive the rents and apply the same, first, to the payment of all expenses
which the Landlord shall have incurred by reason of the Tenant's default and
in connection with such re-entry and re-letting, including, but not by way of
limitation, legal expenses, brokers' commissions, and the cost of reasonable
repairs, re-decoration and alterations, and, secondly to the fulfillment of
the covenants of the Tenant herein contained, and the surplus, if any,
existing at the date herein expressly fixed for the expiration of the term,
shall be paid to the Tenant, but the Tenant shall be entitled to no such
payment until said date. So long as the premises, or any part thereof, shall
not be re-let, or shall be re-let by the Landlord as the agent of the Tenant,
the Tenant shall remain liable for the full and due performance of all the
covenants of this lease, and the Tenant hereby agrees to pay to the Landlord, as
damages for any default hereunder, until the date herein expressly fixed for
the expiration of the term, the equivalent of the amount of all the rent and
additional rent reserved herein, less the net avails of re-letting, as
hereinbefore defined, if any, and the same shall be due and payable by the
Tenant to the Landlord on the several rent days above specified, that is,
upon each of the said rent days the Tenant shall pay to the Landlord the
amount of deficiency then existing, and shall not be entitled to withhold any
such payment until the date herein expressly fixed for the expiration of the
term. The liability of the Tenant shall survive the issuance of a final
order and warrant of dispossess, and re-entry by the Landlord, and any other
termination of this lease for default of the Tenant, and the granting by the
Landlord of a new lease of the premises to another tenant, and the Tenant
hereby waives any defense which might be predicated upon any of said acts or
events.
The Tenant hereby expressly waives (i) any and all right to regain
possession of said premises or to reinstate or redeem this lease as provided
by the Real Property Actions & Proceedings Law, (and as said law may be
amended) or any such right which is or may be given by any other statute, law
or decision now or hereafter in force; (ii) the service of any notice
demanding rent or stating an intention to re-enter; or any similar right
which is or may be given by any statute, law or decision now or hereafter in
force; (iii) any and all rights of redemption and all other rights to regain
possession or to reinstate this lease (in case the Tenant shall be
dispossessed or ejected by, or pursuant to judgment, order, execution or
warrant of any court or judge). Except as provided in Section 259-c of the
Real Property Law with respect to an action for personal injury or property
damage between the parties hereto, the Tenant and the Landlord each waives
and will waive all right to trial by jury in any summary proceedings and in
any other proceeding or action at law hereafter instituted by the Landlord
against the Tenant in respect of this lease, and also in any action or
proceeding between the parties hereto for any cause; and it is hereby agreed,
that in any of such events, the matter in dispute shall be tried before a
judge without a jury. In the event the Landlord shall commence any action or
summary proceeding for non-payment of rent or other breach of covenant or
condition, the Tenant hereby agrees not to interpose any counter-claim of
whatever nature or description in any such action or proceeding except
counter-claims which would be waived if not interposed in such action or
proceeding. The words "re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning.
SURRENDER AT EXPIRATION
TWENTY-SIXTH: Upon the expiration or any termination of the term of this
lease, the Tenant shall quit and surrender the demised premises, together
with any fixtures, equipment or appurtenances installed in the premises at
the commencement of this lease, and any alterations, decorations, additions
and improvements which are not to be removed in compliance with the
provisions of Article Fourth hereof, to the Landlord, in good order and
condition, ordinary wear and tear and casualty damage excepted. The Tenant
shall remove all its furnishings, trade fixtures, stock in trade and like
personal property in accord with the requirements of Article Fourth, so as to
leave the premises broom-clean and in an orderly condition. If the last day
of the term of this lease falls on Sunday, this lease shall expire on the
business day immediately preceding. The Tenant's obligation to observe and
perform this covenant shall survive the expiration or other termination of
the term of this lease.
QUIET ENJOYMENT
TWENTY-SEVENTH: The Landlord covenants that, if the Tenant shall duly
keep and perform all the terms and conditions hereof, the Tenant shall
peaceably and quietly have, hold and enjoy the premises for the term
aforesaid, subject however to ground leases, underlying leases and mortgages
as hereinbefore described. If the Landlord shall hereafter sell, exchange or
lease the entire building or the land and building wherein the premises are
located, subject to this lease, or, being the lessee thereof, shall assign
its lease, the grantee, lessee, or assignee thereof, as the case may be,
shall, without further agreement by any party, be conclusively deemed to be
the Landlord of this lease and to have assumed and undertaken to carry out
all of the obligations hereof on the part of the Landlord to be performed,
and the Tenant does hereby release the above-named Landlord from any claim or
liability arising or accruing hereunder subsequent to such transfer of
ownership or possession, for breach of the covenant of quiet enjoyment, or
otherwise.
(10)
<PAGE>
TENANT'S DEPOSIT
TWENTY-EIGHTH: (a) The Tenant has deposited with the Landlord the sum
of FORTY-EIGHT THOUSAND TWO HUNDRED EIGHTY-THREE AND 34/100 ---- Dollars
($48,283.34----) to secure the faithful performance by the Tenant of all the
terms, conditions, covenants and agreements of this lease, and to make good
to the Landlord any damage which it may sustain by reason of any act or
omission of the Tenant. The Landlord shall segregate the said security
deposit as a trust fund not to be mingled with other funds of the Landlord,
and if, during the term of this lease, the Landlord shall sell, exchange or
lease the entire building, subject to this lease, or, being the lessee
thereof, shall assign its lease, the Landlord shall have the right to pay or
transfer the said deposit to such grantee, lessee, or assignee, as the case
may be, and, in such event, the Landlord shall be release from all
responsibility and liability in connection therewith, and the Tenant will
look solely to said grantee, lessee, or assignee for its return. The
aforesaid security deposit shall be deposited with a bank or trust company,
savings bank or savings and loan association, in an interest-bearing account,
and the Landlord shall advise the Tenant of the name and address thereof. The
Tenant shall be entitled to the payment of interest on the aforesaid security
deposit less the amount equal to 1% of the deposit, to which the Landlord
shall be entitled as administration expense shall be added to the amount of
the deposit. The Tenant's interest in said deposit shall not be assigned or
encumbered without the written consent of the Landlord, and within thirty
(30) days after the expiration of the term, the amount of said deposit shall
be repaid to the Tenant, less any proper charges against the same, as
hereinabove or hereinafter provided. If the Tenant shall at any time be in
default with respect to any payment of rent or of additional rent or of any
other payment due from the Tenant to the Landlord under this lease, or if the
Landlord shall be damaged by any act or omission of the Tenant the Landlord
may, at its option, apply such portion of said deposit as may be adequate to
cure such default or to make good such damage, including, but not by way of
limitation, interest, costs, fees and other expenses, paid or incurred by the
Landlord (and Landlord shall notify Tenant of the amount applied and the
reason therefor) and thereafter such portion so applied shall be free from
any claim by the Tenant for its return. If the Landlord shall re-enter,
pursuant to the provisions of this lease (other than in the event of
insolvency in which event the provisions of Article Twenty-fourth of the
lease shall apply, and shall re-let the premises for its own account, the
entire said deposit shall immediately be and become the absolute property of
the Landlord, as fixed, liquidated and agreed damages, and not as a penalty,
it being impossible in such event to ascertain the exact amount of the damage
which the Landlord may thus sustain, but unless the Landlord shall so re-let
the premises for its own account, the Landlord shall continue to hold the
said deposit, as security for the performance of the Tenant's obligations,
until the date herein expressly fixed for the expiration of the term, and
apply the same from time to time to the unpaid obligations of the Tenant,
under the same terms and conditions as if the said lease were still in full
force and effect. No termination of this lease or re-entry by the Landlord
for default of the Tenant shall entitle the Tenant to the return of any part
of said deposit, nor shall the retention of such deposit, after such
re-entry, impair or otherwise affect the Tenant's liability to the Landlord
during the balance of the term originally provided for. If, at any time, the
said deposit shall be diminished, by reason of the Landlord's having applied
any part thereof in accordance with the provisions of this paragraph, the
Tenant shall pay over to the Landlord upon demand, the equivalent of such
decrease, to be added to said deposit and to be held and applied in
accordance with the provisions of this paragraph.
(b) In lieu of delivering cash as all or any portion of the Deposit or
in exchange for all or any portion of cash previously delivered, the Tenant
may deliver to Landlord an unconditional, irrevocable letter of credit (such
letter of credit, or any extension or replacement thereof, being hereinafter
referred to as the "Letter of Credit") issued by a New York Clearing House
bank, in substance reasonably satisfactory to the Landlord, which Letter of
Credit is to be held by Landlord in accordance with the terms described in
paragraph (a) above. In the event that the Landlord receives notice from the
Bank or Tenant that the Letter of Credit is not renewed or in the event that
Tenant has not delivered a replacement Deposit or a similar Letter of Credit
to Landlord by thirty (30) days before the expiration of the Letter of
Credit, then Landlord shall be entitled to present the Letter of Credit for
immediate payment of the then-potential amount available pursuant to the
Letter of Credit, and such amount of the Letter of Credit shall become the
Deposit hereunder and shall be held, applied and returned by Landlord in
accordance with the terms provided by the ease for the holding, application
and return of the Deposit. If the Letter of Credit is not being renewed but
Tenant does deliver a replacement Deposit or a similar Letter of Credit by
thirty (30) days before expiration of the Letter of Credit, then Landlord
shall not thereafter be entitled to present the expiring Letter of Credit for
payment of any amounts.
(c) At Tenant's request, any cash or cash equivalent held by Landlord as
part of the security deposit, which is in excess of that required to be held
by Landlord pursuant to paragraph (a) which has not been or is not in the
process of being applied pursuant to the provisions of paragraph (a) of this
Article, shall be returned to Tenant within ten (10) days of Tenant's request
therefor. If Landlord is holding a Letter of Credit as part of the security
deposit and provided Landlord had not presented for payment such Letter of
Credit, upon delivery of a substitute Letter of Credit in the appropriate
amount and which otherwise satisfies the requirements of paragraph (b) of
this Article, the Landlord shall deliver to Tenant the Letter of Credit being
replaced.
ELEVATORS, HEAT
TWENTY-NINTH: (a) Except on Saturdays and Sundays, and on holidays
recognized as legal holidays by State or Federal Government, the Landlord
shall furnish, between the hours of eight a.m. and six p.m., elevator service
with the elevators now in the building, and sufficient heat during the cold
season to heat the premises. If the building is equipped with any automatic
elevators then the Landlord shall have one such elevator in service and
available for the Tenant's use at all other times. The Landlord may suspend
such service, if it should become necessary or proper so to do, at any time.
The Landlord shall restore such service within a reasonable time, making due
allowance for labor troubles, acts of God, or any cause beyond the Landlord's
control.
FORTIETH: (SIC) In addition to the elevator service described in
paragraph TWENTY-NINTH of this lease, the Landlord will maintain in service
and available for the use of the Tenant, one passenger elevator at all times
on all days of the week, including Saturdays, Sundays and legal holidays. In
the event that the Tenant requires freight elevator service, or heat on
Saturdays, Sundays, federal and state holidays and all holidays recognized by
the unions representing Landlord's building personnel or during hours in
addition to those prescribed under paragraph TWENTY-NINTH of this lease, the
Landlord will furnish the additional elevator service or heat or both, as the
case may be, upon notice of the Tenant's need therefor. Such notice may be
written or oral and shall be given as long as a time as practicable prior to
the time when the additional heat or freight elevator service is required.
The Tenant will pay for any additional freight elevator service and heat
furnished after the hours prescribed in paragraph TWENTY-NINTH at the
respective prevailing rates per hour as established from time to time by the
Landlord for such services at the building or in the buildings of the
Landlord, generally, for each hour during which the additional service is
supplied. All charges for additional freight elevator service and heat shall
be payable when billed and in the event of default of payment therefor, the
Landlord may refuse further service and the amount unpaid shall be deemed
additional rent for which the Landlord shall have all the remedies for
collection herein specified with respect to rent. The failure on the part of
the Landlord to furnish such additional elevator service or heat, if due to
breakdowns, repairs, maintenance, strikes, or other causes beyond the control
of the Landlord, shall involve no liability on the part of the Landlord nor
shall it constitute an eviction.
(b) The Landlord shall be entitled to refuse to furnish passenger or
freight elevator service in connection with any sale at auction of the
Tenant's fixtures, machinery, stock in trade and other property or a sale in
any other manner of all or substantially all of such property unless the
Landlord shall have been given not less than two days' notice of the
intention to hold the auction or other sale and unless the Landlord shall be
given an undertaking by a person, firm or corporation of satisfactory
financial resources wherein the Landlord shall be indemnified against (i) all
expense incurred by the Landlord in connection with the removal by purchasers
of any property sold to them at the auction or other sale, (ii) all expense
for removal or storage of any property sold at the auction or other sale
which is not removed by the purchaser within two days following the sale, and
(iii) all expenses which the Landlord may incur for the removal of property
not sold and waste and rubbish from the premises.
WATER AND SEWER RENTS
THIRTIETH: (a) The Tenant shall pay for all hot and cold water used on
the premises and the Tenant's proportionate share of the cost of such water
used for lavatory purposes in any lavatories used by the Tenant in common
with other tenants at the Landlord's standard rates. In the event that the
Tenant shall use water for any industrial purpose or any purpose other than
usual lavatory purposes, the Tenant shall, at its own expense, install a
meter or meters for the measurement of the quantity of water thus consumed
and keep the same in good working order. With respect to water used for
lavatory purposes, whether on the premises or in lavatories used by the
Tenant in common with other tenants, if the quantity of water so used is
measured by a meter which measures the consumption of water by other tenants,
the Tenant shall pay its proportionate share of all water so consumed. Such
proportionate part shall be fixed in
(11)
<PAGE>
accord with the number of persons occupying the premises and the number of
persons occupying all premises using water which is measured by such meter.
In the event that there shall be a separate meter which measures the use of
water by the Tenant for lavatory purposes, the Tenant will pay for the water
so shown to have been used and the cost of maintenance of such meter. All
payments for water shall be due when billed to the Tenant. In the event that
the Tenant defaults in the payment for any water, the amount not paid shall
forthwith be payable as additional rent. The Landlord is not under obligation
to supply hot water (other than for lavatory purposes) and, if hot water is
supplied, the Landlord may at any time without notice discontinue such supply
without constituting an eviction or without incurring any liability or
disability therefor.
(b) The Tenant shall pay the New York City sewer rents apportioned to
the Tenant's consumption of water at the premises. The apportionment of the
sewer rent to the premises shall be made in accord with the measurement or
apportionment of water consumed at the premises as in this lease hereinbefore
provided. The sewer rents shall be billed with the water charges and the
Landlord shall have the same remedies for the collection thereof provided in
the case of charges for water.
SPRINKLER MAINTENANCE
THIRTY-FIRST: The Tenant shall pay to the Landlord the Tenant's
proportionate share of the cost of maintenance, operation and rental of the
automatic fire alarm supervisory service and manual alarm and sprinkler
system now installed in the building and the premises. The Tenant's
proportionate share of such cost shall be the fraction of the annual
expenditures of the Landlord for such purposes, of which the numerator is the
area of the premises and the denominator is the rentable area of the entire
building. The amount so payable by the Tenant shall be due when bills
therefor are rendered by the Landlord to the Tenant, and in the event of
default in the payment thereof, the Landlord may add the amount of any such
bill to any succeeding installment of rent and the same shall be collectible
as additional rent.
INSURANCE
THIRTY-SECOND: The Tenant shall, during the demised term, provide and
keep in force public liability insurance, written by insurance companies
approved by the Landlord, covering the Tenant, which shall be in the limit of
at least $500,000 for claims arising from injury to any one person and
(subject to said limit for each individual) with a limit of at least
$1,000,000 for total claims arising from any one casualty.
The Tenant shall furnish the Landlord within five (5) days after the
commencement of the term hereof, with a certificate of such insurance, which
certificate shall provide, that in the event of any change or cancellation of
the policy, advance notice thereof will be given to the Landlord. Upon
failure at any time on the part of the Tenant to obtain or keep in force the
insurance required by this paragraph, or to pay the premiums thereof, in
addition to the rights and remedies provided in paragraph Twenty-fifth
hereof, the Landlord shall be at liberty from time to time, and as often as
such failure shall occur (after 5 days' notice to Tenant and Tenant's failure
to cure within such period), to pay the premiums therefor and any and all
sums so paid for insurance by the Landlord shall be and become, and are
hereby declared to be, additional rent under this lease due and payable on
the next rent day or any successive rent day.
DEFAULT UNDER OTHER LEASES
THIRTY-THIRD: (a) If the Tenant, before the commencement of the term
herein granted, shall default in any covenant of any other lease with the
Landlord, then at the option of the Landlord this lease shall not go into
effect and the Tenant shall have no right to possession of the premises; and
the Tenant agrees to reimburse the Landlord upon demand for any expense or
loss that may be suffered due to the Tenant's default.
(b) In the event that during the term herein granted the Tenant shall
default in the performance of the covenants of any other lease with the
Landlord such default shall be deemed a default under the terms of this lease
and the Landlord shall have all the remedies herein provided for in the event
of a default under this lease.
WORK TO BE DONE BY LANDLORD
THIRTY-FOURTH: If work of any nature is agreed herein to be done by the
Landlord, the Tenant agrees (provided that the Landlord shall have used
reasonable efforts to complete the same prior to the commencement of the term
and shall thereafter diligently proceed with the same in a timely manner; and
provided, further, that if any work to be done by the Landlord with respect
to the original provision of electricity to the premises shall not have been
substantially completed prior to the commencement of the Tenant's operation
for business from the premises, the Tenant's rent shall be equitably
apportioned (Tenant hereby acknowledging and agreeing that such original
provision of electricity will entail the delivery to the floor of 1,000
amperes of electricity at 120/208 volts)) that it may be done after the
commencement of the term of this lease and that no rebate of rent or
allowance will be granted therefor. The Landlord shall not be required to
furnish any work or materials to the premises, except as expressly provided
in the memorandum of repairs or decorations to be done by the Landlord
attached to this lease. In case the Landlord or Tenant is prevented from
making any repairs, improvements, decorations or alterations, installing any
fixtures or articles of equipment, furnishing any services or performing any
other covenant herein contained to be performed on the Landlord's or Tenant's
part, due to the Landlord's or Tenant's inability to obtain, or difficulty in
obtaining, labor or materials necessary therefor, or due to any governmental
rules and regulations relating to the priority of national defense
requirements, or due to labor troubles, or due to any other cause beyond the
Landlord's or Tenant's control, the Landlord or Tenant, as the case may be,
shall not be liable to the Tenant or the Landlord, as the case may be for
damages resulting therefrom, nor except as expressly otherwise provided in
Article Seventeenth hereof (in respect of damage to the premises due to
fire), shall the Tenant be entitled to any abatement or reduction of rent by
reason thereof, nor shall the same give rise to a claim in the Tenant's favor
that such failure constitutes actual or constructive, total or partial,
eviction from the premises.
TRADING WITH THE ENEMY
THIRTY-FIFTH: The Tenant represents and warrants that the Tenant is not
disqualified under the Trading with the Enemy Act or any other similar
legislation or under the rules and regulations of any governmental department
or authority, from acquiring, owning and holding any interest in real
property. The breach by the Tenant of this condition shall be deemed a
default within the meaning of Article Twenty-fifth of this lease.
MARGINAL NOTES
THIRTY-SIXTH: The marginal headings or titles of the various Articles or
paragraphs of this lease are for reference and index purposes only, and none
of them shall be taken into consideration or given any effect whatever in
determining the meaning or scope of the provisions to which any of them
apply. The use of any pronoun referring to either of the parties to this
lease shall be construed to include any or no gender and any number.
(12)
<PAGE>
CPI ESCALATION
THIRTY-SEVENTH: (a) Real Estate Tax and CPI Escalation. In order (I) to
adjust, during the term of this lease, for increases in the expenses of the
Landlord for Real Estate Taxes, the Tenant shall
pay to the Landlord, as additional rent, the Tenant's Proportionate
Share of any increases in such Real Estate Taxes, and (ii) to adjust
for increases in other operating expenses of the Landlord, the
Tenant shall pay to the Landlord, as additional rent, the CPI
Adjustments for Increases in Other Operating Expenses, namely the
amount by which the Base Rent Allocated to Other Operating Expenses
is increased by application to the Base Rent Allocated to Other
Operating Expenses of increases in the Index over the Base Index,
all as computed as set forth below in this Article. Capitalized
words or expressions use above are defined in subparagraph (b) below.
(b) Definitions. As used in this Article the following
capitalized words or expressions shall have the meaning ascribed to
them below:
1. "Real Estate Taxes' shall mean and include the expenditures
of the Landlord for taxes or assessments payable by the Landlord
upon or with respect to the building and the land upon which it is
located, imposed by Federal, State or local government (plus all
expenditures for fees and expenses incurred in the course of
obtaining a reduction in any tentative assessed valuation), and all
taxes imposed by any such authority relating to the maintenance and
operation of the building, but shall not include income, franchise,
inheritance or capital stock taxes or transfer or recordation taxes.
2. "Base Rent Allocated to Other Operating Expenses' shall mean
an amount equal to 90% of the fixed annual rent prescribed on page 1
of this lease, as such rent may be payable from time to time.
3. "Increase in Real Estate Taxes' shall mean the amount by
which Real Estate Taxes in any Subsequent Year, exceed Real Estate
Taxes for the Base Year.
4. "CPI Adjustment for Increases in Other Operating Expenses' shall mean
the amount obtained by multiplying the Base Rent Allocated to Other Operating
Expenses by the percentage by which the Index as last published on the date
next prior to the Computation Date, shall exceed the Base Index; PROVIDED,
HOWEVER, that, with respect to any particular 12-month period ending on a
Computation Date (a "CPI Year"), if the percentage increase in the Index
occurring during any CPI Year, is less than 2.5% (a "CPI Adjustment Year"),
then in calculating the CPI Adjustment for Increases in Other Operating
Expenses with respect to such CPI Adjustment Year (whether in such CPI
Adjustment Year or in a subsequent CPI Year), the percentage increase for
such CPI Adjustment Year shall be deemed to have been 2.5%.
5. "Index' shall mean the ""Consumer Price Index for All Urban
Consumers'"(1982/84=100)' specified for "All Items,' relating to New
York City and published by the Bureau of Labor Statistics of the
United States Department of Labor. In the event the index shall
hereafter be converted to a different standard reference base or
otherwise revised, the determination of the CPI Adjustment for
Increases in Other Operating Expenses shall be made on the basis of
such conversion factor, formula or table for converting the Index as
may be published by the Bureau of Labor Statistics, or, if said
Bureau shall not publish the same, then with the use of such
conversion factor, formula or table as may be published by
Prentice-Hall, Inc., or, failing such publication, by any other
nationally recognized published of similar statistical information.
In the event either Index shall cease to be published, then, for the
purposes of this Article, there shall be substituted for the Index
such other index as Landlord and Tenant shall agree upon, and, if
they are unable within ninety (90) days after the Index ceases to be
published, such matter shall be determined in New York City by
arbitration in accordance with the Rules of the American Arbitration
Association.
6. "Base Index' shall mean the Index as last published prior to
February 1, 1999.
7. "CPI Comparative Statement' shall mean a statement ,in
writing, signed by the Landlord, or , on its behalf, by an officer
of any corporation acting as its managing agent, showing (i) a
comparison of (a) Real Estate Taxes for the Base Year with (b)
Projected Real Estate Taxes for a Subsequent Year (which shall be
the same calendar year as the year of the Computation Date used in
such CPI Adjustment for Increases in Other Operating Expenses for
such Subsequent Year, and (iii)if the Tenant paid additional rent
pursuant to this Article with respect to the immediate preceding
Subsequent Year, and adjustment necessitated by a variance between
the Projected Real Estate Taxes for such Subsequent Year (as shown
in the current CPI Comparative Statement).
8. "Base Year' shall mean the Real Estate tax year commencing
July 1, 1998 and ending June 30, 1999.
9. "Subsequent Year' shall mean any calendar year following the
Base Year, falling wholly or partly within the term of the Tenant
under this lease and the calendar year following the year in which
the term of this lease terminates.
(1)
<PAGE>
10. "Computation Date" shall mean the first day of
February , 2000, and in Subsequent Years, its anniversary date.
11. "Projected Real Estate Taxes" shall mean the Landlord's estimate
(which in any event must be reasonable in the light of past experience) of
Real Estate Taxes for a particular Subsequent Year.
12. "Tenant's Proportionate Share" shall mean a fraction, of which the
numerator shall be the number of Rentable Square Feet of Area of the premises
occupied by the Tenant and the denominator shall be 100% of the total number
of Rentable Square Feet of Area in the entire building.
13. "Rentable Square Feet of Area" shall mean, as to basement and
ground floor space, the number of net square feet of the area thereof and,
as to all floors above the ground floor, shall mean the number of gross
square feet of the area thereof.
The terms "Increases in Other Operating Expenses" and "Operating Expense
Comparative Statement" shall have the meanings assigned to such terms in
paragraph (b) of Article THIRTY-EIGHTH.
(c) Statements for the Tenant. On or before March 1, 2000, and on or
before that say in each Subsequent Year, the Landlord will furnish a CPI
Comparative Statement to the Tenant. The failure of the Landlord to furnish a
CPI Comparative Statement shall be without prejudice to the right of the
Landlord to furnish a CPI Comparative Statement at any time in the future.
Every CPI Comparative Statement furnished By the Landlord pursuant to
this Article shall be conclusive and binding upon the Tenant unless (i)
within ninety days after the receipt of such CPI Comparative Statement Tenant
shall notify Landlord that it disputes the correctness thereof, specifying
the particular respects in which the CPI Comparative Statement is claimed to
be incorrect, and (ii) if such dispute shall not have been settled by
agreement, the dispute shall have been submitted to arbitration within 180
days after receipt of the CPI Comparative Statement. Pending the
determination of such dispute by agreement of arbitration as aforesaid,
Tenant shall pay additional rent in accordance with the CPI Comparative
Statement and such payment shall be without prejudice to Tenant's position
and to the Tenant's rights to a refund of any overpayment. 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
compliance with the CPI Comparative Statement.
(d) Computation of Increase in Tent Payable by the Tenant. When the
Landlord shall furnish the Tenant with any CPI Comparative Statement in
accordance with this Article which shall show an Increase in Projected Real
Estate Taxes or a CPI Adjustment for Increases in Other Operating Expenses,
then the rent payable under the lease shall be increased by the Tenant's
Proportionate Share of the increase in Projected Real Estate Taxes and by the
CPI Adjustment for Increases in Other Operating Expense which shall be
payable (with payment on account of such increases) as follows: (1) on the
first day for the payment of rent under this lease following the receipt of a
CPI Comparative Statement, the Tenant shall pay to the Landlord a sum equal
to one-twelfth of the Tenant's Proportionate Share of the increase in
Projected Real Estate Taxes plus one-twelfth of the CPI Adjustment for
Increases in Other Operating Expenses (plus or minus, as the case may be, any
adjustment necessitated by a variance between (x) the Projected Real Estate
Taxes for the calendar year prior to the year of the Computation Date used in
such CPI Comparative Statement and (y) the actual Real Estate Taxes for such
calendar year) and (2) thereafter, until a different CPI Comparative
Statement or Operating Expense Comparative Statement shall be submitted, the
monthly installments of rent payable under this lease shall continue to be
increased by such amount.
With respect to any CPI Comparative Statement furnished to the Tenant in
the Subsequent Year following the year in which the term of this lease
terminates, if such CPI Comparative Statement shall indicate an adjustment
necessitated by a variance between (x) the Projected Real Estate Taxes for
the calendar year prior to the year of the Computation Date used in such CPI
Comparative Statement (ie., the last calendar year of the lease term) and (y)
the actual Real Estate Taxes for such calendar year, then the Tenant shall
promptly pay to the Landlord, or the Landlord promptly shall pay to the
Tenant, as the case may be the amount of any such adjustment as indicated in
such CPI Comparative Statement.
(e) Inspection of Books. The Tenant or its authorized representative
shall have a right to examine the books of the Landlord showing the Real
Estate Taxes with respect to the building during regular business hours for
the purpose of verifying the information set forth in any CPI Comparative
Statement relating to any Increase in Real Estate Taxes shown in such CPI
Comparative Statement; provided that a written request for such inspection is
made by the Tenant within 180 days of the receipt of any such CPI Comparative
Statement.
(f) Decreases in Real Estate Taxes or Index. In no event shall any
decrease in the Real Estate Taxes or the Index in any way reduce the fixed
rent or additional rent payable by the Tenant under this lease, except to the
extent to which any such decrease shall result in a decrease in the additional
rent payable pursuant to this Article; provided however that no decrease in
Real Estate Taxes shall in any way reduce any additional rent payable on
account of any CPI Adjustment for Increases in Other Operating Expenses, and
that no decrease in the amount of the CPI Adjustment for Increase in Other
Operating Expenses shall in any way reduce any additional rent payable on
account of any Increase in Real Estate Taxes.
(2)
<PAGE>
WORK SHEET
Attached to and made part of lease dated April 23, 1999 between THE
RECTOR, CHURCH-WARDENS AND VESTRYMEN OR TRINITY CHURCH IN THE CITY OF NEW
YORK, Landlord,
and STARTEC GLOBAL COMMUNICATIONS CORPORATION, Tenant.
-----------------------------------------
Building 225 Varick Street
-------------------------------------
Space Part 5th Floor
-------------------------------------
It is agreed that the following work is to be done by the Landlord at
the Landlord's expense:
1. Deliver space demolished, demised and broom clean.
2. Provide ACP-5 certificates.
3. Upon completion of the lobby renovation, Landlord will have installed a
Local Law #5 system for the base building which includes a fire command
station, necessary risers, warden stations, pull stations and smoke
detectors required for the core area. Landlord will provide Tenant with
connection points and all fire safety lines brought to the premises to
allow Tenant to install within the premises additional speakers and
equipment necessitated by Tenant's partitioning, as well as strobe
devises required by Local Law #58. Tenant will be required to install
all devices within Tenant's premises and connect all to Landlord's
system, at Tenant's cost and expense.
4. Deliver the existing perimeter radiation and sprinkler system in good
working order.
5. Renovate existing toilets on the 5th floor of the building to Landlord's
specifications and deliver at least one (1) toilet in compliance with
ADA requirements.
6. Provided that the Tenant is not in default under any of the terms of
this lease, the Landlord agrees to reimburse the Tenant in an amount up
to a maximum of $144,850.00 toward the Tenant's actual out-of-pocket
cost of interior alterations and construction of permanent office
improvements (other than air conditioning equipment) made by the Tenant
in the premises. All such alterations and improvements shall be made in
accordance with the provisions of Article FOURTH of this lease. The
Landlord shall only be obligated to reimburse the Tenant upon submission
to the Landlord of invoices for the cost of such alterations and
improvements marked by the contractor, vendor or supplier "Paid In Full"
and upon submission to the Landlord of such other documents (including
lien waivers) as the Landlord may reasonably require to evidence payment
in full of the cost of such alterations and improvements.
7. Provided that the Tenant is not in default under any of the terms of
this lease, the Landlord agrees to reimburse the Tenant in an amount up
to a maximum of $70,000.00 toward the Tenant's actual out-of-pocket cost
of air conditioning equipment (including but not limited to, ductwork)
to be installed by the Tenant in the premises. The installation of all
such air conditioning equipment and ductwork shall be made in accordance
with the provisions of Article FOURTH of this lease. The Landlord shall
only be obligated to reimburse the Tenant upon submission to the
Landlord of invoices for the cost of such air conditioning equipment and
its installation marked by the vendor or supplier "Paid In Full" and
upon submission to the Landlord of such other documents (including lien
waivers) as the Landlord may require to evidence payment in full of the
cost of such air conditioning equipment and its installation.
It is stipulated and agreed that the foregoing constitutes the memorandum
of repairs or decorations to be done by the Landlord referred to in the
attached and all the work to be done by the Landlord in the demised premises,
except as otherwise expressly provided in the attached lease.
It is further stipulated and agreed that the aforesaid work shall be
commenced by the Landlord as soon as possible after the signing of the
attached lease and the payment by the Tenant of the first installment of rent
and the performance by the Tenant of any other obligations to be performed by
the Tenant at the time of the signing of the lease and shall be completed
with reasonable diligence, provided that the Landlord shall not be required
to do the work on days or hours other than usual working days and hours in
the trades in question.
Subject to the foregoing provisions the Landlord reserves the right,
after according reasonable consideration to the Tenant's wishes in the
matter, to make all decisions as to the time or times when, the order and
style in which, said work is to be done, and the labor or materials to be
employed therefor. The work shall be done, unless the Landlord otherwise
directs, during the usual working hours observed by the trades in question.
It is stipulated and agreed that in case the Landlord is prevented from
commencing, prosecuting or completing said work, due to the Landlord's
inability to obtain or difficulty in obtaining the labor or materials
necessary therefor, or due to any governmental requirements or regulations
relating to the priority or national defense requirements, or due to any
other cause beyond the Landlord's control, the Landlord shall not be liable
to the Tenant for damages resulting therefrom, nor shall the Tenant be
entitled to any abatement or reduction or rent by reason thereof, nor shall
the same [???illegible???] to a claim in the Tenant's favor that such failure
constitutes actual, constructive, total or partial eviction from the demised
premises.
THE RECTOR, CHURCH-WARDENS AND VESTRYMEN OF
TRINITY CHURCH IN THE CITY OF NEW YORK, Landlord
By: /s/ Stephen J. Heyman
----------------------------------------------
Director of Leasing
STARTEC GLOBAL COMMUNICATIONS CORP.
----------------------------------------------
Tenant
By: /s/ John B. Selveraj
----------------------------------------------
Senior Manager, Contracts
<PAGE>
RULES AND REGULATIONS
1. The Tenant shall not clean, nor require, permit or allow any window
in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or of the Rules of the Board of Standards and
Appeals, or of any other board or body having or asserted jurisdiction;
2. All machinery shall be kept in approved settings, sufficient to
absorb any shock and prevent any noise, vibration or annoyance in the
building of which the demised premises are a part and shall be provided with
oil pans between such machinery and the floor beneath it, sufficient to
prevent the seepage of oil on or into the floors;
3. No acid that in any way may injure any of the pipes or plumbing
equipment in the building shall be poured or allowed to drain into the pipes
or plumbing equipment thereof, but shall in the event that the building is
provided with an acid line be poured or allowed to drain only therein, or if
there be no acid line, shall be neutralized in a manner satisfactory to the
Landlord. No substance which may cause any objectionable odor shall be left
in the demised premises;
4. During the cold season, the windows shall be kept closed to maintain
the temperature of the demised premises and to prevent any freezing thereof,
or of any equipment or appliance therein;
5. All trucks, vehicles or conveyances used by the Tenant in the demised
premises shall have rubber-tired wheels;
6. The Tenant's employees, except clerical or executive help, shall, if
the Landlord so directs, at all times use only the combination passenger and
freight elevator, if any, in going into or coming out of the demised premises;
7. No sign or lettering shall be inscribed on any door, wall or window
of the demised premises which is visible from the street or the portion of
the building used in common by other tenants except such as may be approved
in writing by the Landlord or its agents or designee;
8. No additional locks or bolts shall be placed anywhere upon or within
the demised premises or any on rooms therein, unless duplicate keys thereto
be given to the Landlord and all such keys must, on the termination of this
lease, be surrendered to the Landlord;
9. The Landlord may exclude any persons visiting or attempting to visit
the premises between 7 P.M. and 8 A.M. and on Saturdays, Sundays and the
holidays recognized as such by the state or federal government unless such
person shall be equipped with a pass signed by the Tenant and unless such
person shall sign his name and the premises which he is to visit on the night
report.
10. The sanitary and safety facilities used solely by the Tenant or by
the Tenant in common with other occupants of the building of which the
demised premises are a part, shall be used only for the purposes for which
they were constructed;
11. No signs, signals, devices, displays, sounds or advertisements
visible or audible from the street or from the halls and other parts of the
building used in common by the Tenant and other tenants shall be inscribed,
erected or maintained unless the kind, style, location and manner thereof
shall have been approved in writing by the Landlord and if any sign, signal,
sound display or advertising be erected, made or inscribed without such
approval, the Landlord may remove the same and charge the cost of so doing to
the Tenant as additional rent. Any sign or display which may be installed by
the Tenant shall be kept in good order and repair and in a neat and
attractive condition. The Landlord reserves the right to use the roof and
outside walls surrounding the premises for sign purposes. The Landlord may
remove any sign or signs or displays in order to paint the premises or any
part of the building, or make any repairs, alterations or improvements in or
upon the premises or building, or any part thereof, provided it causes the
same to be removed and replaced at the Landlord's expense, whenever the said
painting, repairs, alterations or improvements shall have been completed;
(13)
<PAGE>
12. No advertising which, in the reasonable opinion of the Landlord,
tends to impair the reputation of the building or its desirability as a loft
or office building, shall be published or caused to be published by the
Tenant and, upon notice from the Landlord, the Tenant shall refrain from or
discontinue such advertising;
13. Awnings, antennae, aerials, ventilating and air-conditioning
apparatus or other projections from the window or outside walls of the
demised premises shall not be erected or installed. All air-conditioning
apparatus installed in windows shall be so arranged that condensate does not
drain on the outside of the building wall or into the street;
14. The lights, skylights, entrances, passages, courts, elevators,
stairways, loading platforms, halls or any part of the building intended for
the use in common by the Tenant and the other occupants thereof shall not be
obstructed or encumbered (whether by means of storing of materials and skids
or otherwise). In the event of any such encumbrance or obstruction, the
Landlord may remove the material causing such encumbrance or obstruction and
cause it to be stored and charge the cost of doing so to the Tenant. No
courtyard or yard appurtenant to the premises or the building shall be used
for parking vehicles of any kind;
15. Except for the hanging of pictures and for alterations approved by
the Landlord, no part of the premises or the building shall be marked,
painted, drilled into, or in any way defaced. No laying of linoleum, or other
similar floor covering so that the same shall come in direct contact with the
floor of the demised premises shall be made; 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. Cements and other similar adhesive material shall not be
used. Removal of any alterations, decorations or improvements in compliance
with paragraph Fourth of this lease shall include the removal of all
linoleum, lining and adhesive material;
16. No part of the demised premises shall be used in a manner or for a
purpose that is substantially objectionable to the Landlord or to another
tenant, or which in the reasonable judgment of the Landlord, might cause
structural injury to the building;
17. The Tenant's employees shall not stand or loiter around the
hallways, stairways, elevators, front, roof or any other part of the building
used in common by the occupants thereof;
18. No load shall be placed upon any floor of the building exceeding the
floor load per square foot area which such floor was designed to carry, and
all loads shall be evenly distributed. The Landlord reserves the right to
prescribe the weight and position of all safes, machinery and other personal
property in the premises which must be placed so as to distribute their
weight;
19. Nothing shall be thrown out of the windows or doors, or down the
passages or skylights of the buildings, nor shall any of them be covered,
obstructed or encumbered. No improper noises shall be made in the building,
nor shall birds or animals be brought therein;
20. Where freight elevators are approved by the building and are in
operation, all deliveries shall be made to or from the demised premises
exclusively by means of such elevators;
21. Any one doing janitorial work for the Tenant shall at all times be
subject to order and direction by the superintendent of the building,
although he shall not be the servant of either the superintendent or the
Landlord;
22. No peddling, soliciting or canvassing shall be permitted in the
premises or by the Tenant's employees elsewhere in the building;
23. The Landlord may prescribe, and from time to time vary, the time for
any removals or deliveries from or into the premises, at any time, and such
prescriptions shall apply whether or not the material so removed or received
is the property of the Tenant. Removals or deliveries of safes, machinery and
any other heavy or bulky matter shall be done only upon written
authorization of the Landlord and only in such manner and by such persons as
may be acceptable to the Landlord, and the Landlord may require any further
assurances or agreements or indemnity from the Tenant and the movers to that
effect. The Landlord reserves the right to inspect all freight to be brought
into the building and to exclude from the building all freight which violates
any of these Rules and Regulations or the lease of which these Rules and
Regulations are a part;
(14)
<PAGE>
24. The Tenant shall not permit its servants, employees, agents,
visitors or licensees, at any time to bring or keep upon the premises any
inflammable, combustible or explosive fluid, chemical or substance or cause
or permit any unusual or objectionable odors to be produced upon or emanate
from the premises;
25. The passenger and service elevators, other than automatic
self-service elevators, if any, shall be operated only by employees of the
Landlord, and must not in any event be interfered with by the Tenant, his
servants, employees, agents visitors or licensees. Manned freight elevators
will be operated only during such hours as the Landlord may from time to time
determine;
26. The Tenant shall not use any other method of heating than that
supplied by the Landlord;
27. If the premises consist of basement space, or if any merchandise of
the Tenant is stored in the basement portion of the building, all such
merchandise shall, at the Tenant's own cost and expense, be placed entirely
on skids or platforms, which will raise such merchandise at lease six inches
from the floor;
28. No drilling in floors, walls or ceilings shall be done except in
compliance with paragraph Fourth of this lease and no such drilling shall be
done during usual business hours unless authorized by the Landlord in writing;
29. No vending machine shall be installed or permitted to remain in the
premises unless the Landlord shall first have given its specific written
authorization for the installation of each such machine. The Tenant shall not
authorize or permit any vendor of sandwiches, coffee, or other foods, candies
or beverages to enter the premises for the purpose of soliciting sales of
such wares to the Tenant's employees.
THE TERMS, COVENANTS AND CONDITIONS contained in the foregoing lease
shall be binding on, and shall enure to the benefit of the parties hereto,
and their respective legal representatives, successors, and assigns, but no
assignment made or purported to be made in violation of the provisions of
this lease shall vest in such assignee any right or title in or to this
lease or in or to the estate hereby created.
IN WITNESS WHEREOF, this agreement, consisting of fifteen (15)
printed pages numbered 1 to 15 and typewritten or printed rider pages bearing
clauses, numbered TENTH(a)(re-written) EIGHTEENTH(re-written) and
THIRTY-SEVENTH to FIFTY-FIRST inclusive, has been signed and sealed by the
parties hereto, the day and year first above written.
THE RECTOR, CHURCH-WARDENS AND VESTRYMEN OF
TRINITY CHURCH IN THE CITY OF NEW YORK
By:
----------------------------------------------
Daniel Paul Matthews, Rector
Attest:
As to Landlord:
- ------------------------- By: /s/ Steven J. Heyman
Executive Vice President ----------------------------------------------
of Real Estate Director of Leasing
By: /s/ John A. McKepney
----------------------------------------------
Finance Department
Attest: STARTEC GLOBAL COMMUNICATIONS CORPORATION
As to Tenant: ----------------------------------------------
Tenant
/s/ Illegible
- ------------------------- By: /s/ John B. Selveraj
----------------------------------------(L.S.)
Senior Manager, Contracts
March 22, 1999
----------------------------------------(L.S.)
(15)
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0
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