AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1998.
REGISTRATION STATEMENT NO. 333-46177
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PT-1 COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 4813 11-3265685
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
30-50 WHITESTONE EXPRESSWAY JOHN J. KLUSARITZ, ESQ.
FLUSHING, NEW YORK 11354 EXECUTIVE VICE PRESIDENT AND GENERAL
(718) 939-9000 COUNSEL
(ADDRESS, INCLUDING ZIP CODE, AND PT-1 COMMUNICATIONS, INC.
TELEPHONE NUMBER, INCLUDING AREA 30-50 WHITESTONE EXPRESSWAY
CODE, OF REGISTRANT'S PRINCIPAL FLUSHING, NEW YORK 11354
EXECUTIVE OFFICES) (718) 939-9000
(NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
MORRIS F. DEFEO, JR., ESQ. ROBERT W. SMITH, JR., ESQ.
ANDREW M. RAY, ESQ. PIPER & MARBURY L.L.P.
SWIDLER & BERLIN, CHARTERED 36 SOUTH CHARLES STREET
3000 K STREET, N.W., SUITE 300 BALTIMORE MD 21201
WASHINGTON, D.C. 20007 (410) 539-2530
(202) 424-7500
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box: [_]
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: [_]
---------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1)(2) REGISTRATION FEE
- -----------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par
value..................... $87,000,000 $25,665
</TABLE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
(2) Includes shares of Common Stock which the Underwriters have the option to
purchase to cover over-allotments, if any.
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 SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The table below sets forth the expenses to be incurred by the Company in
connection with the issuance and distribution of the shares registered for
offer and sale hereby, other than underwriting discounts and commissions. All
amounts shown represent estimates except the Securities Act registration fee
and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee under the Securities Act of 1933.............. $25,665
NASD filing fee...............................................
-------
Nasdaq National Market fee....................................
-------
Printing expenses............................................. *
Registrar and Transfer Agent's fees and expenses.............. *
Accountants' fees and expenses................................ *
Legal fees and expenses (not including Blue Sky).............. *
Miscellaneous................................................. *
-------
Total.................................................... $ *
=======
</TABLE>
---------------------
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 722 of the New York Business Corporation Law allows, in general, for
indemnification, in certain circumstances, by a corporation of any person
threatened with or made a party to any action, suit, or proceeding by reason
of the fact that he or she is, or was, a director, officer, employee, or agent
of such corporation. Indemnification is also authorized with respect to a
criminal action or proceeding where the person had no reasonable cause to
believe that his conduct was unlawful.
Under the Company's Restated Certificate of Incorporation, the Company has
agreed to indemnify and advance expenses to each person who is or was a
director or officer of the Corporation, to the fullest extent permitted by the
New York Business Corporation Law against actions that may arise against them
in such capacities. In addition, at the Company's option, it may indemnify any
other person (his testator or intestate) who is or was serving at the request
of the Company as a director or officer of any another corporation of any type
or kind, domestic or foreign, of any partnership, joint venture, trust,
employee benefit plan or other enterprise to the fullest extent permitted by
the New York Business Corporation Law against actions that may arise against
them in such capacities.
The Company intends to obtain directors' and officers' insurance which will
provide for indemnification of certain directors and officers of the Company.
In the Underwriting Agreement, the proposed form of which has been filed as
Exhibit 1.1, the Underwriters will agree to indemnify, under certain
conditions, the Company's officers, directors and controlling persons against
certain liabilities, including liabilities under the Securities Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following paragraphs of this Item 15 describe all offers and sales of
securities by the Company within the last three years which were not
registered under the Securities Act of 1933, other than securities issued in
connection with stock reclassifications, stock dividends or stock splits:
On April 21, 1995, the Company issued 30,450,000 shares of Common Stock to
each of Mr. Samer Tawfik and Mr. Thomas Hickey in connection with the
formation of the Company.
II-1
<PAGE>
<PAGE>
On April 6, 1996, the Company issued 6,500,000 and 2,600,000 shares of
Common Stock to Mr. Peter Vita and Mr. Douglas Barley, respectively, for
nominal consideration.
On March 26, 1997, the Company repurchased 25,052,632 shares of Common Stock
from Mr. Hickey for an aggregate purchase price of $15.0 million, of which
$5.0 million was payable in cash and $10.0 million was payable in the form of
a promissory note.
On May 9, 1997, in connection with Mr. Joseph Pannullo's employment
agreement, the Company granted an option to Mr. Pannullo to acquire 1,048,600
shares of Common Stock at a nominal exercise price. Mr. Pannullo exercised his
option on May 20, 1997.
On May 26, 1997, in connection with Mr. Klusaritz's employment agreement,
the Company granted Mr. Klusaritz an option to acquire 1,916,600 shares of
Common Stock at an aggregate exercise price of $3.6 million. Mr. Klusaritz
exercised his option on October 15, 1997.
On June 29, 1997, the Company granted warrants to employees of
InterExchange, Inc. to acquire shares of Common Stock with an aggregate "fair
market value" equal to (i) $1,000,000, at a nominal exercise price and (ii)
$2.0 million, at an aggregate exercise price equal to $1,000,000.
During October 1997, the Company has also granted options under the Stock
Incentive Plan to acquire 738,000 shares of the Company's Common Stock, at a
weighted average exercise price of $12.25 per share.
On November 7, 1997, the Company issued 483,980 shares of Common Stock to
Mr. Hickey in consideration for the extension of Mr. Hickey's non-competition
agreement with the Company and the settlement of certain claims.
Each issuance of securities described above was made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act as
a transaction by an issuer not involving any public offering. The recipients
of securities in each such transaction represented their intention to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Company.
II-2
<PAGE>
<PAGE>
ITEM 16(A). EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
<C> <S> <C>
*1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of
the Company
3.2 Amended and Restated Bylaws of the Company
*4.1 Form of Common Stock Certificate of the Company
4.2 Reference is made to Exhibits 3.1 and 3.2
4.3 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to David
L. Turock
4.4 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to Eric
L. Hecht
4.5 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to
Richard A. Robbins
4.6 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to
Bradley D. Turock
4.7 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, held in escrow
4.8 Escrow Agreement dated June 29, 1997 between John J.
Klusaritz as Escrow Agent, the Company
and InterExchange, Inc.
*5.1 Opinion of Swidler & Berlin, Chartered
10.1 PT-1 Communications, Inc. 1997 Stock Incentive Plan
10.2 Share Purchase Agreement, dated as of April 6, 1996,
by and among Thomas Hickey, Peter Vita and Douglas Barley
10.3 Phonetime, Inc. Share Purchase Agreement, dated as of March 26,
1997, by and among Phonetime, Inc., Thomas Hickey, Samer Tawfik,
Peter Vita and Douglas Barley
10.4 Agreement dated as of November 7, 1997, by and among the Company,
Thomas Hickey, Thomas Hickey Trust U/A dated September 9, 1997,
Samer Tawfik, Peter Vita, Douglas Barley, Joseph Pannullo and John
Klusaritz
10.5 Option Agreement dated May 9, 1997, between the
Company and Joseph Pannullo
10.6 Option Agreement dated May 26, 1997, as amended
between the Company and John J. Klusaritz
*10.7 Form of Registration Rights Agreement, dated ,
1997, between the Company and certain shareholders
10.8 Employment Agreement, dated as of October 1, 1997,
between the Company and Samer Tawfik
10.9 Employment Agreement, dated as of April 6, 1996,
between the Company and Peter M. Vita
</TABLE>
II-3<PAGE>
<PAGE>
ITEM 16(A). EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED
PAGE
<C> <S> <C>
10.10 Employment Agreement, dated as of April 6, 1996,
between the Company and Douglas Barley
10.11 Employment Agreement, dated as of May 9, 1997,
between the Company and Joseph Pannullo
10.12 Employment Agreement, dated as of May 26, 1997,
between the Company and John J. Klusaritz
*10.13 Agreement, dated as of June 29, 1997, between Phonetime,
Inc. and InterExchange, Inc.
*10.14 Software License Agreement, dated as of May 9, 1997,
between GodotSoft, L.L.C. and Phonetime, Inc.
10.15 Settlement Agreement dated as of April 3, 1996
between Samer Tawfik, Thomas J. Hickey, The
Interactive Telephone Company and Joseph Pannullo
10.16 Agreement of Lease between Golden Union, LLC, as Landlord and
Phonetime, Inc., as Tenant dated April 8, 1997, as modified
*10.17 Network Products Purchase Agreement by and between Northern Telecom,
Inc. and Phonetime, Inc. with related Product Attachment and
Services Agreement (undated)
10.18 General Loan and Collateral Agreement by and between the Company
and The Chase Manhattan Bank, dated October 8, 1997
10.19 Security Agreements between the Company and The Chase Manhattan
Bank, dated October 8, 1997
10.20 Promissory Note from the Company in favor of The Chase Manhattan
Bank, dated September 22, 1997
*11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of PT-1 Communications, Inc.
**23.1 Consent of KPMG Peat Marwick LLP
*23.2 Consent of Swidler & Berlin, Chartered (to be
included in Exhibit 5.1 to this Registration
Statement)
**24.1 Power of Attorney (included on signature page)
*27.1 Financial Data Schedule
</TABLE>
- ---------------------
*To be filed by amendment.
**Previously filed.
ITEM 16(B). FINANCIAL STATEMENT SCHEDULES.
None.
II-4<PAGE>
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON MARCH 3, 1998.
PT-1 COMMUNICATIONS, INC.
By: *
------------------------------
SAMER TAWFIK
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 3, 1998.
SIGNATURE TITLE
* Chief Executive Officer and Chairman
- ------------------------------------- of the Board (Principal Executive
SAMER TAWFIK Officer)
* Chief Financial Officer, Secretary,
- ------------------------------------- Treasurer and Director (Principal
DOUGLAS BARLEY Financial Officer and Principal
Accounting Officer)
* Chief Operating Officer and Director
- -------------------------------------
JOSEPH PANNULLO
* President and Director
- -------------------------------------
PETER M. VITA
/s/ John J. Klusaritz Executive Vice President, General
- ------------------------------------- Counsel and Director
JOHN J. KLUSARITZ
* John J. Klusaritz, by signing his name hereto, signs this document on
behalf of each of the persons so indicated above pursuant to powers of
attorney duly executed by such person and filed with the Securities and
Exchange Commission.
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of
the Company
3.2 Amended and Restated Bylaws of the Company
*4.1 Form of Common Stock Certificate of the Company
4.2 Reference is made to Exhibits 3.1 and 3.2
4.3 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to David
L. Turock
4.4 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to Eric
L. Hecht
4.5 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to
Richard A. Robbins
4.6 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, issued to
Bradley D. Turock
4.7 Warrants for the purchase of shares of Common Stock
of the Company, dated June 29, 1997, held in escrow
4.8 Escrow Agreement dated June 29, 1997 between John J.
Klusaritz as Escrow Agent, the Company
and InterExchange, Inc.
*5.1 Opinion of Swidler & Berlin, Chartered
10.1 PT-1 Communications, Inc. 1997 Stock Incentive Plan
10.2 Share Purchase Agreement, dated as of April 6, 1996,
by and among Thomas Hickey, Peter Vita and Douglas Barley
10.3 Phonetime, Inc. Share Purchase Agreement, dated as of March 26,
1997, by and among Phonetime, Inc., Thomas Hickey, Samer Tawfik,
Peter Vita and Douglas Barley
10.4 Agreement dated as of November 7, 1997, by and among the Company,
Thomas Hickey, Thomas Hickey Trust U/A dated September 9, 1997,
Samer Tawfik, Peter Vita, Douglas Barley, Joseph Pannullo and John
Klusaritz
10.5 Option Agreement dated May 9, 1997, between the
Company and Joseph Pannullo
10.6 Option Agreement dated May 26, 1997, as amended
between the Company and John J. Klusaritz
*10.7 Form of Registration Rights Agreement, dated ,
1997, between the Company and certain shareholders
10.8 Employment Agreement, dated as of October 1, 1997,
between the Company and Samer Tawfik
10.9 Employment Agreement, dated as of April 6, 1996,
between the Company and Peter M. Vita
II-7<PAGE>
<PAGE>
10.10 Employment Agreement, dated as of April 6, 1996,
between the Company and Douglas Barley
10.11 Employment Agreement, dated as of May 9, 1997,
between the Company and Joseph Pannullo
10.12 Employment Agreement, dated as of May 26, 1997,
between the Company and John J. Klusaritz
*10.13 Agreement, dated as of June 29, 1997, between Phonetime,
Inc. and InterExchange, Inc.
*10.14 Software License Agreement, dated as of May 9, 1997,
between GodotSoft, L.L.C. and Phonetime, Inc.
10.15 Settlement Agreement dated as of April 3, 1996
between Samer Tawfik, Thomas J. Hickey, The
Interactive Telephone Company and Joseph Pannullo
10.16 Agreement of Lease between Golden Union, LLC, as Landlord and
Phonetime, Inc., as Tenant dated April 8, 1997, as modified
*10.17 Network Products Purchase Agreement by and between Northern Telecom,
Inc. and Phonetime, Inc. with related Product Attachment and
Services Agreement (undated)
10.18 General Loan and Collateral Agreement by and between the Company
and The Chase Manhattan Bank, dated October 8, 1997
10.19 Security Agreements between the Company and The Chase Manhattan
Bank, dated October 8, 1997
10.20 Promissory Note from the Company in favor of The Chase Manhattan
Bank, dated September 22, 1997
*11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of PT-1 Communications, Inc.
**23.1 Consent of KPMG Peat Marwick LLP
*23.2 Consent of Swidler & Berlin, Chartered (to be
included in Exhibit 5.1 to this Registration
Statement)
**24.1 Power of Attorney (included on signature page)
*27.1 Financial Data Schedule
</TABLE>
- ---------------------
*To be filed by amendment.
**Previously filed.
II-8
RESTATED CERTIFICATE OF INCORPORATION
OF
PT-1 COMMUNICATIONS, INC.
(Under Section 807 of the Business Corporation Law)
Pursuant to Section 807 of the Business Corporation Law, the undersigned,
being the President and Secretary of PT-1 COMMUNICATIONS, INC., a New York
corporation, do hereby certify:
FIRST: The name of the corporation is PT-1 COMMUNICATIONS, INC. (the
"Corporation"). The name under which the Corporation was formed is PHONETIME,
INC.
SECOND: The certificate of incorporation of the Corporation was filed
with the Department of State of the State of New York on April 21, 1995.
THIRD: The certificate of incorporation of the Corporation is hereby
amended or changed to effect one or more of the amendments or changes
authorized by the Business Corporation Law, as follows:
1. To change the stated purposes of the Corporation.
2. To increase the number of shares of Common Stock authorized to be
issued from 200 shares, without par value, all of the same class, of which
69.1379 shares are issued without par value and 130.8621 shares are unissued
without par value, to One Hundred Fifty Million (150,000,000) shares, $.01 par
value per share, all of the same class, of which 48,396,530 shares are issued
with a par value of $.01 and 101,603,470 shares are unissued with a par value
of $.01. The rate of change of issued stock 1:700,000. The rate of change of
unissued stock is 1:700,000.
3. To authorize the issuance of Fifteen Million (15,000,000) shares
of Preferred Stock, $.01 par value per share.
4. To amend the address to which the Secretary of State shall mail
service of process.
5. To add a provision denying preemptive rights to the shareholders
of the Corporation.
6. To add a provision specifying the number of directors and
providing that directors may be removed only with cause either by action of
the Board of Directors or by vote of the shareholders.
7. To add a provision providing for classification of the board of
directors.<PAGE>
<PAGE>02
8. To modify the provision limiting directors' and officers'
liability.
9. To modify the provision indemnifying directors, officers,
employees and agents of the Corporation and to provide for advancement of
expenses in connection therewith.
FOURTH: To accomplish the foregoing amendments, Sections (2), (4),
(5), (6) and (7) of the certificate of incorporation of the Corporation,
relating to (i) the purposes of the Corporation, (ii) the aggregate number of
shares which the Corporation is authorized to issue and the par value thereof,
(iii) the address to which the Secretary of State shall mail service of
process, (iv) indemnification of directors, officers, employees and agents,
and (v) the limitation of directors' and officers' liability, respectively,
are hereby amended to read as set forth in the same numbered sections of the
certificate of incorporation of the Corporation as hereinafter restated; and
new sections (8) and (9) relating to (i) preemptive rights and (ii) the Board
of Directors, respectively, are hereby added as set forth in the same numbered
sections of the certificate of incorporation as hereinafter restated.
FIFTH: The text of the certificate of incorporation of the Corporation is
hereby restated as further amended or changed herein to read as follows:
CERTIFICATE OF INCORPORATION
OF
PT-1 COMMUNICATIONS, INC.
(Under Section 402 of the Business Corporation Law)
(1) The name of the corporation is
PT-1 COMMUNICATIONS, INC. (the "Corporation").
(2) The purpose or purposes for which the Corporation is formed is to
engage in any lawful act or activity for which corporations may be organized
pursuant to the Business Corporation Law provided that the Corporation is not
formed to engage in any act or activity requiring the consent or approval of
any state official, department, board, agency or other body without such
consent or approval first being obtained.
(3) The office of the Corporation is to be located in the County of
Queens, State of New York.
(4) The aggregate number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is One Hundred
Sixty-Five Million (165,000,000), of which One Hundred Fifty Million
(150,000,000)
shares are to be shares of Common Stock, $.01 par value per share ("Common
Stock"), and Fifteen Million (15,000,000) shares are to be shares of Preferred
Stock, $.01 par value per share ("Preferred Stock").
<PAGE>
<PAGE>03
A description of the terms, conditions, rights, privileges and
other provisions regarding the Preferred Stock and the Common Stock is as
follows:
(a) The Preferred Stock may be issued from time to time in one
or more series of any number of shares provided that the aggregate number of
shares issued and not canceled of any and all such series shall not exceed the
total number of shares of Preferred Stock hereinabove authorized. Each series
of Preferred Stock shall be distinctively designated by letter or descriptive
words. All series of Preferred Stock shall rank equally and be identical in
all respects except as permitted by the provisions of this Section (4).
(b) Authority is hereby expressly vested in the Board of
Directors from time to time to issue the Preferred Stock as Preferred Stock of
any series and in connection with the creation of each such series to fix by
the resolution or resolutions providing for the issue of shares thereof the
designations, relative rights, preferences and limitations thereof, to the
full extent now or hereafter permitted by this Restated Certificate of
Incorporation and the laws of the State of New York, including, without
limitation:
(i) the distinctive designation of such series and the
number of shares which shall constitute such series, which number may be
increased (but not above the total number of authorized shares of the series)
or decreased (but not below the number of shares thereof then outstanding)
from time to time by a resolution or resolutions of the Board of Directors,
all subject to the conditions or restrictions set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of
any series of Preferred Stock;
(ii) the dividend rate payable on shares of such series,
the conditions and dates upon which such dividends shall be payable, the
preferences or relation which such dividend shall bear to the dividends
payable on any other class or classes or any other series of capital stock
(except as otherwise expressly provided in this Restated Certificate of
Incorporation), and whether such dividends shall be cumulative or
non-cumulative and, if cumulative, the date or dates from which dividends
shall accumulate;
(iii) whether the shares of such series shall be subject
to redemption by the Corporation and, if made subject to redemption, the price
or prices at which, and the terms and conditions on which, the shares of such
series may be redeemed by the Corporation;
(iv) the amount or amounts payable upon the shares of such
series in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation and the preferences or relation which such
payments shall bear to such payments made on any other class or classes or any
other series of capital stock (except as otherwise expressly provided in this
Restated Certificate of Incorporation);
<PAGE>
<PAGE>04
(v) whether or not the shares of such series shall be made
convertible into, or exchangeable for, shares of any other class or classes of
capital stock of the Corporation, or any series thereof, or for any other
series of the same class of capital stock of the Corporation or for debt of
the Corporation evidenced by an instrument of indebtedness, and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(vi) whether the holders of shares of such series shall
have any right or power to vote or to receive notice of any meeting of
shareholders, either generally or as a condition to specified corporate
action; and
(vii) any other preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as may be permitted by the laws of the State of New York
and as shall not be inconsistent with this Section (4).
(c) Shares of Preferred Stock which have been issued and
reacquired in any manner by the Corporation (excluding, until the Corporation
elects to retire them, shares which are held as treasury shares, but including
shares redeemed, shares purchased and retired and shares which have been
converted into shares of Common Stock) shall have the status of authorized but
unissued shares of Preferred Stock and may be reissued as a part of the series
of which they were originally a part or may be reissued as a part of another
series of Preferred Stock, all subject to the conditions or restrictions on
issuance set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of any series of Preferred Stock.
(d) Except as otherwise provided by the resolution or
resolutions providing for the issuance of any series of Preferred Stock, after
payment shall have been made to the holders of Preferred Stock of the full
amount of dividends to which they shall be entitled pursuant to the resolution
or resolutions providing for the issuance of any series of Preferred Stock,
the holders of Common Stock shall be entitled, to the exclusion of the holders
of Preferred Stock of any and all series, to receive such dividends as from
time to time may be declared by the Board of Directors.
(e) Except as otherwise provided by the resolution or
resolutions providing for the issuance of any series of Preferred Stock, in
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment shall have been made to the
holders of Preferred Stock of the full amounts to which they shall be entitled
pursuant to the resolution or resolutions providing for the issuance of any
series of Preferred Stock, the holders of Common Stock shall be entitled, to
the exclusion of the holders of Preferred Stock of any and all series, to
share, ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the Corporation available for distribution to its
stockholders.
<PAGE>
<PAGE>05
(5) The Secretary of State of the State of New York is hereby
designated as the agent of the Corporation upon whom process in any action or
proceeding may be served. The address to which the Secretary of State shall
mail a copy of any process in any action or proceeding against the Corporation
which may be served upon him is:
3000 K Street, NW, Suite 300
Washington, D.C. 20007
(6) The Corporation shall, to the fullest extent permitted by Article
7 of the Business Corporation Law of the State of New York, as the same may be
amended and supplemented, or by any successor thereto, indemnify and advance
expenses to each person who is or was a director or officer of the
Corporation. The Corporation may, at the Corporation's option, to the fullest
extent permitted by Article 7 of the Business Corporation Law of the State of
New York, as the same may be amended and supplemented, or by any successor
thereto, indemnify and advance expenses to any other person (his testator or
intestate) who is or was serving at the request of the Corporation as a
director or officer of any another corporation of any type or kind, domestic
or foreign, of any partnership, joint venture, trust, employee benefit plan or
other enterprise. The indemnification and advancement of expenses provided
for herein shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of shareholders, vote of disinterested directors, or
otherwise, as permitted by said Article. Neither the amendment or repeal of
this Section 6, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Section 6 shall adversely affect any
right or protection existing under this Section 6 at the time of such
amendment or repeal.
(7) To the fullest extent now or hereafter permitted under the
New York Business Corporation Law, no person serving as a director or officer
of the Corporation shall be personally liable to the Corporation or its
shareholders for monetary damages for any breach of fiduciary duty in such
capacity. No amendment or repeal of this Section 7 shall adversely affect any
right or protection of any director or officer of the Corporation existing at
the time of such amendment or repeal with respect to acts or omissions
occurring prior to such amendment or repeal.
(8) Except to the extent that such rights shall be specifically
provided for in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of any series of Preferred Stock, no
holder of any of the shares of any class of the Corporation shall be entitled
as of right to subscribe for, purchase, or otherwise acquire any shares of any
class of the Corporation which the Corporation proposes to issue or any rights
or options which the Corporation proposes to grant for the purchase of shares
of any class of the Corporation or for the purchase of any shares, bonds,
securities, or obligations of the Corporation which are convertible into or
exchangeable for, or which carry any rights to subscribe for, purchase or
otherwise acquire shares of any class of the Corporation; and any and all of
such shares, bonds, securities, or obligations of the Corporation, whether now
or hereafter authorized or created, may be issued, or may be reissued or
<PAGE>
<PAGE>06
transferred if the same have been reacquired and have treasury status, and any
and all such rights and options may be granted by the Board of Directors to
such persons, firms, corporations and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering the same, or any thereof, to any said
holder. Without limiting the generality of the foregoing stated denial of any
and all preemptive rights, no holder of shares of any class of the Corporation
shall have any preemptive rights in respect of the matters, proceedings, or
transactions specified in subparagraphs (1) to (6), inclusive, of paragraph
(e) of Section 622 of the Business Corporation Law of the State of New York.
(9) (a) The number of Directors of the Corporation constituting the
entire Board of Directors shall be not less than three nor more than twelve.
The Board of Directors shall determine from time to time the number of
Directors which shall constitute the entire Board of Directors. Any such
determination made by the Board of Directors shall continue in effect unless
and until changed by the Board of Directors, but no such changes shall affect
the term of any directors then in office. Directors need not be shareholders
of the Corporation.
(b) The Board of Directors shall be divided into three (3) classes
in respect of term of office, designated Class I, Class II and Class III.
Each class shall contain one-third (1/3) of the entire Board of Directors, or
such other number that will cause all three (3) classes to be as nearly equal
in number as possible, with the terms of office of one class expiring each
year. Class I directors shall serve until the annual meeting of shareholders
to be held in 1998; Class II directors shall serve until the annual meeting of
shareholders to be held in 1999; and Class III directors shall serve until the
annual meeting of shareholders to be held in 2000; provided that in each case,
directors shall continue to serve until their successors shall be elected and
shall qualify or until their earlier death, resignation or removal.
Commencing with the 1998 meeting, one (1) class of directors shall be elected
to serve until the annual meeting of shareholders held three (3) years next
following and until their successors shall be elected and shall qualify or
until their earlier death, resignation or removal. No decrease in the number
of directors shall have the effect of shortening the term of office of any
incumbent director. Any increase or decrease in the number of directors shall
be apportioned among the classes so as to make all classes as nearly equal in
number as possible.
(c) Advance notice of nominations for the election of directors,
other than by the Board of Directors or a committee thereof, shall be given in
the manner provided in the By-laws.
(d) Any vacancy on the Board of Directors that results from an
increase in the number of directors and any other vacancy on the Board may be
filled by vote of the shareholders or by the Board provided that a quorum is
then in office and present, or by a majority of the Directors then in office,
if less than a quorum is then in office, or by a sole remaining director. A
director elected to fill a newly created directorship or other vacancy, unless
elected by the shareholders, shall hold office until the next meeting of
shareholders at which the election of directors is in the regular course of
business, and until his successor has been elected and qualified.<PAGE>
<PAGE>07
(e) The directors of the Corporation may not be removed prior to the
expiration date of their terms of office except for cause, either by action of
the Board of Directors or by vote of the shareholders at the Annual Meeting of
Shareholders or at any Special Meeting of Shareholders called by the Board of
Directors or by the Chairman of the Board or by the President for this
purpose.
SIXTH: The restatement of the certificate of incorporation of the
Corporation herein provided was authorized by the unanimous written consent of
the Board of Directors followed by the unanimous written consent of the
holders of all outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, each of the undersigned has hereunto signed his name
and hereby subscribes and affirms that the statements made herein are true
under the penalties of perjury as of the 2nd day of December, 1997.
-------------------------------------
Peter Vita, President
-------------------------------------
Douglas Barley, Secretary
AMENDED AND RESTATED BY-LAWS
OF
PT-1 COMMUNICATIONS, INC.
ARTICLE I - OFFICES
The principal office of the Corporation shall be in the County of
Queens, State of New York. The Corporation may also have offices at such other
places within or without the State of New York as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II - SHAREHOLDERS
1. PLACE OF MEETING. Meetings of shareholders may be held at the
Corporation's office in the State of New York or elsewhere within or without
the State of New York as the Board of Directors from time to time may
determine.
2. ANNUAL MEETING. The annual meeting of shareholders for the election of
directors and for the transaction of such other business as may properly come
before the meeting shall be held on the first Monday of August in each year,
if not a legal holiday, and if a legal holiday, then on the not secular day
following, at 10:00 A.M., Eastern Standard Time, or on such date and at such
time as shall be designated by the Board of Directors and stated in the notice
of such meeting.
3. PROPOSED BUSINESS AT ANNUAL MEETING. No business may be transacted at
any annual meeting of shareholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized committee
thereof), which shall include shareholder proposals contained in the
Corporation's proxy statement made in accordance with Rule 14a-8 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor thereto, or (b) otherwise properly brought before the annual meeting
by or at the direction of the Board of Directors (or any duly authorized
committee thereof).
4. SPECIAL MEETINGS. Special Meetings of the Shareholders, for any
purpose or purposes, may be called at any time only by resolution of the Board
of Directors or by the President or the Chairman of the Board, at such times
and at such place either within or without the State of New York as may be
stated in the call or in the waiver of notice thereof. Business transacted at
any special meeting shall be limited to the purposes stated in the notice.
5. NOTICE OF MEETING. Written notice of the time, place, and purpose of
every meeting of shareholders, and if a special meeting, at whose direction
such meeting is being called, shall be personally delivered to each <PAGE>
<PAGE>01
shareholder of record entitled to vote at such meeting or delivered by first
class mail, not less than ten (10) days nor more than fifty (50) days before
the meeting, or by third class mail, not less than twenty-four (24) days nor
more than fifty (50) days before the meeting, at the address of such
shareholder as it appears on the records of the Corporation, or at such other
address as shall be furnished by shareholder in writing to the Corporation for
such purpose. Such further notice shall be given as may be required by law or
by these By-laws. If, at any meeting, action is proposed to be taken which
would, if taken, entitled shareholders fulfilling the statutory requirements
to receive payment for their shares, the notice of such meeting shall include
a statement of that purpose and to that effect. If mailed, such notice shall
be deemed given when deposited in the United States mail, with postage thereon
prepaid, directed to the shareholder at his or her address as it appears on
the record of shareholders, or, if the shareholder shall have filed with the
secretary of the corporation a written request that notices to him or her be
mailed to some other address, then directed to the shareholder at such other
address. Any meeting may be held without notice if all shareholders entitled
to vote are present in person or by proxy or if notice is waived in writing,
either before, at, or after the meeting, by those not present. The attendance
of any shareholder at a meeting, in person or by proxy, without protesting
prior to the conclusion of the meeting lack of notice of such meeting, shall
constitute a waiver of notice by such shareholder.
6. ORGANIZATION OF MEETINGS. Meetings of the shareholders shall be
presided over by the Chairman of the Board or if he is not present, by the
President, or if he is not present, by a chairman to be chosen at the meeting.
The Secretary of the Corporation, or in his absence, an Assistant Secretary,
shall act as Secretary of the meeting, if present.
7. QUORUM. Except as otherwise provided by law or in the Certificate of
Incorporation of the Corporation, at all meetings of shareholders the holders
of record of a majority of the issued and outstanding shares of the
Corporation entitled to vote at such meeting, present in person or by proxy,
shall constitute a quorum for the transaction of business. In the absence of a
quorum, a majority in interest of those present or represented may adjourn the
meeting by resolution to a date fixed therein, and no further notice thereof
shall be required, except as may be required by the provisions of Section
605(b) of the Business Corporation Law. At any such adjourned meeting at which
a quorum may be present, any business may be transacted which might have been
transacted at the meeting as originally called, but only those shareholders
who would have been entitled to vote at the meeting as originally called shall
be entitled to vote at such adjourned meeting.
8. VOTING. (a) At each meeting of shareholders, except as otherwise
provided by statute, every holder of record of stock entitled to vote shall be
entitled to cast the number of votes to which shares of such class or series
are entitled as set forth in the Certificate of Incorporation or any
Certificate of Amendment with respect to any preferred stock, in person or by
proxy for each share of such stock standing in his name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast at such meeting and, except as otherwise provided by statute, the
Certificate of Incorporation, or these By-laws, all other action shall be
determined by a majority of the votes cast at such meeting.<PAGE>
<PAGE> 02
(b) At all elections of directors, the voting shall be by ballot or in
such other manner as may be determined by the shareholders present in person
or by proxy entitled to vote at such election. With respect to any other
matter presented to the shareholders for their consideration at a meeting, any
shareholder entitled to vote may, on any question, demand a vote by ballot.
(c) A complete list of the shareholders as of the record date,
certified by the Secretary or Transfer Agent of the Corporation, shall be
produced at any meeting of shareholders upon the request of any shareholder
made at or prior to such meeting. If the right to vote at any meeting is
challenged, the inspectors of election, or person presiding thereat, shall
require such list of shareholders to be produced as evidence of the right of
the persons challenged to vote at such meetings, and all persons who appear
form such list to be shareholders entitled to vote thereat may vote at such
meeting.
9. INSPECTORS AT SHAREHOLDERS' MEETINGS. The Board of Directors, in
advance of any shareholders' meeting, may appoint one or more inspectors to
act at the meeting or any adjournment hereof. If inspectors are not so
appointed, the person presiding at a shareholders' meeting may, and on the
request of any shareholder entitled to vote thereat shall, appoint inspectors.
In case any person appointed fails to appear or act, the vacancy may be filled
by appointment made by the Board of Directors in advance of the meeting or at
the meeting by the person presiding thereat. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his or her ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots, or consents; hear and
determine all challenges and questions arising in connection with the right to
vote; count and tabulate all votes, ballots, or consents; determine the
result; and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the person presiding at the
meeting or any shareholder entitled to vote thereat, the inspectors shall make
a report in writing if any challenge, question, or matter determined by them
and execute a certificate of any fact found by them. A report or certificate
made by them shall be prima facie evidence of the facie evidence of the facts
stated and of the vote as certified by them.
10. ACTION BY CONSENT. Any action required or permitted to be taken at any
meeting of shareholders may be taken without a meeting, if, prior to such
action, a written consent or consents thereto setting forth such action, is
signed by the holders of record of all of the stock of the Corporation, issued
and outstanding and entitled to vote.
11. PROXIES. Every shareholder entitled to vote at any meeting of
shareholders may vote by proxy. Every proxy must be executed in writing by the
shareholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date of its execution
unless the shareholder executing it shall have specified a longer duration.
<PAGE>
<PAGE>
Every proxy shall be revocable at the pleasure of the person executing it or
of his personal representatives or assigns except as otherwise provided by
law.
12. SHAREHOLDER PROPOSALS. At any annual or special meeting of
shareholders, only such business shall be conducted as shall have been
properly brought before a meeting. Business must be (a) specified in the
notice of meeting (or any supplement thereto), (b) brought before the meeting
by or at the direction of the Board of Directors, or (c) properly brought
before an annual meeting by a shareholder, and, if and only if the notice of a
special meeting provides for business to be brought before the special meeting
by shareholders, properly brought before the special meeting by a shareholder.
For business to be properly brought before a meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than 60 days prior to the meeting; provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the tenth day following
the day on which such notice of the date of the meeting was mailed or such
public notice of the date of the meeting was mailed or such public disclosure
was made. Furthermore, shareholders are not permitted to nominate individuals
to serve as directors unless notice of such nomination is given to the
Corporation in accordance with Section Article III, Section 4 of these By-laws.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address,
as they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder and (d) any material interest of the
shareholder in such business. Notwithstanding anything in the By-laws to the
contrary, no business shall be conducted at any meeting of shareholders except
in accordance with the procedures set forth in this Section. The chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance
with the provisions of this Section, and if he should so determine, he shall
so declare that any such business not properly brought before the meeting
shall not be transacted. Notwithstanding anything in the By-laws to the
contrary, the Corporation shall be under no obligation to submit for action
any shareholder proposal at any meeting of shareholders which proposal the
Corporation would otherwise be permitted to omit in accordance with Rule 14a-8
under the Exchange Act.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS. The property, affairs and business of the Corporation
shall be managed by the Board of Directors.
2. NUMBER. The number of directors of the Corporation shall be fixed in
the manner provided in the Certificate of Incorporation.<PAGE>
<PAGE>
3. QUALIFICATIONS; TERM OF OFFICE. Each director shall be at least 18
years of age. Directors need not be shareholders. Directors shall be elected
to hold office until the next annual election of directors and shall hold
office until their successors have been elected and shall have qualified.
4. NOMINATION OF DIRECTORS. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors of
the Corporation, except as may otherwise be provided in any Certificate of
Amendment of the Corporation with respect to the right of holders of certain
specified classes of preferred stock of the Corporation to nominate and elect
a specified number of directors in certain circumstances. Nominations of
persons for election to the Board of Directors may be made at any annual
meeting of shareholders, or at any special meeting of shareholders called for
that purpose, (a) by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (b) by any shareholder entitled to vote
in the election of directors generally. However, any shareholder entitled to
vote in the election of directors generally may nominate one or more persons
for election as directors at a meeting only if timely notice of such
shareholder's intent to make such nomination or nominations has been given in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not fewer than 60 days prior to the meeting;
provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Each such
notice shall set forth (a) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be nominated, (b) a
representation that the shareholder is a holder of record of shares of the
Corporation entitled to vote for the election of directors on the date of such
notice and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, (c) a description of all
arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder, (d) such
other information regarding each nominee proposed by such shareholder as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors and (e) the
consent of each nominee to serve as a director of the Corporation if so
elected.
If a person is validly designated as a nominee in accordance with this
Article III, Section 4 and shall thereafter become unable or unwilling to
stand for election to the Board of Directors, the Board of Directors or the
shareholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than 20 days prior to the date of
the meeting for the election of such nominee, of a written notice to the
Secretary setting forth such information regarding such substitute nominee as
would have been required to be delivered to the Secretary pursuant to this
Section 4 of Article III had such substitute nominee been initially proposed
<PAGE>
<PAGE>
as a nominee. Such notice shall include a signed consent to serve as a
director of the Corporation, if elected, of each such substitute nominee.
If the chairman of the meeting for the election of directors determines
that a nomination of any candidate for election as a director at such meeting
was not made in accordance with the applicable provisions of this Section 3.4,
such nomination shall be void.
5. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships
resulting from an increase in the number of directors and vacancies occurring
in the Board of Directors for any reason except the removal of directors
without cause may be filled by vote of a majority of the directors then in
office, although less than a quorum exists. Vacancies occurring in the Board
of Directors by reason of the removal of directors without cause may be filled
only by vote of the shareholders. A director elected to fill a vacancy,
unless elected by the shareholders, shall be elected to hold office until the
next meeting of shareholders at which the election of directors is in the
regular order of business, and until his or her successor has been elected and
qualified. If elected by the shareholders, the director shall hold office for
the unexpired term of his or her predecessor.
6. PLACE OF MEETING. The Board of Directors shall hold its meetings at
such places within or without the State of New York as it may decide.
7. REGULAR MEETINGS; NOTICE. Regular meetings of the Board of Directors
shall be held at such time and place as may be fixed from time to time by the
Board of Directors. Notice need not be given of regular meetings of the Board
of Directors.
8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held at any time upon the call of two directors, the Chairman of the Board, or
the President, by oral, facsimile, telegraphic or written notice, duly served
on or sent or mailed to each director not less than two (2) days before such
meeting. A meeting of the Board of Directors may be held, without notice,
immediately after the annual meeting of shareholders at the same place at
which such meeting was held. Notice of a meeting need not be given to any
director who submits a signed waiver of notice whether before, at, or after
the meeting or who attends the meeting, without protesting prior thereto or at
its commencement, the lack of notice.
9. QUORUM; ADJOURNMENTS. Except as otherwise provided by law or in the
Certificate of Incorporation of the Corporation, a majority of the members of
the Board of Directors then holding office shall be present at any meeting of
directors to constitute a quorum for the transaction of any business or any
specified item of business and the vote of a majority of the members of the
Board of Directors present at a meeting, at which a quorum is present shall be
necessary for the transaction of any business or specified item of business at
any meeting of directors. In the absence of a quorum of the Board of
Directors, a majority of the members present may adjourn the meeting from time
to time until a quorum be had. Notice of the time and place of such adjourned
meeting shall be given to all the directors.
<PAGE>
<PAGE>
10. REMOVAL. The directors of the Corporation may be removed for cause by
action of the Board of Directors or by vote of the shareholders at the Annual
Meeting of Shareholders or at any special meeting of Shareholders called by
the Board of Directors or by the Chairman of the Board or by the President for
this purpose. No director may be removed without cause.
11. COMPENSATION. The Board of Directors may determine, from time to time,
the amount of compensation which shall be paid to its members. The Board of
Directors shall also have the power, in its discretion, to allow a fixed sum
and expenses for attendance at each regular or special meeting of the Board of
Directors, or any committee of the Board of Directors; the Board of Directors
shall also have power, in its discretion, to provide for any pay to directors
rendering services to the Corporation, not ordinarily rendered by directors,
as such, special compensation appropriate to the value of such services, as
determined by the Board of Directors from time to time. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity as an officer, agent or otherwise, and
receiving compensation therefor.
12. ACTION BY CONSENT. Any action required or permitted to be taken by the
Board of Directors or any committee thereof may be taken without a meeting if
all members of the Board of Directors or committee consent in writing to the
due adoption of a resolution authorizing the action. The resolutions and the
written consents thereto by the members of the Board of Directors or committee
thereof shall be filed with the minutes of the proceedings of the Board of
Directors or such committee.
13. ACTION BY TELEPHONE COMMUNICATION. Any one or more members of the
Board of Directors or any committee thereof may participate in a meeting of
the Board of Directors or such committee by means of a conference telephone or
similar communications equipment, allowing all persons participating in the
meeting to hear each other at the same time, and participation by such means
shall constitute presence in person at such meeting.
ARTICLE IV - INTERESTED TRANSACTIONS
1. CONTRACTS OR TRANSACTIONS.
(a) No contract or other transaction between the Corporation and one
or more of its directors, or between the Corporation and any other
corporation, firm, association or other entity in which one or more of its
directors are directors or officers, or have a substantial financial interest,
shall be either void or voidable for this reason alone or by reason that such
director or directors are present at the meeting of the Board of Directors, or
of a committee thereof, which approves such contract or transaction, or that
the votes of such director or directors are counted for such purposes:
(i) If the material facts as to such director's interest in such
contract or transaction and as to any common directorship, officership or
financial interest are disclosed in good faith or known to the Board of
Directors or committee, and the Board of Directors or committee approves such
contract or transaction by a vote sufficient for such purpose without counting
<PAGE>
<PAGE>
the vote or votes of such interested director or directors or, if the votes of
the disinterested directors are insufficient to constitute an act of the Board
of Directors, by unanimous vote of disinterested directors; or
(ii) If the material facts as to such director's interest in such
contract or transaction and as to any common directorship, officership or
financial interest are disclosed in good faith or known to the shareholders
entitled to vote thereto, and such contract or transaction is approved by vote
of the shareholders.
(b) If such good faith disclosure of the material facts as to the
director's interest in the contract or transaction and as to any common
directorship, officership or financial interest is made to the directors or
shareholders, or known to the Board of Directors or committee or shareholders
entitled to vote thereon, the contract or transaction may not be avoided by
the Corporation for the reason set forth in Section 1(a) of this Article IV.
If there was no such disclosure or knowledge, or if the vote of such
interested director or directors was necessary for approval of a contract or
transaction at a meeting of the Board of Directors or committee at which it
was approved, the Corporation may avoid the contract or transaction unless the
parties thereto shall establish affirmatively that the contract or transaction
was fair and reasonable as to the Corporation at the time it was approved by
the Board of Directors or committee or the shareholders.
(c) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which approves such contract or transaction.
(d) The Board of Directors shall have authority to fix the
compensation of directors for services in any capacity.
(e) A loan shall not be made by the corporation to any director
unless it is authorized by vote of the shareholders. For this purpose, the
shares of the director who would be the borrower shall not be shares entitled
to vote.
ARTICLE V - COMMITTEES
1. HOW CONSTITUTED AND THE POWERS THEREOF. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may
designate three or more directors to constitute one or more executive or other
committees, who shall serve during the pleasure of the Board of Directors. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any
meeting of the committee. Except as otherwise provided by law, by the
Certificate of Incorporation of the Corporation, by these By-laws, or by
resolution adopted by a majority of the same Board of Directors, and excepting
the powers enumerated in Section 712(1) - (5) of the Business Corporation Law,
the committees shall possess and may exercise such powers as shall be
conferred or authorized by the resolution appointing them.
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2. QUORUM AND MANNER OF ACTING. A majority of the members of any such
committee shall constitute a quorum for the transaction of any business or any
specified item of business, and the vote of a majority of the members of the
committee present at a meeting at which a quorum is present shall be necessary
for the transaction of any business or any specified item of business at any
meeting of such committee.
3. MEETINGS. A majority of any such committee shall fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
Each committee shall keep regular minutes of its meetings and report the same
to the Board of Directors when requested. Notice of each committee meeting
shall be sent to each committee member by mail at least two (2) days before
the meeting is to be held, or, if given by the chairman, may be given
personally or by telegraph or telephone at least one (1) day before the day on
which the meeting is to be held. Notice of a meeting need not be given to any
committee member who submits a signed waiver of notice whether before, at, or
after the meeting or who attends the meeting, without protesting prior thereto
or at its commencement, the lack of notice.
4. REMOVAL. The Board of Directors shall have the power, at any time, to
change the membership of any committee, to fill vacancies in it, or to
dissolve it.
ARTICLE VI - OFFICERS
1. OFFICERS; NUMBERS. The officers of the Corporation shall be the
Chairman of the Board, the President, one or more Vice Presidents (if the
Board of Directors so determines), a Treasurer (if the Board of Directors so
determines) and a Secretary. The Board of Directors may from time to time
appoint one or more Assistant Secretaries and Assistant Treasurers, and such
other officers and agents as it shall deem necessary, and may define their
powers and duties. The same person may hold any two or more offices except
those of President and Secretary.
2. SALARIES. The Board of Directors shall from time to time fix the salary
of the President, as well as the salaries of other officers of the
Corporation.
3. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. All officers of the
Corporation shall be elected or appointed annually (unless otherwise specified
at the time of election) by the Board of Directors and each officer shall hold
office until the meeting of the Board of Directors following the next annual
meeting of shareholders and until his successor shall have been duly chosen
and shall have qualified, or until he shall resign or shall have been removed
in the manner hereinafter provided.
4. VACANCIES. If any vacancy shall occur in any office of the Corporation,
such vacancy shall be filled by the Board of Directors, and such successor
officer shall hold office for the unexpired term in respect of which such
vacancy occurred.
5. REMOVAL. Any officer of the Corporation may be removed, with or
without cause, by the Board of Directors.<PAGE>
<PAGE>
6. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the shareholders and all meetings of the Board of Directors
and shall have such powers and perform such duties as may from time to time be
assigned to him by the Board of Directors.
7. PRESIDENT. The President shall be the chief executive of the
Corporation and, subject to the control of the Board of Directors, shall have
general direction of its business, affairs and property and over its several
officers. He shall be entitled to preside at all meetings of the shareholders
and directors in the absence of the Chairman of the Board. He shall appoint
and discharge employees and agents of the Corporation (other than officers
elected by the Board of Directors) and fix their compensation; and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The President shall have the power to execute, in the name and on
behalf of the Corporation, all authorized deeds, bonds, mortgages and other
contracts, agreements and instruments, except in cases in which the signing
and execution thereof shall have been expressly delegated to some other
officer or agent of the Corporation; and in general, he shall perform all
duties incident to the office of a president of a corporation, and such other
duties as from time to time may be assigned to him by the Board of Directors.
8. VICE PRESIDENTS. The Vice President or Vice Presidents of the
Corporation, under the direction of the President, shall have such powers and
perform such duties as the Board of Directors or President may from time to
time prescribe, and shall perform such other duties as may be prescribed in
these By-laws. In each case of the absence or inability of the President to
act, the Vice Presidents, in the order of seniority, shall have the powers and
discharge the duties of the President.
9. TREASURER. The Treasurer, under the direction of the President, shall
have charge of the funds, securities, receipts and disbursements of the
Corporation. He shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such banks or trust companies or
with such other depositories as the Board of Directors may from time to time
designate. He shall supervise and have charge of keeping correct books of
account of all the Corporation's business and transactions. If required by the
Board of Directors, he shall give a bond in such sum as the Board of Directors
may designate, conditioned upon the faithful performance of the duties of his
office and the restoration to the Corporation, at the expiration of his term
of office, or upon his death, resignation or removal from office, of all
books, papers, vouchers, money or other property of whatever kind in his
possession belonging to the Corporation. He shall render to the President, the
Board of Directors and any committee or committees, if any, at its regular
meetings, or when the Board of Directors so requires, an account of all of the
Treasurer's transactions and of the financial condition of the Corporation.
The Treasurer shall also have such other powers and perform such other duties
as pertain to his office, or as the Board of Directors or the President may
from time to time prescribe.
10. ASSISTANT TREASURER. In the absence or disability of the Treasurer,
the Assistant Treasurers, in the order designated by the Board of Directors,
shall perform the duties of the Treasurer, and, when so acting, shall have all
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the powers of, and be subject to all restrictions upon, the Treasurer. They
shall also perform such other duties as from time to time may be assigned to
them by the Board of Directors or the President.
11. SECRETARY. The Secretary shall attend all meetings of the shareholders
of the Corporation and of its Board of Directors, shall keep the minutes of
all such meetings in a book or books kept by him for that purpose, and shall
give, or cause to be given, notice of all meetings of the shareholders and of
the Board of Directors. He shall keep in safe custody the seal of the
Corporation, and, when authorized by the Board of Directors, he shall affix
such seal to any instrument requiring it. When the seal is so affixed, it
shall be attested by the signature of the Secretary or Assistant Secretary or
the Treasurer or an Assistant Treasurer who may affix the seal to any such
instrument in the event of the absence or disability of the Secretary. In the
absence of a Transfer Agent or a Registrar, the Secretary shall have charge of
the stock certificate books, and the Secretary shall have charge of such other
books and papers as the Board of Directors may direct. He shall also have such
other powers and perform such other duties as pertain to his office, or as the
Board of Directors or the President may from time to time prescribe.
12. ASSISTANT SECRETARIES. In the absence or disability of the Secretary,
the Assistant Secretaries, in the order designated by the Board of Directors,
shall perform the duties of the Secretary, and, when so acting, shall have all
the powers of, and be subject to all the restrictions upon, the Secretary.
They shall also perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
13. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence or
disability of any officer of the Corporation, or for any other reason that the
Board of Directors may deem sufficient, the Board of Directors may delegate,
for the time being, the powers or duties, or any of them, of such officer to
any other officers, or to any other director.
ARTICLE VII - DRAFTS, CHECKS, ETC.
All checks, drafts or other orders for the payment of money out
of the funds of the Corporation and all notes or other evidences of
indebtedness issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents, or person or persons to whom the Board
of Directors shall have delegated the power, but under such conditions and
restrictions as in said resolutions may be imposed. The signature of any
officer upon any of the foregoing instruments may be a facsimile whenever
authorized by the Board of Directors.
ARTICLE VIII - SHARES AND THEIR TRANSFER
1. ISSUES OF CERTIFICATES OF STOCK. The Board of Directors shall provide
for the issue and transfer of the certificates of stock of the Corporation and
prescribe the form of such certificates. Every owner of shares of the
Corporation shall be entitled to a certificate of stock, which shall be under
the seal of the Corporation (which seal may be a facsimile, engraved or
printed), specifying the number of shares owned by him, and which certificate
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<PAGE>
shall be signed by the President or a Vice President, or by the Chairman of
the Board, and by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer of the Corporation. Where any such certificate is
countersigned by a transfer agent other than the Corporation or its employee,
or registered by a registrar other than the Corporation or its employee, or
where the shares are listed on a registered national security exchange, the
signature of any officer or officers upon the certificates may be facsimiles.
In case any officer or officers who shall have signed, or whose facsimile
signatures shall have been used on, any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such officer or
officers of the Corporation.
2. TRANSFER AGENTS AND REGISTRARS. The Board of Directors shall have power
to appoint a Transfer Agent and/or Registrar of its stock; to prescribe their
respective duties; and to require the countersignature of such Transfer Agent
and/or Registrar upon stock certificates. The duties of the Transfer Agent and
Registrar may be combined.
3. TRANSFER OF SHARES. Subject to any restrictions on transfer of shares
of stock of the Corporation of any class, series or designation contained in
the Certificate of Incorporation, the shares of stock of the Corporation shall
be transferred only upon the books of the Corporation by the holder thereof in
person or by such person's attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof
of the authenticity of the signature as the Corporation or its agents may
reasonably require.
4. ADDRESSES OF SHAREHOLDERS. Every shareholder shall furnish the
Transfer Agent, or in the absence of a Transfer Agent, the Registrar, or in
the absence of a Transfer Agent and a Registrar, the Secretary, with an
address at or to which notices of meetings and all other notices may be served
him or mailed to him, and in default thereof, notices may be addressed to him
at the office of the Corporation.
5. RECORD DATE.
(a) The Board of Directors may set a date not exceeding fifty (50)
days and not less than ten (10) days prior to the date of any meetings of
shareholders nor more than fifty (50) days prior to any other action as the
time as of which shareholders entitled to notice of and to vote at such
meeting or whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined, and all persons who were
then holders of record of such shares and no others shall be entitled to
notice of or to vote at such meeting or to express their consent or dissent,
as the case may be.
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<PAGE>
(b) The Board of Directors shall also have power to fix a
date not exceeding fifty (50) days preceding the date fixed for the payment of
any dividend or the making of any distribution or for the allotment of any
evidence of right or interest, or the date when any change, conversion or
exchange of capital stock shall go into effect, or for any other purpose, as a
record time for the determination of the shareholders entitled to receive any
such dividend, distribution, right or interest, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to
participate in any such other action, and in such case only shareholders of
record at the time so fixed shall be entitled to receive such dividend,
distribution, right or interest, or to exercise such rights, or to participate
in such other action.
6. LOST AND DESTROYED CERTIFICATES. The Board of Directors may direct a
new certificate or certificates of stock to be issued in the place of any
certificate or certificates theretofore issued and alleged to have been lost
or destroyed; but the Board of Directors when authorizing such issue of a new
certificate or certificates, may in its discretion require the owner of the
shares represented by the certificate so lost or destroyed or his legal
representative to furnish proof by affidavit or otherwise to the satisfaction
of the Board of Directors of the ownership of the shares represented by such
certificate alleged to have been lost or destroyed and the facts which tend to
prove its loss or destruction. The Board of Directors may also require such
person to execute and deliver to the Corporation a bond, with or without
sureties, in such sum as the Board of Directors may direct, indemnifying the
Corporation, its Transfer Agents and Registrars, if any, against any claim
that may be made against them, or any of them, by reason of the issue of such
certificate. The Board of Directors, however, may in its discretion refuse to
issue any such new certificate, except pursuant to court order.
ARTICLE IX - SEAL
The corporate seal of the Corporation shall be circular in form and shall
contain the name of the Corporation, the year of its creation and the words
"Corporate Seal New York," or words of similar import. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or in any
manner reproduced, and said seal may be altered from time to time at the
discretion of the Board of Directors.
ARTICLE X - MISCELLANEOUS
1. EXAMINATION OF BOOKS AND RECORDS. There shall be kept at such office of
the Corporation as the Board of Directors shall determine, within or without
the State of New York, correct books and records of account of all its
business and transactions, minutes of the proceedings of its shareholders,
Board of Directors and committees, and the stock book, containing the names
and addresses of the shareholders, the number of shares held by them and the
class or series thereof, respectively, and the dates when they respectively
became the owners of record thereof, and in which the transfer of stock shall
be registered, and such other books and records as the Board of Directors may
from time to time determine. The Board of Directors may determine from time to
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<PAGE>
time whether, and to what extent, and at what times and places and under what
conditions and regulations, the accounts and books of the Corporation, or any
of them, shall be open to the inspection of the shareholders, and no
shareholder shall have any right to inspect any account or book or document of
the Corporation, except as provided by the statutes of the State of New York
or authorized by the Board of Directors.
2. VOTING OF STOCK IN OTHER CORPORATIONS. Any shares in any other
corporations, which may from time to time be held by the Corporation, may be
represented and voted on at any of the shareholders' meetings thereof by the
President or one of the Vice Presidents of the Corporation, or by proxy or
proxies appointed by the President or one of the Vice Presidents of the
Corporation. The Board of Directors, however, may, by resolution, appoint any
other person or persons to vote such shares, in which case such other person
or persons shall be entitled to vote such shares upon the production of a
certified copy of such resolution.
3. FISCAL YEAR. The fiscal year of the Corporation shall end on March 31st
in each year unless otherwise fixed by resolution of the Board of Directors.
ARTICLE XI - AMENDMENTS
1. BY SHAREHOLDERS. The vote of the holders of at least a majority of the
shares that are issued and outstanding and entitled to vote, shall be
necessary at any meeting of shareholders to amend or repeal the By-laws or to
adopt new By-laws.
2. BY DIRECTORS. The Board of Directors shall have the power to alter,
amend or repeal any of these By-laws by the vote of at least a majority of the
entire Board of Directors at any meeting of the Board of Directors, provided
that any By-law adopted by the Board of Directors may be amended or repealed
by the shareholders.
3. NOTICE. Any proposal to amend or repeal these By-laws or to adopt new
By-laws shall be stated in the notice of the meeting of the Board of Directors
or shareholders, or in the waiver of notice thereof, as the case may be,
unless all of the directors or the holders of all of the shares of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
June 29 , 1997
PHONETIME, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, PhoneTime, Inc., a New York corporation (the
"Company"), hereby certifies that David L. Turock (the "Holder"), is entitled,
subject to the provisions contained herein, to purchase from the Company fully
paid and non-assessable shares of Common Stock (as defined below) subject to
adjustment as provided herein. The number of Warrant Shares and the Exercise
Price thereof shall be determined as follows:
(a) From and after the earlier of: (X) March 31, 1998 or (Y)
sixty (60) days after the closing of an initial public offering ("IPO")
by the Company (the "First Vesting Date"), the Holder shall be entitled
to (i) that number of Warrant Shares having a fair market value as of the
First Vesting Date equal to $145,500, at an aggregate Exercise Price
equal to $.01, and (ii) that number of Warrant Shares having a fair
market value as of the First Vesting Date equal to $291,000, at an
aggregate Exercise Price equal to $145,500, but if and only if that
certain Agreement dated June 29, 1997 between the Company and
InterExchange, Inc. ("IX") (as it may be amended from time to time, the
"Primary Agreement") has not been terminated on or before such date
(except if the Primary Agreement was terminated by IX by virtue of a
default by the Company) and no material default by IX has occurred and is
uncured as of such date. On or after the First Vesting Date, the
Warrants granted under Subsections (i) and (ii) above may be exercised
independent of each other.
(b) From and after January 1, 1999 (the "Second Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Second Vesting Date equal to
$145,500, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Second
Vesting Date equal to $291,000, at an aggregate Exercise Price equal to
$145,500, but if and only if the Primary Agreement has not been
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<PAGE>
terminated on or before such date (except if the Primary Agreement was
terminated by IX by virtue of a default by the Company) and no material
default by IX has occurred and is uncured as of such date. On or after
the Second Vesting Date, the Warrants granted under Subsections (i) and
(ii) above may be exercised independent of each other.
(c) From and after December 1, 1999 (the "Third Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Third Vesting Date equal to
$145,500, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Third
Vesting Date equal to $291,000, at an aggregate Exercise Price equal to
$145,500, but if and only if the Primary Agreement has not been
terminated (other than as a result of its expiration or except if the
Primary Agreement was terminated by IX by virtue of a default by the
Company) on or before such date and no material default by IX has
occurred and is uncured as of such date. On or after the Third Vesting
Date, the Warrants granted under Subsections (i) and (ii) above may be
exercised independent of each other.
(d) For purposes of the foregoing, "fair market value" per share
as of a particular date shall mean (i) the average closing sales price
per share of Common Stock on the principal national securities exchange,
if any, on which the Common Stock shall then be listed for the preceding
twenty days on which there was a sale of such Common Stock on such
exchange, or (ii) if the Common Stock is not then listed on a national
securities exchange, the average closing sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
preceding twenty days on which there was a sale of such Common Stock on
such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national
inter-dealer quotation system, the average of the closing bid and asked
prices for the Common Stock in the over-the-counter market for the
preceding twenty days on which there was a quotation for such Common
Stock in such market or (iv) if no price can be determined under the
preceding alternatives, then the price per share as determined by the
Company's Board of Directors in good faith.
(e) Notwithstanding Sections (a), (b), (c) and (d) above, in the
event that a "change in control" (as defined below) of PTI occurs, then
all of the Warrants set forth in Subsections (a), (b) and (c) above shall
vest and be immediately exercisable and, all determinations of fair
market value, as required above, except as to Warrants that have already
vested, shall be as of the date the "change in control" occurs. A
"change in control" shall mean the occurrence of any merger, sale of
substantially all of the assets, sale of stock or consolidation such
that a "person" or "group" (within the meanings of Section 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934), other than Samer Tawfik,
becomes the "beneficial owner" of voting stock representing more than 50%
of the voting stock of the Company.
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<PAGE>
The term "Common Stock" means the Common Stock, no par value per share,
of the Company as constituted on the date hereof. The shares of Common Stock
deliverable upon such exercise, are hereinafter referred to as "Warrant
Shares" or "Warrant Stock." For purposes of the foregoing, references to the
"Company" shall mean PhoneTime, Inc. and any successor thereto including any
successor corporation resulting from the merger or consolidation of PhoneTime,
Inc.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject, to all of the conditions,
limitations and provisions set forth herein, including the following:
1. Exercise of Warrants. Each Warrant granted above may be exercised in
whole or in part, at any time, after satisfaction of the conditions set
forth above but prior to the fifth anniversary of the Vesting Date of
the respective Warrant by presentation and surrender of such Warrant to
the Company at its principal office (which on the date hereof is 30-60
Whitestone Expressway, Flushing, New York 11354), with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or checks,
payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. If these Warrants are
exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing
the rights of the Holder thereof to purchase the balance of Warrant
Stock purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the
Company's stock transfer agent at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock issuable upon such exercise, notwithstanding that the
transfer books of the Company shall then be closed or that certificates
representing such Warrant Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares and Adjustments. The Company will at all times
reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock of the Company from time to time receivable upon
exercise of these Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid
and non-assessable and free and clear of all preemptive rights. For
each Warrant granted hereunder, the number of shares of Common Stock
issuable upon the exercise of such Warrant shall be adjusted in the
event of any stock split or stock dividend that occurs after the Vesting
Date of such Warrant so that the Holder would be entitled to receive the
same number of shares of Common Stock as if the Warrant had been
exercised immediately before the stock split or stock dividend.
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<PAGE>
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants,
but the Company shall pay the Holder an amount in cash equal to the fair
market value of such fractional share in lieu of each fraction of a
share otherwise issuable upon any exercise of these Warrants, as
determined by the Board of Directors of the Company in its reasonable
discretion.
4. Restrictions on Transfer of Warrants, Warrant Stock. In connection
with an IPO, Holder agrees to execute a "lockup" agreement if requested
by the managing underwriter provided the "lockup" period does not exceed
6 months. The Warrant Stock may not be sold, transferred or otherwise
disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant
to available exemptions from such registration, provided that the seller
delivers to the Company an opinion of counsel reasonably satisfactory to
the Company confirming the availability of such exemption. Unless the
shares of Warrant Stock have been registered under the Securities Act,
upon exercise of any of these Warrants and the issuance of any of the
shares of Warrant Stock, all certificates representing such securities
shall bear on the fact thereof substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
5. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two
days after mailing when mailed by certified or registered mail, return
receipt requested, to the Company at its principal office, or to the
Holder at the address set forth on the record books of the Company, or
at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
6. Applicable Law. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving
effect to conflicts of law principles.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as
of the day and year first above written.
PHONETIME, INC.
By: /s/ Samer Tawfik
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Name:
Title: <PAGE>
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase ________ shares of Common Stock of PhoneTime, Inc., a New York
corporation, and hereby makes payment of $_______________ in full satisfaction
therefor.
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Signature
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Signature, if jointly held
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Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
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(if other than to the Holder of the within Warrants)
Name
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(Please typewrite or print in block letters)
Address
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Social Security or Taxpayer Identification Number
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THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
June 29, 1997
PHONETIME, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, PhoneTime, Inc., a New York corporation (the
"Company"), hereby certifies that Eric L. Hecht (the "Holder"), is entitled,
subject to the provisions contained herein, to purchase from the Company fully
paid and non-assessable shares of Common Stock (as defined below) subject to
adjustment as provided herein. The number of Warrant Shares and the Exercise
Price thereof shall be determined as follows:
(a) From and after the earlier of: (X) March 31, 1998 or (Y)
sixty (60) days after the closing of an initial public offering ("IPO")
by the Company (the "First Vesting Date"), the Holder shall be entitled
to (i) that number of Warrant Shares having a fair market value as of the
First Vesting Date equal to $72,750, at an aggregate Exercise Price
equal to $.01, and (ii) that number of Warrant Shares having a fair
market value as of the First Vesting Date equal to $145,000, at an
aggregate Exercise Price equal to $72,750, but if and only if that
certain Agreement dated June 29, 1997 between the Company and
InterExchange, Inc. ("IX") (as it may be amended from time to time, the
"Primary Agreement") has not been terminated on or before such date
(except if the Primary Agreement was terminated by IX by virtue of a
default by the Company) and no material default by IX has occurred and is
uncured as of such date. On or after the First Vesting Date, the
Warrants granted under Subsections (i) and (ii) above may be exercised
independent of each other.
(b) From and after January 1, 1999 (the "Second Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Second Vesting Date equal to
$72,750, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Second
Vesting Date equal to $145,500, at an aggregate Exercise Price equal to
$72,750, but if and only if the Primary Agreement has not been
<PAGE>
<PAGE>
terminated on or before such date (except if the Primary Agreement was
terminated by IX by virtue of a default by the Company) and no material
default by IX has occurred and is uncured as of such date. On or after
the Second Vesting Date, the Warrants granted under Subsections (i) and
(ii) above may be exercised independent of each other.
(c) From and after December 1, 1999 (the "Third Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Third Vesting Date equal to
$72,750, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Third
Vesting Date equal to $145,500, at an aggregate Exercise Price equal to
$72,750, but if and only if the Primary Agreement has not been
terminated (other than as a result of its expiration or except if the
Primary Agreement was terminated by IX by virtue of a default by the
Company) on or before such date and no material default by IX has
occurred and is uncured as of such date. On or after the Third Vesting
Date, the Warrants granted under Subsections (i) and (ii) above may be
exercised independent of each other.
(d) For purposes of the foregoing, "fair market value" per share
as of a particular date shall mean (i) the average closing sales price
per share of Common Stock on the principal national securities exchange,
if any, on which the Common Stock shall then be listed for the preceding
twenty days on which there was a sale of such Common Stock on such
exchange, or (ii) if the Common Stock is not then listed on a national
securities exchange, the average closing sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
preceding twenty days on which there was a sale of such Common Stock on
such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national
inter-dealer quotation system, the average of the closing bid and asked
prices for the Common Stock in the over-the-counter market for the
preceding twenty days on which there was a quotation for such Common
Stock in such market or (iv) if no price can be determined under the
preceding alternatives, then the price per share as determined by the
Company's Board of Directors in good faith.
(e) Notwithstanding Sections (a), (b), (c) and (d) above, in the
event that a "change in control" (as defined below) of PTI occurs, then
all of the Warrants set forth in Subsections (a), (b) and (c) above shall
vest and be immediately exercisable and, all determinations of fair
market value, as required above, except as to Warrants that have already
vested, shall be as of the date the "change in control" occurs. A
"change in control" shall mean the occurrence of any merger, sale of
substantially all of the assets, sale of stock or consolidation such
that a "person" or "group" (within the meanings of Section 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934), other than Samer Tawfik,
becomes the "beneficial owner" of voting stock representing more than 50%
of the voting stock of the Company.
<PAGE>
<PAGE>
The term "Common Stock" means the Common Stock, no par value per share,
of the Company as constituted on the date hereof. The shares of Common Stock
deliverable upon such exercise, are hereinafter referred to as "Warrant
Shares" or "Warrant Stock." For purposes of the foregoing, references to the
"Company" shall mean PhoneTime, Inc. and any successor thereto including any
successor corporation resulting from the merger or consolidation of PhoneTime,
Inc.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject, to all of the conditions,
limitations and provisions set forth herein, including the following:
1. Exercise of Warrants. Each Warrant granted above may be exercised in
whole or in part, at any time, after satisfaction of the conditions set
forth above but prior to the fifth anniversary of the Vesting Date of
the respective Warrant by presentation and surrender of such Warrant to
the Company at its principal office (which on the date hereof is 30-60
Whitestone Expressway, Flushing, New York 11354), with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or checks,
payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. If these Warrants are
exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing
the rights of the Holder thereof to purchase the balance of Warrant
Stock purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the
Company's stock transfer agent at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock issuable upon such exercise, notwithstanding that the
transfer books of the Company shall then be closed or that certificates
representing such Warrant Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares and Adjustments. The Company will at all times
reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock of the Company from time to time receivable upon
exercise of these Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid
and non-assessable and free and clear of all preemptive rights. For
each Warrant granted hereunder, the number of shares of Common Stock
issuable upon the exercise of such Warrant shall be adjusted in the
event of any stock split or stock dividend that occurs after the Vesting
Date of such Warrant so that the Holder would be entitled to receive the
same number of shares of Common Stock as if the Warrant had been
exercised immediately before the stock split or stock dividend.
<PAGE>
<PAGE>
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants,
but the Company shall pay the Holder an amount in cash equal to the fair
market value of such fractional share in lieu of each fraction of a
share otherwise issuable upon any exercise of these Warrants, as
determined by the Board of Directors of the Company in its reasonable
discretion.
4. Restrictions on Transfer of Warrants, Warrant Stock. In connection
with an IPO, Holder agrees to execute a "lockup" agreement if requested
by the managing underwriter provided the "lockup" period does not exceed
6 months. The Warrant Stock may not be sold, transferred or otherwise
disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant
to available exemptions from such registration, provided that the seller
delivers to the Company an opinion of counsel reasonably satisfactory to
the Company confirming the availability of such exemption. Unless the
shares of Warrant Stock have been registered under the Securities Act,
upon exercise of any of these Warrants and the issuance of any of the
shares of Warrant Stock, all certificates representing such securities
shall bear on the fact thereof substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
5. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two
days after mailing when mailed by certified or registered mail, return
receipt requested, to the Company at its principal office, or to the
Holder at the address set forth on the record books of the Company, or
at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
6. Applicable Law. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving
effect to conflicts of law principles.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as
of the day and year first above written.
PHONETIME, INC.
By: /s/ Samer Tawfik
----------------------------------
Name:
Title: <PAGE>
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase ________ shares of Common Stock of PhoneTime, Inc., a New York
corporation, and hereby makes payment of $_______________ in full satisfaction
therefor.
----------------------------------
Signature
----------------------------------
Signature, if jointly held
----------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
----------------------------------
(if other than to the Holder of the within Warrants)
Name
---------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------
- --------------------------------------------------------------------------
Social Security or Taxpayer Identification Number
--------------------------
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
June 29, 1997
PHONETIME, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, PhoneTime, Inc., a New York corporation (the
"Company"), hereby certifies that Richard A. Robbins (the "Holder"), is
entitled, subject to the provisions contained herein, to purchase from the
Company fully paid and non-assessable shares of Common Stock (as defined
below) subject to adjustment as provided herein. The number of Warrant Shares
and the Exercise Price thereof shall be determined as follows:
(a) From and after the earlier of: (X) March 31, 1998 or (Y)
sixty (60) days after the closing of an initial public offering ("IPO")
by the Company (the "First Vesting Date"), the Holder shall be entitled
to (i) that number of Warrant Shares having a fair market value as of the
First Vesting Date equal to $72,750, at an aggregate Exercise Price
equal to $.01, and (ii) that number of Warrant Shares having a fair
market value as of the First Vesting Date equal to $145,000, at an
aggregate Exercise Price equal to $72,750, but if and only if that
certain Agreement dated June 29, 1997 between the Company and
InterExchange, Inc. ("IX") (as it may be amended from time to time, the
"Primary Agreement") has not been terminated on or before such date
(except if the Primary Agreement was terminated by IX by virtue of a
default by the Company) and no material default by IX has occurred and is
uncured as of such date. On or after the First Vesting Date, the
Warrants granted under Subsections (i) and (ii) above may be exercised
independent of each other.
(b) From and after January 1, 1999 (the "Second Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Second Vesting Date equal to
$72,750, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Second
Vesting Date equal to $145,500, at an aggregate Exercise Price equal to
$72,750, but if and only if the Primary Agreement has not been
<PAGE>
<PAGE>
terminated on or before such date (except if the Primary Agreement was
terminated by IX by virtue of a default by the Company) and no material
default by IX has occurred and is uncured as of such date. On or after
the Second Vesting Date, the Warrants granted under Subsections (i) and
(ii) above may be exercised independent of each other.
(c) From and after December 1, 1999 (the "Third Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Third Vesting Date equal to
$72,750, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Third
Vesting Date equal to $145,500, at an aggregate Exercise Price equal to
$72,750, but if and only if the Primary Agreement has not been
terminated (other than as a result of its expiration or except if the
Primary Agreement was terminated by IX by virtue of a default by the
Company) on or before such date and no material default by IX has
occurred and is uncured as of such date. On or after the Third Vesting
Date, the Warrants granted under Subsections (i) and (ii) above may be
exercised independent of each other.
(d) For purposes of the foregoing, "fair market value" per share
as of a particular date shall mean (i) the average closing sales price
per share of Common Stock on the principal national securities exchange,
if any, on which the Common Stock shall then be listed for the preceding
twenty days on which there was a sale of such Common Stock on such
exchange, or (ii) if the Common Stock is not then listed on a national
securities exchange, the average closing sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
preceding twenty days on which there was a sale of such Common Stock on
such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national
inter-dealer quotation system, the average of the closing bid and asked
prices for the Common Stock in the over-the-counter market for the
preceding twenty days on which there was a quotation for such Common
Stock in such market or (iv) if no price can be determined under the
preceding alternatives, then the price per share as determined by the
Company's Board of Directors in good faith.
(e) Notwithstanding Sections (a), (b), (c) and (d) above, in the
event that a "change in control" (as defined below) of PTI occurs, then
all of the Warrants set forth in Subsections (a), (b) and (c) above shall
vest and be immediately exercisable and, all determinations of fair
market value, as required above, except as to Warrants that have already
vested, shall be as of the date the "change in control" occurs. A
"change in control" shall mean the occurrence of any merger, sale of
substantially all of the assets, sale of stock or consolidation such
that a "person" or "group" (within the meanings of Section 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934), other than Samer Tawfik,
becomes the "beneficial owner" of voting stock representing more than 50%
of the voting stock of the Company.
<PAGE>
<PAGE>
The term "Common Stock" means the Common Stock, no par value per share,
of the Company as constituted on the date hereof. The shares of Common Stock
deliverable upon such exercise, are hereinafter referred to as "Warrant
Shares" or "Warrant Stock." For purposes of the foregoing, references to the
"Company" shall mean PhoneTime, Inc. and any successor thereto including any
successor corporation resulting from the merger or consolidation of PhoneTime,
Inc.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject, to all of the conditions,
limitations and provisions set forth herein, including the following:
1. Exercise of Warrants. Each Warrant granted above may be exercised in
whole or in part, at any time, after satisfaction of the conditions set
forth above but prior to the fifth anniversary of the Vesting Date of
the respective Warrant by presentation and surrender of such Warrant to
the Company at its principal office (which on the date hereof is 30-60
Whitestone Expressway, Flushing, New York 11354), with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or checks,
payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. If these Warrants are
exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing
the rights of the Holder thereof to purchase the balance of Warrant
Stock purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the
Company's stock transfer agent at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock issuable upon such exercise, notwithstanding that the
transfer books of the Company shall then be closed or that certificates
representing such Warrant Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares and Adjustments. The Company will at all times
reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock of the Company from time to time receivable upon
exercise of these Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid
and non-assessable and free and clear of all preemptive rights. For
each Warrant granted hereunder, the number of shares of Common Stock
issuable upon the exercise of such Warrant shall be adjusted in the
event of any stock split or stock dividend that occurs after the Vesting
Date of such Warrant so that the Holder would be entitled to receive the
same number of shares of Common Stock as if the Warrant had been
exercised immediately before the stock split or stock dividend.
<PAGE>
<PAGE>
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants,
but the Company shall pay the Holder an amount in cash equal to the fair
market value of such fractional share in lieu of each fraction of a
share otherwise issuable upon any exercise of these Warrants, as
determined by the Board of Directors of the Company in its reasonable
discretion.
4. Restrictions on Transfer of Warrants, Warrant Stock. In connection
with an IPO, Holder agrees to execute a "lockup" agreement if requested
by the managing underwriter provided the "lockup" period does not exceed
6 months. The Warrant Stock may not be sold, transferred or otherwise
disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant
to available exemptions from such registration, provided that the seller
delivers to the Company an opinion of counsel reasonably satisfactory to
the Company confirming the availability of such exemption. Unless the
shares of Warrant Stock have been registered under the Securities Act,
upon exercise of any of these Warrants and the issuance of any of the
shares of Warrant Stock, all certificates representing such securities
shall bear on the fact thereof substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
5. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two
days after mailing when mailed by certified or registered mail, return
receipt requested, to the Company at its principal office, or to the
Holder at the address set forth on the record books of the Company, or
at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
6. Applicable Law. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving
effect to conflicts of law principles.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as
of the day and year first above written.
PHONETIME, INC.
By: /s/ Samer Tawfik
----------------------------------
Name:
Title: <PAGE>
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase ________ shares of Common Stock of PhoneTime, Inc., a New York
corporation, and hereby makes payment of $_______________ in full satisfaction
therefor.
----------------------------------
Signature
----------------------------------
Signature, if jointly held
----------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
----------------------------------
(if other than to the Holder of the within Warrants)
Name
---------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------
- --------------------------------------------------------------------------
Social Security or Taxpayer Identification Number
--------------------------
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
June 29, 1997
PHONETIME, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, PhoneTime, Inc., a New York corporation (the
"Company"), hereby certifies that Eric L. Hecht (the "Holder"), is entitled,
subject to the provisions contained herein, to purchase from the Company fully
paid and non-assessable shares of Common Stock (as defined below) subject to
adjustment as provided herein. The number of Warrant Shares and the Exercise
Price thereof shall be determined as follows:
(a) From and after the earlier of: (X) March 31, 1998 or (Y)
sixty (60) days after the closing of an initial public offering ("IPO")
by the Company (the "First Vesting Date"), the Holder shall be entitled
to (i) that number of Warrant Shares having a fair market value as of the
First Vesting Date equal to $9,000, at an aggregate Exercise Price
equal to $.01, and (ii) that number of Warrant Shares having a fair
market value as of the First Vesting Date equal to $18,000, at an
aggregate Exercise Price equal to $9,000, but if and only if that
certain Agreement dated June 29, 1997 between the Company and
InterExchange, Inc. ("IX") (as it may be amended from time to time, the
"Primary Agreement") has not been terminated on or before such date
(except if the Primary Agreement was terminated by IX by virtue of a
default by the Company) and no material default by IX has occurred and is
uncured as of such date. On or after the First Vesting Date, the
Warrants granted under Subsections (i) and (ii) above may be exercised
independent of each other.
(b) From and after January 1, 1999 (the "Second Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Second Vesting Date equal to
$9,000, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Second
Vesting Date equal to $18,000, at an aggregate Exercise Price equal to
$9,000, but if and only if the Primary Agreement has not been
<PAGE>
<PAGE>
terminated on or before such date (except if the Primary Agreement was
terminated by IX by virtue of a default by the Company) and no material
default by IX has occurred and is uncured as of such date. On or after
the Second Vesting Date, the Warrants granted under Subsections (i) and
(ii) above may be exercised independent of each other.
(c) From and after December 1, 1999 (the "Third Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Third Vesting Date equal to
$9,000, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Third
Vesting Date equal to $18,000, at an aggregate Exercise Price equal to
$9,000, but if and only if the Primary Agreement has not been
terminated (other than as a result of its expiration or except if the
Primary Agreement was terminated by IX by virtue of a default by the
Company) on or before such date and no material default by IX has
occurred and is uncured as of such date. On or after the Third Vesting
Date, the Warrants granted under Subsections (i) and (ii) above may be
exercised independent of each other.
(d) For purposes of the foregoing, "fair market value" per share
as of a particular date shall mean (i) the average closing sales price
per share of Common Stock on the principal national securities exchange,
if any, on which the Common Stock shall then be listed for the preceding
twenty days on which there was a sale of such Common Stock on such
exchange, or (ii) if the Common Stock is not then listed on a national
securities exchange, the average closing sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
preceding twenty days on which there was a sale of such Common Stock on
such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national
inter-dealer quotation system, the average of the closing bid and asked
prices for the Common Stock in the over-the-counter market for the
preceding twenty days on which there was a quotation for such Common
Stock in such market or (iv) if no price can be determined under the
preceding alternatives, then the price per share as determined by the
Company's Board of Directors in good faith.
(e) Notwithstanding Sections (a), (b), (c) and (d) above, in the
event that a "change in control" (as defined below) of PTI occurs, then
all of the Warrants set forth in Subsections (a), (b) and (c) above shall
vest and be immediately exercisable and, all determinations of fair
market value, as required above, except as to Warrants that have already
vested, shall be as of the date the "change in control" occurs. A
"change in control" shall mean the occurrence of any merger, sale of
substantially all of the assets, sale of stock or consolidation such
that a "person" or "group" (within the meanings of Section 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934), other than Samer Tawfik,
becomes the "beneficial owner" of voting stock representing more than 50%
of the voting stock of the Company.
<PAGE>
<PAGE>
The term "Common Stock" means the Common Stock, no par value per share,
of the Company as constituted on the date hereof. The shares of Common Stock
deliverable upon such exercise, are hereinafter referred to as "Warrant
Shares" or "Warrant Stock." For purposes of the foregoing, references to the
"Company" shall mean PhoneTime, Inc. and any successor thereto including any
successor corporation resulting from the merger or consolidation of PhoneTime,
Inc.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject, to all of the conditions,
limitations and provisions set forth herein, including the following:
1. Exercise of Warrants. Each Warrant granted above may be exercised in
whole or in part, at any time, after satisfaction of the conditions set
forth above but prior to the fifth anniversary of the Vesting Date of
the respective Warrant by presentation and surrender of such Warrant to
the Company at its principal office (which on the date hereof is 30-60
Whitestone Expressway, Flushing, New York 11354), with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or checks,
payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. If these Warrants are
exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing
the rights of the Holder thereof to purchase the balance of Warrant
Stock purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the
Company's stock transfer agent at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock issuable upon such exercise, notwithstanding that the
transfer books of the Company shall then be closed or that certificates
representing such Warrant Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares and Adjustments. The Company will at all times
reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock of the Company from time to time receivable upon
exercise of these Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid
and non-assessable and free and clear of all preemptive rights. For
each Warrant granted hereunder, the number of shares of Common Stock
issuable upon the exercise of such Warrant shall be adjusted in the
event of any stock split or stock dividend that occurs after the Vesting
Date of such Warrant so that the Holder would be entitled to receive the
same number of shares of Common Stock as if the Warrant had been
exercised immediately before the stock split or stock dividend.
<PAGE>
<PAGE>
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants,
but the Company shall pay the Holder an amount in cash equal to the fair
market value of such fractional share in lieu of each fraction of a
share otherwise issuable upon any exercise of these Warrants, as
determined by the Board of Directors of the Company in its reasonable
discretion.
4. Restrictions on Transfer of Warrants, Warrant Stock. In connection
with an IPO, Holder agrees to execute a "lockup" agreement if requested
by the managing underwriter provided the "lockup" period does not exceed
6 months. The Warrant Stock may not be sold, transferred or otherwise
disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant
to available exemptions from such registration, provided that the seller
delivers to the Company an opinion of counsel reasonably satisfactory to
the Company confirming the availability of such exemption. Unless the
shares of Warrant Stock have been registered under the Securities Act,
upon exercise of any of these Warrants and the issuance of any of the
shares of Warrant Stock, all certificates representing such securities
shall bear on the fact thereof substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
5. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two
days after mailing when mailed by certified or registered mail, return
receipt requested, to the Company at its principal office, or to the
Holder at the address set forth on the record books of the Company, or
at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
6. Applicable Law. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving
effect to conflicts of law principles.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as
of the day and year first above written.
PHONETIME, INC.
By: /s/ Samer Tawfik
----------------------------------
Name:
Title: <PAGE>
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase ________ shares of Common Stock of PhoneTime, Inc., a New York
corporation, and hereby makes payment of $_______________ in full satisfaction
therefor.
----------------------------------
Signature
----------------------------------
Signature, if jointly held
----------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
----------------------------------
(if other than to the Holder of the within Warrants)
Name
---------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------
- --------------------------------------------------------------------------
Social Security or Taxpayer Identification Number
--------------------------
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
June 29, 1997
PHONETIME, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, PhoneTime, Inc., a New York corporation (the
"Company"), hereby certifies that (the "Holder"), is
------------------------
entitled, subject to the provisions contained herein, to purchase from the
Company fully paid and non-assessable shares of Common Stock (as defined
below) subject to adjustment as provided herein. The number of Warrant Shares
and the Exercise Price thereof shall be determined as follows:
(a) From and after the earlier of: (X) March 31, 1998 or (Y)
sixty (60) days after the closing of an initial public offering ("IPO")
by the Company (the "First Vesting Date"), the Holder shall be entitled
to (i) that number of Warrant Shares having a fair market value as of the
First Vesting Date equal to $33,333, at an aggregate Exercise Price
equal to $.01, and (ii) that number of Warrant Shares having a fair
market value as of the First Vesting Date equal to $66,667, at an
aggregate Exercise Price equal to $33,000, but if and only if that
certain Agreement dated June 29, 1997 between the Company and
InterExchange, Inc. ("IX") (as it may be amended from time to time, the
"Primary Agreement") has not been terminated on or before such date
(except if the Primary Agreement was terminated by IX by virtue of a
default by the Company) and no material default by IX has occurred and is
uncured as of such date. On or after the First Vesting Date, the
Warrants granted under Subsections (i) and (ii) above may be exercised
independent of each other.
(b) From and after January 1, 1999 (the "Second Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Second Vesting Date equal to
$33,333, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Second
Vesting Date equal to $66,667, at an aggregate Exercise Price equal to
$33,000, but if and only if the Primary Agreement has not been
<PAGE>
<PAGE>
terminated on or before such date (except if the Primary Agreement was
terminated by IX by virtue of a default by the Company) and no material
default by IX has occurred and is uncured as of such date. On or after
the Second Vesting Date, the Warrants granted under Subsections (i) and
(ii) above may be exercised independent of each other.
(c) From and after December 1, 1999 (the "Third Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Third Vesting Date equal to
$33,333, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Third
Vesting Date equal to $66,667, at an aggregate Exercise Price equal to
$33,000, but if and only if the Primary Agreement has not been
terminated (other than as a result of its expiration or except if the
Primary Agreement was terminated by IX by virtue of a default by the
Company) on or before such date and no material default by IX has
occurred and is uncured as of such date. On or after the Third Vesting
Date, the Warrants granted under Subsections (i) and (ii) above may be
exercised independent of each other.
(d) For purposes of the foregoing, "fair market value" per share
as of a particular date shall mean (i) the average closing sales price
per share of Common Stock on the principal national securities exchange,
if any, on which the Common Stock shall then be listed for the preceding
twenty days on which there was a sale of such Common Stock on such
exchange, or (ii) if the Common Stock is not then listed on a national
securities exchange, the average closing sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
preceding twenty days on which there was a sale of such Common Stock on
such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national
inter-dealer quotation system, the average of the closing bid and asked
prices for the Common Stock in the over-the-counter market for the
preceding twenty days on which there was a quotation for such Common
Stock in such market or (iv) if no price can be determined under the
preceding alternatives, then the price per share as determined by the
Company's Board of Directors in good faith.
(e) Notwithstanding Sections (a), (b), (c) and (d) above, in the
event that a "change in control" (as defined below) of PTI occurs, then
all of the Warrants set forth in Subsections (a), (b) and (c) above shall
vest and be immediately exercisable and, all determinations of fair
market value, as required above, except as to Warrants that have already
vested, shall be as of the date the "change in control" occurs. A
"change in control" shall mean the occurrence of any merger, sale of
substantially all of the assets, sale of stock or consolidation such
that a "person" or "group" (within the meanings of Section 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934), other than Samer Tawfik,
becomes the "beneficial owner" of voting stock representing more than 50%
of the voting stock of the Company.
<PAGE>
<PAGE>
The term "Common Stock" means the Common Stock, no par value per share,
of the Company as constituted on the date hereof. The shares of Common Stock
deliverable upon such exercise, are hereinafter referred to as "Warrant
Shares" or "Warrant Stock." For purposes of the foregoing, references to the
"Company" shall mean PhoneTime, Inc. and any successor thereto including any
successor corporation resulting from the merger or consolidation of PhoneTime,
Inc.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject, to all of the conditions,
limitations and provisions set forth herein, including the following:
1. Exercise of Warrants. Each Warrant granted above may be exercised in
whole or in part, at any time, after satisfaction of the conditions set
forth above but prior to the fifth anniversary of the Vesting Date of
the respective Warrant by presentation and surrender of such Warrant to
the Company at its principal office (which on the date hereof is 30-60
Whitestone Expressway, Flushing, New York 11354), with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or checks,
payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. If these Warrants are
exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing
the rights of the Holder thereof to purchase the balance of Warrant
Stock purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the
Company's stock transfer agent at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock issuable upon such exercise, notwithstanding that the
transfer books of the Company shall then be closed or that certificates
representing such Warrant Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares and Adjustments. The Company will at all times
reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock of the Company from time to time receivable upon
exercise of these Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid
and non-assessable and free and clear of all preemptive rights. For
each Warrant granted hereunder, the number of shares of Common Stock
issuable upon the exercise of such Warrant shall be adjusted in the
event of any stock split or stock dividend that occurs after the Vesting
Date of such Warrant so that the Holder would be entitled to receive the
same number of shares of Common Stock as if the Warrant had been
exercised immediately before the stock split or stock dividend.
<PAGE>
<PAGE>
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants,
but the Company shall pay the Holder an amount in cash equal to the fair
market value of such fractional share in lieu of each fraction of a
share otherwise issuable upon any exercise of these Warrants, as
determined by the Board of Directors of the Company in its reasonable
discretion.
4. Restrictions on Transfer of Warrants, Warrant Stock. In connection
with an IPO, Holder agrees to execute a "lockup" agreement if requested
by the managing underwriter provided the "lockup" period does not exceed
6 months. The Warrant Stock may not be sold, transferred or otherwise
disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant
to available exemptions from such registration, provided that the seller
delivers to the Company an opinion of counsel reasonably satisfactory to
the Company confirming the availability of such exemption. Unless the
shares of Warrant Stock have been registered under the Securities Act,
upon exercise of any of these Warrants and the issuance of any of the
shares of Warrant Stock, all certificates representing such securities
shall bear on the fact thereof substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
5. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two
days after mailing when mailed by certified or registered mail, return
receipt requested, to the Company at its principal office, or to the
Holder at the address set forth on the record books of the Company, or
at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
6. Applicable Law. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving
effect to conflicts of law principles.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as
of the day and year first above written.
PHONETIME, INC.
By:
----------------------------------
Name:
Title: <PAGE>
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase ________ shares of Common Stock of PhoneTime, Inc., a New York
corporation, and hereby makes payment of $_______________ in full satisfaction
therefor.
----------------------------------
Signature
----------------------------------
Signature, if jointly held
----------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
----------------------------------
(if other than to the Holder of the within Warrants)
Name
---------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------
- --------------------------------------------------------------------------
Social Security or Taxpayer Identification Number
--------------------------
[LETTERHEAD OF JOHN J. KLUSARITZ, ATTORNEY-AT-LAW,
SWIDLER AND BERLIN, CHARTERED]
MEMORANDUM
VIA FACSIMILE
- -------------
TO: PhoneTime, Inc.
InterExchange, Inc.
FROM: John Klusaritz
DATE: June 29, 1997
RE: Escrow Agreement
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
This letter agreement (the "Escrow Agreement") sets forth the terms
pursuant to which I will act as escrow agent ("Escrow Agent") on behalf of
PhoneTime, Inc. ("PTI") and InterExchange, Inc. ("IX").
As of the date hereof, PTI and IX are entering into an agreement (the
"Primary Agreement") pursuant to which IX will provide certain services to
PTI. In connection with such Primary Agreement, PTI is executing four
separate warrant agreements to each of David Turock, Richard Robbins, Eric
Hecht and Bradley Turock pursuant to which, subject to the terms as set forth
in the respective warrant agreements, each of such individuals will be granted
warrants to purchase stock in PTI. In addition, in connection with the
Primary Agreement, PTI has agreed to enter into an additional warrant
agreement in a form attached hereto (the "Employee Warrant Agreement")
pursuant to which, subject to the terms as set forth in such Employee Warrant
Agreement, PTI will grant the holder of such Employee Warrant Agreement,
warrants (the "Employee Warrants") to purchase stock in PTI.
As of the date hereof, IX has not yet decided which of its employees,
independent contractors, shareholders (or combination thereof) it wishes to
give the Employee Warrant. To permit IX to have time to make such decision,
PTI will allow IX to designate in the future the employee(s), independent
contractor(s), or shareholder(s) it wishes to receive such Employee Warrant.
Escrow Agent agrees to hold in escrow the Employee Warrant until IX has
provided to me and to PTI written instructions as to which employee(s),
independent contractor(s),<PAGE>
<PAGE>
-2-
shareholder(s) or combination thereof are to receive the Employee Warrant. At
such time, Escrow Agent will revise the Employee Warrant to designate the
holders set forth in IX's instruction letter and deliver the Employee Warrant
to such holder(s). For purposes of the foregoing, all parties understand and
agree that the Warrants given in the Employee Warrant may be divided up among
more than one individual but that the total Employee Warrants granted will not
exceed those set forth in the attached Employee Warrant Agreement. Further,
at IX's request, the Employee Warrants given to such individuals may contain a
provision that would require any such holder to forfeit any unvested portion
of the Employee Warrant if such holder ceases to be employed by or provide
services to (in the case of an independent contractor) IX. In the case of any
such forfeiture, the portion of the Employee Warrant forfeited would, at IX's
request, be transferred either to IX or a shareholder, employee or independent
contractor of IX designated by IX.
The obligation of Escrow Agent to comply with the foregoing provisions
is subject to the following conditions which are hereby agreed to by PTI and
IX:
1. The Escrow Agent shall not be required to take any action in
violation of any law, Federal securities, state securities or otherwise;
2. The Escrow Agent shall not be required to deliver any Warrant if, at
such time, the Warrant has expired or been forfeited due to provisions in such
Warrant that relate to the Primary Agreement;
3. PTI and IX agree, jointly and severally, to indemnify and hold
harmless Escrow Agent for any loss or liability whatsoever that the Escrow
Agent may incur in performance of his duties hereunder and further, PTI and IX
each agree that neither party may bring an action against the escrow agent
relating to this agreement except in the case of fraud or willful misconduct;
4. In the event of any disagreement between PTI and IX hereunder
regarding the disposition of the Employee Warrants, the Escrow Agent shall not
be required to take any action hereunder and, in addition, shall have the
option to deliver the Employee Warrants into court pending resolution of any
such disagreement.
5. The term of this Escrow Agreement shall be for two years. At the end
of such term, if any portion of the Employee Warrant is still being held by
Escrow Agent, IX and PTI shall be required to mutually agree upon a successor
to Escrow Agent who shall assume all of Escrow Agent's responsibilities
hereunder. In addition, upon the death or disability of Escrow Agent, IX and
PTI shall mutually agree upon a successor to Escrow Agent who shall assume all
of Escrow Agent's responsibilities hereunder.
If you agree with the terms set forth above, please execute below
whereupon the terms set forth herein shall become the binding agreement of the
parties.
<PAGE>
<PAGE>
-3-
INTEREXCHANGE, INC.
By: /s/ Eric Hecht
---------------------------
PHONETIME, INC.
By: /s/ Samer Tawfik
------------------------------
/s/ John Klusaritz
- ---------------------------------
John Klusaritz
<PAGE>
<PAGE>
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
June 29, 1997
PHONETIME, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, PhoneTime, Inc., a New York corporation (the
"Company"), hereby certifies that (the "Holder"), is
------------------------
entitled, subject to the provisions contained herein, to purchase from the
Company fully paid and non-assessable shares of Common Stock (as defined
below) subject to adjustment as provided herein. The number of Warrant Shares
and the Exercise Price thereof shall be determined as follows:
(a) From and after the earlier of: (X) March 31, 1998 or (Y)
sixty (60) days after the closing of an initial public offering ("IPO")
by the Company (the "First Vesting Date"), the Holder shall be entitled
to (i) that number of Warrant Shares having a fair market value as of the
First Vesting Date equal to $33,333, at an aggregate Exercise Price
equal to $.01, and (ii) that number of Warrant Shares having a fair
market value as of the First Vesting Date equal to $66,667, at an
aggregate Exercise Price equal to $33,000, but if and only if that
certain Agreement dated June 29, 1997 between the Company and
InterExchange, Inc. ("IX") (as it may be amended from time to time, the
"Primary Agreement") has not been terminated on or before such date
(except if the Primary Agreement was terminated by IX by virtue of a
default by the Company) and no material default by IX has occurred and is
uncured as of such date. On or after the First Vesting Date, the
Warrants granted under Subsections (i) and (ii) above may be exercised
independent of each other.
(b) From and after January 1, 1999 (the "Second Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Second Vesting Date equal to
$33,333, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Second
Vesting Date equal to $66,667, at an aggregate Exercise Price equal to
$33,000, but if and only if the Primary Agreement has not been
<PAGE>
<PAGE>
terminated on or before such date (except if the Primary Agreement was
terminated by IX by virtue of a default by the Company) and no material
default by IX has occurred and is uncured as of such date. On or after
the Second Vesting Date, the Warrants granted under Subsections (i) and
(ii) above may be exercised independent of each other.
(c) From and after December 1, 1999 (the "Third Vesting Date"),
the Holder shall be entitled to: (i) that number of Warrant Shares
having a fair market value as of the Third Vesting Date equal to
$33,333, at an aggregate Exercise Price equal to $.01, and (ii) that
number of Warrant Shares having a fair market value as of the Third
Vesting Date equal to $66,667, at an aggregate Exercise Price equal to
$33,000, but if and only if the Primary Agreement has not been
terminated (other than as a result of its expiration or except if the
Primary Agreement was terminated by IX by virtue of a default by the
Company) on or before such date and no material default by IX has
occurred and is uncured as of such date. On or after the Third Vesting
Date, the Warrants granted under Subsections (i) and (ii) above may be
exercised independent of each other.
(d) For purposes of the foregoing, "fair market value" per share
as of a particular date shall mean (i) the average closing sales price
per share of Common Stock on the principal national securities exchange,
if any, on which the Common Stock shall then be listed for the preceding
twenty days on which there was a sale of such Common Stock on such
exchange, or (ii) if the Common Stock is not then listed on a national
securities exchange, the average closing sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
preceding twenty days on which there was a sale of such Common Stock on
such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national
inter-dealer quotation system, the average of the closing bid and asked
prices for the Common Stock in the over-the-counter market for the
preceding twenty days on which there was a quotation for such Common
Stock in such market or (iv) if no price can be determined under the
preceding alternatives, then the price per share as determined by the
Company's Board of Directors in good faith.
(e) Notwithstanding Sections (a), (b), (c) and (d) above, in the
event that a "change in control" (as defined below) of PTI occurs, then
all of the Warrants set forth in Subsections (a), (b) and (c) above shall
vest and be immediately exercisable and, all determinations of fair
market value, as required above, except as to Warrants that have already
vested, shall be as of the date the "change in control" occurs. A
"change in control" shall mean the occurrence of any merger, sale of
substantially all of the assets, sale of stock or consolidation such
that a "person" or "group" (within the meanings of Section 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934), other than Samer Tawfik,
becomes the "beneficial owner" of voting stock representing more than 50%
of the voting stock of the Company.
<PAGE>
<PAGE>
The term "Common Stock" means the Common Stock, no par value per share,
of the Company as constituted on the date hereof. The shares of Common Stock
deliverable upon such exercise, are hereinafter referred to as "Warrant
Shares" or "Warrant Stock." For purposes of the foregoing, references to the
"Company" shall mean PhoneTime, Inc. and any successor thereto including any
successor corporation resulting from the merger or consolidation of PhoneTime,
Inc.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject, to all of the conditions,
limitations and provisions set forth herein, including the following:
1. Exercise of Warrants. Each Warrant granted above may be exercised in
whole or in part, at any time, after satisfaction of the conditions set
forth above but prior to the fifth anniversary of the Vesting Date of
the respective Warrant by presentation and surrender of such Warrant to
the Company at its principal office (which on the date hereof is 30-60
Whitestone Expressway, Flushing, New York 11354), with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or checks,
payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. If these Warrants are
exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing
the rights of the Holder thereof to purchase the balance of Warrant
Stock purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the
Company's stock transfer agent at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock issuable upon such exercise, notwithstanding that the
transfer books of the Company shall then be closed or that certificates
representing such Warrant Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares and Adjustments. The Company will at all times
reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock of the Company from time to time receivable upon
exercise of these Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid
and non-assessable and free and clear of all preemptive rights. For
each Warrant granted hereunder, the number of shares of Common Stock
issuable upon the exercise of such Warrant shall be adjusted in the
event of any stock split or stock dividend that occurs after the Vesting
Date of such Warrant so that the Holder would be entitled to receive the
same number of shares of Common Stock as if the Warrant had been
exercised immediately before the stock split or stock dividend.
<PAGE>
<PAGE>
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants,
but the Company shall pay the Holder an amount in cash equal to the fair
market value of such fractional share in lieu of each fraction of a
share otherwise issuable upon any exercise of these Warrants, as
determined by the Board of Directors of the Company in its reasonable
discretion.
4. Restrictions on Transfer of Warrants, Warrant Stock. In connection
with an IPO, Holder agrees to execute a "lockup" agreement if requested
by the managing underwriter provided the "lockup" period does not exceed
6 months. The Warrant Stock may not be sold, transferred or otherwise
disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant
to available exemptions from such registration, provided that the seller
delivers to the Company an opinion of counsel reasonably satisfactory to
the Company confirming the availability of such exemption. Unless the
shares of Warrant Stock have been registered under the Securities Act,
upon exercise of any of these Warrants and the issuance of any of the
shares of Warrant Stock, all certificates representing such securities
shall bear on the fact thereof substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
5. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two
days after mailing when mailed by certified or registered mail, return
receipt requested, to the Company at its principal office, or to the
Holder at the address set forth on the record books of the Company, or
at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
6. Applicable Law. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving
effect to conflicts of law principles.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as
of the day and year first above written.
PHONETIME, INC.
By:
----------------------------------
Name:
Title: <PAGE>
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase ________ shares of Common Stock of PhoneTime, Inc., a New York
corporation, and hereby makes payment of $_______________ in full satisfaction
therefor.
----------------------------------
Signature
----------------------------------
Signature, if jointly held
----------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
----------------------------------
(if other than to the Holder of the within Warrants)
Name
---------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------
- --------------------------------------------------------------------------
Social Security or Taxpayer Identification Number
--------------------------
PT-1 COMMUNICATIONS, INC.
1997 STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
I THE PLAN.......................................................1
1.1 Purpose................................................1
1.2 Administration and Authorization; Power and Procedure..1
(a) Committee......................................1
(b) Awards; Interpretation; Powers of Committee....1
(c) Binding Determinations.........................2
(d) Reliance on Experts............................2
(e) Delegation.....................................2
1.3 Participation..........................................3
1.4 Shares Available for Awards; Share Limits..............3
(a) Shares Available...............................3
(b) Share Limits...................................3
(c) Calculation of Available Shares and
Replenishment...............................3
1.5 Grant of Awards........................................4
1.6 Award Period...........................................4
1.7 Limitations on Exercise of Awards......................4
(a) Provisions for Exercise........................4
(b) Procedure......................................4
(c) Fractional Shares/Minimum Issue................4
1.8 Acceptance of Notes to Finance Exercise................5
1.9 No Transferability.....................................5
(a) Limit on Exercise..............................5
(b) Limit on Transfer..............................6
(c) Designation of Beneficiary.....................6
(d) Exceptions.....................................6
II OPTIONS........................................................6
2.1 Grants.................................................6
2.2 Option Price...........................................6
(a) Pricing Limits.................................6
(1) Incentive Stock Option.................
(2) Non-Incentive Stock Option.............
(b) Payment Provisions.............................7
2.3 Limitations on Grant and Terms of Incentive
Stock Options.......................................7
(a) $100,000 Limit.................................7
(b) Other Code Limits..............................7
2.4 Option Repricing/Cancellation and Regrant/Waiver
of Restrictions.....................................8
III STOCK APPRECIATION RIGHTS......................................8
3.2 Exercise of Stock Appreciation Rights..................8
(a) Exercisability.................................8
(b) Effect on Available Shares.....................8
3.3 Payment................................................9
(a) Amount.........................................9
(b) Form of Payment................................9
3.4 Limited Stock Appreciation Rights......................9
<PAGE>
<PAGE>
IV OTHER PROVISIONS..............................................10
4.1 Rights of Eligible Employees, Participants
and Beneficiaries...................................10
(a) Employment Status.............................10
(b) No Employment Contract........................10
(c) Plan Not Funded...............................10
4.2 Adjustments; Acceleration.............................10
(a) Adjustments...................................10
(b) Acceleration of Awards Upon Change
in Control..................................11
(c) Termination of Awards on Dissolution..........11
4.3 Effect of Termination on Employment...................12
4.4 Compliance with Laws..................................12
4.5 Tax Withholding.......................................13
4.6 Plan Amendment, Termination and Suspension............13
(a) Board Authorization...........................13
(b) Shareholder Approval..........................13
(c) Amendments to Awards..........................13
(d) Limitations on Amendments to Plan
and Awards..................................14
4.7 Privileges of Stock Ownership.........................14
4.8 Effective Date of the Plan............................14
4.9 Term of the Plan......................................14
4.10 Governing Law/Construction/Severability...............14
(a) Choice of Law.................................14
(b) Severability..................................14
(c) Plan Construction.............................15
(d) Bifurcation...................................15
4.11 Captions..............................................15
4.12 Effect of Change of Subsidiary Status.................15
4.13 Non-Exclusivity of Plan...............................15
4.14 Conflict..............................................15
V DEFINITIONS...................................................16
5.1 Definitions...........................................16
<PAGE>
<PAGE>
PT-1 COMMUNICATIONS, INC.
1997 STOCK INCENTIVE PLAN
I THE PLAN
1.1 Purpose.
The purpose of this Plan is to promote the success of PT-1
Communications, Inc. (the "Company") by providing an additional means through
the grant of Awards to attract, reward and retain key personnel, of the
Company and certain other closely related eligible persons with awards and
incentives for high levels of individual performance and improved financial
performance of the Company. Capitalized terms are defined in Article V.
1.2 Administration and Authorization; Power and Procedure.
(a) Committee. This Plan shall be administered by, and all
Awards to Eligible Employees, Other Eligible Persons and Non-Employee
Directors granted after the Initial Options shall be authorized by, the
Committee. Action of the Committee with respect to the administration of this
Plan shall be taken pursuant to a majority vote or by written consent of its
members.
(b) Awards; Interpretation; Powers of Committee. Subject to
the express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible
the particular Eligible Employees, Other Eligible
Persons and Non-Employee Directors who will
receive any Awards;
(ii) to grant Awards to Eligible Employees, Other
Eligible Persons and Non-Employee Directors,
determine the price at which securities will be
offered and the amount of securities to be
offered to any of such persons, and determine the
other specific terms and conditions of such
Awards consistent with the express limits of this
Plan, and establish the installments (if any) in
which such Awards shall become exercisable, or
determine that no delayed exercisability is
required, and establish the events of termination
of such Awards;
<PAGE>
<PAGE>
(iii) to approve the forms of Awards (which need not be
identical either as to type of Award or among
Participants);
(iv) to construe and interpret this Plan and any
agreements defining the rights and obligations of
the Company and Participants under this Plan,
further define the terms used in this Plan, and
prescribe, amend and rescind rules and
regulations relating to the administration of
this Plan;
(v) to cancel, modify or waive the Corporation's
rights with respect to, or modify, discontinue,
suspend or terminate any or all outstanding
Awards held by Participants, subject to any
required consent under Section 4.6;
(vi) to accelerate or extend the exercisability or
extend the term of any or all such outstanding
Awards within the maximum ten-year term of Awards
under Section 1.6; and
(v) to make all other determinations and take such
other action as contemplated by this Plan or as
may be necessary or advisable for the
administration of this Plan and the effectuation
of its purposes.
(c) Binding Determinations. Any action taken by, or inaction
of, the Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan shall be within the absolute discretion of that entity
or body and shall be conclusive and binding upon all persons. No member of
the Board or Committee, or officer of the Corporation or any Subsidiary, shall
be liable for any such action or inaction of the entity or body, of another
person or, except in circumstances involving bad faith, of himself or herself.
Subject only to compliance with the express provisions hereof, the Board and
Committee may act in their absolute discretion in matters within their
authority related to this Plan.
(d) Reliance on Experts. In making any determination or in
taking or not taking any action under this Plan, the Committee or the Board,
as the case may be, may obtain and may rely upon the advice of experts,
including professional advisors to the Corporation. No director, officer or
agent of the Company shall be liable for any such action or determination
taken or made or omitted in good faith.
(e) Delegation. The Committee may delegate ministerial, non-
discretionary functions to individuals who are officers or employees of the
Company.
<PAGE>
<PAGE>
1.3 Participation.
Awards may be granted to Eligible Employees, Other Eligible
Persons and Non-Employee Directors. An Eligible Employee, Other Eligible
Person or Non-Employee Director who has been granted an Award may, if
otherwise eligible, be granted additional Awards if the Committee shall so
determine. Only Eligible Employees shall be eligible to receive any Incentive
Stock Options under this Plan.
From and after any initial public offering of the Company,
directors serving on the Committee are not eligible to receive Options
pursuant to the Plan.
1.4 Shares Available for Awards; Share Limits.
(a) Shares Available. Subject to the provisions of Section
4.2, the capital stock that may be delivered under this Plan shall be shares
of the Corporation's authorized but unissued Common Stock and any shares of
its Common Stock held as treasury shares. The shares may be delivered for any
lawful consideration.
(b) Share Limits. The maximum number of shares of Common
Stock that may be delivered pursuant to Awards granted under this Plan shall
not exceed 3,500,000 shares. The maximum number of shares of Common Stock
subject to those Options that are granted during any calendar year to any
individual under this Plan shall not exceed 2,879,500 shares. Each of the
foregoing numerical limits shall be subject to adjustment as contemplated by
this Section 1.4 and Section 4.2
(c) Calculation of Available Shares and Replenishment. Shares
subject to outstanding Awards shall be reserved for issuance. If any Option
or other right to acquire shares of Common Stock under an Award shall expire
or be canceled or terminated without having been exercised in full, or any
Common Stock subject to an Award shall not vest or be delivered, the
unpurchased, unvested or undelivered shares subject thereto shall again be
available for the purposes of the Plan, subject to any applicable limitations
under Rule 16b-3. If a Stock Appreciation Right or similar right is
exercised, the number of shares of Common Stock to which such exercise or
payment relates under the applicable Award shall be charged against the
maximum amount of Common Stock that may be delivered pursuant to Awards under
this Plan and, if applicable, such Award. If the Corporation withholds shares
of Common Stock pursuant to Section 4.5, the number of shares that would have
been deliverable with respect to an award but that are withheld pursuant to
the provisions of Section 4.5 may in effect not be issued, but the aggregate
number of shares issuable with respect to the applicable Award and under the
Plan<PAGE>
<PAGE>
shall be reduced by the number of shares withheld and such shares shall not be
available for additional Awards under this Plan.
1.5 Grant of Awards.
The Initial Options shall be granted under this Plan
automatically, without further corporate action, upon the Effective Date
(except as otherwise provided in Exhibit A). Subject to the express
provisions of this Plan, the Committee shall determine the number of shares of
Common Stock subject to each other Award, and the price to be paid for such
shares.
1.6 Award Period.
Each Award and all executory rights and obligations under the
related Awards shall expire on such date (if any) as shall be determined by
the Committee, but not later than ten 10 years after the Award Date.
1.7 Limitations on Exercise of Awards.
(a) Provisions for Exercise. Once exercisable, an Award
shall remain exercisable until the expiration or earlier termination of the
Award unless the Committee otherwise provides as of the Award Date or (by
amendment consistent with the terms of Section 4.6(d)) thereafter.
(b) Procedure. Any exercisable Award shall be deemed to be
exercised when the Secretary of the Corporation receives written notice of
such exercise from the Participant, together with any required payment made in
accordance with Section 2.2(b).
(c) Fractional Shares/Minimum Issue. Fractional shares
shall not be issued, but fractional share interests may be accumulated. The
Committee, however, may determine that cash, other securities, or other
property will be paid or transferred in lieu of any fractional share
interests. No fewer than 50 shares may be purchased on exercise of any Award
at one time unless the number purchased is the total number at the time
available for purchase under the Award.
1.8 Acceptance of Notes to Finance Exercise.
The Corporation may, with the Committee's approval at or prior to
the time of exercise of any Award, accept one or more notes from any
Participant who is an Eligible<PAGE>
<PAGE>
Employee in connection with the exercise or receipt of any outstanding Award;
provided that any such note shall be subject to the following terms and
conditions:
(a) The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of one or
more Awards under the Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions, shall not
exceed a period of five (5) years.
(c) The note shall provide for full recourse to the
Participant.
(d) If the employment of the Participant terminates, the
unpaid principal balance of the note shall become due and payable within
thirty (30) days after such termination; provided, however, that if a sale of
shares would cause such Participant to incur liability under Section 16(b) of
the Exchange Act, the unpaid balance shall become due and payable on the 10th
business day after the first day on which a sale of such shares could have
been made without incurring such liability, assuming for these purposes that
there are no other transactions by the Participant subsequent to such
termination.
(e) If required by the Committee or by applicable law, the
note shall be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions and collateral release
provisions of the note and the pledge securing the note shall conform with
applicable rules and regulations of the Federal Reserve Board as then in
effect.
1.9 Non Transferability.
(a) Limit on Exercise. The Committee may permit Options or
SARs to be exercised by and paid to certain persons or entities related to the
Participant who are transferees of the Participant without consideration, but
only pursuant to such conditions and procedures as the Committee may expressly
establish and (for Options or SARs intended to satisfy the conditions of Rule
16b-3) as may be permitted under Rule 16b-3.
(b) Limit on Transfer. No Award shall be transferrable by
the Participant or shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge (other than to the
Corporation), except (i) by will or the laws of descent<PAGE>
<PAGE>
and distribution or pursuant to a QDRO, (ii) pursuant to another exception to
transfer restrictions expressly permitted by the Committee and set forth in
the Award, (iii) in the case of Options or SARs intended to satisfy the
conditions of Rule 16b-3 to the extent permitted by Rule 16b-3, and (iv) in
the case of Incentive Stock Options, as permitted by the Code. Any attempted
transfer in violation of these provisions shall be void and the Corporation
shall disregard any attempt at transfer, assignment or other alienation
prohibited hereby.
(c) Designation of Beneficiary. The designation of a
Beneficiary hereunder shall not constitute a transfer for these purposes.
(d) Exceptions. The restrictions on exercise and transfer
above shall not be deemed to prohibit the authorization by the Committee of
"cashless exercise" procedures with unaffiliated third parties who provide
financing for the purpose of (or who otherwise facilitate) exercise of Options
consistent with any applicable legal restrictions (including Rule 16b-3), nor,
to the extent permitted by the Committee, transfers for estate and financial
planning purposes, notwithstanding that the inclusion of such features may
render the particular Options ineligible for the benefits of Rule 16-b3, nor,
in the case of Participants who are not Section 16 persons, transfers to such
other persons or in such other circumstances as the Committee may in the Award
or other writing expressly permit.
II OPTIONS
2.1 Grants.
One or more Options may be granted under this Article to any
Eligible Employee, Other Eligible Person or Non-Employee Director. Each
Option granted may be either an Option intended to be an Incentive Stock
Option, or not so intended, and such intent shall be indicated in the
applicable Award, however, only Eligible Employees may be granted Incentive
Stock Options under the Plan.
2.2 Option Price.
(a) Pricing Limits. The purchase price per share of the
Common Stock covered by each of the Initial Options shall be the amount set
forth in the Initial Option Award.
(i) Incentive Stock Options. Each Incentive Stock
Option shall state the purchase price per share, which, shall be not less than
one hundred percent (100%) of the Fair Market Value of the shares of Common
Stock on the date of grant of the Option (or, in the case of an amendment, the
date of the amendment); provided, however, in the case of an<PAGE>
<PAGE>
Incentive Stock Option granted to a participant who owns or is deemed to own
under section 424(d) of the Code more than 10% of the total combined voting
power of all classes of stock of the Corporation, the Option Price shall not
be less than one hundred ten percent (110%) of such Fair Market Value. The
Option Price shall be subject to adjustment as provided in Section 4.2(a)
hereof. The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is
granted.
(ii) Non-Incentive Stock Options. Each Option that
is not an Incentive Stock Option shall state the purchase price per share. In
the case of Non-Incentive Stock Options granted on or before the Reliance
Period Termination Date, the purchase price per share shall not be less than
fifty percent (50 percent) of the Fair Market Value of the shares of Common
Stock on the date of grant of the Option (or, in the case of an amendment, the
date of the amendment). In the case of Non-Incentive Stock Options granted
after the Reliance Period Termination Date, the Option Price shall not be less
than one hundred percent (100 percent) of the Fair Market Value of the shares
of Common Stock on the date of grant of the Option (or, in the case of an
amendment, the date of the amendment). The Option Price shall be subject to
adjustment as provided in Section 4.2(a) hereof. The date on which the
Committee adopts a resolution expressly granting an Option shall be considered
the day on which such Option is granted.
(b) Payment Provisions. The purchase price of any shares
purchased on exercise of an Option granted under this Article shall be paid in
full at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by check payable
to the order of the Corporation; (iii) if authorized by the Committee or
specified in the applicable Award, by a promissory note of the Participant
consistent with the requirements of Section 1.8; (iv) by notice and third
party payment in such manner as may be authorized by the Committee; or (v) by
the delivery of shares of Common Stock of the Corporation already owned by the
Participant; provided, however, that the Committee may in its absolute
discretion limit or deny the Participant's ability to exercise an Option by
delivering such shares. Shares of Common Stock used to satisfy the exercise
price of an Option shall be valued at their Fair Market Value on the date of
exercise.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
(a) $100,000 Limit. To the extent that the aggregate " fair
market value" of stock with respect to which Incentive Stock Options first
become exercisable by a Participant in any calendar year exceeds $100,000,
taking into account both Common Stock subject to Incentive Stock Options under
this Plan and stock subject to incentive stock options under all other plans
of the Company or any parent corporation, such options shall be treated as
Non-Incentive stock options. For this purpose, the "fair market value" of the
stock subject to options<PAGE>
<PAGE>
shall be determined as of the date the options were awarded. In reducing the
number of options treated as incentive stock options to meet the $100,000
limit, the most recently granted options shall be reduced first. To the
extent a reduction of simultaneously granted options is necessary to meet the
$100,000 limit, the Committee may, in the manner and to the extent permitted
by law, designate which shares of Common Stock are to be treated as shares
acquired pursuant to the exercise of an Incentive Stock Option.
(b) Term and Exercise of Options.
(i) Incentive Stock Options. Incentive Stock Options
shall be exercisable over the exercise period specified by the Committee in an
Award Agreement, but in no event shall such period exceed ten (10) years from
the date of the grant of each such Incentive Stock Option; provided, however,
that in the case of an Incentive Stock Option granted to a Ten Percent
Shareholder, the exercise period shall not exceed five (5) years from the date
such Option is granted. An Incentive Stock Option may be exercised, as to any
or all full shares of Common Stock as to which the Incentive Stock Option has
become exercisable, by giving written notice of such exercise to the
Committee; provided, that an Incentive Stock Option may not be exercised at
any one (1) time for less than one hundred (100) shares of Common Stock (or
such number of shares as to which the Incentive Stock Option is then
exercisable if such number of shares is less than 100).
(ii) Non-Incentive Stock Options. Options which have
not been designated by the Committee as Incentive Stock Options shall be
exercisable over a period of ten (10) years.
2.4 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.
Subject to Section 1.4 and Section 4.6 and the specific
limitations on Awards contained in this Plan, the Committee from time to time
may authorize, generally or in specific cases only, for the benefit of any
Eligible Employee, any adjustment in the exercise or purchase price, the
number of shares subject to, the restrictions upon or the term of, an Award
granted under this Article by cancellation of an outstanding Award and a
subsequent regranting of an Award, by amendment, by substitution of an
outstanding Award, by waiver or by other legally valid means. Such amendment
or other action may result among other changes in an exercise or purchase
price which is higher or lower than the exercise or purchase price of the
original or prior Award, provide for a greater or lesser number of shares
subject to the Award, or provide for a longer or shorter vesting or exercise
period, provided that in no event shall any such change reduce the exercise or
base price of an outstanding Option or Stock Appreciation Right to a price
below the Fair Market Value on the effective date of the change.
<PAGE>
<PAGE>
III STOCK APPRECIATION RIGHTS
3.1 Grants.
In its discretion, the Committee may grant to any Eligible
Employee, Other Eligible Persons or Non-Employee Director Stock Appreciation
Rights either concurrently with the grant of another Award or in respect of an
outstanding Award, in whole or in part. Any Stock Appreciation Right granted
in connection with an Incentive Stock Option shall contain such terms as may
be required to comply with the provisions of Section 422 of the Code and the
regulations promulgated thereunder, unless the holder thereof otherwise
agrees.
3.2 Exercise of Stock Appreciation Rights.
(a) Exercisability. Unless the Award or the Committee
otherwise provides, a Stock Appreciation Right shall be exercisable only at
such time or times, and to the extent, that the related Award shall be
exercisable.
(b) Effect on Available Shares. To the extent that a Stock
Appreciation Right is exercised for stock or for cash, the number of
underlying shares of Common Stock with respect to which the Stock Appreciation
Right is exercised shall be charged against the maximum number of shares of
Common Stock that may be delivered pursuant to Awards under this Plan. The
number of shares subject to the Stock Appreciation Right and the related
Option of the Participant shall also be reduced by the same number of shares.
3.3 Payment.
(a) Amount. Unless the Committee otherwise provides, upon
exercise of a Stock Appreciation Right and attendant surrender of an
exercisable portion of any related Award, the Participant shall be entitled to
receive payment of an amount determined by multiplying
(i) the difference obtained by subtracting the
exercise price per share of Common Stock under
the related Award from the Fair Market Value of a
share of Common Stock on the date of exercise of
the Stock Appreciation Right; by
(ii) the number of shares with respect to which the
Stock Appreciation Right shall have been
exercised.
<PAGE>
<PAGE>
(b) Form of Payment. The Committee, in its sole
discretion, shall determine the form in which payment shall be made of the
amount determined under paragraph (a) above, either solely in cash, solely in
shares of Common Stock (valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right), or partly in such shares and partly in cash,
provided that the Committee shall have determined that such exercise and form
of payment are consistent with applicable law and outstanding contractual
commitments of the Company. If the Committee permits the Participant to elect
to receive cash or shares (or a combination thereof) on such exercise, any
such election shall be subject to such conditions as the Committee may impose
and, in the case of any Section 16 Person, any election to receive cash may be
conditioned upon satisfaction of any applicable limitations under Rule 16b-3.
3.4 Limited Stock Appreciation Rights.
The Committee may grant to any Eligible Employee, Other Eligible
Person or Non-Employee Director Stock Appreciation Rights exercisable only
upon or in respect of a change in control or any other specified event
("Limited SARs") and such Limited SARs may relate to or operate in tandem or
combination with or substitution for Options or other SARs (or any combination
thereof), and may be payable in cash or shares based on the spread between the
exercise price of the SAR and a price based upon the Fair Market Value of the
shares during a specified period (or at a specified time) within the period
commencing not more than six months and 10 days before and ending not more
than six months and 10 days after such event.
IV OTHER PROVISIONS
4.1 Rights of Eligible Employees, Participants and Beneficiaries.
(a) Employment Status. Status as an Eligible Employee shall
not be construed as a commitment that any Award will be made under this Plan
to a particular Eligible Employee or to Eligible Employees generally.
(b) No Employment Contract. Nothing contained in this Plan
(or in any other documents related to this Plan or to any Award) shall confer
upon any Eligible Employee any right to continue in the employ or other
service of the Company or constitute any contract or agreement of employment
or other service, nor shall it interfere in any way with the right of the
Company to change such person's compensation or other benefits or to terminate
the employment of such person, with or without cause, but nothing contained in
this Plan or any document related hereto shall adversely affect the
independent contractual right of such person without his or her consent
thereto.
<PAGE>
<PAGE>
(c) Plan Not Funded. Awards payable under this Plan shall be
payable in shares of the Corporation (unless determined otherwise pursuant to
Section 3.3(b)) and, (except as provided in Section 1.4(c)) no special or
separate reserve, fund or deposit shall be made to assure payment of such
Awards. No Participant, Beneficiary or other person shall have any right,
title or interest in any fund or in any specific asset (including shares of
Common Stock, except as expressly otherwise provided) of the Company by reason
of any Award hereunder. Neither the provisions of this Plan (or of any
related documents), nor the creation or adoption of this Plan, nor any action
taken pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Company
and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive payment
pursuant to any Award hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Company.
4.2 Adjustments; Acceleration.
(a) Adjustments. If there shall occur any extraordinary
dividend or other extraordinary distribution in respect of the Common Stock
(whether in the form of cash, Common Stock, other securities or other
property), or any recapitalization, stock split (including a stock split in
the form of a stock dividend), reverse stock split, reorganization, merger,
combination consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock or other securities of the Corporation, or there
shall occur any other fundamental change or event in respect of the Common
Stock or a sale of substantially all the assets of the Corporation as an
entirety, then the Committee shall, in such manner and to such extent (if any)
as it in good faith deems appropriate and equitable (1) proportionately adjust
any or all of (a) the number and type of shares of Common Stock (or other
securities) which thereafter may be made the subject of Awards (including the
specific maxima and numbers of shares set forth elsewhere in this Plan), (b)
the number, amount and type of shares of Common Stock (or other securities or
property) subject to any or all outstanding Awards, (c) the grant, exercise or
base price of any or all outstanding Awards, (d) the securities or property
deliverable upon exercise of any outstanding Awards; or (2) in the case of an
extraordinary dividend or other distribution, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin-off,
make other provision for a cash payment or for the substitution or exchange of
any or all outstanding Awards or securities deliverable to the holder of any
or all outstanding Awards based upon the distribution or consideration payable
to holders of the Common Stock of the Corporation upon or in respect of such
event; provided, however, in each case, that with respect to Incentive Stock
Options, no such adjustment shall be made which would cause the Plan to
violate section 424 of the Code or any successor provisions thereto, without
the written consent of the holders of Incentive Stock Options who are
materially adversely affected thereby.
<PAGE>
<PAGE>
(b) Acceleration of Awards Upon Change in Control. As to any
or all Participants, upon or in anticipation of a Change in Control Event, the
Committee may determine that any or all Awards or certain or limited benefits
under Awards shall be accelerated and/or extended and the extent to which they
shall be accelerated and/or extended, and/or establish a different time in
respect of such Change in Control Event for such acceleration or extension.
The Committee may override its discretionary authority to accelerate in this
Section 4.2(b) and by express provision in the Award mandate acceleration or
preclude acceleration, and may accord any Eligible Employee, Other Eligible
Employee or Non-Employee Director a right to refuse any acceleration, whether
pursuant to the Award or otherwise, in such circumstances as the Committee may
approve. Any acceleration of Awards shall comply with applicable regulatory
requirements, including without limitation, Section 422 of the code unless, in
the case of compliance with Section 422 of the Code, the holders of Incentive
Stock Options otherwise consent in writing.
(c) Termination of Awards on Dissolution. If any Option or
other right to acquire Common Stock under this Plan is not exercised prior to
a dissolution of the Corporation, and no express provision has been made in
the Award or otherwise for the survival, substitution, exchange or other
settlement of such Option or right, such Option or right shall thereupon
terminate. Unless other provision is made for the payment of the fair value
thereof, under a reorganization event of the type described in Section 4.2(a)
that the Corporation does not legally survive, the Awards shall be converted
into or otherwise substituted for a right to receive, on exercise, the
consideration distributed or payable upon such reorganization event in respect
of the number of shares of Common Stock as to which the Option is exercised.
4.3 Effect of Termination on Employment.
In determining the effect of a termination on the rights and
benefits of an Award, the Committee may make distinctions based upon the cause
of termination. Unless the Committee otherwise determines the effect a
termination of employment on the rights and benefits under an Award (or, in
the case of the Initial Options, extends the periods set forth herein), and in
the case of Incentive Stock Options, subject to the applicable Code limits:
(a) upon a Participant's death or Total Disability, an Award
shall become and shall remain fully exercisable for one year after the date of
death or until the expiration of the stated term of the Award, whichever
occurs first;
(b) upon the termination by the Company of the Participant's
employment for cause (other than a termination for cause within two (2) years
following a Change in Control), as determined by the Committee in its sole
discretion, the Award shall terminate; and
<PAGE>
<PAGE>
(c) upon a termination of a Participant's employment or
services for any reason other than the reasons set forth in clauses (a) and
(b), any portion of an Award that is not yet exercisable shall terminate and
any portion of such Award that is then exercisable shall remain fully
exercisable for three (3) months after the date of termination or until the
expiration of the stated term of the Award, whichever occurs first.
4.4 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan and
the issuance and delivery of shares of Common Stock and/or the payment of
money under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation,
be necessary or advisable in connection therewith. Any securities delivered
under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Corporation, provide such
assurances and representations to the Corporation as the Corporation may
reasonably deem necessary to assure compliance with all applicable legal
requirements.
4.5 Tax Withholding.
Upon the exercise of any Award or upon the disposition of shares
of Common Stock acquired pursuant to the exercise of an Incentive Stock Option
prior to satisfaction of the holding period requirements of Section 422 of
the Code, the Company shall have the right at its option to (i) require the
Participant (or Personal Representative or Beneficiary, as the case may be) to
pay or provide for payment of the amount of any taxes which the Company may be
required to withhold with respect to such transaction, or (ii) deduct from any
amount payable in cash the amount of any taxes which the Company may be
required to withhold with respect to such cash amount. In any case where a
tax is required to be withheld in connection with the delivery of shares of
Common Stock under this Plan, the Committee may grant (either at the time of
the Award or thereafter) to the Participant the right to elect, pursuant to
such rules and subject to such conditions as the Committee may establish, to
have the Corporation reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of shares valued at their then
Fair Market Value, to satisfy such withholding obligation.
<PAGE>
<PAGE>
4.6 Plan Amendment, Termination and Suspension.
(a) Board Authorization. Subject to the provisions of this
Section 4.6, the Board may, at any time, terminate or, from time to time,
amend, modify or suspend this Plan, in whole or in part. No Awards may be
granted during any suspension of this Plan or after termination of this Plan,
but the Committee shall retain jurisdiction as to Awards then outstanding in
accordance with the terms of this Plan.
(b) Shareholder Approval. If any amendment to this Plan
would (i) materially increase the benefits accruing to Participants under this
Plan, (ii) materially increase the aggregate number of securities that may be
issued under this Plan, or (iii) materially modify the requirements as to
eligibility for participation in this Plan, then to the extent required under
applicable law, or deemed necessary or advisable by the Board, such amendment
shall be subject to shareholder approval.
(c) Amendments to Awards. Without limiting any other express
authority of the Committee under but subject to the express limits of this
Plan, the Committee by agreement or resolution may waive conditions of or
limitations on Awards to Participants that the Committee in the prior exercise
of its discretion has imposed, without the consent of a Participant, and may
make other changes to the terms and conditions of Awards that do not affect in
any manner adverse to the Participant, his or her rights and benefits under an
Award.
(d) Limitations on Amendments to Plan and Awards. No
amendment, suspension or termination of the Plan or change of or affecting any
outstanding Award shall, without written consent of the Participant, affect in
any manner materially adverse to the Participant any rights or benefits of the
Participant or obligations of the Corporation under any Award granted under
this Plan prior to the effective date of such change. Changes contemplated by
Section 4.2 shall not be deemed to constitute changes or amendments for
purposes of this Section 4.6
4.7 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership
as to any shares of Common Stock not actually delivered to and held of record
by him or her. No adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to such date of delivery.
<PAGE>
<PAGE>
4.8 Effective Date of the Plan.
The Plan shall be submitted to the stockholders of the
Corporation for approval. The Effective Date shall be the day the Plan is
approved by the Shareholders.
4.9 Term of the Plan.
No Award shall be granted more than ten (10) years after the
Effective Date of this Plan ("termination date"). Unless otherwise expressly
provided in this Plan or in an applicable Award, any Award theretofore granted
may extend beyond such date, and all authority of the Committee with respect
to Awards hereunder shall continue during any suspension of this Plan and in
respect of outstanding Awards on such termination date.
4.10 Governing Law/Construction/Severability.
(a) Choice of Law. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with, the laws of the state of incorporation of the
Corporation.
(b) Severability. If any provision shall be held by a court
of competent jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue in effect.
(c) Plan Construction. If this Plan is approved in the
manner required by Rule 16b-3, it is the intent of the Corporation that this
Plan and Awards hereunder that would satisfy such Rule be interpreted in a
manner that, in the case of Eligible Employees who are or may be subject to
Section 16 of the Exchange Act, would satisfy the applicable requirements of
Rule 16b-3 so that such persons (unless they otherwise agree) would be
entitled to the benefits of Rule 16b-3 or other exemptive rules under Section
16 of the Exchange Act and would not be subjected to avoidable liability
thereunder.
(d) Bifurcation. Notwithstanding anything to the contrary
in this Plan, the provisions of this Plan may at any time be bifurcated by the
Board or the Committee in any manner so that certain provisions of this Plan
or any Award intended or required in order to satisfy the applicable
requirements of Rule 16b-3 are only applicable to Section 16 Persons and those
Awards to such persons intended to be entitled to the benefits of Rule 16b-3.
<PAGE>
<PAGE>
4.11 Captions.
Captions and headings are given to the sections and subsections
of this Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
4.12 Effect of Change of Subsidiary Status.
For purposes of this Plan and any Award hereunder, if an entity
ceases to be a Subsidiary, a termination of employment shall be deemed to have
occurred with respect to each employee of such Subsidiary who does not
continue as an employee of another entity within the Company.
4.13 Non-Exclusivity of Plan.
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority.
4.14 Conflict.
Notwithstanding anything contained in this Plan or any amendment
or modification thereof, in the event of any conflict, inconsistency, or
ambiguity between, or arising as the result of, the terms and provisions of
this Plan and the terms and provisions of any Initial Option Award or any
other written agreement between the grantee of an Initial Option and the
Corporation, the terms most favorable to the Participant shall be controlling.
V DEFINITIONS
5.1 Definitions.
(a) "Award" shall mean any writing setting forth the terms of
an award authorized by the Committee of any Option or Stock Appreciation Right
authorized by and granted under this Plan.
(b) "Award Date" shall mean the date upon which the Committee
took the action granting an Award or such later date as the Committee
designates as the Award Date at the time of the Award.
<PAGE>
<PAGE>
(c) "Award Period" shall mean the period beginning on an
Award Date and ending on the expiration date of such Award.
(d) "Beneficiary" shall mean the person, persons, trust or
trusts designated by a Participant or in the absence of a designation entitled
by will or the laws of descent and distribution to receive the benefits
specified in the Award and under this Plan in the event of a Participant's
death, and shall mean the Participant's executor or administrator if no other
Beneficiary is identified and able to act under the circumstances.
(e) "Board" shall mean the Board of Directors of the
Corporation.
(f) "Change in Control Event" shall mean any of the
following:
(i) Approval by the stockholders of the Corporation
of the dissolution or liquidation of the
Corporation;
(ii) Approval by the stockholders of the Corporation
of an agreement to merge or consolidate, or
otherwise reorganize, with or into one or more
entities that are not Subsidiaries, as a result
of which less than 50 percent of the outstanding
voting securities of the surviving or resulting
entity immediately after the reorganization are,
or will be, owned by stockholders of the
Corporation immediately before such
reorganization (assuming for purposes of such
determination that there is no change in the
record ownership of the Corporation's securities
from the record date for such approval until
such reorganization and that such record owners
hold no securities of the other parties to such
reorganization);
(iii) Approval by the stockholders of the Corporation
of the sale of substantially all of the
Corporation's business and/or assets to a person
or entity which is not a Subsidiary;
(iv) During any period (commencing after the
Effective Date) not longer than two consecutive
years, individuals who at the beginning of such
period constituted the Board cease to constitute
at least a majority thereof, unless the
election, or the nomination for election by the
Corporation's stockholders, of each new Board
member was approved by a vote of at least three-
fourths of the Board members then still in
office who were Board members at the<PAGE>
<PAGE>
beginning of such period (including for these
purposes, new members whose election or
nomination was so approved).
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(h) "Commission" shall mean the Securities and Exchange
Commission.
(i) "Committee" shall mean a committee appointed by the
Board to administer this Plan, which committee shall be comprised only of two
or more directors or such greater number of directors as may be required under
applicable law, each of whom, during such time as one or more Participants may
be subject to Section 16 of the Exchange Act, shall be Disinterested. In
addition, from and after the consummation of any initial public offering
undertaken by the Company, no person may serve as a member of the Committee
unless such person is also an "outside director" within the meaning of
Treasury Regulation section 1.162-27(e)(3)(i).
(j) "Common Stock" shall mean the Common Stock of the
Corporation and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4.2 of this Plan.
(k) "Company" shall mean, collectively, the Corporation and
its Subsidiaries.
(l) "Corporation" shall mean PT-1 Communications, Inc., a
Delaware corporation, and any successor, on and after the Effective Date.
(m) "Disinterested" shall mean disinterested within the
meaning of any applicable regulatory requirements, including Rule 16b-3.
(n) "Eligible Employee" shall mean any employee of the
Company.
(o) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(p) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(q) "Fair Market Value" on any applicable determination date
shall mean (i) if the stock is listed or admitted to trade on a securities
exchange, the closing price of the stock, on<PAGE>
<PAGE>
such day, on the principal securities exchange on which the stock is so listed
or admitted to trade, or, if there is no such reported sale on such date, the
average closing bid and asked prices on such day, or (if none) then the
closing price of the stock or (if none) such average, as reported on the next
preceding date on which there was such reported activity in such shares (such
determination or earlier date being hereinafter referred to as the "applicable
trading date"); (ii) if the stock is not listed or admitted to trade on a
securities exchange, the last reported sales price for the stock or (if none)
the average of the last reported bid and asked prices on the applicable
trading date, as reported by the principal reputable quotation system
available to the Committee; (iii) if the stock is not listed or admitted to
trade on a securities exchange and no such reported closing sale price or
closing bid and asked prices are available, the average of the reported high
bid and low asked price for the stock on the applicable trading date, as
reported by a reputable quotation source designated by the Committee; or (iv)
if the stock is not listed or admitted to trade on a securities exchange,
trading is not so reported, and bid and asked prices are not available on a
reasonably current basis, the value as established by the Committee in good
faith at such time for purposes of this Plan.
(r) "Incentive Stock Option" shall mean an Option which is
designated as an incentive stock option within the meaning of section 422 of
the Code, the award of which contains such provisions as are necessary to
comply with that section and is subject to or follows the stock holder
approval required thereby.
(s) "Initial Options" shall mean those Options granted under
this Plan as of the Effective Date as set forth in Exhibit A hereto.
(t) "Non-Incentive Stock Option" shall mean an Option that is
designated as a Non-Incentive Stock Option and shall include any Option
intended as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as
an Incentive Stock Option shall be deemed to be designated a Non-Incentive
Stock Option under this Plan.
(u) "Non-Employee Director" shall mean a member of the Board
of Directors of the Corporation who is not an officer or employee of the
Company.
(v) "Option" shall mean an option to purchase Common Stock
under this Plan. The Committee shall designate any Option granted to an
Eligible Employee as a Non-Incentive Stock Option or an Incentive Stock Option
and any Option granted to a Non-Employee Director or Other Eligible Person as
a Non-Incentive Stock Option.
<PAGE>
<PAGE>
(w) "Other Eligible Person" shall mean any other person
(including a significant agent or consultant) who performs substantial
services for the Company of a nature similar to those performed by key
employees, selected to participate in this Plan by the Committee from time to
time.
(x) "Participant" shall mean an Eligible Employee, Other
Eligible Person or Non-Employee Director who has been granted an Award under
this Plan.
(y) "Personal Representative" shall mean the person or persons
who, upon the disability or incompetence of a Participant, shall have acquired
on behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(z) "Plan" shall mean this 1997 Stock Incentive Plan, as
amended from time to time.
(aa) "QDRO" shall mean a qualified domestic relations order as
defined in Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA
(to the same extent as if this Plan were subject thereto), or the applicable
rules thereunder.
(bb) "Reliance Period Termination Date" shall mean the date
that is the earlier of:
(1) The date of expiration or termination of the
Plan;
(2) The date of any material modification of the
Plan, within the meaning of Treasury Regulation section 1.162-
7(h)(1)(iii);
(3) The first date as of which all Options provided
for under the Plan have been issued; and
(4) The date of the first meeting of shareholders of
the Company at which Directors are to be elected that occurs after
the year 2000.
(cc) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act, as amended from time to time.
(dd) "Section 16 Person" shall mean a person subject to
Section 16(a) of the Exchange Act.
<PAGE>
<PAGE>
(ee) "Securities Act" shall mean the Securities Act of 1933,
as amended from time to time.
(ff) "Stock Appreciation Right" or "SAR" shall mean a right to
receive a number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Common
Stock, that is authorized under this Plan.
(gg) "Subsidiary" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Corporation.
(hh) "Total Disability" shall mean a "permanent and total
disability" within the meaning of section 22(e)(3) of the Code and such other
disabilities, infirmities, afflictions or conditions as the Committee by rule
may include.
Adopted by the Board of Directors on ___________________________.
Attest:
- ------------------------ -------------------------------
Secretary
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
PT-1 COMMUNICATIONS, INC.
ANALYSIS OF STOCK OPTION ISSUANCES
QUARTER ENDED SEPTEMBER 30, 1997
I. EMPLOYEES
$ Stock
Grant # of --------Exercisable------------ Comp/Exp --3 Months End--
Employee Name Dept. Date Shares Dates Shares $Price/Sh. Recog. 9/30/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baher Ahmed Shipping 09/30/97 3,000 IPO or 03/31/98 1,000 IPO or FMV(2) - - -
09/30/98 1,000 IPO or FMV(2) - - -
09/30/99 1,000 IPO or FMV(2) - - -
Mohammed Ahmed Shipping 09/30/97 3,000 IPO or 03/31/98 1,000 IPO or FMV(2) - - -
09/30/98 1,000 IPO or FMV(2) - - -
09/30/99 1,000 IPO or FMV(2) - - -
Arthur E. Anderson Net. Op. 09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
Anibal Aponte Shipping 09/30/97 20,000 IPO or 03/31/98 6,666 IPO or FMV(2) - - -
09/30/98 6,667 IPO or FMV(2) - - -
09/30/99 6,667 IPO or FMV(2) - - -
Daniel DeLyra Sales 09/30/97 5,000 IPO or 03/31/98 1,666 IPO or FMV(2) - - -
09/30/98 1,667 IPO or FMV(2) - - -
09/30/99 1,667 IPO or FMV(2) - - -
Annette M. Dickson Provis. 09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
Robinson Francisco Program. 09/30/97 7,500 IPO or 03/31/98 2,500 IPO or FMV(2) - - -
09/30/98 2,500 IPO or FMV(2) - - -
09/30/99 2,500 IPO or FMV(2) - - -
Dora Franco Acct./Sales 09/30/97 20,000 IPO or 03/31/98 6,666 IPO or FMV(2) - - -
09/30/98 6,667 IPO or FMV(2) - - -
09/30/99 6,667 IPO or FMV(2) - - -
Eliz. Franco Acctg/Sales 09/30/97 25,000 IPO or 03/31/98 8,333 IPO or FMV(2) - - -
09/30/98 8,334 IPO or FMV(2) - - -
09/30/99 8,334 IPO or FMV(2) - - -
(1) Comp. Exp. based on 5 percent discount on $13/share IP.
(2) FMV as determined by BOD on 3/31/98<PAGE>
<PAGE>
Juan Goris Shipping 09/30/97 3,000 IPO or 03/31/98 1,000 IPO or FMV(2) - - -
09/30/98 1,000 IPO or FMV(2) - - -
09/30/99 1,000 IPO or FMV(2) - - -
Robert Greenwald Sales 09/30/97 5,000 09/30/97 1,666 $10 per Share 3,915.10 3,915.10 -
09/30/98 1,667 $10 per Share 3,917.45 - 979.36
09/30/99 1,667 $10 per Share 3,917.45 - 489.68
2,500 IPO or 03/31/98 833 IPO or FMV(2) - - -
09/30/98 833 IPO or FMV(2) - - -
09/30/99 834 IPO or FMV(2) - - -
Richard Harding Sales 09/30/97 7,500 IPO or 03/31/98 7,500 IPO or FMV(2) - - -
30,000 IPO or 03/31/98 10,000 IPO or FMV(2) - - -
09/30/98 10,000 120 per. of IPO - - -
09/30/99 10,000 140 per. of IPO - - -
Jeffrey Hecht Provis. 09/30/97 15,000 09/30/97 5,000 $10 per Share 11,750.00 11,750.00 -
09/30/98 5,000 $10 per Share 11,750.00 - 2,937.50
09/30/99 5,000 $10 per Share 11,750.00 - 1,468.75
35,000 IPO or 03/31/98 11,666 IPO or FMV(2) - - -
09/30/98 11,667 IPO or FMV(2) - - -
09/30/99 11,667 IPO or FMV(2) - - -
Helene Kidary Net. Op. 09/30/97 10,000 09/30/97 10,000 $0.00 123,500.00 123,500.00 -
40,000 09/30/97 13,333 $10 per Share 31,332.55 31,332.55 -
09/30/98 13,333 $10 per Share 31,332.55 31,332.55 -
09/30/99 13,333 $10 per Share 31,334.90 31,334.90 -
200,000 IPO or 03/31/98 66,666 IPO or FMV(2) - - -
09/30/98 66,667 IPO or FMV(2) - - -
09/30/99 66,667 IPO or FMV(2) - - -
Abbey Knowlton Access 09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
(2) FMV as determined by BOD on 3/31/98.<PAGE>
<PAGE>
Sergei Konik Acct. 09/30/97 5,000 IPO or 03/31/98 1,666 IPO or FMV(2) - - -
09/30/98 1,667 IPO or FMV(2) - - -
09/30/99 1,667 IPO or FMV(2) - - -
Richard Langer Sales 09/30/97 50,000 09/30/97 16,667 $10 per Share 39,165.10 39,165.10 -
09/30/98 16,667 $10 per Share 39,167.45 - 9,781.86
09/30/99 16,667 $10 per Share 39,167.45 - 4,895.93
60,000 IPO or 03/31/98 20,000 IPO or FMV(2) - - -
09/30/98 20,000 IPO or FMV(2) - - -
09/30/99 20,000 IPO or FMV(2) - - -
Adolfo Lemoine Sales 09/30/97 15,000 IPO or 03/31/98 5,000 IPO or FMV(2) - - -
09/30/98 5,000 IPO or FMV(2) - - -
09/30/99 5,000 IPO or FMV(2) - - -
Robert Lorenz Acct. 09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
Larry Louzau Sales 09/30/97 5,000 09/30/97 1,666 $10 per Share 3,915.10 3,915.10 -
09/30/98 1,667 $10 per Share 3,917.45 - -
09/30/99 1,667 $10 per Share 3,917.45 - 489.66
09/30/97 5,000 IPO or 03/31/98 1,666 IPO or FMV(2) - - -
09/30/98 1,667 IPO or FMV(2) - - -
09/30/99 1,667 IPO or FMV(2) - - -
Timothy Marsh Sales 09/30/97 15,000 IPO or 03/31/98 5,000 IPO or FMV(2) - - -
09/30/98 5,000 IPO or FMV(2) - - -
09/30/99 5,000 IPO or FMV(2) - - -
Maureen McElroy Acct. 09/30/97 10,000 IPO or 03/31/98 3,333 IPO or FMV(2) - - -
09/30/98 3,334 IPO or FMV(2) - - -
09/30/99 3,334 IPO or FMV(2) - - -
Kathleen McEnroe Acct. 09/30/97 5,000 IPO or 03/31/98 1,666 IPO or FMV(2) - - -
09/30/98 1,667 IPO or FMV(2) - - -
09/30/99 1,667 IPO or FMV(2) - - -
(2) FMV as determined by BOD on 3/31/98.<PAGE>
<PAGE>
Jeannine Molloy Acct. 09/30/97 20,000 09/30/97 6,666 $10 per Share 15,665.10 15,665.10 -
09/30/98 6,667 $10 per Share 15,667.45 - 3,916.86
09/30/99 6,667 $10 per Share 15,667.45 - 1,958.43
30,000 IPO or 03/31/98 10,000 IPO or FMV(2) - - -
09/30/98 10,000 IPO or FMV(2) - - -
09/30/99 10,000 IPO or FMV(2) - - -
Fabian Pachon Net.Op. 09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
Barbara Pena Ad. Asst. 09/30/97 2,000 IPO or 03/31/98 666 IPO or FMV(2) - - -
09/30/98 667 IPO or FMV(2) - - -
09/30/99 667 IPO or FMV(2) - - -
Adam Pratt Ad. Asst. 09/30/97 5,000 09/30/97 1,666 $10 per Share 15,665.10 15,665.10 -
09/30/98 1,667 $10 per Share 15,667.45 - 3,916.86
09/30/99 1,667 $10 per Share 15,667.45 - 1,958.43
2,500 IPO or 03/31/98 833 IPO or FMV(2) - - -
09/30/98 833 IPO or FMV(2) - - -
09/30/99 834 IPO or FMV(2) - - -
Estelle(Julissa)
Serna Ad. Asst. 09/30/97 5,000 IPO or 03/31/98 1,666 IPO or FMV(2) - - -
09/30/98 1,667 IPO or FMV(2) - - -
09/30/99 1,667 IPO or FMV(2) - - -
Alexsandra
Strbanovic Program. 09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
Jorge Tobon Sales 09/30/97 20,000 IPO or 03/31/98 6,666 IPO or FMV(2) - - -
09/30/98 6,667 IPO or FMV(2) - - -
09/30/99 6,667 IPO or FMV(2) - - -
Rafael Vasquez Shipping 09/30/97 10,000 IPO or 03/31/98 3,333 IPO or FMV(2) - - -
09/30/98 3,333 IPO or FMV(2) - - -
09/30/99 3,334 IPO or FMV(2) - - -
Frank Weiss Cust. Svc.09/30/97 6,000 IPO or 03/31/98 2,000 IPO or FMV(2) - - -
09/30/98 2,000 IPO or FMV(2) - - -
09/30/99 2,000 IPO or FMV(2) - - -
Total Emp. Option
Shares Issued 09/30/97: 738,000 738,000 452,500.00 233,158.05 41,126.43
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
II. TECHNOLOGY MANAGEMENT (EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Valerie Wood(3) 05/12/97 Unknown 18/30/and 36 Unknown 125K,62.5K(2x) 250,000.00 32,292.00 32,292.00
Srdjan Strbanovic(3) 05/12/97 Unknown months from Unknown 175K,87.5K(2x) 350,000.00 45,207.00 5,207.00
Sidney Huang (3) 06/00/97 Unknown effective date Unknown 125K,62.5K(2x) 250,000.00 32,292.00 32,292.00
------------ --------- ---------
Recognized Stock Based Compensation Expense 3,102,500.00 762,169.05 570,137.43
------------ ---------- ----------
------------ ---------- ----------
(3) $ based bonus paid in stock.
</TABLE>
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 6th day of April, 1996, by and among Thomas Hickey ("Seller") and
Peter Vita and Douglas Barley (collectively, the "Buyers").
RECITALS
A. Following the recapitalization of the Company of even date herewith,
the authorized capital stock of PhoneTime, Inc., a New York corporation
("PTI"), consists of 200 shares of common stock, no par value ("Common
Shares") of which 87 shares are issued and outstanding and 43.5 are held by
the Seller.
B. Concurrently herewith there shall be executed and delivered: a
Subscription Agreement by and among the Buyers and PTI ("Subscription
Agreement").
C. The Seller wishes to sell 3-3/14 Common Shares to Peter Vita ("Vita
Shares") and 1-4/14 Common Shares to Douglas Barley ("Barley Shares") for the
consideration and under the terms and conditions set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged:
ARTICLE 1
DEFINITIONS
In addition to capitalized terms defined elsewhere in this Agreement, the
following terms have the meanings specified or referred to in this Article 1:
"Affiliate" means, with respect to any person, any other person who
directly or indirectly controls, is controlled by or is under common control
with such person, and in addition with respect to officers, directors and
stockholders of any person, any relative or spouse (or relative of such
spouse) who resides with any such officer, director or spouse.
"Encumbrance" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect
in title, covenant or other restrictions of any kind.
<PAGE>
<PAGE>
ARTICLE 2
SALE OF SHARES
2.1 Sale of Shares. Subject to the provisions of this Agreement (a)
the Seller agrees to sell, and Peter Vita agrees to purchase, at Closing, the
Vita Shares, and (b) the Seller agrees to sell, and Douglas Barley agrees to
purchase, at Closing, the Barley Shares.
2.2 Purchase Price. The purchase price for the Common Shares shall be
as follows:
(a) With respect to the Vita Shares, one dollar per share, payable by
Peter Vita at Closing; and
(b) With respect to the Barley Shares, one dollar per share, payable by
Douglas Barley at Closing.
2.3 Share Issuance Procedure. At Closing, the Buyers shall deliver to
the Seller the consideration set forth above, together with any documents
reasonably required by the Seller. At Closing, the Seller deliver to each
Buyer a certificates representing such Buyer's respective Shares duly endorsed
(or accompanied by duly executed stock powers) for transfer to Buyers.
2.4 Further Assurances. If at any time after the Closing, the Seller
or any of the Buyers shall consider or be advised that any agreements,
assurances or any other acts or things are necessary to implement the transfer
of shares hereunder, each party shall execute and deliver all such agreements
and assurances and do all such other acts and things reasonably necessary,
desirable or proper to carry out the purpose of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE BUYERS
As an inducement to the Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, each of the Buyers, severally
and not jointly, represents and warrants to Seller as follows:
3.1 Authority of Buyers. This Agreement has been duly executed and
delivered by each Buyer and constitutes a valid and binding obligation of such
Buyer enforceable against him in accordance with its terms. Neither the
execution and delivery of this Agreement or any of the other agreements or
instruments contemplated hereby or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the
terms, conditions and provisions hereof or thereof does or will:
(a) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any Encumbrance upon
<PAGE>
<PAGE>
any of the properties of the Buyer, or under any note, instrument, agreement,
mortgage, lease, license, franchise, permit, judgment, order, award, decree or
other authorization, right, restriction or obligation to which the Buyer is a
party or any of his properties is subject or by which the Buyer is bound, or
any law, rule, regulation or other legal requirement affecting the Buyer or
his properties, or
(b) require the approval, consent, authorization or act of, or the
making by the Buyer of any declaration, filing or registration with, any third
party or any foreign, federal, state or local court, governmental authority or
regulatory body.
3.2 Disclosure. None of the representations or warranties of the
Buyers contained herein and none of the other information or documents
furnished or to be furnished to Seller or any of its representatives by the
Buyers or their representatives pursuant to the terms of this Agreement, is
false or misleading in any material respect or omits to state a fact herein or
therein necessary to make the statements herein or therein not misleading in
any material respect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF SELLER
As an inducement to the Buyers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Seller hereby represents
and warrants to the Buyers as follows:
4.1 Authority of The Seller. This Agreement has been duly executed and
delivered by the Seller and is the legal, valid and binding agreement of the
Seller, enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement or any of the other agreements or instruments
contemplated hereby or the consummation of any of the transactions
contemplated hereby or thereby, nor compliance with or fulfillment of the
terms, conditions and provisions hereof or thereof will:
(a) conflict with the Certificate of Incorporation or By-Laws of
PTI, or result in a breach of the terms, conditions or provisions, or
constitute a default, or an event of default or an event creating rights of
acceleration, termination or cancellation or loss of rights under, or result
in the creation or imposition of any Encumbrance upon any of the properties of
the Seller, under any note, instrument, agreement, mortgage, lease, license,
franchise, permit, judgment, order, award, decree or other authorization,
right, restriction or obligation to which the Seller is a party, or any of its
properties is subject or by which the Seller is bound, or any statute, other
law or regulatory provision affecting the Seller or his properties; or
(b) require the approval, consent, authorization or act of, or the
making by the Seller of any declaration, filing or registration with, any
<PAGE>
<PAGE>
third party or any foreign, federal, state or local court, governmental
authority or regulatory body.
4.2 Disclosure. None of the representations or warranties of the
Seller contained herein and none of the other information or documents
furnished or to be furnished to the Buyers or any of their representatives by
the Seller or its representatives pursuant to the terms of this Agreement, is
false or misleading in any material respect or omits to state a fact herein or
therein necessary to make the statements herein or therein not misleading in
any material respect.
ARTICLE 5
ACTION PRIOR TO CLOSING
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing:
5.1 Preserve Accuracy of Representations and Warranties. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Article 3 or 4 of this Agreement
inaccurate as of the Closing Date. Each party shall promptly notify the
others of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Each party shall
promptly notify the other parties of any lawsuit, claim, proceeding or
investigation that may be threatened, brought, asserted or commenced against
such party that would have been listed in a Schedule hereto by such party if
such lawsuit, claim, proceeding or investigation had arisen prior to the date
hereof.
5.2 Consents and Approvals. Each party hereto shall cooperate in using
such party's best efforts promptly to obtain all consents and amendments from
parties to contracts, licenses, leases and other agreements and all consents,
amendments or permits from governmental authorities, which are required by the
terms thereof, this Agreement or otherwise for the due and punctual
consummation of the transactions contemplated by this Agreement.
5.3 No Public Announcement. No party hereto shall, without the
approval of the other parties hereto make any press release or other public
announcement concerning the transactions contemplated by this Agreement,
except as and to the extent that any such party shall be so obligated by law,
in which case PTI shall be advised and the parties shall use their best
efforts to cause a mutually agreeable release or announcement to be issued.
ARTICLE 6
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE SELLER
The obligation of the Seller to consummate the sale of the Shares under
this Agreement shall, at the option of the Seller, be subject to the<PAGE>
<PAGE>
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
6.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by any Buyer in the performance of any of
their respective covenants and agreements herein; each of the representations
and warranties of the Buyers contained or referred to herein shall be true and
correct in all material respects as of the Closing Date as though made on the
Closing Date, except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing
by the Seller.
6.2 No Restraint or Litigation. No action, suit, investigation or
proceeding shall have been instituted or threatened to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated
hereby.
6.3 Agreements. Peter Vita, Douglas Barley and PTI shall have entered
into the Subscription Agreement and the transactions contemplated thereby
shall be consummated concurrently herewith.
6.4 Necessary Governmental Approvals. The parties shall have received
all governmental and regulatory approvals and actions necessary to consummate
the transactions contemplated hereby, which are required to be obtained prior
to the Closing Date by applicable law or regulation or which are necessary to
prevent a material adverse change in the properties, the business or the
operations, liabilities, profits, prospects or condition (financial or
otherwise) of PTI.
ARTICLE 7
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYERS
The obligation of the Buyers to consummate the purchase of the Shares
under this Agreement shall be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
7.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by the Seller in the performance of any of
its covenants and agreements herein; each of the representations and
warranties of the Seller contained or referred to in this Agreement shall be
true and correct on the Closing Date as though made on the Closing Date.
7.2 No Restraint or Litigation. No action, suit or proceeding by any
governmental agency shall have been instituted or threatened to restrain,
prohibit or otherwise challenge the legality or validity of the transactions
contemplated hereby.
<PAGE>
<PAGE>
7.3 Necessary Governmental Approvals. The parties shall have received
all governmental and regulatory approvals and actions necessary to consummate
the transactions contemplated hereby, which are required to be obtained prior
to the Closing Date by applicable law or regulation or which are necessary to
prevent a material adverse change in the properties, the business or the
operations, liabilities, profits, prospects or condition (financial or
otherwise) of PTI.
7.4 Agreements. Peter Vita, Douglas Barley and PTI shall have
entered into the Subscription Agreement.
ARTICLE 8
CLOSING
8.1 Time and Place. The closing (the "Closing") under this Agreement
shall be held on April 6, 1996 (the "Closing Date"), at the offices of PTI
or at such other time and place as shall be agreed upon by the Seller and the
Buyers.
8.2 Deliveries. At the Closing, each of the parties hereto shall
deliver to the other parties all of the documents and instruments required to
be delivered by such party pursuant to Articles 6 and 7 hereof.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Buyers. Each Buyer, severally but not jointly,
agrees to indemnify and hold harmless the Seller and his Affiliates (excluding
the Buyers), successors and assigns from and against any and all (a)
liabilities, losses, costs or damages ("Loss" or "Losses") and (b) reasonable
attorneys' and accountants' fees and expenses, court costs and all other
reasonable out-of-pocket expenses ("Expense" or "Expenses") incurred by the
Seller and his Affiliates (excluding the Buyers), successors and assigns in
connection with or arising from any material breach of any warranty or the
material inaccuracy of any representation of any Buyer contained in this
Agreement.
9.2 Indemnification by the Seller. The Seller agrees to indemnify and
hold harmless each Buyer from and against any and all Losses and Expenses
incurred by such Buyer in connection with or arising from any material breach
of any warranty or the material inaccuracy of any representation of the Seller
contained in this Agreement.
9.3 Notice of Claims. If the Seller or a Buyer believes that any of
the persons indemnified under this Article 9 has suffered or incurred any Loss
or incurred any Expense, the Seller or such Buyer shall so notify the other
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
<PAGE>
<PAGE>
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred. If any
action at law or suit in equity is instituted by or against a third party with
respect to which any of the indemnified persons intends to claim any liability
or expense as Loss or Expense under this Article 9, any such indemnified
person shall promptly notify the indemnifying party of such action or suit.
9.4 Third Party Claims. (a) Subject to paragraph (b) of this Section
9.4, the persons indemnified under this Article 9 shall have the right to
conduct and control, through counsel (but no more than one law firm) of their
choosing, any third party claim, action or suit, and the persons indemnified
may compromise or settle the same, provided that any of the indemnified
persons shall give the indemnifying party advance notice of any proposed
compromise or settlement. The indemnified persons shall permit the
indemnifying party to participate in the defense of any such action or suit
through counsel chosen by it, provided that the fees and expenses of such
counsel shall be borne by the indemnifying party. Any compromise or
settlement with respect to a claim for money damages effected after the
indemnifying party by notice to the indemnified party shall have disapproved
such compromise or settlement shall discharge the indemnifying party from
liability with respect to the subject matter thereof, and no amount in respect
thereof shall be claimed as Loss or Expense under this Article 9; provided,
however, that if the indemnifying party has not elected to conduct and control
an action or suit subject to paragraph (b) of this Section 9.4, such
indemnifying party shall have no right to disapprove such compromise or
settlement or to be discharged from liability with respect to the subject
matter thereof.
(b) If the remedy sought in any action or suit referred to in
paragraph (a) of this Section 9.4 is solely money damages and will have no
continuing effect on the business of any indemnified person, the indemnifying
party shall have 5 business days after receipt of the notice referred to in
the last sentence of Section 9.3 to notify the indemnified persons that it
elects to conduct and control such action or suit. If the indemnifying party
does not give the foregoing notice, the indemnified persons shall have the
right to defend, contest, settle or compromise such action or suit in the
exercise of their exclusive discretion, and the indemnifying party shall, upon
request from any of the indemnified persons, promptly pay to such indemnified
persons in accordance with the other terms of this Article 9 the amount of any
Loss resulting from its liability to the third party claimant and all related
Expense. If the indemnifying party gives the foregoing notice, the
indemnifying party shall have the right to undertake, conduct and control,
through counsel of its own choosing and at the sole expense of the
indemnifying party, the conduct and settlement of such action or suit, and the
indemnified persons shall cooperate with the indemnifying party in connection
therewith; provided that (x) the indemnifying party shall not thereby permit
to exist any Encumbrance or other adverse charge upon any asset of any
indemnified person; (y) the indemnifying party shall permit the indemnified
persons to participate in such conduct or settlement through counsel chosen by
<PAGE>
<PAGE>
the indemnified persons, but the fees and expenses of such counsel shall be
borne by the indemnified persons except as provided in clause (z) below; and
(z) the indemnifying party shall agree promptly to reimburse to the extent
required under this Article 9 the indemnified persons for the full amount of
any Loss resulting from such action or suit and all related Expense incurred
by the indemnified persons, except fees and expenses of counsel for the
indemnified persons incurred after the assumption of the conduct and control
of such action or suit by the indemnifying party. So long as the indemnifying
party is contesting any such action or suit in good faith, the indemnified
persons shall not pay or settle any such action or suit without the express
prior written consent of the indemnifying party. Notwithstanding the
foregoing, the indemnified persons shall have the right to pay or settle any
such action or suit, provided that in such event the indemnified persons shall
waive any right to indemnity therefor by the indemnifying party, and no amount
in respect thereof shall be claimed as Loss or Expense under this Article 9.
ARTICLE 10
TERMINATION
10.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual consent of the parties hereto; and
(b) by the Seller or the Buyers if the Closing shall not have
occurred on or before April 30, 1996 (or such later date as may be mutually
agreed to by Seller and the Buyers).
In the event that this Agreement shall be terminated pursuant to this
Article 10, all further obligations of the parties under this Agreement (other
than Sections 5.3, 11.2 and 11.9) shall be terminated without further
liability of any party to the other, provided that nothing herein shall
relieve any party from liability for its breach of this Agreement.
ARTICLE 11
GENERAL PROVISIONS
11.1 Survival of Obligations. All representations, warranties,
covenants and obligations contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement.
11.2 Confidential Nature of Information. Each party agrees that it
will treat in confidence all documents, materials and other information that
it shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated
hereby (whether obtained before or after the date of this Agreement), and the
preparation of this Agreement and other related documents, and, in the event
the transactions contemplated hereby shall not be consummated, each party will
<PAGE>
<PAGE>
return to the other party all copies of non-public documents and materials
that have been furnished in connection therewith. The obligation of each
party to treat such documents, materials and other information in confidence
shall not apply to any information that (a) such party can demonstrate was
already lawfully in its possession prior to the disclosure thereof by the
other party, (b) is known to the public and did not become so known through
any violation of a legal obligation, (c) became known to the public through no
fault of such party, or (d) is later lawfully acquired by such party from
other sources.
11.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York, without regard to conflicts-of-laws
principles.
11.4 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or when sent by registered or certified mail or by
private courier addressed as follows:
If to Vita, to:
Peter Vita
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
If to Barley, to:
Douglas Barley
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
If to Seller, to:
Thomas Hickey
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
or to such other address as such party may indicate by a notice delivered in
writing to the other parties hereto.
11.5 Successors and Assigns. (a) The rights and obligations of each
party under this Agreement shall not be assignable by such party hereto prior
to the Closing Date without the express prior written consent of the other
parties.
<PAGE>
<PAGE>
(b) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their successors and permitted assigns. Nothing in
this Agreement, expressed or implied, is intended or shall be construed to
confer upon any person other than the parties and successors and assigns
permitted by this Section 11.5 any right, remedy or claim under or by reason
of this Agreement.
11.6 Entire Agreement; Amendments. This Agreement and the Schedules
referred to herein and the documents delivered pursuant hereto contain the
entire understanding of the parties hereto with regard to the subject matter
contained herein or therein. This agreement supersedes all prior and
contemporaneous agreements, understandings or intents between or among any of
the parties hereto with respect to the subject matter contained herein or
therein. The parties hereto, by mutual agreement in writing, may amend,
modify and supplement this Agreement.
11.7 Interpretation. Article titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement. The
Schedules referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim
herein. So long as the Schedules provide full and clear disclosure, any
matter disclosed on one Schedule shall be deemed disclosed on all other
relevant Schedules.
11.8 Waivers. Any term or provision of this Agreement may be waived in
writing, or the time for its performance may be extended in writing, by the
party or parties entitled to the benefit thereof. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach
of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
11.9 Expenses. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
11.10 Partial Invalidity. Whenever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never
been contained herein unless the deletion of such provision or provisions
<PAGE>
<PAGE>
would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.
11.11 Execution in Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement,
and shall become binding when two or more counterparts have been signed by
each of the parties and delivered to each party hereto.
[SIGNATURES ON FOLLOWING PAGE]<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SELLER:
WITNESS:
- ------------------------ -----------------------------
Name: Thomas Hickey
BUYERS:
WITNESS:
- ------------------------ --------------------------
Name: Peter Vita
WITNESS:
- ------------------------- --------------------------
Name: Douglas Barley
PHONETIME INC.
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made as of March 26,
1997 (the "Effective Date"), by and among PHONETIME, INC., a New York
corporation (the "Corporation" or "Purchaser"), Thomas Hickey ("Seller"),
Samer Tawfik ("Tawfik"), Peter Vita ("Vita") and Douglas Barley ("Barley" and
together with Tawfik and Vita the "Management Shareholders").
RECITALS
--------
A. On April 21, 1995, the Corporation issued to Seller 10 shares of
the Corporation's common stock, no par value ("Common Shares"), in
consideration for a payment by Seller to the Corporation of one hundred
dollars ($100).
B. On April 6, 1996, the Corporation effected a 4.35-for-one stock
split (the "Stock Split"), such that each Common Share issued and outstanding
prior to April 6, 1996 thereafter entitled the holder thereof to 4.35 Common
Shares; after giving effect to the Stock Split, Seller owned 43.5 Common
Shares.
C. On April 6, 1996, immediately following the Stock Split, the
Corporation issued to Vita 9-2/7 Common Shares and issued to Barley 3-5/7
Common Shares (collectively, the "1996 Issuance").
D. On April 6, 1996, immediately following the Stock Split, Seller
sold to (i) Vita 3-3/14 Common Shares and (ii) Barley 1-4/14 Common Shares
(collectively, the "Shareholder Transfers").
E. Upon consummation of the Stock Split, the 1996 Issuance and the
Shareholder Transfers, the issued and outstanding Common Shares of the
Corporation have been held beneficially and of record as set forth on Schedule
1 attached hereto (and all parties hereto have set forth their initials next
to the number of Common Shares owned by such party).
F. Seller desires to sell to the Corporation and the Corporation
desires to redeem from Seller, 35-15/19 Common Shares (or as otherwise
adjusted pursuant to Section 6.2, the "Redeemed Shares"), on the terms and
subject to the conditions hereinafter set forth; and upon the consummation of
such redemption, the issued and outstanding Common Shares of the Corporation
will be held beneficially and of record as set forth on Schedule 1 attached
hereto (and all parties hereto have set forth their initials next to the
number of Common Shares owned by such party).
<PAGE>
<PAGE>
G. As a result of the Corporation redeeming the Redeemed Shares from
Seller, Seller will own 3-4/19 Common Shares (unless otherwise adjusted
pursuant to Section 6.2), which amount represents 5.00 percent of the issued
and outstanding Common Shares at the time of Closing (the "Initial Seller
Ownership Percentage").
AGREEMENTS
----------
In consideration of the recitals and the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
REDEMPTION AND SALE OF REDEEMED SHARES
--------------------------------------
1.1 Redemption of Redeemed Shares from Seller. Subject to the
satisfaction of the terms and conditions and in reliance upon the
representations and warranties set forth herein or in any document delivered
pursuant hereto, the Corporation agrees to redeem from Seller the Redeemed
Shares for an aggregate redemption price of fifteen million dollars
($15,000,000) payable by delivery at the Closing of (i) five million dollars
(the "Cash"), and (ii) a promissory note with a face value of ten million
dollars, a form of which is attached hereto as Exhibit A (the "Note," and
together with the Cash, the "Redemption Price").
1.2 Sale of Redeemed Shares to Corporation. Subject to the
satisfaction of the terms and conditions and in reliance upon the
representations and warranties set forth herein or in any document delivered
pursuant hereto, the Seller agrees to sell to the Corporation, at the Closing,
the Redeemed Shares for the Redemption Price.
ARTICLE II
CLOSING; DELIVERY
-----------------
2.1 Closing. Subject to the terms and conditions of this Agreement,
the Closing will be held at the offices of Parker Duryee Rosoff & Haft, 529
Fifth Avenue, New York, NY 10017, on March 26, 1997, at 10:00 a.m. (the
"Closing Date"), or at such other time, date and place as may be agreed to in
writing by the Corporation and the Seller.
2.2 Deliveries at Closing.
(a) Seller's Deliveries. At the Closing, the Seller will
deliver to the Corporation:
<PAGE>
<PAGE> (i) certificates representing the Redeemed Shares
owned by Seller, together with duly executed stock
powers,
(ii) all books, records and property of the Corporation,
including without limitation any Confidential
Information (as defined below) in Seller's possession
or that the Seller knows the whereabouts and can
reasonably obtain,
(iii) all books, records, share certificates, stock powers
transferring any interest of Seller in Tempus
Worldwide Communications ("Tempus") and property,
including without limitation any Confidential
Information of Tempus (including without limitation
any documents or computer disks containing
information belonging to Tempus) in the Seller's
possession or that the Seller knows the whereabouts
and can reasonably obtain,
(iv) a duly executed Escrow Agreement in the form of
Exhibit B hereto,
(v) a duly executed Pledge Agreement in the form of
Exhibit C hereto,
(vi) a duly executed Co-Sale Agreement in the form of
Exhibit D hereto, and
(vii) a letter of resignation in the form of Exhibit E
hereto.
(b) Corporation's Deliveries. At the Closing, the Corporation will
deliver to the Seller:
(i) the Cash by certified check or at the option of the
Seller via wire transfer of immediately available funds
to an account of the Seller designated by the Seller,
(ii) the Note,
(iii) a duly executed Escrow Agreement,
(iv) a duly executed Pledge Agreement,
(v) a certificate evidencing that Seller holds beneficially
and of record 3-4/19 Common Shares,
(vi) all salary and benefits owing to Seller through the
Closing Date,
(vii) with respect to the Corporation's rights to the
"Tempus" tradename, an Assignment Agreement in the form
of Exhibit E hereto, and
(viii) subject to Article V, the payment of the fees and
expenses of Parker Duryee Rosoff & Haft.<PAGE>
<PAGE>
ARTICLE III
CONDITIONS TO CLOSING BY THE CORPORATION
The obligation of the Corporation to redeem the Redeemed Shares at the
Closing is subject to the fulfillment or (to the extent permitted by law) the
express written waiver by the Corporation of each of the following conditions
on or before the Closing:
3.1 Representations and Warranties Correct. The representations and
warranties made by the Seller in Article V shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects as of the Closing as if made at the Closing.
3.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Seller at or prior
to the Closing shall have been performed or complied with in all material
respects.
3.3 Co-Sale Agreement. The Co-Sale Agreement shall have been duly
executed and delivered by all of the parties thereto and such agreement shall
be in effect as of the Closing.
3.4 Receipt of Certificates. The Seller shall deliver to the
Corporation certificates representing the Redeemed Shares, together with duly
executed stock powers.
3.5 Delivery of Books and Records and Confidential Information. The
Seller shall deliver to the Corporation all books, records and property of the
Corporation (including without limitation any documents or computer disks
containing Confidential Information (as defined in Article VIII)) in Seller's
possession or that the Seller knows the whereabouts and can reasonably obtain,
and all books, records, share certificates, stock powers transferring any
interest of Seller in Tempus and property of Tempus (including without
limitation any documents or computer disks containing Confidential Information
relating or belonging to Tempus) in the Seller's possession or that the Seller
knows the whereabouts and can reasonably obtain.
3.6 Delivery of Resignation. The Seller shall deliver to the
Corporation a letter of resignation, in the form of Exhibit F hereto.
3.7 Delivery of Escrow Agreement. The Escrow Agreement shall have
been duly executed and delivered by all of the parties thereto and such
agreement shall be in effect as of the Closing.
3.8 Delivery of Pledge Agreement. The Pledge Agreement shall have
been duly executed and delivered by all of the parties thereto and such
agreement shall be in effect as of the Closing.
<PAGE>
<PAGE>
3.9 Delivery of Joint Written Consent of Shareholders and Directors.
The Joint Written Consent of Shareholders and Directors approving the
redemption by the Corporation of the Redeemed Shares shall have been duly
executed and delivered by Seller.
ARTICLE IV
CONDITIONS TO CLOSING BY THE SELLER
The obligation of Seller to consummate the sale of Redeemed Shares to the
Corporation at the Closing is subject to the fulfillment or (to the extent
permitted by law) the express written waiver by Seller of each of the
following conditions on or before the Closing:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Corporation in Article V shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects as of the Closing as if made at the Closing.
4.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Corporation at or
prior to the Closing shall have been performed or complied with in all
material respects.
4.3 Redemption Price. The Corporation shall deliver to Seller the
Redemption Price as specified in Section 2.2.
4.4 Certificate. The Corporation shall deliver to Seller a
certificate evidencing that Seller holds beneficially and of record 3-4/19
Common Shares.
4.5 Delivery of Escrow Agreement. The Escrow Agreement shall have
been duly executed and delivered by all of the parties thereto and such
agreement shall be in effect as of the Closing.
4.6 Delivery of Pledge Agreement. The Pledge Agreement shall have
been duly executed and delivered by all of the parties thereto and such
agreement shall be in effect as of the Closing.
4.7 Delivery of Assignment Agreement. The Assignment Agreement shall
have been duly executed and delivered by all of the parties thereto and such
agreement shall be in effect on the Closing Date.
4.8 Payment of Attorneys' Fees. The Corporation shall deliver to
Parker Duryee Rosoff & Haft a check in the amount of $___________.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Corporation. The Corporation represents and warrants to the
Seller as of the Closing that the Corporation has not executed any written
<PAGE>
<PAGE>
agreement or written letter of intent with respect to the merger, combination
or sale of all or substantially all of the outstanding voting securities of
the Corporation.
5.2 Seller. The Seller represents and warrants to the Corporation as
of the Closing as follows:
(a) Shares. The Redeemed Shares are now, and on the Closing
Date will be, owned of record and beneficially by Seller free and clear of any
security interest, pledge, option, lien, claim, commitment, proxy, equity
right, restriction on transfer, encumbrance of any nature whatsoever, interest
arising in connection with so-called community property laws or other laws
relating to the rights of spouses, charge, escrow, right of first refusal,
mortgage, indenture, security agreement or other agreement, arrangement,
contract, commitment, understanding or obligation, whether written or oral and
whether or not relating in any way to credit or the borrowing of money
(collectively, "Encumbrances"). Upon the Closing, the Corporation will
acquire good and valid title to all of the Redeemed Shares free and clear of
any Encumbrance.
(b) Access to Information. Seller and Seller's advisors
(including Seller's attorneys and financial advisors) have had the opportunity
to obtain from the Corporation any and all information necessary to evaluate
the merits and risks of a sale of the Redeemed Shares, and Seller (after
consultation with his attorneys and financial advisors) has concluded, in its
sole judgment and without reliance upon any representations or warranties of
the Corporation (except as set forth in Section 5.1), to sell the Redeemed
Shares pursuant to the terms of this Agreement.
(c) Tempus.
(i) attached hereto as Exhibit G is all of the
organizational documents of Tempus, which documents
Seller has not subsequently caused to be amended or
supplemented;
(ii) Seller has not caused Tempus to issue and, to the
best of Seller's knowledge, Tempus has not issued any
securities to any person, corporation, partnership,
association, trust, joint venture, joint stock
company, or other unincorporated entity (each, a
"Person") other than the Corporation;
(iii) Seller does not hold beneficially or of record any
securities of Tempus, Seller hereby transfers,
assigns and conveys to the Corporation any and all
interest (legal, beneficial, equitable or other) in
Tempus that Seller has and agrees that it will
execute any documents and make any filings necessary
<PAGE>
<PAGE>
to effect the transfer of such interest(s) to the
Corporation, and to best of Seller's knowledge the
Corporation is, and as of the Closing Date will be,
the sole shareholder of all of the outstanding
securities of Tempus;
(iv) Attached hereto as Exhibit H is the a current balance
sheet of Tempus which shows all liabilities of Tempus
as of the date thereof and as of the Closing Date;
(v) Seller has not entered into on behalf of Tempus or
caused Tempus to enter into, and to the best of
Seller's knowledge Tempus is not a party to any
agreement, contract, deed, lease, mortgage,
indenture, note, license, franchise, obligation,
instrument or other commitment, arrangement or
understanding of any kind, whether written or oral;
(vi) There is no Encumbrance on any property or asset of
Tempus and any securities issued by Tempus are now,
and as of Closing will be, free of any Encumbrance.
5.3 Covenant of the Corporation.
(a) Use of Tempus Name. At the request of Seller, the
Corporation agrees that it will execute any documents and make any filings
necessary to effect the transfer of the name "Tempus" to Seller.
(b) Payment of Seller's Attorneys' Fees. The Corporation agrees
to reimburse Seller at the Closing for any reasonable attorneys' fees and
expenses incurred by Seller in connection with the consummation of this
Agreement and the transactions contemplated hereby, which reimbursement shall
not exceed thirty five thousand dollars ($35,000).
(c) Indemnification of Seller in Connection with Lease. The
Corporation hereby agrees to indemnify and hold Seller harmless from, against
and in respect of, any and all claims, demands, lawsuits, proceedings, losses,
assessments, fines, penalties, liabilities, and damages, including interest,
penalties, reasonable attorneys' fees and costs of investigation which arise
or result from and to the extent that they are attributable to Seller's
personal guaranty given with respect to that certain Lease dated as of
______________, 199_ between [name parties], a copy of which guarantee is
attached hereto as Exhibit I.
5.4 No Other Representations. The Parties to this Agreement
acknowledge that the representations and warranties set forth in this Article
V are made as of the Effective Date and as of the Closing Date and the
representations and warranties set forth in this Article V and in Article X
are the only representations made pursuant to this Agreement.
<PAGE>
<PAGE>
ARTICLE VI
SELLER'S RIGHTS IN THE EVENT OF A
SUBSEQUENT FINANCING BY THE CORPORATION
6.1 Additional Financing. Subject to the conditions set forth in
this Article VI, the Corporation shall not be restricted in any manner from
soliciting and/or raising additional funds for use by the Corporation,
including but not limited to any financing involving the issuance by the
Corporation of Common Shares or other equity or debt securities of the
Corporation or any combination thereof, or any financing obtained by entering
into long-term debt arrangements ("Future Financing"), and Seller shall not
have any right to participate, preemptive right, anti-dilution protection or
any other statutory or contractual right to receive additional Common Shares
or other equity or debt securities of the Corporation or any combination
thereof in connection with any Future Financing.
6.2 Financing Related to Redemption Price. If (i) the Corporation
issues additional Common Shares or any other debt or equity securities of the
Corporation or any securities convertible into or exchangeable for Common
Shares or other debt or equity securities of the Corporation in a Future
Financing and the proceeds received by the Corporation from such Future
Financing are used as the Cash to redeem the Redeemed Shares from Seller or to
repay a note or other evidence of indebtedness from one or more of the
Management Shareholders to the Corporation that was made by the Corporation to
obtain the Cash to redeem the Redeemed Shares from Seller, then (ii) in
connection with such Future Financing the Corporation shall issue to Seller a
certificate representing the number of Common Shares which, when added to the
3-4/19 Common Shares held by Seller following the Closing, restores (or, if at
the time of the Future Financing which causes this Section 6.2 to take effect,
the Seller no longer owns 3-4/19 Common Shares, would have restored) to Seller
the Initial Seller Ownership Percentage.
6.3 Prepayment of Note. Other than proceeds received by the
Corporation from one or more Management Shareholders to obtain all or a part
of the Cash to redeem the Redeemed Shares from Seller, which proceeds shall
not be included in the Financing Amount (defined below), if the Corporation
receives proceeds from one or more Future Financings above a certain specified
amount (aggregated, the "Financing Amount"), the Corporation shall use a
certain percentage (the "Prepayment Percentage") of the proceeds received in
connection with such Future Financing ("Repayment Proceeds") to prepay a
portion of the Note as follows:
(a) until the Financing Amount exceeds $7,500,000, the Prepayment
Percentage shall be zero;
(b) if the Financing Amount exceeds $7,500,000 but does not exceed
$10,000,000, the Prepayment Percentage shall be twenty five
percent (25 percent) of such proceeds that exceed $7,500,000 but
do not exceed $10,000,000 or such lesser amount that will result
in the full prepayment of the Note (and any accrued but unpaid
interest);<PAGE>
<PAGE>
(c) if the Financing Amount exceeds $10,000,000, the Prepayment
Percentage shall be fifty percent (50 percent) of such proceeds
above $10,000,000 or such lesser amount that will result in the
full prepayment of the Note (and any accrued but unpaid
interest).
Repayment Proceeds shall be applied first to the payment of accrued but unpaid
interest on the Note and thereafter to the repayment of the principal balance
of the Note.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Piggyback Registration. If the Corporation, at any time that
Seller owns any Common Shares, proposes to register any Common Shares under
the Securities Act of 1933, as amended (the "Securities Act"), it will give
prompt written notice to Seller of the Corporation's intention to effect such
a registration and include in such registration all Common Shares owned by
Seller with respect to which the Corporation has received written notice for
inclusion therein within 20 days after the date of the Corporation's notice;
provided, however, that:
(a) if, at any time after giving written notice of its intention to
register any shares and, prior to the effective date of the
Registration Statement filed in connection with such
registration, the Corporation shall determine for any reason not
to register such Common Shares, the Corporation may, at its
election, give written notice of such determination to Seller (if
Seller has requested inclusion therein), and, thereupon, the
Corporation shall be relieved of its obligation to register any
Common Shares owned by Seller in connection with such
registration;
(b) if such registration shall be in connection with an underwritten
public offering and the managing underwriter shall advise the
Corporation in writing that in its opinion the number of shares
requested to be included in such registration exceeds the number
of such securities which can be sold in such offering or would
have an adverse impact on the price of such securities, the
Corporation shall include in such registration as follows:
(i) the securities to be included therein by the Corporation;
(ii) the number (if any) of other securities of the Corporation
(including, without limitation, Common Shares owned by
Seller and Common Shares owed by Management Shareholders)
requested to be included pursuant to any piggyback or
incidental registration rights which in the written
opinion of such underwriter can be sold (and if, in such
<PAGE>
<PAGE>
opinion of such underwriter, some but not all of such
securities may be so included, all holders of Common
Shares requested to be included therein shall share pro
rata in the number of Common Shares included in such
underwritten public offering on the basis of the number of
shares of Common Shares requested to be included therein);
provided, however, if in the opinion of the underwriter
Common Shares owned by Management Shareholders must not be
included in the underwritten public offering or the
number of shares so included must be limited in either
case because of their status as "insiders," the Common
Shares owned by Seller shall nevertheless be included in
such offering to the extent permitted by this subsection
requested to be included pursuant to any piggyback or
incidental registration rights, pari passu.
For purposes of this Article VII, "Registration Statement" means any
registration statement or comparable document under the Securities Act through
which a public sale or disposition of the securities of the Corporation may be
registered, including the prospectus, amendments and supplements to such
registration statement, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such Registration
Statement.
7.2 Selection of Underwriters. If any registration pursuant to this
Article VII is an underwritten primary offering, the Corporation shall have
the right to select the managing underwriter to administer such offering.
7.3 Holdback Agreement. In the event of an underwritten public
distribution of Common Shares under a Registration Statement, whether or not
Common Shares owned by Seller or Management Shareholders are included, Seller
and each Management Shareholder, severally, agrees not to effect any public
sale or distribution of Common Shares (except as part of such underwritten
public distribution), including a sale pursuant to Rule 144 or Rule 144A under
the Securities Act, during a period designated by the Corporation in a written
notice duly given to Seller or such Management Shareholder(s), which period
shall commence approximately 14 days prior to the effective date of any such
post-effective amendment to the shelf registration statement filed on Form S-3
or filing of such prospectus supplement, as the case may be, or the
commencement of such underwritten public distribution of Common Shares under a
Registration Statement and shall continue for up to 104 consecutive days. The
foregoing shall not apply to Seller or any Management Shareholder to the
extent such person is prohibited by applicable law from agreeing to withhold
from sale.
ARTICLE VIII
SELLER'S AGREEMENT NOT TO COMPETE,
SOLICIT, OR DISCLOSE CERTAIN INFORMATION
<PAGE>
<PAGE>
Any and all references to the Corporation in this Article VIII shall be
deemed to include the Corporation and, where applicable, Tempus.
8.1 Confidential Information. As a director, officer and shareholder
of the Corporation, Seller acknowledges that he has occupied a position of
trust and confidence with the Corporation prior to the date hereof and has
become familiar with the following, any and all of which constitute
confidential information of the Corporation (collectively the "Confidential
Information"):
(a) Trade Secrets. Any and all trade secrets concerning the
business and affairs of the Corporation, product specifications, data, know-how,
formulae, compositions, processes, designs, graphs, past, current and
planned research and development, customer lists, current and anticipated
customer requirements, customer contacts, price lists, market studies,
business plans, computer software and programs (including object code and
source code), computer software and database technologies, systems,
structures, and architectures (and related processes, formulae, compositions,
improvements, devices, know-how, inventions, discoveries, concepts, ideas,
designs, methods and information), and any information, however documented, of
the Corporation that is a trade secret; and
(b) Business and Affairs. Any and all information concerning the
business and affairs of the Corporation, however documented, including, but
not limited to, historical financial statements, financial projections and
budgets, capital spending budgets and plans, the names and backgrounds of key
personnel, and personnel training and techniques and materials; and
(c) Other Information. Any and all notes, analysis, compilations,
studies, summaries, and other material prepared by or for the Corporation
containing or based, in whole or in part, on any information in the foregoing.
(d) Exception. Confidential Information shall not include
information that becomes generally known to, and available for, use by the
public other than as a result of Seller's disclosure of such Confidential
Information or the disclosure of such Confidential Information by any other
Person bound by a duty of nondisclosure to the Corporation.
8.2 Reasonable and Necessary. Seller acknowledges that the
provisions of this Article VIII are reasonable and necessary to protect and
preserve the Corporation's business and that the Corporation would be
irreparably damaged if Seller were to breach the any of the covenants set
forth in this Article VIII.
8.3 Confidential Information Is Property of the Corporation. Seller
acknowledges and agrees that all the Confidential Information known or
obtained by Seller, whether before or after the date hereof, is the property
of the Corporation.
<PAGE>
<PAGE>
8.4 Nondisclosure. Seller agrees that he will not, at any time,
disclose to any unauthorized person or use for his own account or for the
benefit of any third party any of the Confidential Information, whether Seller
has such information in his memory or it is embodied in writing or other
physical form, without the Corporation's prior written consent.
8.5 Documents. Seller agrees to deliver to the Corporation at the
time of execution of this Agreement, and at any other time the Corporation may
request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or other form (and all copies of the foregoing), relating
to the business, operations, or affairs of the Corporation and any other
Confidential Information that Seller may then possess or have under his
control.
8.6 Non-Solicitation. For a period of one year following the Closing
Date, Seller agrees that he will not, directly or indirectly, either for
himself or any other Person, (i) induce or attempt to induce any employee of
the Corporation to leave the employ of the Corporation, (ii) in any way
interfere with the relationship between the Corporation and an employee of the
Corporation, or (iii) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any employee of the Corporation.
8.7 Non-Competition. For a period of one year following the Closing
Date, Seller agrees that he will not, singly, jointly, or as a partner,
member, employee, agent, officer, director, stockholder (except as a holder of
not more than five percent (5 percent) of any class of the outstanding stock
of any company listed on a national securities exchange, or actively traded in
a national over-the-counter market), investor, consultant, independent
contractor, or joint venturer of any other Person, or in any other capacity,
directly, indirectly or beneficially, (i) own, manage, operate, join, control,
or participate in the ownership, management, operation or control of, or
permit the use of his name by, or work for, or provide consulting, financial
or other assistance to, or be connected in any manner with, any business
located in the continental United States that is engaged in providing long
distance telephone services through the use of prepaid calling cards or any
business that intends to engage in the same anywhere in the world, or (ii)
induce or attempt to induce any Person which is a customer of the Corporation,
or which otherwise is a contracting party with the Corporation, as of the date
hereof, to terminate any written or oral agreement or understanding or
business relationship with the Corporation.
8.8 Remedies for Breach. If Seller breaches any covenant set forth
in this Article VIII, the Corporation will be entitled to the following
remedies: (i) damages from Seller; and (ii) in addition to its right to
damages and any other rights it may have, to obtain injunctive or other
equitable relief to restrain any breach or threatened breach or otherwise
specifically enforce the provision of this Article VIII. Seller acknowledges
that the rights of the Corporation set forth in this Agreement are special,
unique and of extraordinary character, and that, in the event Seller violates
or fails or refuses to perform any covenant set forth in this Agreement, then
the Corporation may be without adequate remedy at law. Seller therefore
agrees that if he violates or fails and refuses to perform any covenant or
agreement made in this Agreement, then the Corporation may, in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief.
ARTICLE IX
TAWFIK'S AGREEMENT NOT TO COMPETE,
SOLICIT, OR DISCLOSE CERTAIN INFORMATION
Any and all references to the Corporation in this Article IX shall be
deemed to include the Corporation and, where applicable, Tempus.
9.1 Confidential Information. As a director, officer and shareholder
of the Corporation, Tawfik acknowledges that he has occupied a position of
trust and confidence with the Corporation prior to the date hereof and has
become familiar with the Confidential Information of the Corporation.
9.2 Reasonable and Necessary. Tawfik acknowledges that the
provisions of this Article IX are reasonable and necessary to protect and
preserve the Corporation's business and that the Corporation would be
irreparably damaged if Tawfik were to breach the any of the covenants set
forth in this Article IX.
9.3 Confidential Information Is Property of the Corporation. Tawfik
acknowledges and agrees that all the Confidential Information known or
obtained by Tawfik, whether before or after the date hereof, is the property
of the Corporation.
9.4 Nondisclosure. Tawfik agrees that he will not, at any time,
disclose to any unauthorized person or use for his own account or for the
benefit of any third party any of the Confidential Information, whether Tawfik
has such information in his memory or it is embodied in writing or other
physical form, without the Corporation's prior written consent, unless, and
only to the extent that, the Confidential Information is or becomes generally
known to, and available for, use by the public other than as a result of
Tawfik's disclosure of such Confidential Information or the disclosure of such
Confidential Information by any other Person bound by a duty of nondisclosure
to the Corporation.
9.5 Documents. Tawfik agrees to deliver to the Corporation at the
time of execution of this Agreement, and at any other time the Corporation may
request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or other form (and all copies of the foregoing), relating
to the business, operations, or affairs of the Corporation and any other
Confidential Information that Tawfik may then possess or have under his
control.
<PAGE>
<PAGE>
9.6 Non-Solicitation. Tawfik agrees that he will not, directly or
indirectly, either for himself or any other Person, (i) induce or attempt to
induce any employee of the Corporation to leave the employ of the Corporation,
(ii) in any way interfere with the relationship between the Corporation and an
employee of the Corporation, or (iii) employ, or otherwise engage as an
employee, independent contractor, or otherwise, any employee of the
Corporation.
9.7 Non-Competition. Tawfik agrees that he will not, singly,
jointly, or as a partner, member, employee, agent, officer, director,
stockholder (except as a holder of not more than five percent (5 percent) of
any class of the outstanding stock of any company listed on a national
securities exchange, or actively traded in a national over-the-counter
market), investor, consultant, independent contractor, or joint venturer of
any other Person, or in any other capacity, directly, indirectly or
beneficially, (i) own, manage, operate, join, control, or participate in the
ownership, management, operation or control of, or permit the use of his name
by, or work for, or provide consulting, financial or other assistance to, or
be connected in any manner with, any business engaged in providing long
distance telephone services through the use of prepaid calling cards or any
business that intends to engage in the same anywhere in the world, or (ii)
induce or attempt to induce any Person which is a customer of the Corporation,
or which otherwise is a contracting party with the Corporation, as of the date
hereof, to terminate any written or oral agreement or understanding or
business relationship with the Corporation.
9.8 Remedies for Breach. If Tawfik breaches any covenant set forth
in this Article IX, the Corporation will be entitled to the following
remedies: (i) damages from Tawfik; and (ii) in addition to its right to
damages and any other rights it may have, to obtain injunctive or other
equitable relief to restrain any breach or threatened breach or otherwise
specifically enforce the provision of this Article IX. Tawfik acknowledges
that the rights of the Corporation set forth in this Agreement are special,
unique and of extraordinary character, and that, in the event Tawfik violates
or fails or refuses to perform any covenant set forth in this Agreement, then
the Corporation may be without adequate remedy at law. Tawfik therefore
agrees that if he violates or fails and refuses to perform any covenant or
agreement made in this Agreement, then the Corporation may, in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief.
9.9 Term. The term of this Article IX shall commence on the Closing
Date and shall continue until the earlier of: (i) three months from the date
that Tawfik ceases to be an employee, officer and director of the Corporation
or (ii) the date that the Note is paid (or prepaid) in full.
9.10 Third Party Beneficiary. The Corporation and Tawfik acknowledge
and agree that Seller, as holder of the Note, is a third party beneficiary of
the provisions of this Article IX.<PAGE>
<PAGE>
ARTICLE X
DISMISSAL OF PENDING LITIGATION; RELEASES
The provisions of this Article X shall be effective as of the Closing
Date (if Closing occurs):
10.1 Seller Release and Waiver. Seller, on behalf of himself and his
respective predecessors, successors, affiliates, assigns, agents, attorneys,
heirs, executors, beneficiaries, representatives and any other person or
entity who has or could potentially derive rights through him (individually
and collectively, "Seller Releasors"), hereby irrevocably and unconditionally
releases, waives, acquits and forever discharges, and agrees to indemnify,
defend and hold harmless, (i) the Corporation and its respective affiliates,
predecessors, successors, assigns, officers, employees, directors,
shareholders, agents, representatives and attorneys, whether past, present or
future, (ii) Tawfik and his Successors, (iii) Vita and his Successors and (iv)
Barley and his Successors (individually and collectively, the "Seller
Releasees"), from and against any and all claims, demand, costs, contracts,
liabilities, objections, actions and causes of action of any nature, type or
description, whether at law or in equity, in contract or tort, or otherwise,
known or unknown, or suspected or unsuspected (collectively, "Claims") which
arise in whole or in part, directly or indirectly, contemporaneously with or
prior to the Closing, that any of the Seller Releasors ever had or now has or
may claim to have or hereafter has or claim to have against any of the Seller
Releasees pertaining to any matter or event occurring contemporaneously with
or prior to Closing, including but not limited to the ownership, management or
operation of the Corporation or to salaries or benefits owing to Seller;
provided, however, that this Section 10.1 shall not apply to any Claims
against the Corporation arising from breaches by the Corporation or the
Management Shareholders under this Agreement, the Pledge Agreement, the Escrow
Agreement or the Note (the "Transaction Documents").
For purposes of this Article X, "Successors" shall mean predecessors,
successors, affiliates, assigns, agents, attorneys, heirs, executors,
beneficiaries, and representatives of such person.
10.2 Tawfik Release and Waiver. Tawfik, on behalf of himself and his
respective predecessors, successors, affiliates, assigns, agents, attorneys,
heirs, executors, beneficiaries, representatives and any other person or
entity who has or could potentially derive rights through him (individually
and collectively, "Tawfik Releasors"), hereby irrevocably and unconditionally
releases, waives, acquits and forever discharges, and agrees to indemnify,
defend and hold harmless, Seller and his Successors (individually and
collectively, the "Tawfik Releasees"), from and against any and all Claims
which arise in whole or in part, directly or indirectly, contemporaneously
with or prior to the Closing, that any of the Tawfik Releasors ever had or now
has or may claim to have or hereafter has of claims to have against any of the
Tawfik Releasees pertaining to any matter or event occurring contemporaneously
with or prior to Closing; provided, however, that this Section 10.2 shall not
<PAGE>
<PAGE>
apply to any Claims against Seller arising from breaches by Seller under the
Transaction Documents.
10.3 Vita Release and Waiver. Vita, on behalf of himself and his
respective predecessors, successors, affiliates, assigns, agents, attorneys,
heirs, executors, beneficiaries, representatives and any other person or
entity who has or could potentially derive rights through him (individually
and collectively, "Vita Releasors"), hereby irrevocably and unconditionally
releases, waives, acquits and forever discharges, and agrees to indemnify,
defend and hold harmless, Seller and his Successors (individually and
collectively, the "Vita Releasees"), from and against any and all Claims which
arise in whole or in part, directly or indirectly, contemporaneously with or
prior to the Closing, that any of the Vita Releasors ever had or now has or
may claim to have or hereafter has of claims to have against any of the Vita
Releasees pertaining to any matter or event occurring contemporaneously with
or prior to Closing; provided, however, that this Section 10.3 shall not apply
to any Claims against Seller arising from breaches by the Seller under the
Transaction Documents.
10.4 Barley Release and Waiver. Barley, on behalf of himself and his
respective predecessors, successors, affiliates, assigns, agents, attorneys,
heirs, executors, beneficiaries, representatives and any other person or
entity who has or could potentially derive rights through him (individually
and collectively, "Barley Releasors"), hereby irrevocably and unconditionally
releases, waives, acquits and forever discharges, and agrees to indemnify,
defend and hold harmless, Seller and his Successors (individually and
collectively, the "Barley Releasees"), from and against any and all Claims
which arise in whole or in part, directly or indirectly, contemporaneously
with or prior to the Closing, that any of the Barley Releasors ever had or now
has or may claim to have or hereafter has of claims to have against any of the
Barley Releasees pertaining to any matter or event occurring contemporaneously
with or prior to Closing; provided, however, that this Section 10.4 shall not
apply to any Claims against Seller arising from breaches by the Seller under
the Transaction Documents.
10.5 Corporation Release and Waiver. The Corporation, on behalf of
itself and its respective affiliates, predecessors, successors, assigns,
officers, employees, directors, agents, representatives and attorneys, whether
past, present or future (individually and collectively, "Corporation
Releasors"), hereby irrevocably and unconditionally releases, waives, acquits
and forever discharges, and agrees to indemnify, defend and hold harmless
Seller and his Successors (individually and collectively, the "Corporation
Releasees"), from and against any and all Claims which arise in whole or in
part, directly or indirectly, contemporaneously with or prior to the Closing,
that any of the Corporation Releasors ever had or now has or may claim to have
or hereafter has of claims to have against any of the Corporation Releasees
pertaining to any matter or event occurring contemporaneously with or prior to
Closing; provided, however, that this Section 10.5 shall not apply to any
Claims against Seller arising from breaches by the Seller under the
Transaction Documents.<PAGE>
<PAGE>
10.6 Dismissal of Pending Litigation.
(a) Vita. Vita hereby agrees to take all necessary actions to
dismiss with prejudice that certain action commenced by Vita against the
Corporation, Tawfik and Seller, docket No. ___________ within five (5) days
after the Closing Date.
(b) Barley. Barley hereby agrees to take all necessary actions
to dismiss with prejudice that certain action commenced by Barley against the
Corporation, Tawfik and Seller, docket No. ___________ within five (5) days
after the Closing Date.
10.7 Management Shareholder Subordination. Each of the Management
Shareholders agrees that, so long as the Note is outstanding, any indebtedness
or other money obligation of the Corporation owing to such Management
Shareholders (other than monies due with respect to salaries and bonuses not
to exceed in the aggregate one million dollars per year and commissions)
shall, by virtue hereof, be subordinated in all respects to the Note;
provided, however, that Tawfik shall be permitted to make a non-subordinated
loan to the Corporation, not to exceed five million dollars ($5,000,000), for
the purpose of consummating the transactions set forth in this Agreement. Any
grant of a security interest that is inconsistent with this Section 10.7 shall
be deemed void ab initio.
ARTICLE XI
MISCELLANEOUS
11.1 Waivers. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing.
11.2 [Intentionally omitted.]
11.3 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed
or not.
11.4 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
<PAGE>
<PAGE>
11.5 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute
a part of and shall not be utilized in interpreting this Agreement.
11.6 Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service, charges prepaid, to the
following addresses, or such other address as any party hereto designates by
written notice to the Corporation, and shall be deemed to have been given upon
delivery, if delivered personally, five days after mailing, if mailed, or one
business day after delivery to the courier, if delivered by overnight courier
service:
If to the Corporation to:
PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Attention: Samer Tawfik
with a copy (which shall not constitute notice) to:
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, DC 20007
Attention: John J. Klusaritz, Esq.
If to Seller, to:
Thomas Hickey
[Address]
with a copy (which shall not constitute notice) to:
Parker Duryee Rusoff & Haft P.C.
529 Fifth Avenue
New York, NY 10017
Attention: Craig S. Libson, Esq
If to Tawfik, to:
Samer Tawfik
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
<PAGE>
<PAGE>
with a copy (which shall not constitute notice) to:
[name and address, if any]
If to Vita to:
Peter Vita
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
with a copy (which shall not constitute notice) to:
[name and address, if any]
If to Barely, to:
Douglas Barley
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
with a copy (which shall not constitute notice) to:
[name and address, if any]
11.7 Governing Law. All questions concerning the construction,
validity and interpretation of, and the performance of the obligations imposed
by, this Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and wholly to be
performed in that state.
11.8 Additional Actions and Documents. Each of the parties hereto
hereby agrees to take or cause to be taken such further actions, to execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments, and to use best reasonable efforts to obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement, whether
before, at or after the Closing of the transactions contemplated by this
Agreement.
11.9 Breach of Covenant. Each of the parties to this Agreement will
be entitled to enforce its rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in its favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
<PAGE>
<PAGE>
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
The rights and remedies specified in any provision of this Agreement are
in addition to all other rights and remedies a party may have under any other
agreement or applicable law, including any right to equitable relief and any
right to sue for damages as a result of a breach of this Agreement (whether or
not it elects to terminate this Agreement), and all such rights and remedies
are cumulative. Without limiting the foregoing, no exercise of a remedy shall
be deemed an election excluding any other remedy (any such claim by any other
party being hereby waived). A party who prevails in enforcing rights or
remedies under this Agreement shall (in addition to any other relief
hereunder) be paid by the other party all costs, fees and expenses, including
reasonable attorneys' fees, incurred by the prevailing party in enforcing such
rights and remedies.
11.10 Final Agreement. This Agreement constitutes the final
agreement of the parties concerning the matters referred to herein, and
supersedes all prior oral and written agreements and understandings.
11.11 Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
11.12 Legend. Until (a) the securities represented by the
certificate to be delivered to Seller pursuant to Section 2.2 of this
Agreement are effectively registered under the Securities Act, and applicable
state securities laws, or (b) the holder of such securities delivers to the
Corporation a written opinion of counsel to such holder reasonably acceptable
to the Corporation to the effect that such legend is no longer necessary under
the Securities Act and such state securities laws, the Corporation will cause
each certificate representing Common Shares to be stamped or otherwise
imprinted with a legend to substantially the following effect:<PAGE>
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE, AND THUS MAY NOT BE SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SO
REGISTERED OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE
UNDER SUCH ACT AND UNDER ANY SUCH APPLICABLE STATE SECURITIES LAWS."
11.13 Termination. If each of the conditions set forth in Articles
III and IV have not been satisfied or waived (by the person entitled
thereunder to make such waivers), by 5:00 p.m. New York City time on April 1,
1997, for whatever reason, the Agreement shall terminate.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement was executed and delivered or caused to
be executed and delivered in the name and on behalf of the parties hereto as
of the date first set forth above.
PHONETIME, INC., a New York corporation
WITNESS:
- --------------------- ---------------------------------------
Name: By:
--------------------------------
Title:
----------------------------
WITNESS:
- ----------------------- -----------------------------------
Name: Thomas Hickey
Solely With Respect to Article IX and Article X and XI:
WITNESS:
- ----------------------- -----------------------------------
Name: Samer Tawfik
Solely With Respect to Article X and XI:
WITNESS:
- ----------------------- -----------------------------------
Name: Peter Vita
Solely With Respect to Article X and XI:
WITNESS:
- ----------------------- -----------------------------------
Name: Douglas Barley<PAGE>
<PAGE>
EXHIBITS
A Form of Promissory Note
B Form of Escrow Agreement
C Form of Pledge Agreement
D Form of Co-Sale Agreement
E Form of Assignment Agreement
F Letter of Resignation of Thomas Hickey (for both Tempus and PTI)
G Organizational Documents of Tempus Worldwide Communications
H Current Balance Sheet of Tempus Showing all Outstanding
Liabilities
I Copy of Lease to which Thomas Hickey is personal guarantor<PAGE>
<PAGE>
Schedule 1
Number of Common Shares Number of Common Shares
Owned Beneficially and of Owned Beneficially and of
Name of Shareholder Record Prior Redemption Record After Redemption
- ------------------- ------------------------- ------------------------
Samer Tawfik 43-1/2 _______ 43-1/2 _______
Thomas Hickey 39 _______ 3-4/19 _______
Peter Vita 12-1/2 _______ 12-1/2 _______
Douglas Barley 5 _______ 5 _______
</TEXT
AGREEMENT
This Agreement is entered into as of November 7, 1997 by and among PT-1
Communications, Inc., a New York Corporation (the "Company" ), Thomas Hickey
("Hickey"), Thomas Hickey Trust U/A dated September 9, 1997 ("Hickey Trust"),
Samer Tawfik ("Tawfik"), Peter Vita ("Vita"), Douglas Barley ("Barley"),
Joseph Pannullo ("Pannullo") and John Klusaritz ("Klusaritz").
RECITALS
A. The Company, Hickey, Tawfik, Vita and Barley are parties to that
certain PhoneTime Inc. Share Purchase Agreement (the "Share Purchase
Agreement") dated as of March 26, 1997.
B. Section 8.7 of the Share Purchase Agreement is a "non-competition"
provision that restricts the ability of Hickey to engage in certain activities
in competition with the Company for a period commencing on March 26, 1997 and
terminating on March 26, 1998 (the "Non-Compete Term").
C. The Company desires to (a) issue additional shares of common stock
of the Company, no par value (the "Common Stock") to Hickey and (b) cause the
delivery of certain releases to Hickey and the Hickey Trust in consideration
of (i) the execution of a new Non-Competition Agreement providing for a term
of three (3) years from March 26, 1998 through March 26, 2001, (ii) the
execution and delivery of certain releases by Hickey and the Hickey Trust and
of (iii) certain additional agreements and undertakings by Hickey and the
Hickey Trust, and for other good and valuable consideration, all on the terms
and subject to the conditions set forth herein.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties, the parties agree as follows:
1. Agreements Regarding Ownership of Common Stock.
The parties hereto hereby acknowledge and agree that, as of the date of
this Agreement (the "Effective Date") and without giving effect to the filing
of the Company's Restated Certificate of Incorporation (the "Restated
Certificate"), which was approved by all of the Company's shareholders on
October 20, 1997:
(a) the Company's authorized capital stock consists of 200 shares of
Common Stock, of which 68.4465 are issued and outstanding and held of
record as set forth under the heading "Initial Shares of Common Stock" in
<PAGE>
<PAGE>
the table on Exhibit A attached hereto and incorporated herein by
reference;
(b) all issued and outstanding shares of Common Stock have been duly
and validly authorized and issued;
(c) the Company has duly and validly granted certain options to
certain of its employees and has duly and validly issued certain warrants
to certain third parties, a complete list of which is attached hereto as
Exhibit E; and
(d) no shareholder has any preemptive or other right (or any such
existing preemptive or other right is hereby waived) to acquire any
shares of Common Stock (or any options, warrants, or other instruments
that are convertible into or exchangeable for such shares) as a result of
the issuance of such shares, options or warrants.
2. Acknowledgments Regarding Common Stock.
Hickey and the Hickey Trust acknowledge that: (a) except as expressly
provided in Section 3 below, they have no other shares of Common Stock or any
options, warrants, rights or instruments convertible into or exchangeable for
any Common Stock or other equity interest in the Company except as set forth
on Exhibit A; and (b) they have no preemptive, anti-dilutive, or other right
to acquire any shares of Common Stock (or any options, warrants, or other
instruments that are convertible into or exchangeable for such shares) as a
result of (i) the issuance of the shares, options or warrants set forth in
Exhibits A and E, or (ii) any other shares, options, warrants or other equity
interests in the Company, in each case outstanding as of the date hereof.
3. Issuance of Common Stock to Hickey.
Concurrently with the execution of this Agreement, the Company shall
issue 0.6914 shares of Common Stock to Hickey and shall deliver a stock
certificate to Hickey reflecting such issuance. As a result of such issuance,
the parties hereto hereby agree that the issued and outstanding shares of
Common Stock of the Company shall be owned beneficially and of record as set
forth under the heading "Post Issuance" in the table on Exhibit A attached
hereto and incorporated herein by reference.
4. Releases.
Concurrently with the execution of this Agreement each of the parties
shall execute and deliver the releases attached hereto as Exhibit B which are
incorporated herein by reference and shall for all purposes be deemed to
constitute part of this Agreement.
<PAGE>
<PAGE>
5. Non-Competition Agreement.
Hickey hereby agrees to execute and deliver a Non-Competition Agreement
("Non-Competition Agreement") for a period of three (3) years from March 26,
1998 until March 26, 2001, and the Company shall, in order to effect such Non-
Competition Agreement, execute and deliver the Non-Competition Agreement in
the form attached hereto as Exhibit C which is incorporated herein by
reference and shall for all purposes be deemed to constitute part of this
Agreement.
6. Unanimous Consent of Shareholders To Action in Lieu of a Meeting.
Concurrently with the execution of this Agreement, Hickey and the Hickey
Trust, Tawfik, Vita, Barley, Pannullo and Klusaritz shall execute and deliver
the Unanimous Consent of Shareholders To Action in Lieu of a Meeting attached
hereto as Exhibit D which is incorporated herein by reference and shall for
all purposes be deemed to constitute part of this Agreement, pursuant to which
such parties, inter alia, authorize and ratify certain actions by the Company,
its Board of Directors and its officers, including the granting of certain
options and the issuance of certain warrants to acquire Common Stock, in
addition to waiving any and all preemptive rights any such party might have
with respect to the granting or issuance of such options and warrants.
7. Covenants.
Hickey and the Hickey Trust agree and covenant on behalf of themselves
and any successor, assignee or beneficiary of any of the shares of Common
Stock owned by any of them as of the date of this Agreement and as a result of
the consummation of the transactions contemplated hereby to use their best
efforts to cooperate with the Company with respect to the Company's efforts to
obtain any pending or future public or private financing, merger, acquisition,
sale or other corporate reorganization (a "Financing Transaction"). Without
limiting the generality of the foregoing, Hickey and the Hickey Trust agree to
(i) make themselves and their counsel available in person upon reasonable
prior notice for interviews, (ii) execute any requested underwriting or
similar agreements containing customary representations, warranties and
covenants, such execution to occur no later than five (5) business days after
Hickey and/or the Hickey Trust have been provided with any such agreement,
(iii) execute any "lockup" or similar agreement limiting Hickey's and/or the
Hickey Trust's ability to sell or otherwise transfer or dispose of any of
their shares of Common Stock following the effective date of a Financing
Transaction for a period of 180 days thereafter (or such other shorter period
as may be specified with relation to a particular Financing Transaction), such
execution to occur no later than five (5) business days after Hickey and/or
the Hickey Trust have been provided with any such agreement, provided such
holdback is requested of all shareholders holding the same number of shares as
Hickey and/or the Hickey Trust, and (iv) execute and deliver such other
certificates, agreements and documents and undertake such other acts and deeds
as may be reasonably requested by the Company in connection with a Financing
Transaction.<PAGE>
<PAGE>
8. Remedies.
(a) Each of the parties to this Agreement shall be entitled to
enforce any rights under this Agreement to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights at
law or equity existing in his or its favor. The parties hereto agree and
acknowledge that money damages will not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in his or its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement and any opposing party waives
any right to argue or assert lack of irreparable harm.
(b) The rights and remedies specified in any provision of this
Agreement are in addition to all other rights and remedies a party may have
available under any other agreement or applicable law, including any right to
equitable relief and any right to sue for damages as a result of a breach of
this Agreement, and all such rights and remedies are cumulative. Without
limiting the foregoing, no exercise of a remedy shall be deemed an election
excluding any other remedy (any such claim by any other party being hereby
waived). A party who prevails in enforcing rights or remedies under this
Agreement shall (in addition to any other relief hereunder) be paid by the
other party all costs, fees and expenses, including attorneys' fees incurred
by the prevailing party in enforcing such rights and remedies.
(c) Any breach of this Agreement by any party hereto, or any breach
of the Non-Competition Agreement by Hickey, shall be deemed to be a breach
under the Share Purchase Agreement, and in such event, in addition to the
rights and remedies set forth in this Agreement, the non-breaching parties
shall be entitled to exercise any and all rights and remedies set forth in the
Share Purchase Agreement (including the right to set-off against any payments
made pursuant to that certain Secured Promissory Note by the Company payable
to the order of Hickey dated March 26, 1997). In addition, each party to this
Agreement agrees to indemnify and hold harmless every other party to this
Agreement for any claims, causes of action, actions, suits, judgments,
liabilities, losses, damages, obligations, costs, and expenses (including,
without limitation, attorneys' fees and court costs) suffered or incurred by
every other party to this Agreement as a result of a party's breach of this
Agreement.
9. Governing Law.
All questions concerning the construction, validity and interpretation
of, and the performance of the obligations imposed by this Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and wholly to be performed in that state.
<PAGE>
<PAGE>
10. Final Agreement.
This Agreement (together with the Exhibits attached hereto) and the Share
Purchase Agreement constitute the final agreements of the parties concerning
the matters referred to herein, and supersede all prior oral and written
agreements and understandings.
11. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, and such
counterparts together shall constitute one instrument.
12. Supersedure.
This Agreement supersedes in its entirety that certain letter agreement
dated October 30, 1997, from Craig S. Libson, Esq. of Parker Duryee Rosoff &
Haft to Michael J. Chepiga, Esq. of Simpson Thacher & Bartlett.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement was executed and delivered or caused
to be executed and delivered in the name of and on behalf of the parties
hereto as of the date first set forth above.
PT-1 COMMUNICATIONS, INC.
By:
----------------------------------
Name:
--------------------------------
Its:
--------------------------------
--------------------------------
Thomas Hickey
--------------------------------
Samer Tawfik
--------------------------------
Peter Vita
--------------------------------
Douglas Barley
--------------------------------
Thomas Hickey Trust U/A
dated September 9, 1997
--------------------------------
Joseph Pannullo
--------------------------------
John Klusaritz<PAGE>
<PAGE>
EXHIBIT A
Shareholder Initial Shares Post
Shares of Received Issuance
Common Stock
- ----------- -------------- ----------- ---------
Mr. Samer Tawfik 43.5000 0.0000 43.5000
Mr. Peter Vita 12.5000 0.0000 12.5000
Mr. Douglas Barley 5.0000 0.0000 5.0000
Mr. Joseph Pannullo 1.4980 0.0000 1.4980
Mr. John Klusaritz 2.7380 0.0000 2.7380
Mr. Thomas Hickey 1.2105 0.6914 1.9019
Thomas Hickey Trust U/A
dated September 9, 1997 2.0000 0.0000 2.0000
Total 68.4465 0.6914 69.1379<PAGE>
<PAGE>
EXHIBIT B
RELEASE
This release (the "Release") is given as of November 7, 1997 by PT-1
Communications, Inc., a New York Corporation, formerly known as PhoneTime Inc.
(collectively with its officers and directors hereinafter the "Company"),
Samer Tawfik ("Tawfik"), Peter Vita ("Vita"), Douglas Barley ("Barley"),
Joseph Pannullo ("Pannullo") and John Klusaritz ("Klusaritz") (collectively
the "Releasing Parties") in exchange for valuable consideration, the adequacy
and receipt of which are hereby acknowledged.
The Releasing Parties hereby and forever remit, release, exculpate,
acquit, and discharge Thomas Hickey ("Hickey") and the Thomas Hickey Trust U/A
dated September 9, 1997 ("Hickey Trust"), and their present and former
officers, directors, members, partners, employees, shareholders, agents,
servants, outside consultants, advisers, bankers, accountants, investment
bankers, attorneys, subsidiaries, affiliates, successors in interest,
trustees, heirs, beneficiaries, executors, administrators, representatives,
assigns, parents, divisions, and predecessors and successors of any kind
(collectively the "Releasees") from any and all claims, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
judgments, variances, trespasses, demands, liabilities, losses, damages,
obligations, promises, rights, costs, expenses, compensations, suits, and
actions, known or unknown, fixed or contingent, suspected or unsuspected, of
every kind and nature whatsoever, in law or in equity, in any capacity in any
court or tribunal, from the beginning of the world to the date hereof
(collectively "Claims"), including without limitation Claims arising out of,
in connection with, or in any way relating to, the business relationship
between Hickey and/or the Hickey Trust and the Releasees, including, but not
limited to, the PhoneTime Inc. Share Purchase Agreement executed on March 26,
1997 by the Company, Hickey, Tawfik, Vita, and Barley (the "Share Purchase
Agreement"); Hickey's and/or the Hickey Trust's ownership interest in the
securities of the Company, and all disclosures, negotiations, transactions,
discussions, meetings, or documents related thereto; the common stock, options
and warrants of the Company; any disclosures regarding the valuation of the
Company or its business or property; any and all employment agreements,
financings, or contracts entered into by the Company; the process of
underwriting the common stock for the contemplated initial public offering of
the Company (the "IPO"); and all transactions, facts, occurrences and
negotiations related to the foregoing (collectively, the "Released Claims").
The Releasing Parties execute this Release and all components of this
document for themselves and on behalf of their successors, family members,
heirs, and assigns, and, in so doing, expressly acknowledge, represent,
affirm, concede, agree, and warrant that:
<PAGE>
<PAGE>
(1) Facts with respect to which this Release is executed may turn out
to be other than or different from the facts now known to or
believed by the undersigned, and the undersigned, therefore,
expressly assume the risk of the facts turning out to be
different and agree that this Release shall be in all respects
effective and not subject to modification or termination by
reason of any different facts.
(2) The undersigned expressly waive any and all rights the
undersigned may have under the provisions of any statute or any
principle of the common law to the effect that the Release does
not extend to claims which the Releasing Parties do not know or
suspect to exist in their favor at the time of executing the
Release. The Releasing Parties agree that subsequent changes in
either statutory or common law shall not alter the provisions of
this Release.
(3) The undersigned have consulted with counsel of their choosing and
their own financial advisers to the extent that they deem
necessary and have had both time and opportunity to consult with
any other kind of expert or adviser they may deem necessary with
regard to the terms of this Release and the underlying facts
relating to the IPO and the Share Purchase Agreement.
(4) In the event that legal action is brought to enforce, defend, or
construe any of the provisions of this Release, the party whose
position does not prevail will indemnify the other party or
parties for all expenses and costs, including, but not limited
to, attorneys' fees and costs, court costs, and expert fees and
costs.
(5) The Releasing Parties have no reservations, objections,
complaints or claims relating to the Share Purchase Agreement or
any disclosures, negotiations, transactions, discussions,
meetings, or documents related thereto, and the Releasing Parties
hereby irrevocably reaffirm the Share Purchase Agreement. The
Releasing Parties have consulted with their own attorneys and
other financial advisers, but the Releasing Parties have not
relied on the books, records, and IPO documents in reaffirming
the Share Purchase Agreement.
(6) The Releasing Parties understand all terms of the Release and
have executed the Release voluntarily. The Releasing Parties
have no claims of conflict of interest, nondisclosure, fraud,
fraud in the inducement, or coercion whatsoever in connection
with (i) this Release, (ii) the Share Purchase Agreement, (iii)
the Agreement dated the date hereof among Hickey, Hickey Trust,
Tawfik, Vita, Barley, Pannullo, and Klusaritz, (iv) the Non-
Competition Agreement dated the date hereof, or (v) the Unanimous
Consent of Shareholders to Action in Lieu of a Meeting dated the
date hereof.<PAGE>
<PAGE>
(7) The Releasing Parties agree that they will not bring, commence,
institute, maintain, prosecute, or voluntarily aid any action at
law, claim in arbitration, or proceeding in equity, or otherwise
prosecute or sue any of the Releasees either affirmatively or by
way of cross-complaint, defense, or counterclaim or by any other
way or manner at all, in any court or other legal forum, as to
any of the Released Claims.
(8) Notwithstanding anything to the contrary contained in this
Release, this Release shall not operate, or be deemed, to release
or relieve any party from any rights and obligations continuing
after the date hereof under (a) the Share Purchase Agreement or
under (i) the Note, (ii) the Escrow Agreement, (iii) the Pledge
Agreement, or (iv) the Co-Sale Agreement, each as defined in and
delivered pursuant to the Share Purchase Agreement, or (b) the
Agreement dated the date hereof among Hickey, Hickey Trust,
Tawfik, Vita, Barley, Pannullo, and Klusaritz, or (c) the Non-
Competition Agreement dated the date hereof, and this Release
shall not apply to any breach arising after the date hereof of
any of the foregoing.
(9) This Release constitutes the entire agreement concerning the
matters referred to herein.
(10) If any part of this Release shall be held to be invalid or
unenforceable, such findings shall not affect the validity or
enforceability of the balance of this Release.
(11) This Release shall not be altered or modified in any way except
by written consent of the Releasing Parties and the Releasees or
of their authorized representatives.
(12) This Release shall be governed by and interpreted in accordance
with the substantive laws of the State of New York without regard
to its conflict of laws provisions.
[SIGNATURE PAGE FOLLOWS.]<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Release was executed and delivered or caused to
be executed and delivered in the name of and on behalf of the parties hereto
as of the date first set forth above.
PT-1 COMMUNICATIONS, INC.
By:
----------------------------------
Name:
--------------------------------
Its:
--------------------------------
--------------------------------
Samer Tawfik
--------------------------------
Peter Vita
--------------------------------
Douglas Barley
--------------------------------
Joseph Pannullo
--------------------------------
John Klusaritz<PAGE>
<PAGE>
EXHIBIT C
NON-COMPETITION AGREEMENT
This Non-Competition Agreement ("Non-Competition Agreement") is entered
into as of November 7, 1997 by and between PT-1 Communications, Inc., formerly
known as PhoneTime, Inc., a New York Corporation (the "Corporation"), and
Thomas Hickey (an individual residing at 613 South Beach Road, Jupiter Island,
Florida, 33468).
RECITALS
Concurrently with the execution of this Non-Competition Agreement, the
parties to this Non-Competition Agreement and certain other parties are
entering into that certain agreement dated as of November 7, 1997 titled
Agreement (and to which this Non-Competition Agreement is attached as Exhibit
C and which provides for the execution of this Non-Competition Agreement).
AGREEMENTS
NOW, THEREFORE, for and in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties, the parties agree as follows:
1. For a period of three years commencing on March 26, 1998 and
ending on March 26, 2001, Thomas Hickey agrees that he will not, singly,
jointly, or as a partner, member, employee, agent, officer, director,
stockholder (except as a holder of not more than five percent (5 percent) of
any class of the outstanding stock of any company listed on a national
securities exchange, or actively traded in a national over-the-counter
market), investor, consultant, independent contractor, or joint venturer of
any other person, corporation, partnership, association, trust, joint venture,
joint stock company, or other unincorporated entity (each, a "Person"), or in
any other capacity, directly, indirectly or beneficially, (i) own, manage,
operate, join, control, or participate in the ownership, management, operation
or control of, or permit the use of his name by, or work for, or provide
consulting, financial, distribution services, other information, or assistance
to, or be connected in any manner with, any business located in the
continental United States that is engaged in providing long distance telephone
services through the use of prepaid calling cards or any business that intends
to engage in the same anywhere in the world, or (ii) induce or attempt to
induce any Person which is a customer of the Company, or which otherwise is a
contracting party with the Company, as of the date hereof, to terminate any
written or oral agreement or understanding or business relationship with the
Company.
2. Thomas Hickey acknowledges and agrees that any breach of this Non-
Competition Agreement by him shall be deemed to be a breach by him under that
certain PhoneTime Inc. Share Purchase Agreement dated as of March 26, 1997
(the "Share Purchase Agreement"), and that in such event, in addition to the
rights and remedies set forth in this Non-Competition Agreement, the non-<PAGE>
<PAGE>
breaching parties shall be entitled to exercise any and all rights and
remedies set forth in the Share Purchase Agreement (including the right to
set-off against any payments made pursuant to that certain Secured Promissory
Note by the Company payable to the order of Thomas Hickey dated March 26,
1997).
3. All questions concerning the construction, validity and
interpretation of, and the performance of the obligations imposed by this Non-
Competition Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and wholly to
be performed in that state.
4. This Non-Competition Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument.
[SIGNATURE PAGE FOLLOWS.]<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Non-Competition Agreement was executed and
delivered or caused to be executed and delivered in the name of and on behalf
of the parties hereto as of the date first set forth above.
PT-1 COMMUNICATIONS, INC.
By:
----------------------------------
Name:
--------------------------------
Its:
--------------------------------
--------------------------------
Thomas Hickey
<PAGE>
<PAGE>
EXHIBIT D
PT-1 COMMUNICATIONS, INC.
(A New York Corporation)
UNANIMOUS CONSENT OF SHAREHOLDERS
TO ACTION
IN LIEU OF A MEETING
The undersigned, constituting all of the shareholders (the
"Shareholders") of PT-1 Communications, Inc., a New York corporation (the
"Company"), hereby waive all notice of time, place or purpose of a meeting and
consent to, approve and adopt the following resolutions pursuant to Section
615 of the Business Corporation Law of the State of New York:
I. RATIFICATION OF CERTAIN ACTIONS
A. GRANTING OF OPTIONS
WHEREAS, on May 9, 1997, in connection with his employment by the
Company, options to acquire 1.498 shares of Common Stock of the Company were
granted to Joseph Pannullo, at an exercise price of $0.01, which options were
exercised by Mr. Pannullo on May 20, 1997; and
WHEREAS, on May 26, 1997, in connection with his employment by the
Company, options to acquire 2.738 shares of Common Stock of the Company were
granted to John Klusaritz, at an aggregate exercise price of $3.57 million,
which options were exercised by Mr. Klusaritz on October 15, 1997; and
WHEREAS, the Company has granted options to certain other employees of
the Company as set forth on the attached Schedule A.
NOW, THEREFORE, BE IT:
RESOLVED, that the granting of such options, the reservation of all
shares of Common Stock necessary for the exercise of such options, all of the
terms and conditions of each of the aforementioned options, the issuance of
such shares upon the proper exercise of such options (subject to any
restrictions imposed by the New York Business Corporation Law, including,
without limitation, Section 505 thereof), and all actions taken by the
Company's officers in connection therewith, including without limitation the
execution and delivery of option agreements, are hereby approved, ratified and
confirmed, and each Shareholder hereby irrevocably waives any preemptive
right, right of participation, or right to prior notice of the granting of
such options.
<PAGE>
<PAGE>
B. ISSUANCE OF WARRANTS
WHEREAS, on June 29, 1997, the Company entered into an agreement (the "IX
Agreement") with InterExchange, Inc. ("IX"), pursuant to which IX agreed,
inter alia, to operate the Company's Debit Card Platform located in Edison,
New Jersey, activating PINs (at the direction of the Company), decrementing
Prepaid Card dollar balances and generating management reports and other
information; and
WHEREAS, in connection with the execution of the IX Agreement, the
Company granted warrants for the purchase of shares of Common Stock to certain
employees of IX (collectively, the "IX Warrants") that are exercisable for
shares of Common Stock with a fair market value (as defined) equal to (i) $1.0
million, at an exercise price equal to $.01 and (ii) $2.0 million, at an
aggregate exercise price equal to $1.0 million (collectively, the "Warrant
Shares"); and
WHEREAS, IX Warrants with respect to 1/3 of the Warrant Shares vest and
become exercisable upon each of: (i) the earlier to occur of the closing of
the Offering (as defined in the IX Warrants) or March 31, 1998, (ii) January
l, 1999 and (iii) December l, 1999, in each case if and only if the IX
Agreement has not been terminated on or before such date (other than as a
result of a breach by the Company).
NOW, THEREFORE, BE IT:
RESOLVED, that the granting of the IX Warrants, the reservation of all
shares of Common Stock necessary for the exercise of such IX Warrants, the
issuance of such shares upon the proper exercise of the IX Warrants (subject
to any restrictions imposed by the New York Business Corporation Law), all of
the terms and conditions of the IX Warrants, and all actions taken by the
Company's officers in connection therewith, including without limitation the
execution and delivery of the IX Warrants, are hereby approved, ratified and
confirmed, and each Shareholder hereby irrevocably waives any preemptive
right, right of participation, or right to prior notice of the granting of the
IX Warrants.
II. GENERAL AUTHORIZATION RESOLUTIONS
RESOLVED, that in addition to the specific authorizations set forth in
any of the foregoing resolutions, the Company's officers be, and each of them
hereby is, authorized and directed in the name and on behalf of the Company to
take any and all actions and to execute and deliver from time to time any and
all instruments, requests, receipts, notes, applications, reports,
certificates and other documents as may be necessary or desirable in their
opinion, or in the opinion of any of them, to effectuate, consummate and
comply with the purposes and intent of any of the foregoing resolutions; and
<PAGE>
<PAGE>
RESOLVED, FURTHER, that whenever it is provided in the foregoing
resolutions that any person or persons may execute any document with such
changes as such person or persons deems necessary or appropriate, the
execution of such document shall be deemed conclusive evidence that the
execution is deemed by such person or persons to be necessary or appropriate;
and
RESOLVED, FURTHER, that any and all actions and all certificates,
agreements and documents executed by any member of the Board or any officer of
the Company, or by any person or persons designated and authorized to act by
any officer or a member of the Board, in the name of or on behalf of the
Company, in connection with the aforesaid matters or otherwise prior to the
date of this Consent are hereby approved, affirmed, ratified and confirmed as
the acts of the Company.
[SIGNATURE PAGE FOLLOWS.]<PAGE>
<PAGE>
This Consent shall be filed with the minutes of the Company and may be
executed in one or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.
Dated as of ____________________, 1997.
SHAREHOLDERS:
-------------------------------
Samer Tawfik
-------------------------------
Thomas Hickey
-------------------------------
Peter Vita
-------------------------------
Douglas Barley
-------------------------------
Joseph Pannullo
--------------------------------
John Klusaritz
---------------------------------
Thomas Hickey Trust U/A
dated September 9, 1997
PHONETIME, INC.
OPTION AGREEMENT
Date of Grant: May 9, 1997
This Agreement (the "Agreement") dated as of the date of grant first
stated above (the "Date of Grant"), is entered into between PhoneTime, Inc., a
New York corporation ("PTI"), and Joseph Pannullo (the "Optionee"), who is an
employee of PTI.
WHEREAS, the Compensation Committee appointed by the Board of Directors
of PTI (the "Committee") on May 9, 1997, adopted, and the Shareholders
subsequently approved, the PhoneTime, Inc. Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of stock options by PTI to
employees of PTI or any subsidiaries to purchase, or to exercise certain
rights with respect to, shares of Common Stock, no par value, of PTI (the
"Stock"), in accordance with the terms and provisions thereof;
WHEREAS, the Compensation Committee considers the Optionee to be a
person who is eligible for a grant of Stock Options under the Plan, and has
determined that it would be in the best interests of PTI to grant the options
documented herein;
WHEREAS, the Company's has 64 4/19 shares of Common Stock issued and
outstanding as of the Date of Grant; and
WHEREAS, capitalized terms used but not defined herein have the meanings
ascribed thereto in the Plan.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
<PAGE>
<PAGE>
1. Grant of Option; Restrictions.
-----------------------------
a. Subject to the terms and conditions of the Plan or hereinafter
set forth, PTI, with the approval and at the direction of the Committee,
hereby grants to the Optionee, as of the Date of Grant, an Option to purchase
up to 1.498 shares of Stock at an Option Price of $0.01 per share (the "Option
Price") as adjusted in the event of any stock split or dividend. Such option
is hereinafter referred to as the "Option" and the shares of stock purchasable
upon exercise of the Option are hereinafter sometimes referred to as the
"Option Shares."
b. The Option (and the Option Shares) shall be subject to the
following restrictions:
1. Contemporaneously with the execution of this Agreement,
a subsidiary of the Company is acquiring certain equipment from Interactive
Telephone Company, the Company is entering into certain agreements with the
Optionee, and the Company is obtaining a license to use certain software from
Godot Soft, LLC (collectively, the "Related Transactions"). The Company shall
have the right to offset any obligation to issue Option Shares hereunder
against any obligation or liability of Interactive Telephone Company, Godot
Soft, LLC or the Optionee to the Company or any subsidiary pursuant to the
Related Transactions. In the event that Optionee has exercised the Option in
whole or in part prior to such offset, the Company shall have the right to
redeem the Option Shares having a value equal to the obligation or liability
to be offset, by repayment to Optionee of the exercise price therefor. In
determining the number of Option Shares to be redeemed or forfeited, the value
per share shall be the value determined by the Board (or a committee thereof)
in accordance with the Plan in its most recent action prior to the date of
such offset and no revaluation shall be required in connection with such
offset.
2. (a) In the event that the Licensed Products (as defined
in the Software License Agreement of even date herewith between Optionee and
PTI, as amended from time to time, the "Option Agreement") fail to meet the
Acceptance Standard prior to the end of the Acceptance Period (each as defined
in the Option Agreement), PTI shall have the right to withhold payments under
the Note and reduce the number of Option Shares, as follows (for purposes of
computing the following, the Option Shares shall have an assumed valuation of
$667,557 per share, as adjusted in the event of any stock split or stock
dividend):
(i) If the Licensed Products meet at least eighty
percent (80 percent ) but less than one hundred
percent (100 percent) of the<PAGE>
<PAGE>
Acceptance Standard, PTI shall be entitled to
withhold an amount equal to $1,000,000 multiplied
by the percentage shortfall, in any combination
of note payments and Option Shares elected by
PTI. For example, if the Licensed Products meet
95 percent of the Acceptance Standard prior to
the end of the Acceptance Period, PTI shall be
entitled to withhold Note payments or reduce
Option Shares in an amount equal to $50,000.
(ii) If the Licensed Products fail to meet at least
eighty percent (80 percent) of the Acceptance
Standard prior to the end of the Acceptance
Period, PTI shall be entitled to withhold an
amount equal to $1,000,000 in any combination of
Note payments and Option Shares elected by PTI.
(b) In the event that the Option is exercised in
whole or in part at any time prior to the end of the Acceptance Period, 2/7 of
the Option Shares issued pursuant to such exercise (the "Escrowed Shares")
shall be delivered to an escrow agent mutually acceptable to PTI and the
Optionee and shall be held in escrow for the remainder of such Acceptance
Period and released in accordance with subsection (a) above
3. In the event that Optionee's employment is terminated for
Cause or as a result of a Voluntary Termination (each as defined in that
certain Employment Agreement of even date herewith between Optionee and PTI
and Optionee), in either case within one (1) year of the Date of Grant, PTI
shall have the right to repurchase the Option Shares (or terminate the Option
with respect to Option Shares if unexercised) at a purchase price or
termination payment equal to the fair market value per share as adjusted in
the event of any stock split or stock dividend (the value per share as
determined by the Board (or a committee thereof) in accordance with the Plan
in its most recent action prior to the date of termination and no revaluation
shall be required in connection with such purchase or termination.
2. Termination of Option.
---------------------
The Option and all rights with respect thereto, to the extent such
rights shall not have been exercised, shall terminate and become null and void
after the expiration of ten (10) years from the Date of Grant (the "Option
Term").
<PAGE>
<PAGE>
b. In the event of the death of the Optionee, the Option may be
exercised by the Optionee's estate or by a person who acquires the right to
exercise such Option by bequest or inheritance or by reason of the death of
the Optionee, provided that such exercise occurs within the sooner of the
remaining Option Term of the Option and one year after the Optionee's death.
3. Exercise of Options.
-------------------
a. The Optionee may exercise the Option with respect to all or any
part of the number of Option Shares then exercisable hereunder by giving the
Secretary of PTI written notice of intent to exercise. The notice of exercise
shall specify the number of Option Shares as to which the Optionee is
exercising and the date of exercise thereof, which date shall be at least five
(5) days after the giving of such notice unless an earlier time shall have
been mutually agreed upon.
b. Full payment (in U.S. dollars) by the Optionee of the Option
Price for the Option Shares purchased shall be made on or before the exercise
date specified in the notice of exercise in cash, or, with the prior written
consent of the Committee, which may be granted or withheld in the Committee's
sole discretion, in whole or in part through the surrender of previously
acquired shares of Stock at the Fair Market Value thereof on the exercise
date.
On the exercise date specified in the Optionee's notice or as soon
thereafter as is practicable, PTI shall cause to be delivered to the Optionee,
a certificate or certificates for the Option Shares then being purchased (out
of theretofore authorized and unissued Stock or Treasury Stock, as PTI may
elect) upon full payment for such Option Shares in accordance with the terms
of the Plan and this Agreement. The obligation of PTI to deliver Stock shall,
however, be subject to the condition that if at any time the Committee shall
determine in its discretion that the listing, registration or qualification of
the Option or the Option Shares upon any securities exchange or under any
state or Federal law, or the consent or approval of any governmental or
regulatory body, or an agreement by the Optionee with respect to the
disposition of Option Shares, is necessary or desirable as a condition of, or
in connection with, the Option or the issuance or purchase of Stock
thereunder, the Option may not be exercised in whole or in part until such
listing, registration, qualification, consent, approval or agreement shall
have been effected or obtained free of any conditions not acceptable to the
Committee, and, if it would otherwise expire, the term of the Option shall be
extended until thirty (30) days after receipt by Optionee of the foregoing.
<PAGE>
<PAGE>
c. If the Optionee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof, the Optionee's
right to purchase such Option Shares may be terminated by PTI. The date
specified in the Optionee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in full for the Option
Shares to be purchased upon such exercise shall have been received by such
date.
d. In the event that Optionee exercises the Option in whole or in
part prior to April 15, 1998, PTI shall make a one-year loan of up to
$350,000, secured by a pledge of the Option Shares, on or about such date, to
enable Optionee to pay any federal or state income taxes imposed as a result
of such exercise. The loan shall be for a one year term from such date and
shall bear interest at a rate equal to: (i) the applicable federal rate as
established pursuant to Section 7872 of the Internal Revenue Code, if PTI does
not have a class of publicly traded equity securities; or (ii) twelve percent
(12 percent) if PTI has a class of publicly traded equity securities at the
time of the loan.
4. Non-Assignability of Option.
---------------------------
The Option is not assignable or transferable by the Optionee except by
will or by the laws of descent and distribution. During the life of the
Optionee, the Option is exercisable only by the Optionee or by the Optionee's
guardian or legal representative.
5. Employment Not Affected.
-----------------------
Nothing in the Plan or this Agreement shall confer upon the Optionee the
right to continue in the employment of PTI or affect any right which PTI has
to terminate the employment of the Optionee.
6. Stock for Investment.
--------------------
The Optionee shall upon each exercise of a part or all of the Option
represent and warrant that his purchase of Stock pursuant to such Option is
for investment only, for the Optionee's account only and not with a view to
any distribution thereof.
7. Rights as a Shareholder.
-----------------------
The Optionee shall have no rights as a shareholder of PTI unless and
until certificates for shares of Stock are issued to him.
<PAGE>
<PAGE>
8. Notice.
------
Any notice to PTI provided for in this instrument shall be addressed to
it in care of its Secretary at its executive offices at 30-50 Whitestone
Expressway, Flushing, New York 11354, and any notice to the Optionee shall be
addressed to the Optionee at the current address shown on the payroll records
of PTI. Any notice shall be deemed to be duly given if and when properly
addressed and posted by registered or certified mail, postage prepaid.
9. Incorporation of Plan by Reference.
----------------------------------
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall in all
respects be interpreted in accordance with the Plan, which may be amended from
time to time in accordance with the terms thereof.
10. Governing Law.
-------------
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of New York, except to the extent preempted by federal
law, which shall to the extent govern.
IN WITNESS WHEREOF, PTI has caused its duly authorized officers to
execute and attest this Agreement, and to apply the corporate seal hereto, and
the Optionee has placed his or her signature hereon, effective as of the Date
of Grant.
Attest: PHONETIME, INC.
/s/ Douglas Barley By: /s/ Samer Tawfik
- ------------------------- -------------------------------
Douglas Barley President
/s/ Douglas Barley /s/ Joseph Pannullo
- ------------------------- ------------------------------
Douglas Barley Joseph Pannullo
Joseph Pannullo
PHONETIME, INC.
OPTION AGREEMENT
Date of Grant: May 26, 1997
This Agreement (the "Agreement") dated as of the date of grant first
stated above (the "Date of Grant"), is entered into between PhoneTime, Inc., a
New York corporation ("PTI"), and John J. Klusaritz (the "Optionee"), who is
an employee of PTI.
WHEREAS, Optionee has entered into an Employment Agreement (the
"Employment Agreement") with PTI;
WHEREAS, in consideration for entering into such Employment Agreement,
PTI wishes to grant to Optionee options to acquire shares of Common Stock, no
par value, of PTI (PTI common stock is hereinafter referred to as "Common
Stock"), in accordance with the terms and provisions herein;
WHEREAS, the Company has 65.708 shares of Common Stock issued and
outstanding.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Grant of Option; Restrictions.
------------------------------
a. Subject to the terms and conditions hereinafter set forth, PTI,
unconditionally and irrevocably, hereby grants to the Optionee, as of the Date
of Grant, an Option to purchase up to 2.738 shares of Common Stock (as such
number of shares may be adjusted herein) at an aggregate Option Price of $3.57
million (the "Option Price"). Such option is hereinafter referred to as the
"Option" and the shares of stock purchasable upon exercise of the Option (as
such number of shares may be adjusted herein) are hereinafter sometimes
referred to as the "Option Shares." The number of shares of Common Stock to be
issued to Optionee upon exercise of the Option is based upon PTI's
representations under Section 7 herein and, if exercised immediately, would
result in Optionee's owning four percent (4 percent) of the Capital Stock of
PTI(computed after taking into account the issuance of the Option Shares).
The number of shares of Common Stock to be issued to Optionee upon exercise
<PAGE>
<PAGE>
of the Option shall be adjusted upward in the event of any change in the
capitalization of or outstanding capital stock of PTI due to stock split,
stock dividend, recapitalization, stock issuance, issuance of any securities
convertible or exchangeable into capital stock, grant of any right to obtain
any of the foregoing, entering into of any binding agreement to undertake any
of the foregoing or similar event that occurs prior to or simultaneously upon
closing of an initial public offering ("IPO") of the Company in order to
prevent dilution to Optionee. The foregoing antidilution right shall not
apply in the case of: (i) shares of Common Stock issued in connection with
acquisitions by PTI of operating businesses from third parties to the extent
any such shares are issued for fair market value consideration; or (ii) shares
of Common Stock issued to the public in connection with an IPO (it being
understood that Optionee's antidilution right shall apply in connection with
the issuance of shares pursuant to any stock option plan or other agreement
if the plan is approved, shares reserved or agreement entered into on or
prior to the closing of an IPO even if the actual grants of options or
issuance of shares under such plan or pursuant to such agreement do not take
place until after closing of an IPO); or (iii) any issuance of Common Stock
after the IPO unless pursuant to a binding agreement, grant or stock option
plan executed, issued or otherwise put in place on or prior to the closing of
an IPO. In the event PTI takes any action set forth above on or prior to the
closing of an IPO but after Optionee has already fully exercised the Option,
Optionee shall be granted options to purchase additional Common Stock, without
additional consideration, such that the total number of Option Shares would
represent four percent (4 percent) of the outstanding Common Stock of
PTI(computed after taking into account the issuance of such Option Shares).
Notwithstanding any of the foregoing, Optionee's anti dilution rights shall
not apply to any additional issuances of shares of Common Stock by PTI to the
extent that the aggregate amount of such additional issuances does not exceed
two and one half percent (2 1/2 percent) of the number of shares of common
stock outstanding on the Date of Grant.
b. PTI agrees that the Option granted herein is fully vested,
irrevocable, unconditional, not subject to forfeiture for any reason and
unrelated to Optionee's continued employment with PTI.
c. In the event that PTI is merged or consolidated into any entity
or acquired by any entity, Optionee's rights hereunder shall be to obtain
options to acquire common stock of such successor entity on equivalent terms
to the terms set forth herein.
2. Exercise of Options, Term.
-------------------------
a. The Option and all rights with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the expiration of ten (10) years after the date hereof (the "Option
Term"). The Option shall be exercisable immediately in whole or in part and
shall remain exercisable until the end of the Option Term.
<PAGE>
<PAGE>
b. In the event of the death of the Optionee, the Option may be
exercised by the Optionee's estate or by a person who acquires the right to
exercise such Option by bequest or inheritance or by reason of the death of
the Optionee, provided that such exercise occurs within the sooner of the
remaining Option Term of the Option and one year after the Optionee's death.
c. The Optionee may exercise the Option with respect to all or any
part of the number of Option Shares then exercisable hereunder by giving the
Secretary of PTI written notice of intent to exercise. The notice of exercise
shall specify the number of Option Shares as to which the Optionee is
exercising and the date of exercise thereof, which date shall be at least five
(5) days after the giving of such notice unless an earlier time shall have
been mutually agreed upon. In the case where the Optionee exercises less than
the full Option, the price payable shall be determined by multiplying the
Option Price by the aggregate number of Option Shares purchased, divided by
the total number of purchasable Option Shares.
d. Full payment (in U.S. dollars) by the Optionee of the Option Price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written
consent of PTI, which may be granted or withheld in the PTI's sole
discretion, in whole or in part through the surrender of previously acquired
shares of Common Stock at the fair market value thereof on the exercise date.
Notwithstanding the foregoing, in the event that Optionee exercises the Option
in whole or in part prior to December 31, l997, PTI shall make a loan to
Optionee of up to the entire Option Price, secured by a pledge of the Option
Shares, on the date of such exercise, to enable Optionee to obtain the funds
to pay the Option Price. The loan shall be noninterest bearing for one and
one half years and thereafter bear interest at a rate equal to the applicable
federal rate as established pursuant to Section 7872 of the Internal Revenue
Code. The principal of the loan and all outstanding interest shall be due and
payable the earlier of: (i) two years after the date of the loan; (ii) one
year after PTI has closed an IPO; or (iii) at the time of any sale of
"control" (as defined in regulations promulgated under the Securities Exchange
Act of l934) of PTI.
e. On the exercise date specified in the Optionee's notice or as soon
thereafter as is practicable, PTI shall cause to be delivered to the Optionee,
a certificate or certificates for the Option Shares then being purchased (out
of theretofore authorized and unissued Stock or Treasury Stock, as PTI may
elect) upon payment for such Option Shares in accordance with the terms of
this Agreement.
<PAGE>
<PAGE>
3. Non-Assignability of Option.
----------------------------
The Option is not assignable or transferable by the Optionee except by
will or by the laws of descent and distribution. During the life of the
Optionee, the Option is exercisable only by the Optionee or by the Optionee's
guardian or legal representative.
4. Stock for Investment.
---------------------
The Optionee shall upon each exercise of a part or all of the Option
represent and warrant that his purchase of Common Stock pursuant to such
Option is for investment only, for the Optionee's account only and not with a
view to any distribution thereof.
5. Rights as a Shareholder.
------------------------
The Optionee shall have no rights as a shareholder of PTI unless and
until Optionee has exercised the Option.
6. Notice.
-------
Any notice to PTI provided for in this instrument shall be addressed to
it in care of its Secretary at its executive offices at 30-50 Whitestone
Expressway, Flushing, New York 11354, and any notice to the Optionee shall be
addressed to the Optionee at the current address shown on the payroll records
of PTI. Any notice shall be deemed to be duly given if and when properly
addressed and posted by registered or certified mail, postage prepaid.
7. Representations and Warranties of PTI.
-------------------------------------
As an inducement to Optionee to enter into this Agreement and the
Employment Agreement, PTI hereby represents and warrants to Optionee as
follows: (i) PTI is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York; (ii) The outstanding
capital stock of PTI consists of 65.745 shares of Common Stock. The Option
Shares to be issued to Optionee pursuant to an exercise of the Option, when so
issued, will be duly and validly authorized, issued and outstanding, fully
paid, non-assessable and free of preemptive rights; (iii) Except for the
65.745 shares of Common Stock outstanding, there is no outstanding right,
subscription, warrant, call unsatisfied preemptive right, option, or other
agreement of any kind to purchase or otherwise to receive from PTI any capital
stock or any other security of PTI, and there is no outstanding security of
any kind convertible into such capital stock; (iv) PTI has heretofore
delivered to Optionee true and complete copies of its Certificate of<PAGE>
<PAGE>
Incorporation and By-Laws as in effect on the date hereof; (v) PTI has full
power and authority to execute and deliver this Agreement and to consummate
the transactions herein. The execution, delivery and performance of this
Agreement by PTI has been duly authorized and approved by PTI's Board of
Directors, and no other corporate authorizations or proceedings are necessary.
This Agreement has been duly executed by PTI and is the legal, valid and
binding agreement of PTI, enforceable in accordance with its terms; and (vi)
None of the representations or warranties of PTI contained herein, or
information otherwise furnished to Optionee is false or misleading in any
material respect or omits to state a fact herein or therein necessary to make
the statements herein misleading in any material respect.
8. Governing Law.
-------------
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the law of
the State of New York, except to the extent preempted by federal law, which
shall to the extent govern.
IN WITNESS WHEREOF, PTI has caused its duly authorized officers to
execute and attest this Agreement, and to apply the corporate seal hereto, and
the Optionee has placed his or her signature hereon, effective as of the date
hereof.
Attest: PHONETIME, INC.
/s/ Douglas Barley By: /s/ Samer Tawfik
- ----------------------- ------------------------
Samer Tawfik, CEO
/s/ B.K. Klusaritz /s/ John J. Klusaritz
- -------------------- ------------------------
John J. Klusaritz
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
__________, 1997, is made and entered into by and between PT-1 COMMUNICATIONS,
INC., a New York corporation (the "Company"), and SAMER TAWFIK (the
"Executive").
RECITALS
--------
WHEREAS, the Company has employed and desires to continue to employ
the Executive as Chairman of the Board and Chief Executive Officer on the
terms and conditions hereinafter set forth and the Executive desires to
continue such employment on such terms and subject to such conditions; and
WHEREAS, the Executive possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties agree as follows:
1. Employment. Effective October 1, 1997 (the "Effective
Date"), the Company shall employ the Executive, and the Executive shall be
employed by and shall serve the Company, pursuant to the terms of this
Agreement, and in the capacities of Chairman of the Board and Chief Executive
Officer reporting directly to the Board of Directors (the "Board"). The
Company will use its best efforts to include Executive in its slate of
candidates for membership on the Board and the Executive Committee, if any.
2. Term and Renewals. Subject to the provisions for earlier
termination provided herein, the term of this Agreement (the "Initial Term")
shall commence on the Effective Date and shall terminate on the three (3)-year
anniversary of the Effective Date. Following expiration of the Initial Term,
the Agreement shall be renewed for a one (1)-year period (the "Initial Renewal
Term") if at least one (1) month prior to the expiration of the Initial Term
either party hereto shall not have given the other party written notice not to
renew this Agreement. The Initial Renewal Term and each "Renewal Term" (as
defined in this Section 2) shall be renewed for successive one (1)-year
periods (each, a "Renewal Term," the Initial Term, the Initial Renewal Term,
if any, and each Renewal Term, if any, collectively, the "Term") if at least
one (1) month prior to the expiration of the Initial Renewal Term or a Renewal
Term, as the case may be, either party hereto shall not have given the other
party written notice of its intention not to renew this Agreement. Nothing in
this Agreement shall be construed to require either party hereto to renew this
Agreement and either party hereto has the sole discretion not to renew this
Agreement.
<PAGE>
<PAGE>
3. Duties. During the Term, the Executive shall be the chief
executive officer of the Company and shall report to the Board, and shall have
all duties and responsibilities assigned to the Executive by the Board, as
limited or expanded pursuant to this Agreement. The Executive shall devote
all of his working time and effort during normal business hours to the
business and affairs of the Company, and shall use his reasonable best efforts
to perform such duties and responsibilities faithfully and efficiently.
Subject to the terms of Section 8, this shall not preclude Executive from
serving on community and civic boards, participating in industry associations,
pursuing his personal financial and legal affairs, or otherwise engaging in
other activities, so long as such activities do not unreasonably interfere
with his duties to the Company.
4. Compensation. For services rendered by the Executive
pursuant to this Agreement, the Company shall pay or award compensation to the
Executive as follows:
(a) Base Compensation. The Company shall pay to the
Executive a base salary ("Base Compensation") of $450,000 per annum, payable
in accordance with the Company's customary practices for its officers. The
amount of Base Compensation shall be reviewed by the Board annually, and may
be increased to reflect inflation or such other adjustments as it may deem
appropriate; provided, however, that Base Compensation, as increased, may not
be decreased.
(b) Bonus Compensation. In addition to the Base
Compensation, the Board may in its discretion award the Executive a
performance bonus (the "Performance Bonus") in cash or stock options.
(c) Withholding. The Company shall deduct and withhold
from the compensation payable to the Executive hereunder any and all
applicable federal, state and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the Company under
applicable statute or regulation.
5. Additional Benefits.
(a) Fringe Benefits; Reimbursement; Vacation. In addition
to Base Compensation and Bonus provided for in Section 4 above, in connection
with the Executive's employment by the Company, the Executive shall be
entitled to receive:
(i) all fringe benefits customarily offered by the
Company to its senior executive officers, including without limitation,
expense accounts, participation in any Company stock compensation plan and the
various employee benefit plans or programs (collectively, the "Benefit Plans")
provided to the employees of the Company in general, subject to the
eligibility requirements with respect to each such Benefit Plan,<PAGE>
<PAGE>
and to such other benefits or perquisites as may be approved by the Board
during the Term;
(ii) reimbursement from the Company for all
customary, ordinary and necessary business expenses incurred by the Executive
in the performance of his duties and responsibilities hereunder, provided that
the Executive furnishes the Company with vouchers, receipts and other
substantiation of such expenses within thirty (30) days after they are
incurred;
(iii) paid vacation benefits in accordance with the
Company's vacation policy in effect for its senior executive officers; and
(iv) all of the administrative, operational and
facility support customary for a similarly situated executive, including,
without limitation, a suitably appointed private office, a secretary or
administrative assistant.
6. Termination of Employment.
(a) Termination. Except as otherwise provided in this
Agreement, the Executive's employment by the Company hereunder shall terminate
upon the earliest to occur of the dates specified below (as applicable, the
"Termination Date"):
(i) The close of business on the date of expiration
of the Term.
(ii) The close of business on the date of the
Executive's death ("Death").
(iii) The close of business on the date specified
as the effective date of termination of the Executive's employment in a
"Notice of Termination" (as defined below) delivered by the Company to
the Executive due to the Executive's "Disability." For purposes of this
Agreement, the term "Disability" shall mean the inability or incapacity
of the Executive, due to any medically determined physical or mental
impairment, to perform his duties and responsibilities for the Company
for a total of sixty (60) calendar days in any twelve (12) month period
during the Term.
(iv) The close of business on the date specified as
the effective date of termination of the Executive's employment by the
Executive in a Notice of Termination delivered by the Executive to the
Company (a "Voluntary Termination").
(v) The close of business on the date specified as
the effective date of termination of the Executive's employment by the
Company for "Cause" (as defined below) in a Notice of Termination
delivered by the Company to the Executive. For purposes of this
Agreement, the term "Cause" shall mean termination based on (A) the
Executive's material breach of this Agreement; (B) conviction of the
Executive for (x)<PAGE>
<PAGE>
any crime constituting a felony in the jurisdiction in
which committed, (y) any crime involving moral turpitude (whether or not
a felony) or (z) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company (whether
or not a felony); (C) substance abuse by the Executive which is repeated
after written notice to the Executive identifying such abuse; (D) the
failure or the refusal of the Executive to follow lawful and proper
directives of the Board; (E) willful malfeasance or misconduct by the
Executive in connection with misappropriating any funds or property of
the Company or attempting to willfully obtain any personal profit from
any transaction in which the Executive has an interest which is adverse
to the interests of the Company or any other willful misconduct that
discredits or damages the Company; (F) indictment of the Executive by a
grand jury for a felony violation of the federal securities laws; or (G)
the engagement by the Executive in any "Prohibited Activity" or
"Competitive Activity" (as such terms respectively are defined in
Sections 8(c)(i) and 8(c)(ii) below) in violation of this Agreement.
(b) Notice of Termination. Any termination of the
Executive's employment hereunder (other than termination as a result of Death)
by the Company or by the Executive shall be communicated by a Notice of
Termination to the other party hereto given in accordance with the provisions
of Section 9(b) below. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, and (ii) if applicable,
sets forth the facts and circumstances claimed to provided a basis for
termination of the Executive's employment.
(c) Exclusive Rights. The events set forth in Section 6(a)
and the parties' right to terminate in connection with said events shall
constitute the exclusive rights of the parties to terminate the Executive's
employment by the Company.
7. Payment Upon Termination of Employment.
(a) Voluntary Termination, Termination for Cause or
Expiration of Term. If the Executive's employment is terminated pursuant to
Section 6(a)(iv) above (a Voluntary Termination), Section 6(a)(v) above (a
termination for Cause) or Section 6(a)(i) above (the expiration of the Term),
then, without limiting any other rights or remedies available to the Company
at law or in equity, the Company shall pay or provide to the Executive, his
legal representatives, heirs, eligible dependents, if any, or permitted
assigns, as applicable, (i) on the Termination Date, all compensation earned
but unpaid as of the Termination Date set forth in Section 4 above; and (ii)
all benefits to which such persons may be entitled under any of the Benefit
Plans which provide for benefits after termination of employment, in
accordance with the terms thereof.
(b) Other Terminations. Subject to the provisions of
Section 7(c) below, if the Executive's employment is terminated pursuant to
Section 6(a)(ii) above (Death)<PAGE>
<PAGE>
or Section 6(a)(iii) above (Disability) (i) the Company shall pay to the
Executive, his legal representatives, heirs or permitted assigns, on the
Termination Date, all compensation earned but unpaid as of the Termination
Date set forth in Section 4 above; (ii) during the period beginning on the
Termination Date and extending until the earlier to occur of the Executive's
Death or the date this Agreement otherwise would have terminated had the
employment of the Executive not been earlier terminated but, regardless of the
Executive's Death, not less than a period of six (6) months from the
Termination Date (the "Remaining Term"), the Company shall provide to the
executive, his legal representatives, heirs, eligible dependents, if any, or
permitted assigns, as applicable, all benefits to which such persons may be
entitled under any of the Benefit Plans, and specifically, without limitation,
shall provide the Executive and his eligible dependents, if any, with life,
disability, accident and group health insurance benefits substantially similar
to those which the Executive and his dependents were receiving immediately
prior to the Notice of Termination, provided the Executive or his legal
representatives, heirs or permitted assigns pay the regular premium required
of active employees for such coverage (following the expiration of the
Remaining Term, the Executive shall be eligible to purchase health insurance
benefits in accordance with applicable federal law); (iii) beginning with the
first day of the month on or following the Termination Date and continuing
until the expiration of the Remaining Term, the Company shall pay the
Executive in cash an amount equal to one-twelfth (1/12) of the Base
Compensation, less the amount, if any, of monthly disability income paid to
the Executive pursuant to any Company-sponsored long-term disability plan;
(iv) if on the termination Date the Executive has completed six (6) or more
months of the Company's then current fiscal year, the Company shall pay to the
Executive, his legal representatives, heirs or permitted assigns, a pro-rata
portion of his Bonus for such fiscal year (the "Pro Rata Bonus"), such payment
to be made within ten (10) days following the date on which a bonus in which
the Executive would have participated but for his termination is declared,
provided the criteria established by the Board for such Pro Rata Bonus have
been satisfied fully as of the Termination Date; and (v) all stock options,
warrants, rights and other Company stock-related awards granted to the
Executive by the Company (collectively, the "Stock Awards") that otherwise
would have vested and become exercisable during the fiscal year of the Company
in which the Executive was terminated, shall become upon the Termination Date
fully vested and nonforfeitable, all restrictions (except for restrictions
required by law), if any, thereon shall lapse, all performance goals, if any,
associated therewith shall be deemed met in full, and the Executive shall be
entitled to exercise any or all such Stock Awards in accordance with the terms
of the documentation pursuant to which such Stock Awards were granted.
(c) Exclusive Payments. The payments upon termination made
by the Company to the Executive pursuant to Sections 7(a) and (b) above shall
constitute the exclusive payments due to the Executive upon termination under
this Agreement; provided, however, that all monthly payments made pursuant to
Section 7(b)(iii) above, shall be reduced or mitigated by the amount of any
cash compensation secured or earned by the Executive during such month for
services rendered to another employer; provided, further, that all benefits
receivable by the Executive, his legal representatives, heirs, eligible
dependents, if any, or permitted assigns, as applicable, shall be reduce to
the extent comparable benefits actually are received by the Executive, his
<PAGE>
<PAGE>
legal representatives, heirs, eligible dependents, if any, or permitted
assigns, as applicable, during the Remaining Term pursuant to similar plans or
programs of another employer.
8. Executive Covenants.
(a) The Executive agrees and understands that due to the
Executive's position with the Company, both prior to, if applicable, and
subsequent to the Effective Date, the Executive has been and will be exposed
to, and has received and will receive confidential and proprietary information
of the Company or relating to the Company's business or affairs (collectively,
the "Trade Secrets"), including but not limited to technical information,
computer software (including source and object code data and related
documentation), research and development, know-how, product information,
formulae, processes, business and marketing plans, strategies, customer
information, other information concerning the Company's products, promotions,
development, financing, expansion plans, business policies and practices and
other forms of information considered by the Company to be proprietary and
confidential and in the nature of trade secrets. Except to the extent that
the proper performance of the Executive's duties and responsibilities
hereunder may require disclosure, and except as such information (i) was known
to the Executive prior to his employment by the Company or (ii) was or becomes
generally available to the public other than as a result of a disclosure by
the Executive in violation of the provisions of this Section 8(a), the
Executive agrees that during the Term and at all times thereafter the
Executive will keep such Trade Secrets confidential and will not disclose such
information, either directly or indirectly, to any third person or entity
without the prior written consent of the Company. This confidentiality
covenant has no temporal, geographical or territorial restriction. On the
Termination Date, the Executive promptly will supply to the Company all
property, keys, notes, memoranda, writings, lists, files, reports, customer
lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines,
technical data, formulae or any other tangible product or document
constituting Trade Secrets which have been produced by, received by or
otherwise submitted to the Executive during the course of his employment with
the Company, including the period during and prior to the Term. Any material
breach of the terms of this Section 8(a) shall be considered Cause.
(b) Inventions. The Executive agrees that any and all
inventions, discoveries, improvements, processes, formulae, business
application software patents, copyrights and trademarks made, developed,
discovered or acquired by him after the Effective Date and while employed by
the Company, solely or jointly with others or otherwise, which relate to the
business of the Company, and all knowledge possessed by the Executive relating
thereto (collectively, the "Inventions"), shall be fully and promptly
disclosed to the Board and to such person or persons as the Board shall
direct, and shall be the sole and absolute property of the Company and the
Company shall be the sole and absolute owner thereof. The Executive agrees
that he will at all times keep all Inventions secret from everyone except the
Company and such persons as the Board may from time to time direct or until
such Inventions become public. The Executive shall, as requested by the
Company to effect disclosure and assignment of the Inventions to the Company
or its designees and any patent applications (United States or foreign) and
<PAGE>
<PAGE>
renewals with respect thereto, including any other instruments deemed
necessary by the Company for the prosecution of patent applications or the
acquisition of letters patent. Notwithstanding the above, the Company
acknowledges that Executive has conceived of telecommunications
hardware/software devices and processes for, inter alia, automated telephone
dialing (the "Existing Inventions"). The Company agrees that it has no right,
title or interest in the subject matter of the Existing Inventions and that,
notwithstanding anything herein to the contrary, Executive is the sole owner
of all right, title and interest in the Existing Inventions and is entitled to
patent, license, transfer, improve, exploit and otherwise deal with the
Existing Inventions without any obligation of any kind to the Company,
provided no Company assets or resources shall be used in connection with
improving, patenting, licensing or otherwise exploiting the Existing
Inventions.
(c) Prohibited and Competitive Activities. The Executive
and the Company recognize that due to the nature of the Executive's engagement
hereunder and the relationship of the Executive to the Company, both prior and
subsequent to the Effective Date, the Executive has had and will have access
to, has had and will acquire, and has assisted and may continue to assist in
developing, confidential and proprietary information relating to the business
and operations of the Company and its affiliates, including Trade Secrets.
The Executive acknowledges that such information has been and will be of
central importance to the business of the Company and its affiliates and that
disclosure of it to, or its use by, others (including, without limitation,
the Executive (other than with respect to the Company's business and affairs))
could cause substantial loss to the Company. The Executive and the Company
also recognize that an important part of the Executive's duties and
responsibilities will be to develop good will for the Company and its
affiliates through his personal contact with "Clients" (as defined below),
employees and others having business relationships with the Company, and that
there is a danger that this good will, a proprietary asset of the Company, and
follow the Executive if and when his relationship with the Company is
terminated. The Executive accordingly agrees as follows:
(i) Prohibited Activities. The executive will not at any
time during the Term (A) other than in the course of his employment,
disclose or furnish to any other person or, directly or indirectly, use
for his own account or the account of any other person, any Trade
Secrets, and he shall retain all such Trade Secrets in trust for the
benefit of the Company, its affiliates and the successors and assigns of
any of them; (B) directly or through one or more intermediaries, solicit
for employment by a Competitor (as defined in Section 8(c)(ii) below) any
person who, at the time of such solicitation, is employed by the Company
or any affiliate thereof; (C) directly or indirectly, whether for his own
account or for the account of any other person, solicit, divert or
endeavor to entice away from the Company or any entity controlled by the
Company, or otherwise engage in any activity intended to terminate,
disrupt or interfere with, the Company's or any of its affiliate's
relationship with Clients, or otherwise adversely affect the Company's or
any of its affiliate's relationship with Clients or other business
relationships of the Company or any affiliate thereof; or (D) publish or
make any statement critical of the Company or any shareholder or<PAGE>
<PAGE>
affiliate of the Company, or in any way adversely affect or otherwise
malign the business or reputation of any of the foregoing persons (any
activity described in clause (A), (B), (C) or (D) of this Section 8(c)(i)
being herein referred to as a "Prohibited Activity"); provided, however,
that if in the written opinion of counsel, the Executive is legally
compelled to disclose Trade Secrets to any tribunal or else stand liable
for contempt or suffer other similar censure or penalty, then the
disclosure to such tribunal of those Trade Secrets which such counsel
advises in writing legally are required to be disclosed shall not
constitute a Prohibited Activity, provided that the Executive shall give
the Company as much advance notice of such disclosure as is reasonably
practicable. For purposes of this Agreement, "Clients" shall mean
persons who, at any time during the Executive's course of employment with
the Company (including, without limitation, prior to the Effective Date)
are or were clients or customers of the Company or any affiliate thereof
or any predecessor of any of the foregoing.
(ii) Non-Competition. By and in consideration of the
Company's entering into this Agreement and providing the compensation and
benefits to be provided by the Company to the Executive, and further in
consideration of the Executive's continued exposure to the confidential
and proprietary information of the Company (including, without
limitation, the Trade Secrets), the Executive agrees that the Executive
will not, from the Effective Date and until a period of one (1) year
after the Termination Date, engage in any "Competitive Activity" as
defined below. For purposes of this Agreement, the term "Competitive
Activity" shall mean engaging in any of the following activities: (A)
serving as a director of any "Competitor" (as defined below); (B)
directly or indirectly through one or more intermediaries, either (x)
controlling any Competitor or (y) owning any equity or debt interests in
any Competitor (other than equity or debt interests which are publicly
traded and, at the time of any acquisition, do not exceed 5% of the
particular class of interest outstanding) (it being understood that, if
interests in any Competitor are owned by an investment vehicle or other
entity in which the Executive owns an equity interest, a portion of the
interests in such competitor owned by such entity shall be attributed to
the Executive, such portion determined by applying the percentage of the
equity interest in such entity owned by the Executive to the interests in
such Competitor owned by such entity); (C) employment by (including
serving as an officer or partner of), providing consulting services to
(including, without limitation, as an independent contractor), or
managing or operating the business or affairs of, any Competitor; or (D)
participating in the ownership, management, operation or control of or
being connected in any manner with any Competitor. For purposes of this
Agreement, the term "Competitor" shall mean any person (other than the
Company or any affiliate thereof) whose primary business activity is the
sale of telecommunications debit cards in the United States for the
provision of long distance telephone services.
(iii) Remedies. The Executive agrees that any breach of
the terms of this Section 8 would result in irreparable injury and damage
to the Company for which the Company would have no adequate remedy at
law. The Executive therefore<PAGE>
<PAGE>
also agrees that in the event of any such breach or any threat of such
breach, the Company shall be entitled to an immediate injunction and
restraining order to prevent such breach and/or threatened breach and/or
continued breach by the Executive and/or any and all persons and/or
entities acting for and/or with the Executive, without having to prove
damages, in addition to any other remedies to which the Company may be
entitled at law or in equity. The terms of this Section 8 shall not
prevent the Company from pursuing any other available remedies for any
breach or threatened breach hereof, including but not limited to the
recovery of damages from the Executive.
The provisions of this Section 8 shall survive any termination of
this Agreement. The existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements set forth in this Section 8.
9. Indemnification.
During the Term, the Company shall indemnify Executive and hold
Executive harmless from and against any claim, loss or cause of action arising
from or out of Executive's performance as an officer, director or employee of
the Company or any of its subsidiaries or in any other capacity, including any
fiduciary capacity, in which Executive serves at the request of the Company to
the maximum extent permitted by applicable law. If any claim is asserted
hereunder with respect to which Executive reasonably believes in good faith he
is entitled to indemnification, the Company shall pay Executive legal expenses
(or cause such expenses to be paid) on a monthly basis, provided that
Executive shall reimburse the Company for such amounts if Executive shall be
found by a court of competent jurisdiction not to have been entitled to
indemnification. In addition, the Company agrees to provide Executive with
coverage under a directors and officers liability insurance policy.
10. Miscellaneous.
(a) Binding Effect; Assignment. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors
and assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement. The
Executive, or any beneficiary or legal representative of the Executive, shall
not assign all or any portion of the Executive's rights or obligations under
this Agreement without the prior written consent of the Company.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been given (i) if mailed with the United
States Postal Service by prepaid, first class, certified mail, return receipt
requested, at the time of receipt by the intended recipient, or (ii) if sent
<PAGE>
<PAGE>
by facsimile transmission, when so sent and receipt acknowledged by an
appropriate telephone or facsimile receipt addressed as follows:
If to the Company, addressed to:
PT-1 Communications, Inc.
30-50 Whitestone Expressway
Flushing, New York 11354
Attn: Corporate Secretary
Telecopier: (718) 779-6571
If to the Executive:
Mr. Samer Tawfik
c/o PT-1 COMMUNICATIONS, INC.
30-50 Whitestone Expressway
Flushing, New York 11354
Telecopier: (718) 779-6571
or such other address as may be given from time to time under the terms of
this notice provision.
(c) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
(d) Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment or waiver may be charged against a party without
that party's prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each transferee of any
party hereto.
(e) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) No Third Party Beneficiaries. This Agreement is not
intended to confer any rights or remedies on any person not a party to this
Agreement.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
<PAGE>
<PAGE>
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without reference to the
conflict of laws provisions of such state.
(j) Survival of Certain Provisions. The Company's
obligations under Section 7 shall survive the termination of this Agreement.
The Executive's obligations under Section 8(c)(i)(A) shall, except as
expressly provided in Section 8(c)(i), survive without limitation as to time.
The Executive's obligations under Section 8(c)(i)(B) shall survive for six
months following the expiration of the Term or earlier termination of this
Agreement.
(k) Mediation and Arbitration. Except for breaches of the
Executive's obligations under Section 8(c)(i)(A) or Section 8(c)(i)(B) for
which the Company may seek injunctive and monetary relief in a court of law of
competent jurisdiction, any dispute which may arise between the parties hereto
as to the construction, interpretation or effect of this Agreement which is
not resolved by mutual agreement between the parties, shall first be submitted
to nonbinding mediation on terms and conditions to be mutually agreed upon by
the parties. In the event that a dispute is not resolved by nonbinding
mediation, the disputing party may give the other party notice of such party's
intention to cause the same to be submitted to arbitration. After fifteen
(15) days have elapsed from the giving of such notice, but not before such
time, the party who gave such notice may cause any such dispute which then
remains unresolved to be submitted to arbitration by submitting the same to
the New York, New York office of the American Arbitration Association (the
"AAA") (or any successor thereto, but if no organization is then performing a
function reasonably similar to the AAA, then to a court of competent
jurisdiction in accordance with the rules of such court) with a request for
arbitration to be conducted in accordance with the rules thereof by one (1)
arbitrator to be jointly selected by the parties. The prevailing party's
expenses, including without limitation attorneys' fees, in connection with
such arbitration shall be borne by the losing party; provided, however, that
if liability is allocated by the arbitrator between the parties, the expenses
of such arbitration, including without limitation the parties' attorneys'
fees, shall be borne by the parties in proportion to their respective
percentages or proportions of liability assessed by the arbitrator. The
decision of the arbitrator as to all matters properly submitted to such
arbitrator and as to the apportionment of expenses of arbitration shall be
conclusive and binding upon the parties and judgment upon any award may be
entered in any court of competent jurisdiction.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Company:
PT-1 COMMUNICATIONS, INC.
a New York corporation
WITNESS:
/s/ Douglas Barley By: /s/ John Klusaritz
- ------------------------ ----------------------------------
Name: Name:
Title: General Counsel
EXECUTIVE: WITNESS:
/s/ Douglas Barley /s/ Samer Tawfik
- -------------------------- -------------------------------
Name: Samer Tawfik
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
April 6, 1996, is made and entered into by and between PHONETIME, INC., a New
York corporation (the "Company"), and PETER VITA (the "Executive").
RECITALS
WHEREAS, the Company desires to employ the Executive as Executive
Vice President on the terms and conditions hereinafter set forth and the
Executive desires to accept such employment on such terms and subject to such
conditions; and
WHEREAS, the Executive possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties agree as follows:
1. Employment. Subject to and pursuant to the terms of this
Agreement, effective April 6, 1996 (the "Effective Date"), the Company shall
employ the Executive, and the Executive shall be employed by and shall serve
the Company, in the capacity of Executive Vice President reporting directly to
the President and the Board of Directors (the "Board").
2. Term and Renewals. Subject to the provisions for earlier
termination provided herein, the term of this Agreement (the "Initial Term")
shall commence on the Effective Date and shall terminate on the three (3)-year
anniversary of the Effective Date. Following expiration of the Initial Term,
the Agreement shall be renewed for a one (1)-year period (the "Initial Renewal
Term") if at least one (1) month prior to the expiration of the Initial Term
either party hereto shall not have given the other party written notice not to
renew this Agreement. The Initial Renewal Term and each "Renewal Term" (as
defined in this Section 2) shall be renewed for successive one (1)-year
periods (each, a "Renewal Term," the Initial Term, the Initial Renewal Term,
if any, and each Renewal, if any, collectively, the "Term") if at least one
(1) month prior to the expiration of the Initial Renewal Term or a Renewal
Term, as the case may be, either party hereto shall not have given the other
party written notice of its intention not to renew this Agreement. Nothing in
this Agreement shall be construed to require either party hereto to renew this
Agreement and either party hereto has the sole discretion not to renew this
Agreement.
3. Duties. During the Term, the Executive shall be an executive
officer of the Company and shall report to the President of the Company and
the Board, and shall have all<PAGE>
<PAGE>
duties and responsibilities assigned to the executive by the President and the
Board, as limited or expanded pursuant to this Agreement. The Executive shall
devote all of his working time and effort during normal business hours to the
business and affairs of the Company, and shall use his reasonable best efforts
to perform such duties and responsibilities faithfully and efficiently.
4. Compensation. For services rendered by the Executive
pursuant to this Agreement, the Company shall pay or award compensation to the
Executive as follows:
(a) Base Compensation. The Company shall pay to the
Executive a base salary ("Base Compensation") of $150,000 per annum, payable
in accordance with the Company's customary practices for its officers. The
amount of Base Compensation shall be reviewed by the Board annually, and may
be increased to reflect inflation or such other adjustments as it may deem
appropriate; provided, however, that Base Compensation, as increased, may not
be decreased.
(b) Bonus Compensation. In addition to the Base
Compensation, the Board of Directors may in its discretion award the Executive
a performance bonus (the "Performance Bonus") in cash or stock options.
(c) Withholding. The Company shall deduct and withhold
from the compensation payable to the Executive hereunder any and all
applicable federal, state and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the Company under
applicable statute or regulation.
5. Additional Benefits.
(a) Fringe Benefits; Reimbursement; Vacation. In
addition to Base Compensation and Bonus provided for in Section 4 above, in
connection with the Executive's employment by the Company, the Executive shall
be entitled to receive:
(i) all fringe benefits customarily offered by
the Company to its senior executive officers, including without
limitation, expense accounts, participation in any Company stock
compensation plan and the various employee benefit plans or programs
(collectively, the "Benefit Plans") provided to the employees of the
Company in general, subject to the eligibility requirements with respect
to each such Benefit Plan, and to such other benefits or perquisites as
may be approved by the Board during the Term;
(ii) reimbursement from the Company for all
customary, ordinary and necessary business expenses incurred by the
Executive in the performance of his duties and responsibilities
hereunder, provided that the Executive furnishes the Company with
vouchers, receipts and other substantiation of such expenses within
thirty (30) days after they are incurred; and
<PAGE>
<PAGE>
(iii) paid vacation benefits in accordance with
the Company's vacation policy in effect for its senior executive
officers.
6. Termination of Employment.
(a) Termination. Except as otherwise provided in this
Agreement, the Executive's employment by the Company hereunder shall terminate
upon the earliest to occur of the dates specified below (as applicable, the
"Termination Date"):
(i) The close of business on the date of
expiration of the Term.
(ii) The close of business on the date of the
Executive's death ("Death").
(iii) The close of business on the date specified
as the effective date of termination of the Executive's employment in a
"Notice of Termination" (as defined below) delivered by the Company to
the Executive due to the Executive's "Disability". For purposes of this
Agreement, the term "Disability" shall mean the inability or incapacity
of the Executive, due to any medically determined physical or mental
impairment, to perform his duties and responsibilities for the Company
for a total of sixty (60) calendar days in any twelve (12) month period
during the Term.
(iv) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Executive in a Notice of Termination delivered by the Executive to the
Company (a "Voluntary Termination").
(v) The close of business on the date specified as
the effective date of termination of the Executive's employment by the
Company for "Cause" (as defined below) in a Notice of Termination
delivered by the Company to the Executive. For purposes of this
Agreement, the term "Cause" shall mean termination based on (A) the
Executive's material breach of this Agreement; (B) conviction of the
Executive for (x) any crime constituting a felony in the jurisdiction in
which committed, (y) any crime involving moral turpitude (whether or not
a felony) or (z) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company (whether
or not a felony); (C) substance abuse by the Executive which is repeated
after written notice to the Executive identifying such abuse; (D) the
failure or the refusal of the Executive to follow lawful and proper
directives of the Board; (E) willful malfeasance or misconduct by the
Executive which in connection with misappropriating any funds or property
of the Company or attempting to willfully obtain any personal profit from
any transaction in which the Executive has an interest which is adverse
to the interests of the Company or any other willful misconduct that
discredits or damages the Company; (F) indictment of the Executive by a
grand jury for a felony violation of the federal securities laws; or (G)
the engagement by the Executive in any "Prohibited Activity" or<PAGE>
<PAGE>
"Competitive Activity" (as such terms respectively are defined in
Sections 9(c)(i) and 9(c)(ii) below) in violation of this Agreement.
(vi) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Company other than for Death, Disability or Cause in a Notice of
Termination delivered by the Company to the Executive.
(b) Notice of Termination. Any termination of the
Executive's employment hereunder (other than termination as a result of Death)
by the Company or by the Executive shall be communicated by a Notice of
Termination to the other party hereto given in accordance with the provisions
of Section 10(b) below. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, and (ii) if applicable,
sets forth the facts and circumstances claimed to provided a basis for
termination of the Executive's employment.
7. Payment Upon Termination of Employment.
(a) Voluntary Termination, Termination for Cause or
Expiration of Term. If the Executive's employment is terminated pursuant to a
Voluntary Termination, a termination for Cause or the expiration of the Term,
then, without limiting any other rights or remedies available to the Company
at law or in equity, the Company shall pay or provide to the Executive, his
legal representatives, heirs, eligible dependents, if any, or permitted
assigns, as applicable, (i) on the Termination Date, all compensation earned
but unpaid as of the Termination Date set forth in Section 4 above; and (ii)
all benefits to which such persons may be entitled under any of the Benefit
Plans which provide for benefits after termination of employment, in
accordance with the terms thereof.
(b) Other Terminations. Subject to the provisions of
Section 8(c) below, if the Executive's employment is terminated other than
pursuant to a Voluntary Termination, a termination for Cause or the expiration
of the Term, (i) the Company shall pay to the Executive, his legal
representatives, heirs or permitted assigns, on the Termination Date, all
compensation earned but unpaid as of the Termination Date set forth in Section
4 above; (ii) during the period beginning on the Termination Date and
extending until the earlier to occur of the Executive's Death or the date this
Agreement otherwise would have terminated had the employment of the Executive
not been earlier terminated but, regardless of the Executive's Death, not less
than a period of six (6) months from the Termination Date (the "Remaining
Term"), the Company shall provide to the executive, his legal representatives,
heirs, eligible dependents, if any, or permitted assigns, as applicable, all
benefits to which such persons may be entitled under any of the Benefit Plans,
and specifically, without limitation, shall provide the Executive and his
eligible dependents, if any, with life, disability, accident and group health
insurance benefits substantially similar to those which the Executive and his
dependents were receiving immediately prior to the Notice of Termination,
provided the Executive or his legal<PAGE>
<PAGE>
representatives, heirs or permitted assigns pay the regular premium required
of active employees for such coverage (following the expiration of the
Remaining Term, the Executive shall be eligible to purchase health insurance
benefits in accordance with applicable federal law); (iii) beginning with the
first day of the month on or following the Termination Date and continuing
until the expiration of the Remaining Term, the Company shall pay the
Executive in cash an amount equal to one-twelfth (1/12) of the Base
Compensation, less the amount, if any, of monthly disability income paid to
the Executive pursuant to any Company-sponsored long-term disability plan;
(iv) if on the termination Date the Executive has completed six (6) or more
months of the Company's then current fiscal year, the Company shall pay to the
Executive, his legal representatives, heirs or permitted assigns, a pro-rata
portion of his Bonus for such fiscal year (the "Pro Rata Bonus"), such payment
to be made within ten (10) days following the date on which a bonus in which
the Executive would have participated but for his termination is declared,
provided the criteria established by the Board for such Pro Rata Bonus have
been satisfied fully as of the Termination Date; and (v) all stock options,
warrants, rights and other Company stock-related awards granted to the
Executive by the Company (collectively, the "Stock Awards") that otherwise
would have vested and become exercisable during the fiscal year of the Company
in which the Executive has terminated, shall become upon the Termination Date
fully vested an nonforfeitable, all restrictions (except for restrictions
required by law), if any, thereon shall lapse, all performance goals, if any,
associated therewith shall be deemed met in full, an the Executive shall be
entitled to exercise any or all such Stock Awards in accordance with the terms
of the documentation pursuant to which such Stock Awards were granted.
(c) Exclusive Payments. The payments upon termination made
by the Company to the Executive pursuant to Sections 7(b) and (c) above shall
constitute the exclusive payments due to the Executive upon termination under
this Agreement; provided, however, that all monthly payments made pursuant to
Section 7(b)(iii) above, except as provided in Section 8(d), shall be reduced
or mitigated by the amount of any cash compensation secured or earned by the
Executive during such month for services rendered to another employer;
provided, further, that all benefits receivable by the Executive, his legal
representatives, heirs, eligible dependents, if any, or permitted assigns, as
applicable, shall be reduce to the extent comparable benefits actually are
received by the Executive, his legal representatives, heirs, eligible
dependents, if any, or permitted assigns, as applicable, during the Remaining
Term pursuant to similar plans or programs of another employer.
8. Repurchase Option.
(a) Subject to Section 8(d) below, in the event of a
termination of this Agreement pursuant to Section 6(a)(iv) or Section 6(a)(v)
hereof prior to the third anniversary of the Effective Date, the Company may
within thirty (30) days after such Termination Date (the "Notice Period")
elect to purchase (the "Repurchase Option"), one hundred percent (100%) of the
shares of common stock of the Company ("Common Stock") then held by the
Executive (the "Repurchase Shares") at the Fair Market Value of such Common
Stock (the "Repurchase Price"). As used herein, "Fair Market Value" shall
mean either (a) if the Common Stock is publicly<PAGE>
<PAGE>
traded, then the average aggregate price of the Repurchase Shares for the
thirty (30) trading days preceding the date on which the Company notifies the
Executive of its intent to exercise the Repurchase Option as quoted on the
stock market or over-the-counter market on which the Common Stock is traded,
or (b) if the Common Stock is not publicly traded, then at the aggregate
value of the Repurchase Shares on the date on which the Company notifies the
Executive of its intent to exercise the Repurchase Option as determined by an
appraisal performed by an independent appraiser selected by the Company. The
Repurchase Option, if exercised by the Company, shall be exercised by written
notice signed by an officer of the Company and mailed pursuant to the terms of
Section 10(b) below within the Notice Period. Within thirty (30) days of
delivery of such notice (the "Repurchase Period"), the Company shall pay for
the Repurchase Shares it has elected to repurchase from any source of funds to
the extent legally available therefor (i) by delivery of a check to Executive
in the amount of the Repurchase Price for Repurchase Shares being purchased,
(ii) by cancellation by the Company of an amount of Executive's indebtedness
to the Company or (iii) by a combination of clauses (i) and (ii) so that the
combined payment and cancellation of indebtedness equals the Repurchase Price.
(b) In the event the Company for any reason elects not to
exercise the Repurchase Option pursuant to Section 8(a) hereof, the Company
may assign its Repurchase Option to any third party during the Notice Period.
If exercised by the Company's assignees and mailed pursuant to the terms of
Section 10(b) below within the Repurchase Period. Such assignees shall pay
for the Repurchase Shares they have elected to purchase by delivery of a check
in the amount of the Repurchase Price to the Executive.
(c) In the event that the Company or such assignee(s) do
not elect to exercise the Repurchase Option as to all of the Repurchase Shares
subject to it during the Notice Period, the Repurchase Option shall expire as
to all shares that the Company and such assignee(s) have not elected to
purchase.
(d) Should Executive continue as an employee of the
Company, the Repurchase Shares subject to the Company's Repurchase Option
shall vest and be released from the Repurchase Option in accordance with the
following schedule: (i) one-third of the Repurchase Shares shall no longer be
subject to the Repurchase Option ("Vest") on the first anniversary of the
Effective Date; and (ii) the remaining Repurchase Shares shall Vest on the
first day of each month in 24 successive equal monthly installments over the
24-month period following the first anniversary of the Effective Date.
9. Executive Covenants.
(a) The Executive agrees and understands that due to the
Executive's position with the Company, both prior to, if applicable, and
subsequent to the Effective Date, the Executive has been and will be exposed
to, and has received and will receive confidential and proprietary information
of the Company or relating to the Company's business or affairs (collectively,
the "Trade Secrets"), including but not limited to technical information,
computer<PAGE>
<PAGE>
software (including source and object code data and related documentation),
research and development, know-how, product information, formulae, processes,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, business policies and practices and other forms of
information considered by the Company to be proprietary and confidential and
in the nature of trade secrets. Except to the extent that the proper
performance of the Executive's duties and responsibilities hereunder may
require disclosure, and except as such information (i) was known to the
Executive prior to his employment by the Company or (ii) was or becomes
generally available to the public other than as a result of a disclosure by
the Executive in violation of the provisions of this Section 9(a), the
Executive agrees that during the Term and at all times thereafter the
Executive will keep such Trade Secrets confidential and will not disclose such
information, either directly or indirectly, to any third person or entity
without the prior written consent of the Company. This confidentiality
covenant has no temporal, geographical or territorial restriction. On the
Termination Date, the Executive promptly will supply to the Company all
property, keys, notes, memoranda, writings, lists, files, reports, customer
lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines,
technical data, formulae or any other tangible product or document
constituting Trade Secrets which have been produced by, received by or
otherwise submitted to the Executive during the course of his employment with
the Company, including the period during and prior to the Term. Any material
breach of the terms of this Section 9(a) shall be considered Cause.
(b) Inventions. The Executive agrees that any and all
inventions, discoveries, improvements, processes, formulae, business
application software patents, copyrights and trademarks made, developed,
discovered or acquired by him during his employment by the Company, including
the Term, solely or jointly with others or otherwise, which relate to the
business of the Company, and all knowledge possessed by the Executive relating
thereto (collectively, the "Inventions"), shall be fully and promptly
disclosed to the Board and to such person or persons as the Board shall
direct, and shall be the sole and absolute property of the Company and the
Company shall be the sole and absolute owner thereof. The Executive agrees
that he will at all times keep all Inventions secret from everyone except the
Company and such persons as the Board may from time to time direct. The
executive shall, as requested by the Company to effect disclosure and
assignment of the Inventions to the Company or its designees and any patent
applications (United States or foreign) and renewals with respect thereto,
including any other instruments deemed necessary by the Company for the
prosecution of patent applications or the acquisition of letters patent.
(c) Prohibited and Competitive Activities. The Executive
and the Company recognize that due to the nature of the Executive's engagement
hereunder and the relationship of the Executive to the Company, both prior and
subsequent to the Effective Date, the Executive has had and will have access
to, has had and will acquire, and has assisted and may continue to assist in
developing, confidential and proprietary information relating to the business
and operations of the Company and its affiliates, including Trade Secrets.
The Executive acknowledges that such information has been and will be of
central importance to the business of<PAGE>
<PAGE>
the Company and its affiliates and that disclosure of it to, or its use by,
others (including, without limitation, the Executive (other than with respect
to the Company's business and affairs)) could cause substantial loss to the
Company. The Executive and the Company also recognize that an important part
of the Executive's duties and responsibilities will be to develop good will
for the Company and its affiliates through his personal contact with "Clients"
(as defined below), employees and others having business relationships with
the Company, and that there is a danger that this good will, a proprietary
asset of the Company, any follow the Executive if and when his relationship
with the Company is terminated. The Executive accordingly agrees as follows:
(i) Prohibited Activities. The executive will not
at any time during the Term (A) other than in the course of his
employment, disclose or furnish to any other person or, directly or
indirectly, use for his own account or the account of any other person,
any Trade Secrets, and he shall retain all such Trade Secrets in trust
for the benefit of the Company, its affiliates and the successors and
assigns of any of them; (B) directly or through one or more
intermediaries, solicit for employment by a Competitor (as defined in
Section 9(c)(ii) below) any person who, at the time of such solicitation,
is employed by the Company or any affiliate thereof; (C) directly or
indirectly, whether for his own account or for the account of any other
person, solicit, divert or endeavor to entice away from the Company or
any entity controlled by the Company, or otherwise engage in any activity
intended to terminate, disrupt or interfere with, the Company's or any of
its affiliate's relationship with, Clients, or otherwise adversely affect
the Company's or any of its affiliate's relationship with clients or
other business relationships of the Company or any affiliate thereof; or
(D) publish or make any statement critical of the Company or any
shareholder or affiliate of the Company, or in any way adversely affect
or otherwise malign the business or reputation of any of the foregoing
persons (any activity described in clause (A), (B), (C) or (D) of this
Section 9(c)(i) being herein referred to as a "Prohibited Activity");
provided, however, that if in the written opinion of counsel, the
Executive is legally compelled to disclose Trade Secrets to any tribunal
or else stand liable for contempt or suffer other similar censure or
penalty, then the disclosure to such tribunal of those Trade Secrets
which such counsel advises in writing legally are required to be
disclosed shall not constitute a Prohibited Activity, provided that the
Executive shall give the Company as much advance notice of such
disclosure as is reasonably practicable. For purposes of this Agreement,
"Clients" shall mean persons who, at any time during the Executive's
course of employment with the Company (including, without limitation,
prior to the Effective Date) are or were clients or customers of the
Company or any affiliate thereof or any predecessor of any of the
foregoing.
(ii) Non-Competition. By and in consideration of
the Company's entering into this Agreement and providing the compensation
and benefits to be provided by the Company to the Executive, and further
in consideration of the Executive's continued exposure to the
confidential an proprietary information of the<PAGE>
<PAGE>
Company (including, without limitation, the Trade Secrets), the Executive
agrees that the Executive will not, from the Effective Date and until a
period of one (1) year after the Termination Date, engage in any
"Competitive Activity" as defined below. For purposes of this Agreement,
the term "Competitive Activity" shall mean engaging in any of the
following activities: (A) serving as a director of any "Competitor" (as
defined below); (B) directly or indirectly through one or more
intermediaries, either (x) controlling any Competitor or (y) owning any
equity or debt interests in any Competitor (other than equity or debt
interests which are publicly traded and, at the time of any acquisition,
do not exceed 5 percent of the particular class of interest outstanding)
(it being understood that, if interests in any Competitor are owned by an
investment vehicle or other entity in which the Executive owns an equity
interest, a portion of the interests in such competitor owned by such
entity shall be attributed to the Executive, such portion determined by
applying the percentage of the equity shall be attributed to the
Executive, such portion determined by applying the percentage of the
equity interest in such entity owned by the Executive to the interests in
such Competitor owned by such entity); (C) employment by (including
serving as an officer or partner of), providing consulting services to
(including, without limitation, as an independent contractor), or
managing or operating the business or affairs of, any Competitor; or (D)
participating in the ownership, management, operation or control of or
being connected in any manner with any Competitor. For purposes of this
Agreement, the term "Competitor" shall mean any person (other than the
Company or any affiliate thereof) that competes, either directly or
indirectly, at the time of determination, in any "Restricted Area" (as
defined below) with any of the business conducted by the Company or any
affiliate thereof. For purposes of this Agreement, the term "Restricted
Area" shall mean any state or territory of the United States in which the
Company or any affiliate thereof conducts business or any state or
similar subdivision of any foreign country.
(iii) Remedies. The Executive agrees that any
breach of the terms of this Section 9 would result in irreparable injury
and damage to the Company for which the Company would have no adequate
remedy at law. The Executive therefore also agrees that in the event of
any such breach or any threat of such breach, the Company shall be
entitled to an immediate injunction and restraining order to prevent such
breach and/or threatened breach and/or continued breach by the Executive
and/or any and all persons and/or entities acting for and/or with the
Executive, without having to prove damages, in addition to any other
remedies to which the Company may be entitled at law or in equity. The
terms of this Section 9 shall not prevent the Company from pursuing any
other available remedies for any breach or threatened breach hereof,
including but not limited to the recovery of damages form the Executive.
The provisions of this Section 9 shall survive any termination of
this Agreement. The existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements set forth in this Section 9.
<PAGE>
<PAGE>
10. Miscellaneous.
(a) Binding Effect; Assignment. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of the Repurchase Shares).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or be reason of this
Agreement, except as expressly provided in this Agreement. The Executive, or
any beneficiary or legal representative of the Executive, shall not assign all
or any portion of the Executive's rights or obligations under this Agreement
without the prior written consent of the Company.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been given (i) if mailed with the United
States Postal Service by prepaid, first class, certified mail, return receipt
requested, at the time of receipt by the intended recipient, or (ii) if sent
by facsimile transmission, when so sent and receipt acknowledged by an
appropriate telephone or facsimile receipt addressed as follows:
If to the Company, addressed to:
PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Attn: Corporate Secretary
Telecopier: (718) 779-6571
With a copy to:
Swidler & Berlin Chartered
3000 K Street, N.W.
Washington, D.C. 20007-5516
Telecopier: (202) 424-7643
Attention: John J. Klusaritz, Esq.
If to the Executive:
Mr. Peter Vita
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Telecopier: (718) 779-6571
or such other address as may be given from time to time under the terms of
this notice provision.
<PAGE>
<PAGE>
(c) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
(d) Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment or waiver may be charged against a party without
that party's prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each transferee of any
party hereto.
(e) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) No Third Party Beneficiaries. This Agreement is not
intended to confer any rights or remedies on any person not a party to this
Agreement.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without reference to the
conflict of laws provisions of such state.
<PAGE>
<PAGE>
(j) Survival of Certain Provisions. The Executive's
obligations under Section 9(c)(i)(A) shall survive without limitation as to
time. The Executive's obligations under Section 9(c)(i)(B) shall survive for
six months following the expiration of the Term or early termination of this
Agreement.
(k) Mediation and Arbitration. Except for breaches of the
Executive's obligations under Section 9(c)(i)(A) or Section 9(c)(i)(B) for
which the Company may seek injunctive and monetary relief in a court of law of
competent jurisdiction, any dispute which may arise between the parties hereto
as to the construction, interpretation or effect of this Agreement which is
not resolved by mutual agreement between the parties, shall first be submitted
to nonbinding mediation on terms and conditions to be mutually agreed upon by
the parties. In the event that a dispute is not resolved by nonbinding
mediation, the disputing party may give the other party notice of such party's
intention to cause the same to be submitted to arbitration. After fifteen
(15) days have elapsed from the giving of such notice, but not before such
time, the party who gave such notice may cause any such dispute which then
remains unresolved to be submitted to arbitration by submitting the same to
the New York, New York office of the American Arbitration Association (the
"AAA") (or any successor thereto, but if no organization is then performing a
function reasonably similar to the AAA, then to a court of competent
jurisdiction in accordance with the rules of such court) with a request for
arbitration to be conducted in accordance with the rules thereof by one (1)
arbitrator to be jointly selected by the parties. The prevailing party's
expenses, including without limitation attorneys' fees, in connection with
such arbitration shall be borne by the losing party; provided, however, that
if liability is allocated by the arbitrator between the parties, the expenses
of such arbitration, including without limitation the parties' attorneys'
fees, shall be borne by the parties in proportion to their respective
percentages or proportions of liability assessed by the arbitrator. The
decision of the arbitrator as to all matters properly submitted to such
arbitrator and as to the apportionment of expenses of arbitration shall be
conclusive and binding upon the parties and judgment upon any award may be
entered in any court of competent jurisdiction.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Company:
PHONETIME, INC.
a New York corporation
WITNESS:
/s/ John Klusaritz By: /s/ Samer Tawfik
- ----------------------- -----------------------------
Name: Name:
Title:
EXECUTIVE:
WITNESS:
/s/ John Klusaritz /s/ Peter Vita
- ----------------------- -------------------------------
Name: Peter Vita
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
April 6, 1996, is made and entered into by and between PHONETIME, INC., a New
York corporation (the "Company"), and DOUGLAS BARLEY (the "Executive").
RECITALS
WHEREAS, the Company desires to employ the Executive as Vice
President on the terms and conditions hereinafter set forth and the Executive
desires to accept such employment on such terms and subject to such
conditions; and
WHEREAS, the Executive possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties agree as follows:
1. Employment. Subject to and pursuant to the terms of this
Agreement, effective April 6, 1996 (the "Effective Date"), the Company shall
employ the Executive, and the Executive shall be employed by and shall serve
the Company, in the capacity of Vice President reporting directly to the
President and the Board of Directors (the "Board").
2. Term and Renewals. Subject to the provisions for earlier
termination provided herein, the term of this Agreement (the "Initial Term")
shall commence on the Effective Date and shall terminate on the three (3)-year
anniversary of the Effective Date. Following expiration of the Initial Term,
the Agreement shall be renewed for a one (1)-year period (the "Initial Renewal
Term") if at least one (1) month prior to the expiration of the Initial Term
either party hereto shall not have given the other party written notice not to
renew this Agreement. The Initial Renewal Term and each "Renewal Term" (as
defined in this Section 2) shall be renewed for successive one (1)-year
periods (each, a "Renewal Term," the Initial Term, the Initial Renewal Term,
if any, and each Renewal, if any, collectively, the "Term") if at least one
(1) month prior to the expiration of the Initial Renewal Term or a Renewal
Term, as the case may be, either party hereto shall not have given the other
party written notice of its intention not to renew this Agreement. Nothing in
this Agreement shall be construed to require either party hereto to renew this
Agreement and either party hereto has the sole discretion not to renew this
Agreement.
3. Duties. During the Term, the Executive shall be an executive
officer of the Company and shall report to the President of the Company and
the Board, and shall have all<PAGE>
<PAGE>
duties and responsibilities assigned to the executive by the President and the
Board, as limited or expanded pursuant to this Agreement. The Executive shall
devote all of his working time and effort during normal business hours to the
business and affairs of the Company, and shall use his reasonable best efforts
to perform such duties and responsibilities faithfully and efficiently.
4. Compensation. For services rendered by the Executive
pursuant to this Agreement, the Company shall pay or award compensation to the
Executive as follows:
(a) Base Compensation. The Company shall pay to the
Executive a base salary ("Base Compensation") of $100,000 per annum, payable
in accordance with the Company's customary practices for its officers. The
amount of Base Compensation shall be reviewed by the Board annually, and may
be increased to reflect inflation or such other adjustments as it may deem
appropriate; provided, however, that Base Compensation, as increased, may not
be decreased.
(b) Bonus Compensation. In addition to the Base
Compensation, the Board of Directors may in its discretion award the Executive
a performance bonus (the "Performance Bonus") in cash or stock options.
(c) Withholding. The Company shall deduct and withhold
from the compensation payable to the Executive hereunder any and all
applicable federal, state and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the Company under
applicable statute or regulation.
5. Additional Benefits.
(a) Fringe Benefits; Reimbursement; Vacation. In
addition to Base Compensation and Bonus provided for in Section 4 above, in
connection with the Executive's employment by the Company, the Executive shall
be entitled to receive:
(i) all fringe benefits customarily offered by
the Company to its senior executive officers, including without
limitation, expense accounts, participation in any Company stock
compensation plan and the various employee benefit plans or programs
(collectively, the "Benefit Plans") provided to the employees of the
Company in general, subject to the eligibility requirements with respect
to each such Benefit Plan, and to such other benefits or perquisites as
may be approved by the Board during the Term;
(ii) reimbursement from the Company for all
customary, ordinary and necessary business expenses incurred by the
Executive in the performance of his duties and responsibilities
hereunder, provided that the Executive furnishes the Company with
vouchers, receipts and other substantiation of such expenses within
thirty (30) days after they are incurred; and
<PAGE>
<PAGE>
(iii) paid vacation benefits in accordance with
the Company's vacation policy in effect for its senior executive
officers.
6. Termination of Employment.
(a) Termination. Except as otherwise provided in this
Agreement, the Executive's employment by the Company hereunder shall terminate
upon the earliest to occur of the dates specified below (as applicable, the
"Termination Date"):
(i) The close of business on the date of
expiration of the Term.
(ii) The close of business on the date of the
Executive's death ("Death").
(iii) The close of business on the date specified
as the effective date of termination of the Executive's employment in a
"Notice of Termination" (as defined below) delivered by the Company to
the Executive due to the Executive's "Disability". For purposes of this
Agreement, the term "Disability" shall mean the inability or incapacity
of the Executive, due to any medically determined physical or mental
impairment, to perform his duties and responsibilities for the Company
for a total of sixty (60) calendar days in any twelve (12) month period
during the Term.
(iv) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Executive in a Notice of Termination delivered by the Executive to the
Company (a "Voluntary Termination").
(v) The close of business on the date specified as
the effective date of termination of the Executive's employment by the
Company for "Cause" (as defined below) in a Notice of Termination
delivered by the Company to the Executive. For purposes of this
Agreement, the term "Cause" shall mean termination based on (A) the
Executive's material breach of this Agreement; (B) conviction of the
Executive for (x) any crime constituting a felony in the jurisdiction in
which committed, (y) any crime involving moral turpitude (whether or not
a felony) or (z) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company (whether
or not a felony); (C) substance abuse by the Executive which is repeated
after written notice to the Executive identifying such abuse; (D) the
failure or the refusal of the Executive to follow lawful and proper
directives of the Board; (E) willful malfeasance or misconduct by the
Executive which in connection with misappropriating any funds or property
of the Company or attempting to willfully obtain any personal profit from
any transaction in which the Executive has an interest which is adverse
to the interests of the Company or any other willful misconduct that
discredits or damages the Company; (F) indictment of the Executive by a
grand jury for a felony violation of the federal securities laws; or (G)
the engagement by the Executive in any "Prohibited Activity" or<PAGE>
<PAGE>
"Competitive Activity" (as such terms respectively are defined in
Sections 9(c)(i) and 9(c)(ii) below) in violation of this Agreement.
(vi) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Company other than for Death, Disability or Cause in a Notice of
Termination delivered by the Company to the Executive.
(b) Notice of Termination. Any termination of the
Executive's employment hereunder (other than termination as a result of Death)
by the Company or by the Executive shall be communicated by a Notice of
Termination to the other party hereto given in accordance with the provisions
of Section 10(b) below. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, and (ii) if applicable,
sets forth the facts and circumstances claimed to provided a basis for
termination of the Executive's employment.
7. Payment Upon Termination of Employment.
(a) Voluntary Termination, Termination for Cause or
Expiration of Term. If the Executive's employment is terminated pursuant to a
Voluntary Termination, a termination for Cause or the expiration of the Term,
then, without limiting any other rights or remedies available to the Company
at law or in equity, the Company shall pay or provide to the Executive, his
legal representatives, heirs, eligible dependents, if any, or permitted
assigns, as applicable, (i) on the Termination Date, all compensation earned
but unpaid as of the Termination Date set forth in Section 4 above; and (ii)
all benefits to which such persons may be entitled under any of the Benefit
Plans which provide for benefits after termination of employment, in
accordance with the terms thereof.
(b) Other Terminations. Subject to the provisions of
Section 8(c) below, if the Executive's employment is terminated other than
pursuant to a Voluntary Termination, a termination for Cause or the expiration
of the Term, (i) the Company shall pay to the Executive, his legal
representatives, heirs or permitted assigns, on the Termination Date, all
compensation earned but unpaid as of the Termination Date set forth in Section
4 above; (ii) during the period beginning on the Termination Date and
extending until the earlier to occur of the Executive's Death or the date this
Agreement otherwise would have terminated had the employment of the Executive
not been earlier terminated but, regardless of the Executive's Death, not less
than a period of six (6) months from the Termination Date (the "Remaining
Term"), the Company shall provide to the executive, his legal representatives,
heirs, eligible dependents, if any, or permitted assigns, as applicable, all
benefits to which such persons may be entitled under any of the Benefit Plans,
and specifically, without limitation, shall provide the Executive and his
eligible dependents, if any, with life, disability, accident and group health
insurance benefits substantially similar to those which the Executive and his
dependents were receiving immediately prior to the Notice of Termination,
provided the Executive or his legal<PAGE>
<PAGE>
representatives, heirs or permitted assigns pay the regular premium required
of active employees for such coverage (following the expiration of the
Remaining Term, the Executive shall be eligible to purchase health insurance
benefits in accordance with applicable federal law); (iii) beginning with the
first day of the month on or following the Termination Date and continuing
until the expiration of the Remaining Term, the Company shall pay the
Executive in cash an amount equal to one-twelfth (1/12) of the Base
Compensation, less the amount, if any, of monthly disability income paid to
the Executive pursuant to any Company-sponsored long-term disability plan;
(iv) if on the termination Date the Executive has completed six (6) or more
months of the Company's then current fiscal year, the Company shall pay to the
Executive, his legal representatives, heirs or permitted assigns, a pro-rata
portion of his Bonus for such fiscal year (the "Pro Rata Bonus"), such payment
to be made within ten (10) days following the date on which a bonus in which
the Executive would have participated but for his termination is declared,
provided the criteria established by the Board for such Pro Rata Bonus have
been satisfied fully as of the Termination Date; and (v) all stock options,
warrants, rights and other Company stock-related awards granted to the
Executive by the Company (collectively, the "Stock Awards") that otherwise
would have vested and become exercisable during the fiscal year of the Company
in which the Executive has terminated, shall become upon the Termination Date
fully vested an nonforfeitable, all restrictions (except for restrictions
required by law), if any, thereon shall lapse, all performance goals, if any,
associated therewith shall be deemed met in full, an the Executive shall be
entitled to exercise any or all such Stock Awards in accordance with the terms
of the documentation pursuant to which such Stock Awards were granted.
(c) Exclusive Payments. The payments upon termination made
by the Company to the Executive pursuant to Sections 7(b) and (c) above shall
constitute the exclusive payments due to the Executive upon termination under
this Agreement; provided, however, that all monthly payments made pursuant to
Section 7(b)(iii) above, except as provided in Section 8(d), shall be reduced
or mitigated by the amount of any cash compensation secured or earned by the
Executive during such month for services rendered to another employer;
provided, further, that all benefits receivable by the Executive, his legal
representatives, heirs, eligible dependents, if any, or permitted assigns, as
applicable, shall be reduce to the extent comparable benefits actually are
received by the Executive, his legal representatives, heirs, eligible
dependents, if any, or permitted assigns, as applicable, during the Remaining
Term pursuant to similar plans or programs of another employer.
8. Repurchase Option.
(a) Subject to Section 8(d) below, in the event of a
termination of this Agreement pursuant to Section 6(a)(iv) or Section 6(a)(v)
hereof prior to the third anniversary of the Effective Date, the Company may
within thirty (30) days after such Termination Date (the "Notice Period")
elect to purchase (the "Repurchase Option"), one hundred percent (100%) of the
shares of common stock of the Company ("Common Stock") then held by the
Executive (the "Repurchase Shares") at the Fair Market Value of such Common
Stock (the "Repurchase Price"). As used herein, "Fair Market Value" shall
mean either (a) if the Common Stock is publicly<PAGE>
<PAGE>
traded, then the average aggregate price of the Repurchase Shares for the
thirty (30) trading days preceding the date on which the Company notifies the
Executive of its intent to exercise the Repurchase Option as quoted on the
stock market or over-the-counter market on which the Common Stock is traded,
or (b) if the Common Stock is not publicly traded, then at the aggregate
value of the Repurchase Shares on the date on which the Company notifies the
Executive of its intent to exercise the Repurchase Option as determined by an
appraisal performed by an independent appraiser selected by the Company. The
Repurchase Option, if exercised by the Company, shall be exercised by written
notice signed by an officer of the Company and mailed pursuant to the terms of
Section 10(b) below within the Notice Period. Within thirty (30) days of
delivery of such notice (the "Repurchase Period"), the Company shall pay for
the Repurchase Shares it has elected to repurchase from any source of funds to
the extent legally available therefor (i) by delivery of a check to Executive
in the amount of the Repurchase Price for Repurchase Shares being purchased,
(ii) by cancellation by the Company of an amount of Executive's indebtedness
to the Company or (iii) by a combination of clauses (i) and (ii) so that the
combined payment and cancellation of indebtedness equals the Repurchase Price.
(b) In the event the Company for any reason elects not to
exercise the Repurchase Option pursuant to Section 8(a) hereof, the Company
may assign its Repurchase Option to any third party during the Notice Period.
If exercised by the Company's assignees and mailed pursuant to the terms of
Section 10(b) below within the Repurchase Period. Such assignees shall pay
for the Repurchase Shares they have elected to purchase by delivery of a check
in the amount of the Repurchase Price to the Executive.
(c) In the event that the Company or such assignee(s) do
not elect to exercise the Repurchase Option as to all of the Repurchase Shares
subject to it during the Notice Period, the Repurchase Option shall expire as
to all shares that the Company and such assignee(s) have not elected to
purchase.
(d) Should Executive continue as an employee of the
Company, the Repurchase Shares subject to the Company's Repurchase Option
shall vest and be released from the Repurchase Option in accordance with the
following schedule: (i) one-third of the Repurchase Shares shall no longer be
subject to the Repurchase Option ("Vest") on the first anniversary of the
Effective Date; and (ii) the remaining Repurchase Shares shall Vest on the
first day of each month in 24 successive equal monthly installments over the
24-month period following the first anniversary of the Effective Date.
9. Executive Covenants.
(a) The Executive agrees and understands that due to the
Executive's position with the Company, both prior to, if applicable, and
subsequent to the Effective Date, the Executive has been and will be exposed
to, and has received and will receive confidential and proprietary information
of the Company or relating to the Company's business or affairs (collectively,
the "Trade Secrets"), including but not limited to technical information,
computer<PAGE>
<PAGE>
software (including source and object code data and related documentation),
research and development, know-how, product information, formulae, processes,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, business policies and practices and other forms of
information considered by the Company to be proprietary and confidential and
in the nature of trade secrets. Except to the extent that the proper
performance of the Executive's duties and responsibilities hereunder may
require disclosure, and except as such information (i) was known to the
Executive prior to his employment by the Company or (ii) was or becomes
generally available to the public other than as a result of a disclosure by
the Executive in violation of the provisions of this Section 9(a), the
Executive agrees that during the Term and at all times thereafter the
Executive will keep such Trade Secrets confidential and will not disclose such
information, either directly or indirectly, to any third person or entity
without the prior written consent of the Company. This confidentiality
covenant has no temporal, geographical or territorial restriction. On the
Termination Date, the Executive promptly will supply to the Company all
property, keys, notes, memoranda, writings, lists, files, reports, customer
lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines,
technical data, formulae or any other tangible product or document
constituting Trade Secrets which have been produced by, received by or
otherwise submitted to the Executive during the course of his employment with
the Company, including the period during and prior to the Term. Any material
breach of the terms of this Section 9(a) shall be considered Cause.
(b) Inventions. The Executive agrees that any and all
inventions, discoveries, improvements, processes, formulae, business
application software patents, copyrights and trademarks made, developed,
discovered or acquired by him during his employment by the Company, including
the Term, solely or jointly with others or otherwise, which relate to the
business of the Company, and all knowledge possessed by the Executive relating
thereto (collectively, the "Inventions"), shall be fully and promptly
disclosed to the Board and to such person or persons as the Board shall
direct, and shall be the sole and absolute property of the Company and the
Company shall be the sole and absolute owner thereof. The Executive agrees
that he will at all times keep all Inventions secret from everyone except the
Company and such persons as the Board may from time to time direct. The
executive shall, as requested by the Company to effect disclosure and
assignment of the Inventions to the Company or its designees and any patent
applications (United States or foreign) and renewals with respect thereto,
including any other instruments deemed necessary by the Company for the
prosecution of patent applications or the acquisition of letters patent.
(c) Prohibited and Competitive Activities. The Executive
and the Company recognize that due to the nature of the Executive's engagement
hereunder and the relationship of the Executive to the Company, both prior and
subsequent to the Effective Date, the Executive has had and will have access
to, has had and will acquire, and has assisted and may continue to assist in
developing, confidential and proprietary information relating to the business
and operations of the Company and its affiliates, including Trade Secrets.
The Executive acknowledges that such information has been and will be of
central importance to the business of<PAGE>
<PAGE>
the Company and its affiliates and that disclosure of it to, or its use by,
others (including, without limitation, the Executive (other than with respect
to the Company's business and affairs)) could cause substantial loss to the
Company. The Executive and the Company also recognize that an important part
of the Executive's duties and responsibilities will be to develop good will
for the Company and its affiliates through his personal contact with "Clients"
(as defined below), employees and others having business relationships with
the Company, and that there is a danger that this good will, a proprietary
asset of the Company, any follow the Executive if and when his relationship
with the Company is terminated. The Executive accordingly agrees as follows:
(i) Prohibited Activities. The executive will not
at any time during the Term (A) other than in the course of his
employment, disclose or furnish to any other person or, directly or
indirectly, use for his own account or the account of any other person,
any Trade Secrets, and he shall retain all such Trade Secrets in trust
for the benefit of the Company, its affiliates and the successors and
assigns of any of them; (B) directly or through one or more
intermediaries, solicit for employment by a Competitor (as defined in
Section 9(c)(ii) below) any person who, at the time of such solicitation,
is employed by the Company or any affiliate thereof; (C) directly or
indirectly, whether for his own account or for the account of any other
person, solicit, divert or endeavor to entice away from the Company or
any entity controlled by the Company, or otherwise engage in any activity
intended to terminate, disrupt or interfere with, the Company's or any of
its affiliate's relationship with, Clients, or otherwise adversely affect
the Company's or any of its affiliate's relationship with clients or
other business relationships of the Company or any affiliate thereof; or
(D) publish or make any statement critical of the Company or any
shareholder or affiliate of the Company, or in any way adversely affect
or otherwise malign the business or reputation of any of the foregoing
persons (any activity described in clause (A), (B), (C) or (D) of this
Section 9(c)(i) being herein referred to as a "Prohibited Activity");
provided, however, that if in the written opinion of counsel, the
Executive is legally compelled to disclose Trade Secrets to any tribunal
or else stand liable for contempt or suffer other similar censure or
penalty, then the disclosure to such tribunal of those Trade Secrets
which such counsel advises in writing legally are required to be
disclosed shall not constitute a Prohibited Activity, provided that the
Executive shall give the Company as much advance notice of such
disclosure as is reasonably practicable. For purposes of this Agreement,
"Clients" shall mean persons who, at any time during the Executive's
course of employment with the Company (including, without limitation,
prior to the Effective Date) are or were clients or customers of the
Company or any affiliate thereof or any predecessor of any of the
foregoing.
(ii) Non-Competition. By and in consideration of
the Company's entering into this Agreement and providing the compensation
and benefits to be provided by the Company to the Executive, and further
in consideration of the Executive's continued exposure to the
confidential an proprietary information of the<PAGE>
<PAGE>
Company (including, without limitation, the Trade Secrets), the Executive
agrees that the Executive will not, from the Effective Date and until a
period of one (1) year after the Termination Date, engage in any
"Competitive Activity" as defined below. For purposes of this Agreement,
the term "Competitive Activity" shall mean engaging in any of the
following activities: (A) serving as a director of any "Competitor" (as
defined below); (B) directly or indirectly through one or more
intermediaries, either (x) controlling any Competitor or (y) owning any
equity or debt interests in any Competitor (other than equity or debt
interests which are publicly traded and, at the time of any acquisition,
do not exceed 5 percent of the particular class of interest outstanding)
(it being understood that, if interests in any Competitor are owned by an
investment vehicle or other entity in which the Executive owns an equity
interest, a portion of the interests in such competitor owned by such
entity shall be attributed to the Executive, such portion determined by
applying the percentage of the equity shall be attributed to the
Executive, such portion determined by applying the percentage of the
equity interest in such entity owned by the Executive to the interests in
such Competitor owned by such entity); (C) employment by (including
serving as an officer or partner of), providing consulting services to
(including, without limitation, as an independent contractor), or
managing or operating the business or affairs of, any Competitor; or (D)
participating in the ownership, management, operation or control of or
being connected in any manner with any Competitor. For purposes of this
Agreement, the term "Competitor" shall mean any person (other than the
Company or any affiliate thereof) that competes, either directly or
indirectly, at the time of determination, in any "Restricted Area" (as
defined below) with any of the business conducted by the Company or any
affiliate thereof. For purposes of this Agreement, the term "Restricted
Area" shall mean any state or territory of the United States in which the
Company or any affiliate thereof conducts business or any state or
similar subdivision of any foreign country.
(iii) Remedies. The Executive agrees that any
breach of the terms of this Section 9 would result in irreparable injury
and damage to the Company for which the Company would have no adequate
remedy at law. The Executive therefore also agrees that in the event of
any such breach or any threat of such breach, the Company shall be
entitled to an immediate injunction and restraining order to prevent such
breach and/or threatened breach and/or continued breach by the Executive
and/or any and all persons and/or entities acting for and/or with the
Executive, without having to prove damages, in addition to any other
remedies to which the Company may be entitled at law or in equity. The
terms of this Section 9 shall not prevent the Company from pursuing any
other available remedies for any breach or threatened breach hereof,
including but not limited to the recovery of damages form the Executive.
The provisions of this Section 9 shall survive any termination of
this Agreement. The existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements set forth in this Section 9.
<PAGE>
<PAGE>
10. Miscellaneous.
(a) Binding Effect; Assignment. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of the Repurchase Shares).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or be reason of this
Agreement, except as expressly provided in this Agreement. The Executive, or
any beneficiary or legal representative of the Executive, shall not assign all
or any portion of the Executive's rights or obligations under this Agreement
without the prior written consent of the Company.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been given (i) if mailed with the United
States Postal Service by prepaid, first class, certified mail, return receipt
requested, at the time of receipt by the intended recipient, or (ii) if sent
by facsimile transmission, when so sent and receipt acknowledged by an
appropriate telephone or facsimile receipt addressed as follows:
If to the Company, addressed to:
PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Attn: Corporate Secretary
Telecopier: (718) 779-6571
With a copy to:
Swidler & Berlin Chartered
3000 K Street, N.W.
Washington, D.C. 20007-5516
Telecopier: (202) 424-7643
Attention: John J. Klusaritz, Esq.
If to the Executive:
Mr. Douglas Barley
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Telecopier: (718) 779-6571
or such other address as may be given from time to time under the terms of
this notice provision.
<PAGE>
<PAGE>
(c) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
(d) Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment or waiver may be charged against a party without
that party's prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each transferee of any
party hereto.
(e) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) No Third Party Beneficiaries. This Agreement is not
intended to confer any rights or remedies on any person not a party to this
Agreement.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without reference to the
conflict of laws provisions of such state.
<PAGE>
<PAGE>
(j) Survival of Certain Provisions. The Executive's
obligations under Section 9(c)(i)(A) shall survive without limitation as to
time. The Executive's obligations under Section 9(c)(i)(B) shall survive for
six months following the expiration of the Term or early termination of this
Agreement.
(k) Mediation and Arbitration. Except for breaches of the
Executive's obligations under Section 9(c)(i)(A) or Section 9(c)(i)(B) for
which the Company may seek injunctive and monetary relief in a court of law of
competent jurisdiction, any dispute which may arise between the parties hereto
as to the construction, interpretation or effect of this Agreement which is
not resolved by mutual agreement between the parties, shall first be submitted
to nonbinding mediation on terms and conditions to be mutually agreed upon by
the parties. In the event that a dispute is not resolved by nonbinding
mediation, the disputing party may give the other party notice of such party's
intention to cause the same to be submitted to arbitration. After fifteen
(15) days have elapsed from the giving of such notice, but not before such
time, the party who gave such notice may cause any such dispute which then
remains unresolved to be submitted to arbitration by submitting the same to
the New York, New York office of the American Arbitration Association (the
"AAA") (or any successor thereto, but if no organization is then performing a
function reasonably similar to the AAA, then to a court of competent
jurisdiction in accordance with the rules of such court) with a request for
arbitration to be conducted in accordance with the rules thereof by one (1)
arbitrator to be jointly selected by the parties. The prevailing party's
expenses, including without limitation attorneys' fees, in connection with
such arbitration shall be borne by the losing party; provided, however, that
if liability is allocated by the arbitrator between the parties, the expenses
of such arbitration, including without limitation the parties' attorneys'
fees, shall be borne by the parties in proportion to their respective
percentages or proportions of liability assessed by the arbitrator. The
decision of the arbitrator as to all matters properly submitted to such
arbitrator and as to the apportionment of expenses of arbitration shall be
conclusive and binding upon the parties and judgment upon any award may be
entered in any court of competent jurisdiction.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Company:
PHONETIME, INC.
a New York corporation
WITNESS:
/s/ John Klusaritz By: /s/ Samer Tawfik
- ----------------------- -----------------------------
Name: Name:
Title:
EXECUTIVE:
WITNESS:
/s/ John Klusaritz /s/ Douglas Barley
- ----------------------- -------------------------------
Name: Douglas Barley
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
May 12, 1997, is made and entered into by and between PHONETIME, INC., a New
York corporation (the "Company"), and JOSEPH PANNULLO (the "Executive").
RECITALS
WHEREAS, the Company desires to employ the Executive as Chief
Operating Officer on the terms and conditions hereinafter set forth and the
Executive desires to accept such employment on such terms and subject to such
conditions; and
WHEREAS, the Executive possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties agree as follows:
1. Employment. Subject to and pursuant to the terms of this
Agreement, effective May 12, 1997 (the "Effective Date"), the Company shall
employ the Executive, and the Executive shall be employed by and shall serve
the Company, in the capacity of Chief Operating Officer reporting directly to
the Chief Executive Officer and the Board of Directors (the "Board"), or in
such other capacity as may be determined by the Board.
2. Term and Renewals. Subject to the provisions for earlier
termination provided herein, the term of this Agreement (the "Initial Term")
shall commence on the Effective Date and shall terminate on the three (3)-year
anniversary of the Effective Date. Following expiration of the Initial Term,
the Agreement shall be renewed for a one (1)-year period (the "Initial Renewal
Term") if at least one (1) month prior to the expiration of the Initial Term
either party hereto shall not have given the other party written notice not to
renew this Agreement. The Initial Renewal Term and each "Renewal Term" (as
defined in this Section 2) shall be renewed for successive one (1)-year
periods (each, a "Renewal Term," the Initial Term, the Initial Renewal Term,
if any, and each Renewal, if any, collectively, the "Term") if at least one
(1) month prior to the expiration of the Initial Renewal Term or a Renewal
Term, as the case may be, either party hereto shall not have given the other
party written notice of its intention not to renew this Agreement. Nothing in
this Agreement shall be construed to require either party hereto to renew this
Agreement and either party hereto has the sole discretion not to renew this
Agreement.
3. Duties. During the Term, the Executive shall be an executive
officer of the Company and shall report to the Chief Executive Officer of the
Company and the Board, and<PAGE>
<PAGE>
shall have all duties and responsibilities assigned to the executive by the
President and the Board, as limited or expanded pursuant to this Agreement.
The Executive shall devote all of his working time and effort during normal
business hours to the business and affairs of the Company, and shall use his
reasonable best efforts to perform such duties and responsibilities faithfully
and efficiently.
4. Compensation. For services rendered by the Executive
pursuant to this Agreement, the Company shall pay or award compensation to the
Executive as follows:
(a) Base Compensation. The Company shall pay to the
Executive a base salary ("Base Compensation") of $125,000 per annum, payable
in accordance with the Company's customary practices for its officers. The
amount of Base Compensation shall be reviewed by the Board annually, provided,
however, that the first review should occur before the earlier of September
30,1997 or any major acquisition or financing by PTI or the addition of any
new directors to the PTI board, and may be increased to reflect inflation or
such other adjustments as it may deem appropriate; provided, however, that
Base Compensation, as increased, may not be decreased.
(b) Stock Options. The Company has adopted for its
employees an incentive and non-qualified stock option plan (the "Stock Option
Plan"). Promptly following execution of this Agreement, the Executive shall
be granted the right and option as of the Effective Date ("Initial Options")
pursuant to the Stock Option Plan to purchase up to that number of Common
Shares which is equal to 2.333 percent of the issued and outstanding common
stock of the Company (on a fully diluted basis). The Initial Options may be
exercised at any time or from time to time during the 10-year period following
the date the Initial Options are granted. The purchase price of the Initial
Option Shares shall be $.01 per share. The Initial Options are in addition to
any other rights and options which, at the Company's sole election and in its
sole discretion, may be granted to the Executive under any qualified, non-
qualified, incentive, bonus and other stock or stock option plans which may be
adopted by the Company.
(c) Bonus Compensation. In addition to the Base
Compensation, the Board of Directors may in its discretion award the Executive
a performance bonus (the "Performance Bonus") in cash or stock options.
(d) Withholding. The Company shall deduct and withhold
from the compensation payable to the Executive hereunder any and all
applicable federal, state and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the Company under
applicable statute or regulation.
<PAGE>
<PAGE>
5. Additional Benefits.
(a) Fringe Benefits; Reimbursement; Vacation. In
addition to Base Compensation and Bonus provided for in Section 4 above, in
connection with the Executive's employment by the Company, the Executive shall
be entitled to receive:
(i) all fringe benefits customarily offered by
the Company to its senior executive officers, including without
limitation, expense accounts, participation in any Company stock
compensation plan and the various employee benefit plans or programs
(collectively, the "Benefit Plans") provided to the employees of the
Company in general, subject to the eligibility requirements with respect
to each such Benefit Plan, and to such other benefits or perquisites as
may be approved by the Board during the Term;
(ii) reimbursement from the Company for all
customary, ordinary and necessary business expenses incurred by the
Executive in the performance of his duties and responsibilities
hereunder, provided that the Executive furnishes the Company with
vouchers, receipts and other substantiation of such expenses within
thirty (30) days after they are incurred; and
(iii) paid vacation benefits in accordance with
the Company's vacation policy in effect for its senior executive
officers.
6. Termination of Employment.
(a) Termination. Except as otherwise provided in this
Agreement, the Executive's employment by the Company hereunder shall terminate
upon the earliest to occur of the dates specified below (as applicable, the
"Termination Date"):
(i) The close of business on the date of
expiration of the Term.
(ii) The close of business on the date of the
Executive's death ("Death").
(iii) The close of business on the date specified
as the effective date of termination of the Executive's employment in a
"Notice of Termination" (as defined below) delivered by the Company to
the Executive due to the Executive's "Disability". For purposes of this
Agreement, the term "Disability" shall mean the inability or incapacity
of the Executive, due to any medically determined physical or mental
impairment, to perform his duties and responsibilities for the Company
for a total of sixty (60) calendar days in any twelve (12) month period
during the Term.
<PAGE>
<PAGE>
(iv) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Executive in a Notice of Termination delivered by the Executive to the
Company (a "Voluntary Termination").
(v) The close of business on the date specified as
the effective date of termination of the Executive's employment by the
Company for "Cause" (as defined below) in a Notice of Termination
delivered by the Company to the Executive. For purposes of this
Agreement, the term "Cause" shall mean termination based on (A) the
Executive's material breach of this Agreement; (B) conviction of the
Executive for (x) any crime constituting a felony in the jurisdiction in
which committed, (y) any crime involving moral turpitude (whether or not
a felony) or (z) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company (whether
or not a felony); (C) substance abuse by the Executive which is repeated
after written notice to the Executive identifying such abuse; (D) the
failure or the refusal of the Executive to follow lawful and proper
directives of the Board; (E) willful malfeasance or misconduct by the
Executive which in connection with misappropriating any funds or property
of the Company or attempting to willfully obtain any personal profit from
any transaction in which the Executive has an interest which is adverse
to the interests of the Company or any other willful misconduct that
discredits or damages the Company; (F) indictment of the Executive by a
grand jury for a felony violation of the federal securities laws; or (G)
the engagement by the Executive in any "Prohibited Activity" or
"Competitive Activity" (as such terms respectively are defined in
Sections 9(c)(i) and 9(c)(ii) below) in violation of this Agreement.
(vi) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Company other than for Death, Disability or Cause in a Notice of
Termination delivered by the Company to the Executive.
(b) Notice of Termination. Any termination of the
Executive's employment hereunder (other than termination as a result of Death)
by the Company or by the Executive shall be communicated by a Notice of
Termination to the other party hereto given in accordance with the provisions
of Section 10(b) below. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, and (ii) if applicable,
sets forth the facts and circumstances claimed to provided a basis for
termination of the Executive's employment.
7. Payment Upon Termination of Employment.
(a) Voluntary Termination, Termination for Cause or
Expiration of Term. If the Executive's employment is terminated pursuant to a
Voluntary Termination, a termination for Cause or the expiration of the Term,
then, without limiting any other rights or remedies available to the Company
at law or in equity, the Company shall pay or provide to the<PAGE>
<PAGE>
Executive, his legal representatives, heirs, eligible dependents, if any, or
permitted assigns, as applicable, (i) on the Termination Date, all
compensation earned but unpaid as of the Termination Date set forth in Section
4 above; and (ii) all benefits to which such persons may be entitled under any
of the Benefit Plans which provide for benefits after termination of
employment, in accordance with the terms thereof.
(b) Other Terminations. Subject to the provisions of
Section 8(c) below, if the Executive's employment is terminated other than
pursuant to a Voluntary Termination, a termination for Cause or the expiration
of the Term, (i) the Company shall pay to the Executive, his legal
representatives, heirs or permitted assigns, on the Termination Date, all
compensation earned but unpaid as of the Termination Date set forth in Section
4 above; (ii) during the period beginning on the Termination Date and
extending until the earlier to occur of the Executive's Death or the date this
Agreement otherwise would have terminated had the employment of the Executive
not been earlier terminated but, regardless of the Executive's Death, not less
than a period of six (6) months from the Termination Date (the "Remaining
Term"), the Company shall provide to the executive, his legal representatives,
heirs, eligible dependents, if any, or permitted assigns, as applicable, all
benefits to which such persons may be entitled under any of the Benefit Plans,
and specifically, without limitation, shall provide the Executive and his
eligible dependents, if any, with life, disability, accident and group health
insurance benefits substantially similar to those which the Executive and his
dependents were receiving immediately prior to the Notice of Termination,
provided the Executive or his legal<PAGE>
<PAGE>
representatives, heirs or permitted assigns pay the regular premium required
of active employees for such coverage (following the expiration of the
Remaining Term, the Executive shall be eligible to purchase health insurance
benefits in accordance with applicable federal law); (iii) beginning with the
first day of the month on or following the Termination Date and continuing
until the expiration of the Remaining Term, the Company shall pay the
Executive in cash an amount equal to one-twelfth (1/12) of the Base
Compensation, less the amount, if any, of monthly disability income paid to
the Executive pursuant to any Company-sponsored long-term disability plan;
(iv) if on the termination Date the Executive has completed six (6) or more
months of the Company's then current fiscal year, the Company shall pay to the
Executive, his legal representatives, heirs or permitted assigns, a pro-rata
portion of his Bonus for such fiscal year (the "Pro Rata Bonus"), such payment
to be made within ten (10) days following the date on which a bonus in which
the Executive would have participated but for his termination is declared,
provided the criteria established by the Board for such Pro Rata Bonus have
been satisfied fully as of the Termination Date; and (v) all stock options,
warrants, rights and other Company stock-related awards granted to the
Executive by the Company (collectively, the "Stock Awards") that otherwise
would have vested and become exercisable during the fiscal year of the Company
in which the Executive has terminated, shall become upon the Termination Date
fully vested an nonforfeitable, all restrictions (except for restrictions
required by law), if any, thereon shall lapse, all performance goals, if any,
associated therewith shall be deemed met in full, an the Executive shall be
entitled to exercise any or all such Stock Awards in accordance with the terms
of the documentation pursuant to which such Stock Awards were granted.
<PAGE>
<PAGE>
(c) Exclusive Payments. The payments upon termination made
by the Company to the Executive pursuant to Sections 7(b) and (c) above shall
constitute the exclusive payments due to the Executive upon termination under
this Agreement; provided, however, that all monthly payments made pursuant to
Section 7(b)(iii) above, except as provided in Section 8(d), shall be reduced
or mitigated by the amount of any cash compensation secured or earned by the
Executive during such month for services rendered to another employer;
provided, further, that all benefits receivable by the Executive, his legal
representatives, heirs, eligible dependents, if any, or permitted assigns, as
applicable, shall be reduce to the extent comparable benefits actually are
received by the Executive, his legal representatives, heirs, eligible
dependents, if any, or permitted assigns, as applicable, during the Remaining
Term pursuant to similar plans or programs of another employer.
8 Executive Covenants.
(a) The Executive agrees and understands that due to the
Executive's position with the Company, both prior to, if applicable, and
subsequent to the Effective Date, the Executive has been and will be exposed
to, and has received and will receive confidential and proprietary information
of the Company or relating to the Company's business or affairs (collectively,
the "Trade Secrets"), including but not limited to technical information,
computer software (including source and object code data and related
documentation), research and development, know-how, product information,
formulae, processes, business and marketing plans, strategies, customer
information, other information concerning the Company's products, promotions,
development, financing, expansion plans, business policies and practices and
other forms of information considered by the Company to be proprietary and
confidential and in the nature of trade secrets. Except to the extent that
the proper performance of the Executive's duties and responsibilities
hereunder may require disclosure, and except as such information (i) was known
to the Executive prior to his employment by the Company or (ii) was or becomes
generally available to the public other than as a result of a disclosure by
the Executive in violation of the provisions of this Section 9(a), the
Executive agrees that during the Term and at all times thereafter the
Executive will keep such Trade Secrets confidential and will not disclose such
information, either directly or indirectly, to any third person or entity
without the prior written consent of the Company. This confidentiality
covenant has no temporal, geographical or territorial restriction. On the
Termination Date, the Executive promptly will supply to the Company all
property, keys, notes, memoranda, writings, lists, files, reports, customer
lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines,
technical data, formulae or any other tangible product or document
constituting Trade Secrets which have been produced by, received by or
otherwise submitted to the Executive during the course of his employment with
the Company, including the period during and prior to the Term. Any material
breach of the terms of this Section 9(a) shall be considered Cause.
(b) Inventions. Subject to Section 17.3 of the Software
License Agreement, the Executive agrees that any and all inventions,
discoveries, improvements, processes, formulae, business application software
patents, copyrights and trademarks made,<PAGE>
<PAGE>
developed, discovered or acquired by him during his employment by the Company,
including the Term, solely or jointly with others or otherwise, which relate
to the business of the Company, and all knowledge possessed by the Executive
relating thereto (collectively, the "Inventions"), shall be fully and promptly
disclosed to the Board and to such person or persons as the Board shall
direct, and shall be the sole and absolute property of the Company and the
Company shall be the sole and absolute owner thereof. The Executive agrees
that he will at all times keep all Inventions secret from everyone except the
Company and such persons as the Board may from time to time direct. The
executive shall, as requested by the Company to effect disclosure and
assignment of the Inventions to the Company or its designees and any patent
applications (United States or foreign) and renewals with respect thereto,
including any other instruments deemed necessary by the Company for the
prosecution of patent applications or the acquisition of letters patent.
(c) Prohibited and Competitive Activities. The Executive
and the Company recognize that due to the nature of the Executive's engagement
hereunder and the relationship of the Executive to the Company, both prior and
subsequent to the Effective Date, the Executive has had and will have access
to, has had and will acquire, and has assisted and may continue to assist in
developing, confidential and proprietary information relating to the business
and operations of the Company and its affiliates, including Trade Secrets.
The Executive acknowledges that such information has been and will be of
central importance to the business of the Company and its affiliates and that
disclosure of it to, or its use by, others (including, without limitation, the
Executive (other than with respect to the Company's business and affairs))
could cause substantial loss to the Company. The Executive and the Company
also recognize that an important part of the Executive's duties and
responsibilities will be to develop good will for the Company and its
affiliates through his personal contact with "Clients" (as defined below),
employees and others having business relationships with the Company, and that
there is a danger that this good will, a proprietary asset of the Company, any
follow the Executive if and when his relationship with the Company is
terminated. The Executive accordingly agrees as follows:
(i) Prohibited Activities. The executive will not
at any time during the Term (A) other than in the course of his
employment, disclose or furnish to any other person or, directly or
indirectly, use for his own account or the account of any other person,
any Trade Secrets, and he shall retain all such Trade Secrets in trust
for the benefit of the Company, its affiliates and the successors and
assigns of any of them; (B) directly or through one or more
intermediaries, solicit for employment by a Competitor (as defined in
Section 9(c)(ii) below) any person who, at the time of such solicitation,
is employed by the Company or any affiliate thereof; (C) directly or
indirectly, whether for his own account or for the account of any other
person, solicit, divert or endeavor to entice away from the Company or
any entity controlled by the Company, or otherwise engage in any activity
intended to terminate, disrupt or interfere with, the Company's or any of
its affiliate's relationship with, Clients, or otherwise adversely affect
the Company's or any of its affiliate's relationship with clients or
other business relationships<PAGE>
<PAGE>
of the Company or any affiliate thereof; or (D) publish or make any
statement critical of the Company or any shareholder or affiliate of the
Company, or in any way adversely affect or otherwise malign the business
or reputation of any of the foregoing persons (any activity described in
clause (A), (B), (C) or (D) of this Section 9(c)(i) being herein referred
to as a "Prohibited Activity"); provided, however, that if in the written
opinion of counsel, the Executive is legally compelled to disclose Trade
Secrets to any tribunal or else stand liable for contempt or suffer other
similar censure or penalty, then the disclosure to such tribunal of those
Trade Secrets which such counsel advises in writing legally are required
to be disclosed shall not constitute a Prohibited Activity, provided that
the Executive shall give the Company as much advance notice of such
disclosure as is reasonably practicable. For purposes of this Agreement,
"Clients" shall mean persons who, at any time during the Executive's
course of employment with the Company (including, without limitation,
prior to the Effective Date) are or were clients or customers of the
Company or any affiliate thereof or any predecessor of any of the
foregoing.
(ii) Non-Competition. By and in consideration of
the Company's entering into this Agreement and providing the compensation
and benefits to be provided by the Company to the Executive, and further
in consideration of the Executive's continued exposure to the
confidential and proprietary information of the Company (including,
without limitation, the Trade Secrets), the Executive agrees that the
Executive will not, from the Effective Date and until a period of one (1)
year after the Termination Date, engage in any "Competitive Activity" as
defined below. For purposes of this Agreement, the term "Competitive
Activity" shall mean engaging in any of the following activities: (A)
serving as a director of any "Competitor" (as defined below); (B)
directly or indirectly through one or more intermediaries, either (x)
controlling any Competitor or (y) owning any equity or debt interests in
any Competitor (other than equity or debt interests which are publicly
traded and, at the time of any acquisition, do not exceed 5% of the
particular class of interest outstanding) (it being understood that, if
interests in any Competitor are owned by an investment vehicle or other
entity in which the Executive owns an equity interest, a portion of the
interests in such competitor owned by such entity shall be attributed to
the Executive, such portion determined by applying the percentage of the
equity interest in such entity owned by the Executive to the interests in
such Competitor owned by such entity); (C) employment by (including
serving as an officer or partner of), providing consulting services to
(including, without limitation, as an independent contractor), or
managing or operating the business or affairs of, any Competitor; or (D)
participating in the ownership, management, operation or control of or
being connected in any manner with any Competitor. For purposes of this
Agreement, the term "Competitor" shall mean any person (other than the
Company or any affiliate thereof) that competes, either directly or
indirectly in any "Restricted Area" (as defined below) with "Licensee's
Field of Use (as defined in that certain Software License <PAGE>
<PAGE>
Agreement of even date herewith between the Company, Executive and Godot
Soft, LLC, as amended from time to time, the Software License Agreement")
For purposes of this Agreement, the term "Restricted Area" shall mean any
state or territory of the United States, and any state or similar
subdivision of any foreign country in which the Company or any affiliate
thereof conducts business.
(iii) Remedies. The Executive agrees that any
breach of the terms of this Section 8 would result in irreparable injury
and damage to the Company for which the Company would have no adequate
remedy at law. The Executive therefore also agrees that in the event of
any such breach or any threat of such breach, the Company shall be
entitled to an immediate injunction and restraining order to prevent such
breach and/or threatened breach and/or continued breach by the Executive
and/or any and all persons and/or entities acting for and/or with the
Executive, without having to prove damages, in addition to any other
remedies to which the Company may be entitled at law or in equity. The
terms of this Section 8 shall not prevent the Company from pursuing any
other available remedies for any breach or threatened breach hereof,
including but not limited to the recovery of damages form the Executive.
The provisions of this Section 8 shall survive any termination of
this Agreement. The existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements set forth in this Section 8.
9. Miscellaneous.
(a) Binding Effect; Assignment. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of the Repurchase Shares).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or be reason of this
Agreement, except as expressly provided in this Agreement. The Executive, or
any beneficiary or legal representative of the Executive, shall not assign all
or any portion of the Executive's rights or obligations under this Agreement
without the prior written consent of the Company.
<PAGE>
<PAGE>
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been given (i) if mailed with the United
States Postal Service by prepaid, first class, certified mail, return receipt
requested, at the time of receipt by the intended recipient, or (ii) if sent
by facsimile transmission, when so sent and receipt acknowledged by an
appropriate telephone or facsimile receipt addressed as follows:
If to the Company, addressed to:
PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Attn: Corporate Secretary
Telecopier: (718) 779-6571
With a copy to:
Swidler & Berlin Chartered
3000 K Street, N.W.
Washington, D.C. 20007-5516
Telecopier: (202) 424-7643
Attention: John J. Klusaritz, Esq.
If to the Executive:
Mr. Joseph Pannullo
c/o PhoneTime, Inc.
30-60 Whitestone Expressway
Flushing, New York 11354
Telecopier: (718) 779-6571
With a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan
85 Livingston Avenue
Roseland, NJ 07068-1791
Telecopier: (201) 992-5820
Attention: Richard Sandler, Esq.
or such other address as may be given from time to time under the terms of
this notice provision.
(c) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to<PAGE>
<PAGE>
any other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
(d) Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment or waiver may be charged against a party without
that party's prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each transferee of any
party hereto.
(e) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) No Third Party Beneficiaries. This Agreement is not
intended to confer any rights or remedies on any person not a party to this
Agreement.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without reference to the
conflict of laws provisions of such state.
(j) Survival of Certain Provisions. The Executive's
obligations under Section 8(c)(i)(A) shall survive without limitation as to
time. The Executive's obligations under Section 8(c)(i)(B) shall survive for
six months following the expiration of the Term or early termination of this
Agreement.
(k) Mediation and Arbitration. Except for breaches of the
Executive's obligations under Section 8(c)(i)(A) or Section 8(c)(i)(B) for
which the Company may seek injunctive and monetary relief in a court of law of
competent jurisdiction, any dispute which may arise between the parties hereto
as to the construction, interpretation or effect of this Agreement which is
not resolved by mutual agreement between the parties, shall first be submitted
to nonbinding mediation on terms and conditions to be mutually agreed upon by
the parties. In the event that a dispute is not resolved by nonbinding
mediation, the disputing party may give the other party notice of such party's
intention to cause the same to be submitted to arbitration. After fifteen
(15) days have elapsed from the giving of such notice, but not before such
time, the party<PAGE>
<PAGE>
who gave such notice may cause any such dispute which then remains unresolved
to be submitted to arbitration by submitting the same to the New York, New
York office of the American Arbitration Association (the "AAA") (or any
successor thereto, but if no organization is then performing a function
reasonably similar to the AAA, then to a court of competent jurisdiction in
accordance with the rules of such court) with a request for arbitration to be
conducted in accordance with the rules thereof by one (1) arbitrator to be
jointly selected by the parties. The prevailing party's expenses, including
without limitation attorneys' fees, in connection with such arbitration shall
be borne by the losing party; provided, however, that if liability is
allocated by the arbitrator between the parties, the expenses of such
arbitration, including without limitation the parties' attorneys' fees, shall
be borne by the parties in proportion to their respective percentages or
proportions of liability assessed by the arbitrator. The decision of the
arbitrator as to all matters properly submitted to such arbitrator and as to
the apportionment of expenses of arbitration shall be conclusive and binding
upon the parties and judgment upon any award may be entered in any court of
competent jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Company:
PHONETIME, INC.
a New York corporation
WITNESS:
/s/ Douglas Barley By: /s/ Samer Tawfik
- ----------------------- -----------------------------
Name: Douglas Barley Name: Sam Tawfik
Title: CEO & Chairman
EXECUTIVE:
WITNESS:
/s/ Douglas Barley /s/ Joseph Pannullo
- ----------------------- -------------------------------
Name: Douglas Barley Joseph Pannullo
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
May 26, 1997 (the "Effective Date"), is made and entered into by and between
PHONETIME, INC., a New York corporation (the "Company"), and JOHN J. KLUSARITZ
(the "Executive").
RECITALS
WHEREAS, pursuant to the employment arrangement described below, the
Company will employ the Executive as Executive Vice President, General Counsel
and Director of Investor Relations on the terms and conditions hereinafter set
forth and the Executive desires to accept such employment on such terms and
subject to such conditions; and
WHEREAS, the Executive possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties agree as follows:
1. Employment. Subject to and pursuant to the terms of this
Agreement, as soon as practicable after the execution of this Agreement,
consistent with Executive's obligations and commitments with respect to his
law practice, but in any event within ninety (90) days of the Effective Date,
the Company shall employ the Executive, and the Executive shall be employed by
and shall serve the Company, in the capacity of Executive Vice President,
General Counsel and Director of Investor Relations reporting directly to the
Chief Executive Officer and the Board of Directors (the "Board").
2. Term and Renewals. Subject to the provisions for earlier
termination provided herein, the term of this Agreement (the "Initial Term")
shall commence on the Effective Date and shall terminate on the three (3)-year
anniversary of the Effective Date. Following expiration of the Initial Term,
the Agreement shall be renewed for a one (1)-year period (the "Initial Renewal
Term") if at least one (1) month prior to the expiration of the Initial Term
either party hereto shall not have given the other party written notice not to
renew this Agreement. The Initial Renewal Term and each "Renewal Term" (as
defined in this Section 2) shall be renewed for successive one (1)-year
periods (each, a "Renewal Term," the Initial Term, the Initial Renewal Term,
if any, and each Renewal, if any, collectively, the "Term") if at least one
(1) month prior to the expiration of the Initial Renewal Term or a Renewal
Term, as the case may be, either party hereto shall not have given the other
party written notice of its intention not to renew this Agreement. Nothing in
this Agreement shall be construed to require either party<PAGE>
<PAGE>
hereto to renew this Agreement and either party hereto has the sole discretion
not to renew this Agreement.
3. Duties. Following Executive's commencement of employment,
the Executive shall be an executive officer of the Company and shall report to
the Chief Executive Officer of the Company and the Board, and shall have all
duties and responsibilities assigned to the executive by the Chief Executive
Officer and the Board which shall consist of (i) Overseeing all legal aspects
of the Company's business (with assistance from outside counsel and in-house
persons available) including contracts (relating to operations, structure,
carrier agreements, service agreements, loans, etc.), real estate,
distribution agreements, regulatory, litigation, tax, etc.; (ii) Overseeing,
structuring and coordinating all aspects of the initial public offering
("IPO") (with assistance from outside counsel and in-house persons available)
including coordinating the selection of and liasons with investment banks,
assembling information on the Company, the various banks and the industry,
responding to requests and concerns of investment banks, advising the Company
on all relevent issues involving the IPO, prospectus, underwriting
arrangements and working with outside counsel to prepare IPO documents and IPO
tasks (i.e., preparing prospectus, schedules, underwriting agreement,
corporate cleanup, due diligence, background information, etc.); (iii)
Following the IPO, having primary in-house responsibility (with assistance
from outside counsel and in-house persons available) for overseeing and
coordinating the public company aspects of PTI including overseeing all 1934
Act requirements and coordinating communications with investment banks,
analysts and institutional investors; and (iv) Providing assistance on all
mergers and acquisitions. The Executive shall devote all of his working time
and effort during normal business hours to the business and affairs of the
Company, and shall use his reasonable best efforts to perform such duties and
responsibilities faithfully and efficiently. It is understood that the
Executive may continue to reside in the Washington D.C. metropolitan area and
that, provided the Company complies with its obligations herein to reimburse
Executive for expenses, Executive agrees to work in the Company's New York
offices three (3) days during the week and to work out of a home office in the
Washington D.C. metropolitan area the remaining two (2) week days. In no
event may the Executive be required to relocate to New York or to work in the
Company's New York offices more than three (3) days during the week.
4. Compensation. For services rendered by the Executive
pursuant to this Agreement, the Company shall pay or award compensation to the
Executive as follows:
(a) Base Compensation. The Company shall pay to the
Executive a base salary ("Base Compensation") of $280,000 per annum, payable
in accordance with the Company's customary practices for its officers. The
amount of Base Compensation shall be reviewed by the Board annually, and may
be increased to reflect inflation or such other adjustments as it may deem
appropriate; provided, however, that Base Compensation, as increased, may not
be decreased.
(b) Bonus Compensation. In addition to the Base
Compensation, the Board of Directors may in its discretion award the Executive
a performance bonus (the "Performance Bonus") in cash or stock options.<PAGE>
<PAGE>
(c) Withholding. The Company shall deduct and withhold
from the compensation payable to the Executive hereunder any and all
applicable federal, state and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the Company under
applicable statute or regulation.
5. Additional Benefits.
(a) Fringe Benefits; Reimbursement; Vacation. In
addition to Base Compensation and Bonus provided for in Section 4 above, in
connection with the Executive's employment by the Company, the Executive shall
be entitled to receive:
(i) all fringe benefits customarily offered by
the Company to its senior executive officers, including without
limitation, expense accounts, participation in any Company stock
compensation plan and the various employee benefit plans (including
health insurance, life insurance and similar benefits) or programs
(collectively, the "Benefit Plans") provided to the employees of the
Company in general, subject to the eligibility requirements with respect
to each such Benefit Plan, and to such other benefits or perquisites as
may be approved by the Board during the Term;
(ii) reimbursement from the Company for all
customary, ordinary and necessary business expenses incurred by the
Executive in the performance of his duties and responsibilities
hereunder, provided that the Executive furnishes the Company with
vouchers, receipts and other substantiation of such expenses within
thirty (30) days after they are incurred; and
(iii) reimbursement from the Company, within
five days of Executive's submission of invoices, for all expenses
directly related to Executive's commuting to New York (including airfair,
New York hotel or apartment costs, mobile phone, airport parking at
Washington National Airport and taxi expenses in New York);
(iv) reimbursement from the Company to Executive
for expenses incurred by Executive in starting and maintaining
Executive's home office (including, but not limited to, acquisition and
maintenance of a computer, computer ancillary equipment, printer,
telefax machine, long distance telephone calls, etc.); and
(v) paid vacation benefits in accordance with
the Company's vacation policy in effect for its senior executive
officers.
6. Termination of Employment.
<PAGE>
<PAGE>
(a) Termination. Except as otherwise provided in this
Agreement, the Executive's employment by the Company hereunder shall terminate
upon the earliest to occur of the dates specified below (as applicable, the
"Termination Date"):
(i) The close of business on the date of
expiration of the Term.
(ii) The close of business on the date of the
Executive's death ("Death").
(iii) The close of business on the date specified
as the effective date of termination of the Executive's employment in a
"Notice of Termination" (as defined below) delivered by the Company to
the Executive due to the Executive's "Disability". For purposes of this
Agreement, the term "Disability" shall mean the inability or incapacity
of the Executive, due to any medically determined physical or mental
impairment, to perform his duties and responsibilities for the Company
for a total of sixty (60) calendar days in any twelve (12) month period
during the Term.
(iv) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Executive in a Notice of Termination delivered by the Executive to the
Company (a "Voluntary Termination").
(v) The close of business on the date specified as
the effective date of termination of the Executive's employment by the
Company for "Cause" (as defined below) in a Notice of Termination
delivered by the Company to the Executive. For purposes of this
Agreement, the term "Cause" shall mean termination based on (A) the
Executive's material breach of this Agreement; (B) conviction of the
Executive for (x) any crime constituting a felony in the jurisdiction in
which committed, (y) any crime involving moral turpitude (whether or not
a felony) or (z) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company (whether
or not a felony); (C) substance abuse by the Executive which is repeated
after written notice to the Executive identifying such abuse; (D) the
failure or the refusal of the Executive to follow lawful and proper
directives of the Board; (E) willful malfeasance or misconduct by the
Executive which in connection with misappropriating any funds or property
of the Company or attempting to willfully obtain any personal profit from
any transaction in which the Executive has an interest which is adverse
to the interests of the Company or any other willful misconduct that
discredits or damages the Company; (F) indictment of the Executive by a
grand jury for a felony violation of the federal securities laws; or (G)
the engagement by the Executive in any "Prohibited Activity" or
"Competitive Activity" (as such terms respectively are defined in
Sections 9(c)(i) and 9(c)(ii) below) in violation of this Agreement.
(vi) The close of business on the date specified
as the effective date of termination of the Executive's employment by the
Company other than for Death,<PAGE>
<PAGE>
Disability or Cause in a Notice of Termination delivered by the Company
to the Executive.
(b) Notice of Termination. Any termination of the
Executive's employment hereunder (other than termination as a result of Death)
by the Company or by the Executive shall be communicated by a Notice of
Termination to the other party hereto given in accordance with the provisions
of Section 10(b) below. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, and (ii) if applicable,
sets forth the facts and circumstances claimed to provided a basis for
termination of the Executive's employment.
7. Payment Upon Termination of Employment.
(a) Voluntary Termination, Termination for Cause or
Expiration of Term. If the Executive's employment is terminated pursuant to a
Voluntary Termination, a termination for Cause or the expiration of the Term,
then, without limiting any other rights or remedies available to the Company
at law or in equity, the Company shall pay or provide to the Executive, his
legal representatives, heirs, eligible dependents, if any, or permitted
assigns, as applicable, (i) on the Termination Date, all compensation earned
but unpaid as of the Termination Date set forth in Section 4 above; and (ii)
all benefits to which such persons may be entitled under any of the Benefit
Plans which provide for benefits after termination of employment, in
accordance with the terms thereof.
(b) Other Terminations. Subject to the provisions of
Section 8(c) below, if the Executive's employment is terminated other than
pursuant to a Voluntary Termination, a termination for Cause or the expiration
of the Term, (i) the Company shall pay to the Executive, his legal
representatives, heirs or permitted assigns, on the Termination Date, all
compensation earned but unpaid as of the Termination Date set forth in Section
4 above; (ii) during the period beginning on the Termination Date and
extending until the earlier to occur of the Executive's Death or the date this
Agreement otherwise would have terminated had the employment of the Executive
not been earlier terminated but, regardless of the Executive's Death, not less
than a period of six (6) months from the Termination Date (the "Remaining
Term"), the Company shall provide to the executive, his legal representatives,
heirs, eligible dependents, if any, or permitted assigns, as applicable, all
benefits to which such persons may be entitled under any of the Benefit Plans,
and specifically, without limitation, shall provide the Executive and his
eligible dependents, if any, with life, disability, accident and group health
insurance benefits substantially similar to those which the Executive and his
dependents were receiving immediately prior to the Notice of Termination,
provided the Executive or his legal representatives, heirs or permitted
assigns pay the regular premium required of active employees for such coverage
(following the expiration of the Remaining Term, the Executive shall be
eligible to purchase health insurance benefits in accordance with applicable
federal law); (iii) beginning with the first day of the month on or following
the Termination Date and continuing until the expiration of the Remaining
Term, the Company shall pay the Executive in cash each month<PAGE>
<PAGE>
an amount equal to one-twelfth (1/12) of the Base Compensation, less the
amount, if any, of monthly disability income paid to the Executive pursuant to
any Company-sponsored long-term disability plan; (iv) if on the termination
Date the Executive has completed six (6) or more months of the Company's then
current fiscal year, the Company shall pay to the Executive, his legal
representatives, heirs or permitted assigns, a pro-rata portion of his Bonus
for such fiscal year (the "Pro Rata Bonus"), such payment to be made within
ten (10) days following the date on which a bonus in which the Executive would
have participated but for his termination is declared, provided the criteria
established by the Board for such Pro Rata Bonus have been satisfied fully as
of the Termination Date; and (v) all stock options, warrants, rights and other
Company stock-related awards granted to the Executive by the Company
(collectively, the "Stock Awards") that otherwise would have vested and become
exercisable during the fiscal year of the Company in which the Executive has
terminated, shall become upon the Termination Date fully vested an
nonforfeitable, all restrictions (except for restrictions required by law), if
any, thereon shall lapse, all performance goals, if any, associated therewith
shall be deemed met in full, an the Executive shall be entitled to exercise
any or all such Stock Awards in accordance with the terms of the documentation
pursuant to which such Stock Awards were granted.
(c) Exclusive Payments. The payments upon termination made
by the Company to the Executive pursuant to Sections 7(b) and (c) above shall
constitute the exclusive payments due to the Executive upon termination under
this Agreement; provided, however, that all monthly payments made pursuant to
Section 7(b)(iii) above, except as provided in Section 8(d), shall be reduced
or mitigated by the amount of any cash compensation secured or earned by the
Executive during such month for services rendered to another employer;
provided, further, that all benefits receivable by the Executive, his legal
representatives, heirs, eligible dependents, if any, or permitted assigns, as
applicable, shall be reduce to the extent comparable benefits actually are
received by the Executive, his legal representatives, heirs, eligible
dependents, if any, or permitted assigns, as applicable, during the Remaining
Term pursuant to similar plans or programs of another employer.
8. Stock Option Agreement.
As noted in the preamble to this Agreement, in consideration
for Executive's execution of this Agreement and agreeing to become employed by
the Company, the Company and the Executive have separately entered into a
Stock Option Agreement of even date, pursuant to which Executive has been
granted options by the Company to acquire stock in the Company (the "Initial
Options'). It is understood and agreed that, notwithstanding anything to the
contrary herein, the Initial Options shall not be subject to any vesting
requirements, and Executive's rights under the Stock Option Agreement shall
not be related to Executive's continued employment with the Company an such
Initial Options are in addition to any Stock Awards or other stock options
that may be granted to Executive pursuant to this Agreement.
9. Executive Covenants.
<PAGE>
<PAGE>
(a) The Executive agrees and understands that due to the
Executive's position with the Company, both prior to, if applicable, and
subsequent to the Effective Date, the Executive has been and will be exposed
to, and has received and will receive confidential and proprietary information
of the Company or relating to the Company's business or affairs (collectively,
the "Trade Secrets"), including but not limited to technical information,
computer software (including source and object code data and related
documentation), research and development, know-how, product information,
formulae, processes, business and marketing plans, strategies, customer
information, other information concerning the Company's products, promotions,
development, financing, expansion plans, business policies and practices and
other forms of information considered by the Company to be proprietary and
confidential and in the nature of trade secrets. Except to the extent that
the proper performance of the Executive's duties and responsibilities
hereunder may require disclosure, and except as such information (i) was known
to the Executive prior to his employment by the Company or (ii) was or becomes
generally available to the public other than as a result of a disclosure by
the Executive in violation of the provisions of this Section 9(a), the
Executive agrees that during the Term and at all times thereafter the
Executive will keep such Trade Secrets confidential and will not disclose such
information, either directly or indirectly, to any third person or entity
without the prior written consent of the Company. This confidentiality
covenant has no temporal, geographical or territorial restriction. On the
Termination Date, the Executive promptly will supply to the Company all
property, keys, notes, memoranda, writings, lists, files, reports, customer
lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines,
technical data, formulae or any other tangible product or document
constituting Trade Secrets which have been produced by, received by or
otherwise submitted to the Executive during the course of his employment with
the Company, including the period during and prior to the Term. Any material
breach of the terms of this Section 9(a) shall be considered Cause.
(b) Inventions. The Executive agrees that any and all
inventions, discoveries, improvements, processes, formulae, business
application software patents, copyrights and trademarks made, developed,
discovered or acquired by him during his employment by the Company, including
the Term, solely or jointly with others or otherwise, which relate to the
business of the Company, and all knowledge possessed by the Executive relating
thereto (collectively, the "Inventions"), shall be fully and promptly
disclosed to the Board and to such person or persons as the Board shall
direct, and shall be the sole and absolute property of the Company and the
Company shall be the sole and absolute owner thereof. The Executive agrees
that he will at all times keep all Inventions secret from everyone except the
Company and such persons as the Board may from time to time direct. The
executive shall, as requested by the Company to effect disclosure and
assignment of the Inventions to the Company or its designees and any patent
applications (United States or foreign) and renewals with respect thereto,
including any other instruments deemed necessary by the Company for the
prosecution of patent applications or the acquisition of letters patent.
(c) Prohibited and Competitive Activities. The Executive
and the Company recognize that due to the nature of the Executive's engagement
hereunder and the<PAGE>
<PAGE>
relationship of the Executive to the Company, both prior and subsequent to the
Effective Date, the Executive has had and will have access to, has had and
will acquire, and has assisted and may continue to assist in developing,
confidential and proprietary information relating to the business and
operations of the Company and its affiliates, including Trade Secrets. The
Executive acknowledges that such information has been and will be of central
importance to the business of the Company and its affiliates and that
disclosure of it to, or its use by, others (including, without limitation, the
Executive (other than with respect to the Company's business and affairs))
could cause substantial loss to the Company. The Executive and the Company
also recognize that an important part of the Executive's duties and
responsibilities will be to develop good will for the Company and its
affiliates through his personal contact with "Clients" (as defined below),
employees and others having business relationships with the Company, and that
there is a danger that this good will, a proprietary asset of the Company, any
follow the Executive if and when his relationship with the Company is
terminated. The Executive accordingly agrees as follows:
(i) Prohibited Activities. The executive will not at
any time during him employment with the Company (A) other than in the
course of his employment, disclose or furnish to any other person or,
directly or indirectly, use for his own account or the account of any
other person, any Trade Secrets, and he shall retain all such Trade
Secrets in trust for the benefit of the Company, its affiliates and the
successors and assigns of any of them; (B) directly or through one or
more intermediaries, solicit for employment by a Competitor (as defined
in Section 9(c)(ii) below) any person who, at the time of such
solicitation, is employed by the Company or any affiliate thereof; (C)
directly or indirectly, whether for his own account or for the account of
any other person, solicit, divert or endeavor to entice away from the
Company or any entity controlled by the Company, or otherwise engage in
any activity intended to terminate, disrupt or interfere with, the
Company's or any of its affiliate's relationship with, Clients, or
otherwise adversely affect the Company's or any of its affiliate's
relationship with clients or other business relationships of the Company
or any affiliate thereof; or (D) publish or make any statement critical
of the Company or any shareholder or affiliate of the Company, or in any
way adversely affect or otherwise malign the business or reputation of
any of the foregoing persons (any activity described in clause (A), (B),
(C) or (D) of this Section 9(c)(i) being herein referred to as a
"Prohibited Activity"); provided, however, that if in the written opinion
of counsel, the Executive is legally compelled to disclose Trade Secrets
to any tribunal or else stand liable for contempt or suffer other similar
censure or penalty, then the disclosure to such tribunal of those Trade
Secrets which such counsel advises in writing legally are required to be
disclosed shall not constitute a Prohibited Activity, provided that the
Executive shall give the Company as much advance notice of such
disclosure as is reasonably practicable. For purposes of this Agreement,
"Clients" shall mean persons who, at any time during the Executive's
course of employment with the Company (including, without limitation,
prior to the Effective Date) are or were clients or customers of the
Company or any affiliate thereof or any predecessor of any of the
foregoing.<PAGE>
<PAGE>
(ii) Non-Competition. By and in consideration of
the Company's entering into this Agreement and providing the compensation
and benefits to be provided by the Company to the Executive, and further
in consideration of the Executive's continued exposure to the
confidential an proprietary information of the Company (including,
without limitation, the Trade Secrets), the Executive
agrees that the Executive will not, from the Effective Date and until a
period of one (1) year after the Termination Date, engage in any
"Competitive Activity" as defined below. For purposes of this Agreement,
the term "Competitive Activity" shall mean engaging in any of the
following activities: (A) serving as a director of any "Competitor" (as
defined below); (B) directly or indirectly through one or more
intermediaries, either (x) controlling any Competitor or (y) owning any
equity or debt interests in any Competitor (other than equity or debt
interests which are publicly traded and, at the time of any acquisition,
do not exceed 5 percent of the particular class of interest outstanding)
(it being understood that, if interests in any Competitor are owned by an
investment vehicle or other entity in which the Executive owns an equity
interest, a portion of the interests in such competitor owned by such
entity shall be attributed to the Executive, such portion determined by
applying the percentage of the equity shall be attributed to the
Executive, such portion determined by applying the percentage of the
equity interest in such entity owned by the Executive to the interests in
such Competitor owned by such entity); (C) employment by (including
serving as an officer or partner of), providing consulting services to
(including, without limitation, as an independent contractor), or
managing or operating the business or affairs of, any Competitor; or (D)
participating in the ownership, management, operation or control of or
being connected in any manner with any Competitor. For purposes of this
Agreement, the term "Competitor" shall mean any person (other than the
Company or any affiliate thereof) that competes, either directly or
indirectly, at the time of determination, in any "Restricted Area" (as
defined below) with any of the business conducted by the Company or any
affiliate thereof. For purposes of this Agreement, the term "Restricted
Area" shall mean any state or territory of the United States in which the
Company or any affiliate thereof conducts business or any state or
similar subdivision of any foreign country.
(iii) Remedies. The Executive agrees that any
breach of the terms of this Section 9 would result in irreparable injury
and damage to the Company for which the Company would have no adequate
remedy at law. The Executive therefore also agrees that in the event of
any such breach or any threat of such breach, the Company shall be
entitled to an immediate injunction and restraining order to prevent such
breach and/or threatened breach and/or continued breach by the Executive
and/or any and all persons and/or entities acting for and/or with the
Executive, without having to prove damages, in addition to any other
remedies to which the Company may be entitled at law or in equity. The
terms of this Section 9 shall not prevent the Company from pursuing any
other available remedies for any breach or threatened breach hereof,
including but not limited to the recovery of damages form the Executive.
<PAGE>
<PAGE>
The provisions of this Section 9 shall survive any termination of
this Agreement. The existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements set forth in this Section 9.
10. Miscellaneous.
(a) Binding Effect; Assignment. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any shares of the Repurchase Shares).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or be reason of this
Agreement, except as expressly provided in this Agreement. The Executive, or
any beneficiary or legal representative of the Executive, shall not assign all
or any portion of the Executive's rights or obligations under this Agreement
without the prior written consent of the Company.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been given (i) if mailed with the United
States Postal Service by prepaid, first class, certified mail, return receipt
requested, at the time of receipt by the intended recipient, or (ii) if sent
by facsimile transmission, when so sent and receipt acknowledged by an
appropriate telephone or facsimile receipt addressed as follows:
If to the Company, addressed to:
PhoneTime, Inc.
30-50 Whitestone Expressway
Flushing, New York 11354
Attn: Corporate Secretary
Telecopier: (718) 779-6571
If to the Executive:
Mr. John J. Klusaritz
8700 Fallen Oak Drive
Bethesda, Maryland 20817
or such other address as may be given from time to time under the terms of
this notice provision.
<PAGE>
<PAGE>
(c) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
(d) Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment or waiver may be charged against a party without
that party's prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each transferee of any
party hereto.
(e) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) No Third Party Beneficiaries. This Agreement is not
intended to confer any rights or remedies on any person not a party to this
Agreement.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without reference to the
conflict of laws provisions of such state.
(j) Survival of Certain Provisions. The Executive's
obligations under Section 9(c)(i)(A) shall survive without limitation as to
time. The Executive's obligations under Section 9(c)(i)(B) shall survive for
six months following the expiration of the Term or early termination of this
Agreement.
(k) Mediation and Arbitration. Except for breaches of the
Executive's obligations under Section 9(c)(i)(A) or Section 9(c)(i)(B) for
which the Company may seek injunctive and monetary relief in a court of law of
competent jurisdiction, any dispute which may<PAGE>
<PAGE>
arise between the parties hereto as to the construction, interpretation or
effect of this Agreement which is not resolved by mutual agreement between the
parties, shall first be submitted to nonbinding mediation on terms and
conditions to be mutually agreed upon by the parties. In the event that a
dispute is not resolved by nonbinding mediation, the disputing party may give
the other party notice of such party's intention to cause the same to be
submitted to arbitration. After fifteen (15) days have elapsed from the
giving of such notice, but not before such time, the party who gave such
notice may cause any such dispute which then remains unresolved to be
submitted to arbitration by submitting the same to the New York, New York
office of the American Arbitration Association (the "AAA") (or any successor
thereto, but if no organization is then performing a function reasonably
similar to the AAA, then to a court of competent jurisdiction in accordance
with the rules of such court) with a request for arbitration to be conducted
in accordance with the rules thereof by one (1) arbitrator to be jointly
selected by the parties. The prevailing party's expenses, including without
limitation attorneys' fees, in connection with such arbitration shall be borne
by the losing party; provided, however, that if liability is allocated by the
arbitrator between the parties, the expenses of such arbitration, including
without limitation the parties' attorneys' fees, shall be borne by the parties
in proportion to their respective percentages or proportions of liability
assessed by the arbitrator. The decision of the arbitrator as to all matters
properly submitted to such arbitrator and as to the apportionment of expenses
of arbitration shall be conclusive and binding upon the parties and judgment
upon any award may be entered in any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Company:
PHONETIME, INC.
a New York corporation
WITNESS:
/s/ Douglas Barley By: /s/ Samer Tawfik
- ----------------------- -----------------------------
Name: Douglas Barley Name: Samer Tawfik
Title: Chief Executive Officer
EXECUTIVE:
WITNESS:
/s/ B.K. Klusaritz /s/ John J. Klusaritz
- ----------------------- -------------------------------
Name: John J. Klusaritz
SETTLEMENT AGREEMENT
AGREEMENT, dated as of this 3rd day of April, 1996, by and between
Phonetime, Inc., New York Corporation with its principal place of business
located at 30-60 Whitestone Expressway, Flushing, NY 11354, ("PTI") Samer
Tawfik and Thomas J. Hickey and The Interactive Telephone Company, a Delaware
Corporation with its principal place of business located at 25 Main Street,
Hackensack, NJ 07601 ("Interactive") and Joseph Pannullo, (collectively the
"Parties Hereto").
WHEREAS, the Parties Hereto desire to settle the various claims asserted
against each other in the context of the ongoing action pending in Supreme
Court, Queens County, entitled The Interactive Telephone Company v. Phonetime,
Inc., and the discontinued action commenced in Supreme Court, Nassau County,
entitled: "Phonetime, Inc., v. The Interactive Telephone Company, et al", as
well as the claims each party may have against the other but not asserted in
those proceedings.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the adequacy and sufficiency of which is
hereby acknowledged, Interactive and PTI hereby agree as follows:
1. MUTUAL RELEASES BETWEEN THE PARTIES HERETO: Interactive and Joseph
Pannullo shall release PTI, Samer Tawfik and Thomas J. Hickey and PTI, Samer
Tawfik and Thomas J. Hickey shall release Interactive and Joseph Pannullo from
any and all liability arising out of, or in connection with, their business
relationship or any prior course of dealing, except those binding obligations
stated in this Agreement, as more fully defined in the Indemnification
Agreement (Schedule A) and the Mutual Release (Schedule B), both of which are
attached hereto and hereby made a part hereof.
2. OFFSET OF CERTAIN OBLIGATIONS BETWEEN THE PARTIES HERETO:
A. Interactive agrees to relinquish its rights or claims to: (i) a one-
third equity interest in PTI; (ii) any profits, drawings or other income which
Interactive may be entitled to; (iii) service fees of Interactive provided to
PTI; (iv) the security deposits which Interactive transferred over to PTI,
including: (a) Merit Tel; (b) Intellico, Inc./InterExchange, Inc.; (c)
Cherry; and (v) any other rights or claims Interactive may have, and
B. PTI, Samer Tawfik and Thomas J. Hickey agree to: (i) relinquish any
rights they may have for any and all sums of money or other consideration
conveyed to Interactive, directly or indirectly; (ii) indemnify Interactive
and Joseph Pannullo from certain Third Party Vendors claims, as set forth and
as that term is defined below: (iii) deliver, concurrent herewith, the sum of
thirty-one thousand two-hundred dollars ($31,200.00) dollars, in unendorsed
certified funds, payable directly to the order of Interactive; and (iv)
deliver an option to acquire five (5 percent) percent of all of the greater of
the current or then issued and outstanding shares of each class of stock of
<PAGE>
<PAGE>
PTI, as more fully defined in the Option Agreement (Schedule C), attached
hereto and hereby made a part hereof.
3. [INTENTIONALLY OMITTED]
4. CHEMICAL BANK ACCOUNTS OF PTI: PTI to deliver proof, reasonably
satisfactory to Joseph Pannullo, that all such bank accounts have been duly
closed or that Joseph Pannullo has been removed as a signatory, with not
outstanding obligations. This provision shall survive closing.
5. PTI OBLIGATIONS REGARDING THIRD PARTY VENDORS: PTI shall pay any
indebtedness or obtain or deliver general releases or indemnifications and
hold harmless protections, as the case may be, with respect to the following
Third Party Vendors, namely: the International Telecommunications Corporation
("Intelco"); Metropolitan Fiber Systems ("MFS"); Intellicom, Inc.;
InterExchange, Inc. ("InterExchange"); Merit Tel, Inc. ("Merit Tel") and LCI
International ("LCI"), (collectively the "Third Party Vendors") and provide
Interactive and Joseph Pannullo, with the exception of MFS, with the general
unconditional releases and indemnifications and hold harmless protections as
more fully defined in the Indemnification Agreement:
(i) Intelco: PTI shall deliver, at closing, an unconditional release
of ITC and Joseph Pannullo from Intelco, relating to any and all obligations
or claims whatsoever arising out of: (a) PTI billing codes; (b) Dedicated
"800" numbers of PTI used at Intelco; and (c) PTI phone traffic, installation,
recurring, service or related charges arising at any time, out of or accruing
during the period commencing July 10, 1995;
(ii) MFS: PTI shall deliver at closing the sum of eleven thousand
two-hundred dollars ($11,200.00) dollars, in unendorsed certified funds,
payable directly to the order of ITC (as part of, not in addition to, the
remuneration described in Section 2 B, hereof);
(iii) InterExchange: PTI shall deliver at closing, the
Indemnification Agreement, which shall specifically reference the
InterExchange Agreement, originally executed by Intellicom and assigned by
Intellicom to Interexchange (attached hereto as Exhibit I);
(iv) Merit Tel: PTI shall deliver at closing, the Indemnification
Agreement, which shall specifically reference the Merit Tel Agreement
(attached hereto as Exhibit II); and
(v) LCI: PTI shall deliver at closing: (i) the Indemnification
Agreement, which shall specifically reference LCI; and (ii) the sum of fifty
thousand dollars ($50,000.00) dollars, in unendorsed certified funds, payable
directly to the order of Schupbach Williams and Pavone, LLP, as Escrowee (the
"Escrowed Funds"), to be held in accordance with the Escrow Agreement
(Schedule D), which is attached hereto and made a part hereof. The Parties
hereto shall negotiate together in good faith on an expedited basis with the
principals or representatives of LCI regarding fully satisfying the
outstanding indebtedness (or a reduced amount acceptable to LCI), of ITC to
LCI which, it is agreed, arose out of , or accrued during ITC's dealings on
behalf of PTI during the period September 1995 through and including November,
<PAGE>
<PAGE>
1995, by way of the use of four (4) "800" numbers and four (4) "T1s". the
Escrowed Funds shall be disbursed by Escrowee as more fully defined in the
Escrow Agreement (Schedule D), attached hereto and hereby made a part hereof.
To the best of the parties' knowledge, LCI has claimed $319,000 as due or
owing.
6. CONFIDENTIALITY: All information contained herein and in the Related
Agreements, including but not limited to settlement terms, details of
contracts and other business affairs of the Parties Hereto, are and shall be
treated as confidential, unless required to be disclosed by applicable
statute, law or regulation. The parties Hereto agree for themselves and on
behalf of its directors, officers, employees and agents to whom such
information and materials are disclosed, that they shall keep such information
and materials confidential and retain them in the strictest confidence after
the term of this Agreement. The Parties Here to acknowledge and agree that
such unauthorized disclosure or other breach of this Section will cause
irreparable injury to the other parties hereto and that money damages will not
provide adequate remedy. Accordingly, the Parties Hereto shall be entitled to
recover from the breaching party, its costs, expenses and attorneys' fees
incurred in enforcing its rights hereunder. Because the parties agree that
breach of the provisions of this Section shall cause irreparable injury, for
which money damages shall be neither adequate or ascertainable, the non-
breaching party shall therefore be entitled to injunctive relief any such
breaches. The provisions of this Section shall survive the termination or
expiration of this Agreement and shall be deemed a separate and independent
agreement in consideration of, and fully vested upon, the Parties Hereto
making available to each other confidential information that is subject to
these provisions. Notwithstanding the foregoing the Parties Hereto may
disclose the terms of the Option Agreement which right shall in no way effect
or diminish the parties obligations as set forth in this Section 6.
7. FURTHER ASSURANCES: In the event any further documentation or
cooperation is required by the Parties Hereto to effectuate any of the
conditions or agreements enumerated herein, including, but not limited to
amendments, corrections, deletions, additions or modifications, the Parties
Hereto hereby agree to execute such documentation, to preserve and protect the
other parties rights. In the event either Party Hereto is required to furnish
such necessary documentation and the other party fails to do so within seven
(7) days of receipt of written demand, then such failure shall be an event of
default hereunder. PTI represents that since its date of incorporation, there
have been no sales, transfers, or exchanges of assets, other than in the
ordinary course of business and for good and fair consideration.
8. INDEMNIFICATION AND PRIORITY OF PAYMENT:
A. PTI acknowledges that Interactive had entered into certain contractual
relationships on behalf of PTI, with the Third Party Vendors. As further
security to Interactive for PTIs obligations to indemnify and hold harmless
Interactive and/or Joseph Pannullo, PTI hereby grants and assigns to
Interactive the right to receive all funds received by PTI, including any and
all cash in hand, cash deposits, accounts receivable, bank deposits, income,
now or hereafter acquired, all of which shall be collectively known as <PAGE>
<PAGE>
"Receivables", to be first applied by Interactive to satisfy any and all
indebtedness or open accounts incurred by Interactive on behalf of PTI.
Accordingly, and in the event of a breach of this Agreement or any of the
Schedules hereto (the "Related Agreements"), then within Forty-Eight (48)
hours of receipt of any such Receivables, by PTI, PTI shall forward such sums
to Interactive for use by Interactive in satisfying and paying down the
indebtedness and/or open accounts incurred on behalf of PTI. In such event,
Interactive will endeavor to provide PTI with statements on a weekly, but in
no event less frequently than monthly basis, evidencing the amounts paid and
to whom and setting forth the amounts remaining outstanding. In any action to
enforce PTIs obligations under this Agreement, the Parties Hereto waive their
rights to a jury trial and PTI waives any right to bring a counter-claim or
set-off in any such proceeding. This Assignment shall terminate upon the
satisfaction of PTI's obligations hereunder, or sooner, with regard to
MeritTel only, provided PTI deposits the sum of $20,000.00 with _________,
under terms substantially similar to those contained in Schedule D hereto.
Such satisfaction shall be in a form reasonably satisfactory to ITC.
9. DISCONTINUANCE OF ACTION: Interactive shall, by its attorney, prepare
and file a Stipulation of Discontinuance, without prejudice, of the action it
commenced namely: "The Interactive Telephone Company v. Phonetime, Inc."
Supreme Court, Queens County, Index Number: 96-3875.
10. DEFAULT: The failure of any of the Parties Hereto to act in
accordance, or comply with any of the obligations herein enumerated shall
constitute a material default and shall render this agreement null and void.
11. CONSENT TO THIS AGREEMENT: The Parties hereto consent to this
Agreement only to avoid further expense, inconvenience and litigation.
Nothing contained herein is intended, nor shall it be construed in any manner,
as an admission by any of the Parties hereto of any violation of law, or
liability or lack of merit to their respective claims or defenses.
12. LEGAL REPRESENTATIVES, SUCCESSORS, ETC.: This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their legal
representatives, executor, successors and assigns.
13. ENTIRE AGREEMENT: This Agreement contains the entire understanding of
the parties and supersedes and merges all prior and contemporaneous agreements
and discussions between the parties. Any and all representations or
agreements by any agent or representative of either party not contained in
this Agreement shall be null, void and of no effect. This Agreement may not
be changed in any way, except by an instrument in writing, signed by both
parties.
14. REVIEWED BY COUNSEL: The Parties hereto acknowledge that they have
had the opportunity to consult with counsel concerning this matter, that they
have read and fully understand the terms of this Agreement or have had it
analyzed by their counsel, with sufficient time and that they are fully aware
of its contents and of its legal effect. Because the respective counsel for
the Parties Hereto have participated in the drafting and revising of this
Agreement, the Parties Hereto agree that this Agreement shall not be construed
<PAGE>
<PAGE>
against either party on the grounds that such party drafted this Agreement.
The Parties Hereto enter into this Agreement freely and voluntarily and with a
full understanding of its terms.
15. CLOSING DATE: The closing shall occur on April 3, 1996 at 1:00 P.M.
at the law offices of Christopher J. Gulotta, Esq. at: 270 Madison Avenue,
Suite 1301, New York, NY 10016.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the day and year above written.
AGREED AND ACCEPTED BY: AGREED AND ACCEPTED BY:
The Interactive Telephone Company Phonetime, Inc.
By: /s/ Joseph Pannullo By: /s/ Samer Tawfik
-------------------------- --------------------------
Name: Joseph Pannullo Name: Samer Tawfik
Title: President Title: President
/s/ Samer Tawfik
---------------------------
/s/ Joseph Pannullo /s/ Thomas J. Hickey
- ---------------------------- ---------------------------
Joseph Pannullo Thomas J. Hickey
<PAGE>
<PAGE>
[SCHEDULE B]
MUTUAL RELEASE
This mutual release is made this 3 day of April, 1996 by and among
Joseph Pannullo and Interactive Telephone Company ("ITC"), on the one side,
and Samer Tawfik, Thomas Hickey and Phonetime, Inc. ("PTI"), on the other
(collectively the "Parties Hereto").
WHEREAS, ITC and PTI are entering into an agreement of even date
herewith (the "Settlement Agreement") providing for a settlement of the all of
the claims of each respective party against the other, which agreement, among
other things, recognizes the concurrent execution and delivery by the Parties
Hereto of this release.
NOW THEREFORE, the Parties Hereto agree as follows:
1. Mutual Release of Claims. The Parties Hereto on behalf of
themselves, and their respective heirs, executors, officers, directors,
employees, partners, investors, shareholders, administrators, predecessor and
successor corporations, and assigns, hereby fully and forever release each
other and their respective heirs, executors, officers, directors, employees,
partners, investors, shareholders, administrators, predecessor and successor
corporations, and assigns, from, and agree not to sue concerning any claim,
duty, obligation or cause of action relating to any matters of any kind,
whether presently known or unknown, suspected or unsuspected, that any of them
may possess arising from any omissions, acts or facts that have occurred up
until and including the date hereof, including, without limitation, any claims
arising out of or based upon the business relationship or prior course of
dealings among the Parties Hereto with respect to Phonetime, Inc.
The Parties Hereto agree that the release set forth in this section
shall be and remain in effect in all respects as a complete general release as
to the matters released. Notwithstanding anything contained herein to the
contrary, this release does not extend to any of the following obligations:
(a) any obligations incurred hereunder or under the AGREEMENT;
and
(b) any obligation to defend and/or indemnify ITC in connection
with any claims against ITC brought by any Third Party Vendor, as the term is
defined in the Agreement.
2. Authority. The Parties Hereto represent and warrant that
they have the authority to act on their own behalf or on behalf of any entity
for which they are executing this instrument and to bind themselves and all
who may claim through them to the terms and conditions hereof.
3. No Representations. The Parties Hereto represent that they
have had the opportunity to consult with attorneys, and have carefully read
and understand the scope and effect of the provisions hereof. None of the
<PAGE>
<PAGE>
Parties Hereto has relied upon any representations or statements made by any
party which are not specifically set forth herein or in the Agreement.
4. Governing Law. This release shall be governed by the laws of
the State of New York.
5. Voluntary Execution. This release is executed voluntarily
and without any duress or undue influence on the part or behalf of the Parties
Hereto, with the full intent of releasing all claims. The Parties Hereto
acknowledge that (a) they have read this release; (b) they have been
represented in the preparation, negotiation, and execution of this release by
legal counsel of their own choice; (c) they understand the terms and
consequences of this instrument and of the releases it contains; and (d) they
are fully aware of the legal and binding effect of this release.
IN WITNESS WHEREOF, the Parties Hereto have executed this release as
of the date first written above.
The Interactive Telephone Company Phonetime, Inc.
/s/ Joseph Pannullo /s/ Samer Tawfik
- ------------------------- -----------------------
By: By:
/s/ Samer Tawfik
---------------------------
/s/ Joseph Pannullo /s/ Thomas J. Hickey
- ---------------------------- ---------------------------
Joseph Pannullo Thomas J. Hickey<PAGE>
<PAGE>
OPTION TO PURCHASE COMMON STOCK OF PHONETIME, INC.
--------------------------------------------------
Phonetime, Inc., a New York corporation (the "Company" or "PTI"), hereby
grants to The Interactive Telephone Company, a Delaware corporation (together
with its successors, assigns and designees, the "Holder" or "ITC"), an option
to purchase from the Company, Five (5) shares of the Company's Common Stock,
par value $--0-- per share (the "Common Stock"), or such other number of
shares as the case may be, as more fully provided for in Section 4 hereof
(the "Shares"), or such other Securities referenced in Section 4, upon
presentation and surrender of this Option with a written notice of the Holder
of its intention to exercise this Option at any time from and after the Option
Effective Date (as defined in Section 1 hereof) and on or before April 2nd,
2001, at the offices of the attorneys for the Company located at c/o
Schupbach, Williams and Pavone, 401 Franklin Avenue, Suite 206, Garden City,
NY 11530 (or at such other office as hereafter shall have been designated by
the Company by notice pursuant hereto) and upon payment therefor of the
purchase price (herein called the "Purchase Price") in lawful money of the
United States of America of the greater of: (a) $0.25 per share; or (b) fifty
percent (50 percent) of the Best Office Price (as defined in Section 2
hereof). In the case of a purchase of "Other Securities," the Purchase Price
shall be equal to fifty percent (50 percent) of the price paid for such Other
Securities by unrelated third parties.
This Option is subject to the following terms and conditions:
1. TIME OF EXERCISE: The purchase rights represented by this Option
are exercisable at the option of the Holder hereof, in whole at any time, or
in part from time to time (but not as to a fractional share of Common Stock)
on or after the Option Effective Date and on or before the Expiration Date, as
that term is defined in Section 2 hereof. The term "Option Effective Date" as
used herein shall mean the earliest of the date on which: (1) the Company
consolidates with or merges with or into another corporation; (2) the
shareholders of the Company sell or otherwise issue any stock options or
warrants in the Company; (3) the Company sells all or substantially all of its
assets to a third party; 94) the Company pledges, mortgages, or otherwise
encumbers any or all of its assets in favor of a third party after the date
hereof; or (5) the Company closes a private placement or public offering of
its debt or equity securities. In the event of a consolidation or merger in
which the Company is not the surviving entity, the Holder hereof shall
thereafter receive, upon the exercise hereof, the securities or property to
which a Holder of the number of shares of Common Stock then deliverable upon
the exercise hereof would have been entitled upon such consolidation or
merger, and the Company shall take whatever steps necessary in connection with
such consolidation or merger as may be necessary to assure that the provisions
hereof shall thereafter be applicable in relation to any securities or
property thereafter deliverable upon the exercise of this Option.
2. BEST OFFER PRICE: For purposes hereof, the term "Best Offer
Price" shall mean the price paid for a share of Common Stock by an unrelated
third party in the most recent sale or other transaction by the Company, of
Common Stock, whether the price paid was in cash, cash equivalents or other
consideration tendered by an unrelated third party.<PAGE>
<PAGE>
3. EXPIRATION DATE: The term "Expiration Date" shall mean the close
of business on April 2nd, 2001, or if said date shall in the State of New York
be a holiday or a day on which banks are authorized to close, then the next
following date which in the State of New York is not a holiday or a day on
which banks are authorized to close.
4. ANTIDILUTION: The number of shares of Common Stock covered by
this Option on the date hereof represent five percent (5 percent) of the fully
diluted shares of Common Stock currently issued and outstanding, taking into
consideration both all issued and outstanding shares as well as all shares
which are issuable upon the exercise of any outstanding options, warrants or
other rights issued by the Company, as well as, upon the conversion of any
debt, preferred or other securities (collectively, "Fully Diluted Shares").
If at any time or from time to time the Company shall by issuance,
subdivision, consolidation or reclassification of shares, or otherwise change
as a whole the outstanding shares of its Common Stock into a different number
of class of shares, the number and class of shares as so changed shall replace
the shares to which this Option is applicable immediately prior to such
change, and the number of shares purchasable under this Option shall be
increased or decreased as the case may be so that at all times this Option
shall cover five percent (5 percent) of the Fully Diluted Shares of the
Company. Similarly, if at any time the Company shall issue any securities
other than Common Stock which represent an equity interest in the Company or
may be converted into any equity interest in the Company ("Other Securities"),
this Option shall be deemed to cover five percent (5 percent) of the issued
and outstanding amount of such Other Securities. Irrespective of any
adjustments or change in the Options theretofore and thereafter issued in
replacement or substitution hereof, Holder may continue to express the
Purchase Price per share and the number of shares purchasable which were
expressed upon the Options when initially issued.
5. RESERVATION OF SHARES: The Company shall reserve and keep
available a sufficient number of shares of Common Stock (or, as the case may
be, Other Securities) to satisfy the requirements of this Option. The Company
will take all such action as may be necessary to insure that all shares of
capital stock issued upon exercise of the Option will be duly and validly
authorized and issued and fully paid and non-assessable.
6. EXCHANGE OF OPTIONS: This Option is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for new
Options of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder, each of such new Options
to represent the right to purchase such number of shares as shall be
designated by said Holder at the time of such surrender.
7. REPLACEMENT OF OPTIONS: Upon receipt by the Company of evidence
reasonable satisfactory to it of the loss, theft, destruction or mutilation of
this Option, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Option, if mutilated, the Company will make and deliver a
new Option of like tenor, in lieu of this Option.
<PAGE>
<PAGE>
8. REPURCHASE BY THE COMPANY: Provided the Company has not defaulted
with all of the terms and conditions of the Related Agreements, and has not
received notice from ITC, in writing, alleging a default as that term is
defined in the Settlement Agreement, the Company shall have the right at its
sole discretion, to repurchase this Option from the Holder hereof by paying
the Holder hereof ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00), if paid
prior to the twelve (12) month anniversary hereof; or TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000.00), if paid after the twelve (12) month
anniversary hereof, payable by wire transfer or cashier's check to the Holder
in accordance with written instructions delivered by the Holder to the
Company. Further, with all of the terms and conditions of the Related
Agreements, the Company may exercise this right to repurchase at any time
prior to the Option Effective Date as defined in Section 1 hereof.
9. REPRESENTATIONS BY THE COMPANY: The Company represents,
knowing that it has induced the Holder based, inter alia hereon, that: (i)
the Company's Certificate of Incorporation ("Certificate"), authorizes the
issuance of 200 shares of common stock, par value: $--0-- per share, with no
other classes of stock authorized; (ii) the Company will not amend, change or
modify its Certificate to change or alter the number of authorized shares or
class of stock, without notifying Holder as set forth herein; (iii) the
Company shall notify Holder within twenty-four (24) hours of any event that
triggers the Option Effective Date, as defined in Section 1 hereof; (iv) that
Thomas J. Hickey and Samer Tawfik are the sole shareholders of all of the
issued shares of the Company and that, with the exception of the rights
granted under this Agreement, there are no outstanding rights, options,
warrants or other interests convertable directly or indirectly into the equity
of the Company.
10. NOTICES: All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered, via certified mail, return receipt requested:
If to the Holder:
----------------
The Interactive Telephone Company
25 Main Street, Hackensack, NJ 07601;
and to
------
Christopher J. Gulotta, Esq.
81 Pondfield Road, Bronxville, NY 10708
or: at such other address as may have been furnished to the
Company in writing by the Holder.
If to the Company:
-----------------
Phonetime, Inc.
30-60 Whitestone Expressway
Flushing, NY 11354
and to
------
Paul Williams, Esq.
Schupbach, Williams and Pavone
401 Franklin Avenue, Suite 206
Garden City, NY 11560
or: at such other address as may have been furnished to the Holder
in writing by the Company.
11. SUCCESSORS AND ASSIGNS: This Option shall be binding upon any
successors or assigns of the Company.
12. GOVERNING LAW: This Option shall be construed in accordance with
and governed by the laws of the State of New York.
13. INJUNCTIVE RELIEF: Because of the nature of the damages which
the Parties Hereto would suffer as result of any breaches of this Agreement,
the Parties hereto may seek injunctive relief before a court of competent
jurisdiction to achieve all applicable equitable relief.
IN WITNESS WHEREOF, the parties hereto have caused this Option to be duly
executed as of the date set forth below.
PHONETIME, INC. THE INTERACTIVE TELEPHONE COMPANY
By: /s/ Samer Tawfik By: /s/ Joseph Pannullo
-------------------- -------------------------
Name: Sam Tawfik Name: J. Pannullo
Title:President Title: President
Date: 4/3/96 Date: 4/3/96
Witness: /s/ [illegible] Witness: /s/ [illegible]
Name: [illegible] Name: [illegible]
<PAGE>
<PAGE>
SCHEDULE D
ESCROW AGREEMENT
As further security for PTI's performance under the Indemnity
Agreement of even date herewith, and, in particular, with respect to the
payment and stipulation of the indebtedness to LCI, PTI has paid the sum of
$50,000.00 to Schupbach, Williams and Pavone LLP, receipt of which is hereby
acknowledges by the Escrow Agent. This sum shall beheld in escrow by
Escrow Agent pending the final payment and satisfaction of the amounts due to
LCI arising out of ITC's dealings on behalf of PTI during the period
September 15, 1995 through and including November, 1995, by way of the four
(4) "800" numbers and four (4) "TIs". The parties agree that this sum may be
released and paid over by Escrow Agent to LCI as part of the consideration for
any such payment and satisfaction. Escrow Agent agrees to provide to ITC or
its counsel written notice of any such payment. The parties further consent
to retention of funds in an interest bearing segregated bank account in the
name of Escrow Agent pending such payment and satisfaction. Upon final
settlement of the LCI indebtedness, any escrow balance remaining shall be
released to PTI.
The parties acknowledge that Escrow Agent is acting solely as a
stake Holder at their request and for their convenience and that Escrow Agent
shall not be liable to either party for any act or omission on its part unless
taken or suffered in bad faith or in willful disregard of this agreement or
involving gross negligence on the part of the Escrow Agent. PTI and ITC
jointly and severally agree to defend, indemnify and hold Escrow Agent
harmless from and against all costs, claims and expenses (including reasonable
attorneys' fees) incurred in connection with the performance of Escrow Agent's
duties hereunder, except with respect to actions or omissions taken or
suffered by Escrow Agent in bad faith or in willful disregard of this contract
or involving gross negligence on the part of the Escrow Agent.
Escrow Agent or any member of its firm shall be permitted to act as
counsel for PTI in any dispute as to the disbursement of the escrow funds or
any other dispute between the parties, whether or not Escrow Agent is in
possession of the escrow funds and continues to act as Escrow Agent.
PHONETIME, INC.
By: /s Samer Tawfik
------------------------------
THE INTERACTIVE TELEPHONE COMPANY
By: /s/ Joseph Pannullo
------------------------------
SCHUPBACK, WILLIAMS and PAVONE LLP, Escrow Agent
By: /s/Shupback, Williams and Pavone
-----------------------------------
WHITESTONE EXECUTIVE PLAZA
30-50 Whitestone Expressway
Flushing, New York 11354
GOLDEN UNION, LLC (LANDLORD)
WITH
PHONETIME, INC. (TENANT)<PAGE>
<PAGE>
WHITESTONE EXECUTIVE PLAZA
PHONETIME LEASE
TABLE OF CONTENTS
ARTICLE # TITLE PAGE #
-------- ----- ------
1 Space 3
2 Term 3
3 Rent 4
3.1 Renewal Option 4
3.2 Termination of Lease 4, 5
4 Use 5
5 Services 5
6 " 5
7 " 5
8 " 5
9 " 5
10 " 5
11 Landlord's Repairs 5, 6
12 Parking Field 6
13 Directory 6
14 Tenant's Repairs 6
15 Floor Loading 7
16 Insurance 7
17 Real Estate Tax Escalation 7, 8, 9
18 Space Intentionally Omitted 9
19 Miscellaneous 9
20 " 9
21 " 9
22 " 9
23 " 9
24 Fixtures & Installation 9
25 Alterations 10
26 Requirements of Law 10, 11
27 End of Term 11
28 Quiet Enjoyment 11
29 Signs 11, 12
30 Rules & Regulations 12
31 Assignment & Subletting 12, 13
32 Landlord's Access to Premises 13
33 Subordination 13, 14
34A Property Loss, Damage Reimbursement 14
34B Tenant's Indemnity 14, 15
34C Landlord's Indemnity 15
<PAGE>
<PAGE>
WHITESTONE EXECUTIVE PLAZA
PHONETIME LEASE
TABLE OF CONTENTS
ARTICLE # TITLE PAGE #
-------- ----- ------
35 Destruction-Fire or Other Casualty 15
36 Subrogation 16
37 Eminent Domain 16
38 Waste 16
39 Certificate of Occupancy 16, 17
40 Default 17, 18
41 18
42 Sprinklers 18
43 Damages 18, 19
44 Sums Due Landlord 19
45 No Waiver 19, 20
46 Waiver of Trial by Jury 20
47 Bills and Notices 20
48(A) Inability to Perform 20, 21
48(B) Interruption of Services 21
48(C) Conditions of Landlord's Liability 21
48(D) Tenants Taking Possession 21
49 Entire Agreement 22
50 Vault, Vault Space, Area 22
51 Security 22, 23
52 Definitions 23
53 Partnership Tenant 24
54 Successors, Assigns, etc. 24
55 Application of Insurance Proceeds 24
Waiver of Subrogation 24
56 Broker 24
57 Captions 24
58 Nonliability of Landlord 24
59 Right of First Refusal 24
60 Governing Law 24
61 Jurisdiction 24
62 Signature Sheet 25
SCHEDULES
Schedule A DELETED
Schedule B DELETED
Schedule C Heating and Air Conditioning 26
Schedule D Cleaning Schedule 27
Schedule E Rules and Regulations 28, 29
<PAGE>
<PAGE>
AGREEMENT OF LEASE, made as of this 8th day of April, 1997 between GOLDEN
UNION, LLC, having its principal office c/o ALMA REALTY CO., 28-18 31st
Street, Astoria, New York 11102
(hereinafter referred to as "Landlord"), and
PHONETIME, INC., having its principal office at 30-60 Whitestone Expressway,
Flushing, New York 11354
(hereinafter referred to as "Tenant").
WITNESSETH: Landlord and Tenant hereby covenant and agree as follows:
SPACE
1. Landlord is the fee owner of the Building and the parcel of real
property on which the Building is located (which included the Building Parking
Area as defined below). Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord approximately 2,700 square feet on the ground floor;
approximately 15,600 square feet, which is the entire second floor and
approximately 9,000 square feet on the third floor substantially as shown on
the Rental Plan initialed by the parties and made part hereof as Exhibit I
("Demised Premises") in the building known as the Whitestone Executive Plaza,
30-50 Whitestone Expressway, Flushing, New York 11354, (hereinafter referred
to as the "Building). The Demised Premises currently contains approximately
27,300 rentable square feet which currently constitutes 43.86 percent of the
rentable area of the Building. In addition to occupying the Demised Premises,
Tenant, during the entire term of this Lease shall have the right to use in
common with others, at no additional expense to Tenant: a) all common areas
and public portions of the Building; b) all remaining available space on the
roof of the Building, whereby Tenant shall install telecommunications
equipment; and c) space located in the parking lot or adjoining the Building,
whereby Tenant shall install/house an electrical generator.
TERM
2. The term of this lease shall commence April 1, 1997 hereinafter
referred to as the "Term Commencement Date," and shall terminate on March 31,
2002, hereinafter referred to as the "Expiration Date." The term of this
Lease is subject to extensions as provided for below.
Should the Term Commencement Date be a date other than the first day of
the month, the Tenant shall pay a pro rata portion of the rent from such date
through and including the last day of such month. Should the Expiration Date
be a date other than the last day of the month, the Tenant shall pay a pro
rata portion of the base rent from the first day of such month through and
including such Expiration Date.
In consideration of Tenant entering this Lease, Landlord hereby waives
(i) the payment of all rent for the second and third floor for the months of
April 1, thru June 30, 1997 and (ii) all rent for the 2,700 square feet of the
first floor until the later to occur of (a) June 30, 1997 or (b) the
completion of all construction work to be performed by Landlord on such first
floor space to Tenant's reasonable satisfaction.<PAGE>
<PAGE>
RENT
3. The basic annual rental rate is as follows:
LEASE YEAR ANNUAL RENT MONTHLY RENT
1st $480,000.00 $40,000.00
2nd 499,200.00 41,600.00
3rd 519,168.00 43,264.00
4th 539,934.72 44,994.57
5th 561,532.11 46,794.34
During the term of this Lease, the basic annual rental shall be as cited
above, payable in equal monthly installments as listed above, which Tenant
agrees to pay in lawful money of the U.S. which shall be legal tender in
payment of the debts and dues, public and private, at the time of payment, in
advance on the first day of each calendar month during the Demised Term at the
Office of the Landlord, except that Tenant shall pay the first monthly
installment on the signing of this Lease and, subject to the rent concessions
set forth in paragraph 2 above, each month thereafter from the "Term
Commencement Date." Tenant shall pay the rent as above and as hereinafter
provided, without any set off or deduction whatsoever, except as set forth
herein.
3.1 RENEWAL OPTION
Provided that Tenant is not then in default beyond any applicable cure
period of any of the covenants and conditions of this Lease, Landlord hereby
grants to Tenant an option to continue leasing the Leased Premises for One (1)
Five (5) Year Option Period commencing on the day following the last day of
the initial Lease Term. Tenant shall exercise this renewal option by giving
to Landlord, at least one hundred eighty (180) days prior to the expiration of
the respective preceding Lease Term, written notice from Tenant stating that
Tenant intends to exercise said renewal option. In the event that Tenant
fails to exercise its renewal option hereunder, or such renewal notice from
Tenant is not timely given, the renewal option provided for herein shall
immediately cease and be thereafter null and void.
During the renewal Lease Term, the terms and provisions of this Lease,
including those terms relating to additional rent, shall remain unchanged,
except that this Article 3.1 shall be deleted. The Base Rent for such renewal
term shall be as follows:
OPTION YEAR ANNUAL RENT MONTHLY RENT
1st $83,993.40 $48,666.12
2nd 607,353.14 50,612.76
3rd 631,647.25 52,637.27
4th 656,913.15 54,742.76
5th 683,189.68 56,932.47
<PAGE>
<PAGE>
3.2 TERMINATION OF LEASE
Provided that Tenant is not in default beyond any applicable cure period
of any of the covenants and conditions of this Lease, Landlord hereby grants
to Tenant the right to terminate this Lease at any time, but, only during the
Option Period of this Lease.
In order to exercise the termination option, Tenant must first notify
Landlord in writing of its option to terminate and the effective date of
termination. This notice must be give to Landlord at least three (3) months
prior to the effective date of termination.
An additional requirement in order for Tenant to exercise its termination
Option shall be that Tenant must pay to Landlord an amount equal to six (6)
months base rent for the six (6) month period that follows the effective date
of Tenant's termination. (For example, if Tenant notifies Landlord that July
1, 2004 shall be the effective date of termination, Tenant must be current
with its rent through June 30, 2004 and must pay to Landlord the six (6) month
Lease buy-out for months covering July 1, 2004 through December 31, 2004 at
$50,612.76/month *six (6) months = $303,676.56)
Once Landlord receives the six (6) months of the Lease buy-out, payable
ONLY by certified funds, and Tenant vacates the Premises and leaves same in
broom clean condition, Landlord and Tenant shall execute a Surrender of Lease
Agreement and thereafter Tenant shall not be liable for any of the remaining
Lease term or any obligations of this Lease.
USE
4. The Tenant shall use and occupy the Demised Premises only for General
Office use and for the installation and maintenance of a telecommunication
switching facility and related equipment and for no other purpose. Tenant
shall also have the right to install and maintain, at Tenant's expense,
conduits both inside the Building and from the generator into the Building in
connection with the use of its equipment.
SERVICES
5. Landlord will provide heat and air conditioning to the Demised Premises
(subject to the conditions set forth in "Schedule C" attached hereto and made
part hereof) during business hours of 8:00 a.m. to 6:00 p.m. on weekdays and
from 9:00 a.m. to 6:00 p.m. on Saturdays; excluding all legal holidays.
Tenant will pay proportionate share of utility charges as it relates to the
Demised Premises as billed by Landlord. Tenant's proportionate share will be
43.86% of the Building's bill for the aforementioned charges, which
proportionate share is subject to change based upon any change in the square
footage of the Building or the Demised Premises. Landlord will manage the
Building in accordance with building standards for similarly situated first
class office buildings.
<PAGE>
<PAGE>
Charges for heat, air conditioning and utilities for common areas shall
be pro-rated to the Tenant in accordance with the percentage of the building's
rentable space occupied by the Tenant. Landlord will furnish copies of all
such bills to Tenant promptly upon receipt thereof.
6. Landlord will provide cleaning services which will be performed between
the hours 5:00 p.m. and 6:00 a.m. on Monday through Friday, legal holidays
excepted, as set forth in Schedule "D", attached hereto and made part hereof.
7. Landlord will furnish elevator service to the Demised Premises during
hours at no charge to Tenant.
8. Landlord will furnish adequate hot and cold tempered water for
lavatory, drinking and cleaning services at no charge to Tenant.
9. At any hours other than the aforementioned business hours at the
Tenant's request and upon Landlord's agreement, not to be unreasonably
withheld or delayed, any services heretofore enumerated will be provided at
the Tenant's expense as overtime services, except that there will be no charge
for overtime service for moving in and out of the Demised Premises.
Heat and Air Conditioning overtime charge is $25.00 per hour or any part
thereof. This charge will escalate annually at the rate of five percent
(5%/year).
Except for the amounts expressly payable by Tenant under this Article
entitled "Services" as well as amounts payable by Tenant under Article 17
below, Tenant shall not be responsible for the payment of any other operating
expenses incurred by the Landlord in connection with the Building or the
Property.
10. Any diminution in services required by Federal, State or Municipal Law
or by virtue of any code or regulation or directive of any Environmental
Agency or Conservation Program of the Federal, State, City, County or local
government body of any nature whatsoever, shall not entitle the Tenant to any
diminution, abatement or refund of rent or other charges due under the
provisions of this Lease, except if it renders the Demised Premises unusable.
LANDLORD'S REPAIRS
11. (A) Landlord, at its expense, will make all the repairs to and provide
the maintenance for the Demised Premises (excluding painting and decoration)
and for al public areas and facilities, and to the roof and structure to the
Building and to the building systems including but not limited to plumbing,
electrical, HVAC and mechanical servicing the Demised Premises and to the
windows of the Building in a manner appropriate for a first class office
building in Flushing, New York, except such repairs and maintenance as may be
necessitated by the negligence, improper care or sue of such premises and
facilities by Tenant, its agents, employees, licensees or invitees, which will
be made by Landlord at Tenant's expense. Landlord represents that all systems
function, roof foes not leak and there are not structural defects in the
building.
<PAGE>
<PAGE>
(B) Notwithstanding the aforementioned, Landlord shall provide the
following to Tenant at no cost to Tenant: a) paint and plaster the Demised
Premises prior to Tenant's occupancy of same; b) Landlord shall clean and
repair the carpet in the Demised Premises as needed; c) Landlord shall install
a swipe system that can print details of users access at the front entrance
and at the entrance of Tenant's space on each of the three floors; d) Landlord
shall install two sets of glass doors for the second floor rear elevators with
a cord access swipe lock; e) Landlord shall install a security system
comprising of cameras, intercoms and buzzers for all three floors; f) Landlord
shall pave the driveway; g) construct a loading dock; h) Landlord shall build-
out Tenant's space located on the first floor in accordance with reasonable
plans and specifications to be submitted by Tenant to Landlord; and (i)
Landlord shall remove the two offices and closets located on the third floor
space and install a secure double door in accordance with reasonable plans and
specifications provided by Tenant to Landlord, all of which work shall be
completed by Landlord lien-free and in a good and workmanlike manner in
accordance with all applicable laws and regulations.
Landlord shall provide the following at Tenant's sole cost: a) security
bars/gates for the first (1st) floor space; and b) Landlord to provide Tenant
with an adequate exterior location (mutually agreed upon by both parties)
whereby Tenant shall install/house a generator. No additional rent shall be
payable on account of such space.
Landlord represents that the Building of which the Demised Premises forms
a part of shall be cable ready by the time Tenant occupies same.
PARKING FIELD
12. Tenant shall have the right at no additional cost to Tenant, or its
employees or invitees, to self-park in 125 reserved parking spaces for the
reserved parking of automobiles of the Tenant; its employees and invitees, in
the parking area reserved for tenants of the Building (hereinafter sometimes
referred to as "Building Parking Area") subject to the Rules and Regulations
now or hereafter reasonably adopted by Landlord. Said parking spaces shall be
marked as Reserved PTI. Landlord shall have no obligation to police said
parking spaces, but shall be obligated to maintain the Building Parking Area.
DIRECTORY
13. Landlord will furnish in the lobby of the Building a directory which
will contain a Tenant List. Tenant shall have the right to install its own
directory in the lobby of each floor of the Building in which Tenant occupies
space, but must first obtain Landlord's consent, which consent shall not be
unreasonably withheld or delayed.
TENANT'S REPAIRS
14. Tenant shall take good care of the Demised and, subject to the
provisions hereof, Landlord after fifteen (15) days notice to Tenant, except
in an emergency, at the expense of Tenant shall make as and when needed as a
<PAGE>
<PAGE>
result of misuse or neglect by Tenant or Tenant's servants, employees, agents
or licensees, all repairs in and about Demised Premises necessary to preserve
them in good order and condition. When caused by misuse or neglect by Tenant
or Tenant's servants, employees, agents, licensees or invitees, except as
provided in Article 36 hereof, there shall be no allowance to Tenant for a
diminution of rental value and no liability on the part of Landlord by reason
of inconvenience, annoyance or injury to business arising from Landlord,
Tenant or others making any repairs, alterations, additions or improvements in
or to any portion of the Building or of Demised Premises, or in or to the
fixtures, appurtenances or equipment thereof, except for Landlord's own
negligence or that of its agents, contractors or employees. Landlord agrees
to use its best efforts to not interfere with Tenant's business. Landlord
shall not be obligated to do work at "premium hours".
FLOOR LOADING
15. The placement of any equipment which will impose an evenly distributed
floor load in excess of 50 pounds per square foot live load shall be done only
after written permission is received from the Landlord which shall not be
unreasonably withheld. Such permission will be granted only after adequate
proof is furnished by a professional engineer that such floor loading will not
endanger the structure.
INSURANCE
16. Tenant, at its expense, shall maintain at all times during the term of
this Lease , public liability insurance in respect of the Demised Premises and
the conduct or operation of business therein, with Landlord as an additional
named insured, and with limits of $1,000,000 for property damage and not less
than $1,000,000 for bodily injury or death to any number of persons in any one
occurrence under a customary property insurance policy.
Tenant shall promptly deliver to Landlord a Certificate of Insurance for
such fully paid for policies prior to occupancy, and Tenant shall deliver to
Landlord such Certificate of Insurance for renewal policy at least thirty (30)
days before the expiration of any existing policy. All such policies shall be
issued by companies licensed to do business in the State of New York and all
such policies shall contain a provision whereby the same cannot be canceled or
materially modified unless Landlord is given at least twenty (20) days prior
written notice of such cancellation or material modification, including,
without limitation, any cancellation resulting from the non-payment of
premiums.
Landlord, at its expense, shall maintain at all times public liability
insurance coverage of $3,000,000,00 on the Building and also have the Building
insured for its full replacement value.
REAL ESTATE TAX ESCALATION
17. (A) For purposes of this Article 17, the following definitions
shall apply:
<PAGE>
<PAGE>
(a) The term "Tax Year" shall mean the City of New York fiscal
year, July 1 to June 30 (or such other fiscal year as hereafter may be duly
adopted by the City of New York as the fiscal year for real estate tax
purposes)
(b) The term "Escalation Year" shall mean any Tax Year during
the term of this Lease commencing with Tax Year commencing July 1, 1998.
(c) The term "Base Tax Year" shall mean the July 1, 1997 to June
30, 1998 Tax Year.
(d) The term "Base Taxes" shall mean the Taxes computed by the
taxing jurisdiction for the Base Tax Year.
(e) The term "Taxes" shall be deemed to include all real estate
taxes upon or with respect to the tax lot upon which the Building is situated
and imposed by the City of New York, County of Queens, or any other taxing
authority, provided that the tax assessed by any other taxing authority is to
create a new or additional source of revenue through taxation of real estate
as such. If, due to any change in the method or taxation, or other tax shall
be substituted for, or levied against Landlord or any owner of the Building or
the Real Property, in lieu of any real estate taxes or assessments upon or
with respect to the Real Property, such tax shall be included in the term
Taxes for the purposes of this Article, except taxes such as franchise, income
or revenue tax on Landlord's rental income receipts.
Landlord hereby represents that there are no other improvements on the
tax lot other than the Building and Building Parking Area.
(B) If taxes payable in any Escalation Year shall be in such amount
as shall constitute an increase above or decrease below Base Taxes, Tenant
shall pay "Tenant's Proportionate Share", (i.e currently 43.86%) of such
increase or Tenant shall received its proportionate share of any decrease.
Tenant's Proportionate Share shall mean the fraction, the denominator of which
is the net rentable area of the Building (currently 62,260 square feet) and
the numerator of which is the Demised Premises area (currently 27,300 square
feet).
Increases in taxes, payable by reason of reductions in Landlord's tax
abatement shall be deemed tax increases subject to provision of this
Escalation Clause.
(1) INTENTIONALLY OMITTED.
(2) If the sum of the installments of Taxes payable by Landlord
in any Escalation Year exceeds the Landlord's Base Taxes for the Base Tax
Year, the annual rental reserved hereunder for such Escalation Year shall be
increased by Tenant's Proportionate Share of the amount of such excess and
shall be payable during such Escalation Year in monthly amounts equal to
1/12th of the amount of such increase (as reasonably estimated by Landlord if
not finally determinable on the first day of such Tax Year, subject to later
adjustment).
<PAGE>
<PAGE>
(3) If a final determination shall be rendered reducing the
assessed valuation of the land and/or Building for the Landlord's Base Tax
Year, the assessed valuation as so reduced shall, for all purposed be the
assessed valuation as so reduced shall, for all purposes be the assessed
valuation used in computing the Landlord's Base Taxes under section (d) of
sub-paragraph (A) above. If said determination is rendered subsequent to the
submission by Landlord to Tenant of any statements referred to in sub-paragraph
(5) below, Landlord shall submit revised statements to Tenant based
upon the reduced assessed valuation and Tenant shall, within thirty (30) days
after submission of said revised statements, pay Landlord any additional rent
due by reason of such recomputations which computation shall be adequately set
forth in the said revised statements.
(4) If Landlord shall receive a refund of Taxes for any Tax Year with
respect to which Tenant paid additional rent by reason of an increase in
Taxes, Landlord shall set forth in the first statement thereafter submitted to
Tenant pursuant to sub-paragraph (5) below the amount of such refund and the
amount of the legal fees and other expenses incurred in connection with the
collection of the refund; and, provided that Tenant is not in arrears, credit
for Tenant's Proportionate Share of the refund may be taken against the
installment or installments of rent next falling due equal to Tenant's
Proportionate Share of the amount by which the refund exceeds said fees and
expenses. In no event shall such fees and expenses exceed the refund.
(5) Landlord shall from time to time during the term of this Lease,
after the respective amounts of Taxes for the periods in question become
ascertainable, submit to Tenant statements setting forth the computation of
any increase or decrease in rental. Landlord's failure to submit a statement
or statements pursuant to this sub-paragraph (5) or sub-paragraph (2) above
shall not constitute a waiver of any rent increases payable by Tenant under
this paragraph provided, however, that such additional rental shall only
become due and payable following Tenant's receipt of such statement from
Landlord. Landlord may submit its statements (or estimates thereof)
separately and at different times, but the payment of additional rent shall
nevertheless be made in the manner and within the time limits herein above set
forth with respect to each statement so submitted.
(6) If the term of this Lease expires on a day other than the last
day of the Tax Year, rental increases pursuant to subparagraph (2) above shall
be pro-rated as of said expiration date.
(7) In the event of a taking, pursuant to the power of eminent
domain, of a portion of the Building under such circumstances as shall not
result in a termination of this Lease, then from and after the date of such
taking (i) the Base Tax Amount shall be deemed reduced in proportion to the
reduction in the number of square feet of rentable space in the Building
resulting from such taking, and (ii) Tenant's Proportionate Share shall be
adjusted so as to be equal to a fraction of which the denominator is the
reduced number of square feet of rentable space in the building and the
numerator is the number of square feet of space leased to Tenant following
such taking.
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(8) The provisions of this paragraph shall survive the expiration or
termination of this Lease until a final adjustment has been made for the Tax
year in which the Expiration Date occurs.
(9) The statements of the adjustment to be furnished by Landlord as
provided in subdivision (5) shall be based on data submitted by Landlord to a
firm of Certified Public Accountants (who may be the firm now or then
currently employed by Landlord for the audit to its accounts). In the
accountant's opinion based on the date submitted, such statements shall
present fairly the escalation adjustment for the periods represented thereby.
(10) Any delay or failure of Landlord, beyond January of any year, in
computing the billing for the rent adjustments herein above provided, shall
not constitute a waiver of or in any way impair the continuing obligation of
Tenant to pay such rent adjustments hereunder upon Tenant's receipt of such
statements.
(11) Notwithstanding any expiration or termination of this Lease
prior to the Lease expiration date (except in the case of a cancellation by
mutual agreement, termination upon casualty or condemnation or upon
termination by Tenant in accordance with Article 3.2) Tenant's obligation to
pay rent as adjusted under this Article shall continue and shall cover all
periods up to the Lease expiration date, and shall survive an expiration or
termination of this Lease until such amounts previously accruing have been
paid.
18. If the first or final lease year during which escalations may occur
shall contain less than twelve (12) months, the additional rental under this
Lease shall be prorated.
MISCELLANEOUS
19. Landlord, shall upon Tenant's request execute a Memorandum of Lease in
recordable form.
20. THIS SPACE IS INTENTIONALLY OMITTED.
21. THIS SPACE IS INTENTIONALLY OMITTED.
22. In the event the Tenant shall fail to pay Landlord the charges and
expenses as required by the terms of this Lease, the Landlord shall have the
same rights and remedies as those provided for in the Lease with regard to the
Tenant's failure to pay an installment of the annual base rent.
23. The term "Lease Interest Rate" shall mean interest at the rate of ten
(10%) percent per annum provided such rate does not violate the usury laws of
New York State. If such rate violates such usuary laws, then it shall be 1/2%
below the maximum permissible rate.
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FIXTURES & INSTALLATIONS
24. All appurtenances, fixtures, improvements, additions and other
property attached to or built into the Demised Premises, by Landlord at
Landlord's expense, shall be and remain the property of Landlord, except that
any such fixtures, improvements, additions and other property installed at the
expense of Tenant may be removed by Tenant on the condition that Tenant shall
repair at its expense any damage to the Demised Premises or the Building
resulting from such removal. Notwithstanding anything herein to the contrary,
all equipment installed by Tenant shall remain the property of Tenant in all
events. Except as otherwise provided for herein, all the outside walls of the
Demised Premises including corridor walls and the outside entrances doors to
the Demised Premises, any balconies, terraces or roofs adjacent to the Demised
Premises, and any space in the Demised Premises used for shafts, stacks,
pipes, conduit, ducts or other building facilities, and the use thereof, as
well as access thereto upon notice and accompanied by Tenant in and through
the Demised Premises for the purpose of operation, maintenance, decoration and
repair, are expressly reserved to Landlord, and Landlord does not convey any
rights to Tenant therein, provided the area demised to Tenant is not reduced
thereby or the use of the Demised Premises by Tenant is not restricted or
interfered with thereby. Notwithstanding the foregoing, Tenant shall enjoy
full right of access to the Demised Premises through the public entrances,
public corridors and public areas within the Building.
ALTERATIONS
25. (A) After completion of the Demised Premises, except items that
can be removed at the end of term the installation of which do not require
permits, Tenant shall make no structural alterations, decorations,
installations, additions or improvements in or to the Demised Premises without
Landlord's prior written consent (which consent shall not be unreasonably
withheld or delayed) and then only by contractors or mechanics who do not
interfere with Landlord's work in the Building by labor disharmony.
(B) All installations or work done by Tenant shall at all times
comply with:
(1) Laws, rules, orders and regulations of governmental
authorities having jurisdiction thereof.
(2) Reasonable rules and regulations of the Landlord.
(3) Plans and specifications prepared by and at the expense of
Tenant shall be submitted to Landlord for its prior written approval, which
approval will not be unreasonably withheld or delayed; no installations or
work shall be undertaken, started, or begun by Tenant, its agents, servants or
employees, until Landlord has approved such plans and specifications; and no
material amendments or additions to such plans and specifications shall be
made without prior written consent of Landlord, which will not be unreasonably
withheld or delayed. Tenant agrees that it will not, either directly or
indirectly, use any contractors and/or labor and/or materials that would or
will create any labor disharmony with any contractors and/or labor engaged by
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Landlord in the construction, maintenance and/or operation of the Building or
any part thereof.
(4) The indemnity contained in Article 34 (B) shall apply to any
claim arising out of the performance of said Tenant's work. Tenant shall
supply Landlord with workmen's compensation certificates for all persons
and/or contractors performing work for Tenant at the Demised Premises, a
public liability insurance policy in the sum of Two Million ($2,000,000.00)
Dollars for personal injuries and death claims and Five Hundred Thousand
($500,000.00) Dollars for property damage. In the event any mechanics lien
shall be filed against the Building by any of the Tenant's contractors,
subcontractors or material men, for work done on behalf of Tenant, Tenant
shall discharge the lien by bond, payment or otherwise, within thirty (3) days
of filing thereof after notice to Tenant and upon Tenant's failure to so
discharge any lien, Landlord may, at its option, remove the lien by bonding
and charge the Tenant with the cost thereof, together with reasonable
attorneys' fees.
REQUIREMENTS OF LAW
26. (A) Tenant, at Tenant's sole cost and expense shall comply with all
applicable laws, orders and regulations of Federal, State, county and
Municipal authorities, and with all directions, pursuant to law, of all public
officers, which shall impose any duty upon Tenant with respect tot the special
use or occupation of the Demised Premises by Tenant, except that Tenant shall
not be required to make any structural alterations in order so to comply
unless such alterations shall be necessitated or occasioned, by the improper
acts, omissions, or negligence of Tenant or any person claiming through or
under Tenant or any of their employees, contractors, agents, invitees or
licensees.
(B) Tenant shall not do anything, or permit anything to be done, in the
Demised Premises which shall (i) invalidate or be in conflict with the
provisions of any fire or other insurance policies covering the Building or
any property located therein, or (ii) result in a refusal by fire insurance
companies of good standing to insure the Building or any such property, or
(iii) cause any increase in the fire insurance rates applicable to the
Building or property located therein at the beginning of the Demised Term or
at any time thereafter. Tenant, at Tenant's expense, shall comply with all
the rules, orders, regulations or requirements of the New York Board of Fire
Underwriters and the New York Fire Insurance Rating organization or any
similar body. Landlord represents that the use of the Demised Premises as
general offices and the installation and maintenance of a telecommunication
switching facility and related equipment will not give rise to sub-paragraph
(i) through (iii) above being effective.
(C) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule or "make-up" of rates applicable to the Building or
property located therein issued by the New York Fire Insurance Rating
Organization or other similar body fixing such fire insurance rates, shall be
conclusive evidence of the facts therein stated and of the several items and
charges in the fire insurance rates then applicable to the Building or
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(D) Landlord shall be responsible for curing any notices of violation not
arising out of Tenant's acts issued by any governmental agency affecting the
Demised Premises and the Building and Property and otherwise complying with
all applicable laws and regulations affecting the Building and the Property.
END OF TERM
27. Upon the expiration or other termination of the term of this Lease,
Tenant shall quit and surrender to Landlord the Demised Premises, broom clean,
in good order and condition, ordinary wear and casualty excepted, and Tenant
shall remove all of its property and shall repair all damage to the Demised
Premises or the Building occasioned by such removal. Any property not removed
from the premises shall be deemed abandoned by Tenant and may be disposed of
in any manner deemed appropriate by the Landlord, unless otherwise agreed to
in writing (i.e. extension of time to remove). Tenant expressly waives, for
itself and for any person claiming through or under Tenant, any rights which
Tenant or any such person may have under the provisions of Section 221 of the
Real Property Actions and Proceedings Law and of any successor law of like
import then in force in connection with any holdover or summary proceedings
which Landlord may institute to enforce the foregoing provisions of this
Article at the end of the term as expressed herein. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of the term of this lease. If the last day of the term of this
lease or any renewal hereof falls on a Sunday or a legal holiday, this lease
shall expire on the business day immediately preceding.
QUIET ENJOYMENT
28. Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms, covenants
and conditions on Tenant's part to be observed and performed, Tenant may
peaceably and quietly enjoy the Demised Premises during the term of this lease
without hindrance or molestation by anyone claiming by or through Landlord,
subject, nevertheless, to the terms, covenants and conditions of this Lease
including, but not limited to Article 37.
SIGNS
29. a) No sign or lettering of any nature may be put on or in any
window, nor on the exterior of the Building or elsewhere within the Demised
Premises such as shall be visible from the street, except with the written
approval of the Landlord.
b) Notwithstanding the aforementioned in paragraph 29 (a) above, upon
receiving Landlord's approval which approval shall not be unreasonably
withheld or delayed, Tenant shall have the exclusive right to erect/post one
(1) sign on each side of the Building, one (1) sign on the rear of the
Building. Tenant shall not erect/post any sign(s) on the front of the
building. In addition hereto, Tenant shall have the exclusive right to
erect/post one (1) sign on the ground level of the Building. Tenant must
provide Landlord with a design/sketch of the sigh(s) to be erected, which said
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sign(s) Landlord shall permit Tenant to install upon Landlord's approval, on
the rear, and both sides of the exterior of the Building signs identifying
Tenant. Tenant. will be solely responsible for the fees and costs associated
with erecting the sign on the exterior of the Building and for the future
removal of the sign, if any, if and when the Tenant ceases to occupy the
Demised Premises at the Building.
c) Tenant's sign(s) shall not exceed the dimensions of the existing
signs on the Building, i.e. that of the Long Island Savings Bank, Omnipoint
Communications and Enterprise Rent-A-Car.
d) Tenant, after complying with the provisions of 29 (a & b) above,
shall have the right to install an illuminated rotating sign on the roof of
the Building. The location of this rotating sign will be restricted to the
roof of the mechanical/elevator room located on the roof of the Building.
e) Tenant shall have the right to maintain all of such signs in their
approved locations during the term of this Lease and Landlord shall not grant
any rights to any other tenant of the Building or any third party which would
interfere with the visibility of any such sign.
RULES AND REGULATIONS
30. Tenant and Tenant's agents, employees, invitees, and licensees shall
faithfully comply with the Rules and Regulations set forth on Schedule "E"
annexed hereto and made part hereof, and with such further reasonable Rules
and Regulations as Landlord at any time may make and communicate in writing to
Tenant which, in Landlord's reasonable judgement shall be necessary for the
reputation, safety, care or appearance of the Building and the land allocated
to it or the preservation of good order therein, or the operation or
maintenance of the Building, and such land, its equipment, or the more useful
occupancy or the comfort of the tenants or others in the Building. Landlord
shall not be liable to Tenant for the violation of any of said Rules and
Regulations, or the breach of any covenant or condition in any lease by any
other tenant in the Building, provided such are applied in an equal and non-
discriminatory manner. In the event of a conflict between this Lease and the
Rules and Regulations, terms of this Lease shall prevail. Landlord shall not
enforce any of the Rules and Regulations in a manner discriminatory to Tenant.
ASSIGNMENT AND SUBLETTING
31. (A) Tenant, for itself, its successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this Agreement, nor
under let the Demised Premises or any part thereof or license or permit the
demised Premises or any part thereof to be used by others, without the prior
written consent of the Landlord, such consent not to be unreasonably withheld
or delayed in each instance and upon due compliance with the provisions of
this Article 31.
(B) The Tenant shall have no right to assign this Lease or sublet all
or any portion of the Demised Premises for a period of less than one (1 year,
unless assignment or subletting is to an affiliate entity.
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(C) Prior to requesting the approval of Landlord to an assignment or
subletting as hereinafter provided, Tenant shall offer to terminate this Lease
as of the last day of calendar month which is at least sixty (60) days from
the date of Tenant's notice, during the term hereof, which day shall be prior
to the effective date of such proposed assignment or subletting, and to vacate
and surrender the Demised Premises to Landlord. Simultaneously with said
offer to terminate this Lease, Tenant shall advise the Landlord of all the
terms, covenants and conditions of the Tenants' proposed sublease or
assignment. A sublease of less than 40% of the Demised Area shall not give
rise to Landlord's recapture rights herein. The provisions of this subsection
30 (c) shall not be applicable during the initial term of this Lease, provided
(i) in the case of a sublease(s) in excess of forth (40%) percent of the
demised Area, fifty (50%) percent of all rent and additional rent received by
Tenant for sublease(s) in excess of the rent and additional rent received
herein, shall be paid to Landlord within fifteen (15) days of receipt, as
additional rent; and (ii) in the case of an assignment, fifty (50'%) percent
of any consideration paid to Tenant for said assignment, except that which is
paid for Tenant's furniture, fixtures, equipment, leasehold improvements and
goodwill shall be paid to Landlord within fifteen (15) days of receipt. In
either of the foregoing cases, Tenant shall first deduct its expenses,
including brokerage fees, before submitting to Landlord.
(D) With respect to any proposed subtenant or assigned who is not an
"Affiliated Entity" (as defined below), Tenant shall submit to Landlord the
most recent fiscal year's financial statements of such entity as well as a
description of the business of the entity. Upon Tenant's due compliance with
the aforesaid provisions of this Article 31, Landlord agrees not to
unreasonably withhold its consent to an assignment or subletting, provided
that the Tenant is not then in default beyond any cure period under this Lease
and that the proposed assignee or undertenant is: (a) financially responsible
(b) credit-worthy and (c) of good reputation.
(E) No such assignment shall be effective until duplicate originals
of such Assignment and Assumption Agreement wherein Assignee agrees to perform
al the obligations of the Tenant under this lease in form appropriate for
recording are delivered to Landlord.
(F) No sub-letting of the Demised Premises shall release or discharge
the Tenant hereunder from any of its obligations to be performed under this
Lease, unless otherwise agreed upon by the parties herein. Any assignment of
the Lease approved by Landlord shall release Tenant from all obligations
arising from and after the effective date of such assignment.
(G) Notwithstanding anything contained in this Lease to the contrary,
Landlord shall not be obligated to entertain or consider any request by Tenant
to consent to any proposed assignment of this Lease or sublease unless each
request by Tenant is accompanied by non-refundable fee by certified check not
to exceed $1,500.00 to cover Landlord's reasonable legal fees and related
costs to process the proposed assignment. Neither Tenant's payment nor
Landlord's acceptance of the foregoing fee shall be construed to impose any
obligation whatsoever upon Landlord to consent to Tenant's request.
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(H) Not withstanding anything to the contrary herein, Tenant may (i)
assign this Lease to any successor by merger, purchase, reorganization,
acquisition or consolidation, subsidiary, parent or affiliate (hereinafter
called collectively "Affiliated Entity") provide that a copy of said
assignment, in recordable form, is delivered to the Landlord containing full
assumption by the assigned of all the Tenant's obligations hereunder; or (ii)
sublease the Demised Premises or any portion thereof to an Affiliated Entity.
LANDLORD'S ACCESS TO PREMISES
32. (A) Landlord or Landlord's agents shall have the right to enter
and/or pass through the Demised Premises at all times after reasonable notice
and during normal business hours and accompanied by Tenant, except in an
emergency, to examine the same, and to show them to mortgagees, ground
lessors, prospective purchasers or lessees or mortgagees of the Building, and
to make such repairs, improvements or additions as Landlord may deem necessary
and Landlord shall be allowed to take all material into and upon and/or
through said Demised Premises that may be required therefore, provided the
same does not interfere with Tenant's business operation. during the six
months prior to the expiration of the term of this Lease, or any renewal term,
Landlord may exhibit, upon notice, the Demised Premises to prospective tenants
or purchasers at all reasonable hours and without unreasonably interfering
with Tenant's business. If Tenant shall not be personally present to open and
permit an entry into said premises at any time when for any reason an entry
therein shall be necessary in an emergency, Landlord or Landlord's agents may
enter the same by a master key without rendering Landlord or such agent liable
therefore (if during such entry Landlord or Landlord's agents shall accord
reasonable care to Tenant's property). Landlord shall not have access to
secure areas designated by Tenant, as such, except in an emergency.
(B) Landlord shall also have the right at any time, to change the
arrangement and/or location of entrances or passageways, doors and doorways,
and corridors, elevators, stairs, toilets and other public parts of the
Building, provided, however, the Landlord shall make no change in the
arrangement and/or location of entrances or passageways or other public parts
of the Building which will adversely affect in any manner Tenant's use and
enjoyment of the Demised Premises as set forth in Article 4 herein and
provided the same does not diminish Tenant's usable area or obstruct Tenant's
access to the Demised Premises, or visibility of the Demised Premises.
(C) Provided the Landlord complies with the terms hereof, the
exercise by Landlord or its agents of any right reserved to Landlord in this
Article 32 shall not constitute an actual or constructive eviction, in whole
or in part, or entitle Tenant to any abatement or diminution of rent, or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord, or its agents, or upon any lessor under any ground or
underlying lease, by reason of inconvenience or annoyance to Tenant, or injury
to or interruption of Tenant's business, or otherwise. Landlord agrees to use
its best efforts to minimize interference with Tenant's business.
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SUBORDINATION
33. (A) Subject to the delivery of the Subordination and Non-Disturbance
Agreement described below, this Lease is subject and subordinate
in all respect s to all ground leases and/or underlying leases and to all
first mortgages which may now be place on or affect such leases and/or the
real property of which the Demised Premise forms a part, or any part of parts
of such real property and/or Landlord's interest or estate therein, and to
each advance made and/or hereafter to be made under any such mortgages, and to
all renewals, modifications, consolidations, replacements and extensions
thereof. In confirmation of such subordination, Tenant shall execute and
deliver promptly any reasonable certificate that Landlord and or any mortgagee
and/or the lessor under any ground or underlying lease and/or their respective
successors in interest may reasonably request subject to the delivery of the
Subordination and Non-Disturbance Agreement referred to below. A
Subordination Non-Disturbance Agreement in form and content reasonably
satisfactory to Tenant shall be delivered by all current and future mortgagees
and ground lessors, as a pre-condition to such subordination.
(B) Without limitation of any of the provisions of this Lease, in the
event that any mortgagee or its assigns shall succeed to the interest of
Landlord or of any successor-Landlord and/shall have become lessee under a new
ground or underlying lease then, this Lease shall nevertheless continue in
full force and effect and Tenant shall and does hereby agree to attorn to such
mortgagee or its assigns and recognize such mortgagee or its respective
assigns as its Landlord, provided A Subordination Non-Disturbance Agreement
was received.
(C) Tenant shall, at any time and from time to time upon not less
than fifteen (15) days prior notice by Landlord, execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modification) and the dates to which the rent, additional rent and other
charges have been paid in advance, if any, and stating whether or not to the
best knowledge of the signer of such certificate that Landlord is in default
in performance of any covenant, agreement, term, provision or condition
contained in this lease, and if so, specifying each such default of which the
signer may have knowledge, it being intended that any such statement delivered
pursuant hereto may be relied upon by any mortgagee, prospective purchaser or
lessee of said real property or any interest or estate therein, any
prospective mortgagee thereof or any prospective assignee of any mortgage
thereof.
PROPERTY LOSS, DAMAGE REIMBURSEMENT
34. (A) Landlord or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the Building, nor
for the loss of, or damage to, any property of Tenant by theft or otherwise,
unless caused by negligence or misconduct of Landlord, its agents,
contractors, servants and/or employees. Landlord or its agents shall not be
liable for any injury or damage to persons or property resulting from fire,
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explosion, falling plaster, steam, gas, electrical, electrical disturbance,
water, rain or snow or leaks from any part of the Building or from the pipes,
appliances or plumbing works or from the roof, street or subsurface or from
any other place or by dampness or by any other cause of whatsoever nature,
unless caused by or due to the negligence or willful misconduct of Landlord,
its agents, servants, contractors or employees; nor shall Landlord or its
agents be liable for any such damage caused by other tenants or persons in the
Building or caused by operations of construction or any private, public or
quasi-public work. If at any time any windows of the Demised Premises are
temporarily closed or darkened incident to or for the purpose of repair,
replacement, maintenance and/or cleaning in, on or about the Building or any
part or parts thereof, Landlord shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation therefore
nor abatement of rent nor shall the same release Tenant from obligations
hereunder nor constitute an eviction, provided Landlord uses its best efforts
to restore the same, unless caused by Landlord, agent, employee or contractor
negligence. Tenant shall reimburse and compensate Landlord as additional
rent for all expenditures made by , or damages or fines sustained or incurred
by Landlord due to Tenant's non-performance or non-compliance with or breach
or failure to observe any term, covenants or conditions of this Lese, on
Tenant's part to be kept, observed, performed or complied with, after notice
to Tenant with an opportunity to cure. Landlord shall reimburse and
compensate Tenant for all expenditures made by, or damages or fines sustained
or incurred by Tenant due to non-performance of or non-compliance with or
breach or failure to observe any terms covenants or conditions of this Lease
on Landlord's part to be kept, observed, performed or complied with, after
notice to Landlord, with an opportunity to cure. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Building or of defects
therein or in any fixtures or equipment of which Tenant has knowledge,
provided no liability or obligation shall be imposed upon Tenant for failure
to so notify Landlord with respect to the Building and not the Demised
Premises.
TENANT'S INDEMNITY
(B) Except if caused by negligence or willful act of Landlord, its
agents, contractors or employees, Tenant shall indemnify and save harmless
Landlord against and from any and all claims by or on behalf of any person or
persons, firm or firms, corporation or corporations arising from the omission
of any Tenant work or thing whatsoever done by Tenant (other than by Landlord
or its contractors or the agents or employees of either) in and on the Demised
Premise during the term of this Lese and during the period of time, if any,
prior to the specified commencement date that Tenant may have been given
access to the Demised Premises for the purpose of making installations, and
will further indemnify and save harmless Landlord against and from any and all
claims arising from any condition of the Demised Premises due to or arising
from any willful misconduct or breach of Lease or negligence of Tenant or any
of tits agents, contractors, servants, employees, licensees or invitees and
against and from all reasonable cost, expenses, and liabilities incurred in
connection with any such claim or claims or action or proceeding brought
thereon; and in case any action or proceeding be brought against Landlord by
reason of any such claim TENANT, upon notice from Landlord, agrees that <PAGE>
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Tenant, at Tenant's expense will resist or defend such action or proceeding
and will employ counsel therefore.
LANDLORD'S INDEMNITY
(C) Except if cause by negligence or willful act of Tenant, its
agents, contractors, employees or invitees, Landlord shall indemnify and save
harmless Tenant against and from any and all claims by or on behalf of any
person or persons, firm or firms, corporation or corporations arising from the
omission of any Landlord work or thing whatsoever done by Landlord (other than
by Tenant or its agents, contractor or employees of either) in and on the
Demised Premises, the common areas and the Building during the term of this
Lease and during the period of time, if any, prior to the specified
commencement date that Landlord may have had access to the Demised Premises
for the purpose of making installations, wand will further indemnify and save
harmless Tenant against and from any and all claims arising from any condition
of the Demised Premises due to or arising from any willful misconduct or
breach of Lease or negligence of Landlord or any of its agents, contractors or
employees and against and from all reasonable costs, expenses, and liabilities
incurred in connection with any such claim or claims or action or proceeding
brought thereon; and in case any action or proceeding be brought against
Tenant by reason of such claim, Landlord, upon notice from Tenant, agrees that
Landlord, at Landlord's expense will resist or defend such action or
proceeding and will employ counsel therefore.
DESTRUCTION - FIRE OR OTHER CASUALTY
35. If the Demised Premises shall be damaged by fire or other casualty
Landlord, at Landlord's expense, shall promptly repair such damage, but in all
events, within 120 days of fire or casualty to substantially the same
condition as existed prior to such casualty. However, Landlord shall have no
obligation to repair any damage to, or to replace, Tenant's personal property
or any other property or effect of Tenant except if such fire or casualty was
caused by the negligence or willful misconduct of Landlord or its agents,
contractors or employees. If the entire Demised Premises shall be rendered
untenantable by reason of any such damage, the rent and additional rent shall
abate for the period from the date of such damage to the date when such damage
shall have been repaired, and if only a part of the Demised Premises shall be
so rendered untenantable, the rent and additional rent shall abate for such
period in the proportion which the area of the part of the Demised Premises so
rendered untenantable bears to the total area of the Demised Premises.
However, if, prior to the date when all of such damage shall have been
repaired any part of the Demised Premises so damaged shall be rendered
tenantable and shall be used or occupied by Tenant or any person or persons
claiming through or under Tenant, the amount by which the rent and additional
rent shall abate shall be equitably apportioned for the period from the date
of any such use or occupancy to the date when all such damage shall have been
repaired. Tenant hereby expressly waives the provisions of Sections 227 of
the New York Real Property Law and of any successor law of like import then in
force and Tenant agrees that the provision of this Article shall govern and
control in lieu thereof. Notwithstanding the foregoing provisions of this
Section, if, prior to or during the Demised Term (i) the Demised Premises
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shall be totally damaged or rendered wholly untenantable by fire or other
casualty, and if Landlord shall decide not to restore the Demised Premises, or
(ii) the Building shall be so damaged by fire or other casualty that total
laceration, demolition or reconstruction of the Building shall be required,
such that restoration would take 120 days or more (whether or not the Demised
Premises shall be damaged or rendered untenantable), then, in any such events,
Landlord, at Landlord's option, may give to Tenant within forty-five (45) days
after such fire or other casualty, a thirty (30) days notice of termination of
this lease and, in the event such notice is given, this Lease and the Demised
Term shall come to an end and expire (whether or not said term shall have
commenced) upon the expiration of said thirty (30) days with the same effect
as if the date of expiration of said thirty (30) days were the Expiration
Date, the rent and additional rent shall be apportioned and any prepaid
portion of rent and additional rent for any period after such date shall be
refunded by Landlord to Tenant.
In the event that the Demised Premises shall be damaged to such an extent
that (i) Tenant reasonably determines that they cannot be restored within
ninety (90) days of the occurrence of such damage, or ii) if Landlord does not
restore the Demised Premises within said ninety (90) days to substantially the
same condition as existed prior to the casualty, Tenant shall have the option
of canceling this Lease, on notice to Landlord, at the end of such ninety (90)
day period, or immediately, under (i).
SUBROGATION
36. Each of the parties hereto and their successors or assigns hereby
waivers any and all rights of action against the other party hereto which may
hereafter a rise for damage to the premises or to property therein resulting
from any fire or other casualty of the kind covered by standard fire insurance
policies with extended converge, carried by such respective parties. Both
parties agree to obtain and maintain a waiver of subrogation from if, prior to
the date when al of such damage shall have been repaired any part of the
Demised Premises so damaged shall be rendered tenantable and shall be used or
occupied by Tenant or any person or persons claiming through or under Tenant,
the amount by which the rent and additional rent shall abate shall be
equitably apportioned for the period from the date of any such use or
occupancy to the date when all such damage shall have been repaired. Tenant
hereby expressly waives the provisions of Section 227 of the New York Real
Property Law and of any successor law of like import then in force and tenant
agrees that the provision of this Article shall govern and control in lieu
thereof. Notwithstanding the foregoing provisions of this Section, if, prior
to or during the Demised Term (i) the Demised Premises shall be totally
damaged or rendered wholly untenantable by fire or other casualty, and if
Landlord shall decide not to restore the Demised Premises, or (ii) the
Building shall be so damaged by fire or other casualty that total alteration,
demolition or reconstruction of the Building shall be required, such that
restoration would take 120 days or more (whether or not the Demised Premises
shall be damaged or rendered untenantable), then, in any such events,
Landlord, at Landlord's option, may give to Tenant within forty-five (45) days
after such fire or other casualty, a thirty (30) days notice of termination of
this lease and, in the event such notice is give, this Lease and the Demised
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Term shall come to an end and expire (whether or not said term shall have
commenced) upon the expiration of said thirty (30) days with the same effect
as if the date of expiration of said thirty (30) days were the Expiration
Date, the rent and additional rent shall be apportioned and any prepaid
portion of rent and additional rent for any period after such date shall be
refunded by Landlord to Tenant.
In the event that the Demised Premises shall be damaged to such an extent
that (i) Tenant reasonably determines that they cannot be restored within
ninety (90) days of the occurrence of such damage, or ii) if Landlord does not
restore the Demised Premises within said ninety (90) days to substantially the
same condition as existed prior to the casualty, Tenant shall have the option
of canceling this Lease, on notice to Landlord, at the end of such ninety (90)
day period, or immediately, under (i).
EMINENT DOMAIN
37. (A) In the event that the whole of the Demised Premises or access
thereto or a material part of the parking area is taken without substitution
of comparable parking space located within a three (3) block radius of the
Building, shall be lawfully condemned or taken in any manner for any public or
quasi-public use, this Lease and the term and estate hereby granted shall
forthwith cease and terminate as of the date of vesting of title. In the
event that a material part of the Demised Premises shall be so condemned or
taken, then effective as of the date of vesting of title, rent and additional
rent hereunder shall be abated in an amount thereof apportioned according to
the area of the Demised Premises so condemned or taken. In the event that a
material part of the Building (in excess of 40%) shall be so condemned or
taken, then (a) Landlord (whether or not the Demised Premises be affected)
may, at its option terminate this Lease and the term and estate hereby granted
as of the date of such vesting of title by notifying Tenant in writing of such
termination within forty-five (45) days following date on which Landlord shall
have received notice of vesting of title, and (b) if such condemnation or
taking shall be of a substantial part of the Demised Premises (in excess of
25% of the Demised Premises) or a substantial part (25% or more) of the means
of access thereto or of the parking, Tenant shall have the right, by delivery
of notice in writing to Landlord within sixty (60) days following the date on
which Tenant shall have received notice of vesting of title, to terminate this
Lease and the term and estate hereby granted as of the date of vesting of
title or, (c) if neither Landlord nor Tenant elects to terminate this Lease,
as aforesaid, this Lease shall be and remain unaffected by such condemnation
or taking, except that the rent and additional rent shall be abated to the
extent, if any, herein above provided in this Article 36. In the event that
only a part of the Demised Premises shall be so condemned or taken and this
Lease and the term and estate hereby granted are not terminated as
hereinbefore provided, Landlord will, at its expense, promptly (but in all
events in less than 120 days) restore the remaining portion of the Demised
Premises as nearly as practicable to the same condition as it was in prior to
such condemnation or taking. In the event Landlord fails to restore the
Demised Premised, Tenant shall have the right, upon ten (10) days' notice to
Landlord, to terminate this Lease.
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(B) In the event of a termination in any of the cases herein above
provided, this lease and the term and estate granted shall expire as of the
date of such termination with the same effect as if that were the date
hereinbefore set forth for the expiration of the term of this Lese, and the
rent and additional rent hereunder shall be apportioned as of such date.
(C) In the event of any condemnation or taking herein above mentioned
of all or a part of the Building, Landlord shall be entitled to receive the
entire award made for the value of the estate vested by this Lease in Tenant,
except that the Tenant may file a claim for any taking of removable fixtures
owned by Tenant and for moving expenses incurred by Tenant.
WASTE
38. Tenant will not do or suffer any waste or damage, disfigurement or
injury to the Building or any part thereof.
CERTIFICATE OF OCCUPANCY
39. Tenant will not at any time use or occupy the Demised Premises in
violation of the Certificate of Occupancy (temporary or permanent) issued for
the Building or portion thereof of which the Demised Premises form a part. If
Tenant does not use the premises in accordance with the Certificate of
Occupancy, such shall constitute a default hereunder upon notice of default
and fifteen (15) days notice to cure. This Article is without prejudice to
Landlord's rights by reason of Tenant's default or as otherwise set forth
herein and without obligation on the part of the Landlord to recompense
Tenant. Nothing herein this Article 39 shall relieve Tenant of its obligation
to pay base rent and additional rent for the term hereof.
Landlord represents that the permitted use described in paragraph four
(4) does not violate the Certificate of Occupancy and will furnish a copy of
same to Tenant.
DEFAULT
40. (A) Upon the occurrence, at any time prior to or during the
Demised Term, of any one or more of the following events (referred to as
"Events of Default):
(i) If Tenant shall default in the payment when due of any
installment of rent or in the payment when due of any additional rent, and
such default shall continue for a period of fifteen (15) days after notice by
Landlord to Tenant of such default; or
(ii) If Tenant shall default in the observance or performance of
any term, covenant or condition of this Lease on Tenant's part to be observed
or performed (other than the covenants for the payment of rent and additional
rent) and Tenant shall fail to remedy such default within thirty (30) days
after notice by Landlord to Tenant of such default, or if such default is of
such a nature that it cannot be completely remedied within said period of
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thirty (30) days and Tenant shall not commence curing such default within said
period of thirty (30) days, or shall not thereafter diligently prosecute to
completion, all steps necessary to remedy such default; or
(iii) If Tenant shall file a voluntary petition in bankruptcy or
insolvency, or shall be adjudicated bankrupt or become insolvent, or shall
file any petition seeking any reorganizations, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the present t
or any future federal bankruptcy act or any other present or future applicable
federal, state or other statute of law, or shall make an assignment for the
benefit of creditors or shall seek or consent to, or acquiesce in the
appointment or any trustee, receiver or liquidator of Tenant or of all or any
part of Tenant's property; or
(iv) If, within seventy-five (75) days after the commencement of
any proceeding against Tenant, whether by the filing of a petition or
otherwise seeking any reorganization, arrangement, composition, liquidation,
dissolution or similar relief under the present or any future federal
bankruptcy act or any other present or future applicable federal, state or
other statute or law, such proceedings shall not have been dismissed, or if
within seventy-five (75) days after the appointment of any trustee, receiver
or liquidator of Tenant, or of all or any part of Tenant's property, without
the consent or acquiescence of Tenant such appointment shall not have been
vacated or otherwise discharged, or if any execution or attachment shall be
issued against Tenant or any of Tenant's property pursuant to which the
Demised Premises shall be taken or occupied or attempted to be taken or
occupied and not dismissed within seventy-five (75) days; or
(v) If the demised Premises shall become vacant, deserted or
abandoned and Tenant ceases to pay rent; or
(vi) If Tenant's interest in this Lease shall devolve upon or
pass to any person, whether by operation of law or otherwise, except as
expressly permitted under Article 31; then upon the occurrence, at any time
prior to or during the Demised Term, of any one or more of such Events of
Default, Landlord, at any time thereafter, at Landlord's option, may give to
Tenant a five (5) days notice of termination of this Lease after fifteen (15)
days notice to cure said default during which period there was no cure and, in
the event such notice is given, this Lease and the Demised Term shall come to
an end and expire (whether or not said term shall have commenced) upon the
expiration of said five (5) days with the same effect as if the date of
expiration of said five (5) days were the Expiration Date but Tenant shall
remain liable for damages as provided in Article 43.
Any monies received by Landlord from or on behalf of Tenant during the
pendency of any proceeding of the types referred to in said subsections (iii)
and (iv) shall be deemed paid as compensation for the use and occupancy of the
Demised Premises and the acceptance of any such compensation by Landlord shall
not be deemed a waiver on the part of Landlord of any right s under this
Article 40.
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(B) In the event Landlord shall default in the performance or for
observance of any material term, covenant or condition of this Lease on
Landlord's part to be performed and Landlord shall fail to remedy such default
within thirty (30) days after notice by Tenant to Landlord of such default, or
if such default is of such a nature that it cannot be completely remedied
within said period of thirty (30) days and Landlord shall not commence curing
such default within such thirty 30) days, or shall not thereafter diligently
prosecute to completion the cure of such default, then, in such event, Tenant
shall have the right to pursue whatever remedies it may have under this Lease
or all rights and remedies at or in equity to which Tenant may be entitled.
41. (A) If Tenant shall default in the payment when due of any
installment of rent or in the payment when due for any additional rent and
such default shall continue for a period of fifteen (15) days after notice by
Landlord to Tenant of such default, or if this Lease and the Demised Term
shall expire and come to an end as provided in this Article 41.
i. Landlord and its agents and servants may immediately or at
any time after such Event of Default or after the date upon which the Lease
and the Demised Term shall expire and come to an end, re-enter the Demised
Premises or any part thereof, with notice, only by summary proceedings or by
any other applicable action or proceeding and after obtaining an order of a
court of competent jurisdiction authorizing same, and may repossess the
Demised Premises and dispossess Tenant and any other persons from the Demised
Premises and remove any and all of their property and effects from the Demised
Premises; and
ii. Landlord, at Landlord's option, may relet the whole or any
part or parts of the Demised Premises from time to time either in the name of
Landlord or otherwise, to such tenant or tenants, for such term or terms
ending before, on or after the Expiration Date, at such rental or rentals and
upon such other conditions, which may include concessions and free rent
periods, as Landlord, in its reasonable discretion, any determine. Landlord
shall have use commercially reasonable efforts to relet the Demised Premises
or any part thereof but shall in no event be liable for refusal or failure to
relet the Demised Premises or any part thereof, where such refusal was
commercially reasonable under the circumstances, or, in the event of any such
reletting, for refusal or failure to collect any rent due upon any such
reletting, and no such refusal or failure shall operate to relieve Tenant of
any liability under this Lease where such refusal was commercially reasonable
under the circumstances. Provided Landlord treats the Demised Premises, like
the balance of its available space inventory, Landlord at Landlord's option,
may make such repairs, replacements, alterations, additions, improvements,
decorations and other physical changes in and to the Demised Premises as
Landlord, in its reasonable discretion considers advisable or necessary in
connection with any such reletting without relieving Tenant of any liability
under this Lease or otherwise affecting any such liability. Landlord shall
use commercially reasonable efforts to relet the Demised Premises.
(B) Tenant, on its own behalf and on behalf of all persons claiming
through or under Tenant, including all creditors, does hereby waive any and
all rights which Tenant and all such persons might otherwise have under any
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present or future law to redeem the Demised Premises, or to re-enter or
repossess the Demised Premises, or to restore the operation of this Lease,
after (i) Tenant shall have been dispossessed by a judgement or by warrant of
any court or judge or (ii) and re-entry by Landlord, or (iii) any expiration
or termination of this Lease and the Demised Term, whether such dispossess,
re-entry, expiration or termination shall be by operation of law or pursuant
to the provisions of this Lease.
SPRINKLERS
42. Anything elsewhere in this Lease to the contrary notwithstanding, if
the New York Board of Fire Underwriters or New York Fire Insurance Exchange or
any bureau, department, official of the federal, state or city government
require the installation of a sprinkler system or that nay changes,
modifications, alterations, or additional sprinkler heads or other equipment
be made or supplied in an existing sprinkler system solely by reason of
Tenant's business, or if any such sprinkler system installations, changes,
modifications, alterations, additional sprinkler heads or other such equipment
become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate set by any
said Exchange or any fire insurance company, Tenant shall, at Tenant's
expense, promptly make such sprinkler system installations, change,
modifications, alterations, and supply additional sprinkler heads or other
equipment as required.
DAMAGES
43. (A) If this Lease and the Demised Term shall expire and come to an
end as provided in Article 27 or by or under any summary proceeding, or any
other action or proceeding or if Landlord shall re-enter the Demised Premises
as provided in Article 40 by or under any summary proceedings or any other
action or proceeding then, in any of said events:
i. Tenant shall pay to Landlord all rent, additional rent and
other charges payable under this Lease by Tenant to Landlord to the date upon
which this Lease and the Demised Term shall have expired and come to an end or
to the date of re-entry upon the Demised Premises by Landlord, as the case may
be; and
ii. Tenant shall also be liable for, and shall pay to Landlord,
as liquidated and agreed final damages, any deficiency (referred to as
"Deficiency") which is the sum equal to the amount by which the rent and
additional rent reserved in this Lease for the period which otherwise would
have constituted the unexpired portion of the Demised Term (excluding any
unexercised extension option) exceeds the net amount, if any, of rents collect
under any re-letting effected pursuant tot he provision of Section 41 (A) for
any part of such period (first deducting from the rents collected under any
such re-letting all of Landlord's reasonable and actual expenses regarding
such re-letting including, but not limited to, all repossession costs,
brokerage commissions, reasonable legal expenses, reasonable attorneys' fees,
alteration costs and other expenses of preparing the Demised Premises for such
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re-letting). Any such Deficiency shall be paid in monthly installments by
Tenant on the days specified in this Lease for payment of installments of
rent. Landlord shall be entitled to recover from Tenant each monthly
Deficiency as the same shall arise, and no suit to collect the amount of the
Deficiency for any month shall prejudice Landlord's rights to collect the
Deficiency for any subsequent month by a similar proceeding.
(B) If the Demised Premises, or any part thereof, shall be relet
together with other space in the Building, the rent collected or reserved
under any such re-letting and the expenses of any such re-letting shall be
equitably apportioned for the purpose of this Article 43. Tenant shall in no
event be entitled to any rents collected or payable under any re-letting,
whether or not such rents shall exceed the rent reserved in this Lease.
Solely for the purposes of this Article, the term "rent" as used in Section 43
A shall mean the rent in effect immediately prior to the date upon which this
Lease and the Demised Term shall have expired and come to an end, or the date
of re-entry upon the Demised Premises by Landlord, as the case may be, plus
any additional rent payable pursuant to the provisions of Article 17A (i)
immediately preceding such event.
SUMS DUE LANDLORD
44. (A) If Tenant shall default after notice and the expiration of any
applicable cure period, in the performance of any covenants on Tenant's part
to be performed in this Lease contained, Landlord may immediately, or at any
time thereafter, after thirty (30) days notice, perform the same for the
account of the Tenant, except in an emergency. If Landlord at any time is
compelled to pay or elects to pay any sum of money, or do any acto which will
require the payment of any sum of money, by reason of the failure of Tenant to
comply with any provision hereof, or, if Landlord is compelled to do or does
incur any reasonable expense including reasonable attorney's fees,
instituting, prosecuting and/or defending any action or proceeding instituted
by reason of any default of Tenant hereunder, the sum or sums so paid by
Landlord with all interest and reasonable costs, shall be deemed to be
additional rent hereunder and shall be due from Tenant to Landlord on the
first day of the month following the incurring of such respective expenses, or
at Landlord's option on the first day of any subsequent month. Any sum of
money (other than rent) accruing from Tenant to Landlord pursuant to Schedule
"C", whether prior to or after the Term Commencement Date, may, at Landlord's
option, be deemed additional rent, and Landlord shall have the same remedies
for Tenant's failure to pay any item of additional rent when due as for
Tenant's failure to pay any installment of rent when due. Tenant's
obligations under this Article shall survive the expiration or sooner
termination of the Demised Term. In any case in which the base rent or
additional rent is not paid within fifteen (15) days of notice that it was not
paid upon the day when same is due, Tenant shall pay a late charge equal to 5
cents for each dollar so due.
(B) If Landlord shall default, after notice from Tenant and the
expiration of thirty (30) days, except in the event of an emergency, in which
case Tenant shall only be obligated to provide such notice as is reasonable
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under the circumstances, in any of its obligations or covenants on Landlord's
part to be performed in this Lease contained, Tenant may immediately (but
shall be under no obligation to) perform the same for the account of Landlord.
If Tenant at any time is compelled to pay or elects to pay any reasonable sum
of money by reason of failure of Landlord to comply with any provision hereof,
or if Tenant is compelled to do or does incur any reasonable expense including
reasonable attorneys' fees, instituting, prosecuting and/or defending any
action or proceeding instituted by reason of a default by Landlord hereunder,
the sum or sums shall be due form Landlord to Tenant on the first day of the
month following the incurring of such expenses and Tenant shall have the right
to offset such amounts against the next installments of basic rent due and
payable hereunder. Landlord's obligations hereunder shall survive the
expiration or termination of this Lease. Amounts not paid to Tenant hereunder
within fifteen (15) days of the due date shall bear interest at the Lease
Interest Rate.
NO WAIVER
45. (A) No act or thin done by Landlord or Landlord's agents during
the term hereby demised shall be deemed an acceptance of surrender of said
Demised Premises and no agreement to accept such surrender of the Demised
Premises shall be valid unless in writing signed by Landlord. No employee of
Landlord or of Landlord's agents shall have any power to accept the keys of
said Demised Premises prior to the termination of this Lease. The delivery of
keys to any employee of Landlord or of Landlord agents shall not operate as a
termination of this Lease or a surrender of the Demised Premises. In the
event of Tenant at any time desiring to have Landlord under let the Demised
Premises for Tenant's account, Landlord or Landlord's agents are authorized to
receive said keys for such purposes without releasing Tenant form any
liability for loss of or damage to any of Tenant's effects in connection with
such under letting, except if due to Landlord negligence. The failure of
either party to seek redress for violation of, or to insist upon the strict
performance of, any covenants or conditions of this Lease, or any of the Rules
and Regulations annexed hereto and made part hereof or hereafter reasonably
adopted by Landlord, shall not prevent a subsequent act, which would have
originally-constituted a violation, from having all the force and effect of an
original violation. The failure by Landlord to enforce any of the Rules and
Regulations annexed hereto and made part hereof, or hereafter reasonably
adopted, against Tenant and/or any other tenant in the Building shall not be
deemed a waiver of any such Rules and Regulations. No provision of this Lease
shall be deemed to have been waived by Landlord or Tenant, unless such waiver
be in writing signed by Landlord and Tenant. No payment by Tenant or receipt
by Landlord of a lesser amount than the monthly rent herein stipulated shall
be deemed to be other than on account of the earliest stipulated rent nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment as rent be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy in this Lease
provided.
(B) Landlord's failure to timely render a Landlord's Statement with
respect to any Escalation year per Article 18 shall not prejudice Landlord's
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right to render a Landlord's Statement with respect to any Escalation year,
provided such statement is rendered within twenty-four (24) months of the end
of the Escalation Year. The obligation of Landlord and Tenant under the
provisions of Article 18 with respect to any additional rent payable by Tenant
thereunder for any Escalation year shall survive the expiration or any sooner
termination of the Demised Term, for two (2) years after the term of this
Lease.
WAIVER OF TRIAL BY JURY
46. To the extent such waiver is permitted by law, Landlord and Tenant
hereby waive trial by jury in any action, proceeding or counterclaim brought
by Landlord or Tenant against the other on any matter whatsoever arising out
of or in any way connected with this Lease, the relationship of Landlord and
Tenant, the use or occupancy of the Demised Premises by Tenant or any person
claiming through or under Tenant, any claim of injury or damage, and any
emergency or other statutory remedy, except personal injury claim. The
provisions of the foregoing sentence shall survive the expiration or any
sooner termination of the Demised Term. If Landlord commences any summary
proceeding for nonpayment of rent, Tenant agrees not to interpose any non-
compulsory counterclaim of whatever nature or description in any such
proceeding. Nothing herein shall prohibit Tenant from bringing a separate
action against the Landlord.
BILLS AND NOTICES
47. Except as otherwise expressly provided in this Lease, any bills,
statements, notices, demands, requests or other communications give or
required to be given under this Lease shall be effective only if rendered or
given in writing, sent by Registered or Certified Mail (return receipt
requested), addressed (A) to Tenants at Tenant's address set forth in this
Lease if mailed prior to Tenant's taking possession of the Demised Premises,
and to (B) Landlord at Landlord's address set forth in this Lease, with a copy
to (C) Mihos & Karabelas, Esqs., 28-18 31st Street, Suite 202, Astoria, New
York 11102 or (D) addressed to such other address as either Landlord or Tenant
may designate as its new address for such purpose by notice given to the other
in accordance with the provisions of this Article. Any such bills,
statements, notices, demands, requests or other communications shall be deemed
to have been rendered or given on the date when it shall have been mailed as
provided in this Article.
INABILITY TO PERFORM
48. (A) If, by reason of strikes or other labor disputes, fire or
other casualty, accidents, orders or regulations of any Federal, State, County
or municipal authority, or any other cause beyond Landlord's reasonable
control, whether or not such other cause shall be similar in nature to those
hereinbefore enumerated, Landlord is unable to furnish or is delayed in
furnishing any utility or service required to be furnished by Landlord under
the provisions of this Lease or any collateral instrument, or is unable to
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decorations, repairs, alterations, additions or improvements, whether or not
required to be performed or made under this Lease, or under any collateral
instrument, or is unable to fulfill or is delayed in fulfilling any of
Landlord's other obligations under this Lease, or any collateral instrument,
no such inability or delay shall constitute an actual or constructive
eviction, in whole or in part or entitle Tenant to any abatement or diminution
of rent, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reasons of the
inconvenience or annoyance to Tenant, or injury to, or interruption of
Tenant's business, or otherwise, but only for so long as such force majeure
conditions exist provided, however that in the event such condition renders
the Demised Premises untenantable, Tenant shall be entitled to a rental
abatement for the period in which such condition exists. If Tenant is unable
to fulfill its obligations hereunder by reason of the conditions specified in
this Section 48A, Tenant shall not be deemed to be in default hereunder by
reason thereof.
INTERRUPTION OF SERVICE
(B) Landlord reserves the right to stop the services of the air
conditioning, elevator, escalator, plumbing, electrical or other mechanical
systems or facilities in the Building when necessary by reason of accident or
emergency, or for repairs, alterations, replacements or improvement, which, in
the reasonable judgement of Landlord are necessary, until said repairs,
alterations, replacements or improvements shall have been complete, provided
Landlord (i) uses its best efforts to restore such services as quickly as
possible and (ii) perform such work at times and in a reasonable manner so as
to minimize interference with Tenant's business. The exercise of such rights
by Landlord shall not constitute an actual or constructive eviction, in whole
or in part, or entitle Tenant to any abatement or diminution of rent, or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord or its agents by reason of inconvenience or annoyance
to Tenant, or injury to or interruption of Tenant's business or otherwise
except if due to the negligence of Landlord, its agents, contractors or
employees. Notwithstanding the aforementioned, if the interruption of
services continues for more than five (5) days, Tenant will receive a rent
abatement for each day services are interrupted. If the interruption of
services continues for more than fifteen (15) days, Tenant may cancel this
Lease.
CONDITIONS OF LANDLORD'S LIABILITY
(C) i. Tenant shall not be entitled to claim a constructive
eviction form the Demised Premises unless Tenant shall have first notified
Landlord of the condition or conditions giving rise thereto, and unless
Landlord shall have failed to remedy such conditions within a reasonable time
after receipt of such notice,
ii. If Landlord shall be unable to give possession of the
Demised Premises on any date specified for the commencement of the term by
reason of the fact that the premises have not been sufficiently completed to
make the premises ready for occupancy, or for any other reason which is not
<PAGE>
<PAGE>
the fault of the Landlord, Landlord shall not be subject to any liability for
the failure to give possession on said date, nor shall such failure in any way
affect the validity of this Lease or the obligations of Tenant hereunder.
iii. Notwithstanding the aforementioned, in the event Landlord
shall be unable to give possession to the Demised Premises within one hundred
twenty (120) days after execution of this Lease, Tenant at its sole option may
terminate this Lease, which time period shall be extended to the extent any
such delays are directly attributable to the Tenant.
TENANT'S TAKING POSSESSION
(D) i. Tenant by entering into occupancy of the premises shall be
conclusively deemed to have agreed that Landlord up to the time of such
occupancy had performed all of its obligations hereunder and that the premises
were in Satisfactory condition as of the date of such occupancy, except for
latent defects, and punch list items of which Tenant shall have given written
notice to Landlord within ninety (90) days of occupancy specifying such punch
list items, all of which shall be promptly repaired by Landlord.
ii. If Tenant shall use or occupy all or any part of the Demised
Premises for the conduct of business prior to the Term Commencement Date, such
use or occupancy shall be deemed to be under all of the terms, covenants and
conditions of this Lease, excluding the covenant to pay rent and additional
rent except those charges payable pursuant to Schedule "C" hereof, for the
period from the commencement of said use or occupancy to the Term Commencement
Date.
ENTIRE AGREEMENT
49. This Lease contains the entire agreement between the parties and all
negotiations and agreements are merged herein, except as set forth herein.
Neither party has made any representations or statements, or promises, upon
which the other has relied regarding any matter or thing relating to the
Building, (including the parking area) or the Demised Premises, or any other
matter whatsoever, except as is expressly set forth in this Lease, including
but without limiting the generality of the foregoing, any statement,
representation or promise as to the fitness of the Demised Premises for any
particular use, the services to be rendered to the Demised Premises or the
prospective amount of any item of additional rent. No oral statement,
representation or promise whatsoever with respect to the foregoing or any
other matter made by Landlord or Tenant, their agents or any broker, whether
contained in an affidavit, information circular, or otherwise shall be binding
upon the Landlord or Tenant unless licenses are or shall be acquired by Tenant
by implication or otherwise or unless expressly set forth in this Lease. This
Lease may not be changed, modified or discharged, in whole or in part, orally
and no agreement shall be effective to change, modify or discharge, in whole
or in part, this Lease or any obligations under this Lease, unless such
agreement is set forth in a written instrument executed by the party against
whom enforcement of the change, modification or discharge is sought. All
references in this Lease to the consent or approval of Landlord shall be <PAGE>
<PAGE>
deemed to mean the written consent of Landlord, or the written approval of
Landlord approval of Landlord shall be deemed to mean the written consent of
Landlord, or the written approval of Landlord, as the case may be, and no
consent or approval of Landlord shall be effective for any purpose unless such
consent or approval is set forth in a written instrument executed by Landlord.
Landlord's consent or approval shall in no events, under any of the provisions
of the Lease be unreasonably withheld or denied.
VAULT, VAULT SPACE, AREA
50. No vaults, vault space or area, whether or not enclosed or covered,
not within the property line of the Building is leased hereunder, anything
contained in or indicated on any sketch, blueprint or plan, or anything
contained elsewhere in this Lease to the contrary notwithstanding. Landlord
makes no representation as to the location of the property line of the
Building. All vaults and vault space and all such areas not within the
property line of the Building, which Tenant may be permitted to use and/or
occupy, is to be used and/or occupied under a revocable license, and if any
such license be revoked, or if the amount of such space or area be diminished
or required by any federal, state or municipal authority or public utility,
Landlord shall not be subject to any liability nor shall Tenant be entitled to
any compensation or diminution or abatement of rent, nor shall such
revocation, diminution or requisition be deemed constructive or actual
eviction. Any tax, fee or charge of municipal authorities for such vault or
area shall be paid by Tenant, provided Tenant continues to use or occupy same.
SECURITY
51. Tenant shall deposit with Landlord the sum of $80,000.00 as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this Lease; it is agreed that in the event Tenant defaults
in respect of any of the terms, provisions and conditions of this Lease,
including, but not limited to, the payment of rent and additional rent,
Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional
rent or any other sum as to which Tenant is in default or for any sum which
Landlord expended by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this Lease, including but not limited to,
any damages or deficiency in the reletting of the premises, whether such
damages or deficiency accrued before or after summary proceedings or other re-
entry by Landlord. In the event that Tenant shall fully and faithfully comply
with all the terms, provisions, covenants and conditions of this Lease, the
security with the interest thereon, if any, to which the Tenant is entitled
shall be returned to Tenant promptly after the date fixed as the end of the
Lease and after delivery of entire possession of the Demised Premises to
Landlord. In the event of a sale of the land and building or leasing of the
building, of which the Demised Premises form a part, Landlord shall have the
right to transfer the security to the vendee or lessee and Landlord shall
thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look solely to the new landlord for the return
of said security; and it is agreed that the provisions hereof shall apply to
every transfer or assignment made of the security to a new landlord. Tenant
<PAGE>
<PAGE>
further covenants that it will not assign or encumber or attempt to assign or
encumber the monies deposited herein as security and that neither Landlord nor
its successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
For purposes of recording security, Tenant's I.D. number is
.
In the event Tenant is not in default of this Lease beyond any applicable
cure period, Landlord shall apply $40,000.00 of the security towards Tenant's
rental payment due for the 13th month of this Lease. Thereafter, if Tenant is
not in default of this Lease beyond any applicable cure period, Landlord shall
apply the remaining $40,000.00 towards Tenant's rental payment due for the
25th month of this Lease. Tenant shall pay Landlord the difference in the
rental payment due for the 13th and 25th month(s) at the time such payments
become due hereunder.
DEFINITIONS
52. The term "Landlord" as used in this Lease means only the owner, or the
mortgagee in possession, for the time being of the land and Building (or the
owner of a Lease of the Building or of the land and Building) of which the
Demised Premises form a part, so that in the event of any sale or sales of
said land and Building or of said Lease, or in the event of a lease of the
Building, or of the land and Building, the said Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing after the date of such sale or lease, and it shall be
deemed and construed as a covenant running with the land without further
agreement between the parties or their successors in interest, or between the
parties and the purchaser, at any sale, or the lessee of the Building, or of
the land and Building, that the purchaser of the lessee of the Building
assumes and agrees to carry out any and all covenants and obligations of
Landlord hereunder. The words "re-enter" and "re-entry", and "re-entered" as
used in this Lease are not restricted to their technical legal meanings. The
term "business days" as used in this Lease shall exclude Saturdays (except
such portion thereof as is covered by specific hours in Article 5 hereof),
Sundays and all days observed by State or Federal Government as legal holidays
(which shall not include days when the New York Stock Exchange is open for
trading). The terms "person" and "persons" as used in this Lease shall be
deemed to included natural persons, firms, corporations, associations and any
other private or public entities, whether any of the foregoing are acting on
their behalf or in a representative capacity.
PARTNERSHIP TENANT
53. If Tenant is a partnership (or is comprised of two (2) or more
persons, individually and as co-partners of a partnership) or if Tenant's
interest in this Lease shall be assigned to a partnership (or to two (2) or
more persons, individually and as co-partners of a partnership) pursuant to
any provision herein, (any such partnership and such persons are referred to
in this section as "Partnership Tenant"), the following provisions of this
Section shall apply to such Partnership Tenant; (a) the liability of each of
the parties comprising Partnership Tenant shall be joint and several, and (b)
<PAGE>
<PAGE>
each of the parties comprising Partnership Tenant hereby consents in advance
to, and agrees to be bound by, any modifications of this Lease which may
hereafter be made and by any notices, demands, requests or other
communications which may hereafter be given by Partnership Tenant or by any of
the parties comprising Partnership Tenant, and (c) any bills, statements,
notices, demands, requests and other communications given or rendered to
Partnership Tenant or to any of the parties comprising Partnership Tenant
shall be deemed given or rendered to Partnership; Tenant and to all parties
comprising partnership tenant and shall be binding upon Partnership Tenant and
all such parties, and (d) if Partnership Tenant shall admit new general
partners, all of such new partners shall, by their admission to Partnership
Tenant, be deemed to have assumed performance of all of the terms, covenants
and conditions of this Lease on Tenant's part to be observed and performed,
and (e) Partnership Tenant shall give prompt notice to Landlord of the
admission of any such new partners.
SUCCESSORS, ASSIGNS, ETC.
54. The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributees, executors, administrators, successors, and except as
otherwise provided in this Lease, their respective assigns.
APPLICATION OF INSURANCE PROCEEDS, WAIVER OF SUBROGATION
55. In any case in which Tenant shall be obligated under any provisions of
this Lease to pay to Landlord any loss, cost, damage, liability or expense,
provided that the allowance of such offset does not invalidate or prejudice
the policy or policies, Landlord shall allow to Tenant as an offset against
the amount thereof the net proceeds of any insurance collected by Landlord for
or on account of such loss, cost, damage, liability or expense, provided that
the allowance of such offset does not invalidate or prejudice the policy or
policies under which such proceeds were payable.
BROKER
56. Both parties represent and warrant that Alma Realty Co. was the sole
Broker brought about transaction. Tenant agrees to indemnify and hold
Landlord harmless from any claims of any other Broker with respect to this
Lease. Landlord agrees to pay Broker pursuant to separate agreement and to
indemnify and hold Tenant harmless from any claims of any other broker with
respect to this Lease.
CAPTIONS
57. The captions are included only as a matter of convenience and for
reference, and in no way define, limit or describe the scope of this Lease nor
the intent of any provisions thereof.
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<PAGE>
NON-LIABILITY OF LANDLORD
58. If Landlord or a successor in interest is an individual (which term as
used herein includes aggregates of individuals, such a joint ventures, general
or limited partnerships or associations) such individual shall be under no
personal liability with respect to any of the provisions of this Lease, and if
such individual hereto is in breach or in default with respect to its
obligations under this Lease, Tenant shall look solely to the equity of such
individual in the land and Building of which the Demised Premises form a part
for the satisfaction of Tenants' remedies and in no event shall Tenant attempt
to secure any personal judgement against any partner, employee or agent of
Landlord by reason of such default by Landlord.
RIGHT OF FIRST REFUSAL
59. Provided that Tenant is not then in default of any of the covenants of
this Lease, Landlord hereby grants to Tenant during the term of this Lease,
the right of first refusal to lease from Landlord any space located in the
Building which becomes vacant and available. Tenant shall have fifteen (15)
days after notice from Landlord to accept the vacant space pursuant to
Landlord's terms and conditions which shall be no less favorable than the
terms being offered to a third party.
GOVERNING LAW
60. This Lease shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
JURISDICTION
61. For purposes of settling any and all disputes hereunder, each party
hereto submits itself to the personal jurisdiction of any court, federal or
sate, sitting in the State of New York, hereby waiver all objections to the
venue of any such court and further hereby waives trial by jury.<PAGE>
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed this
Lease as of the day and year first written above.
Witness for Landlord: GOLDEN UNION, LLC
/s/ George Mitropoulos
- ------------------------------ ---------------------------
Cooper Enterprises, Inc. Member
George Mitropoulos, President
Witness for Tenant: PHONETIME, INC.
Tenant
/s/ Sam Tawfik
- --------------------- -----------------------------
Sam Tawfik, CEO, President<PAGE>
<PAGE>
SCHEDULE C
Heating and Air-Conditioning
(A)Between September 1 and June 1, the "heating system" shall be
operative and maintain a minimum of 70 degrees Fahrenheit DB when the outdoor
temperature is 0 degrees Fahrenheit DB and the prevailing wind velocity does
not exceed 15 mph.
(B)Between April 15 and October 14, the "cooling system" shall be
operative and maintain a maximum of 80 degrees Fahrenheit DB and 55% relative
humidity when the outdoor temperature is 95 degrees Fahrenheit DB and 75
degrees Fahrenheit DB with the prevailing wind velocity not exceeding 13 mph.
(C)During the overlapping seasons (April 15 - June and September 1 -
October 15) both systems shall be operative (cooling and heating).
(D)Zoning temperature and balancing controls shall be operated solely by
the Landlord to assure the conditions above.
(E)Maintenance of the foregoing temperature conditions is conditioned
upon the following criteria, which shall not be exceeded by the Tenant:
1) Population Density 1 Person 150 square feet
2) Lighting and Electrical Load 4 watts per square foot
3) Exhaust and Ventilation Loan 5 cfm per person
Subject to provision in paragraph 5 heretofore.<PAGE>
<PAGE>
SCHEDULE D
Cleaning Schedule
The cleaning service and maintenance of the premises as defined herein shall
be performed on all business days except those days designated as union
holidays for the employees of any union performing the maintenance and
cleaning service at the Building and in accordance with first class office
building standards. There shall be no cleaning of the premises on legal
holidays, Saturdays and Sundays or those days on which the building is
officially closed.
1. CLEANING SERVICES - Common Areas
(A) The common areas and public corridors or lobbies shall be
vacuumed, swept, washed or waxed as required to keep the premises respectably
clean.
(B) All lighting fixtures in common areas shall be cleaned weekly and
lamps or bulbs replaced as required at Landlord's expense. Such costs shall
be reasonable, actual and competitive and pro-rated between tenants where
tenants share a floor. Tenant may audit Landlord's costs.
(C) All restrooms shall be clean and washed daily.
(D) Soaps, tissues and sanitary products shall be available in all
restrooms and the cost shall be pro-rated amongst the tenants according to the
square footage occupied.
(E) Landlord shall keep parking area and all driveways, paths and
sidewalks and any grass and bushes clean (i.e. remove debris and snow, cut
grass, trim bushes).
2. CLEANING SERVICES - Tenant Space
This is to be performed by the Tenant. Trash will be delivered to
the outside receptacle at the West parking lot.<PAGE>
<PAGE>
SCHEDULE E
RULES AND REGULATIONS
(1) The sidewalks, entrances, driveways, passages, courts, vestibules,
stairways , corridors or halls shall not be obstructed or encumbered by any
tenant or used for any purpose other than for ingress to and egress from the
Demised Premises and for delivery of merchandise and equipment in a prompt and
efficient manner using passageways designated for such delivery by Landlord.
There shall not be sued in any space, or in the public hall of the building,
either by any tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and side
guards.
(2) The water and wash closets and plumbing fixtures shall not be used for
any purpose other than those of which they were designed or constructed and no
sweepings, rubbish, acids, or other substances shall be deposited therein, and
the expense of breakage, stoppage, or damage resulting from the violation of
this rule shall be borne by the tenant who, or whose clerks, agents, or
employees, shall have caused it.
(3) No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be
swept or thrown from the Demised Premises any dirt or other substances into
any of the corridors or halls, elevators, or out of the doors or windows or
stairways of the building, and Tenant shall not use, keep or permit to be sued
or keep noxious gas or substance in the Demised Premises, or permit or suffer
the Demised Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of
noise, odors and/or vibrations, or unreasonably interfere in any way with
other tenants or those having business therein, nor shall nay animals or birds
be kept in or about the building.
(4) No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of the Landlord.
(5) No sign, advertisement, notice or other lettering and/or window
treatment shall be exhibited, inscribed, painted or affixed by any Tenant on
any part of the Demised Premises or the Building or on the inside of the
Demised Premises if the same is visible from the outside of the Demised
Premises without the prior written consent of Landlord, which shall not be
unreasonably withheld or delayed, subject, however, to the provisions relating
thereto elsewhere in the Lease. In the event of the violation of the
foregoing by any Tenant, Landlord to provide Tenant with five (5) days notice
of default and if said violations are not promptly cured Landlord may remove
same without liability, and may charge the reasonable expense incurred by such
removal to tenant or Tenants violating this rule. Interior signs on doors and
directory tables should be inscribed, painted or affixed for each Tenant by
Landlord at the expense of such Tenant, and shall be a size, color and style
reasonably acceptable to Landlord and Tenant.
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<PAGE>
(6) No Tenant shall in any way deface any part of the Demised Premises or
the Building of which they form a part. No boring, cutting or stringing of
wires shall be permitted, except with the prior written consent of Landlord,
which shall not be unreasonably withheld or delayed, and as Landlord may
reasonably direct. No Tenant shall lay linoleum or other similar floor
covering so that the same shall come in direct contract with the floor of the
Demised Premises, and if linoleum or other similar floor covering is desired
to be used an interlining of builder's deadening felt shall be first affixed
to floor by a paste or other material, soluble in water, the use of cement or
other similar adhesive material being expressly prohibited.
(7) No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof, unless a copy is given to Landlord. Each Tenant
must, upon the termination of his Tenancy, restore to Landlord all keys of
stores, offices and toilet rooms either furnished to, tor otherwise procured
by, such Tenant, and in the event of the loss of any keys, so furnished, such
Tenant shall pay to Landlord the cost thereof.
(8) Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises through
the service entrances and corridors, and only during hours and in a manner
approved, by Landlord, which approval shall not be unreasonably withheld or
delayed.
(9) Canvassing, soliciting and peddling in the building is prohibited.
(10) Landlord reserved the right to exclude from the building between the
hours of 6:00 p.m. and 8:00 a.m. and at all hours on Sundays, and legal
holidays all persons who do not present a pass to the building signed by
Landlord. Landlord will furnish passes to persons for whom any Tenant
requires same in writing. Each Tenant shall be responsible for all persons
for whom he requests such a pass and shall be liable to Landlord for all
damage caused by such persons during entry into the Building on overtime
hours.
(11) Tenant shall not bring or permit to be brought or kept in or on the
Demised Premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, except for Tenant's phone batteries or cause or permit
any odors of cooking or other processes, or any unusual or other objectionable
odors to permeate in or emanate from the Demised Premises.
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<PAGE>
(12) If the Building contains central air-conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by all
reasonable rules and regulations issued by the Landlord with respect to such
services. If Tenant requires air-conditioning or ventilation and heat after
the usual hours, Tenant shall give notice in writing to the building
superintendent prior to 3:00 p.m. in the case of services required on
weekdays, and prior to 3:00 p.m. on the day prior, in the case after hours
service required on weekend or holidays for which an additional charge
computed in accordance with the provisions of Article 8 hereof, shall be paid
by the Tenant. Said additional charge shall be deemed additional rent due and
payable thirty (30) days after rendition of a bill by Landlord therefore.
<PAGE>
<PAGE>
LEASE MODIFICATION
AGREEMENT made as of this ___th day of June, by and between GOLDEN
UNION, LLC, a New York Limited Liability Corporation with its principal place
of business C/O ALMA REALTY CO. at 28-18 31st Street, Astoria, New York 11102
(hereinafter referred to as "Landlord"), PHONETIME INC., a Corporation with
its principal business at 30-50 Whitestone Expressway, Flushing, New York
11354 (hereinafter referred to as "Tenant").
W I T N E S S E T H
WHEREAS, the Tenant has leased approximately 27300 square feet (the
"Premises"), in the building (the "Building") having and known by the street
address of 30-50 Whitestone Expressway, Flushing, New York 11354 pursuant to a
lease agreement (the "Lease") between Landlord and Tenant dated the 8th day of
April 1997.
WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to
lease from Landlord, additional space of approximately 6,000 square feet
located on the first floor of the Building and more particularly identified in
EXHIBIT A attached hereto (the "Additional Space"), all in accordance with the
terms set forth below.
NOW, THEREFORE, in consideration of their mutual promises and
covenants each to the other, and for other good and valuable consideration,
the parties hereto agree as follows:
1. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Additional Space. The definition of the Demised Premises under
the Lease is hereby modified to include the Additional Space.
2. Tenant agrees to pay additional basic rent for the Additional
Space as follows subject to and in accordance with the terms and requirements
set forth in the Lease as modified hereby:
LEASE YEAR ANNUAL RENT MONTHLY RENT
---------- ----------- ------------
1ST $108,000.00 $9,000.00
2ND 112,320.00 9,360.00
3RD 116,812.80 9,734.40
4TH 121,485.36 10,123.78
5TH 126,634.76 10,528.73
3. Landlord acknowledges receipt of additional $18,000 security
deposit, which was added to the original $80,000. The additional $18,000
shall be held by Landlord and released to Tenant in the same manner, to the
same extent and at the same time as the original $80,000 security deposit.
4. The Lease term for the additional space will run concurrent with
the "term of the Lease".
<PAGE>
<PAGE>
5. Pursuant to Section 12 of the Lease, the number of reserved park
spaces shall be increased from 125 to 155.
6. Except as modified hereby, the Lease remains unmodified and in
full force and effect.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hand and
seal the day and year first above written.
GOLDEN UNION, LLC
Landlord
By: /s/ George Mitropoulos
---------------------------------
Cooper Enterprises, Inc., Member
George Mitropoulos, President
PHONETIME INC.
Tenant
By: /s/ John Klusaritz
-----------------------------------
General Counsel
Executive Vice President
CHEMICAL
All references to Chemical Bank, The
Chase Manhattan Bank, N.A., or The
Chase Manhattan Bank, (National Association)
shall mean The Chase Manhattan Bank, a
New York State Chartered Bank
GENERAL LOAN AND COLLATERAL AGREEMENT
OF PT-1 COMMUNICATIONS, INC.
<PAGE>
<PAGE>
Upon and after the happening of any event of deficiency or event of
default, the Bank shall have, in addition to all other rights and remedies,
the remedies of a secured party under the New York Uniform Commercial Code.
The undersigned hereby authorizes the Bank at any time during the
existence of any event of deficiency, or upon or at any time after the
occurrence of any event of default, whether occasioned by acceleration of
maturity of any of the liabilities of the undersigned as hereinbefore provided
or otherwise, to sell or grant options to purchase or otherwise realize upon
the whole or from time to time any part of the collateral with or without
notice or demand of payment of any of the liabilities of the undersigned. Any
such sales may be made at any broker's board or at public or private sale, at
the option of the Bank, with or without advertisement or notice of intention
to sell or of the time or place of sale and may be for cash or credit and for
present or future delivery. At any sale the Bank may become the purchaser of
any of the property sold, free from any right of redemption.
The undersigned agrees to pay to the Bank, as soon as incurred, all costs
and expenses incidental to the care, sale, or collection of or realization
upon any of the collateral or in any way relating to the rights of the Bank
hereunder, including counsel fees. The Bank may apply any or all proceeds of
the collateral to the payment or reduction of such of the liabilities of the
undersigned and in such amounts as it may select, although contingent and
although unmatured; and may set off, without notice, against all or any part
of the liabilities of the undersigned, whether or not then due or matured, all
amounts owed by the Bank in any capacity to the undersigned in any capacity,
whether or not then due or matured, and the Bank shall be deemed to have
exercised such right against such funds immediately upon an event of default
or event of deficiency and without further action even though such set off is
subsequently entered on the Bank's books and records; and in case of any
deficiency, the undersigned will remain liable therefor.
The undersigned expressly waives and releases any right under any theory
whatsoever to require the Bank to collect any portion of the liabilities of
the undersigned from any other person or from the proceeds of any other
property held by the Bank. The Bank is hereby authorized, with or without
notice, before or after maturity of any of the liabilities of the undersigned,
to transfer to or register in the name of its nominee or nominees all or any
part of the collateral and to exercise any or all rights of collection,
enforcement, conversion or exchange and other similar rights, privileges and
options pertaining to the collateral, but the Bank shall have no duty to
exercise any such rights, privileges or options or to sell or otherwise
realize upon any of the collateral as herein authorized or to preserve the
same and shall not be responsible for any failure to do so or delay in doing
so.
The undersigned expressly waives all notices of any character whatsoever
and waives, as against the Bank, any right of subrogation, contribution,
indemnification and all other rights available to the undersigned at law or in
equity.
<PAGE>
<PAGE>
The Bank may transfer this instrument and/or any or all instruments
evidencing any or all of the liabilities of the undersigned and may deliver
the collateral or any part thereof to the transferee or transferees, who shall
thereupon become vested with all the powers and rights with respect thereto
given to the Bank hereby or by the instrument or instruments so transferred,
and the Bank shall thereafter be forever relieved and fully discharged from
any liability or responsibility with respect thereto; but the Bank shall
retain all rights and powers hereby given to it with respect to any and all
liabilities of the undersigned and collateral not so transferred. The
provisions of the fifth and sixth paragraphs hereof shall be and remain
effective although any of the conditions stated therein shall, with or without
the knowledge of the Bank, exist at or immediately after the time of its
acceptance of any liability of the undersigned or of further security or of
any payment on account. Presentment and demand for payment with respect to
any of the liabilities of the undersigned may be made at the office of the
Bank. Any notice to or demand on the undersigned elected to be given or made
by the Bank or any transferee shall be deemed effective, if not first
otherwise made or given, when forwarded by mail, telecopier, cable or radio or
telephoned to the last address of the undersigned appearing on the Bank's
books. No act or delay on the part of the Bank or any transferee in
exercising any rights hereunder shall be deemed to be a waiver of the
obligation of the undersigned or of the right of the Bank or of any transferee
to take further action without notice or demand as provided herein; nor in any
event shall any waiver be effective unless in writing and then the same shall
be applicable only in the specific instance for which given. No course of
dealing between the undersigned and the Bank shall be effective to modify or
discharge in whole or in part this agreement.
This agreement shall cover all future as well as all existing
transactions and shall remain effective irrespective of any interruptions int
eh business relations of the undersigned with the Bank. The term
"undersigned" as used herein shall, if this instrument is signed by more than
one party, mean the "undersigned and each of them" and each undertaking herein
contained shall be their joint and several undertaking, provided, however,
that in the phrases "of the undersigned", "by the undersigned", "against the
undersigned", "for the undersigned", "to the undersigned", and "on the
undersigned", the term "undersigned" shall mean the "undersigned or any of
them", and the Bank may release or exchange any of the collateral belonging to
any of the parties hereto and may renew or extend any of the liabilities of
any of them and may make additional advances or extensions of credit to any of
them and may release or fail to set off any deposit account or credit of any
of them and may grant other indulgences to any of them, all from time to time,
before or after maturity of any of the liabilities of the undersigned, with or
without further notice to or assent from any of the other parties hereto. If
any party hereto shall be a partnership, the agreements herein contained shall
remain in force and applicable notwithstanding any changes in the individuals
composing the partnership, and the term "undersigned" shall include any
altered or successive partnerships, but the predecessor partnerships and their
partners shall not thereby be released from any liability.
<PAGE>
<PAGE>
In order to induce Chemical Bank _____________________________
(hereinafter called the "Bank") from time to time in its discretion to extend
or continue credit to or make other financial accommodations to or for the
benefit of the undersigned or to or for the benefit of third parties on the
guaranty or endorsement or other assurance of the undersigned, the undersigned
grants to the Bank by pledge, assignment and/or hypothecation and agrees that
in addition to any rights which the Bank would otherwise have, the Bank shall
have a lien for all the liabilities of the undersigned upon, all property and
the proceeds thereof (including any property of others that the undersigned
has the power to pledge, assign, hypothecate or otherwise dispose of), real or
personal, tangible or intangible, of any kind, or any interest in any thereof,
now or hereafter pledged, mortgaged, transferred or assigned to the Bank,
Chemical Securities, Inc., or any other affiliate of the Bank or its agents or
otherwise in the possession or control of the Bank, Chemical Securities, Inc.,
or any other affiliate of the Bank now or hereafter, for safekeeping, custody,
pledge, transmission and collection or for any other or different purpose for
the account or benefit of the undersigned and also upon any balance of any
deposit account or of any credit of the undersigned with the Bank, Chemical
Securities, inc., or any other affiliate of the Bank whether now existing or
hereafter established, hereby authorizing the Bank at any time or times with
or without prior notice to apply such balances or credits or any part hereof
to such of the liabilities of the undersigned, although contingent or
unmatured, in such amounts as it may select and whether or not the collateral
or the responsibility of other persons primarily, secondarily or otherwise
liable may be deemed adequate. All such property and balances and credits are
hereinafter collectively referred to as the "collateral". For the purposes of
this paragraph, all remittances and property shall be deemed to be in the
possession of the Bank as soon as the same may be put in transit to it by mail
or carrier.
For the purposes of this instrument, the term "liabilities of the
undersigned" shall include al present and future liabilities of the
undersigned to the Bank of any and all kinds, and claims of every nature and
description of the Bank against the undersigned, whether created directly or
acquired by the Bank by assignment or otherwise, whether now existing or
hereafter arising, absolute or contingent, joint or several, due or to become
due, secured or unsecured. If the liabilities of the undersigned arise out of
the undersigned's guaranty of another person's or entity's (a "Borrower") debt
to the Bank, such Borrower's obligations shall be part of the liabilities of
the undersigned.
The undersigned shall remain responsible for ascertaining any maturities,
calls, conversions, exchanges, tenders or similar matters relating to the
collateral, and the Bank shall have no duty to so ascertain or to inform the
undersigned with respect thereto (whether or not the Bank has, or is deemed to
have, knowledge). Should the undersigned ascertain any such event and request
that the Bank take action with respect thereto, the Bank shall not be required
to do so unless such request be in writing and the Bank determines that such
action will not adversely affect the value as collateral of the collateral.
<PAGE>
<PAGE>
The undersigned authorizes the Bank to deliver to others a copy of this
General Loan and Collateral Agreement as written notification of the
undersigned's transfer of a security interest in the Collateral to the Bank.
The undersigned will execute immediately upon the Bank's request such
documents and endorsements as are necessary or desirable, in the Bank's sole
discretion, to perfect and continue perfected the liens and security interests
granted herein or to enable the Bank to negotiate, transfer and deliver the
collateral. The undersigned hereby appoints the Bank as the undersigned's
attorney-in-fact, at the Bank's option and at the undersigned's expense, to do
all acts and things, in the undersigned's name, place and stead, which the
Bank deems necessary or desirable to perfect and continue perfected the
security interests created herein and to protect the collateral. Upon receipt
of any securities, dividends, or the like, that are distributed to the
undersigned (as a result of a cash or stock dividend, stock split or
otherwise) in respect of securities being held by the Bank, Chemical
Securities, Inc., or any other affiliate of the Bank as collateral, the
undersigned shall immediately deliver such securities, duly assigned, or such
dividend payments, to the Bank or such affiliate.
The undersigned agrees that if at any time or times the value,
represented by the price readily available to the Bank at an immediate sale,
of the collateral then held by the Bank, should decline or should not be, in
the sole judgment of the Bank, satisfactory or adequate, or shall be, in the
sole judgment of the Bank, unsatisfactory or inadequate with respect to any
and all unpaid liabilities of the undersigned, then and in each such event
(hereinafter referred to as an "event of deficiency"), as to the existence or
occurrence of which the opinion of the Bank or any of its officers shall, for
the purposes of this instrument, be conclusive, the undersigned will, with or
without notice or demand, immediately pay on account such amount, or furnish
such further security, as may, in either case, be satisfactory to the Bank.
During the existence of any event of deficiency, the Bank may at any time or
from time to time, with or without notice, declare any or all of the
liabilities of the undersigned, although otherwise unmatured or contingent,
immediately absolute and due and payable, by making an endorsement or
endorsements to such effect upon the evidences of such liabilities or upon
this instrument.
In the event of (a) any default for any reason under any of the
liabilities of the undersigned or default in the prompt payment (at maturity,
by acceleration or otherwise) of any of the liabilities of the undersigned, or
(b) the insolvency, suspension of usual business, general assignment or
failure of the undersigned or any Borrower, or (c) the appointment of a
receiver, conservator, rehabilitator or similar officer for the undersigned or
any Borrower or for any of the property of the undersigned or any Borrower, or
(d) the issuance of any warrant of attachment against any of the property of
the undersigned or any Borrower, or the issuance of any levy by a taxing
authority or (e) the filing of a petition in bankruptcy by or against the
undersigned or any Borrower or the commencement of any proceedings by or
against the undersigned or any Borrower under any bankruptcy or debtors law
for the relief or reorganization of the undersigned or any Borrower or for the
composition, extension, rearrangement or readjustment of any obligations of
the undersigned or any Borrower, or (f) the commencement of any proceedings
<PAGE>
<PAGE>
supplementary to execution relating to any judgment against the undersigned or
any Borrower, or (g) death or dissolution, merger, consolidation or
reorganization, then and in any such event (hereinafter referred to as an
"event of default") all liabilities of the undersigned, although otherwise
unmatured or contingent, shall forthwith become absolute and due and payable
without any notice or demand whatsoever.
The Bank and the undersigned, in any litigation arising out of or in
connection with the collateral, the liabilities of the undersigned or this
agreement, IRREVOCABLY WAIVE TRIAL BY JURY.
This agreement shall be governed by and construed in accordance with the laws
of the State of New York.
Executed and delivered this 8th day of October 1997.
----------------------------------
(Individual Borrower)
----------------------------------
(Individual Borrower)
PT-1 COMMUNICATIONS, INC.
-------------------------------------------
(Name of Corporate or Partnership Borrower)
ATTEST: /s/ Douglas Barley By: /s/ Samer Tawfik CEO and Chairman
----------------------- --------------------------------------
(for corporate Borrowers
only-to be signed by By: /s/ Peter Vita President
Secretary or Assistant --------------------------------------
Secretary)
(AFFIX CORPORATE SEAL HERE)
All references to Chemical Bank,
The Chase Manhattan Bank, N.A.,
or The Chase Manhattan Bank,
(National Association) shall
mean The Chase Manhattan Bank,
a New York State Chartered Bank.
CHEMICAL
All references to Chemical Bank,
The Chase Manhattan Bank, N.A.,
or The Chase Manhattan Bank,
(National Association) shall
mean The Chase Manhattan Bank,
a New York State Chartered Bank.
SECURITY AGREEMENT
(General Purpose)
This Agreement made this 8th day of October, 1997 between CHEMICAL BANK
(herein called "Bank") and PT-1 COMMUNICATIONS, INC. (herein called
("Borrower").
1. DEFINITIONS OF TERMS USED HEREIN. (a) "Borrower" includes all
individuals executing [this] agreement as parties hereto and all members of a
partnership when Borrower is a partnership, each of which shall be jointly and
severally liable individually and as partners hereunder. (b) "Liability" or
"liabilities" includes all liabilities (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, that may be
hereafter contracted or acquired, of Borrower (including Borrower and any
other person or Bank, including without limitation all liabilities arising
under or from any note, loan or credit agreement, letter of credit, guaranty,
draft, acceptance, interest rate or foreign exchange agreement or any other
instrument or agreement of (or the responsibility of) the Borrower or any
loan, advance or other extension of credit or financial accommodation to
Borrower by Bank. (c) "Proceeds" means whatever is received when Collateral
is sold, exchanged, leased, collected or otherwise disposed of and includes
the account arising when the right to payment is earned under a contract. (d)
"Security interest" means a lien or other interest in Collateral which secures
payment of a liability or performance of an obligation. (e) "Collateral"
means any property described in Section 2 hereof and the following described
property of the Borrower:
All equipment, including but not limited to machinery and furniture and
fixtures, whether now or hereafter existing or now owned or hereafter acquired
and wherever located, all replacements, repairs, additions, substitutions and
accessions thereto, all proceeds thereof (including, without limitations, all
claims against third parties for loss or damage to or destruction of any or
all of the foregoing) and all books, records and other property relating to
any of the foregoing.
All terms used herein which are also defined in the New York or any other
applicable Uniform Commercial Code shall also have at least the meanings
herein as therein defined.
<PAGE>
<PAGE>
2. SECURITY INTEREST. As security for the payment of all loans and
other extensions of credit or other financial accommodations now or in the
future made by Bank to Borrower and all other liabilities of Borrower to Bank,
Borrower hereby grants to Bank a security interest in the above described
Collateral and all and any Proceeds arising therefrom and all and any products
of the Collateral.
DELETE IF NOT APPLICABLE: The proceeds of the loan hereby obtained by the
Borrower will be used to purchase the Collateral.
Borrower represents and warrants that it is the sole lawful owner of the
Collateral, free and clear of liens and encumbrances, and has the right and
power to pledge, sell, assign and transfer absolutely thereto to Bank and that
no financing statement covering the Collateral, other than the Bank's is on
file in any public office.
To further secure the Liabilities, the Borrower hereby grants, pledges and
assigns to the Bank a continuing lien, security interest and right of set-off
in and to all money, securities and all other property of the Borrower, and
the proceeds thereof, now or hereafter actually or constructively held or
received by the Bank, Chemical Securities, Inc. or any other affiliate of the
Bank for any purpose, including safekeeping, custody, pledge, transmission and
collection, and in and to all of the Borrower's deposits (general or special)
and credits with the Bank, Chemical Securities, Inc. or any other affiliate of
the Bank. Borrower authorizes Bank to deliver to others a copy of this
Agreement as written notification of the Borrower's transfer of a security
interest in the foregoing property. The Bank is hereby authorized at any time
and from time to time, without notice, to apply all or part of such money,
securities, property, proceeds, deposits, credits to any of the Liabilities in
such amounts as the Bank may elect in its sole and absolute discretion
although the Liabilities may then be contingent or unmatured and whether or
not the collateral security may be deemed adequate.
3. USE OF COLLATERAL. Until default, Borrower may use the Collateral in
any lawful manner. If Collateral is or is about to become affixed to realty,
Borrower will, at Bank's request, furnish the Bank in writing executed by the
mortgagee of the realty whereby the mortgagee subordinates its rights and
priorities to the Bank's security interest in the Collateral, if the
Collateral is or may become subject to a landlord's lien, the Borrower will at
Bank's request, furnish the Bank with a landlord's waiver satisfactory in form
to the Bank.
COMPLETE IF APPLICABLE: If goods, the Collateral will be used primarily as
- -----------------------------------------------------------------------.
(Equipment in business, inventory for sale or lease, Farming, Personal,
Family or Household.)
4. INSURANCE. Borrower will have and maintain insurance on the
Collateral until this Agreement is terminated against all expected risks to
which it is exposed, including fire, theft and collision, and to which the
Bank may designate, such insurance to be payable to Bank and Borrower as their
interests may appear; all policies shall provide for thirty (30) days' written
<PAGE>
<PAGE>
minimum cancellation notice to the Bank. Bank may act as attorney for
Borrower in obtaining, adjusting, settling and cancelling such insurance.
5. DEFAULT. default shall exist hereunder (1) if the Borrower shall
fail to pay an amount of the Liabilities when due or if the Borrower shall
fail to keep, observe or perform any provision of this Agreement or of any
note, or other instrument or agreement between Borrower and Bank relating to
any Liabilities or if any default or Event of default specified or defined in
any such note, instrument or agreement shall occur, (2) if the Borrower shall
or shall attempt to (a) remove or allow removal of the Collateral from the
county where the Borrower now resides or change the location of its chief
executive office or principal place of business, (b) sell, encumber or
otherwise dispose of the Collateral or any interest therein or permit any lien
or security interest (other than the Bank's) to exist thereon or therein, (c)
conceal, hire out or let the Collateral, (d) misuse or abuse the Collateral,
or (e) use or allow the use of the Collateral in connection with any
undertaking prohibited by law; (3) if bankruptcy or insolvency proceedings
shall be instituted by or against the Borrower, or 94) if the Collateral shall
be attached, levied upon, seized in any legal proceedings, or held by virtue
of any lien or distress, or (5) if the Borrower shall make any assignment for
the benefit of creditors, or (6) if the Borrower shall fail to pay promptly
all taxes and assessments upon the Collateral or the use thereof, or (7) if
the Borrower shall die, or (8) if the Bank with reasonable cause determines
that its interest in the Collateral is in jeopardy, or (9) if Borrower should
fail to keep the Collateral suitably insured. In the event of default or the
breach of any undertaking of or conditions to be performed by the Borrower (1)
all liabilities shall become immediately due and payable, and (2) the Borrower
agrees upon demand to deliver the Collateral to the Bank, or the Bank may,
with or without legal process, and with or without previous notice or demand
for performance, enter any premises wherein the Collateral may be, and take
possession of the same, together with anything therein; and the Bank may make
disposition of the Collateral subject to any and all applicable provisions of
the law. If the Collateral is sold at public sale, Bank may purchase the
Collateral at such sale. The Bank, provided it has sent the statutory notice
of default, may retain from the proceeds of such sale all reasonable costs
incurred in the said taking and sale and also, all sums then owing by the
Borrower, and any surplus of any such sale shall be paid to the Borrower.
6. GENERAL AGREEMENTS. (a) Borrower agrees to pay the costs of filing
financing statements and of conducting searches in connection with this
Agreement. (b) Borrower agrees to allow the Bank through any of its officers
or agents, at all reasonable times, to examine or inspect any of the
Collateral and to examine, inspect and make extracts from the Borrower's books
and records relating to the Collateral. (c) Borrower will promptly pay when
due all taxes and assessments upon the Collateral or for its use of operation
or upon the proceeds thereof or upon this Agreement or upon any note or other
instrument or agreement evidencing any of the liabilities. (d) At its option,
the Bank may discharge taxes, liens or security interests or other
encumbrances at any time levied or placed on the Collateral, and may pay for
the maintenance and preservation of the Collateral, and the Borrower agrees to
reimburse the Bank on demand for any payment made or any expense incurred by
the Bank pursuant to the foregoing authorization, including outside or in-house
counsel fees and disbursements incurred or expended by the Bank in<PAGE>
<PAGE>
connection with this Agreement. (e) Borrower hereby authorizes the Bank to
file financing statements and any amendments thereto without the signature of
Borrower. Such authorization is limited to the security interest granted by
this Agreement. (f) Borrower agrees that the Bank has the right to notify (on
invoices or otherwise) account debtors and other obligors or payors on any
Collateral of its assignment to the Bank and that all payments thereon should
be made directly to the Bank and that the Bank has full power and authority to
collect, compromise, endorse, sell or otherwise deal with the Collateral on
its own name or that of the Borrower at any time. (g) The Borrower agrees to
pay or reimburse the Bank on demand for all costs and expenses incurred by it
in connection with the administration and enforcement of this Agreement and
the administration, preservation, protection, collection or realization of any
Collateral (including outside or in-house attorneys' fees and expenses). (h)
The Bank shall not be deemed to have waived any of its rights hereunder or
under any other agreement, instrument or paper signed by the Borrower unless
such waiver is in writing and signed by the Bank. No delay or omission on the
part of the Bank in exercising any right shall operate as a waiver thereof or
of any other right. A waiver upon any one occasion shall not be construed as
a bar or a waiver or any right or remedy or any future occasion. All of the
rights and remedies of the Bank, whether evidenced hereby or by any other
Agreement, instrument or paper, shall be cumulative and may be exercised
singly or concurrently. (i) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. (j) This AGREEMENT, and
the security interests, obligations, rights and remedies created hereby, shall
inure to the benefit of the Bank and its successors and assigns and be binding
upon the Borrower and its heirs, executors, administrators, legal
representatives, successors and assigns.
7. EXECUTION BY BANK. This Agreement shall take effect immediately upon
execution by the Borrower, and the execution hereof by the Bank shall not be
required as a condition to the effectiveness of this Agreement. The provision
for execution of this Agreement by the Bank is only for purposes of filing
this Agreement as a Security Agreement under the Uniform Commercial Code, if
execution hereof by the Bank is required for purposes of such filing.
All references to Chemical Bank, PT-1 COMMUNICATIONS, INC.
The Chase Manhattan Bank, N.A., -----------------------------
or The Chase Manhattan Bank, Borrower
(National Association) shall
mean The Chase Manhattan Bank, By: /s/ Douglas Barley CFO and
a New York State Chartered Bank. Secretary
---------------------------
30-50 Whitestone Expressway
---------------------------
Flushing, NY 11354
---------------------------
Place of business in counties
other than above.
-------------------------------
-------------------------------
CHEMICAL BANK
--------------------------
Bank Designation
By
-------------------------------------
(Name and Title)
Address
--------------------------------
(Number, Street, City)
<PAGE>
CHEMICAL
All references to Chemical Bank,
The Chase Manhattan Bank, N.A.,
or The Chase Manhattan Bank,
(National Association) shall
mean The Chase Manhattan Bank,
a New York State Chartered Bank.
SECURITY AGREEMENT
(General Purpose)
This Agreement made this 8th day of October, 1997 between CHEMICAL BANK
(herein called "Bank") and PT-1 COMMUNICATIONS, INC. (herein called
("Borrower").
1. DEFINITIONS OF TERMS USED HEREIN. (a) "Borrower" includes all
individuals executing [this] agreement as parties hereto and all members of a
partnership when Borrower is a partnership, each of which shall be jointly and
severally liable individually and as partners hereunder. (b) "Liability" or
"liabilities" includes all liabilities (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, that may be
hereafter contracted or acquired, of Borrower (including Borrower and any
other person or Bank, including without limitation all liabilities arising
under or from any note, loan or credit agreement, letter of credit, guaranty,
draft, acceptance, interest rate or foreign exchange agreement or any other
instrument or agreement of (or the responsibility of) the Borrower or any
loan, advance or other extension of credit or financial accommodation to
Borrower by Bank. (c) "Proceeds" means whatever is received when Collateral
is sold, exchanged, leased, collected or otherwise disposed of and includes
the account arising when the right to payment is earned under a contract. (d)
"Security interest" means a lien or other interest in Collateral which secures
payment of a liability or performance of an obligation. (e) "Collateral"
means any property described in Section 2 hereof and the following described
property of the Borrower:
All present and future accounts, contract rights, general intangibles,
instruments, documents, and chattel paper, all returned and repossessed goods
relating thereto, all proceeds thereof and all books, records and other
property relating to any of the foregoing.
All terms used herein which are also defined in the New York or any other
applicable Uniform Commercial Code shall also have at least the meanings
herein as therein defined.
<PAGE>
<PAGE>
2. SECURITY INTEREST. As security for the payment of all loans and
other extensions of credit or other financial accommodations now or in the
future made by Bank to Borrower and all other liabilities of Borrower to Bank,
Borrower hereby grants to Bank a security interest in the above described
Collateral and all and any Proceeds arising therefrom and all and any products
of the Collateral.
DELETE IF NOT APPLICABLE: The proceeds of the loan hereby obtained by the
Borrower will be used to purchase the Collateral.
Borrower represents and warrants that it is the sole lawful owner of the
Collateral, free and clear of liens and encumbrances, and has the right and
power to pledge, sell, assign and transfer absolutely thereto to Bank and that
no financing statement covering the Collateral, other than the Bank's is on
file in any public office.
To further secure the Liabilities, the Borrower hereby grants, pledges and
assigns to the Bank a continuing lien, security interest and right of set-off
in and to all money, securities and all other property of the Borrower, and
the proceeds thereof, now or hereafter actually or constructively held or
received by the Bank, Chemical Securities, Inc. or any other affiliate of the
Bank for any purpose, including safekeeping, custody, pledge, transmission and
collection, and in and to all of the Borrower's deposits (general or special)
and credits with the Bank, Chemical Securities, Inc. or any other affiliate of
the Bank. Borrower authorizes Bank to deliver to others a copy of this
Agreement as written notification of the Borrower's transfer of a security
interest in the foregoing property. The Bank is hereby authorized at any time
and from time to time, without notice, to apply all or part of such money,
securities, property, proceeds, deposits, credits to any of the Liabilities in
such amounts as the Bank may elect in its sole and absolute discretion
although the Liabilities may then be contingent or unmatured and whether or
not the collateral security may be deemed adequate.
3. USE OF COLLATERAL. Until default, Borrower may use the Collateral in
any lawful manner. If Collateral is or is about to become affixed to realty,
Borrower will, at Bank's request, furnish the Bank in writing executed by the
mortgagee of the realty whereby the mortgagee subordinates its rights and
priorities to the Bank's security interest in the Collateral, if the
Collateral is or may become subject to a landlord's lien, the Borrower will at
Bank's request, furnish the Bank with a landlord's waiver satisfactory in form
to the Bank.
COMPLETE IF APPLICABLE: If goods, the Collateral will be used primarily as
- -----------------------------------------------------------------------.
(Equipment in business, inventory for sale or lease, Farming, Personal,
Family or Household.)
4. INSURANCE. Borrower will have and maintain insurance on the
Collateral until this Agreement is terminated against all expected risks to
which it is exposed, including fire, theft and collision, and to which the
Bank may designate, such insurance to be payable to Bank and Borrower as their
interests may appear; all policies shall provide for thirty (30) days' written
<PAGE>
<PAGE>
minimum cancellation notice to the Bank. Bank may act as attorney for
Borrower in obtaining, adjusting, settling and cancelling such insurance.
5. DEFAULT. default shall exist hereunder (1) if the Borrower shall
fail to pay an amount of the Liabilities when due or if the Borrower shall
fail to keep, observe or perform any provision of this Agreement or of any
note, or other instrument or agreement between Borrower and Bank relating to
any Liabilities or if any default or Event of default specified or defined in
any such note, instrument or agreement shall occur, (2) if the Borrower shall
or shall attempt to (a) remove or allow removal of the Collateral from the
county where the Borrower now resides or change the location of its chief
executive office or principal place of business, (b) sell, encumber or
otherwise dispose of the Collateral or any interest therein or permit any lien
or security interest (other than the Bank's) to exist thereon or therein, (c)
conceal, hire out or let the Collateral, (d) misuse or abuse the Collateral,
or (e) use or allow the use of the Collateral in connection with any
undertaking prohibited by law; (3) if bankruptcy or insolvency proceedings
shall be instituted by or against the Borrower, or 94) if the Collateral shall
be attached, levied upon, seized in any legal proceedings, or held by virtue
of any lien or distress, or (5) if the Borrower shall make any assignment for
the benefit of creditors, or (6) if the Borrower shall fail to pay promptly
all taxes and assessments upon the Collateral or the use thereof, or (7) if
the Borrower shall die, or (8) if the Bank with reasonable cause determines
that its interest in the Collateral is in jeopardy, or (9) if Borrower should
fail to keep the Collateral suitably insured. In the event of default or the
breach of any undertaking of or conditions to be performed by the Borrower (1)
all liabilities shall become immediately due and payable, and (2) the Borrower
agrees upon demand to deliver the Collateral to the Bank, or the Bank may,
with or without legal process, and with or without previous notice or demand
for performance, enter any premises wherein the Collateral may be, and take
possession of the same, together with anything therein; and the Bank may make
disposition of the Collateral subject to any and all applicable provisions of
the law. If the Collateral is sold at public sale, Bank may purchase the
Collateral at such sale. The Bank, provided it has sent the statutory notice
of default, may retain from the proceeds of such sale all reasonable costs
incurred in the said taking and sale and also, all sums then owing by the
Borrower, and any surplus of any such sale shall be paid to the Borrower.
6. GENERAL AGREEMENTS. (a) Borrower agrees to pay the costs of filing
financing statements and of conducting searches in connection with this
Agreement. (b) Borrower agrees to allow the Bank through any of its officers
or agents, at all reasonable times, to examine or inspect any of the
Collateral and to examine, inspect and make extracts from the Borrower's books
and records relating to the Collateral. (c) Borrower will promptly pay when
due all taxes and assessments upon the Collateral or for its use of operation
or upon the proceeds thereof or upon this Agreement or upon any note or other
instrument or agreement evidencing any of the liabilities. (d) At its option,
the Bank may discharge taxes, liens or security interests or other
encumbrances at any time levied or placed on the Collateral, and may pay for
the maintenance and preservation of the Collateral, and the Borrower agrees to
reimburse the Bank on demand for any payment made or any expense incurred by
the Bank pursuant to the foregoing authorization, including outside or in-house
counsel fees and disbursements incurred or expended by the Bank in<PAGE>
<PAGE>
connection with this Agreement. (e) Borrower hereby authorizes the Bank to
file financing statements and any amendments thereto without the signature of
Borrower. Such authorization is limited to the security interest granted by
this Agreement. (f) Borrower agrees that the Bank has the right to notify (on
invoices or otherwise) account debtors and other obligors or payors on any
Collateral of its assignment to the Bank and that all payments thereon should
be made directly to the Bank and that the Bank has full power and authority to
collect, compromise, endorse, sell or otherwise deal with the Collateral on
its own name or that of the Borrower at any time. (g) The Borrower agrees to
pay or reimburse the Bank on demand for all costs and expenses incurred by it
in connection with the administration and enforcement of this Agreement and
the administration, preservation, protection, collection or realization of any
Collateral (including outside or in-house attorneys' fees and expenses). (h)
The Bank shall not be deemed to have waived any of its rights hereunder or
under any other agreement, instrument or paper signed by the Borrower unless
such waiver is in writing and signed by the Bank. No delay or omission on the
part of the Bank in exercising any right shall operate as a waiver thereof or
of any other right. A waiver upon any one occasion shall not be construed as
a bar or a waiver or any right or remedy or any future occasion. All of the
rights and remedies of the Bank, whether evidenced hereby or by any other
Agreement, instrument or paper, shall be cumulative and may be exercised
singly or concurrently. (i) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. (j) This AGREEMENT, and
the security interests, obligations, rights and remedies created hereby, shall
inure to the benefit of the Bank and its successors and assigns and be binding
upon the Borrower and its heirs, executors, administrators, legal
representatives, successors and assigns.
7. EXECUTION BY BANK. This Agreement shall take effect immediately upon
execution by the Borrower, and the execution hereof by the Bank shall not be
required as a condition to the effectiveness of this Agreement. The provision
for execution of this Agreement by the Bank is only for purposes of filing
this Agreement as a Security Agreement under the Uniform Commercial Code, if
execution hereof by the Bank is required for purposes of such filing.
All references to Chemical Bank, PT-1 COMMUNICATIONS, INC.
The Chase Manhattan Bank, N.A., -----------------------------
or The Chase Manhattan Bank, Borrower
(National Association) shall
mean The Chase Manhattan Bank, By: /s/ Douglas Barley CFO and
a New York State Chartered Bank. Secretary
---------------------------
30-50 Whitestone Expressway
---------------------------
Flushing, NY 11354
---------------------------
Place of business in counties
other than above.
-------------------------------
-------------------------------
CHEMICAL BANK
--------------------------
Bank Designation
By
-------------------------------------
(Name and Title)
Address
--------------------------------
(Number, Street, City)
PROMISSORY NOTE
$5,000,000 New York, New York
September 22, 1997
On the due date for each Loan (as recorded on the grid attached hereto),
but in no event later than the Final Maturity Date, for value received, PT-1
COMMUNICATIONS, INC. (the "Borrower"), hereby promises to pay to the order of
THE CHASE MANHATTAN BANK (the "Bank") at the office of the Bank at 95-25
Queens Boulevard, Rego Park, New York 11374, the principal sum of the
aggregate unpaid principal amount of each Loan (as recorded on the grid
attached hereto) made by the Bank to the Borrower hereunder. The Borrower
further promises to pay interest on the unpaid principal amount of each Loan
(computed on the basis of the actual number of days elapsed over a year of 360
days) on each Interest Payment Date, and on the Final Maturity Date, at the
per annum rate of interest equal to either the Adjusted LIBO Rate plus
2.25percent , the Prime Rate or the Fixed Rate as specified below (as recorded
on the grid attached hereto), but in no event higher than the maximum interest
rate permitted under applicable law.
The Bank may lend, in its sole discretion in each instance, such amounts
(each a "Loan" and collectively, the "Loans") as may be requested by the
Borrower hereunder, which Loans shall in no event exceed $5,000,000 in
aggregate principal amount outstanding at any time. Each LIBOR Loan and Fixed
Rate Loan shall be in a minimum principal amount of $500,000 or any larger
multiple of $100,000. The Borrower shall request each LIBOR Loan upon at least
three (3) Business Days' prior oral or written notice to the Bank and may
request a Prime Rate Loan or Fixed Rate Loan upon same day oral or written
notice to the Bank, and in each case of a request for a Fixed Rate Loan, such
request shall be made by 2 P.M. on the required day. If the Borrower shall not
timely notify the Bank that it has selected the Adjusted LIBO Rate plus
2.25percent or the Fixed Rate for a Loan prior to the expiration of the then-
current Interest Period relating to such Loan, then such Loan shall bear
interest at the Prime Rate. The Bank is authorized to enter on the attached
grid schedule all the information specified therein relating to each Loan, all
of which entries, in the absence of manifest error, shall be conclusive and
binding on the Borrower; provided that the failure of the Bank to make any
such entries shall not relieve the Borrower from its obligation to pay any
amount due hereunder.
INTEREST
(a) Each LIBOR Loan shall bear interest, for each Interest Period, at
a rate per annum equal to 2.25percent above the Adjusted LIBO Rate.
(b) Each Prime Rate Loan shall bear interest, at the rate per annum
for each day equal to the Prime Rate.
(c) Each Fixed Rate Loan shall bear interest, for each Interest
Period, at a rate per annum equal to the Fixed Rate.<PAGE>
<PAGE>
(d) Any overdue payments of principal of and, to the extent permitted
by law, interest on any Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2percent plus the rate
on the Loan in effect on such day.
INCREASED COST
If at any time after the date hereof, the Board of Governors of the
Federal Reserve System or any political subdivision of the United States of
America or any other government, governmental agency or central bank shall
impose or modify any reserve or capital requirement on or in respect of loans
made by or deposits with the Bank or shall impose on the Bank or the
Eurocurrency market any other conditions affecting Loans, and the result of
the foregoing is to increase the cost to (or, in the case of Regulation D, to
impose a cost on) the Bank of making or maintaining any Loan or to reduce the
amount of any sum receivable by the Bank in respect thereof, by an amount
deemed by the Bank to be material, then, within 30 days after notice and
demand by the Bank, the Borrower shall pay to the Bank such additional amounts
as will compensate the Bank for such increased cost or reduction; provided
that the Borrower shall not be obligated to compensate the Bank for any
increased cost resulting from the application of Regulation D as required by
the definition of Adjusted LIBO Rate. A certificate of the Bank claiming
compensation hereunder and setting forth the additional amounts to be paid to
it hereunder and the method by which such amounts were calculated shall be
conclusive in the absence of manifest error.
CAPITAL ADEQUACY
If the Bank shall have determined that the applicability of any law,
rule, regulation or guideline adopted pursuant to or arising out of the July
1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and
Capital Standards", or the adoption after the date hereof of any other law,
rule regulation or guideline regarding capital adequacy, or any change in any
of the foregoing or in the interpretation or administration of any of the
foregoing by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
the Bank (or any lending office of the Bank) or the Bank's holding company
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Bank's capital or on the capital of the Bank's holding company, if any, as a
consequence of its obligations hereunder to a level below that which the Bank
or the Bank's holding company could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies and the
policies of such Bank's holding company with respect to capital adequacy) by
an amount deemed by the Bank to be material, then from time to time the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank or the Bank's holding company for any such reduction
suffered.
INDEMNITY
<PAGE>
<PAGE>
The Borrower shall indemnify the Bank against (i) any loss or expense
which the Bank may sustain or incur as a consequence of the occurrence of any
Event of Default and (ii) any loss or expense sustained or incurred including,
without limitation, in connection with obtaining, liquidating or employing
deposits from third parties as a consequence of the payment of any principal
of any Loan by the Borrower (pursuant to demand, a default, change in legality
or otherwise) on any day other than the last day of an Interest Period, or the
failure by the Borrower to prepay any Loan or part thereof once notice has
been given. The Bank shall provide to the Borrower a statement, supported
where applicable by documentary evidence, explaining the amount of any such
loss or expense, which statement shall be conclusive absent manifest error.
CHANGE IN LEGALITY
(a) Notwithstanding anything to the contrary contained elsewhere in
this Note, if any change after the date hereof in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful (based on the opinion of any
counsel, whether in-house, special or general, for the Bank) for the Bank to
make or maintain any Loan or to give effect to its obligations as contemplated
hereby with respect to any Loan, then, by written notice to the Borrower by
the Bank, the Bank may require that all outstanding Loans made by it be
converted to Prime Rate Loans, whereupon all such Loans shall be automatically
converted to Prime Rate Loans as of the effective date of such notice as
provided in paragraph (b) below. In addition, upon receipt of such notice by
the Bank, the Borrower shall be prohibited from requesting LIBOR Loans from
the Bank unless such declaration is subsequently withdrawn and the Bank agrees
to withdraw any such declaration if and to the extent that the making and
maintenance by the Bank of its LIBOR Loans shall cease to be unlawful.
(b) For purposes of this Section, a notice to the Borrower by the
Bank pursuant to paragraph (a) above shall be effective, if lawful and if any
Loans shall then be outstanding, on the last day of the then current Interest
Period; otherwise, such notice shall be effective on the date of receipt by
the Borrower.
REPRESENTATIONS
The Borrower represents and warrants that (i) it is duly organized,
validly existing and in good standing under the laws of the State of its
incorporation, (ii) it has full authority to execute and perform this Note,
(iii) this Note when executed and delivered in accordance with its terms will
constitute a legal, valid and binding obligation of the Borrower, and (iv) no
contractual restriction prevents the satisfactory performance or payment of
this Note by the Borrower.
EVENTS OF DEFAULT
If any of the following events (each, an "Event of Default") shall occur
and be continuing:
<PAGE>
<PAGE>
(i) the Borrower shall fail to make payment when due of any principal
of or interest on any Loan hereunder; or
(ii) the Borrower shall fail to perform or observe any other agreement
or covenant herein; or
(iii) any representation or warranty made by the Borrower herein shall
prove to have been incorrect in any material respect when made or
given; or
(iv) the Borrower shall fail to provide financial statements in a form
acceptable to the Bank at the Bank's request from time to time; or
(v) the Borrower shall default in any other of its outstanding
indebtedness or shall transfer, pledge, mortgage, assign or create
a security interest in any of its assets without the Bank's
consent; or
(vi) the Borrower shall be adjudged to be insolvent (however such
insolvency may be evidenced), or proceedings are instituted by or
against the Borrower under the United States Bankruptcy Code or
under any bankruptcy, reorganization or insolvency law or other
law for the relief of debtors; or
(vii) there shall be a material adverse change, in the Bank's opinion,
in the financial condition of the Borrower; or
(viii) complete or partial suspension or liquidation of any business of
the Borrower; or
(ix) dissolution, merger, consolidation or reorganization of the
Borrower; or
(x) attachment, distraint, levy, execution, final judgment or order
against the Borrower or any of its property for amounts in the
aggregate in excess of $100,000 and remaining undischarged for a
period of 30 days;
then, in any such case the Bank may declare all Loans outstanding hereunder to
be forthwith due and payable, together with accrued interest, whereupon the
same will become forthwith due and payable, without demand, presentment,
protest, notice of dishonor or any other notice or demand whatsoever.
Notwithstanding the foregoing, upon a default under subsection (vi) hereunder,
this Note shall become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are expressly waived.
PREPAYMENT
(a) The Borrower shall have the right (i) at any time and from time
to time to prepay any Prime Rate Loan in full, or in part, without penalty and
(ii) to prepay any Fixed Rate Loan or LIBOR Loan in full, or in part, on the
last day of the Interest Period relating to such Loan, without penalty. Any
<PAGE>
<PAGE>
prepayment of a Fixed Rate Loan or LIBOR Loan on a day other than the last day
of the Interest Period relating to such Loan shall be in full, and upon at
least three (3) Business Days' prior written notice to the Bank, and shall be
subject to the penalty provisions of paragraph (b) of this Section. A notice
of prepayment shall specify the prepayment date (which shall be a Business
Day) and the principal amount to be prepaid, shall be irrevocable and shall
commit the Borrower to prepay the Loan in full on the date and in the amount
stated therein. Each prepayment hereunder shall be accompanied by accrued
interest on the principal amount of the Loan to the date of prepayment.
(b) The Borrower shall reimburse the Bank on demand for any loss
incurred or to be incurred by it in the reemployment of the funds released by
any prepayment of any Fixed Rate Loan or LIBOR Loan on a day other than the
last day of the Interest Period relating to such Loan. Such loss shall be the
difference as reasonably determined by the Bank between the cost of obtaining
the funds for such Loan and any lesser amount which may be realized by the
Bank in reemploying the funds received in prepayment during the period from
the date of prepayment to the last day of the Interest Period relating such
Loan.
DEFINITIONS
A. ADJUSTED LIBO RATE
"Adjusted LIBO Rate" shall mean, with respect to any Loan for any
Interest Period, an interest rate per annum equal to the product
of (i) the LIBO Rate in effect for such Interest Period and (ii)
Statutory Reserves.
"LIBO Rate" shall mean, with respect to any Loan for any Interest
Period, the rate (rounded upwards, if necessary, to the next 1/16
of 1 percent ) at which dollar deposits approximately equal in
principal amount to such Loan and for the maturity equal to the
applicable Interest Period are offered to the Bank in immediately
available funds in the London interbank market at approximately
11:00 a.m., New York City time, two Business Days prior to the
commencement of such Interest Period.
For so long as any Loan hereunder shall bear interest at the
Adjusted LIBO Rate such Loan shall be deemed a LIBOR Loan.
B. BUSINESS DAY
A "Business Day" shall mean any day other than a Saturday, Sunday
or other day on which the Bank is authorized or required by law or
regulation to close, and which, in the case of a LIBOR Loan, is a
day on which transactions in dollar deposits are being carried out
in London.
C. FINAL MATURITY DATE
"Final Maturity Date" shall mean March 31, 1998.
<PAGE>
<PAGE>
D. FIXED RATE
"Fixed Rate" shall mean for any Interest Period, the rate of
interest as may be quoted by the Bank in its sole and absolute
discretion (which may include a refusal to quote any interest
rate). The determination by the Bank of the Fixed Rate shall be
conclusive. For so long as any Loan hereunder shall bear interest
at the Fixed Rate, such Loan shall be deemed a Fixed Rate Loan.
E. INTEREST PAYMENT DATE
"Interest Payment Date" shall mean as to any Loan, the last day of
the Interest Period relating to such Loan and, if such Interest
Period is longer than one month, at intervals of one month after
the first day thereof.
F. INTEREST PERIOD
"Interest Period" shall mean (a) for each LIBOR Loan, the period
commencing on the date of such Loan and ending on the numerically
corresponding day (or if there is no numerically corresponding
day, the last day) in the calendar month that is 1, 2, 3, 6 or 9
months thereafter, as the Borrower may elect, (b) for each Fixed
Rate Loan, the period commencing on the date of such Loan and
continuing for at least 30 days, selected by the Borrower and
accepted by the Bank in its sole and absolute discretion, and (c)
for each Prime Rate Loan, the period commencing on the date of
such Loan and ending one month thereafter; provided, however, that
(i) if any Interest Period would end on a day which shall not be a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, with respect to LIBOR Loans, such
next succeeding Business Day would fall in the next calendar
month, in which case (x) such Interest Period shall end on the
first preceding Business Day and (y) the Interest Period for any
continuation of such LIBOR Loan shall end on the last Business Day
of a calendar month, and (ii) no Interest Period may extend beyond
the Final Maturity Date.
G. PRIME RATE
"Prime Rate" shall mean the interest rate announced to be in
effect by the Bank from time to time as its prime rate. For so
long as any Loan hereunder shall bear interest at the Prime Rate
such Loan shall be deemed a "Prime Rate Loan".
<PAGE>
<PAGE>
H. STATUTORY RESERVES
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the
maximum reserve percentages, expressed as a decimal (including,
without limitation, any marginal, special, emergency or
supplemental reserves) from time to time in effect under
Regulation D or as otherwise established by the Board of Governors
of the Federal Reserve System and any other banking authority to
which the Bank is subject, with respect to the Adjusted LIBOR
Rate, for Eurocurrency Liabilities (as defined in Regulation D).
LIBOR Loans shall be deemed to constitute Eurocurrency Liabilities
and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration,
exceptions or offsets which may be available from time to time to
the Bank under such Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any
change in any reserve percentage.
PARTICIPATIONS
The Bank reserves the right to sell participations in the Loans or the
Note and to provide any participant or prospective participant with
information of the Borrower previously received by the Bank.
JURISDICTION AND GOVERNING LAW
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS NOTE OR THE LOANS,
THE BORROWER WAIVES THE RIGHT TO A TRIAL BY JURY AND ALL RIGHTS OF SETOFF AND
RIGHTS TO INTERPOSE COUNTER-CLAIMS AND CROSS-CLAIMS. THE BORROWER HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK LOCATED IN THE CITY OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN SUCH
CITY AND STATE IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE. THE BORROWER HEREBY AUTHORIZES THE BANK TO COMPLETE
THIS NOTE IN ANY PARTICULARS ACCORDING TO THE TERMS OF THE LOANS EVIDENCED
HEREBY. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
IN SUCH STATE, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF THE
BORROWER AND INURE TO THE BENEFIT OF THE BANK, ITS SUCCESSORS, ENDORSEES AND
ASSIGNS.
PT-l COMMUNICATIONS, INC.
By: /s/ Douglas Barley
--------------------------------
Name: Douglas Barley
Title: CFO and Secretary
<PAGE>
<PAGE>
GRID SCHEDULE
AMOUNT AMOUNT OF
TYPE OF OF PRINCIPAL INTEREST MATURITY
DATE LOAN LOAN REPAID RATE DATE
- ----- ------- ------ ---------- --------- ----------
SUBSIDIARIES OF PT-1 COMMUNICATIONS, INC.
Phonetime Technologies,Inc.
