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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2000
REGISTRATION NO. 333-93631
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STARTEC GLOBAL COMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 52-2099559
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
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10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
(301) 365-8959
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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RAM MUKUNDA
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
STARTEC GLOBAL COMMUNICATIONS CORPORATION
10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
(301) 365-8959
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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COPIES TO:
ROBERT B. MURPHY, ESQ.
THOMAS L. HANLEY, ESQ.
PIPER MARBURY RUDNICK & WOLFE LLP
1200 19TH STREET, N.W.
WASHINGTON, D.C. 20036-2412
202-861-3900
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after
this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF AMOUNT TO PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED* BE REGISTERED** PRICE PER SHARE** OFFERING PRICE** REGISTRATION FEE**
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Common Stock, $.01 par value................. 2,065,723 $19.13 $39,517,280 $10,432.56
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* Includes associated Preferred Share Purchase Rights.
** Estimated under Rule 457(c) solely for the purpose of calculating the
registration fee, based upon the closing price as reported on the Nasdaq
National Market on December 23, 1999 of $19.13.
Pursuant to Rule 429 under the Securities Act, the prospectus contained in
this Registration Statement is a combined prospectus and also relates to (i) up
to 160,000 warrants to purchase common stock and up to 200,226 shares of common
stock underlying such warrants registered under Registration No. 333-64465
previously filed with the Commission on Form S-1 and declared effective and
(ii) up to 807,042 unsold shares of common stock registered under Registration
No. 333-78171 previously filed with the Commission on Form S-3 and declared
effective. This Registration Statement constitutes post-effective Amendment
No. 1 to Registration Statements No. 333-64465 and No. 333-78171 and such
post-effective amendments shall hereafter become effective concurrently with the
effectiveness of this Registration Statement and in accordance with
Section 8(c) of the Securities Act. Upon the effectiveness of such
post-effective amendments, this Registration Statement will relate to an
aggregate of 160,000 Warrants to acquire shares of common stock and 3,072,991
shares of common stock. The filing fee associated with the 160,000 unsold
warrants and the 200,000 shares of common stock underlying such warrants under
Registration No. 333-64465 was $3,872.00, and was paid at the time of filing of
that Registration Statement. The filing fee associated with the 807,042 unsold
shares of common stock under Registration Statement No. 333-78171 was $1,784.57,
and was paid at the time of filing of that Registration Statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING UNDER SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE>
PROSPECTUS
STARTEC GLOBAL COMMUNICATIONS CORPORATION
2,872,765 SHARES
COMMON STOCK
AND
160,000 WARRANTS TO PURCHASE SHARES OF COMMON STOCK
AND
200,226 SHARES OF COMMON STOCK UNDERLYING THOSE WARRANTS
The selling shareholders listed on page 15 may offer from time to time up to
an aggregate of 2,872,765 shares of our common stock, 160,000 warrants to
purchase shares of our common stock and 200,226 shares of our common stock
underlying those warrants under this prospectus. No underwriter is being used in
connection with this offering of common stock. The selling shareholders may
offer and sell their shares to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
selling shareholders, the purchasers of the shares, or both. We will not receive
any of the proceeds from the sale of shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"STGC." On December 23, 1999, the closing price of one share of our common stock
was $19.13 .
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INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. YOU SHOULD CAREFULLY
READ AND CONSIDER THE "RISK FACTORS" SECTION OF THIS PROSPECTUS BEGINNING ON
PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is January 14, 2000
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We have not authorized anyone to provide you with information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. The selling shareholders are
offering to sell, and seeking offers to buy, only the shares of our common stock
covered by this prospectus, and only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus is
current only as of its date, regardless of the time of delivery of this
prospectus or of any sale of the shares.
You should read carefully the entire prospectus, as well as the documents
incorporated by reference in the prospectus, before making an investment
decision. All references to "we," "us," "our," or the "company" in this
prospectus means Startec Global Communications Corporation and its subsidiaries,
except where it is made clear that the term means only the parent company.
TABLE OF CONTENTS
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Startec..................................................... 3
Risk Factors................................................ 5
Selling Shareholders........................................ 15
Plan of Distribution........................................ 18
Legal Matters............................................... 19
Experts..................................................... 19
Where You Can Find More Information......................... 19
Forward-Looking Statements.................................. 20
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STARTEC
We are a rapidly growing, facilities-based provider of communications
services targeting ethnic communities. We market our international and domestic
long-distance and Internet services to select ethnic residential communities
located in major metropolitan areas in North America, Europe and Asia. We also
target leading international long distance and data carriers for wholesale
services.
BACKGROUND
We were founded in 1989 to provide international long distance services to
select ethnic communities located in major U.S. metropolitan markets. Until
1995, we concentrated our marketing efforts on the New York-Washington, D.C.
corridor, and focused on the delivery of international calling services to
India. By the end of 1998, our marketing efforts extended into over 30
communities including the Middle Eastern, Asian and Russian communities. We have
further diversified our customer base by offering services to a broader spectrum
of ethnic groups, including the Caribbean, Latin American, Southeast Asian and
African communities. We have also expanded our marketing efforts to the United
Kingdom, France and Germany, while continuing to target ethnic communities.
Residential customers access our network by either selecting us as their
primary long-distance carrier ("Dial-1" services), by dialing a carrier
identification code prior to dialing the number they are calling
("dial-around"), or by using a "toll free" or "800" access number. We have
developed extensive ethnic marketing expertise and market to our customers using
in-language media. We provide in-language customer service 24 hours a day, seven
days a week through our call centers located in Maryland, Guam and France.
We own and operate 8 carrier class switches and 20 Internet Protocol ("IP")
gateways. Our facilities span 35 countries, including major switching centers in
New York, Los Angeles, Miami, Paris, London, Dusseldorf and Guam. We operate 20
points-of-presence (primary installations of scalable telecommunications
equipment, commonly known as POPs) in North America and Western Europe. We own
capacity on 13 undersea fiber optic cables systems linking North America with
Europe, the Pacific Rim and Asia, as well as fiber optic capacity linking the
East and West Coasts of the United States. To facilitate the termination of
calls overseas, we are a party to interconnection agreements with 50 incumbent
local carriers in foreign countries, commonly known as PTTs, and other
competitive carriers covering 44 countries, primarily in the emerging economies.
GLOBAL NETWORK
We are building a state-of-the-art network using a combination of IP,
Asynchronous Transfer Mode ("ATM") and circuit-switched technologies with an
emphasis on connectivity from points originating in North America and Western
Europe and terminating in the emerging economies. Once completed, this network
will allow us to integrate voice, Internet and video services on a seamless
system using ATM/IP technology.
To date, we have installed 20 IP telephony gateways with access to 17
countries, including Russia, Poland, Paraguay and Hong Kong. By utilizing ATM/IP
technology, we are able to provide high-quality connectivity into the emerging
economies and to exchange IP traffic with carriers worldwide. Our global IP
network is a strategic component of our network strategy to offer a broad range
of services globally to our ethnic customer base. We recently completed testing
our IP gateways and plan to begin on-line deployment of a global IP telephony
clearinghouse beginning early in the year 2000.
We are expanding our services aimed at ethnic communities to include dial-up
Internet access (also known as ISP service) and ethnic interactive portals,
known as virtual communities, which offer in-language content, universal
messaging, e-commerce and other value-added services.
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INTERNET SERVICE
In the two years since we became publicly-held, we have transitioned from a
dial-around (10-10-719) inter-exchange or long distance company to a global
facilities-based communications company offering a bundled suite of services to
our customers, including domestic and international long distance and prepaid
calling cards. We are adding dial-up Internet access service to augment our
bundled suite of services. The bundle will be offered to residential customers
through a tiered pricing structure. We will derive additional revenue from this
bundled service by using the dial-up Internet offering as a tool to convert high
volume dial around customers to Dial 1, thereby capturing domestic long distance
calls at no incremental acquisition cost. Additionally, we expect to experience
lower turnover among bundled customers, in effect lengthening the period which
the customer stays with us. We also expect greater EBITDA contribution (earnings
before interest, taxes, depreciation and amortization, a useful measure in
assessing a company's ability to incur and service indebtedness) from each
bundled customer on a long-term basis.
We believe that we are well positioned to offer dial-up Internet services
for several reasons. First, our existing customer base exhibits a very high
personal computer penetration rate and high interest in a Startec-provided
language-flexible Internet service. As of September 1999, our active customer
base surpassed 250,000 during the third quarter. An additional 250,000 inactive
customers have used us over the past two years. Information necessary to target
our current and former customers is resident in our database for direct mail
campaigns and other marketing purposes. In addition, we believe that the cost of
acquiring bundled ISP customers will be lower than the acquisition cost
experienced in the industry today by harvesting our existing customer base and
targeting former customers for sign-up. Finally, we have an in-language customer
service infrastructure in place in Maryland, Guam and France which can be
leveraged to provide ISP customer support. We plan to continue to add to our
service offerings by expanding into broadband Internet access, such as Digital
Subscriber Line (DSL), in the near future.
Market Opportunity. Through our Internet initiatives, we believe that we can
capitalize on several emerging growth opportunities through the following
service offerings:
VOICE OVER IP ("VOIP"): According to International Data Corp. (IDC),
global revenue generated utilizing VoIP technology is expected to reach
$1.89 billion in 1999. By 2002, this amount is projected to grow to $24.2
billion due to expected improvements in voice quality, reaching the
toll-quality standards of circuit-switched transmissions.
E-COMMERCE: According to IDC, worldwide e-commerce in 1998, totaled
approximately $50 billion. This amount is expected to increase to $1.317
trillion in 2003. Moreover, a higher proportion of this growth is expected
to come from outside of the United States. In 1998, e-commerce revenue
generated in the U.S. accounted for approximately 62% of worldwide
e-commerce revenue. That percentage is expected to decline to 50% of the
worldwide total in 2003.
VIRTUAL COMMUNITIES: According to The Industry Standard, there were 33
million Internet users outside of North America and Western Europe in 1998.
This number is predicted to grow twelve-fold to 412 million by the year
2005. The market for language-specific virtual communities is expected to
exceed that of North America and Western Europe combined.
ETHNIC ONLINE COMMUNITIES
Our virtual community Web sites will be accessible at www.estart.com. Under
the brand name "eStart," we plan to introduce a collection of dynamic ethnic
virtual communities, each encompassing a specific culture that may be comprised
of one or more nation-states. With the introduction of the Arab virtual
community in October 1999, we launched the first of nine planned virtual
communities. These virtual communities will feature culture-specific content,
interactive applications (such as on-line forums on family, religious and
political issues), communication tools and e-commerce opportunities. During
2000, we expect to launch additional virtual communities targeting the Turkish,
Indian, Chinese, Russian, Polish, Israeli, Iranian and Latin American
communities.
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With 10 years of ethnic marketing experience, we plan to leverage our ethnic
marketing skills, customer knowledge and international network of agents and
media partners to create a series of ethnic virtual communities with in-depth,
local content. Our existing customer base of Arabs in North America and Western
Europe enables Startec to promote the Arab virtual community to a
receptive/pre-disposed audience.
The Arab virtual community currently features culture-specific content,
including a variety of religious, political and economic issues, news and
weather, and features on Arab musicians and entertainers. In addition, eStart
will enable online advertisers and merchants to target the Arab community, which
has a high percentage of computer ownership and is rapidly increasing its use of
the Internet. In the near future, eStart will feature an ethnic bazaar,
in-language content and search functions, free email, instant messaging and
bulletin boards, as well as broadband applications. As additional virtual
communities are launched, advertisers and merchants will have an opportunity to
reach an even greater online audience.
STOCK ISSUANCE
On December 23, 1999, we completed the sale of 1,875,000 shares of our
common stock at a purchase price of $16.50 per share, in a private transaction
pursuant to Section 4(2) and Regulation D of the Securities Act of 1933.
RISK FACTORS
You should carefully consider each of the following risks and all of the
other information set forth in this prospectus before deciding to invest in our
common stock. Some of the following risks relate principally to our business in
general and in the industry in which we operate. Other risks relate principally
to the securities markets and ownership of our securities. The risks and
uncertainties not presently known to us or that we currently believe to be
immaterial also may adversely affect our business. If any of the following risks
and uncertainties develop into actual events, our business, financial condition
or results of operations could be materially adversely affected.
OUR INTERNET SERVICES ARE A NEW BUSINESS WITH NO OPERATING HISTORY.
Our virtual communities will be targeted to ethnic groups located in North
America, Asia, Europe and Latin America. We have only recently begun to promote
the eStart brand, and cannot give assurances that the targeted ethnic
populations will accept our products and services or that we will attract
sufficient numbers of repeat users to our virtual community portals to generate
any material revenues from the sale of advertising or from electronic commerce
through the sites. Because the market for our products and services is new and
evolving, it is difficult to predict the future growth rate, if any, and the
size of the market that we have targeted. If the market develops more slowly
than expected or becomes saturated with competitors, or if our products and
services are not accepted by the market, our business could be materially and
adversely affected.
We believe that establishing and maintaining the eStart brand is of critical
importance to our efforts to attract and expand our audience. We also believe
that brand recognition will become more important due to the increasing number
of Internet sites. Promotion and enhancement of our virtual community portals
will depend largely on our success in providing high quality products and
services and content that is of interest to the worldwide emerging economies. We
cannot assure that success. Even if our desired results are achieved, it is
likely that we will expend significant additional amounts in further developing
and maintaining brand loyalty.
CONTENTS OF THE VIRTUAL COMMUNITIES MAY CONTAIN ERRORS.
Because materials may be downloaded by the services that we operate or
facilitate and the materials may subsequently be distributed to others, we could
face claims for errors, defamation, negligence, or copyright or trademark
infringement based on the nature and content of such materials. We also could be
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exposed to liability because of the listings that we select and make available
through our virtual communities, or through content and materials posted by
users in chat rooms and message board services that we provide. Even to the
extent that claims made against us do not result in liability, we may incur
substantial costs in investigating and defending such claims.
WE RELY ON THIRD PARTIES FOR PROVISION OF TECHNOLOGY, INFRASTRUCTURE AND
CONTENT.
Our business depends upon third parties, including providers of technology,
infrastructure, content and features. Termination of our relationships with any
significant third party provider or failure to renew any material agreement upon
expiration could result in substantial additional costs to us in developing or
replacing technology. We also rely upon certain third parties for our Internet
and e-mail connections. Any interruption in the Internet access provided by such
third parties or any other provider of access could have a material and adverse
effect on our business.
We license content, including technology and related databases, from third
parties for portions of our virtual communities, including news from
Agence-France Press, entertainment from Sony Music's Globetrotter label, weather
from Accuweather and chat services from iChat. Any errors, delays or failures
experienced in connection with these third party technologies and services could
have a negative effect on our relationship with users of the virtual
communities, could materially and adversely effect the eStart brand and our
business and could subject us to liability to third parties for business
negligence such as defamation or libel.
THE COMPETITION FOR INTERNET SERVICES IS INTENSE.
We face a high level of competition in the Internet services industry. The
market for Internet connectivity and related services is extremely intense and
competitive. We expect that competition will continue to intensify as the use of
the Internet grows. The tremendous growth and potential market size of the
Internet market has attracted many new start-ups, as well as established
businesses from different industries. Some of these competitors have longer
operating histories, significantly greater market presence, brand recognition
and financial, technical and personnel resources than we do. There is no
assurance that we will be able to establish and expand our Internet business.
WE HAVE SUBSTANTIAL INDEBTEDNESS WHICH COULD HINDER OR PREVENT IMPLEMENTATION OF
OUR BUSINESS STRATEGY
We have substantial indebtedness as a result of our offering of $160 million
of senior notes in May 1998, a $35 million vendor financing agreement in
December 1998, a $30 million credit facility in June 1999, and approximately $25
million in additional vendor financing agreements completed during 1999. We
anticipate that we may incur substantial additional indebtedness in the future.
Our high indebtedness level may constrain our business plans in several ways
including the following:
- we must dedicate a substantial portion of our cash flow from operations,
if any, to the payment of principal and interest on our indebtedness and
other obligations and it may not be available for use in our business;
- we may have limited ability to obtain any necessary financing in the
future for working capital, capital expenditures, debt service
requirements and other purposes;
- we may have less flexibility in planning for, or reacting to, changes in
our business;
- we may become more highly leveraged than some of our competitors, which
may place us at a competitive disadvantage; and
- we may be more vulnerable in the event of a downturn in our business.
If we fail to comply with the various covenants under our debt agreements,
we would be in default under those agreements. Any such default could have a
material and adverse effect on our business.
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AS A HOLDING COMPANY, WE HAVE LIMITED FUNDING RESOURCES TO SERVICE OUR DEBT.
Because we are a holding company, our principal asset is the outstanding
capital stock of our operating subsidiaries. We derive our funds from dividends
from our subsidiaries, intercompany loans and other permitted payments from our
direct and indirect subsidiaries, as well as our own credit arrangements, if
any. However, our operating subsidiaries are legally distinct, and have no
obligation, contingent or otherwise, to pay amounts due under our indebtedness
or to make funds available for such payments. In addition, the ability of our
operating subsidiaries to pay dividends, repay intercompany loans or make other
distributions to us may be restricted by, among other things, their availability
of funds, the terms of such subsidiaries' indebtedness, as well as statutory and
other legal restrictions. If our subsidiaries fail to pay any dividends, repay
intercompany loans or make any other similar distributions, we would be
restricted in our ability to pay our indebtedness and our ability to utilize
cash flow from one subsidiary to cover shortfalls in working capital at another
subsidiary, and we could experience a material and adverse effect upon our
business. As a holding company we will conduct our business through our
subsidiaries and, accordingly, claims of creditors of our subsidiaries will
generally have priority (a senior claim) on the assets of such subsidiaries over
our claims and those of the holders of our indebtedness. As a result, our
indebtedness is subordinate in right of repayment to all then existing and
future indebtedness and other liabilities and commitments of our subsidiaries,
including their trade payables. In addition, our rights to receive assets of any
subsidiary upon its liquidation or reorganization (and the consequent rights of
certain of our creditors to participate in those assets) are effectively
subordinate to the claims of the subsidiary's creditors, except to the extent
that we are ourselves recognized as a creditor. In that case, however, our
claims still would be subordinate to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior in right of payment to
that which we hold.
WE HAVE HAD A HISTORY OF LOSSES, WE EXPECT TO INCUR LOSSES IN THE FUTURE, AND WE
ARE UNCERTAIN OF FUTURE OPERATING RESULTS.
Although we have experienced significant revenue growth in recent years, we
expect to generate negative EBITDA and significant operating losses and net
losses on an annual basis for the next several years. This will occur as we
incur additional costs associated with the development and expansion of our
marketing programs and entry into new markets, the introduction of new
telecommunications and Internet services, and as a result of the interest
expense associated with our financing activities. Furthermore, we expect that
our operations in new target markets will experience negative cash flows until
we can establish an adequate customer base and derive related revenues. We
cannot assure you that our revenue will continue to grow or be sustained in
future periods or that we will be able to achieve and sustain profitability or
positive cash flow from operating activities in any future period. We intend to
fund our operational and capital requirements until early 2001 using cash on
hand and our available credit facilities. There can be no assurance, however,
that we 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 we are unable to obtain such additional
financing, we will be required to reduce the scope of our expansion plans.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE.
We may need significant investment to implement our strategic plan,
including development and expansion of our network facilities and our marketing
programs, and funding of expected operating losses and working capital needs.
While we believe that we will have sufficient capital to fund currently planned
capital expenditures and anticipated operating losses until early 2001, we can
offer you no assurance that we will not need additional financing sooner than we
currently anticipate. Our need for additional financing will depend on a variety
of factors, including:
- the rate and extent of our expansion in existing and new markets;
- the cost of investment in additional switching and transmission facilities
and ownership rights in fiber optic cable;
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- the costs to support the introduction of additional or enhanced services;
- increased sales and marketing expenses;
- unanticipated working capital needs;
- unanticipated business opportunities, including acquisitions, investments
or strategic alliances;
- increased costs due to changes in competitive conditions; and
- increased costs in response to regulatory or other government actions.
We may seek to raise additional capital from public and/or private equity
and/or debt sources to fund the shortfall in our cash resources expected to
occur at the end of the first quarter of 2001. We cannot assure you, however,
that we will be able to obtain additional financing, or, if obtained, that we
will be able to do so on a timely basis or on terms favorable to us. If we are
able to raise additional funds through the incurrence of debt, we would likely
become subject to additional restrictive financial covenants. If we cannot
obtain such additional capital or cannot obtain such additional capital on
acceptable terms, we may be required to reduce the scope of our expansion. Any
of these measures could materially and adversely effect our business and our
ability to compete effectively in the future and our ability to meet our debt
service obligations. You should be aware that, although we intend to implement
the capital spending plan described in this prospectus, we may conclude that
certain unanticipated business opportunities are more favorable to our long-term
prospects than those in our current capital spending plan and revise our plan
accordingly.
WE EXPERIENCE INTENSE COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY.
The international telecommunications industry is intensely competitive and
subject to constant innovation due to changes in regulation and advances in
technology. Our success depends on our ability to compete with a variety of
other telecommunications providers in the United States and in each of our
international markets, including:
- dominant, often government owned or partially controlled, PTTs in many of
the countries in which we operate or plan to operate;
- large, facilities-based, multinational carriers such as AT&T, Sprint and
MCI WorldCom;
- smaller facilities-based wholesale long distance service providers in the
United States and overseas that have emerged as a result of deregulation;
- switch-based resellers of international long distance services; and
- global alliances among some of the world's largest telecommunications
carriers, such as Global One and Concert, which consist of Sprint,
Deutsche Telekom, France Telecom and AT&T and British Telecom,
respectively. Like other international telecommunications providers, we
compete for residential customers on the basis of price, customer service,
transmission quality, breadth of service offerings and value-added
services, and compete for carrier customers primarily on the basis of
price and network quality.
Residential customers frequently change long distance providers in response
to competitors' offerings of lower rates or promotional incentives. Because we
are also a dial-around provider, our customers can switch carriers at any time
without charge. The availability of dial-around long distance services has made
it possible for residential customers to use the services of a variety of
competing long distance providers without the necessity of switching carriers.
Our carrier customers, in general, also use the services of a number of
international long distance telecommunications providers and are especially
price sensitive. Many of our competitors enjoy economies of scale that can
result in a lower cost structure for their termination and network costs, which
could cause significant pricing pressures within the international
communications industry.
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Several long distance carriers in the United States have introduced pricing
strategies that provide for fixed, low rates for both international and domestic
calls originating in the United States. Such strategies, if widely adopted,
could have a material and adverse effect on our business if increases in
telecommunications usage do not result or are insufficient to offset the effects
of such price decreases. In recent years, intensified competition has caused a
sustained decrease in prices for international long distance services. We expect
prices to continue to decrease in most of the markets in which we currently
compete or into which we may enter in the future. We cannot assure you that our
reductions in prices will be more than offset by our costs of providing such
services. We expect that competition will continue to intensify as the number of
new entrants increases as a result of the competitive opportunities created in
the United States by the Telecommunications Act of 1996, implementation by the
FCC of the commitment of the United States to the World Trade Organization's
efforts to liberalize telecommunications regulations, and changes in legislation
and regulation in various foreign markets. Therefore, we cannot assure you that
we will be able to compete successfully in the future.
The telecommunications industry currently also is experiencing change as a
result of rapid technological evolution, marked by the introduction of new
products and services and increased satellite and undersea cable transmission
capacity for services similar to those we provide. Such technologies include
satellite-based systems, such as those proposed by Globalstar, L.P., utilization
of the Internet for international voice and data communications, and digital
wireless communication systems such as personal communications systems. We
cannot predict which of many possible future product and service offerings will
be important to maintain our competitive position or what expenditures will be
required to develop and provide such products and services.
OUR EXPANSION WILL EXPOSE US TO CERTAIN RISKS OF THE INTERNATIONAL
TELECOMMUNICATIONS BUSINESS AND DOING BUSINESS IN EMERGING MARKETS.
To date, we have generated substantially all of our revenues from
international long distance calls originating in the United States. As part of
our expansion strategy, we have commenced operations in a number of foreign
countries, which will expose us to the risks inherent in doing business on an
international level and which could materially adversely impact our current and
planned operations. These risks include:
- unexpected changes in regulatory requirements or administrative practices;
- value added taxes, tariffs, customs, duties and other trade barriers;
- difficulties in staffing and managing foreign operations;
- problems in collecting accounts receivable;
- risks due to political uncertainties;
- fluctuations in currency exchange rates;
- foreign exchange controls which restrict or prohibit repatriation of
funds;
- technology export and import restrictions or prohibitions;
- delays from customs brokers or government agencies;
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world; and
- potential adverse tax consequences resulting from operating in multiple
jurisdictions with different tax laws.
Moreover, the international telecommunications industry is changing rapidly
due to deregulation, technological improvements, expansion of telecommunications
infrastructure and globalization of the world's economies. We cannot assure you
that one or more of these factors will not vary in a manner that could have a
material and adverse effect on our business.
9
<PAGE>
SUBSTANTIAL FOREIGN GOVERNMENT CONTROL OF NATIONAL TELECOMMUNICATIONS BUSINESS.
As a key component of our business strategy, we plan to continue to expand
into additional international markets, including markets in which we have
limited or no operating experience. We intend to pursue arrangements with
foreign correspondents to gain access to and terminate our traffic in those
markets. In many of these markets, the government may control access to the
local networks and otherwise exert substantial influence over the
telecommunications market, either directly or through ownership or control of
dominant carriers or PTTs. In addition, in many international markets, the PTTs
control access to the local networks, enjoy better brand name recognition and
customer loyalty and possess significant operational economies, including a
larger backbone network and operating agreements with other PTTs. Pursuit of
international growth opportunities may require significant investments for
extended periods of time before we realize returns, if any, on investments.
DIFFICULTY IN OBTAINING FOREIGN LICENSING.
We may be required to commit significant financial resources to obtain
licenses in targeted countries. Such investments may not yield positive net
returns in these markets for extended periods of time, if ever. Further, we
cannot be sure that we will be able to obtain all or any of the permits and
licenses required for us to operate, obtain access on a timely basis (or at all)
to local transmission facilities or sell and deliver competitive services in
these markets.
WE ENCOUNTER RISKS DUE TO OUR DEPENDENCE ON FOREIGN PARTNERS.
Incumbent U.S. carriers serving international markets may have better brand
recognition and customer loyalty, and significant operational advantages over
us. We have limited recourse if our foreign partners fail to perform under their
arrangements with us, or if foreign governments, PTTs or other carriers take
actions that adversely affect our ability to gain entry into their markets. We
are also subject to the Foreign Corrupt Practices Act, which generally prohibits
United States companies and their intermediaries from bribing foreign officials
for the purpose of obtaining or maintaining business. Although our policy
prohibits such actions, we may be exposed to liability under the Foreign Corrupt
Practices Act as a result of past or future actions taken without our knowledge
by agents, strategic partners or other intermediaries.
WE ARE SUBJECT TO SUBSTANTIAL AND CHANGING GOVERNMENT REGULATION.
As a multinational telecommunications company, we are subject to varying
regulation in each jurisdiction in which we provide services. We may be affected
indirectly by the laws of other jurisdictions applicable to foreign carriers
with which we do business. In general, the United States FCC and the state
public service commissions (PSCs) throughout the United States have the
authority to condition, modify, cancel, terminate or revoke our operating
authority for failure to comply with federal or state law and to impose fines or
other penalties for such violations. Because regulatory frameworks in many
foreign countries are relatively new, we cannot adequately assess the potential
for enforcement action in such countries. Any regulatory enforcement action by
United States, state or federal or foreign authorities could have a material and
adverse effect on our business.
In providing services in the United States, we are subject to the
Communications Act of 1934, as amended by, among others, the Telecommunications
Act of 1996 and FCC regulations, as well as applicable laws and regulations of
the various states. If we fail to maintain proper federal and state
certification or tariffs, or have any difficulties or delays in obtaining
required certifications, our business, financial condition and results of
operations could be materially and adversely effected. Moreover, our ability to
compete with other service providers, continue providing the same services, or
introduce new services may be affected by changes in regulatory requirements. We
cannot predict the impact on our operations of any such changes in applicable
regulatory requirements.
10
<PAGE>
The FCC and certain PSCs require telecommunications carriers to obtain prior
approval to provide certain telecommunications services, assign or transfer
control of licenses, reorganize corporate structure, acquire operations, and
assign assets. In addition, to issue securities in six states in which we are
certificated, we must notify, or obtain prior approval from, the state
regulators. These requirements may delay or deter, or prevent a change in
control of our company due to, our issuance of our securities. Moreover, in
general, state regulatory authorities can condition modify, cancel, terminate or
revoke certificates of authority for failure to comply with state law and/or the
rules, regulations, and policies of a PSC.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.
Our recent growth and expansion and our strategy to continue such growth and
expansion has placed, and we expect it to continue to place, a significant
strain on our management, operational and financial resources and systems and
controls. To manage our growth effectively, we must continue to expand our
network and infrastructure, enhance our management, expend financial and
information systems, attract additional managerial, technical and customer
service personnel, and train and manage our personnel base. If we do not
forecast our traffic accurately, however, we may suffer insufficient or
excessive transmission facilities and disproportionately high fixed expenses. In
addition, as we increase our service offerings and expand our target markets in
the United States and overseas, our customer service, marketing and
administrative resources will encounter additional demands. Our failure to
successfully manage our expansion could materially and adversely effect our
business.
WE ARE EXPOSED TO CERTAIN RISKS ASSOCIATED WITH EXPANSION AND OPERATION OF OUR
NETWORK.
We depend largely upon our ability to operate, expand, manage and maintain
our network to deliver high quality, uninterrupted telecommunications services.
In particular, our ability to increase revenues depends on our ability to expand
the capacity of, and eliminate bottlenecks that develop from time to time on,
our network. If our network or other systems or hardware causes interruptions in
our operations we could experience material and adverse effects on our business,
including adverse effects on our customer relationships. Our operations depend
on our ability to successfully integrate new technologies and equipment into the
network. As we increase our traffic, build-out our network, and integrate new
technologies and equipment into our network, we will place additional strains on
our systems and we cannot assure you that we will not experience system
failures. In addition, while we perform the majority of the maintenance of our
owned transmission facilities, we depend on services provided by switch
manufacturer Nortel under a service and support contract to resolve problems
with our key New York City-based switch that we are unable to correct. We also
depend on third parties to maintain facilities that we lease and fiberoptic
cable lines which we have a use arrangement. Frequent, significant or prolonged
system failures, or difficulties experienced by customers in accessing or
maintaining connection with our network could substantially damage our
reputation, result in customer attrition and have a material and adverse effect
on our business.
WE DEPEND ON KEY CARRIER CUSTOMERS.
We depend on a few key carrier customers for a substantial percentage of our
net revenue. Although the composition of our carrier customer base varies from
period to period, during the quarter ended September 30, 1999, our five largest
carrier customers accounted for approximately 34% of our net revenues. In
addition, mergers and alliances in the telecommunications industry may reduce
the number of customers that purchase or are available to purchase our wholesale
international long distance services and, in general, our carrier customers may
terminate our agreements and arrangements on short notice without penalty, and
need not maintain their current levels of our services. A loss of a significant
amount of carrier business from a key customer or an overall reduction in our
number of customers could have a material and adverse effect on our business.
11
<PAGE>
WE DEPEND ON THE AVAILABILITY OF TRANSMISSION FACILITIES.
Historically, we have carried and terminated substantially all of our
customers' telephone calls through transmission lines of facilities-based long
distance carriers, which provide us transmission capacity through a variety of
lease and resale arrangements (off-net). Our future profitability depends in
part on our ability to use transmission facilities cost-effectively. Currently,
however, because the prices we are charged in our transmission line agreements
for leasing and resale vary with our use and other factors, we are exposed to
unanticipated price increases and service cancellations by the carriers.
Therefore, our ability to maintain and expand our business is dependent, in
part, upon our ability to maintain satisfactory relationships with these
carriers, many of which are, or may in the future become, competitors. Although
we believe that our relationships with these carriers generally are
satisfactory, if we fail to maintain satisfactory relationships with one or more
of these carriers, we could experience a material and adverse effect on our
business.
As our traffic volume increases in particular international markets, we
intend to reduce our use of such variable usage leasing arrangements, and enter
into fixed, non-cancelable leasing arrangements on a longer-term basis and/or
construct or acquire additional transmission facilities of our own. However, if
we enter into such fixed arrangements and/or increase our owned transmission
facilities and we incorrectly project traffic volume in particular markets, we
would experience higher fixed costs without any corresponding increase in
revenue. We have certain access rights in and to, a number of undersea fiber
optic cable systems. As a key element in our business strategy, we intend to
acquire additional access rights to undersea fiber optic cable transmission
lines through partial ownership or through lease and other access arrangements
on negotiated terms that may vary with industry and market conditions. We offer
no assurance that we can secure under sea fiber optic cable transmission lines
to meet our current and/or projected International traffic volume, that we can
secure such lines on satisfactory terms, or that we may not over or under invest
in such lines due to inaccurate traffic forecasts.
WE DEPEND ON FOREIGN CALL TERMINATION ARRANGEMENTS.
We currently offer U.S.-originated international long distance service
globally through a network of operating agreements, resale arrangements, transit
and refile agreements (whereby we use an intermediate country to carry our calls
to the destination in a third country) or without the knowledge (refiling) of
the operator in the destination country, and various other foreign termination
arrangements. These agreements permit us to carry and terminate using the lowest
cost route. As an essential component of our business strategy, we intend to
develop our ability to similarly terminate traffic cost-effectively in our
targeted markets through: operating agreements with PTTs in countries that have
yet to become deregulated so we will be able to terminate traffic in, and
receive return traffic from those countries; operating agreements with PTTs and
emerging carriers in foreign countries whose telecommunications markets have
been deregulated so we will be able to terminate traffic in those countries; and
interconnection agreements with PTTs in each of the countries in which we have
operating facilities so we will be able to terminate traffic in each such
country.
Although our operating agreements and termination arrangements are
sufficient for our current business and traffic levels, we offer no assurance
that we will be able to negotiate additional operating agreements or termination
arrangements or maintain such existing or additional agreements or arrangements
in the future. Cancellation of certain operating agreements or other termination
arrangements could have a material and adverse effect on our business. In
addition, the failure to enter into additional operating agreements or
termination arrangements could limit our ability to increase our services to our
current target markets, gain entry into new markets, or otherwise increase our
revenues and control our costs.
WE PLACE GREAT DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS.
We depend on our ability to record and process significant amounts of data
quickly and accurately to route our calls efficiently and cost-effectively, to
bill for the services we provide to customers, to ensure
12
<PAGE>
that we are properly charged by vendors for services we use, to effectively
monitor settlements for service, to achieve operating efficiencies and to
otherwise manage our growth. Difficulties or delays in the acquisition,
implementation, integration and ongoing use of any additional management
information systems resources may disrupt our operations and materially and
adversely affect our business, and operations.
OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 PROBLEMS.
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
United States and internationally (commonly referred to as the "Y2K" issue). In
the fourth quarter of 1997, we formed a Y2K compliance team to determine the
extent to which we are affected by the Y2K issue and to formulate a Y2K
compliance plan. Since then, we have been reviewing our embedded technology and
infrastructure equipment, as well as non-embedded technology equipment to
identify those that contain two-digit year codes. We have taken all commercially
reasonable steps or actions necessary to upgrade our material infrastructure and
corporate facilities in order to achieve Y2K compliance. In addition, we are
working actively with our suppliers, vendors and customers to assess their
compliance and remediation efforts and our exposure to Y2K problems that may be
caused by the failure of such suppliers, vendors and customers to become Y2K
compliant in a timely manner.
We are 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 embedded technology and infrastructure
equipment area of concern consists primarily of switches, POPs, fiber optic
cables and various platforms. Much of this equipment was purchased from third
party vendors and was certified by the vendors to be Y2K compliant. Furthermore,
we require suppliers to warrant that products sold or licensed to us are Y2K
compliant. We cannot offer you assurance of the accuracy or completeness of any
such representations made to us.
Non-embedded technology systems include predominately applications and
interfacing software used for our monitoring and managing the customer call
center and the customer care database, and network support. Much of this
equipment previously has been upgraded to be Y2K compliant through software
upgrades and the purchase of new systems. We currently communicate with our
critical suppliers, vendors and customers about their plans and progress in
addressing the Y2K issue and have completed detailed evaluations of the most
critical third parties.
Many of the residential and commercial markets include areas of emerging
economies in which the Y2K compliance issue does not appear to be a priority. In
particular, we are aware that certain foreign carriers with which we have
relationships have not yet been able to certify Y2K compliance, and although
they are addressing the Y2K issue, we cannot assure you that these carriers will
be Y2K compliant by the end of 1999. While we plan to monitor progress made in
these areas to mitigate any future exposure, we have limited, if any, control
over the progress made by third parties, and therefore, we are unable to predict
the potential effect on our operations if third parties in these foreign markets
fail to adequately address the Y2K issue. As we continue to acquire new
companies, we have implemented and will continue to implement our comprehensive
Y2K assessment and remediation plan.
While all companies we have acquired to date are on schedule to be Y2K
compliant by December, 1999, we cannot assure you that all previously acquired
companies will be Y2K compliant by January 1, 2000. We face many risks
associated with the Y2K issue, including the possibility of a failure of our
routing and compression equipment, computer, and non-information technology
systems. Such failures could have a material and adverse effect upon our
operations and may cause systems malfunctions, incorrect or incomplete
transaction processing, inability to reconcile accounting books and records,
inability to manage our business and consequent customer loss and litigation. In
addition, even if we successfully become Y2K compliant, the failure of third
parties with which we have financial or operational relationships, such as
13
<PAGE>
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 materially
adversely affect our results of operations. We are developing contingency plans
for our key technology systems. We cannot assure you, however, that these
contingency plans successfully will avoid a service disruption. Total costs
incurred as of September 30, 1999 specifically associated with becoming Y2K
compliant have been approximately $550,000. No further material costs are
expected to be incurred to become Y2K compliant. 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.
WE DEPEND ON KEY AND SCARCE EMPLOYEES IN A COMPETITIVE MARKET FOR SKILLED
PERSONNEL.
To a significant degree, our success depends upon the continued
contributions of our management team including, in particular, Ram Mukunda, our
Chairman, President, Chief Executive Officer and Treasurer, and Prabhav V.
Maniyar, our Senior Vice President, Chief Financial Officer and Secretary.
Though we have employment agreements with Messrs. Mukunda and Maniyar and
maintain "key man" life insurance on Mr. Mukunda, loss of one or both of their
services could have a material and adverse effect on our business. Our success
also depends on the continued contributions of our current personnel and on our
ability to attract and retain additional qualified management and technical,
marketing and customer service personnel. Competition for qualified personnel in
the telecommunications industry is intense and, from time to time, there are a
limited number of persons with knowledge of and experience in particular sectors
of the industry who may be available to us. We often undertake a lengthy process
in locating personnel with the combination of skills and attributes required to
implement our strategies, and we can offer you no assurance that we will be
successful in attracting and retaining such personnel, especially management
personnel and personnel for foreign offices. The loss of the services of key
personnel, or our inability to attract additional qualified personnel, could
have a material and adverse effect on our operations and our ability to
implement our business strategies.
CONTROL BY CURRENT STOCKHOLDERS.
As of September 30, 1999, our executive officers and directors beneficially
owned approximately 3,755,291 shares of our common stock representing
approximately 39.78% of the outstanding shares of our common stock. Of these
amounts, Mr. Mukunda beneficially owns approximately 3,578,675 shares. Our
executive officers and directors as a group, or Mr. Mukunda, acting
individually, will be able to exercise significant influence over such matters
as the election of our directors and other fundamental corporate transactions
such as mergers, asset sales and the sale of our company.
14
<PAGE>
THE SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock held by the selling shareholders as of December
23, 1999, the number of shares being registered to permit sales from time to
time by such selling shareholders and the total beneficial ownership of shares
of our common stock if all shares so registered should be sold by the selling
shareholders. Beneficial ownership is determined by the rules of the SEC and
includes voting or investment power of the shares beneficially owned. All shares
are beneficially owned, and sole voting and investment power is held by the
person named, unless otherwise noted. This information assumes the sale of all
shares listed under "Number of Shares of Common Stock to be Offered." It also
assumes that none of the selling shareholders will sell securities which are
beneficially owned by them and are not listed in such column or purchase or
otherwise acquire additional shares of our common stock or securities
convertible into or exchangeable for our common stock.
<TABLE>
<CAPTION>
COMMON STOCK TO
BE OWNED AFTER
COMMON STOCK THE OFFERING
OWNED PRIOR TO SHARES TO NUMBER AND
NAME AND POSITION THE OFFERING BE SOLD (1) PERCENT (2)
----------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
AKKAD (Nominee Name for
Acorn Investment Trust,
Series Designated Acorn
Fund)..................... 230,400 32,000 198,400(1.7%)
Apogee Fund, L.P............ 75,000 0
Argosy Technology Partners,
L.P....................... 40,000 0
Bear Stearns Security Corp.
Cust. for Gerald P.
Gaines, IRA Rollover...... 2,000 0
Bear Stearns Security Corp.
Cust. for David S. Callan,
IRA....................... 1,000 0
Joseph O. Bound............. 3,000 0
Capstone Equities L.P....... 52,500 7,500 45,000
Kien H. Chen and Yung San
Chen...................... 8,500 5,000 3,500
Circle T. Partners, L.P..... 40,000 0
John M. Cooney.............. 3,000 2,000 1,000
EDJ Limited................. 20,000 0
James J. Feeney............. 4,000 0
Frorer Partners, L.P........ 50,000 0
Georgetown University (James
R. Schlesinger Fund)...... 25,000 0
Geary Partners.............. 25,000 0
JMG Triton Offshore Fund,
Ltd....................... 30,000 25,000 5,000
Patrick Grande.............. 2,000 0
Gruber & McBaine
International............. 23,400 10,000 13,400
Jon D. Gruber............... 15,500 10,000 5,500
John J. Allen, Jr........... 2,000 0
Michael J. Kuntz............ 3,000 2,000 1,000
Lagunitas Partners, L.P..... 51,000 20,000 31,000
Lancaster Investment
Partners, L.P............. 105,000 0
Mary M. Losty............... 12,500 0
Losty Capital Management.... 62,500 0
Stephen J. Massocca......... 25,000 0
Ehud Nahum.................. 4,500 0
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK TO
BE OWNED AFTER
COMMON STOCK THE OFFERING
OWNED PRIOR TO SHARES TO NUMBER AND
NAME AND POSITION THE OFFERING BE SOLD (1) PERCENT (2)
----------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Avi Nechemia and Dana
Nechemia.................. 4,500 0
Societe Generale............ 25,000 5,000 20,000
Oppenheimer Enterprise
Fund...................... 187,500 0
The Paisley Fund, L.P....... 20,000 0
The Paisley Pacific Fund.... 40,000 0
Pequot Scout Fund, L.P...... 175,000 0
Polar Capital L.P........... 37,000 0
Leonid Polishuk............. 6,500 4,000 2,500
Porter Partners, L.P........ 55,000 0
Presidio Partners........... 50,000 0
RCW, Sr. Stock Account
Partnership............... 27,000 13,000 14,000
RS Diversified Growth
Fund...................... 40,000 0
RS MicroCap Growth Fund..... 50,000 0
Sandler Associates.......... 100,000 0
Sandler Communications
Offshore Fund, Inc........ 20,000 0
Janet M. Santkulis.......... 3,000 0
Keith A. Storti............. 3,000 2,000 1,000
TCMP(3)..................... 25,000 0
Edward O. Thorp............. 42,000 15,000 27,000
Jeffrey Thorp............... 12,000 0
Turner Micro Cap Growth
Fund...................... 50,000 0
Carroll A. Weinberg, M.D.... 7,000 2,000 5,000
Oregon State Treasury....... 278,000 38,000 240,000(2.1%)
William C. Clement Trustee
UTA dtd. 2/8/91........... 3,000 0
Worthington Growth L.P...... 40,000 0
Alza Corporate Retirement
Plan(3)................... 6,000 0
Andrew Heiskell(3).......... 5,000 0
Asphalt Green, Inc.(3)...... 2,000 0
Butler Family LLC(3)........ 3,000 0
City of Milford Pension and
Retirement Fund(3)........ 27,000 0
City of Stamford Firemen's
Pension Fund(3)........... 13,000 0
Dean Witter Foundation(3)... 8,000 0
Susan Uris Halpern(3)....... 6,000 0
HBL Charitable
Unitrust(3)............... 3,000 0
Helen Hunt(3)............... 3,000 0
Lazar Foundation(3)......... 3,000 0
Peter Looram(3)............. 1,500 0
Domenic J. Mizio(3)......... 6,000 0
Morgan Trust of the Bahamas
Ltd./as Trustee u/a/d
11/30/93(3)............... 7,000 0
Jeanne L. Morency(3)........ 2,000 0
Murray Capital LLC(3)....... 3,000 0
National Federation of
Independent Business
(NFIB)--Corporate
Account(3)................ 6,000 0
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK TO
BE OWNED AFTER
COMMON STOCK THE OFFERING
OWNED PRIOR TO SHARES TO NUMBER AND
NAME AND POSITION THE OFFERING BE SOLD (1) PERCENT (2)
----------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
NFIB Employee Pension
Trust(3).................. 9,000 0
Norwalk Employees' Pension
Plan(3)................... 14,000 0
Psychology Associates(3).... 1,000 0
Public Employee Retirement
System of Idaho(3)........ 70,000 0
Roanoke College(3).......... 7,000 0
The Jenifer Altman
Foundation(3)............. 7,000 0
Wells Family LLC(3)......... 9,000 0
William B. Lazar(3)......... 2,000 0
Harold & Grace Willens
JTWROS(3)................. 3,000 0
Wolfson Investment Partners
L.P.(3)................... 6,000 0
Albert L. Zesiger(3)........ 10,000 0
Barrie R. Zesiger(3)........ 7,000 0
Alain Bigio................. 169,629 0
Eric Saiz................... 174,629 0
Yves Bigio.................. 40,742 0
First Union................. 269,042 0
Judy Reed Smith............. 3,000 0
Richard Prins(4)............ 33,000 0
Boenning & Scattergood...... 20,000 0
Charles Place............... 9,000 0
E. Peter Malekian........... 1,000 0
Mark Rust................... 4,400 0
Steve Shea.................. 23,000 0
Ferris, Baker Watts......... 39,600 0
Gregory Berlacher........... 5,000 0
Robert Berlacher............ 5,000 0
Daniel Gardner.............. 5,000 0
Ronald Spengler............. 5,000 0
Karen M. Dauphinee.......... 2,500 2,500 0
Cohanzick Partners, LP...... 20,000 20,000 0
Ashok Saxena................ 188,094 188,094 0
Rageev Aggarwal............. 2,629 2,629 0
------- -------
</TABLE>
- ------------------------
(1) One or more supplements to this prospectus may be filed pursuant to Rule
424, or otherwise, under the Securities Act to describe any material
arrangements for sale of the shares, if such arrangements are entered into
by any selling shareholder.
(2) Represents less than 1% unless otherwise indicated.
(3) Shareholder purchased common stock being sold in this Offering through the
Zesiger Capital Group, LLC.
(4) Member of our Board of Directors.
The following table sets forth certain information as of the date hereof
with respect to those selling shareholders holding warrants to purchase shares
of our common stock and the shares of our common stock underlying the warrants.
Because the selling shareholders may sell some or all of their warrants or the
underlying warrant shares we cannot estimate the aggregate amount of warrants
and/or the underlying warrant shares that may be owned by each selling
shareholder in the future. The information included in the table was obtained
from the Warrant Agent (as that term is used in the Warrant Agreement dated
17
<PAGE>
May 21, 1998 between us and First Union National Bank.) This information may
change from time to time, and, if required, such changes will be set forth in a
supplement or supplements to this Prospectus.
Unless otherwise set forth below, none of the selling shareholders has, or
within the past three years has had, any position, office or material
relationship with us or our predecessors.
<TABLE>
<CAPTION>
SECURITIES BENEFICIALLY OWNED
PRIOR TO THE OFFERING
---------------------------------
NUMBER OF NUMBER OF
NAME WARRANTS WARRANTS SHARES(1)
- ---- --------- ------------------
<S> <C> <C>
Bank of New York (The)...................................... 21,850 27,343
Bankers Trust Company....................................... 32,330 40,458
Boston Safe Deposit and Trust Company....................... 1,250 1,564
Brown Brothers Harriman & Co................................ 17,500 21,900
Chase Manhattan Bank........................................ 12,835 16,062
Citibank, N.A............................................... 7,000 8,759
Donaldson, Lufkin and Jenrette Securities Corporation....... 5,900 7,383
First Union National Bank (Main)(2)......................... 500 625
First Union National Bank(2)................................ 1,300 1,626
Investors Bank & Trust/M.F. Custody......................... 3,400 4,254
Lehman Brothers, Inc........................................ 14,630 18,308
Northern Trust Company (The)................................ 310 387
Paine Webber Incorporated................................... 190 238
PNC Bank, National Association.............................. 170 213
State Street Bank and Trust Company......................... 40,585 50,788
Swiss American Securities, Inc.............................. 50 62
U.S. Bank National Association.............................. 200 250
</TABLE>
- ------------------------
(1) Represents the number of whole shares of the Company's Common Stock which
may be acquired upon the exercise of the Warrants assuming that all of the
Warrants held by such beneficial owner are exercised. Each Warrant is
exercisable for 1.25141 shares of Common Stock at an exercise price of
$24.20 per share.
(2) Serves as Trustee under the Indenture between the Company and Trustee dated
May 21, 1998 and as Warrant Agent under the Warrant Agreement between the
Company and Warrant Agent dated May 21, 1998.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders. Selling
shareholders, as used in this prospectus, includes donees, pledgees, transferees
or other successors in interest who may receive shares received from a named
selling shareholder as a gift, partnership, distribution or other non-sale
related transfer after the date of this prospectus. The selling shareholders
will act independently of the company in making decisions with respect to the
timing, manner and size of each sale. The selling shareholders may offer their
shares in various amounts and at various times in one or more of the following
transactions:
- in ordinary broker's transactions on the Nasdaq National Market or any
national securities exchange on which our common stock may be listed at
the time of sale;
- in the over-the-counter market;
- in privately negotiated transactions other than in the over-the-counter
market;
- in connection with short sales of other shares of our common stock in
which the shares are redelivered to close out positioning;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options;
18
<PAGE>
- pursuant to Rule 144; or
- in a combination of any of the above transactions.
The selling shareholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling shareholders may use broker-dealers to sell their shares. If
this happens, broker-dealers will either receive discounts or commissions from
the selling shareholders, or they will receive commissions from purchasers of
shares for whom they acted as agents. This compensation may exceed customary
commissions.
The selling shareholders and the broker-dealers to or through whom sale of
the shares may be made could be deemed to be "underwriters" within the meaning
of the Securities Exchange Act, and their commissions or discounts and other
compensation received in connection with such sales may be regarded as
underwriters' compensation.
The selling shareholders have not advised us of any specific plans for the
distribution of the shares covered by this prospectus. When and if we are
notified by any of the selling shareholders that any material arrangement has
been entered into with a broker-dealer or underwriter for the sale of a material
portion of the shares covered by this prospectus, a prospectus supplement or
post-effective amendment to the registration statement will be filed setting
forth:
- the name of the participating broker-dealer(s) or underwriters;
- the number of shares involved;
- the price or prices at which such shares were sold by the selling
shareholders;
- the commissions paid or discounts or concessions allowed by the selling
shareholders to such broker-dealers or underwriters; and
- other material information.
We have agreed to pay all costs relating to the registration of the shares
(other than fees and expenses, if any, of counsel or other advisors to the
selling shareholders). Any commissions or other fees payable to broker-dealers
in connection with any sale of the shares will be borne by the selling
shareholders or other party selling such shares.
LEGAL MATTERS
The validity of the shares of common stock offered will be passed upon for
us by Piper Marbury Rudnick & Wolfe, LLP Washington, DC.
EXPERTS
The financial statements and schedule incorporated by reference in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
WHERE YOU CAN FIND MORE INFORMATION
Because we are subject to the informational requirements of the Securities
Exchange Act of 1934, we file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms at the SEC's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the SEC's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Our SEC filings are also available to the public from
the SEC's website at "http://www.sec.gov". In addition, any of our SEC filings
may also be inspected and copied at the offices of The Nasdaq Stock Market,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
19
<PAGE>
We have filed with the SEC a registration statement on Form S-3 for the
common stock offered by this prospectus. As permitted by the rules and
regulations of the SEC, we have omitted certain information in the prospectus
set forth or incorporated by reference in the registration statement and the
exhibits and schedules to the registration statement. You may inspect and obtain
the registration statement, including its exhibits and schedules incorporated by
reference in the registration statement as described in the preceding paragraph.
Statements contained in this prospectus concerning the contents of any document
we refer to are not necessarily complete and in each instance we refer you to
the copy of that document of the applicable document filed as an exhibit to the
registration statement with the SEC.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
to those documents. The information incorporated by reference is considered to
be part of this prospectus, and the information that we file at a later date
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below as well as any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
(a) Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
(b) Our Current Report on Form 8-K filed on December 30, 1999.
(c) All other reports pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 since the end of our fiscal year ended
December 31, 1998.
(d) The description of our common stock which is contained in our
registration statement on Form 8-A filed September 15, 1997, as amended on
October 8, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Startec Global Communications Corporation
10411 Motor City Drive
Bethesda, MD 20817
Attention: Chief Financial Officer
(301) 365-8959
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are statements other
than historical information or statements of current condition. You may identify
some forward-looking statements by the use of terms, such as "believes",
"anticipates", "intends", or "expects". These forward-looking statements relate
to our plans, objectives and expectations for future operations. In light of the
risks and uncertainties inherent in all forward-looking statements, we do not
represent that we will achieve or we will realize our objectives or plans. Our
revenues and results of operations are difficult to forecast and could differ
materially from those projected in the forward-looking statements contained in
this prospectus 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 additions and
attrition, significant industry competition and rapid technological change.
These factors should not be considered exhaustive; we do not take any obligation
to release publicly the results of any future revisions we may make to
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 10,432.56
Printing fees............................................... 25,000.00
Accounting fees and expenses................................ 20,000.00
Legal fees and expenses..................................... 50,000.00
Miscellaneous............................................... 0
Total..................................................... $105,432.56
</TABLE>
- ------------------------
* Estimated, except for SEC registration fee. No portion of these expenses
will be borne by the selling shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which permits a corporation in its certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions), or (iv) for any transactions from which the director derived an
improper personal benefit. The Registrant's Certificate of Incorporation
contains provisions permitted by Section 102(b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including directors and officers, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such director, officer, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal actions or
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify directors and/or officers in an action or
suit by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the director
or officer is adjudged to be liable to the corporation. Where a director or
officer is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such director or officer actually and reasonably incurred.
The Registrant's Certificate of Incorporation provides indemnification of
directors and officers of the Registrant to the fullest extent permitted by the
DGCL. Pursuant to the respective registration rights agreements entered into
with the Registrant, the selling stockholders have agreed to indemnify directors
and officers of the Registrant against certain liabilities, including
liabilities under the Securities Act.
The Registrant maintains liability insurance for each director and officer
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of the Registrant.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<C> <S>
4.1* Form of Registration Rights Agreement
5.1* Opinion of Piper Marbury Rudnick & Wolfe, LLP
23.1* Consent of Arthur Andersen LLP
23.2* Consent of Piper Marbury Rudnick & Wolfe, LLP (included in
Exhibit 5.1)
24.1** Power of Attorney (contained on signature page).
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement. (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in the Registration Statement; Provided, however, that the
undertakings set forth in paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d)of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at the termination
of the offering.
(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bethesda, State of Maryland, on January 12, 2000.
<TABLE>
<S> <C> <C>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
By: /s/ PRABHAV V. MANIYAR
-----------------------------------------
Prabhav V. Maniyar
CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<C> <S> <C>
/s/ PRABHAV V. MANIYAR
------------------------------------------- Chief Financial Officer January 12, 2000
Prabhav V. Maniyar
</TABLE>
II-3
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Ram
Mukunda and Prabhav V. Maniyar and each of them, as his lawful attorney-in-fact
and agent, each with full power of substitution and resubstitution for him and
in his name, place and stead in any and all capacities to execute in the name of
each such person who is then an officer or director of the registrant any and
all amendments (including post-effective amendments) to this registration
statement and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing required or necessary to be done in and about the
premises as fully as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<C> <S> <C>
President, Chief Officer, December 27, 1999
/s/ RAM MUKUNDA Treasurer And Director
------------------------------------------- (Principal Executive
Ram Mukunda Officer)
Senior Vice President, December 27, 1999
/s/ PRABHAV V. MANIYAR Chief Financial Officer,
------------------------------------------- Secretary and Director
Prabhav V. Maniyar (Principal Financial and
Accounting Officer)
December , 1999
------------------------------------------- Director
Sudhakar Shenoy
December , 1999
------------------------------------------- Director
Nazir G. Dossani
/s/ RICHARD K. PRINS December 27, 1999
------------------------------------------- Director
Richard K. Prins
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------ --------
<C> <S> <C>
4.1* Form of Registration Rights Agreement
5.1* Opinion of Piper Marbury Rudnick & Wolfe, LLP
23.1* Consent of Arthur Andersen LLP
23.2* Consent of Piper Marbury Rudnick & Wolfe, LLP (included in
Exhibit 5.1)
24.1** Power of Attorney (contained on signature page).
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
COMMON STOCK
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of December , 1999 by and among Startec Global Communications
Corporation, a Delaware corporation (the "Company"), and the holders of
Registrable Securities (the "Holders") signatory to this Agreement.
This Agreement is made pursuant to the Subscription Agreements (the
"Subscription Agreements") of even date herewith by and among the Company and
certain Purchasers (including the Holders) relating to a private placement (the
"Private Placement") pursuant to which such Purchasers have agreed to purchase
from the Company certain shares of its Common Stock. In order to induce the
Holders to enter into the Subscription Agreements, the Company has agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Holders.
The parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, certain terms not
otherwise defined herein shall have the meanings set forth in the Subscription
Agreements, and the following terms shall have the following respective
meanings:
"Affiliate" of a specified Person means any other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by or
is under common control with the Person specified, or who holds or beneficially
owns 50% or more of the equity interest in the Person specified or 50% or more
of the voting securities of the Person specified.
"Commission" means the Securities and Exchange Commission.
"Company" means Startec Global Communications Corporation, a Delaware
corporation or any successor to it or to its business.
"Common Stock" means the Common Stock of the Company, par value $.01
per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Expiration Date" means the earlier of (i) the second (2nd) anniversary
of the final closing date for the purchase and sale of the Shares under the
Private Placement or (ii) the date on which no Holder or his permitted
transferee or assignee (other than a person who purchases
<PAGE>
shares pursuant to a registration statement filed pursuant to this
Agreement)holds any Registrable Securities.
"Holders" shall have the meaning set forth in the first paragraph of
this Agreement, and shall include their respective successors and assigns;
PROVIDED, HOWEVER, that the registration rights hereunder shall only be
available to the initial holders and transferees or assignees who are Affiliates
of such Initial Holders who agree to be bound by the provisions of this
Agreement.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or governmental or other agency or political
subdivision thereof.
"Register," "registered" or "registration" refer to a registration
effected by preparing and filing a registration statement or similar document
with the Commission in compliance with the Securities Act and pursuant to Rule
415 under the Securities Act or any successor rule providing for offering of
securities on a continuous basis ("Rule 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the Securities and Exchange
Commission.
"Registrable Securities" means the shares of Common Stock of the
Company initially issued and sold by the Company pursuant to the Purchase
Agreement and owned by a Holder (or a transferee or assignee who is an affiliate
of such Holder), and any shares of Common Stock issued or issuable pursuant to a
stock split, stock dividend, recapitalization or similar event with respect to
the Shares, or any shares of Common Stock otherwise issuable with respect to the
Shares. As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when such securities shall have been disposed of
pursuant to an effective registration statement, or such securities shall have
been transferred to any Person other than the Holders pursuant to Rule 144 (or
any successor provision) under the Securities Act or they shall have ceased to
be held by the Holders or any transferee or assignee who is an Affiliate of such
Holders.
"Registration Expenses" means all expenses incident to the performance
of or compliance with the registration rights granted herein, including, without
limitation, all registration, filing, listing and NASD fees, all fees and
expenses of complying with securities or blue sky laws, all printing expenses,
accounting fees and the fees and expenses of the Company's counsel; PROVIDED,
HOWEVER, that Registration Expenses shall not include underwriting discounts,
broker or similar selling commissions or fees and transfer taxes, if any,
applicable to the Registrable Securities, all of which shall be borne by the
Selling Holders.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute thereto, and the rules and regulations of the Commission
promulgated thereunder.
"Selling Holders" means those Holders (or permitted transferees or
assignees of such Holders) who are participating in a registration pursuant to
Section 2 hereof and who are selling
<PAGE>
Registrable Securities thereunder.
"Shares" means the Company's Common Stock issued and sold in the
Private Placement pursuant to the Subscription Agreements.
<PAGE>
"Subscription Agreements" shall have the meaning set forth in the
second paragraph of this Agreement.
"Violation" shall have the meaning set forth in Section 4(a).
2. REGISTRATION RIGHTS.
(a) MANDATORY REGISTRATION. Subject to paragraph 2(b)
below, within sixty (60) days from the final closing of the Private
Placement, the Company agrees to file a registration statement on Form
S-3 with the Commission registering for sale under the Securities Act
the Shares. If the Company is unable to use Form S-3, another form of
registration statement for which the Company is eligible will be used.
If the Company does not file a registration statement for the Shares on
the appropriate form, within sixty (60) days of the completion of the
final closing of the Private Placement (subject to (b) below), the
Company will issue to each Purchaser in the Private Placement, for no
additional consideration, an additional 10% of the Shares sold to each
such Investor in the Private Placement. Any Holder who does not wish to
include Registrable Shares in the registration statement to be filed by
the Company pursuant to this Section 2(a) shall provide written notice
to the Company prior to the date upon which such filing is made with
the Commission.
(b) If the Company shall furnish to the Holders a
certificate signed by its President stating that in the good faith
judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its shareholders for such registration
statement to be filed by reason solely of a material activity or
pending transaction (such as a material acquisition, joint venture,
merger, consolidation or financing transaction) and it is therefore
advisable to defer the filing of such registration statement, the
Company shall have a one-time right to defer such filing for a period
of not more than sixty (60) days after the date upon which the Company
would otherwise have been required to file a registration statement
pursuant to Section 2(a). The Company hereby confirms that it is not
aware of any event, development, fact or state of affairs that exists
as of the date hereof that constitutes, or that would reasonably be
expected to lead to, a material activity or pending transaction within
the meaning of the preceding sentence.
(c) By executing this Agreement, each Holder acknowledges
that the Company's obligation to register is limited to one
registration statement which becomes effective under the Securities
Act, and, provided that the Company complies with its obligations under
this Agreement, no further registration statements (other than required
amendments or supplements to the original registration statement) will
be filed for the benefit of the Holders.
(d) EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
shall use best
<PAGE>
efforts to obtain effectiveness of the registration statement as soon
as practicable and shall continue to use its best efforts to maintain
such effectiveness for the registration until the Expiration Date. Any
registration pursuant to this Agreement shall not be deemed to have
been effected unless it has become effective with the Commission.
Notwithstanding the foregoing, a registration statement will not be
deemed to have been effected if after it has become effective under the
Securities Act, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or any court proceeding for any reason. The Company
shall use its best efforts to prevent the issuance of any stop order or
other suspension of effectiveness of a registration statement, and, if
such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Holder who holds
Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and
the resolution thereof.
(e) The Company may rely and shall be protected in
relying upon any resolution, certificate, opinion, request,
communication, demand, receipt or other paper or document in good faith
believed by it to be genuine and to have been signed or presented by
the proper party or parties. The Company may act in reliance upon the
advice of its counsel in reference to any matter in connection with
this Agreement and shall not incur any liability for any action taken
in good faith in accordance with such advice. In the event the Company
receives conflicting instructions regarding any action to be taken or
withheld hereunder, the Company may suspend further action relating to
such action until such time as the conflicting instructions are
resolved by the parties giving the same or until the Company is
instructed to take or withhold the requested action by a final order
from which no appeal may be taken issued by a court of competent
jurisdiction.
(f) REGISTRATION EXPENSES. The Company shall pay all
Registration Expenses incurred in connection with the registration of
Registrable Securities pursuant to Section 2(a).
(g) ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that it meets as of the date hereof the requirements for the
use of Form S-3 for registration of the resale by a Holder of the
Registrable Securities.
3. REGISTRATION PROCEDURES.
(a) In connection with the Company's obligation to effect
the registration of any Registrable Securities under the Securities Act
as provided in Section 2, the Company, as expeditiously as possible and
subject to the terms and conditions herein, will use its best efforts
to:
(i) to effect the registration of the registration
statement prepared and filed with the Commission pursuant to
Section 2(a) above and to cause such
<PAGE>
registration to become effective as soon as practicable;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such
registration statement until such time as all of such
securities have been disposed of in accordance with the
intended methods of disposition by the Selling Holders thereof
set forth in such registration statement or, if earlier, until
the Expiration Date;
(iii) furnish to the Selling Holders such number of
conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus
contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any
other prospectus filed under the Securities Act, in conformity
with the requirements of the Securities Act, and such other
documents, in each case, as the Selling Holders may reasonably
request;
(iv) register or qualify all Registrable Securities
covered by such registration statement under such other United
States state securities or blue sky laws of such jurisdictions
as the Selling Holders shall reasonably request, to keep such
registration or qualification in effect for so long as such
registration remains in effect, and take any other action
which may be reasonably necessary or advisable to enable the
Selling Holders to consummate the disposition of the
Registrable Securities owned by the Selling Holders in such
jurisdictions, except that the Company shall not for any such
purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not
but for the requirements of this Section 3(a)(iv) be obligated
to be so qualified, subject itself to taxation in any such
jurisdiction, or consent to general service of process in any
such jurisdiction;
(v) immediately notify the Selling Holders at any
time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made, and promptly prepare
and furnish to the Selling Holders a reasonable number of
copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to
<PAGE>
make the statements therein not misleading in the light of the
circumstances under which they were made;
(vi) comply with all applicable rules and regulations
of the Commission, and not file (or withdraw or correct) any
amendment or supplement to such registration statement or
prospectus to which the Selling Holders shall have reasonably
objected in writing on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or
regulations thereunder;
(vii) provide a transfer agent and registrar for all
Registrable Securities covered by such registration statement
not later than the effective date of such registration
statement; and
(viii) promptly list all Registrable Securities
covered by such registration statement on any securities
exchange or automated inter-dealer quotation system on which
any of the Registrable Securities are then listed or traded.
(b) The Selling Holders agree that upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 3(a)(v), the Selling Holders will forthwith
discontinue their disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until
the Selling Holders' receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(a)(v) and, if so directed
by the Company, will deliver to the Company all copies, other than
permanent file copies, then in the Selling Holders' possession of the
prospectus relating to such Registrable Securities current at the time
of receipt of such notice and that they will immediately notify the
Company, at any time when a prospectus relating to the registration of
such Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event as a result of which
information previously furnished by the Selling Holders to the Company
for inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made.
(c) As a condition of the fulfillment of its obligations
under this Agreement, the Company may require the Selling Holders, at
their own expense, to furnish the Company with such information and
undertakings regarding such Holders and the distribution of such
securities as the Company may from time to time reasonably request in
writing to the extent necessary in order to cause the registration
statement to comply with the Securities Act, and the Holders, by their
execution hereof, agree to provide such information and make such
undertakings as are requested.
(d) In connection with the preparation and filing of each
registration statement
<PAGE>
under the Securities Act, the Company will give the Selling Holders,
and their respective counsel and accountants, the reasonable
opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the
Commission and each amendment thereof or supplement thereto, and will
give each of them such reasonable access to its books and records and
such reasonable opportunities to discuss the business of the Company
with its officers and the independent public accountants who have
certified its financial statements as shall be necessary to conduct a
reasonable investigation within the meaning of the Securities Act.
(e) Notwithstanding anything in this Agreement to the
contrary, the Company will not be required to file any registration
statement hereunder if an opinion of counsel reasonable acceptable to
the Selling Holders is rendered to the Company and the Selling Holders,
to the effect that the sale of the Registrable Securities in the manner
contemplated by the Selling Holders may be effected without
registration regardless of the identity or status of the buyer(s) of
such Registrable Securities. Also, the Company will not be required to
file any registration statement to cover Registrable Securities that
are already registered pursuant to a previous registration statement
that is effective and available for use by the Holders of such
Registrable Securities to effect sales thereof at such time.
(f) Promptly after a sale of Registrable Securities
pursuant to the Registration Statement (assuming that no stop order is
in effect with respect to the Registration Statement at the time of
such sale), the Company shall cooperate with the Holders and provide
the transfer agent for the Common Stock with such instructions and
legal opinions as may be required in order to facilitate the issuance
to the purchaser (or the Holder's broker) of new unlegended
certificates for such Registrable Securities.
4. INDEMNIFICATION; CONTRIBUTION. If any Registrable Securities
are included in a registration statement under this Agreement:
(a) To the extent permitted by applicable law, the
Company shall indemnify and hold harmless each Selling Holder, each
Person, if any, who controls such Selling Holder within the meaning of
the Securities Act, and each officer, director, partner, and employee
of such Selling Holder and such controlling Person, against any and all
losses, claims, damages, liabilities and expenses (joint or several),
including reasonable attorneys' fees and disbursements and expenses of
investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any
of the foregoing Persons may become subject under the Securities Act,
the Exchange Act or any other federal or state laws, insofar as such
losses, claims, damages, liabilities and expenses arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"):
(i) Any untrue statement or alleged untrue statement
of a material fact
<PAGE>
contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein,
or any amendments or supplements thereto;
(ii) The omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or
(iii) Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any
applicable state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any
applicable state securities law; provided, however, that the
indemnification required by this Section 4(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without
the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or
expense to the extent (and only to the extent) that it arises
out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished to
the Company by the indemnified party expressly for use in
connection with such registration.
(b) To the extent permitted by applicable law, each
Selling Holder shall indemnify and hold harmless the Company, each of
its directors, each of its officers who shall have signed the
registration statement, each Person, if any, who controls the Company
within the meaning of the Securities Act, any other Selling Holder, any
controlling Person of any such other Selling Holder and each officer,
director, partner, and employee of such other Selling Holder and such
controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including reasonable
attorneys' fees and disbursements and expenses of investigation,
incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation, or to which any of the foregoing
Persons may otherwise become subject under the Securities Act, the
Exchange Act or any other federal or state laws, insofar as such
losses, claims, damages, liabilities and expenses arise out of or are
based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity
with written information furnished by such Selling Holder expressly for
use in connection with such registration; PROVIDED, HOWEVER, that the
indemnification required by this Section 4(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or expense if settlement is effected without the consent of the
relevant Selling Holder (which consent shall not be unreasonably
withheld); and, PROVIDED FURTHER that in no event shall the amount of
any indemnity under this Section 4(b) exceed the gross proceeds from
the applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under
this Section 4 of
<PAGE>
notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such
indemnified party may make a claim under this Section 4, such
indemnified party shall deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel at its
own expense (except as specifically provided below). The failure to
deliver written notice to the indemnifying party within a reasonable
time following the commencement of any such action shall not relieve
such indemnifying party of any liability to the indemnified party under
this Section 4 except, if and to the extent that the indemnifying party
is actually prejudiced thereby, but in no event shall it relieve the
indemnifying party of any liability that it may have to any indemnified
party otherwise than pursuant to this Section 4. Any fees and expenses
incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such
action or proceeding) shall be paid to the indemnified party, as
incurred, within sixty (60) days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately determined
that an indemnified party is not entitled to indemnification hereunder,
but in such event such amounts shall be immediately refunded). Any such
indemnified party shall have the right to employ separate counsel in
any such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the
expenses of such indemnified party unless (i) the indemnifying party
has agreed to pay such fees and expenses or (ii) the indemnifying party
shall have failed to promptly assume the defense of such action, claim
or proceeding or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified
party shall have been advised by counsel that there may be one or more
legal defenses available to it which are different from or in addition
to those available to the indemnifying party and that the assertion of
such defenses would create a conflict of interest such that counsel
employed by the indemnifying party could not faithfully represent the
indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or
proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified
parties. No indemnifying party shall be liable to an indemnified party
for any settlement of any action, proceeding or claim without the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld.
(d) If the indemnification required by this Section 4
from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to in this Section 4:
<PAGE>
(i) The indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (x) in such
proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the
indemnified party or parties on the other or (y) if the
allocation provided by clause (x) is not permitted by
applicable law , in such proportion as to reflect not only the
relative benefits received by the indemnifying party on the
one hand and the indemnified party or parties on the other,
but also the relative fault of the indemnifying party and
indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed
by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such Violation. The amount paid or payable
by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 4(a)
and (b), any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section
4(d) were determined by pro rata allocation or by any other
method of allocation which does not take into account the
equitable considerations referred to in Section 4(d)(i). No
Person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act shall be
entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
(e) The obligations of the Company and the Selling
Holders of Registrable Securities under this Section 4 shall survive
the completion of any offering of Registrable Securities pursuant to a
registration statement under this Agreement, and otherwise.
5. RULE144; EXCHANGE ACT FILINGS. The Company covenants and
agrees that it will file as and when applicable, on a timely basis, all reports
required to be filed by it under the Exchange Act. If, for any reason the
Company is not required to file reports pursuant to the Exchange Act, thereupon
the request of any Holder of Registrable Securities, the Company shall make
publicly available the information specified in subparagraph (c)(2) of Rule 144
of the Securities Act, and take such further action as may be reasonably
required from time to time and as may be within the reasonable control of the
Company, to enable the Holders to transfer Registrable Securities to a
transferee without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 under the Securities Act or any similar
rule or
<PAGE>
regulation hereafter adopted by the Commission. The Company further covenants
and agrees that it will furnish to each Holder so long as such Holder owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company as to the status of its compliance with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Holders to sell such securities pursuant to Rule 144 without
registration.
6. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. This Agreement
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto PROVIDED, HOWEVER, that the rights of a Holder
under this Agreement to cause the Company to register the Registrable Shares may
be transferred or assigned only with respect to Shares transferred to an
Affiliate of such Holder.
7. CHANGES IN COMMON STOCK. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination,
reclassification, or through merger, consolidation, reorganization or
recapitalization or by any similar means, appropriate adjustment shall be made
in the provisions hereof, as may be required, so that the rights and privileges
granted in this Agreement shall continue with respect to the Common Stock as so
changed.
8. MISCELLANEOUS PROVISIONS.
(a) SPECIFIC PERFORMANCE. The parties hereto acknowledge
that there may be no adequate remedy at law if any party fails to
perform any of its obligations hereunder and that each party may be
irreparably harmed by any such failure, and accordingly agree that each
party, in addition to any other remedy to which it may be entitled at
law or in equity, may be entitled to compel specific performance of the
obligations of any other party under this Agreement in accordance with
the terms and conditions of this Agreement.
(b) NOTICES. All notices, requests, claims, demands,
waivers and other communications required or permitted hereunder shall
be in writing and shall be deemed to have been duly given when
delivered by hand, if delivered personally by courier, or three days
after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows:
(i) The Holders at the addresses indicated on
the signature page hereof.
(ii) The Company at:
Startec Global Communications Corporation
<PAGE>
10411 Motor City Drive
Bethesda, MD 20817
Attention: Yolanda S. Faerber, Esq.
(iii) With a copy to:
Piper Marbury Rudnick & Wolfe LLP
1200 Nineteenth Street, NW
Washington, DC 20036
Attention: Thomas L. Hanley, Esq.
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
(c) LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.
(d) HEADINGS. The descriptive headings of the several
Sections and paragraphs of this Agreement are inserted for convenience
only, and do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
other writings referred to herein or delivered pursuant hereto which
form a part hereof contain the entire understanding of the parties with
respect to its subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its
subject matter. This Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by
a written instrument duly executed by the Company and the Holder or
Holders concerned. Each holder of any Registrable Securities at the
time or thereafter outstanding shall be bound by an amendment or waiver
authorized by this Section 8(e), whether or not any such Registrable
Securities shall have been marked to indicate such consent.
(f) COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together, including those counterparts executed by all
other Holders who execute counterparts as of the date of this Agreement
and thereafter, shall constitute one and the same instrument.
(g) VALIDITY, DUE AUTHORIZATION. By its execution hereof,
the Company represents and warrants that it has the corporate power to
execute, deliver and perform the
<PAGE>
terms and provisions of this Agreement and that it has taken all
appropriate and necessary corporate action to authorize the
transactions contemplated hereby and the execution, delivery and
performance of this Agreement.
[Signature Page Follows]
<PAGE>
[Registration Rights Agreement - Signature Page]
By signing and return to the Company a counterpart hereof, this Agreement, along
with all counterparts executed as of the date of this Agreement and thereafter
by additional Holders, will become a binding agreement among the Company and the
Holders signatory to this Agreement.
HOLDER:
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first written above.
STARTEC GLOBAL COMMUNICATIONS CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT 5.1
PIPER MARBURY RUDNICK & WOLFE LLP
1200 Nineteenth Street, N.W.
Washington, D.C. 20036
202-861-3900
January 11, 1999
The Board of Directors
Startec Global Communications Corporation
10411 Motor City Drive
Bethesda, MD 20817
Re: Registration Statement on Form S-3
----------------------------------
Gentlemen:
We have acted as counsel to Startec Global Communications Corporation, a
Delaware corporation (the "Company"), with respect to the Company's Registration
Statement on Form S-3 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), relating to the offer and
sale of up to 2,065,723 shares (the "Shares") of the Company's Common Stock, par
value $.01 per share, which may be offered and sold from time to time by certain
selling securityholders named in the Prospectus contained in the Registration
Statement or in amendments or supplements thereto.
As counsel for the Company, we have examined the Registration Statement,
and originals or copies, certified or otherwise identified to our satisfaction,
of such other documents, corporate records, certificates of public officials and
other instruments as we have deemed necessary for the purposes of rendering this
opinion. In our examination, we have, with your approval, assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies. As to various questions of fact material to such opinion, we have
relied, to the extent we deemed appropriate, upon representations, statements
and certificates of officers and representatives of the Company and others. We
have not independently verified such information or assumptions.
Based upon, subject to and limited by the foregoing and the other
qualifications herein, we are of the opinion that the Shares have been duly
authorized for issuance by the Company and are validly issued, fully paid and
non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and we consent to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Act or the rules promulgated
thereunder.
Very truly yours,
/s/ Piper Marbury Rudnick & Wolfe LLP
---------------------------------------
PIPER MARBURY RUDNICK & WOLFE LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 of our reports dated
February 23, 1999 included in Startec Global Communications Corporation's Form
10-K for the year ended December 31, 1998 and to all references to our firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Vienna, Virginia
January 11, 2000