<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 MARCH 31, 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
<TABLE>
<S> <C>
DELAWARE 52-2099559
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
------------------------
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.
<TABLE>
<CAPTION>
SHARES OUTSTANDING
TITLE OF EACH CLASS: AS OF MAY 7, 1999
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Common Stock, par value $0.01 per share 9,390,215
</TABLE>
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<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1999
INDEX
<TABLE>
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1... Financial Statements
Condensed Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998...................................... 2
Condensed Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998.................................................. 3
Condensed Consolidated Statements of Cash Flows for the three months
Ended March 31, 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........... 15
PART II. OTHER INFORMATION AND SIGNATURE...................................... 16
</TABLE>
<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
ENDED MARCH 31,
---------------------
<S> <C> <C>
1999 1998
---------- ---------
Net revenues.......................................................... $ 57,714 $ 29,891
Cost of services...................................................... 52,659 25,655
---------- ---------
Gross margin........................................................ 5,055 4,236
General and administrative expenses................................... 9,725 2,691
Selling and marketing expenses........................................ 4,128 648
Depreciation and amortization......................................... 1,375 184
---------- ---------
Income (loss) from operations......................................... (10,173) 713
Interest expense...................................................... (5,199) (153)
Interest income....................................................... 1,647 359
Equity in loss from affiliates........................................ (102) --
---------- ---------
Income (loss) before income taxes..................................... (13,827) 919
Income tax provision.................................................. -- (20)
---------- ---------
Net income (loss)..................................................... $ (13,827) $ 899
---------- ---------
---------- ---------
Basic earnings (loss) per common share................................ $ (1.51) $ 0.10
---------- ---------
---------- ---------
Diluted earnings (loss) per common share.............................. $ (1.51) $ 0.10
---------- ---------
---------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
2
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................. $ 59,451 $ 81,456
Accounts receivable, net of allowance for doubtful accounts of $2,698
and $2,659, respectively............................................................ 38,938 40,370
Accounts receivable, related party.................................................... 503 684
Other current assets.................................................................. 6,514 3,916
----------- ------------
Total current assets.............................................................. 105,406 126,426
Property and equipment, net of accumulated depreciation and amortization of $4,811 and
$3,493, respectively................................................................ 53,038 43,525
Restricted cash and pledged securities................................................ 44,352 44,336
Intangibles, net and other long term assets........................................... 27,943 11,695
----------- ------------
$ 230,739 $ 225,982
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................................... $ 42,154 $ 36,273
Accrued expenses...................................................................... 13,980 6,845
Vendor financing...................................................................... 1,509 1,476
Capital lease obligations............................................................. 365 402
Note payable to individuals and other................................................. 16 16
----------- ------------
Total current liabilities......................................................... 58,024 45,012
Senior notes.......................................................................... 158,075 158,022
Vendor financing, net of current portion.............................................. 7,343 7,409
Minority interest..................................................................... 1,684 --
Capital lease obligations, net of current portion..................................... -- 59
----------- ------------
Total liabilities................................................................. 225,126 210,502
----------- ------------
STOCKHOLDERS' EQUITY:
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............................................................ 43,575 39,632
Unearned compensation................................................................. (177) (190)
Accumulated deficit................................................................... (37,879) (24,052)
----------- ------------
Total stockholders' equity........................................................ 5,613 15,480
----------- ------------
$ 230,739 $ 225,982
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
<S> <C> <C>
1999 1998
---------- ---------
OPERATING ACTIVITIES:
Net income (loss)......................................................................... $ (13,827) $ 899
Adjustments to net income (loss):
Depreciation and amortization........................................................... 1,375 184
Amortization of deferred debt financing costs and debt discounts........................ 178 120
Other non-cash adjustments.............................................................. 28 13
Changes in operating assets and liabilities, net of acquisition costs:
Accounts receivable, net................................................................ 3,045 (3,327)
Accounts receivable, related party...................................................... 181 (568)
Accounts payable........................................................................ 8,433 2,958
Accrued expenses........................................................................ 6,900 (695)
Other................................................................................... (3,584) 941
---------- ---------
Net cash provided by operating activities............................................. 2,729 525
---------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired........................................................ (14,336) --
Purchases of property and equipment....................................................... (10,269) (2,741)
---------- ---------
Net cash used in investing activities................................................. (24,605) (2,741)
---------- ---------
FINANCING ACTIVITIES:
Proceeds from vendor financing............................................................ 324 --
Scheduled repayments of vendor financing.................................................. (357) --
Repayments under capital lease obligations................................................ (96) (90)
Net proceeds from issuance of common shares............................................... -- 259
---------- ---------
Net cash provided by (used in) financing activities................................... (129) 169
---------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS..................................................... (22,005) (2,047)
CASH AND CASH EQUIVALENTS, beginning of year.............................................. 81,456 26,114
---------- ---------
CASH AND CASH EQUIVALENTS, end of year.................................................... $ 59,451 $ 24,067
---------- ---------
---------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................................................. $ 221 $ 32
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Equipment acquired under capital lease.................................................... $ -- $ 84
The Company acquired a 64.6% 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....................... 10,840 --
Cash paid for assets.................................................................... (4,057) --
Accrued acquisition costs............................................................... (990)
Liabilities assumed including minority interest......................................... 1,845 --
Stock issued in connection with acquisition............................................. 3,948 --
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
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 March 31, 1999 and December
31, 1998, and the results of operations and cash flows for the three months
ended March 31, 1999 and 1998. Interim results are not necessarily indicative of
results that may be expected for the entire year.
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 in 1999 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.
5
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 as of March 31, 1999 and 1998
(in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Weighted average common shares outstanding-basic.................................. 9,144 8,909
Stock option and warrant equivalents.............................................. -- 456
--------- ---------
Weighted average common and equivalent shares outstanding--diluted................ 9,144 9,365
--------- ---------
--------- ---------
</TABLE>
Options and warrants to purchase approximately 1,380,000 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.
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. Total consideration
amounted to approximately $9 million, including acquisition costs. The Company
recognized approximately $12.5 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 Company acquired an additional 18% ownership interest
through a tender offer as of May 7, 1999 for a total ownership interest of
approximately 83%.
The purchase price 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 company is
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.
6
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. During the first three months of 1999 and 1998, the
Company's five largest carrier customers accounted for approximately 46 percent
and 47 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. During the first three months of 1999 and 1998, the
Company's five largest vendors accounted for approximately 29 percent and 44
percent of cost of sales, respectively.
6. ASCEND FINANCING FACILITY.
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. The Ascend Facility bears interest at 8.5% per
annum. Under the terms of the Ascend Facility, the Company is subject to certain
financial and operational limitations.
7
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 the United States and Europe and to
leading international long distance carriers. The Company's quarterly revenues
have increased from $29.9 million for the three months ended March 31, 1998 to
$57.7 million for the three months ended March 31, 1999. The Company reported a
net loss for the three months ended March 31, 1999 of $13.8 million, or $1.51
per diluted common share compared to net income of approximately $899,000, or
$0.10 per diluted common share in the three months ended March 31, 1998. The
number of the Company's residential customers increased from approximately
84,000 customers as of March 31, 1998 to approximately 131,000 customers as of
March 31, 1999.
The Company intends to expand 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 in
the U.S.; and (iv) providing co-location and Web hosting facilities at its main
international gateway sites in New York, Los Angeles and Miami.
8
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
ENDED MARCH 31,
--------------------
<S> <C> <C>
1999 1998
--------- ---------
Net revenues......................................................... 100.0% 100.0%
Cost of services..................................................... 91.2 85.8
--------- ---------
Gross margin....................................................... 8.8 14.2
General and administrative expenses.................................. 16.9 9.0
Selling and marketing expenses....................................... 7.1 2.2
Depreciation and amortization........................................ 2.4 0.6
--------- ---------
Income (loss) from operations........................................ (17.6) 2.4
Interest expense..................................................... (9.0) (0.5)
Interest income...................................................... 2.8 1.2
Equity in loss from affiliates....................................... (0.2) --
--------- ---------
Income (loss) before taxes........................................... (24.0) 3.1
Income tax provision................................................. -- (0.1)
--------- ---------
Net income (loss).................................................... (24.0)% 3.0%
--------- ---------
--------- ---------
</TABLE>
THREE MONTH PERIOD ENDED MARCH 31,1999 COMPARED TO THREE MONTH PERIOD ENDED
MARCH 31, 1998
NET REVENUES. Net revenues, consolidated to include the effect of the
acquisitions for the three months ended March 31, 1999, increased $27.8 million,
or 93.1%, to $57.7 million from $29.9 million for the three months ended March
31, 1998. Residential revenue increased by $5.2 million or 46%, to $16.4 million
for the three months ended March 31, 1999, from $11.2 million for the same
period in 1998. The increase in residential revenue was due to an increase in
residential customers to approximately 131,000 at March 31, 1999 from
approximately 84,000 at March 31, 1998 and growth in new markets. Carrier
revenues for the three month period ended March 31, 1999 increased $22.6
million, or 120.9%, to $41.3 million from $18.7 million for the three months
ended March 31, 1998. 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 $819,000 to $5.1 million for the three
months ended March 31, 1999 from $4.2 million for the three months ended March
31, 1998. Gross margin as a percentage of net revenues decreased to 8.8% for the
three months ended March 31, 1999 from 14.2% for the three months ended March
31, 1998. Gross margin was impacted by the implementation of 17 new operating
agreements over the last two 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 March 31, 1999 increased 262% to $9.7 million from $2.7
million for the three months ended March 31, 1998. As a percentage of net
revenues, general and administrative expenses increased to 16.9% from 9% over
the same period in 1998. The increase was primarily due to an increase in
personnel to 564 at
9
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 from 177 employees at March 31, 1998 as a result of the Company's
continued worldwide development and expansion as well as pre-operating costs
associated with start-up operations in Europe and the Company's implementation
of its ISP and data services strategy.
SELLING AND MARKETING. Selling and marketing expenses for the three months
ended March 31, 1999 increased to $4.1 million from approximately $648,000 for
the three months ended March 31, 1998. As a percentage of net revenues, selling
and marketing expenses increased to 7.1% from 2.2% in the respective periods.
The increase is primarily due to the Company's efforts to attract new customers
and retain existing customers. The Company also began sales and marketing
efforts related to operations in Europe and the implementation of the Company's
ISP and data services strategy.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses for
the three months ended March 31, 1999 increased to $1.4 million from
approximately $184,000 for the three months ended March 31, 1998, primarily due
to increases in capital expenditures pursuant to the Company's strategy of
expanding its network infrastructure.
INTEREST EXPENSE. Interest expense for the period ended March 31, 1999
increased to $5.2 million from approximately $153,000 for the three months ended
March 31, 1998, as a result of an offering of Senior Notes and Warrants ("Senior
Notes and Warrants Offering") consummated in May 1998, the proceeds of which are
being used to fund expansion and working capital needs.
INTEREST INCOME. Interest income for the period ended March 31, 1999
increased to $1.6 million from approximately $359,000 for the three months ended
March 31, 1998. The increase is primarily due to the net proceeds from the
Senior Notes and Warrants Offering consummated in May 1998.
NET INCOME (LOSS). Net loss for the three months ended March 31, 1999 was
$13.8 million or $1.51 per diluted common share compared to net income of
approximately $899,000 or $0.10 per diluted common share for the three months
ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company reported a decrease in cash and cash equivalents of $22 million
during the three months ended March 31, 1999. This decrease is primarily due to
expanding capital and operating requirements including the acquisition of a 64%
ownership interest of 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, a deposit for an outstanding tender
offer for PSN common shares and a payment towards the purchase of Global GmbH of
Germany. Cash flow from operations increased $2.2 million to $2.7 million
principally due to changes in operating accounts predominately increases in
accounts payable and accrued expenses.
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 $44.4 million at March 31, 1999.
10
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 $24.6 million in the first quarter of
1999 compared to $2.7 million in the same period in 1998. Cash used in investing
activities through the first quarter of 1999 includes capital expenditures of
$10.3 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.
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. Total consideration
amounted to approximately $9 million, including acquisition costs. The Company
recognized approximately $12.5 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 Company acquired an additional 18% ownership interest
through a tender offer as of May 7, 1999 for a total ownership interest of
approximately 83%.
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 sheets.
In February 1999, the Company agreed to purchase capacity on fiber optic
cable from New York to Los Angeles for $2.9 million. The Company prepaid
$724,000 of the purchase price to secure the transaction.
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.
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 Indefeasible Rights
of Usage ("IRUs") and through signatory ownership. 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 45 operating
agreements in 39 countries. Approximately 27 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.
11
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash used in financing activities was approximately $129,000 for the first
quarter of 1999 compared to cash provided by financing activities of
approximately $169,000 in the first quarter 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 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. The Ascend Facility bears interest at 8.5% per annum.
Under the terms of the Ascend Facility, the Company is subject to certain
financial and operational covenants, including but not limited to restrictions
on the Company's ability to pay dividends and level of indebtedness.
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 March 31, 1999,
approximately $8.9 million bearing interest at 8.91% was outstanding. Principal
and interest payments of approximately $190,000 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 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 through early 2000. 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
12
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 becomeY2K 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 the third quarter of 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
13
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
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.
NEWLY CONSUMMATED 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.
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, commencing in the second quarter of 1999, with completion
expected by the end of the third quarter of 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 third
quarter of 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
14
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 the end of July 1999.
COSTS. Total costs incurred up to March 31, 1999 specifically associated
with becoming Y2K compliant have been less than $400,000. The total estimated
specific costs of becoming Y2K compliant is estimated to be less than $1.5
million. 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 March 31, 1999, the fair value of the Senior
Notes was approximately $144 million and the fair value of the securities
pledged to make certain interest payments on the Senior Notes was approximately
$44.3 million. Changes in interest rates also affect the Company's borrowings
under its vendor financing facility with NTFC, which 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 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.
15
<PAGE>
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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.47 AC-1 Cable Network IRU Agreement between Teleglobe USA Inc. and the
Company dated December 17, 1998.
10.48 Backhaul and Access Connect Service Agreement between Cable & Wireless
Communications Services Limited and the Company dated January 12,
1999.
10.49 Sublease Agreement by and between Ceridian Corporation and the Company
dated January 8, 1999.
27.1 Financial Data Schedule
b. Reports on Form 8-K:
None.
16
<PAGE>
SIGNATURES
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
17(th) day of May, 1999.
<TABLE>
<S> <C> <C>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
By: /s/ PRABHAV V. MANIYAR
-----------------------------------------
Prabhav V. Maniyar
Senior Vice President, Chief Financial
Officer, Secretary and Director
(Principal Financial and Accounting
Officer)
</TABLE>
17
<PAGE>
EXHIBIT 10.47
INDEFEASIBLE RIGHT OF USE AGREEMENT
BETWEEN
TELEGLOBE USA INC.
AND
STARTEC GLOBAL COMMUNICATIONS CORP.
<PAGE>
-1-
THIS AGREEMENT made and entered into as of 17th day of December 1998 (the
"EFFECTIVE DATE").
<TABLE>
<S> <C>
BY AND BETWEEN: TELEGLOBE USA INC., a Delaware
corporation having its principal office
at 1751 Pinnacle Drive, Suite 1600,
McLean, Virginia 22102 hereinafter
referred to as "TELEGLOBE";
AND: STARTEC GLOBAL COMMUNICATIONS CORP., a
corporation organized and existing
under the laws of Maryland, having its
principle office at 10411, Motor City
Drive, Bethesda, MD 20817, hereinafter
referred to as "STARTEC".
</TABLE>
WHEREAS, Teleglobe or its affiliates have acquired certain rights to
transatlantic fiber optic capacity in the AC-1 Cable System and to associated
backhaul capacity which will connect such transatlantic capacity to
terrestrial termination points (the "Cable System"); and
WHEREAS, STARTEC desires to take and pay for the right to use certain
capacity in the Cable System as more fully set forth herein.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS. This Section 1.1 lists defined terms used in this
Agreement. Capitalized terms used in any provision of this Agreement and not
otherwise defined therein shall have the following meanings, respectively,
unless the context otherwise requires.
(A) AC-1 shall mean the Atlantic Crossing One Transatlantic Submarine
Fiber Optic Cable System;
(B) "AGREEMENT" shall mean this Agreement and the schedule attached
hereto, as amended from time to time;
(C) "CABLE SYSTEM" shall mean the Teleglobe's interest in certain
transatlantic submarine fiber optic cable capacity in the Atlantic
Crossing/AC-1 Submarine Cable System (including the full DS-3
which is subject to the IRU herein) between the beachhead cable
station located at Brookhaven, New York and the beachhead cable
station
<PAGE>
-2-
located at White Sands, United Kingdom (the "Cable"). Plus the
backhaul capacity between 60 Hudson Street Brookhaven, NY as well
as the backhaul capacity between White Sands, UK and Telehouse,
5th Floor, Corriander Avenue, East India Docks, London, UK.
(D) "DOLLAR" and "DOLLARS" and the symbol "$" shall mean lawful money
of the United States of America;
(E) "DS3" shall consist of one (1) Virtual Container 3 (VC-3),
allowing the use of 44 736 000 bits per second (nominal 45Mbps)
digital stream.
(F) "EFFECTIVE DATE" shall mean the date that the obligations arising
under this Agreement shall be deemed to be in full force and
effect notwithstanding the formal date of its execution by the
Parties;
(G) "OPERATION AND MAINTENANCE" or "O&M" shall mean the operation and
maintenance of the Cable System and the operation and maintenance
of the Backhaul, if any. Without limiting the generality of the
foregoing, such operation and maintenance activities may include,
but not be limited to, testing, adjustment, and storage of plant
and equipment, repairs, maintenance, and reburial and replacement
of plant;
(H) "PARTIES" shall mean all of the parties hereto collectively; and
"PARTY" shall mean any one of them;
(I) "PERSON" shall mean an individual, corporation, company,
cooperative, partnership, trust or unincorporated association and
pronouns have a similarly extended meaning;
(J) "CAPACITY PURCHASE AGREEMENTS" shall mean any capacity purchase
agreement, or capacity lease agreement entered into by Teleglobe
or its affiliates, or to which Teleglobe or its affiliates as an
IRU-holder or lessee in specific cable capacity is subject to, the
purpose of which is to define the terms and conditions upon which
said cable capacity has been purchased;
(K) "SERVICE DATE" shall mean the date of completion of installation,
acceptance testing, and implementation of the access to and use of
the Cable System, the completion of which shall be confirmed in
writing by Teleglobe to STARTEC. Subject to the compliance of both
Parties with their respective obligations hereunder, it is
anticipated that the Service Date will occur on or about thirty
(30) days from the Effective Date.
(L) "RFS DATE" shall mean, with respect to the AC-1 Cable System, the
date on which the Cable will be available for service.
<PAGE>
-3-
1.2 Gender. Any reference in this Agreement to any gender shall include
all genders and words used herein importing the singular number only
shall include the plural and vice versa.
1.3 Headings. The division of this Agreement into Articles, Sections,
Subsections and other Subdivisions and the insertion of headings are
for convenience of reference only and shall not affect or be utilized
in the construction or interpretation hereof.
1.4 Severability. Any Article, Section, Subsection or other Subdivision of
this Agreement or any other provision of this Agreement which is proven
to be illegal, invalid or unenforceable shall be severed herefrom and
shall be ineffective to the extent of such illegality, invalidity or
unenforceability and shall not affect or impair the remaining provisions
hereof, which provisions shall be severed from any illegal, invalid or
unenforceable Article, Section, Subsection or other subdivision of this
Agreement or any other provision of this Agreement and shall otherwise
remain in full force and effect.
1.5 Entire Agreement. This Agreement constitutes the entire agreement by
and between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, proposals, negotiations
and discussions, whether oral or written, of the Parties.
Except as provided for herein, this Agreement may be amended only by an
instrument in writing signed by both Parties.
1.6 Governing Law. This Agreement shall be interpreted and construed in
accordance with the laws of Virginia, without giving effect to the laws of
such state governing conflicts of laws.
ARTICLE 2
GRANTING OF IRU AND BACKHAUL CAPACITY
2.1 Granting of IRU. Subject to STARTEC making all payments to Teleglobe
when due hereunder, as of and from the Effective Date, Teleglobe shall
grant to STARTEC, on an IRU basis, an interest in one full DS3 in the
Cable.
2.2 Backhaul Service. Subject to STARTEC making all payments to Teleglobe
when due hereunder, Teleglobe shall utilize reasonable efforts to
provide STARTEC as of and from the Service Date with access to and use
of the backhaul in a capacity equal to the IRU granted herein, which
backhaul shall be provided per the terms of this Agreement and for a
term consistent with the IRU in the Cable granted hereunder.
2.3 O&M. Subject to STARTEC making the required payments set forth in
Articles 3 and 4 hereof. Teleglobe shall use reasonable efforts to
ensure that the Cable System is maintained in accordance with the
Capacity purchase agreements between Teleglobe or its affiliate(s)
and the owners of the Cable System.
<PAGE>
-4-
2.4 Cable Restoration. Restoration will not be available on the Cable
until a complete loop is constructed between the US and UK beachhead
cable stations. The AC-1 owners have provided Teleglobe with a Target
Date of 31 March 1999 as an availability date for Cable restoration
capability. At such time that Teleglobe obtains such capability, it
shall forthwith make it available to STARTEC.
ARTICLE 3
CABLE SYSTEM FEE FOR CABLE AND BACKHAUL
Cable System Fee. In consideration of the grant of the use of the
Cable System by Teleglobe to STARTEC, STARTEC agrees to pay to
Teleglobe a non-reimbursable fee of Two Million Seven Hundred Fifty
Thousand US Dollars (US$2,750,000) (the "Cable System Fee"), on the
Effective Date. STARTEC agrees to pay the Cable System Fee by wire
transfer, certified cheque or bank draft. Notwithstanding any other
provision to the contrary, Teleglobe shall not be obligated grant
such usage prior to receipt of the Cable System Fee.
ARTICLE 4
PAYMENT OF CHARGES AND EXPENSES
4.1 O&M Charges. In consideration of Teleglobe's provision of O&M in
connection with the Cable, STARTEC shall pay to Teleglobe an annual
fee of One Hundred Thousand US Dollars (US$100,000) plus an annual
escalator of 3% compounded annually. STARTEC's payment of O&M charges
relating to the Cable and the Backhaul shall be based on a full DS3
of capacity on the Cable System.
4.2 Invoicing and Payments. On the Effective Date and quarterly thereafter,
Teleglobe shall submit to STARTEC an invoice for the O&M charges
provided for in this Article 4 and for any applicable non-recurring
cost. STARTEC shall make full payment on all such invoices no later
than the last day of the month immediately following the month the
invoice was submitted or then (10) business days, whichever is later.
Invoices shall be paid in US Dollars, by wire transfer, certified
cheque or bank draft. All such O&M charges paid by STARTEC pursuant
to this Article 4 shall be non-reimbursable.
4.3 Taxes. All prices and charges due hereunder are exclusive of all
applicable taxes, including without limitation, value added taxes, sales
taxes, and duties or levies imposed by any authority, government, or
governmental agency (except income tax or other corporate taxes
attributable to Teleglobe), all of which shall be paid promptly when due
by STARTEC.
ARTICLE 5
<PAGE>
-5-
REPRESENTATIONS AND WARRANTIES OF STARTEC
Representations and Warranties. STARTEC represents and warrants to Teleglobe
that STARTEC has obtained all relevant telecommunications licenses necessary
for the acquisition of the Cable System, the execution and delivery of, and
the performance of, its obligations under this Agreement and shall use all
reasonable efforts to have continued in effect such exemptions, approvals,
consents, authorizations, licenses and permits as long as it shall have
obligations under this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TELEGLOBE
6.1 Representations and Warranties. Teleglobe represents and warrants
STARTEC that it is authorized to sell and lease interests in the Cable
System as contemplated hereunder.
6.2 No Representation on the Capacity. Except as expressly set forth in
this Agreement, Teleglobe has not made and shall not be deemed to have
made any representations or warranties whatsoever with respect to the
Cable System. Teleglobe expressly disclaims with respect to STARTEC and
STARTEC hereby expressly waives, releases and renounces, all warranties,
obligations and liabilities of Teleglobe and all rights, claims and
remedies against Teleglobe, express or implied, arising by law or
otherwise, with respect to any failure, delay in installation,
cancellation of, non-conformance, temporary or permanent failure of or
defect in the Cable System, whatsoever shall have been the cause and
however long it shall have lasted (whether or not Teleglobe has been
advised of the possibility of such loss or damage arising). Without
limiting the foregoing, Annex I consisting of Technical Performance
Specifications and RFS Standards shall constitute a representation or
warranty on the part of Teleglobe.
6.3
ARTICLE 7
COVENANTS OF STARTEC
During the term of this Agreement, STARTEC shall:
(A) pay to Teleglobe (or its designee, as may be notified in writing to
STARTEC, as the case may be) when they become due all amounts payable
under this Agreement and otherwise comply with all other provisions of
this Agreement;
(B) undertake to keep the Capacity and Backhaul Capacity free of liens,
charges, and other encumbrances (including any inchoate liens or
floating charges) and shall reimburse Teleglobe (or its designee,
as the case may be), and in the event of accidental breach, to take all
steps required to discharge such liens, charges and other encumbrances;
<PAGE>
-6-
(B) not use the Cable System for any illegal, unlawful, fraudulent or
unauthorized purposes and, without limiting the generality of the
foregoing, use Cable System, at all times, in a manner consistent with
the applicable authorization, licenses and permits for the landing,
construction and operation of the Cable System;
(C) use the Cable System in such a way as to avoid degrading the overall
performance of the Cable System or causing interruptions of, or
interference with, impairment or degradation of the use of any other
capacity in the Cable System, or impair privacy of any communications
over such facilities. If, after notification by Teleglobe, STARTEC
does not take immediate and effective action to comply with its
obligations, Teleglobe may take reasonable action required to protect
the other capacity in the Cable System up to and including the
interruption of the Cable System responsible for the interruption,
interference, impairment or degradation. STARTEC shall be responsible
and shall bear any costs required by Teleglobe to correct the
disturbance that was caused by the usage of the Capacity by STARTEC, its
lessees, permitted assigns or customers. STARTEC shall cause all other
purchasers of the IRU granted herein on the Cable System to undertake
obligations comparable to those of STARTEC set forth in this Article;
(D) upon reasonable notice as the situation or circumstance so justify,
make available to Teleglobe the Cable System for such test and
adjustment as may be necessary for the Cable System to be maintained in
efficient working order.
ARTICLE 8
ADDITIONAL TERMS
CAPACITY PURCHASE AGREEMENTS. STARTEC understands and agrees that the Cable
System is subject to the terms and conditions of one or more Capacity
purchase agreements. STARTEC further understands and agrees that such
Capacity purchase agreements terms and conditions are applicable to Teleglobe
and/or the Cable System, and that such Capacity purchase agreements terms and
conditions are applicable to Teleglobe and/or the Cable System, and that such
Capacity purchase agreements terms and conditions shall similarly apply to
Teleglobe's grant of the use of the Cable System hereunder, and STARTEC's use
thereof.
ARTICLE 9
INTELLECTUAL PROPERTY RIGHTS
9.1 NO LICENSE. No license under patents is granted by Teleglobe or shall
be implied or arise by estoppel in favor of STARTEC with respect to any
apparatus, system or method used by STARTEC in connection with the use of the
Cable System granted to STARTEC under this Agreement.
9.2 SPECIFIC INDEMNIFICATION. With respect to claims of patent
infringement made by third Persons, STARTEC will save Teleglobe and the other
signatories to the Capacity purchase agreements harmless against claims
arising out of or based on the use by STARTEC, in
<PAGE>
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combination or in connection with the Cable System, any apparatus, system or
method provided by STARTEC, or any lessee, assignee, or customer of STARTEC.
ARTICLE 10
LATE PAYMENTS AND PERFORMANCES
10.1 In the event that STARTEC shall fail to make any payment under this
Agreement when due, such amounts shall accrue interest, from the date such
payment is due until paid, including accrued interest at an annual rate equal
to one and one-half (1.5) times the prime rate of interest published by the
Wall Street Journal as the base rate on corporate loans posted by a
percentage of the nation's largest banks on the date any such payment is due,
or if lower, the highest percentage allowed by law.
ARTICLE 11
TERM
11.1 The term of this Agreement shall begin on the Effective Date and
subject to the provisions of Section 11.2, shall continue until the
twenty-fifth anniversary of the RFS Date of the AC-1 Cable System (the end of
the Expected Useful Life).
11.2 Notwithstanding the termination of this Agreement, all payment
obligations of STARTEC for amounts still due or payable under this Agreement
for the period ending at the date of termination shall survive until full
payment.
ARTICLE 12
EVENT OF DEFAULT
The occurrence of any one or more of the following events shall constitute an
Event of Default under this Agreement:
(A) If STARTEC fails to make full payment of the IRU Fee or the BACKHAUL
Fee as contemplated in Section 3 of this Agreement or any other
payments required to be made hereunder, including without limitation
the Annual O&M Charge and any applicable nonrecurring charges, when the
same become due and payable as herein provided and such default has not
been cured within ten (10) business days after receipt by STARTEC of a
notice to that effect;
(B) If STARTEC fails to duly observe, perform and discharge the covenants,
conditions and obligations on its part to be observed, performed or
discharged hereunder (other than the default of payment of amounts
under any provisions of this Agreement) and such default
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has not been cured within thirty (30) days after receipt by STARTEC of
a notice from Teleglobe;
(C) If any representation or warranty made herein shall prove at any time
to be materially incorrect;
(D) If STARTEC has defaulted on its payment obligations to Teleglobe or any
of its affiliates under any telecommunications service agreements or if
STARTEC becomes insolvent or bankrupt or ceases paying its debt
generally as they mature or has a receiver, administrative receiver or
manager appointed over the whole or any part of its assets or goes into
liquidation (whether compulsorily or voluntarily), otherwise than for
the purpose of an amalgamation or reconstruction, or makes any
arrangements with its creditors or has any form of execution or
distress levied upon its assets or ceases to carry on its business.
ARTICLE 13
TERMINATION
13.1 TERMINATION UPON DEFAULT. Upon the occurrence of an Event of Default,
Teleglobe shall have the right to terminate this Agreement immediately, and,
in addition to any other remedies available hereunder, at law or in equity,
shall be entitled to repossess the Cable and cease providing the Backhaul
without any other notice or action, with or without legal process. In
addition, upon occurrence of an Event of Default, Teleglobe may temporarily
discontinue use of the Cable System without incurring any liability to
STARTEC, its assignees, its lessees or its customers, until the default is
duly cured by STARTEC to the complete satisfaction of Teleglobe.
13.2 TERMINATION AFTER INITIAL TERM. In the event that this Agreement is
continued beyond the Expected Useful Life of the Cable System as defined
herein, any Party may thereafter terminate this Agreement by giving the other
Party a notice of not less than one (1) year.
13.3 OTHER REMEDIES. Termination of this Agreement by the Party not in
default in accordance with the terms hereof shall be without prejudice to any
other rights or remedies such Party shall have hereunder, at law or in equity.
ARTICLE 14
GENERAL INDEMNIFICATION
STARTEC shall indemnify and save Teleglobe harmless from and against any
direct or consequential claims, demands, actions, causes of action, damages,
losses (which shall include any reduction in value), liabilities, costs or
expenses (including, without limitation, interest, penalties and reasonable
attorneys' fees and disbursements) (collectively, the "Losses") which
<PAGE>
-9-
may be made against Teleglobe or which Teleglobe may suffer or incur as a
result of, arising out of or relating to
(A) any non-performance of or non-compliance with any covenant, agreement
or obligation of STARTEC under or pursuant to this Agreement;
(B) any incorrectness in or breach of, any representation or warranty made
by STARTEC;
(C) any action, suit, claim, trial, demand, investigation arbitration or
other proceeding by any Person containing allegations which, if true,
would constitute an event described in this Section 14.
ARTICLE 15
DISPUTE RESOLUTION
ARBITRATION. Any difference, controversy or claim arising out of or relating
to this Agreement, its interpretation or performance, shall be considered a
"DISPUTE". Any Dispute may, by the written mutual agreement of the Parties, be
referred to binding arbitration under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce in effect on the date
the arbitration is submitted to the tribunal of arbitration. Any arbitration
proceedings shall be conducted in Washington, D.C. in the English language.
ARTICLE 16
MISCELLANEOUS
161. ASSIGNMENT. Neither this Agreement nor any rights, remedies,
liabilities or obligations arising under it or by reason of it shall be
assignable by STARTEC without the prior written consent of Teleglobe, which
consent will not be unreasonably withheld. Teleglobe may assign this
Agreement and its rights, remedies, liabilities and obligations hereunder
without the consent of STARTEC; provided, however that Teleglobe shall give
STARTEC written notice of the assignment of Teleglobe's interest hereunder to
any Person that is not an affiliate of Teleglobe. Subject to the foregoing,
this Agreement shall inure to the benefit of and be binding on the Parties
and their respective successors and permitted assigns.
16.2 FURTHER ASSURANCES. The Parties shall, with reasonable diligence, do
all things and provide all reasonable assurances as may be required to
consummate the transactions contemplated by this Agreement, and each Party
shall provide further documents or instruments required by the other Party as
may be reasonably necessary or desirable to effect the purpose of this
Agreement.
16.3 NOTICES. Any notice, consent, request, authorization, permission,
direction or other communication required or permitted to be given hereunder
shall be in writing and shall be delivered either by personal delivery or by
telex, telecopier or similar telecommunications device, return receipt
requested, and addressed as follows:
<PAGE>
(A) in the case of Teleglobe:
TELEGLOBE USE INC.
1751 Pinnacle Drive
Suite 1600
McLean, Virginia 22102
Attention: Vice President & General Manager
Facsimile: (703) 714-6653
(B) in the case of STARTEC:
STARTEC
10411 Motor City Drive
Bethesda, MD 20817
Attention: Mr. Mark Boettcher, Senior Manager of Provisioning
Facsimile (301) 365-5592
Any notice, consent, request, authorization, permission, direction or other
communication delivered as aforesaid shall be deemed to have been effectively
received, if sent by telex, telecopier or similar telecommunication device,
on the Business Day next following transmission thereof, or, if personally
delivered, on the date of such delivery, provided, however, that if such date
is not a Business Day then it shall be deemed to have been received on the
Business Day next following such delivery. An address may be modified by
written notice delivered as aforesaid.
16.4 NO PARTNERSHIP. The relationship between Teleglobe and STARTEC under
this Agreement shall not be that of partners or joint venturers and nothing
herein contained shall be deemed to constitute a partnership or join venture
between them and the rights and obligations of the Parties shall be limited
to the express provisions of this Agreement.
16.5 CONFIDENTIALITY AND PUBLIC ANNOUNCEMENT. It is expected that the
Parties may disclose to each other proprietary or confidential technical,
financial and business information ("PROPRIETARY INFORMATION"). Except as
necessary to perform its obligations under this Agreement, the receiving
Party shall not make any use of Proprietary Information for its own benefit
or for the benefit of any other Person, and, except with the prior written
consent of the disclosing Party or as otherwise specifically provided herein,
the receiving Party will not, during and for a period of three (3) years
after the termination of this Agreement, duplicate, use or disclose any
Proprietary Information to any Person.
<PAGE>
The receiving Party shall not disclose all or any part of the disclosing
Party's Proprietary Information to any affiliates, agents, officers,
directors, employees or representatives (collectively, "REPRESENTATIVES") of
the receiving Party, except on a need to know basis. Such Representatives
shall be informed of the confidential and proprietary nature of the
Proprietary Information. Each Party shall maintain the other Party's
Proprietary Information with at least the same degree of care each Party uses
to maintain its own proprietary information. The receiving Party shall
immediately advise the disclosing Party in writing of any misappropriation or
misuse by any person of the disclosing Party's Proprietary Information of
which the receiving Party is aware.
All Proprietary Information in whatever form shall be promptly returned by
the receiving Party to the disclosing Party upon written request by the
disclosing Party for any reason or upon termination of this Agreement.
Each receiving Party acknowledges that the Proprietary Information of the
disclosing Party is central to the disclosing Party's business and was
developed by or for the disclosing Party at a significant cost. Each
receiving party further acknowledges that damages would not be an adequate
remedy for any breach of this Agreement by the receiving Party or its
Representatives and that the disclosing Party may obtain injunctive or other
equitable relief to remedy or prevent any breach or threatened breach of this
Agreement by the receiving Party or any of its Representatives. Such remedy
shall not be deemed to be the exclusive remedy for any such breach of this
Section 16.5, but shall be in addition to all other remedies available at law
or in equity to the disclosing Party.
None of the Parties shall disclose or make any public announcement of the
existence of this Agreement, the transaction contemplated hereby or the
contents hereof without in each case the prior written consent of the other,
unless such disclosure is required by law and then only after prior notice to
the other Party.
16.6 WAIVER. No waiver of any right under this Agreement shall be deemed
effective unless contained in writing signal by the Party charged with such
waiver, and no waiver of any right arising from any breach or failure to
perform shall be deemed to be a waiver of any future such right or any other
right arising under this Agreement.
16.7 FORCE MAJEURE. Neither Party shall be responsible for failures to
perform or delays in performing its obligations, (except for any payment
obligations hereunder) due to causes beyond its reasonable control and
without its fault or negligence.
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IN WITNESS WHEREOF the Parties have signed this Agreement as of the date
first above written.
TELEGLOBE USA INC. STARTEC
By: /s/ John C. Cahill, Jr. By: /s/ [Illegible]
------------------------------ -------------------------
Name: John C. Cahill, Jr. Name: /s/ [Illegible]
------------------------
Title: President and General Manager Title: CFO
----------------------
Date: 12/18/98 Date: 12/18/98
----------------------------- -----------------------
<PAGE>
ANNEX 1 CONSISTING OF 2 PAGES
TECHNICAL PERFORMANCE SPECIFICATIONS
1. The inland service (Inland Capacity and Restoration Capacity)
shall, at a minimum, be available 99.995% of the time in any 365 day period;
not including, for purposes of such availability calculation, service outages
as a result of force majeure conditions.
2. The transmission performance of the Inland capacity shall be
designed to exceed that defined in ITU Recommendation G.826.
3. The connections and interface to both the Atlantic Crossing
system and to any inland service shall be STM-1o (optical interface) as
specified in ITU Recommendation G.957 and as 1+1 protected or equivalent.
Alternative connections and interfaces may be negotiated directly with the
inland supplier at the appropriate cost adjustment.
4. The inland service capacity shall include both service and
protection circuits. A service-carrying circuit and its protection circuit
shall be on diverse routes.
5. The protection switching shall be automatic and switch time shall
not exceed 50 rms.
6. Grantor and Backhaul Providers shall provide a designated point
of contact that is available 24 hours a day, 7 days a week for the reporting
of troubles, coordinating test efforts locating troubles and clearing
troubles.
<PAGE>
ANNEX 1 CONSISTING OF 2 PAGES
RFS STANDARD
RFS Standard means for any Inland Capacity that (a) the fiber optic
telecommunications system carrying such capacity has the ability to carry
commercial traffic between the System Interface at the Cable Station to the
Inland Point of Interface meeting performance criteria of ITU-T G.826 and has
protection switching capability and (b) the interface to the System shall be
STM-1 (optical interface) as specified in ITU Recommendation G.957 and 1+1
protected or equivalent.
<PAGE>
DATE: 12 JANUARY 1999
Exhibit 10.48
AGREEMENT BETWEEN
CABLE & WIRELESS COMMUNICATIONS SERVICES LIMITED
AND
STARTEC GLOBAL COMMUNICATIONS CORPORATION
RELATING TO
BACKHAUL CONNECT & ACCESS CONNECT SERVICES
------------------------
<PAGE>
THIS AGREEMENT is made 12 January 1999
BETWEEN
1. CABLE & WIRELESS COMMUNICATIONS SERVICES LIMITED whose registered
office is at Caxton Way, Watford Business Park, Watford, Hartfordshire
WD:BXH ("C&W")
and
2. STARTEC GLOBAL COMMUNICATIONS CORPORATION whose
registered office is at 10411 Motor City Drive, Bethesda, Maryland 20817,
USA ("the Customer")
IT IS AGREED:
I. DEFINITIONS
1. In these terms the words and expressions listed below shall have the
following meanings:
"Act" the Telecommunications Act 1984 as amended
or modified from time to time;
"Agreement" this agreement made between the Customer and
C&W for the Services including the Schedules;
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"Associated Company" C&W's ultimate holding company or any
subsidiary thereof as defined by Sections
736 and 736A of the Companies Act 1985 or
other affiliated company;
"C&W" Cable & Wireless Communications Services
Limited as agent for Associated Companies
including those which hold the License
relevant to the supply of Services;
"Customer Location" the premises of the Customer to which the
Services may be provided;
"Initial Period" a period referred to as such and stated in
Schedule 1 commencing on the Services
Commencement Date;
"License" the license granted to the Customer under
Section 7 of the Act (and any supplements
or amendments to this license from time to
time);
"Network" the telecommunication system(s) used by C&W
for the provision of Services;
"Non-recurring Charges" the Non-recurring charges payable by the
Customer in connection with the Services as
specified in Schedule 1;
"Normal Working Hours" the working hours which C&W normally
operate, as set out in its Services
Literature or other applicable document;
"Recurring Changes" the recurring charges payable in connection
with the Services as set out in Schedule 1;
"Services" telecommunication Services as specified in
Schedule 1;
"Service Commencement the date on which a Service is tested and
Date" ready for use, of if earlier, the date on
which the Customer first uses the Services;
"Services Equipment" equipment, including any multiplexer
telecoms apparatus, communicator channel
or software embodied therein, to be
installed at the Customer Location by C&W in
order to make available Services to the
Customer;
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"Services Literature": any brochure, customer guide, description or
instructions as current from time to time
published by C&W in connection with the
provision of Services;
"Services Support": Services support in relation to Services
Equipment;
"System": the system which C&W operate to provide
certain of the Services;
1.2 In these terms any undertaking by either party not to do any act or thing
shall be deemed to include an undertaking not to permit or suffer the doing
of that act or thing.
1.3 In these terms the expressions "The Customer" and "C&W" shall include their
respective successors and permitted assigns and their respective employees
and agents.
1.4 In the event of a conflict or inconsistency between the main clauses of
this Agreement and Schedule 1, Schedule 1 shall prevail over the main
clauses of this Agreement.
2: DURATION
This Agreement shall come into force immediately and shall continue until
terminated in accordance with Clause 7 below.
3: PROVISION AND USE OF SERVICES
3.1 C&W shall provide the Services from the Services Commencement Date.
3.2 The Customer shall only use the Services in accordance with such conditions
as C&W may notify the Customer in writing from time to time and/or in
accordance with the relevant provisions of the Act, the Licence, any
direction of the Director General of Telecommunications or other competent
authority and any licence granted thereunder which governs the running of a
telecommunication system.
4: PROVISION OF INFORMATION
4.1 The Customer will promptly provide C&W (free of charge) with all
information and co-operation which C&W may reasonably require from time to
time to enable C&W to proceed uninteruptedly with the performance of its
obligations under the Agreement.
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4.2 The Customer will inform C&W promptly of any change of address, telephone
numbers or any other details which the Customer originally provided to C&W.
4.3 In order for C&W to investigate abuse of the Network, the Customer will
co-operate in allowing C&W to examine any records relating to the use of
the Services or the equipment connected to it.
5. CHARGES
In consideration of the provision of the Services the Customer shall pay to
C&W as applicable:
- Non-recurring Charges and
- Recurring Charges
6. PAYMENT
6.1 Non-recurring Charges shall be payable when incurred.
6.2 Recurring Charges shall be payable quarterly in advance. Between the
Services Commencement Date and the start of the first billing period a
proportionate part of the Recurring Charges shall be payable calculated on
a pro rata daily basis.
6.3 Payment of all sums due under the Agreement shall be made within thirty
days of the date of the relevant invoice.
6.4 Payment of all sums due under the Agreement shall be made by direct debit
(on completion of an appropriate mandate), cheque or such other method as
C&W may reasonably specify from time to time and payment of all such sums
shall be made in full (without any set-off, deduction or withholding
whatsoever)
6.5 Without prejudice to its other rights, C&W reserve the right to charge
daily interest on all outstanding amounts at the rate equal to 4% per annum
above the National Westminster Bank PLC Base Lending Rate as current from
time to time. Interest shall continue to accrue notwithstanding termination
of the Agreement for any cause whatsoever.
6.6 Charges are exclusive of Value Added Tax ("VAT"), and any other taxes
applicable from time to time, which the Customer shall pay.
7. TERMINATION
7.1 The Customer shall be entitled to terminate a Service by giving C&W not
less than three months' prior written notice to take effect at the end of
the Initial Period for that Service or at any time thereafter. The
Agreement shall terminate when the last of the Services is terminated.
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7.2 Without prejudice to its other rights, the Customer may terminate the
Agreement on giving written notice to C&W, taking immediate effect, if C&W
is in breach of a material obligation under the Agreement and fails to
remedy the breach within 30 days after receipt of a written notice of
termination giving full particulars of the breach.
7.3 C&W shall be entitled to terminate a Service by giving the Customer not
less than three months' prior written notice to take effect at the end of
the Initial Period for that Service or at any time thereafter. The
Agreement shall terminate when the last of the Services is terminated.
7.4 Without prejudice to its other rights, C&W may terminate the Agreement on
giving 30 days written notice to the Customer if:
(a) a receiver or administrative receiver is appointed of any of the
Customer's assets or undertaking or a resolution or petition to wind
the Customer up is passed or presented (otherwise than for the purpose
of reconstruction or amalgamation) or if any circumstances arise which
entitle the court or a creditor to appoint a receiver, administrative
receiver or administrator or to present a winding up petition or
make a winding up order; or
(b) the Customer fails to make any payment when it is due under the
Agreement; or
(c) the Customer defaults in due performance or observance of any
material obligation under the Agreement and (in the case of a
remediable breach) fails to remedy the breach within such reasonable
time as C&W specify; or
(d) C&W is directed by the Director General of Telecommunications or
other competent authority to cease to provide or allow the provision
of the Services.
8. CONSEQUENCES OF TERMINATION
8.1 On termination of the Agreement; all outstanding charges shall be payable
by the Customer including any cancellation charges.
8.2 Upon termination of the Agreement for any reason the Customer shall:
(a) forthwith cease to use the Services; and
(b) where applicable, permit or procure permission for C&W to gain
access to the Customer Locations during its Normal Working Hours for
the purpose of removing any Services Equipment. If the Agreement is
terminated by reason of its breach the Customer shall pay for the cost
of removal.
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<PAGE>
9. SUSPENSION OF SERVICES
9.1 C&W may at its sole discretion suspend immediately the provision of
Services until further notice on notifying the Customer either orally
(confirming such notification in writing) or in writing if:
(a) C&W is entitled to terminate the Agreement in accordance with
clause 7.4, or
(b) C&W is instructed or requested to do so by Government, at emergency
Services organisation, or other competent authority.
9.2 Any suspension of Services shall not exclude C&W's right subsequently to
terminate the Agreement.
10. COPYRIGHT IN DOCUMENTS
Copyright in all documents, drawings and information supplied to the Customer
in connection with the Agreement shall remain vested in C&W or the copyright
owner. Such documents, drawings and information shall not be copied,
disclosed or used (except for the purpose for which they were supplied)
without its prior written consent.
11. INFRINGEMENTS
11.1 C&W shall indemnify the Customer against all proceedings arising from
infringement (or alleged infringement) of any patent, design, copyright
or other intellectual or industrial property right enforceable in the
United Kingdom by reason of the Customer's use or possession of equipment
which C&W has supplied. As a condition of this indemnity the Customer
shall:
(a) notify C&W promptly in writing of any allegation of infringement;
and
(b) make no admission relating to the infringement; and
(c) allow C&W to conduct and settle all negotiations and proceedings
and give C&W all reasonable assistance.
11.2 If at any time an allegation of infringement of patent, design, or
copyright is made. C&W may at its own expense modify the equipment so as
to avoid the infringement or may replace the equipment with non-infringing
equipment.
11.3 The indemnity in clause 11.1 does not apply to infringements
occasioned by:
(a) any modification to the equipment which C&W did not authorise; or
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<PAGE>
(b) use of the equipment in combination with other equipment and/or
software which C&W did not supply; or
(c) designs or specifications made by or to the Customer's order; and
the Customer shall indemnify C&W against all liability, claims, damage,
loss or proceedings howsoever arising from or in any way connected with
any such infringement.
12: WARRANTY/LIMITATION OF LIABILITY
12.1 C&W shall provide the Services using reasonable care and skill.
12.2 Except as expressly provided in the Agreement, C&W shall have no other
obligation, duty or liability whatsoever in contract, tort or otherwise
to the Customer.
12.3 C&W shall not be liable to the Customer in contract, tort or otherwise
including any liability for negligence or for breach of statutory duty
for:
(a) any loss of revenue, business, contracts, anticipated savings, or
profits; or
(b) any indirect or consequential loss, howsoever arising.
12.4 In clause 12.3 "anticipated savings" means any expense which the
Customer expects to avoid incurring or to incur in a lesser amount than
would otherwise have been the case by reason of using the Services.
12.5 C&W's aggregate liability in contract, tort or otherwise, including
negligence, howsoever arising out of or in connection with the
performance of its obligations under the Agreement shall be limited to
L1,000,000 in respect of any one incident, or L2,500,000 in respect of
any series of incidents arising from a common cause in any twelve
month period.
12.6 Nothing in this contract shall limit C&W's liability for death or
personal injury resulting from its negligence or the negligence of its
employees while acting in the course of their employment or any other
liability to the extent that it cannot be limited by law.
13: BACK-UP POWER AND LIGHTNING PROTECTION
13.1 Backup-power with sufficient capacity to conform to the stand-by
requirement of the relevant British Standards is needed if the Services,
including the provision of access to emergency Services, are required to
continue uninterrupted in the event of a power failure in the principal
power supply.
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<PAGE>
13.2 If C&W so require, the Customer shall install at its own expense, by a
date specified by C&W, externally mounted equipment for lightning
protection at the customer premises.
14: DELIVERY AND INSTALLATION OF THE SERVICES EQUIPMENT
C&W shall deliver the Services Equipment to and install it at the
Customer Location.
15: MODIFICATIONS TO THE SERVICES EQUIPMENT
C&W may modify or replace the Services Equipment provided that it does
not detract from or impair the overall performance or operation of the
Services.
16: PREPARATION OF THE CUSTOMER LOCATION
The Customer shall at all times provide a secure electricity power
supply as well as suitable accommodation and environmental conditions for
the Services Equipment. C&W shall specify in advance and the Customer
will implement at its reasonable expense all preparations necessary for
the delivery and installation of the Services Equipment.
17: CONSENTS
17.1 The Customer confirm that in respect of the Customer Location the
Customer are (i) the occupier and (ii) the owner of the freehold or of a
lease for a term of at least 12 months and the Customer agree that:
(a) C&W may carry out works in connection with the installation
maintenance adjustment repair or alteration of the Services
Equipment and Apparatus;
(b) C&W may keep the Services Equipment installed at the Customer
Location; and
(c) C&W and its representatives may have reasonable access to the
Customer Location for the above purposes and to inspect the
Services Equipment and Apparatus and the Customer will obtain all
permissions, licenses and consents from third parties which are
necessary or desirable for the supply of the Services. This
provision shall remain in full force and effect notwithstanding
termination of this Agreement until such time as C&W have removed
all Services Equipment from the Customer Location and/or the building.
17.2 C&W will normally carry out the delivery and installation of Services
Equipment during its Normal Working Hours but may, on reasonable notice,
require the Customer to provide access at other times. At the Customer's
request, C&W may agree to work outside its Normal Working Hours and if
the work could be carried
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<PAGE>
out during its Normal Working Hours the Customer shall pay C&W's
reasonable charges for complying with such request.
18: USE OF THE SERVICES EQUIPMENT
The Customer shall be responsible for the safe use of the Services
Equipment after delivery to the Customer Location and in particular (but
without limitation) the Customer shall:
(a) house and use the Services Equipment in accordance with its
Services Literature or such other written instructions as C&W may
notify to the Customer from time to time;
(b) keep the Services Equipment at the Customer Location and stationary
at all times;
(c) not add to, modify, or in any way interfere with or impair the
performance of the Services Equipment;
(d) not remove, tamper with or obliterate any words or labels on the
Services Equipment or any part of it, including, without
limitation, any identification mark(s) showing that it is C&W's
property;
(e) permit C&W to inspect or test the Services Equipment at all
reasonable times and to disconnect and remove the Services
Equipment when the Services is terminated.
19: OWNERSHIP AND RESPONSIBILITY FOR SERVICES EQUIPMENT
C&W shall retain title to the Services Equipment at all times. On all
occasions when the ownership of the Services Equipment is relevant, the
Customer shall make third parties aware that the Services Equipment is
C&W's property. The Customer shall:
(a) be responsible for the Services Equipment whilst it is in its
custody and shall be liable for any loss or damage to the Services
Equipment (except in so far as it can be shown that any such loss
or damage is attributable to C&W's negligent act or omission). The
Customer shall notify C&W immediately of any loss or damage;
(b) at C&W's request, produce evidence satisfactory to C&W that the
Customer has effected and is maintaining suitable insurance in
respect of all relevant risks relating to the Services and if any
payment is made under a policy in relation to the Services
Equipment. The Customer shall pay this amount to C&W;
(c) not permit or suffer any execution or distress to be levied or used
against the Services Equipment or permit or suffer the Services
Equipment to be seized under or affected by any distress,
execution, or other legal process;
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(d) not attempt to let, sell, charge or otherwise deal with the
Services Equipment in a manner prejudicial to C&W's rights therein.
20: SERVICES SUPPORT
20.1 If the Customer detects a defect in the performance of Services the
Customer shall notify C&W of the nature of the defect and shall request
Services Support to be provided. Any such notification and request shall
be made by telephone to C&W's customer Services.
20.2 Subject to any obligations imposed by the License, C&W shall use its
reasonable endeavours to report either to the Customer Location, or the
location at which C&W determine the cause of the reported fault is
located or, where appropriate, to attend to the fault at a point remote
from the location of the fault, as soon as reasonably practicable.
20.3 If C&W identify a fault in the Services Equipment C&W shall either
repair or replace the faulty Services Equipment or any part of it as
soon as reasonably practicable.
20.4 If C&W need to carry out Services Support at the Customer Location, C&W
shall, where it is reasonably practicable, carry out such maintenance at
a time previously agreed with the Customer. If it is not reasonably
practicable for a prearranged time to be agreed or in the absence of
agreement C&W shall be entitled to carry out the Services Support on
notifying the Customer either orally (confirming such notification in
writing) or in writing. C&W may interrupt Services in order to provide
Services Support but shall use reasonable endeavours to ensure minimum
disruption to the Services and in any event shall ensure that the
Customer are given the maximum period of warning practicable in the
circumstances.
21: NOTICES
21.1 Any notices to be given under the Agreement shall, unless otherwise
expressly stated, be in writing and shall be given by sending the same
by first class post or facsimile transmission to the party's address
stipulated in the Agreement or such other address as may be designated
in writing from time to time or, if no such address is stipulated or
designated, then to the registered office of that party.
21.2 Any notice sent by first class post shall be deemed (in the absence of
evidence of earlier receipt) to have been delivered two days after its
dispatch. Any notice given by facsimile transmission shall be deemed to
have been delivered on the next working day following transmission,
provided that the sender has confirmation of transmission.
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<PAGE>
22: ASSIGNMENT/SUBCONTRACTING
22.1 The Customer shall not assign or delegate all or any of its rights and
obligations under the Agreement without C&W's prior written consent,
such consent not to be unreasonably withheld.
22.2 C&W shall have the right to assign or transfer all or any of its rights
and obligations under the Agreement to an Associated Company on
notification to the Customer.
22.3 Subject to clause 22.2, C&W shall not assign or delegate all or any of
its rights and obligations under the Agreement without the Customer's
prior written consent, such consent not to be unreasonably withheld.
23: FORCE MAJEURE
Neither party shall be liable to the other under the Agreement, for any
loss or damage which may be suffered by the other party due to any cause
beyond the first party's reasonable control including without limitation
any act of God, inclement weather, failure or shortage of power
supplies, flood, drought, lightning or fire, strike, lock-out, trade
dispute or labour disturbance, the act or omission of Government,
highways authorities, other telecommunications operators or
administrations or other competent authority, the obstruction by a third
party of line of sight between microwave installations, war, military
operations, acts of terrorism or riot, difficulty, delay or failure in
manufacture, production or supply by third parties of the Services
Equipment.
24: ENTIRE AGREEMENT
24.2 The Agreement represents the entire understanding between the Customer
and C&W in relation to its subject matter and supersedes all prior
agreements understandings or arrangements made by either party, whether
oral or written.
24.2 Any terms and conditions (including dates) on any purchase order or
other document whatsoever which the Customer issue in connection with
the Agreement shall not be binding on C&W nor be used to interpret the
Agreement.
24.3 Each party acknowledges that it is not entering into this Agreement in
reliance on any representation of the other except those contained in
this Agreement and in the event of misrepresentation (other than
fraudulent misrepresentation) the only remedy available shall be a claim
for breach of contract.
25: MODIFICATION
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25.1 C&W shall have the right by notice in writing to the Customer to modify
the Agreement at any time so as to comply with any regulations or other
requirement applicable to or imposed upon C&W under the Licence or by
any competent authority.
25.2 Except as stated in clauses 25.1 the Agreement may only be modified if
such modification is in writing and signed by a duly authorised
representative of such party.
26: NO WAIVER
Failure by either party to exercise or enforce any right conferred by
the Agreement shall not be deemed to be a waiver of any such right nor
operate so as to bar the exercise or enforcement thereof or of any other
right on any later occasion.
27: SEVERABILITY
If any provision of the Agreement shall be found by any court or
administrative body of competent jurisdiction to be invalid or
unenforceable, the invalidity or unenforceability of such provision
shall not affect any other provisions and all provisions not affected by
such invalidity or unenforceability shall remain in full force and
effect.
28: GOVERNING LAW
The Agreement shall be governed by and construed and interpreted in
accordance with English law, and the parties hereby submit to the
non-exclusive jurisdiction of the English courts.
AS WITNESS this Agreement has been signed by or on behalf of the parties the
day and year first before written.
Signed by
duly authorised signatory for and on behalf of
CABLE & WIRELESS COMMUNICATIONS
SERVICES LIMITED
/s/ Nick Jeffery
- -------------------
Nick Jeffery
13/1/99
Signed by
duly authorised signatory for and on behalf of
STARTEC GLOBAL COMMUNICATIONS CORPORATION
/s/ [illegible]
- -------------------
[illegible]
Jan 13, 99
13
<PAGE>
SCHEDULE 1
1. BACKHAUL CONNECT
1.1 SERVICES DEFINITION
The Backhaul Connect offering comprises:
- - a diverse path (the "Primary Path") from C&W's IDTC to the cable station.
- - where it is available, a single path (the "Secondary Path") from C&W's IDTC
to the restoration cable. Data rates supported are from 2.048Mbit/s to
STM-1s(155Mbit/s).
1.2 SERVICES DETAILS
Cable System: FLAG
Cable Station: PORTHCURNO/LANDS END
IDTC: THAMESSIDE
Capacity: 2MBITS
Initial Period: FOR THE LIFETIME OF FLAG CABLE SYSTEM
- - Is restoration available? YES
- - If YES, is the requirement for
(1) Less than 1 STM-1? YES. if so, the Customer is obliged to take
restoration.
(2) 1 STM-1 or more? NO. If so, the Customer: [does/does not] require
restoration.
1.3 CHARGES
Primary Path Rental - Recurring Charge; N/A
Restoration Path Charges: -pound sterling-3.79 per km per annum (Restoration
up to 45 days per year)
Minimum Charged Distance: 50km
Total Restoration Charge: -pound sterling-189.50 per annum
An additional charge will be applied as follows if more than 45 days
restoration during the year is necessary: -pound sterling-0.085 per km per
day. This will come into effect following the services commencement date or
in any subsequent year.
Connection - Non-recurring Charge: N/A
Non-recurring charge - Backhaul IRU: -pound sterling- 54,200
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2. ACCESS CONNECT
2.1 SERVICES DEFINITION
The Access Connect Services provides connectivity from the Customer Location
to the IDTC. It can be requested as PDH/SDH. For SDH, there is the optiion of
single or diverse fibres. Data rates to be supported are: 2Mbps; 8Mbps; 24Mbps;
45Mbps; 140Mbps; 155Mbps.
2.2 SERVICES DETAILS
- IDTC: THAMESSIDE
- Customer location: 65 CLIFTON STREET, LONDON EC2N 4YE
- Capacity: 2MBITS
- Initial Period: LIFETIME OF FLAG CABLE SYSTEM
- PDH/SDH: SDH
- Diverse Routing? NO
- Cross-connects? NO
2.3 CHARGES
Instalation Charge: -pound sterling-550 One-off.
Annual Rental Recurring Charge: -pound sterling-2,778 per annum
15
<PAGE>
Exhibit 10.49
SUBLEASE
THIS SUBLEASE ("Sublease") is made as of January 8, 1999, by CERIDIAN
CORPORATION, a Delaware corporation ("Sublandlord") and STARTEC GLOBAL
COMMUNICATIONS CORPORATION, a Maryland corporation ("Subtenant").
A. Allan J. Riley, whose successor in interest is Allan J. Riley
Marital Trust, c/o Allan J. Riley, as Trustee, 300 Park Avenue, New York, NY
10022, as landlord ("Prime Landlord"), and Sublandlord (whose name was
formerly Control Data Corporation), as tenant, entered into that certain
Lease dated as of July 16, 1985, as amended by a Modification of Lease
executed by Sublandlord on June 22, 1990 and by Allan J. Riley on November
29, 1990, and as further amended by a Modification of Lease dated February
16, 1995 (collectively herein referred to as the "Prime Lease"), regarding
certain premises ("Prime Lease Premises") in the building located at 1151
Seven Locks Road, Rockville, Maryland (the "Building ") all as described in
the Prime Lease.
B. Sublandlord and Subtenant have agreed to enter into a sublease as to
the portion of the Prime Lease Premises shown hatched in the drawing attached
as Exhibit A ("Sublease Premises"), comprising approximately 43,690 square
feet, and including the loading dock shown on Exhibit A, upon the terms and
conditions set forth below.
1. SUBLEASE. Subject to Prime Landlord's written consent to this
Sublease, Subtenant agrees to sublease from Sublandlord, and Sublandlord
agrees to sublease to Subtenant, the Sublease Premises upon the terms and
conditions set forth below. Sublandlord represents and warrants that it is the
sole owner and holder of the lessee's interest under the Prime Lease,
<PAGE>
and that it has the full right and authority to Sublease the Sublease
Premises to Subtenant, upon Prime Landlord's written consent to this Sublease.
2. SUBLEASE TERM. The term of this Sublease ("Sublease Term") will
commence on the date that this Sublease is approved by the Prime Landlord
("Commencement Date") will continue until July 15, 2005 ("Termination Date").
3. USE. Subtenant shall use the Sublease Premises for general office
purposes (including the provision of co-location services as described in
Section 10) and for no other purpose.
4. "AS IS" SUBLEASE; ALTERNATIONS; CONSTRUCTION; ALLOWANCE.
(a) Subtenant agrees to accept the Sublease Premises in "as is"
condition, "with all faults". Subject to paragraph 4(c) of this Sublease,
Subtenant shall be responsible for the installation and cost of any and all
improvements, alterations or other work required on or to the Sublease
Premises or on or to any other portion of the property and/or Building of
which the Sublease Premises are a part as required by any applicable law,
rule or regulation as a result of Subtenant's alterations, use or occupancy
of the Sublease Premises. Subtenant may, at its expense, make or install
improvements, alterations or work on or to the Sublease Premises or on or to
the property and/or Building of which the Sublease Premises are a part,
provided, that all such improvements, alterations or work are performed in
accordance with, and after obtaining any approvals required by, the Prime
Lease and after obtaining Sublandlord's prior written consent, which consent
shall not be unreasonably withheld, and if Sublandlord fails to respond
within 15 business days following receipt of the plans and specifications for
alterations the total cost of which exceeds $100,000, or within 5 business
days following receipt of the plans and
2
<PAGE>
specifications for alterations the total cost of which is less than $100,000,
the same shall be deemed approved by Sublandlord.
(b) Subtenant shall have complete access to the Sublease Premises
on and after the Commencement Date. Sublandlord acknowledges that Subtenant
will construct a calling center and operation center at the Sublease
Premises, and that space planning, design and construction services shall be
obtained by Subtenant, all at Subtenant's expense. In the event that the
initial build-out of the Sublease Premises is competitively bid, Subtenant
agrees that Williamson Group will be given an opportunity to bid for the
work, although Subtenant is under no obligation to select Williamson Group to
perform any or all of such work.
(c) Sublandlord hereby agrees to provide Subtenant with a
$450,000.00 allowance (the "Allowance") for Subtenant's completion of the
improvements and alterations to the Building and Sublease Premises set forth
on the schedule entitled "Scope of Work" attached hereto as Exhibit B (the
"Base Building Improvements") and for build-out of the Sublease Premises as
Subtenant may require, with the excess, if any, to be applied as a credit
against Subtenant's rent obligations under this Sublease. The Allowance shall
be used to reimburse Subtenant for actual costs and expenses incurred by
Subtenant to unrelated third parties in connection with the construction of
(and the preparation of plans and specifications for) the Base Building
Improvements.
(d) The Base Building Improvements and any additional improvements
for Subtenant's build-out of the Sublease Premises (together referred to as
the "Improvements") shall be performed in accordance with plans and
specifications prepared by or on behalf of Subtenant and approved in writing
by Sublandlord, which approval shall not be unreasonably withheld or
3
<PAGE>
delayed, and if Sublandlord fails to respond within 5 business days following
receipt of such plans and specifications, the same shall be deemed approved
by Sublandlord. Subtenant shall ensure that all materials and workmanship
regarding the Improvements shall be of uniformly good and workmanlike quality
and in accordance with applicable governing codes and regulations and with
the standards applicable to office buildings of similar size and character,
and Subtenant shall ensure that the Improvements comply with the requirements
of the Americans with Disabilities Act. Subtenant may retain a general
contractor of its own selection for the construction of the Improvements,
subject to Sublandlord's prior written approval of the selection of such general
contractor, which shall not be unreasonably withheld or delayed, and if
Sublandlord fails to respond within 5 business days following receipt of
information regarding the proposed general contractor, the same shall be
deemed approved by Sublandlord. Subtenant shall cause the Improvements to be
performed in accordance with the terms and conditions of this Sublease, the
Prime Lease and such other reasonable conditions as Sublandlord may impose
during construction of the Improvements. Any damage caused by Subtenant's
contractor or its subcontractors to any property of Sublandlord or other
occupants of the Building shall be promptly repaired to Sublandlord's
reasonable satisfaction, at Subtenant's expense.
(e) Provided that Subtenant is not in default hereunder, the
Allowance will be paid to Subtenant as such time as all Base Building
Improvements have been completed and all costs and expenses incurred in
connection therewith have been paid in full such that the Sublease Premises
and the Building shall be and remain free from any and all claims of
mechanic's, materialmen's and other similar liens relating to labor and/or
materials supplied in connection with the Improvements. Such completion and
payment shall be evidence by the following:
4
<PAGE>
(i) a certificate of completion for the Base Building
Improvements shall have been signed by Subtenant and the
general contractor for the Base Building Improvements and
delivered to Sublandlord, in a form reasonably acceptable
to Sublandlord; and
(ii) Subtenant shall have delivered to Sublandlord written
evidence of payment to, and copies of signed final,
complete and unconditional lien waivers from, all
contractors, subcontractors and suppliers (to the extent
the suppliers have lien rights) who have supplied labor or
materials in excess of $5,000 in connection with the Base
Building Improvements, together with written certification
as to the accuracy and completeness with which Subtenant
has identified all such parties.
Sublandlord will designate a person to serve as project manager, at
Sublandlord's expense, for the construction of the Base Building Improvements
and will give Subtenant notice of the name, address and telephone number of such
person. Subtenant shall submit to such project manager as Sublandlord's
representative each of the items which it is required to submit to
Sublandlord under this Section 4.
(f) Sublandlord licenses Subtenant to use approximately 1,000
square feet of the rooftop area of the Building in a location designated by
Sublandlord for the purpose of installation and use of one or more satellite
communication dishes or antennas and for installation and maintenance of HVAC
units. Said installation shall be in accordance with plans and specifications
approved by Sublandlord, and if required, by Prime Landlord. The Plans and
specifications shall include the means of attaching the portion of such
equipment to the roof of the Building or improvements located thereon.
Sublandlord agrees to cooperate with Subtenant
5
<PAGE>
to secure all necessary approvals from Prime Landlord and State, Federal and
other governmental authorities to construct, operate and maintain such
equipment. All such equipment shall be constructed and maintained by
Subtenant in accordance with applicable laws, ordinances, rules and
regulations and in compliance with the requirements of the insurers of the
Building. Subtenant shall indemnify and defend Sublandlord from and against
all loss, claim, damage and expense arising out of the construction, maintenance
and operation of such equipment. All work in connection with such equipment
shall be done by Subtenant in accordance with the requirements for
Improvements under Section 4(d) and (e) hereof. Subtenant shall remove all
such communications equipment on or before the expiration or termination date
of this Sublease, and repair any damage cause by installation or removal, and
no such action shall materially interfere with work being performed by
Sublandlord. Subtenant shall give to Sublandlord notice of any notices which
Subtenant receives from third parties that any of the equipment is or may be
in violation of any law, ordinance, or regulation. Subtenant shall pay all
taxes of any kind or nature whatsoever levied upon said equipment and all
licensing fees, franchise taxes and other charges, expenses and other costs
of any nature whatsoever relating to the construction, ownership, maintenance
and operation of said equipment. Subtenant agrees to refrain from
interference with the operation of radio, television or other
electromagnetic radiation and reception facilities or AM or FM broadcasting
and two-way radio and microwave transmission in and around the Building which
comply with U.S. Government regulations. Nothing herein shall prevent
Sublandlord from licensing others to use the roof in other areas of the
Building for development, installation and operation of electromagnetic
radiation and reception facilities or FM broadcasting and two-way radio and
microwave transmission provided such facilities do not
6
<PAGE>
unreasonably or materially interfere with the operations of Subtenant
pursuant to its rights granted herein.
5. RENT, OPERATING COSTS, TAXES AND UTILITIES.
(a) Base Rent. For purposes of this Sublease the term "Lease Year"
shall mean a period of 12 consecutive calendar months commencing on the first
day of the month following the Rent Commencement Date (as hereinafter
defined), or commencing on the Rent Commencement Date if it occurs on the
first day of a month, and each subsequent 12-month period thereafter,
including the partial Lease Year in which the Term of this Sublease expires.
Subtenant will pay monthly base rent for the Sublease Premises in advance,
without abatement, deduction or setoff, commencing on the later of (i) April 1,
1999 or (ii) a date 90 days after the date that the Prime Landlord's
Consent to this Sublease, as described in Section 21, is obtained and
furnished to Subtenant (the "Rent Commencement Date"), and continuing on the
first day of each calendar month thereafter during the Sublease Term, in the
following amounts ("Base Rent") for each of the following Lease Years:
<TABLE>
<CAPTION>
BASE RENT
---------
MONTHLY (ANNUAL) LEASE YEAR
--------- -------- ----------
<S> <C> <C>
$32,767.50 ($393,210.00) 1
$33,750.53 ($405,006.30) 2
$34,763.04 ($417,156.49) 3
$35,805.93 ($429,671.18) 4
$36,880.11 ($442,561.32) 5
$37,986.51 ($455,838.16) 6
$39,126.11 ($469,513.30) 7
</TABLE>
7
<PAGE>
Payment of Base Rent for any partial month shall be prorated on a daily basis.
(b) Common Area Maintenance Costs. Subtenant will also pay to
Sublandlord, as additional rent, in payment for the cost of providing snow
removal and landscaping services the sum of $910.21 per month, with such
amount being increased on January 1, 2000 and on January 1 of each subsequent
year by an amount equal to 3% of the monthly amount to be paid in the
previous calendar year.
(c) Taxes, Subtenant will also pay, as additional rent, 26.17% of
taxes, assessments and other amounts to be paid by Sublandlord under
Section 8(a) of the Prime Lease, as and when due under the Prime Lease. A copy
of the current real estate tax bill for the Prime Lease Premises is attached
hereto as Exhibit C.
(d) Utilities. Subtenant agrees to separately meter and be
responsible for all utilities to be furnished to the Sublease Premises, and
Subtenant shall not be responsible for reimbursing Sublandlord for any other
utility costs or charges incurred with respect to the Prime Lease Premises.
Subtenant agrees to pay all utility and service charges to be paid with
respect to the Sublease Premises, including, but not limited to, electricity,
fuel, gas, water, sewer, trash removal and telephone (including equipment and
installation charges). Subtenant shall pay such utility and service charges
as the same become due. Sublandlord shall have no liability whatsoever
relating to any interruption of any utility services or the failure of any
utility service
8
<PAGE>
to be provided to the Sublease Premises, and rent shall not be abated for any
period the Sublease Premises are untenantable as a result of the
unavailability of utility facilities. Subtenant shall maintain the HVAC
systems and equipment and any sprinkler system serving the Sublease Premises,
and Sublandlord shall have no responsibility with respect thereto.
(e) Care of Sublease Premises. Except as expressly provided in
this Sublease, Sublandlord shall have no obligation for repair or maintenance
of the Sublease Premises, the HVAC serving the Sublease Premises, or any
fixtures or equipment in the Sublease Premises. Subtenant will keep the
Sublease Premises and the fixtures and equipment in the Sublease Premises in
as good condition and repair as they were in at the time possession of the
Sublease Premises is tendered to Subtenant, except for ordinary wear and
damage from fire or other casualty beyond Subtenant's control. If Subtenant
fails to do so, Sublandlord and its agents may enter the Sublease Premises at
any time in the event of an emergency, and in all other cases upon reasonable
advance notice and at reasonable times, provided that Sublandlord is
accompanied by a representative of Subtenant (except in the case of an
emergency) to perform the maintenance and repairs and charge the costs to
Subtenant. Subtenant will, at its expense, promptly comply with all laws,
ordinances, rules, orders, regulations and other requirements of governmental
authorities now or subsequently pertaining to the Sublease Premises.
Subtenant will pay any taxes or other charges by any governmental authority
on Subtenant's property or trade fixtures in the Sublease Premises or
relating to Subtenant's use of the Sublease Premises.
6. PARKING. During the Sublease Term, Subtenant will have the
nonexclusive use, at no additional cost, of 160 non-reserved parking spaces
that are part of the Prime Lease Premises in common with other occupants of
the Building; provided that Subtenant shall not use those
9
<PAGE>
spaces shaded on the drawing attached hereto as Exhibit E. In addition,
Subtenant shall have the right to identify no more than 12 reserved parking
spaces for Subtenant's parking, but only to so long as no other current or
subsequent occupant of the Building objects to such reserved parking. The 12
spaces to be designated as parking spaces for Subtenant will be identified by
Sublandlord within 30 days of the Commencement Date. Sublandlord and
Subtenant agree that the parking rights of Subtenant are subject to the
provisions of the letter agreement dated February 8, 1999 signed by Prime
Landlord, a copy of which is attached hereto as Exhibit D. Sublandlord
covenants and agrees with Subtenant that, subject to the terms of the Prime
Lease and unless required under the Prime Lease, during the Sublease Term
Sublandlord shall not reconfigure the parking lot without Subtenant's consent,
which consent shall not be unreasonably withheld. Subtenant shall have the
right, at Subtenant's expense, to mark the reserved parking spaces as
"Reserved". Sublandlord also agrees that it has not heretofore granted, and
during the Sublease Term shall not grant, to other occupants of the Building
parking rights to a specified number of parking spaces which together with
Subtenant's rights to 172 parking spaces will exceed the total number of
parking spaces for the Building; provided, however, that (i) Sublandlord
makes no representation as the actual numbers of spaces being used from time
to time by occupants of the Building, (ii) Subtenant acknowledges and agrees
that Sublandlord shall have no obligation to enforce, police or segregate
parking with respect to any parking spaces for the Building, including those
referred to as reserved parking spaces in this Section, and (iii) all parking
provisions of this Sublease are subject to the parking provisions of the
Prime Lease and the attached Exhibit D.
10
<PAGE>
7. PERFORMANCE OF PRIME LEASE BY SUBTENANT AND SUBLANDLORD. Except as
otherwise set forth in this Sublease, Subtenant assumes and agrees to keep,
obey and perform all of the terms, covenants and conditions of Sublandlord as
Tenant under the Prime Lease with respect to the Sublease Premises, provided,
however, that Subtenant shall not be responsible for (i) Sublandlord's rental
obligations to the Prime Landlord, (ii) payment of real estate taxes (except
for payment to Sublandlord as provided in Section 5(c) of this Sublease,
(iii) maintenance or repairs to portions of the Prime Lease Premises other
than the Sublease Premises, (iv) maintenance or repairs to the Building
foundation, roof, structural elements, exterior walls, or common areas
(v) insurance obligations of Sublandlord under the Prime Lease (except for
Subtenant's insurance obligations under Section 9 of this Sublease),
(vi) damage or destruction to the Building by fire or other casualty, or
(vii) any obligations for Sublandlord's costs (if any) in connection with the
provisions of the Modification of Lease dated June 22, 1990 between Prime
Landlord and Sublandlord.
8. SUBLANDLORD'S ACCESS. Subtenant agrees that Sublandlord and its
agents may enter upon and examine the Sublease Premises upon reasonable,
advance notice and at reasonable times, provided that Sublandlord is
accompanied by a representative of Subtenant.
9. INSURANCE; WAIVERS. Subtenant will, during the Sublease Term,
continuously maintain commercial umbrella general liability insurance
coverage of at least $7,000,000, which insurance policy shall name
Sublandlord as an additional insured party, and a certificate thereof
acceptable to Sublandlord shall be delivered to Sublandlord prior to the
delivery of the Sublease Premises to Subtenant. Subtenant hereby agrees to
indemnify and hold harmless Sublandlord from, and shall reimburse Sublandlord
for, all costs and expenses, including
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<PAGE>
reasonable attorneys' fees, incurred by Sublandlord in connection with the
defense of all claims and demands of third persons, including but not limited
to those for death, personal injuries, or property damage, arising out of any
default of Subtenant in performing or observing any term, covenant, condition
or provision of this Sublease, or out of the use or occupancy of the Sublease
Premises by Subtenant, or out of any of the acts or omissions of the
Subtenant, its agents, representatives, employees, customers, guests,
invitees or other persons who are doing business with Subtenant or who are at
the Sublease Premises with Subtenant's consent. Subtenant, for itself and its
insurers, hereby further expressly waives all claims against Sublandlord for
any and all loss of or damages to property owned or possessed by Subtenant in
the Sublease Premises by or resulting from any thing or circumstance other
than Sublandlord's willful misconduct, if such loss or damage is reasonably
insurable.
10. ASSIGNMENT AND SUBLETTING; CO-LOCATION.
(a) Subtenant may not, without the prior written consent of
Sublandlord, assign or pledge this Sublease, sublet all or any part of the
Sublease Premises, allow any liens to be placed on this Sublease or the
Sublease Premises, or suffer this Sublease or the Sublease Premises or any
portion thereof to be attached or taken upon execution. Sublandlord's consent
shall be in accordance with the requirements of the Prime Lease and shall not
be unreasonably withheld, and if Sublandlord fails to respond within 10
business days following receipt of the required information regarding the
proposed sublease or assignment, the same shall be deemed approved by
Sublandlord if approved by Prime Landlord. Sublandlord may assign its
interest under this Sublease at any time, and in such case, Sublandlord shall
be released from any liability arising under this Sublease after the
effective date of such assignment, provided that the
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<PAGE>
Sublandlord's assignee (i) has been assigned all of Sublandlord's rights
under the Prime Lease, and the Prime Landlord has consented to such
assignment, (ii) has a book net worth (determined in accordance with
generally accepted accounting principles) for the calendar quarter-end
preceeding the effective date of such assignment in excess of $100 million
and (iii) has agreed in writing to assume and accept all of Sublandlord's
obligations under the Sublease and acknowledges receipt of all amounts held
by the assignor under paragraph 17 of this Sublease.
(b) Sublandlord acknowledges and agrees that Subtenant may enter
into agreements with its customers and/or end users ("Co-location
Agreements") providing for physical location of telecommunication equipment
and facilities within the Sublease Premises, maintained and serviced by
Subtenant and placed in the Sublease Premises at Subtenant's sole cost,
expense and risk, provided that such Co-location Agreements shall be
subordinate to the Lease, this Sublease and to any mortgages, deeds of trust,
or land sale contracts now or in the future, against the Prime Lease
Premises. Subtenant may enter into Co-location Agreements with third parties,
for the use of the Sublease Premises at the sole discretion of Subtenant, and
so long as no more than 25% of the Sublease Premises shall be used for
Co-location Agreements and the owners of the equipment installed under the
Co-location Agreements shall not have the right to continuously occupy the
Sublease Premises with employees or contractors other than Subtenant, then
any provision of the subletting and assignment provisions of this Lease to
the contrary notwithstanding, such Co-location Agreements shall not be
construed as an assignment or subletting.
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<PAGE>
11. TERMINATION.
(a) If any substantial portion of the Subleased Premises which is sufficient
to render the remaining portion unsuitable for Subtenant's continuing use or
occupancy in Subtenant's business is taken by condemnation or other eminent
domain proceedings for a period exceeding three calendar months, then
Subtenant may, not later than 30 days after the effective date of the taking
(or the expiration of the three calendar months should the taking be for a
temporary but indeterminate period of time), notify Sublandlord of
Subtenant's intent to terminate this Sublease upon any business day specified
in such notice which occurs not less than 80 nor more than 180 days after the
giving of such notice. Any award of damages for such taking shall be
allocated between Sublandlord and Prime Landlord as provided in the Prime
Lease. All damages, awards and payments for the taking to which Sublandlord
is entitled under the Prime Lease will belong to Sublandlord irrespective of
the basis upon which they were made or awarded, except that Subtenant will be
entitled to any amounts specifically awarded for Subtenant's trade fixtures
or equipment or as a relocation payment or allowance to Subtenant if the same
does not reduce the award to Sublandlord. For purposes of this paragraph, any
condemnation which exceeds 25% of the Sublease Premises, or which makes
access to or use of the Sublease Premises unreasonably inconvenient or
dangerous or which significantly affects sanitary or other facilities
necessary for the occupancy of the Building for office purposes shall be
presumed, at the option of Subtenant, to be an event permitting termination
by Subtenant.
(b) If the Sublease Premises or Building is damaged by a fire,
storm or other casualty, the damage (excluding damage to improvements paid for
by Subtenant or trade fixtures, equipment or personal of Subtenant) will be
repaired by Sublandlord at its expense to a
14
<PAGE>
condition as near as reasonably possible to the condition prior to the
casualty, but if Sublandlord is not required to restore the Prime Lease
Premises under the Prime Lease and the Prime Lease has been terminated,
Sublandlord may terminate this Sublease as of the date of the casualty by
giving written notice to Subtenant within 30 days after the casualty. If this
Lease is not terminated, Sublandlord will complete the repairs as soon as
reasonably possible, subject to acts of God, strikes and other matters not
within the control of Sublandlord. If this Lease is terminated because of the
casualty, rents and other payments will be prorated as of the termination and
will be proportionately refunded to Subtenant or paid to Sublandlord, as the
case may be. During any period in which the Sublease Premises or any portion
of the Sublease Premises is made untenantable as a result of the casualty,
the Base Rent and additional rent will be abated for the period of time
untenantable in proportion to the square foot area untenantable. For purposes
of this paragraph, any damage which results in more than 25% of the Sublease
Premises being untenantable, or which makes access to or use of the Sublease
Premises unreasonably inconvenient or dangerous, or which significantly
affects sanitary or other facilities necessary for the occupancy of the
Sublease Premises for office purposes, shall be presumed, at the option of
Subtenant, to render the entire Sublease Premises untenantable, and the Base
Rent and additional rent will be abated for the period of time untenantable
plus a period for Subtenant to prepare the Sublease Premises for occupancy
and to move back into the Sublease Premises, which period shall not exceed 90
days.
(c) Subtenant shall have no obligation to restore the Building or Sublease
Premises in the event of damage or condemnation provided that should it
continue occupancy, it shall be responsible for compliance with all applicable
laws and regulations as to occupancy.
15
<PAGE>
except those which relate to access to the Sublease Premises, to areas outside
the Sublease Premises, to common facilities, or to the structural integrity of
the Building.
(d) Except as otherwise provided above in this Section 11, this
Sublease shall terminate at the end of the Sublease Term. Subtenant will
peacefully and quietly vacate and surrender the Sublease Premises to Sublandlord
at the expiration of the Sublease Term, in the condition called for under
Section 24 of the Prime Lease.
(e) The existence of this Sublease is dependent and conditioned upon
the continued existence of the Prime Lease, and in the event of the cancellation
or termination of the Prime Lease, this Sublease automatically shall be
terminated; provided, however, that this provision shall not be deemed to
release Sublandlord of liability if the Prime Lease is canceled or terminated
due to a default by Sublandlord as Tenant under the Prime Lease, or as
Sublandlord under this Sublease, which default did not result, in whole or in
part, from a default by Subtenant under this Sublease. Sublandlord agrees not to
amend, alter or modify any of the provisions of the Prime Lease affecting
Subtenant, or to surrender the Prime Lease, without Subtenant's consent, which
consent will not be unreasonably withheld or delayed. Sublandlord shall have no
liability to Subtenant due to the termination of the Prime Lease by reason of
any default by subtenant under this Sublease, or by reason of any condemnation
or destruction of the Prime Lease Premises, except as provided above in this
Section 11.
12. DEFAULT. If Subtenant defaults in its obligations under this Sublease,
Sublandlord shall have all of the same rights and remedies against Subtenant as
would be available to the Prime Landlord against Sublandlord if Sublandlord were
in default under the Prime Lease, as fully as if such rights and remedies were
set forth in this Sublease. Subtenant will have the same
16
<PAGE>
rights to notice of default and opportunity to cure the default that Sublandlord
would have in the event of default under Section 19(a) of the Prime Lease.
13. NOTICES. Any notice or demand permitted or required hereunder shall be
given only if it is in writing and delivered via a nationally recognized
overnight delivery service, for next-day delivery, confirmation of receipt
requested (the date of which confirmation shall be the date that notice shall be
deemed given), addressed as follows:
If to Sublandlord: Ceridian Corporation
8100-34th Avenue South
Bloomington, Minnesota 55425
Attn: Corporate Real Estate (HQS12B)
If to Subtenant: Startec Global Communications Corporation
10411 Motor City Drive
Bethesda, Maryland 20817
Attn: John Selvaraj
With copy to: Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
11921 Rockville Pike, Third Floor
Rockville, Maryland 20852
Attn: Richard J. Melnick
The foregoing addresses may be changed from time to time by notice as above
provided, which change shall be effective 10 days after notice is given.
14. ENTIRE AGREEMENT. This Sublease contains the entire agreement between
Sublandlord and Subtenant regarding the Sublease Premises. Subtenant agrees that
it has not relied on any statement, representation or warranty of any person
except as set out in this Sublease. This Sublease may be modified only by an
agreement in writing signed by Sublandlord and Subtenant. No surrender of the
Sublease Premises, or of the remainder of the sublease Term, will be valid
unless accepted by Sublandlord in writing.
17
<PAGE>
15. SUCCESSORS AND ASSIGNS. All provisions of this Sublease will be binding
on and for the benefit of the successors and assigns of Sublandlord and
Subtenant, except that no person or entity holding under or through Subtenant in
violation of any provision of this Sublease will have any right or interest in
this Sublease or the Sublease Premises.
16. COMMISSIONS. If this Sublease is executed and payment by Subtenant is
made under Section 17 hereof, Sublandlord shall pay any commission due or owing
to Cushman & Wakefield (who in turn shall pay any commission owing to West, Lane
& Schlager Realty Advisors LLC) pursuant to separate agreements with said
parties regarding this Sublease. Sublandlord and Subtenant shall each indemnify
and hold the other harmless from and against any claims, losses, costs or
liability arising from any other parties who may claim a brokerage commission as
a result of the indemnifying party's actions or agreements in connection with
this Sublease.
17. SECURITY DEPOSIT. Subtenant herewith pays to Sublandlord the sum of
$32,767.50 to be applied to the Base Rent and additional rent due under this
Sublease. Subtenant also deposits the sum of $65,535.00 with Sublandlord to be
held as a security deposit. Sublandlord may commingle the security deposit with
other funds but will refund $32,767.50 to Subtenant without interest on or
before April 1, 1999, and $32,767.50 to Subtenant without interest on
termination of this Sublease, in each case less any amounts necessary in
Sublandlord's reasonable opinion to pay the cost of repair or restoration of the
Sublease Premises to the condition required under this Sublease or to cure any
defaults of Subtenant under Section 24 of the Prime Lease.
18
<PAGE>
18. CLEANING. Neither Prime Landlord nor Sublandlord shall have any
responsibility for janitorial services or cleaning for the Sublease Premises,
and all such services shall be contracted for directly by Subtenant.
19. ACCESS. Subtenant shall have access to the Sublease Premises 24
hours per day, seven days per week.
20. SIGNAGE. Subtenant will not place or permit any signs on the
exterior or windows of the Building, or in any other location visible from
the exterior of the Building or from any common areas of the Building, unless
the same complies with all governmental laws, ordinances and regulations, and
unless the proposed signage has been approved by both Prime Landlord and
Sublandlord, which consent shall not be unreasonably withheld by Sublandlord.
21. PRIME LANDLORD'S CONSENT.
(a) This Sublease is expressly subject and subordinate to all of
the terms, covenants and conditions contained in the Prime Lease, including
the consent of the Prime Landlord. This Sublease is conditioned upon
Sublandlord's and Subtenant's receipt of a written consent from Prime
Landlord and Sublandlord, in substantially the form attached hereto as
Exhibit D, on or before January 20, 1999. In the event that the Prime
Landlord has not executed the Consent by January 30, 1999, then either party
may terminate this Sublease upon written notice to the other given prior to
the receipt of such consent. Sublandlord agrees to use commercially
reasonable efforts to obtain the consent of the Prime Landlord to this
execution of this Sublease, and Subtenant agrees to use commercially
reasonable efforts to furnish the Prime Landlord such information as may be
reasonably requested by the Prime Landlord.
19
<PAGE>
(b) Whenever this Sublease or the Prime Lease requires the consent
of the Prime Landlord to any proposed or actual action of the Subtenant,
Sublandlord agrees that if Sublandlord approves the action, it shall
cooperate with, and shall use commercially reasonable efforts to obtain, the
Prime Landlord's consent to such action, so long as the same is all without
cost or expense to Subtenant.
22. ESTOPPEL CERTIFICATES. Both Sublandlord and Subtenant shall
provide each other with estoppel certificates pursuant to the provisions of
the first sentence of Section 22 of the Prime Lease with respect to
the Sublease Premises.
20
<PAGE>
Sublandlord and Subtenant have executed this Sublease as of the date
first stated above.
Sublandlord:
CERIDIAN CORPORATION
-------------------------------
By: F. P. Zielinski
--------------------------
Its: Vice President
--------------------------
Subtenant:
STARTEC GLOBAL
COMMUNICATIONS CORPORATION
/s/ Ram Mukunda
------------------------------
By: Ram Mukunda
--------------------------
Its: CEO
--------------------------
21
<PAGE>
EXHIBIT A
SUBLEASE PREMISES DRAWING
[Recital B]
[Graph]
<PAGE>
EXHIBIT B
SPECIFICATIONS FOR BASE BUILDING IMPROVEMENTS
[SECTION 4(c)]
SCOPE OF WORK
STARTEC GLOBAL COMMUNICATIONS CORPORATION
1151 SEVEN LOCKS ROAD
ROCKVILLE, MARYLAND
1. DEMOLITION
a. Remove significant areas of partitions and doors for proposed tenant
area to reconfigure for new layout.
b. Remove existing flooring at proposed tenant area to allow for new
carpet, VCT and ceramic flooring.
c. Disconnect plumbing and electric to allow for demolition
2. CONCRETE
a. Provide a new ADA compliant ramp with painted steel pipe railings from
the office area to the rear open area.
b. Provide new concrete for patching of trade related demolition.
3. MISCELLANEOUS CONSTRUCTION
a. Provide roof openings, flashings and steel supports for new roof top
HVAC unit and exhaust fans.
b. New floor mounted toilet partitions and wall mounted accessories to
allow for bathroom ADA upgrade and additional toilets.
c. Replace at least (13) window blinds with new, similar to existing.
4. DOORS AND FRAMES
a. Provide new solid core, paint grade doors with hollow metal knock down
frame and standard lever passage set with at least twenty-three (23)
locksets.
b. All doors to have lever style passage sets.
5. ALUMINUM AND GLASS
a. Provide at least thirteen (13) new side lights at all interior office
doors.
<PAGE>
6. MILLWORK
a. New plastic laminate countertops for new bathrooms and showers.
b. New plastic laminate counter and cabinets for Lunch Room (at least 20
LF).
c. Closet shelving (approximately 30 LF).
7. DRYWALL AND ACOUSTICAL
a. Provide new ceiling high partitions at all areas for new layout.
b. Patch existing walls from partition modifications.
c. Replace existing ceiling title and grid with new guilding standard.
8. FINISHES
a. Paint new and existing walls with two coats of flat latex. Door units
shall be painted with alkyd semi-gloss.
b. Provide approximately 5,500 SY of 26 ounce standard commercial level
loop carpet at offices, corridors and classrooms.
c. New 2 x 2 ceramic tile floor for new bathroom.
d. New 2 x 2 ceramic tile, 48" high at urinals.
e. New VCT flooring for Lunch, Service and PBX.
f. New vinyl base throughout.
9. SPECIALTIES
a. New toilet partitions for bathroom.
b. New standard office bathroom accessories including ADA compliance.
10. PLUMBING
a. Modify plumbing lines and provide new handicap fixtures as required
for ADA compliance at new bathrooms.
b. Provide cold water supply for coffee maker in Lunch Room.
c. Provide new water heater for bathroom expansion.
d. Provide new plumbing fixtures for bathroom expansion (at least seven
stalls).
e. Provide new water cooler.
f. Provide new garbage disposal for Lunch Room.
11. SPRINKLER
a. Relocate and add heads for new partition layout based on a business
use and a Light Hazard Occupancy.
<PAGE>
12. HVAC
a. Provide and install multiple new gas heat, electric cooling rooftop
units, with 24-hour operation. The unit will have a roof curb,
economizer with power exhaust, smoke detector and five (5) year
manufacture's compressor warranty.
b. Install 2 x 2 lay-in supply diffusers and 2 x 2 return grilles. All
systems will have ducted supplies. All supply ductwork will be
insulated.
c. Modify existing duct and/or provide new duct to accommodate proposed
tenant layout. All units will be on a central control system with
individual controls and night setback. All systems will have smoke
detectors.
d. Exhaust fans will provided for Conference Rooms, PBX Rooms, bathrooms,
File Server and Lunch Room.
13. ELECTRICAL
a. Provide at least twenty-four (24) additional light fixtures to replace
existing fixtures that are beyond repair.
b. Electrical connections for standard office HVAC unit, new bathroom
plumbing fixtures and exhaust fans.
c. Lighting:
(1) Relocate existing lighting for new tenant layout.
(2) Provide and install new exit signs and battery exit lights to
accommodate new tenant layout.
(3) Provide individual switching of rooms and lighting contractor at
large open area.
<PAGE>
<TABLE>
<S> <C> <C>
Division of Treasury
[SEAL] Tax Period July 1, 1998 - June 30, 1999 101 Monroe Street
FULL YEAR BILL 5th Floor
Rockville, MD 20850
1998
Hours: 8:00 a.m. - 4:30 p.m.
Mon. - Fri.
ALLAN J RILBY TRUSTEE ---------------------------------
C/O CERIDIAN CORP BILL DATE ACCOUNT
8100 34TH AVE S ---------------------------------
BLOOMINGTON MN 55122 07/13/1998 01820676
---------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE INFORMATION PROPERTY ADDRESS TAXABLE ASSESSMENT
- -----------------------------------------------------------------------------------------------------------------------------------
THIS IS A COPY OF THE BILL MAILED 11511 FORTUNE TER STATE: $5,119,120
TO YOUR MORTGAGE COMPANY FOR ---------------------------------------
PAYMENT. LEGAL: WHEEL OF FORTUNE COUNTY: $5,119,120
--------------------------------------------------------------------------------------
LOT BLOCK DIST SUB TAX CLASS
--------------------------------------------------------------------------------------
F23 A 4 201 50
- -----------------------------------------------------------------------------------------------------------------------------------
***PROPERTY MAY BE ELIGIBLE FOR SEMIANNUAL PAYMENT--CALL 301-217-2920***
- -----------------------------------------------------------------------------------------------------------------------------------
TAXES CHARGES FEES RATE AMOUNT DUE
- -----------------------------------------------------------------------------------------------------------------------------------
GENERAL MONTGOMERY COUNTY PROPERTY TAX 1.9230 $98,440.68
STATE OF MARYLAND PROPERTY TAX -----------------------------------
MUNICIPAL PROPERTY TAX CITY OF ROCKVILLE .2100 10,750.15
SPECIAL AREA PROPERTY TAX -----------------------------------
SOLID WASTE CHARGE REF AREA 45 - UNITS 74 - COMM. MED LOW .8150 41,720.83
MUNICIPAL FRONT FOOT BENEFIT CHARGE -----------------------------------
WSSC FRONT FOOT BENEFIT CHARGE .3690 18,889.55
-----------------------------------
16,454.64
-----------------------
-----------------------
-----------------------
-----------------------
NOT PRINCIPAL RESIDENCE TOTAL $186,255.85
- -----------------------------------------------------------------------------------------------------------------------------------
County Rate of 1.523 in Less Than Constant Yield Rate of 1.928 by 0.005
- -----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------- -----------------------------------
Cashier's Use Only Amount Due if Paid By:
--------------------------------------------------------------- -----------------------------------
SEQ# B0008378 ACCT# 04- 1820676
--------------------------------------------------------------- -----------------------------------
[SEAL] TAX $186,255.85 ADV
--------------------------------------------------------------- -----------------------------------
INT O/S 10/31/98 $189,360.74
--------------------------------------------------------------- -----------------------------------
TAX PERIOD 7/1/98-8/30/99 SUB TOTAL 09/30/98 $186,255.85
--------------------------------------------------------------- -----------------------------------
NO PARTIAL PAYMENTS
80008378018625585018936074019246376019556864019867353020177655008
ALLAN J RILEY TRUSTEE
C/O CERIDAN CORP Check here if your address changed &
8100 34TH AVE S enter change on reverse side. /__/
BLOOMINGTON MN 55122 Make Check Payable to:
Montgomery County, MD
--------------------------------
AMOUNT PAID $
--------------------------------
RETURN THIS PORTION WITH PAYMENT
</TABLE>
<PAGE>
EXHIBIT E
PARKING
-------
GRAPHIC
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 59,451
<SECURITIES> 0
<RECEIVABLES> 41,636
<ALLOWANCES> (2,698)
<INVENTORY> 0
<CURRENT-ASSETS> 105,406
<PP&E> 57,849
<DEPRECIATION> (4,811)
<TOTAL-ASSETS> 230,739
<CURRENT-LIABILITIES> 58,024
<BONDS> 158,075
0
0
<COMMON> 94
<OTHER-SE> 5,519
<TOTAL-LIABILITY-AND-EQUITY> 230,739
<SALES> 57,714
<TOTAL-REVENUES> 57,714
<CGS> 52,659
<TOTAL-COSTS> 52,659
<OTHER-EXPENSES> 15,228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,199)
<INCOME-PRETAX> (13,827)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,827)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
