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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
TELTRAN INTERNATIONAL GROUP, LTD.
(Name of Small Business Issuer in Its Charter)
Delaware 11-3172507
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Penn Plaza, Suite 4632
New York, New York 10119
(Address of principal executive offices)
(212) 643-1283
(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered Name of each exchange on which
each class is to be registered
Not applicable Not applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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PART I
Item 1. Description of Business.
Introduction General
Teltran International Group, Ltd. (the "Company") through its wholly
owned subsidiary Teltran International, Inc. ("International") is primarily
engaged in the international telecommunication business. It was a development
stage company until April 1998 when it commenced services for an internet
telephony system. In October 1998 it entered into additional arrangements which
included the ability to sell internet telephony time. Thus far the Company has
entered into initial agreements for this service and anticipates beginning this
service in April 1999.
The Company, formerly known as Spectratek Incorporated, a Utah
corporation, acquired all of the outstanding shares of International on May 1,
1996, by issuing shares of the Company's common stock in an amount that resulted
in the original stockholders of International receiving approximately 66% of the
then outstanding shares of the Company. For financial reporting purposes, the
transaction was recorded as a recapitalization of International. International
is the continuing, surviving, entity for accounting purposes, but the Company is
the continuing entity for legal purposes.
On October 6, 1997, Spectratek was reincorporated in the State of
Delaware under the name of Teltran International Group, Ltd. References to the
"Company" unless otherwise indicated by the context refer to the Company and
International. The Company's offices are located at One Penn Plaza, New York,
New York 10119 and its telephone number is 212-643-1283.
All share and per share data in this registration statement (other than
in the financial statements) have been adjusted to effect a one-for 20 reverse
split of the Company's Common Stock effective on December 1, 1997.
Industry Background
During the last fifteen years international telecommunications have
changed dramatically. Deregulation has resulted in the end of monopoly and a
proliferation of competitors. In addition, international agreements among most
industrial nations have been entered into opening telecommunication markets to
competition and foreign ownership. At the same time technology changed adding to
the overall efficiency of telecommunication services and increasing capacity
dramatically. These factors have combined to reduce costs significantly.
Additionally, the technology resulted in the development of new methods of
completing calls including refiling which is the routing of calls from country A
to B and termination in country C. The combined rates between the three
countries is less than the rate directly from country A to country B.
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A resale arrangement typically involves the wholesale purchase of
termination services on a per-minute basis by one long distance provider from
another. A single international call may pass through the facilities of multiple
long distance carriers and resellers before it reaches the foreign
facilities-based carrier that ultimately terminates the call. Such resale, first
permitted with the deregulation of the United States market, enable the
emergence of alternative international providers that relied, at least in part,
on transmission services acquired on a wholesale basis from other long distance
providers. Resale arrangements set per minute prices for different routes, which
may be guaranteed for a set time period or subject to fluctuation following
notice. These international providers include entities whose business is a
reseller with no independent system to originate or terminate calls and no
equipment except the connection of the resellers source of telecommunication's
time to its customer. Presently, the Company's primary business is the latter.
It attempts to obtain the least expensive telecommunications time available for
resale to other resellers including credit phone card companies.
The Company's immediate resale operations will be conducted through
internet proto-call which is a recent phenomenon. The Internet telephony
industry begin in 1995, when experienced Internet users began to transfer voice
messages from one PC to another. Subsequently, software was introduced which
allowed PC users to place international calls via the Internet to other PC users
for the price of a local call. Initially, the growth of Internet telephony was
constrained due to the poor sound quality of the calls and because calls were
mainly limited to those placed from one PC to another.
However, as the industry has grown, substantial improvements have been
made. New software has substantially reduced delays. The use of private networks
or intranets to transmit calls as an alternative to the public Internet has
alleviated capacity problems. Developments in hardware, software and networks
are expected to continue to improve the quality and viability of Internet
telephony.
Internet telephony provides customers with substantial savings compared
to conventional long distance calls, because the total cost of an Internet
telephone call is based on the local calls to and from the gateways of the
respective internet providers, thereby bypassing the international settlements
process.
Business History
Initially the Company intended to concentrate its efforts on
establishing and operating a global messaging business. Pursuant to that
strategy the Company intended to provide its customers with a universal mailbox
and a platform that was capable of generating multimedia broadcasts of messages
and documents received by the client. That is the messages could be faxed or
otherwise delivered to various locations within the enterprise. As an adjunct to
its global messaging service the Company also provided enhanced fax services
including fax broadcasting. The Company has postponed its efforts to provide
global messaging services. It derived insignificant revenues from fax broadcast
services for clients.
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The Company's principal business activity is to provide the resale of
telecommunication time to enable clients to provide competitive rates for
international communications. This involves several arrangements. The first is
to obtain availability of favorable wholesale international rates from carriers
and other resellers. This Company then enters into arrangements for the sale of
this time. This entails the connection between the Company, the customer and
carrier. This is accomplished through telecommunication switches owned by a
third party at the third parties location. Prior to April, 1998 the Company
derived no or insignificant revenues and was considered a development stage
Company. During 1999 it derived revenues as a refile hub for OzEmail Interline
Pty, Limited ("OzEmail") which operates a collection of network for
international calls through the internet. That is the Company would receive
calls for the OzEmail system and direct them through the least expensive routing
to countries which have no OzEmail internet termination. The Company derived
substantial revenues from this activity in 1998 but believes this source will
decline as OzEmail obtains a greater number of countries with affiliates where
calls can be completed entirely through the OzEmail network collection. The
Company subsequently entered into an "affiliate arrangement with OzEmail which
enables the Company to sell international voice telephone availability through
the internet system utilizing OzEmail technology and protocols.
The OzEmail System
OzEmail is a subsidiary of a major internet provider in Australia.
OzEmail has assembled a consortium of companies in various countries as
affiliates to establish internet network for the transmission and receipt of its
Voice over Internet Protocol worldwide or OzEmail's version of internet
telephony. OzEmail owns proprietary hardware and software technology utilized in
the transmission, routing and connecting of communications, including voice
telephony, fax and other transmissions, through the internet system and other
conventional systems as public switched networks. The proprietary hardware or
"VIN" Hardware is used as the gateway for the carrying and routing of calls.
OzEmail has licensed the proprietary software and VINs and other trade
secrets to provide or establish a network in the country in which the provider
or affiliate is located. OzEmail joins the providers in various countries to
provide international service. Each provider furnishes termination service in
its territory enabling providers in other countries to route the calls to the
local provider which in turn terminates their calls in the territory over
conventional public switched telephone networks. The provider receives a
termination fee. The provider is required to market the OzEmail service in its
territory offering calling service through OzEmail systems. The local provider
is required to pay a fee to OzEmail for all international services of provider
customers routed through OzEmail network. The heart of the system is the VIN,
each of which is capable of handling a fixed number of calls. Each provider is
required to purchase sufficient VINs from OzEmail to service its customers. A
VIN can only handle a finite number of calls so that additional multiple VINS
may be required for each customer. Generally, the customer of the provider is a
pre-paid calling card service calling center or other entity seeking to provide
international calling to its customers.
Basically, the client of the provider's customers originates a local
call through the internet
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which connects to a VIN which transmits the call over internet protocol to a VIN
of a provider located in the foreign country. The call is then connected to the
domestic local telephone network. All the calls are processed by the control
node of OzEmail which is also used for billing, rating and verification
purposes. If no provider has been appointed in the country of destination, the
call will be routed through a refile provider in a third country for the least
expensive routing.
OzEmail/Teltran
In 1998 the Company was appointed as a refile hub for OzEmail for calls
terminating in countries without OzEmail affiliates. In addition, later in
October 1998 the Company was appointed a non-exclusive OzEmail affiliate in the
United States. The Company then purchased and installed VINs at its switching
site and began to market the OzEmail service in the United States. As an
affiliate the Company provides termination services in the United States. To
date, the Company has derived little or no revenues from this service. After the
Company has purchased VINs it has successfully tested the OzEmail telephony
service. Each agreement requires sufficient number of VINs as well as a test
period of several weeks to determine the quality of service to the particular
destination. The Company has entered into a arrangement for sales
of communication time including sales to South Africa and Netherlands Antilles.
Service is scheduled to begin in April 1999. Several additional agreements
are pending.
OzEmail Agreements
The affiliates arrangement consists two three-year agreements each
expiring October 12, 2001. The first agreement is the Interconnectivity and
Support Agreement. Under this agreement, Teltran has joined an international
consortium of companies established by OzEmail in different countries as a
non-exclusive affiliate, of the OzEmail system in the United States. This
entitles the Company to transmit internet telephony calls worldwide over
OzEmail's interconnected systems. The Company is obligated to roll out the
services in the United States and to purchase the required equipment for the
operation of the systems from OzEmail. The Company further is obligated to
provide termination services for a fee for the benefit of providers or
affiliates in other countries. The Agreement provides for the payment of fees
to OzEmail by the Company for calls originating through the system. The second
agreement is the USA Intellectual Property License Agreement. This agreement
grants Teltran a non-exclusive license for three years to use OZI's software,
hardware, Intellectual property, advertising/promotional material, etc. to
perform services under the internet interconnectivity and support agreement. The
refile services are performed under a Telecommunications Service Agreement
expiring October 2000 unless terminated sooner. The Agreement requires the
Company to maintain equipment for refile services. The Company further is
obligated to provide termination services for a fee for the benefit of providers
or affiliates in other countries.
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Government Regulation
The Company is licensed as an international reseller pursuant to
Section 214 of the Federal Communication Act.
Marketing/Customers
The Company will market its resale service as part of the OzEmail
network to other carriers wholesalers, call centers, international phone card
providers and others. During 1998 the Company's principal customer was OzEmail
pursuant to the refile arrangement. During 1998 the Company received
approximately 79.3% of its revenues from OzEmail. The Company does not
anticipate that it will derive significant refile revenues from OzEmail in the
future. Moreover, as the Company enters into resale arrangements, it's
dependence on OzEmail as a refile customer will decline. The Company derived
17.1% of its revenues in 1998 from Telecom 2000 for providing domestic long
distance capacity. This arrangement has terminated.
The Company markets its service through its executive officers, one of
whom is the vice president of sales and marketing. The Company has also entered
into non-exclusive arrangements with agents who will receive a commission from
the revenues generated any customer of the Company introduced by an agent.
Competition
Currently, the Company competes with numerous other long distance
resellers and providers. The Company believes its significant competition will
be other independent resellers and providers including providers of competing
voice telephony systems as well as possible affiliates of OzEmail appointed in
the future other competitors include large carriers such as AT&T, MCI, Sprint,
and WorldCom; and other providers of international long distance services such
as STAR Telecommunications, Inc., as alliances that provide wholesale carrier
services, such as "Global One" other internet telephony problems. In addition,
the Company has a non exclusive affiliate arrangement with OzEmail. Therefore,
OzEmail is free to appoint another affiliate which may result the Company facing
substantial competition. Many of the Company's competitors are significantly
larger and have substantially greater market presence, as well as greater
financial, technical, operational, marketing and other resources and experience
than the Company.
The Company competes for customers in the telecommunications markets
primarily based on price and, to a lesser extent, the type and quality of
service offered. Increased competition could force the Company to reduce its
prices and profit margins if its competitors are able to procure rates or enter
into service agreements that are comparable to or better than those the Company
obtains, or are able to offer other incentives to existing and potential
customers. Similarly, the Company has no control over the prices set by its
competitors.
Employees
The Company has five full-time employees, four of whom are engaged in
executive and
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technical functions and one of whom is a clerical employee. The Company also
employs a bookkeeper on a part-time basis.
Technical Facility
The Company has an oral arrangement with an unaffiliated party pursuant
to which the Company's technical equipment is housed and maintained at this
party's facility in New York City. All equipment, connections and telephone
lines between the Company and its customers and overseas providers are located
at this facility. The Company utilizes the owner's switches to effect these
connections.
Internet Portal
The Company in February 1999 instituted a web portal. A portal is a
website which enables the user to access various other web sites without
multiple steps thereby saving the user time. The Teltran portal contains direct
links to many commerce sites, including Amazon.com the internet bookseller.
Recently, the Company provided access to brokerage firms through the portal and
anticipates receiving payment from brokerage firms utilizing this service based
on customers' business introduced to the brokerage firm through the portal. The
Company has affiliate arrangements with retailers pursuant to the Company will
receive a percentage of revenues generated by consumers accessing the site
through the Company's portal. If the Company's portal received a prescribed
number of hits to its website it will be in a position to provide advertising on
its site and receive revenues for doing so. The Company believes it will achieve
this requirement shortly. Users may also use the portal as their home page.
Additional Revenues
The Company is receiving revenues for obtaining a contract for a third
party. It receives commissions based on income derived by such third party.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Introduction
Prior to April, 1998 the Company was a development stage Company and
had no significant revenues since inception.
Statement of Operations Year Ended 1998 Compared to Year Ended 1997 (unaudited)
The Company's revenues was approximately $535,000 for 1998 while the
Company received no revenues in 1997.
The Company's operating expenses during 1998 were approximately
$707,000 compared to approximately $827,780 during the prior year. The reduced
expenses were primarily attributable to decline in salary expense in 1998
recently from a reduction in staff.
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Since the Company did not commence income producing operations until
1998, the Company does not believe that either 1997 or 1998 are any indication
of the Company's future operations. The Company anticipates that the year 1999
will be the first full year of operations and that its revenues will be derived
from businesses not conducted in 1998.
The Company believes that it will have substantial increased revenues
in 1999 as it began to derive revenues from in voice telephony operations.
Liquidity
The Company had a negative working capital of approximately $280,000 as
of December 31, 1998 compared to a negative working capital or approximately
$82,000 at December 31, 1997. The increase was primarily attributable to
increased debt financing. Also during 1998 the Company financed a portion of its
receivable through a factoring arrangement. Since December 31, 1998 the Company
received gross proceeds of $650,000 from the sale of convertible notes and
exercise of warrants. All the notes have been converted and the Company has been
able to repay and terminate its factoring arrangement.
The Company is required to purchase additional equipment to perform the
contracts for the resale of telephone time over OzEmail networks. This is the
only substantial capital expend___ of the Company. It has determined to require
its client to purchase the equipment or to provide advances for this purpose. As
long as the Company funds to purchase equipment to perform its contracts it
believes its present working capital is adequate for its operations for the next
twelve months.
Item 3. Description of Property.
The Company's executive offices are located at One Penn Plaza, New
York, New York 10119, where it leases approximately 2,400 square feet pursuant
to a lease that expires on February 28, 2003. The annual base rental for this
space is approximately $90,000.
The Company's telecommunication equipment is located and maintained at
a separate facility owned by a third party. See Item 1 - "Description of
Business - Technical Facility
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the
aggregate and percentage ownership of the Company's Common Stock as of February
28, 1999 for (i) each person known by the Company to beneficially own more than
five percent of the Company's Common Stock, (ii) each of the Company's
directors, (iii) each of the executive officers named in the Summary
Compensation Table below and (iv) all directors and executive officers as a
group.
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Beneficial Ownership
Name Number of Shares Percentage
- ---------------------- ---------------- ----------
Byron R. Lerner (1)(2) 725,000 9.1%
James E. Tubbs (1) 725,000 9.1%
Martin Miller (1) 250,000 3.1%
All executive officers
and directors as a
group (4 persons) (1) 1,779,333 22.3%
(1) Includes options exercisable within 60 days to acquire 400,000
shares in the case of Messrs. Lerner and Tubbs and 250,000 shares in the case of
Mr. Miller. The foregoing excludes option to acquire an additional $300,000
shares in the case of Messrs. Lerner and Tubbs.
(2) Includes 250,000 shares held of record by a corporation which is
wholly owned by Mr. Lerner.
- --------------------------------------------------------------------------------
The address of such person is c/o Teltran International Group, Ltd.,
One Penn Plaza, New York, New York 10119.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company are as follows:
Name Age Position
- --------------- --- ---------------------------------------------------
Byron R. Lerner 54 President, Chief Executive Officer and Director
James E. Tubbs 39 Executive Vice President, Chief Operating Officer
and Director
Peter Biagioli 39 Vice president of Sales and Marketing
Martin Miller 58 Director
Byron R. Lerner has been Chief Executive Officer and President of the
Company since June
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1997 and a director of the Company since May 1996. Mr. Lerner was Chief
Financial Officer of the Company between May 1996 and June 1997. Between 1993
and 1995, Mr. Lerner was president of International of GlobalCom, a firm he
founded which engaged in the resale of domestic and international long distance
phone time. From 1990 to 1993 Mr. Lerner was president of L&S Communications, a
reseller of domestic and international long distance telephone time.
James E. Tubbs has been Executive Vice President and a director of the
Company since May 1996. Between 1994 and 1995, Mr. Tubbs was President of
OmniCom, a reseller of UniDial. From 1984 through May 1996 he was employed as an
executive in various entities controlled by Brett Mussburger, the sports
broadcaster. Simultaneously Mr. Tubbs was employed in various capacities as an
executive in sports and entertainment matters by the networks which engaged Mr.
Mussburger.
Peter Biagioli has been Vice President of Sales and Marketing of the
Company since 1997. From February 1988 to January 1997 Mr. Biagioli was vice
president of Worldwide Commercial Development for the Worldwide Manifest
Division TNT Express. During the period November 1982 to January 1988 he was
employed by Avis Rent A Car System Inc. as Regional Sales Manager for the New
York Metropolitan market.
Martin Miller has been a director of the Company since November 1995.
Mr. Miller , for the past five years, has been a manager of corporate finance
for Millport Ltd., presently a Bahamian based investment advisor of foreign
investors.
Item 6. Executive Compensation.
The following table sets forth information concerning compensation paid
or accrued by the Company or its subsidiaries for services rendered during the
fiscal year ended December 31, 1998 to the Company's Chief Executive Officer no
executive officer whose compensation exceeded $100,000 during its fiscal year
ended December 31, 1998.
Summary Compensation Table
Name and Principal Position Year Salary
- ----------------------------------- ---- -------------------
Byron E. Lerner President and Chief 1998 $ 88,000
Executive Officer
1997 37,500
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Executive officers are
elected annually by the Board of Directors to hold office until the first
meeting of the Board following the next annual meeting of stockholders and until
their successors are chosen and qualified.
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Option Plan
The Company has adopted a 1998 Stock Option Plan (the "Option Plan")
for officers, employees and consultants of the Company and any of its
subsidiaries authorizing the grant of options to purchase 3,000,000 shares of
the Company's common stock. As of February 28, 1999 options to purchase
1,790,000 shares of common stock were outstanding and options to purchase
1,210,000 shares of common stock were available for grant.
The Employee Plan is administered by the board of directors. In
general, the Committee will select the persons to whom options will be granted
and will determine, subject to the terms of the Employee Plan, the number, the
exercise period and other provisions of such options. The options granted under
the Employee Plan will be exercisable in such installments as may be provided in
the grant.
Options granted to employees may be either incentive stock options
under the Internal Revenue Code ("ISOs") or non ISOs. The board may determine
the exercise price provided that, in the case of ISOs, such price may not be
less than 100% (110% in the case of ISOs granted to holders of 10% of the voting
power of the Company's stock) of the fair market value (as defined in the
Employment Plan) of the Company's common stock at the date of grant. The
aggregate fair market value (determined at time of option grant) of stock with
respect to which ISOs become exercisable for the first time in any year cannot
exceed $100,000.
The options are evidenced by a written agreement containing the above
terms and such other terms and conditions consistent with the Plan as the
Committee may impose. Each option, unless sooner terminated, shall expire no
later than ten (10) years (five years in the case o ISOs granted to holders of
10% of the voting power of the Company's stock) from the date of the grant, as
the Committee may determine. The Committee has the right to amend, suspend or
terminate the Employee Plan at any time, provided, however, that unless ratified
by the Company's stockholders no amendment or change in the Plan will be
effective for certain maters including increase in the total number of shares
which may be issued under the Plan or extending the term of the Employee Plan.
Options Granted in Last Fiscal Year
Number of Shares
Underlying Option Granted Exercise Price
------------------------- --------------
Byron Lerner 200,000 $.37
83,334 1.75
83,333 3.000
83,333 5.00
James Tubbs 200,000 $.37
83,334 1.75
83,333 3.000
83,333 5.00
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In addition, on January 31, 1999 the Company issued Plan Options to
purchase an additional 795,000 shares of common stock at $.59 per share. Of
these options 250,000 were issued to each of Messrs. Lerner and Tubbs and Martin
Miller, a director of the Company.
Employment Agreements
The Company has entered into an employment agreement with Byron Lerner,
president and chief executive officer of the Company. The agreement is for a
term of 37 months commencing March 1, 1999 and unless notice of non renewal is
given at the end of first thirteen months or any year thereafter, the term of
the agreement is extended for an additional year period. Mr. Lerner is to
receive a base annual salary of $150,000 until August 1999 when the salary
increases to $180,000. Starting in the second year of the agreement on April 1,
2000 the salary increases to $189,000 or $200,000 if the net income as defined
in the agreement is at least $200,000. The salary increases thereafter at the
rate of ten percent per annum. The agreement provides for a bonus pool which
shall be equal to 15% of net income as defined in the agreement of which Mr.
Lerner will receive a maximum of six (6%) of such pool. Mr. James Tubbs, a vice
president, and chief operating officer has entered into an identical agreement
with the Company.
Item 7. Certain Relationships and Related Transactions.
During and prior to 1998 an affiliate of Byron Lerner and James
Tubbs each advanced the Company $100,000 each. In 1998 all these advances were
converted into 500,000 shares of the Company's Common Stock. Mr. Lerner has
advanced approximately an additional $13,000 to the Company in 1998 and 1999.
Item 8. Description of Securities.
General
The Company is authorized to issue 50,000,000 shares of its common
stock, par value $0.001 per share (the "Common Stock"), and 5,000,000 shares of
preferred stock, par value $0.001 per share (the "Preferred Stock"). As of
December 31, 1998 7,953,137 shares of the Common Stock were outstanding. No
shares of Preferred Stock are currently outstanding.
Common Stock
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor.
In the event of liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining available for distribution to them
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after payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights. There are no redemption provisions applicable to the Common Stock. All
of the outstanding shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
"blank check" Preferred Stock with such designation, rights and preferences as
may be determined from time to time by the Company's Board of Directors.
Accordingly, the Company's Board is empowered, without stockholder approval, to
issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of Common Stock. The Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company does not currently intend to issue
any shares of Preferred Stock, there can be no assurance that the Company will
not do so.
Transfer Agent
The transfer agent for the Common Stock is North American Transfer Co.,
147 Merrick Road, Freeport, New York 11520.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
The Company's Common Stock is currently quoted on the OTC Bulletin
Board under the symbol "TLTG."
Set forth below are the high and low closing bid quotations for
Company's Common Stock for the periods indicated as reflected on the electronic
bulletin board. Such quotations reflect interdealer prices without retail
mark-up, mark-down or commissions, and may not reflect actual transactions.
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Period High Low
- ------------------ ---- -----
March 31, 1998 3.13 .4325
June 30, 1998 2.94 1.88
September 30, 1998 1.00 .75
December 31, 1998 1.19 .4325
March 31, 1997 .65 .40
June 30, 1997 .33 .22
September 30, 1997 .18 .11
December 31, 1997 .125 .125
As of December 31, 1998, there were approximately 240 recordholders of
the Company's Common Stock, although the Company believes that there are more
than five hundred beneficial owners of its Common Stock.
The Company plans to retain any future earnings for use in its business
and, accordingly, the Company does not anticipate paying dividends in the
foreseeable future. Payment of dividends is within the discretion of the
Company's Board of Directors and will depend, among other factors, upon the
Company's earnings, financial condition and capital requirements.
Item 2. Legal Proceedings.
Management of the Company is not aware of any legal proceedings, or
pending legal proceedings, to which the Company is a party or to which the
property of the Company is subject. A claim however has made by a corporation
including a claim for receivables of the Company arising from a potential resale
arrangement. The Company has denied the claim.
Item 3. Changes in and Disagreements with Accountants.
None of the events described in Item 304 of Regulation S-B has occurred
within the past twenty-four months.
Item 4. Recent Sales of Unregistered Securities.
The following sets forth information relating to all unregistered
securities of the Company sold by it since December 31, 1995. As previously
indicated, all share numbers have been adjusted retroactively to reflect a 1 for
20 reverse stock split on December 31, 1997.
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On May 1, 1996, the Company issued an aggregate of 500,000 shares of
Common Stock to the stockholders of International in exchange for all of the
outstanding capital stock of International.
In June 1996 the Company issued 158,333 shares of its common stock in
accordance with Regulation 504 of the Securities Act of 1933 for approximately
$950,000.
In February, 1998 the Company issued 500,000 to an affiliate of Bryon
Lerner and an officer and directors in satisfaction of indebtedness of $100,000.
The Company believes the issuance of such shares is exempt from the registration
requirements pursuant to Section 4(2) of the Securities Act.
In June 1998 the Company issued 6,000,000 shares of its common stock to
entities which collectively had the right to participate in the Company's future
earnings. These investors acquired the shares for investment. The Company
believes the issuance of such shares is exempt from the registration
requirements pursuant to Section 4(2) of the Securities Act.
In July and January the Company issued its convertible notes in the
aggregate principal amount of $850,000 to several foreign investors in a
transaction exempt pursuant to Rule 504. In connection with the transaction the
Company issued warrants to purchase an aggregate of 137,500 shares of its Common
Stock various persons. All of the notes have been converted and 1,926,395
shares issued. Warrants were also issued pursuant to Rule 504 to acquire 137,500
shares of the Company have been exercised.
Item 5. Indemnification of Directors and Officers.
Article Sixth of the Certificate of Incorporation of the Company
provides with respect to the indemnification of directors and officers that the
Company shall indemnify to the fullest extent permitted by Sections 102(b)(7)
and 145 of the Delaware General Corporation Law, as amended from time to time,
each person that such Sections grant the Company the power to indemnify. Article
Sixth of the Certificate of Incorporation of the Company also provides that no
director shall be liable to the corporation or any of its stockholders for
monetary damages for breach of fiduciary duty as a director, except with respect
to (1) a breach of the director's duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability under
Section 174 of the Delaware General Corporation Law or (4) a transaction from
which the director derived an improper personal benefit, it being the intention
of the foregoing provision to eliminate the liability of the corporation's
directors to the corporation or its stockholders to the fullest extent permitted
by Section 102(b)(7) of Delaware General Corporation Law, as amended from time
to time.
PART F/S
See Index to Financial Statements and Financial Statements attached hereto
15
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation
3.2 Certificate of Ownership and Merger of Spectratek Incorporation
by Taltran International Group, Ltd.
3.3 Amendment to Certificate of Incorporation
10.1 1998 Stock Option Plan
10.2 Employment Agreement between Byron Lerner and Registrant
10.3 USA Interconnectivity and Support Agreement dated October 12, 1999
between Ozemail and Registrant
10.4 USA Intellectual Property License Agreement dated October 12, 1999
between Ozemail and Registrant
10.5 Telecommunication Services Agreement dated October 15, 1998 between
Ozemail and Registrant
21.1 Subsidiary List
23 Consent of Leibman Goldberg & Drogin LLP
27 Selected Financial Data Schedule
Item 2. Description of Exhibits.
16
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: March 24, 1999
TELTRAN INTERNATIONAL GROUP, LTD.
By:
----------------------------------------
Byron R. Lerner
Chief Executive Officer, President
(Principal Executive, Financial
and Accounting Officer)
17
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
with
INDEPENDENT AUDITORS' REPORT
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
For the years ended December 31, 1998 and 1997
CONTENTS
PAGE #
Independent Auditors' Report 1
Financial Statements:
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3
Consolidated Statement of Stockholders' Deficit 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 10
<PAGE>
The Board of Directors
Teltran International Group, Ltd. and Subsidiaries
We have audited the consolidated balance sheet of Teltran International Group,
Ltd. and Subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of operations, shareholders' deficit and cash flows for
the years then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as, evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Teltran
International Group, Ltd. and Subsidiaries as of December 31, 1998 and 1997 and
the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
February 22, 1999
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ 5,389 $ 3,646
Accounts receivable 94,296 --
Deferred financing costs - net of amortization 19,797 --
----------- -----------
Total current assets 119,482 3,646
----------- -----------
Other Assets:
Goodwill 40,273 40,273
Organization expense - net of amortization 98 218
----------- -----------
Total other assets 40,371 40,491
----------- -----------
Total assets $ 159,853 $ 44,137
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Convertible debentures payable $ 180,488 $ --
Loan payable 50,000 50,000
Due to factor 65,193 --
Accounts payable, accrued expenses and taxes 104,581 35,081
Corporation taxes payable 100 488
----------- -----------
Total current liabilities 400,362 85,569
----------- -----------
Long-Term Liabilities:
Notes payable -- 250,000
Loans payable - stockholders' 1,245 10,880
----------- -----------
Total long-term liabilities 1,245 260,880
----------- -----------
Total liabilities 401,607 346,449
----------- -----------
Commitments and Contingencies
Stockholders' Deficiency:
Preferred stock, $.001 par value per share, 5,000,000
shares authorized and -0- issued and outstanding
Common stock, $.001 par value per share, 50,000,000
shares authorized and 7,697,295 and 915,637 shares
issued in 1998 and 1997 respectively 7,697 916
Additional paid in capital in excess of par value 2,002,359 1,501,928
Deficit (2,251,810) (1,805,156)
----------- -----------
Total stockholders' deficiency (241,754) (302,312)
----------- -----------
Total liabilities and stockholders' deficiency $ 159,853 $ 44,137
=========== ===========
</TABLE>
See notes to financial statements.
-2-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998 and 1997
1998 1997
--------- ---------
Revenues:
Sales $ 535,197 $ --
Cost of Sales:
Purchases 244,832 --
--------- ---------
Gross profit 290,365 --
Expenses:
Salaries 143,356 371,379
Outside services 271,850 112,032
Professional fees 49,531 21,274
Fees - other 9,384 1,003
Payroll taxes 14,878 28,386
Leasing expense 11,446 --
Travel 93,701 21,219
Insurance 28,863 33,573
Rent 48,834 36,532
Office 3,435 170,618
Miscellaneous 3,908 4,395
Telephone 6,088 27,369
Amortization expenses 21398 0
--------- ---------
Total expenses 706,672 827,780
--------- ---------
Loss from operations (416,307) (827,780)
Interest expense 29,959 --
--------- ---------
Net loss before income taxes (446,266) (827,780)
Provision for income taxes 388 464
--------- ---------
Net loss $(446,654) $(828,244)
========= =========
Net loss per share of common stock based upon
7,697,295 and 915,637 (weighted average)
shares issued respectively $ (0.06) $ (0.90)
========= =========
See notes to financial statements.
-3-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Capital
------------------------------- in Excess
Shares Amount Par Value Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance - March 1, 1996 5,145,491 $ 5,145 $ 588,550 $ (550,478)
March, 1996 Teltran Merger 10,000,000 10,000
July, 1996 issuance of
3,166,667 shares 3,166,667 3,167 946,833
Adjustment re: merger
elimination entries 31,273
Net loss for the year (457,707)
--------- ----------- ----------- -----------
Balance - January 1, 1997 18,312,158 18,312 1,535,383 (976,912)
Adjustment re: promissory note (50,851)
Reverse stock split 1:20 -
December 1, 1997 (17,396,521) (17,396) 17,396
For the year ended
December 31, 1997
Net loss for the year (828,244)
--------- ----------- ----------- -----------
Balance - December 31, 1997 915,637 916 1,501,928 (1,805,156)
Issuance of share as full
payment of outstanding debt 6,000,000 6,000 284,000 --
Issuance of shares re:
conversion of debt 281,658 281 116,931 --
Issuance of shares re: payment
of stockholder's loans 500,000 500 99,500 --
Net loss for the year -- -- -- (446,654)
--------- ----------- ----------- -----------
Balance - December 31, 1998 7,697,295 $ 7,697 $ 2,002,359 $(2,251,810)
========= =========== =========== ===========
</TABLE>
See notes to financial statements.
-4-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(446,654) $(828,244)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Amortization expense 21,398 120
Increase in accounts receivable (94,296) --
Increase in deferred financing costs (55,875) --
Cash advances from factor (net of repayments) 65,193 --
Increase in accounts payable and accrued expenses 69,112 5,613
--------- ---------
Net cash used in operating activities (441,122) (822,511)
--------- ---------
Cash Flows from Investing Activities:
Cash received from issuance of common stock -- 602,300
--------- ---------
Net cash provided by operating activities -- 602,300
--------- ---------
Cash Flows from Financing Activities:
Issuance of convertible debentures 180,488 --
Conversion of convertible debenture - stock issued 119,512 --
Decrease in notes payable (250,000) --
Decrease in loans payable - stockholders' 102,865 --
Issuance of stock for notes payable 290,000 --
Cash received as advances from investors -- 199,149
--------- ---------
Net cash provided by financing activities 442,865 199,149
--------- ---------
Net decrease in cash 1,743 (21,062)
Cash - January 1, 3,646 24,708
--------- ---------
Cash - December 31, $ 5,389 $ 3,646
========= =========
Supplemental Disclosures:
Income tax $ 625 $ 464
========= =========
Interest paid $ 29,959 $ --
========= =========
</TABLE>
See notes to financial statements.
-5-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1998
Note 1 - Operations:
Nature of Business:
Teltran International Group, Ltd. through its wholly owned Subsidiary
Teltran International, Inc. (the "Company") provides services for state
of the art telecommunications.
Effective May 1, 1996, the shareholders of Teltran International Inc.
("the Subsidiary"), a Delaware corporation, completed a stock exchange
with Spectratek Inc., a Utah corporation, whereby all the common shares
of the subsidiary, were exchanged for 10,000,000 common shares of
Spectratek, par value $.001. The 10,000,000 shares represented
approximately 67% of the then total issued and outstanding 15,145,491
shares of Spectratek Inc.
On October 6, 1997, Spectratek merged with Teltran International Group,
Ltd., a newly formed Delaware corporation with the surviving entity.
Except as otherwise indicated by the context, references to "the
Company" refer to Teltran International Group, Ltd. and the subsidiary.
Note 2 - Summary of Significant Accounting Policies:
Principles of Consolidation:
The consolidated financial statements include the accounts of the
company and its wholly-owned subsidiary. Intercompany balances and
transactions have been eliminated.
Development Stage Activities and Operations:
Prior to April 1998, the Company was a development stage activity.
Since the Company now has continuing business revenues, comparative
financial information does not include losses accumulated during the
development stage period not part of the financial statement period.
At December 31, 1998, the Company has a net operating loss carryforward
of approximately $2,252,000 after limitations based on changes in
ownership.
-6-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the year ended December 31, 1998
Note 2 - Summary of Significant Accounting Policies:
Basic loss per share was computed by dividing the Company's net loss by
the weighted average number of common shares outstanding during the
period. There is no presentation of diluted loss per share as the
effect of common stock options, warrants and convertible debt amounts
are antidilutive. The weighted average number of common shares used to
calculate loss per common share during 1998 and 1997 was 7,697,295 and
915,637 respectively.
The Company adopted Financial Accounting Standards Board (FASB)
Statement No. 128, "Earnings per Share". The Statement established
standards for computing and presenting earnings per share (EPS). It
replaced the presentation of primary EPS with a presentation of basic
EPS and also requires dual presentation of basic and diluted EPS on the
fact of the income statement. The Statement was retroactively applied
to the 1997 loss per share but did not have any effect.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those amounts.
Fair Value of Financial Instruments:
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure of the fair value information, whether or not
recognized in the balance sheet, where it is practicable to estimate
that value. The carrying value of cash, cash equivalents, accounts
receivable and notes payable approximates fair value.
Impairment of Long-Lived Assets:
The Company has not completed it's evaluation of the adoption of SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." However, management believes any
such effect will not be material.
Major Customer:
During the year ended December 31, 1998, approximately 70% of the
company's revenue was from one customer. Also, 65% of accounts
receivable are from this customer who also was factored.
-7-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the year ended December 31, 1998
Note 3 - Notes Receivable:
In July 1996, the Company issued 3,166,667 shares of common stock to
investors for the sum of $950,000. During the year ended December 31,
1996, the Company received $347,700 and the balance of $602,300 was
received during the year ended December 31, 1997.
Note 4 - Due to Factor:
In June 1998, the Company entered into a factoring agreement; financing
the accounts receivable of their major customers. At December 31, 1998,
the outstanding balance due to the factor, represents approximately 70%
of the customers' open balance. Advances from the factor totaled
$509,036 (before customer repayments) from June, 1998 to December, 1998
and were used to pay operating expenses as well as vendor purchases. In
February 1999, the Company terminated the factoring agreement and paid
the outstanding balance in full.
Note 5 - Notes Payable:
In August 1998, the Company issued $300,000 of convertible debentures
due August 14, 1999 to non-related parties. The debentures accrued
interest at 10%. The debentures are convertible into the Company's
stock at $1.25 or 70% of the lowest closing bid price of the common
stock, 30 trading days preceding the conversion date. During the period
August through December 1998, $119,512 of debentures were converted to
269,158 shares of common stock. In connection with the transaction, the
Company issued 30,000 warrants to purchase ______ shares of common
stock at $1.25 per share. Financing costs of this transaction were
deferred, and are being amortized to the convertible debentures
maturity date.
In November 1997, the Company entered into a joint venture agreement
with a group of unrelated foreign investors which provided for their
participation of future profits of the Company in return for
cancellation of indebtedness. In June 1998, the Company issued on
aggregate of 6,000,000 shares to these investors in consideration of
the termination of the joint venture.
Note 6 - Stockholders' Deficit:
During the period August 1998 to December 31, 1998, the Company issued
269,158 shares of its common stock upon the conversion of $119,512 of
the debentures referred to in Note 5.
The Company also issued 500,000 shares of its common stock to related
parties of an officer and an officer as repayment of $100,000 advanced
to the Company during the year.
-8-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the year ended December 31, 1998
Note 6 - Stockholders' Deficit (Continued):
Upon completion of the reincorporation on October 6, 1997, the
Company's capitalization consisted of 50,000,000 shares of common stock
and 5,000,000 shares of preferred stock. On December 1, 1997, the
shareholders approved a reverse one for twenty common stock split.
Note 7 - Commitments and Contingencies:
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles which
contemplates continuation of the Company as a going concern. The
Company was a development stage company and had no significant revenues
and limited financing during the first three months of 1998.
Additionally, the Company, as shown in the accompanying consolidated
financial statements, has an accumulated deficit of $2,251,810 December
31, 1998 and incurred a net loss of $446,654 during the year ended
December 31, 1998. Subsequent to June 30, 1998, the Company is no
longer a development stage company since revenues are continuing.
The Company rents its facility under a lease agreement through August
31, 2003.
Future minimum lease payments under these agreements for the years
ended December are as follows:
1999 $ 90,500
2000 90,500
2001 90,500
2002 98,644
2003 98,644
--------
$468,788
Rent expense for the years ended December 31, 1998 and 1997 was $48,834
and $36,532, respectively.
-9-
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the year ended December 31, 1998
Note 8 - Stock Compensation Plan:
During the year December 31, 1998, the company granted 1,180,000 stock
options to certain officers/directors, employees and non-employees that
may be exercised at prices ranging from 37.5 to $5.00 per share.
Subsequent to December 31, 1998, the Company pursuant to the plan,
granted 795,000 additional stock options to certain employees and
non-employees that may be exercised at a price of .59 per share. These
options vested immediately upon the date of issuance.
The following table summarizes certain information relative to stock
options:
Weighted Average
Incentive Stock Options Shares Exercise Price
----------------------- ------ ----------------
Granted 1,180,000 $1.69
Exercised 0 --
---------
Outstanding-December 31, 1997 0 1.69
Expired/cancelled 0 1.69
Granted 0 --
----------
Outstanding-December 31, 1998 1,180,000
==========
Exercisable-December 31, 1998 497,500
==========
Note 9 - Subsequent Event:
In January 1999, the Company issued $550,000 principal amount of
convertible debentures due to non-related parties. The debentures
accrue interest at 10%, and are convertible into the Company's common
stock at prices related to market. Subsequent to the issuance of the
debentures, all the debentures were converted into shares.
-10-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation
3.2 Certificate of Ownership and Merger of Spectratek Incorporation
by Taltran International Group, Ltd.
3.3 Amendment to Certificate of Incorporation
10.1 1998 Stock Option Plan
10.2 Employment Agreement between Byron Lerner and Registrant
10.3 USA Interconnectivity and Support Agreement dated October 12, 1999
between Ozemail and Registrant
10.4 USA Intellectual Property License Agreement dated October 12, 1999
between Ozemail and Registrant
10.5 Telecommunication Services Agreement dated October 15, 1998 between
Ozemail and Registrant
21.1 Subsidiary List
23 Consent of Leibman Goldberg & Drogin LLP
27 Selected Financial Data Schedule
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/19/1997
971314828 - 2798687
CERTIFICATE OF INCORPORATION
OF
TELTRAN INTERNATIONAL GROUP, LTD.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Delaware, does hereby set forth
as follows:
FIRST: The name of the corporation is Teltran International Group, Ltd.
SECOND: The address of the initial registered and principal office of
the Corporation in this state is c/o United Corporate Services, Inc., 15 East
North Street, in the City of Dover, County of Kent, State of Delaware 19901 and
the name of the registered agent at said address is United Corporate Services,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH: (a) The corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
----- ---------------- ---------
Common Stock 50,000,000 $.001
Preferred Stock 5,000,000 $.001
(b) The Board of Directors is hereby empowered to authorize by
resolution or resolutions from time to time the issuance of one or more classes
or series of Preferred Stock and to fix the voting powers, full or limited or no
voting powers, and such designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any, with respect to each such class or
series of Preferred Stock (including, without limitation, liquidation
preferences, dividend rates, conversion rights and redemption provisions), and
the number of shares constituting each such class or series, and to increase or
decrease the number of shares of any such class or series to the extent
permitted by the Delaware General Corporation Law.
FIFTH: The name and address of the incorporator are as follows: Joseph
Schmitt, Parker Duryee Rosoff & Haft, 529 Fifth Avenue, 8th Floor, New York, New
York 10017.
<PAGE>
SIXTH: a) The Corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation law, as amended, from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
b) No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time, each person that such Sections grant the
cororation the power to indemnify.
c) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph d)
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Paragraph SIXTH
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition, provided, however, that if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and
<PAGE>
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Paragraph SIXTH or otherwise. The Corporation may, by
action of its Board of Directors, provided indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification or directors and officers.
d) If a claim under sub-paragraph (c) of this Paragraph SIXTH is not paid in
full by the Corporation within thirty (30) days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
e) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Paragraph SIXTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
f) The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
3
<PAGE>
g) The Corporation's obligation, if any, to indemnify any
person who was or is serving as a director, officer, employee, or agent of any
direct or indirect subsidiary of the Corporation or, at the request of the
Corporation, of any other corporation or of a partnership, joint venture, trust,
or other enteprise shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust
or other enteprise.
h) Any repeal or modification of the foregoing provisions of
this Paragraph SIXTH shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
i) Each person who serves as a director of the Corporation
while this Paragraph SIXTH is in effect shall be deemed to be doing so in
reliance on the provisions of this Paragraph SIXTH, and neither the amendment or
repeal of this Paragraph SIXTH, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Paragraph SIXTH, shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for, arising out of, based upon, or in connection with any acts
or omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision. The provisions of this Paragraph SIXTH
are cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, by-law, agreement, vote or
stockholders or disinterested directors, or otherwise.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
4
<PAGE>
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
NINTH: The Board of Directors is authorized to adopt, amend, or
repeal the by-laws of the Corporation except as and to the extent provided in
the by-laws.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this 7th day of August, 1997.
/s/ Joseph H. Schmitt
----------------------------
Joseph Schmitt, Incorporator
5
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/06/1997
971336316-2798687
CERTIFICATE OF OWNERSHIP AND MERGER
OF
SPECTRATEK, INCORPORATED
BY
TELTRAN INTERNATIONAL GROUP, LTD.
Pursuant to Section 253 of the
General Corporation Law of the State of Delaware
Spectratek, Incorporated, a corporation organized and existing under
the laws of the State of Utah (the "Corporation")
DOES HEREBY CERTIFY:
FIRST: That it was organized pursuant to the provisions of the Revised
Business Corporation Act of the State of Utah, on the 5th day of July,
1983.
SECOND: That it owns all of the outstanding shares of the capital
stock of Teltran International Group, Ltd. ("Teltran"), a corporation
organized pursuant to the provisions of the General Corporation Law of
the State of Delaware, on the 19th day of September, 1997.
THIRD: That its Board of Directors at a meeting held on the 6th day of
August 1997, determined to merge the Corporation with Teltran pursuant to
a certain Agreement and Plan of Merger (the "Merger Agreement") and did
adopt the following resolutions:
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name
and on behalf of the Corporation, to form a wholly-owned
subsidiary of the Corporation, which subsidiary shall be
incorporated in the state of Delaware under the name of
Teltran International Group, Ltd. (the "Subsidiary").
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name
and on behalf of the Corporation, to enter into the Merger
Agreement, pursuant to which the Corporation shall be merged
with and into the Subsidiary and the Subsidiary shall be the
surviving corporation;
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name
<PAGE>
and on behalf of the Corporation, to submit the Merger
Agreement to the Corporation's stockholders for approval
in accordance with the Utah Revised Business Corporation
Act.
RESOLVED, that the officers of the Corporation be, and each
hereby is authorized, empowered and directed, in the name
and on behalf of the Corporation as the sole stockholder of
the Subisidiary, to approve the Merger Agreement in
accordance with the Delaware General Corporation Law;
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name
and on behalf of the Corporation, to file with the State of
Delaware and the State of Utah all necessary documents to
reflect the transactions contemplated by the Merger
Agreement; and
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed to take all
such action and to do such things as may be necessary or
advisable or convenient and proper to effectuate the
foregoing resolutions and the intent and purposes thereof.
FOURTH: That the merger has been adopted, approved, certified, executed
and acknowledged by the Board of Directors and the shareholders of the
Corporation, in accordance with the laws of the State of Utah.
IN WITNESS WHEREOF, this Certificate of Ownership and Merger is hereby
executed on this 6th day of October, 1997.
SPECTRATEK, INCORPORATED
By: /s/ Byron Lerner
------------------
Byron Lerner
Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TELTRAN INTERNATIONAL GROUP, LTD.
TELTRAN INTERNATIONAL GROUP, LTD., a Delaware corporation (the
"Corporation"), hereby certifies as follows:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated October 16, 1997 in lieu of a meeting of such Board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of the Corporation, and declaring that such
proposed amendment be submitted for consideration by the stockholders of the
Corporation entitled to vote in respect thereof. The resolution setting forth
the proposed amendment is as follows:
RESOLVED, that ARTICLE FOURTH of the Certificate of Incorporation of
this Corporation be amended to add the following provision to said
Article:
"c) At the time and date this Certificate of Amendment to
the Certificate of Incorporation of the Corporation is
filed with the Secretary of State of the State of Delaware,
all outstanding shares of Common Stock held by each holder
of record on such time and date shall be automatically
combined at the rate of one-for-20 without any further
action on the part of the holders thereof or this
Corporation. No fractional shares will be issued. All
fractional shares for one-half share or more shall be
increased to the next higher whole number of shares and all
fractional shares of less than one-half share shall be
decreased to the next lower whole number of shares,
respectively."
<PAGE>
SECOND: That the amendments effected herein were authorized by the
holders of at least a majority of all of the outstanding shares of the
Corporation entitled to vote thereon, in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Teltran International Group, Ltd. has caused this
Certificate to be signed by Byron Lerner, its President, and attested to by
James Tubbs, its Secretary, this 24th day of November, 1997.
TELTRAN INTERNATIONAL GROUP, LTD.
By: /s/ Byron Lerner
--------------------------
Byron Lerner
President
ATTEST:
/s/ James Tubbs
- -----------------------------
James Tubbs
Secretary
2
<PAGE>
TELTRAN INTERNATIONAL GROUP LTD.
1998 Stock Option Plan
1. Purpose of the Plan. The Teltran International Group LTD 1998 Stock
Option Plan (the "Plan") is intended to advance the interests of Teltran
International Group LTD, a Delaware corporation (the "Company"), by inducing
persons of ability and potential to join and remain with the Company, by
encouraging and enabling employees to acquire proprietary interests in the
Company, and by providing the participating persons with an additional incentive
to promote the success of the Company. This is accomplished by providing for the
granting of "Options" to Eligible Persons. Such may either be (i) options
intended to meet the requirements of Section 422 of the Internal Revenue Code of
1986 (the "Code") ("Incentive Stock Options") and (ii) "Nonstatutory Stock
Options" which are options which do not necessarily meet the requirements of
Section 422.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company or by a committee consisting of at least two persons
chosen by the Board of Directors. Unless otherwise indicated by the context, the
term "Board of Directors" shall refer to the board of directors or such
committee. Except as herein specifically provided, the interpretation and
construction by the administration of any provision of the Plan or of any Option
granted under it shall be final and conclusive. The receipt of Options by
Directors, or any members of the Committee, shall not preclude their vote on any
matters in connection with the administration or interpretation of the Plan,
except as otherwise provided by law.
3. Shares Subject to the Plan. The capital stock subject to grant
under the Plan shall be shares of the Company's common stock, $.001 par value
(the "Common Stock"), whether authorized but unissued or held in the Company's
treasury or shares purchased from stockholders expressly for use under the Plan.
The maximum number of shares of Common Stock which may be issued pursuant to
Options granted under the Plan shall not exceed [3,000,000] shares, subject to
adjustment in accordance with the provisions of Section 12 hereof. The Company
shall at all times while the Plan is in force reserve such number of shares of
Common Stock as will be sufficient to satisfy the requirements of all
outstanding Options granted under the Plan. In the event any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject thereto shall again be available for
Options under the Plan.
4. Certain Definitions: As used herein the following terms shall have
the definitions set forth below:
a. "Eligible Participants". Any person providing service to or
on behalf of the Company including employees, directors, consultants or
independent contractors of the Company or any subsidiary or subsidiaries of the
Company, or any entity which the Company has a substantial interest or any other
entity in which the Board of Directors determines that the Company has a
substantial beneficial interest to any person providing services to a third
party at the request of the Board of Directors.
b. "Eligible Services" shall mean any services by a recipient
of an Option (an "Optionee") to or on behalf of the Company or a subsidiary of
the Company including services as an employee, director, consultant or
independent contractor of or for (i) the Company (ii) any subsidiary of the
Company or (iii) any entity which the Company has an interest as hereinafter
defined.
c. An "entity in which the Company has an interest" shall include
any entity in which (i) Optionee is providing services to or for at the request
of the Company or (ii) the Company or subsidiary of the
<PAGE>
Company has, in the opinion of the Board of Directors, a substantial interest in
the income or assets of such entity or in which the Company otherwise has as an
interest.
5. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Board of Directors and shall be evidenced by a Stock Option
Agreement which shall be executed by the Company and by the person to whom such
Option is granted. The Stock Option Agreement shall specify the number of shares
of Common Stock as to which any Option is granted, the period during which the
Option is exercisable and the option price per share thereof.
6. Options. In addition to any other requirement herein each Option
shall meet the following requirements:
a. The Option must be granted prior to December 8, 2008.
b. The option price of the shares subject to any Option shall
not be less than the fair market value of the Common Stock at the time
such Option is granted; provided, however, if an Incentive Stock Option
is granted to an individual who owns, at the time the Incentive Stock
Option is granted, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of a subsidiary
corporation of the Company, the option price of the shares subject to
the Incentive Stock Option shall be at least one hundred ten percent
(110%) of the fair market value of the Common Stock at the time the
Incentive Stock Option is granted.
c. No Option granted under the Plan shall be exercisable after
the expiration of ten (10) years from the date of its grant. However,
if an Incentive Stock Option is granted to an individual who owns, at
the time the Incentive Stock Option is granted, more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of a subsidiary corporation of the Company, such Incentive
Stock Option shall not be exercisable after the expiration of five (5)
years from the date of its grant. Every Incentive Stock Option granted
under the Plan shall be subject to earlier termination as expressly
provided in Sections 10 and 15(c) hereof.
d. For purposes of determining stock ownership under this
Section 6, the attribution rules of Section 425(d) of the Code shall
apply.
e. No Incentive Stock Option shall be granted to individuals
other than key employees of the Company or of a subsidiary corporation
of the Company.
7. Market Value. For purposes of the Plan, fair market value shall be
determined by the Board of Directors or the Committee and, unless another
reasonable method for determining fair market value is specified by the
Committee, the closing sale price of a share of Common Stock as reported for the
trading date next preceding the date in question.
8. Rights of Option Holders. The holder of any Option granted under
the Plan shall have rights of a stockholder with respect to the shares covered
by his Option until such shares shall be issued to him upon the exercise of his
Option.
9. Transferability. Except as otherwise provided by the Board of
Directors, no Option granted under the Plan shall be transferable by the
individual to whom it was granted otherwise than by will or the laws of descent
and distribution, and, during the lifetime of such individual, shall not be
exercisable by any other person.
2
<PAGE>
10. Termination of Eligible Services or Death.
a. (i) Except as otherwise provided herein, if an Optionee
ceases to provide Eligible Services any Options hereunder
shall terminate forthwith. If an Option terminates because
Optionee ceases to provide Eligible Services as a result of
the Optionee's involuntary termination this Option may
nevertheless be exercised at any time within three months
after such termination. For purposes of this Plan, termination
as a result of retirement pursuant to a plan adopted by the
Company or on the normal retirement date prescribed from time
to time by the Company shall be deemed to be an involuntary
termination of such individual's Eligible Service.
(ii) An Option need not terminate in the event an
Optionee ceases to provide Eligible Services to an entity
which the Company has an interest as defined herein because
the Company ceases to have an interest in such an entity for
any reason. In such event, the Option may be exercised by
Optionee or Optionee's estate as determined in the Stock
Option Agreement.
b. If the holder of an Option under the Plan dies (i) while
providing Eligible Services, or (ii) within three months after the Optionee
ceases to provide Eligible Services as a result of an involuntary termination
then such Option may, subject to the provisions of subparagraph 10(d) of this
Section 10, hereof be exercised by the estate of an Optionee within one year
after death.
c. If the holder of an Option under the Plan ceased providing
Eligible Services because of permanent and total disability while providing
Eligible Services, then such Option may, subject to the provisions of
subparagraph (d) of this Section 10, be exercised at any time within one year
after such termination of Eligible Services.
d. Except as otherwise provided herein an Option may be exercised
pursuant to this Plan only to the extent that an Optionee was entitled to
otherwise exercise the Option at the time of a termination of Eligible Services,
or death, and in any event may not be exercised after the Termination Date.
e. For purposes of this Plan, any employment relationship of an
employee of the Company or of a subsidiary corporation of the Company or
other entity will be treated as continuing intact while he is on military or
sick leave or other bona fide leave or absence (such as temporary employment by
the Government) if such leave does not exceed ninety days, if longer, so long as
his right to re-employment is guaranteed either by statute or by contract.
11. Exercise of Options.
a. Unless otherwise provided in the Stock Option Agreement,
any Option granted under the Plan shall be exercisable in whole at any time, or
in part from time to time, prior to expiration. The Board of Directors, in its
absolute discretion, may provide in any Stock Option Agreement that the exercise
of any Option granted under the Plan shall be subject (i) to such condition or
conditions as it may impose, including, but not limited to, a condition that the
holder thereof provide Eligible Services for such period or periods of time from
the date of grant of the Option, as the Board of Directors or the Committee, in
its absolute discretion, shall determine; and (ii) to such limitations as it may
impose, including, but not limited to, a limitation that the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any employee during any calendar year
(under all plans of the Company and its parent and subsidiary corporations)
shall not exceed One Hundred Thousand Dollars ($100,000).
b. An Option granted under the Plan shall be exercised by the
delivery by the holder thereof to the Company at its principal office (attention
of the Secretary) of written notice of the number of shares with respect to
which the Option is being exercised. Such notice shall be accompanied by payment
of the full option price of such shares, and payment of such option price shall
be made by the holder's delivery of his check payable to the order of the
3
<PAGE>
Company; provided, however, that notwithstanding the foregoing provisions of
this Section 11 or any other terms, provisions or conditions of the Plan, upon
approval by the full Board of Directors, shares acquired pursuant to the
exercise of any Option may be paid for in full at the time of exercise by (i)
the surrender of shares of Common Stock of the Company held by or for the
account of the Optionee or subject to a Stock Option Agreement at the time of
exercise to the extent permitted by subsection (c)(5) of Section 422 of the Code
with respect to an Incentive Stock Option and, with respect to any person who is
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934 (the "Act"), to the extent permitted by Section 16(b) of
that Act and the Rules of the Securities and Exchange Commission, without
liability to the Company; (ii) subject to the approval of the full Board of
Directors, the issuance of a promissory note in compliance with law for a
portion of the purchase price; or (iii) such other methods approved by the Board
of Directors, in compliance with law and provided that such methods do not
disqualify Incentive Stock Options from being treated as such and comply with
the provisions of Section 16(b) of the Act . In the case of (i) above, the fair
market value of the surrendered shares shall be determined by the Board of
Directors as of the date of exercise as provided herein.
12. Adjustment Upon Change in Capitalization.
a. In the event that the outstanding Common Stock is hereafter
changed by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, stock dividends or the
like, an appropriate adjustment shall be made by the Board of Directors in the
aggregate number of shares available under the Plan and in the number of shares
and option price per share subject to outstanding Options. Any adjustment in the
number of shares shall apply proportionately to only the unexercised portion of
the Option granted hereunder. If fractions of a share would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
shares.
b. If the Company shall be reorganized, consolidated or merged with
another corporation, or if all or substantially all of the assets of the Company
shall be sold or exchanged, the holder of an Option shall be entitled to receive
upon the exercise of such Option (the timing of which, as set forth in Section
11, is in the discretion of the Board of Directors) the same number and kind of
shares of stock or the same amount of property, cash or securities as the holder
would have been entitled to receive upon the happening of any such corporate
event as if the holder had been, immediately prior to such event, the holder of
the number of shares covered by such Option; provided, however, that in such
event the Board of Directors shall have the discretionary power to take any
action necessary or appropriate to prevent any Incentive Stock Option granted
hereunder from being disqualified as an "incentive stock option" under the then
existing provisions of the Code or any law amendatory thereof or supplemental
thereto.
13. Further Conditions of Exercise.
a. Unless prior to the exercise of an Option the shares issuable upon
such exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, the notice of exercise shall
be accompanied by a representation or agreement of the individual exercising the
Option to the Company to the effect that such shares are being acquired for
investment and not with a view to the resale or distribution thereof or such
other documentation as may be required by the Company unless in the opinion of
counsel to the Company such representation, agreement or documentation is not
necessary to comply with such Act.
b. The Company shall not be obligated to deliver any Common Stock
until it has been listed on each securities exchange on which the Common Stock
may then be listed or until there has been qualification under or
4
<PAGE>
compliance with such state or federal laws, rules or regulations as the Company
may deem applicable. The Company shall use reasonable efforts to obtain such
listing, qualifications and compliance.
14. Effectiveness of the Plan. The Plan was originally adopted by
the Board of Directors on December 8, 1998. The Plan shall be subject to
approval by the affirmative vote of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purposes, or by written consent,
prior to December 8, 1999, which is within one year of adoption of the Plan by
the Board of Directors. In the event such stockholder approval is withheld or
otherwise not received on or before the latter date, the Plan and all Options
which may have been granted thereunder shall become null and void.
15. Termination, Modification and Amendment.
a. The Plan (but not Options previously granted under the Plan) shall
terminate on December 15, 1998, which is within ten years of the date of its
adoption by the Board of Directors, or sooner as hereinafter provided, and no
Option shall be granted after the termination of the Plan.
b. The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose.
c. The Board of Directors may at any time, on or before the termination
date referred to in Section 15(a) hereof, terminate the Plan, or from time to
time make such modifications or amendments to the Plan as it may deem advisable;
provided, however, that the Board of Directors shall not, without approval by
the affirmative vote of the holders of a majority of the outstanding wholly
owned shares of the Company present in person or by proxy increase (except as
provided by Section 12 hereof) the maximum number of shares as to which
Incentive Stock Options may be granted, or change the designation of the
employees or class of employees eligible to receive Incentive Stock Options.
d. No termination, modification or amendment of the Plan may, without
the consent of the individual to whom an Option shall have been previously
granted, adversely affect the rights conferred by such Option.
16. Not a Contract of Employment. Nothing contained in the Plan or in
any Stock Option Agreement executed pursuant hereto shall be deemed to confer
upon any individual to whom an Option is or may be granted hereunder any right
to remain in the employ or service of the Company or a subsidiary corporation of
the Company.
17. Indemnification of Board of Directors or Committee. In addition to
such other rights of indemnification as they may have, the members of the Board
of Directors or the Committee, as the case may be, shall be indemnified by the
Company to the fullest extent permitted under applicable law against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted thereunder and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board of Directors or the Committee, as the case may be, shall notify the
Company in writing, giving the Company an opportunity at its own cost to defend
the same before such member or members undertake to defend the same on their own
behalf.
5
<PAGE>
18. Definitions. For purposes of the Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the same meanings as set
forth in Sections 425(e) and 425(f) of the Code, respectively, and the masculine
shall include the feminine and the neuter as the context requires.
19. Governing Law. The Plan shall be governed by, and all questions
arising hereunder shall be determined in accordance with, the laws of the State
of New York.
6
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as of March 1,
1999 by and between Teltran International Group, Ltd., a Delaware corporation
(the "Company"), and Byron R. Lerner (the "Executive").
The Executive is being employed by the Company as an executive officer.
The parties desire to enter into an employment agreement and to set forth herein
the terms and conditions of the Executive's continued employment by the Company
and its subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and the mutual benefits to be derived here from, the Company
and the Executive agree as follows:
1. Employment.
(a). Duties. The Company shall employ the Executive, on the
terms set forth in this Agreement, as its Chairman of the Board of Directors
President and Chief Executive Officer. The Executive accepts such employment
with the Company and shall perform and fulfill such duties as are assigned to
him hereunder consistent with his status as a senior executive of the Company,
devoting his best efforts and substantial portion of his professional time and
attention to the performance and fulfillment of his duties and to the
advancement of the interests of the Company, subject only to the direction,
approval, control and directives of the Company's Board of Directors (the
"Board"). Nothing contained herein shall be construed, however, to prevent the
Executive from trading in or managing, for his own account and benefit, in
stocks, bonds, securities, real estate, commodities or other forms of
investments (subject to law and Company policy with respect to trading in
Company securities). Without any additional consideration, Executive shall also
serve as an officer of any or all subsidiaries of the Company. Unless otherwise
indicated by the context, the term "Company" shall include the Company and all
its subsidiaries.
Notwithstanding any provisions to the contrary Executive is retaining
his ownership in and receive passive revenues from any telecommunication he may
have an interest in prior to the date hereof and the time devoted thereto does
not interfere with his duties hereunder.
(b). Place of Performance. In connection with his employment
by the Company, the Executive shall be based at the Company's principal place of
business in the New York, New York, except when required for travel on Company
business.
(c). Nomination as Director. The Company agrees that it will
nominate the Executive as a member of the Board of Directors each year during
the term of this Agreement and will use its best efforts to ensure that the
Executive is elected to the Board of Directors.
<PAGE>
2. Term. The Executive's employment under this Agreement shall
commence as of March 1, 1999 (the "Commencement Date") and shall, unless sooner
terminated in accordance with the provisions hereof, continue uninterrupted
until April 30, 2002 ("Term"). As used herein "Year" shall refer to a twelve
month period ending March 31 except the first year shall be a thirteen month
period beginning March 1, 1999 and ending April 30, 2000. Unless notice of
non-renewal is given by either party at least sixty (60) days prior to the end
of the Term or prior to the end of any Year thereafter, the Term of this
Agreement shall be automatically extended for an additional period of one year.
3. Compensation.
(a). Base Salary. Executive shall receive a "Base Salary"
during the Term. For the period March 1, 1999 through July 31, 1999 the Base
Salary shall be at the rate of $150,000 per annum which shall increase to the
rate of $180,000 per annum commencing August 1, 1999. On April 1, 2000 the Base
Salary shall increase to $189,000 per annum for the Year commencing on such date
provided that if Net Income, as hereinafter defined, for the year ended March
31, 2000 is equal to or greater than $200,000 then the Base Salary shall be
increased to $200,000. Every Year after March 31, 2001 the Base Salary shall
increase by an amount equal to ten (10%) percent of the prior year's base
Salary.
(b). Net Income. As used herein the term "Net Income" shall
mean pre-tax income of the Company determined in accordance with generally
accepted accounting principles consistently applied but excluding therefrom (i)
any reduction reflecting amortization of good-will and (ii) any deduction for
any bonus awarded under Paragraph 1(c).
(c). Bonus Pool Participation. Commencing with the first year
beginning April 1, 1999 and ending March 31, 2000 Executive shall be entitled to
participate in bonus pool to be awarded for each year of the Term. The bonus
pool shall equal fifteen (15%) percent of Net Income for such year and shall be
paid on the earlier of the filing of the Company's quarterly report on Form 10-Q
for the quarter ending March 31, 2000 or fifty days after the end of such year.
At the time of payment Execution shall receive a written statement of the
Company's public accountant's calculating the amount of the bonus pool. The
allocation of such bonus pool shall be determined by Byron Lerner and James
Tubbs while they are employed provided each of Messrs. Lerner and Tubbs shall
receive six (6%) percent of such bonus pool. In addition, each of Messrs. Lerner
and Tubbs shall participate in such bonus pool to such extent for any year in
which they were employed hereunder except if their employment is terminated by
their voluntary termination or termination for cause. The obligation to pay a
bonus hereunder shall survive termination or expiration of the Agreement.
2
<PAGE>
4. Insurance
(a). Health Insurance and Other Benefits. During the Term, the
Executive shall be entitled to all employee benefits generally offered by the
Company to its executive officers and key management employees, including,
without limitation, all pension, profit sharing, retirement, stock option,
salary continuation, deferred compensation, disability insurance,
hospitalization insurance, major medical insurance, medical reimbursement,
survivor income, life insurance or any other benefit plan or arrangement
established and maintained by the Company, subject to the rules and regulations
then in effect regarding participation therein.
(b). Keyman Insurance. The Company may obtain keyman life
insurance upon the life of the Executive. In amounts to be determined from time
to time by Executive and the Company.
5. Expenses.
(a). Reimbursement of Expenses. The Executive shall be
reimbursed for all items of travel, entertainment and miscellaneous expenses
that the Executive reasonably incurs in connection with the performance of his
duties hereunder, provided the Executive submits to the Company such statements
and other evidence supporting said expenses as the Company may reasonably
require.
(b). Automobile Allowance. The Executive shall be reimbursed
for the expenses of owning or leasing an automobile suitable for his position
and consistent with Company practices, including the expenses of operating,
insuring and parking such automobile, provided the Executive submits to the
Company such statements and other evidence supporting such expenses as the
Company may require.
6. Vacation. The Executive shall be entitled to not less than
four (4) weeks of vacation in any calendar year. Any unused vacation time in a
year shall be accumulated and increase the amount of vacation time in subsequent
years.
7. Termination of Employment.
(a). Death or Total Disability. In the event of the death of
the Executive during the Term, this Agreement shall terminate as of the date of
the Executive's death. In the event of the Total Disability (as that term is
defined below) of the Executive for sixty (60) days in the aggregate during any
consecutive nine (9) month period during the Term, the Company shall have the
right to terminate this Agreement by giving the Executive thirty (30) days'
prior written notice thereof, and upon the expiration of such thirty (30) day
period, the Executive's employment under this Agreement shall terminate. If the
Executive shall resume his duties within thirty (30) days after receipt of such
a notice of termination and continue to perform such duties for four (4)
consecutive weeks thereafter,
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this Agreement shall continue in full force and effect, without any reduction in
Base Salary and other benefits, and the notice of termination shall be
considered null and void and of no effect. Upon termination of this Agreement
under this Paragraph 7(a), the Company shall have no further obligations or
liabilities under this Agreement, except to pay to the Executive's estate or the
Executive, as the case may be, (i) the portion, if any, that remains unpaid of
the Base Salary for the Year in which termination occurred, but in no event less
than six (6) months' Base Salary; and (ii) the amount of any expenses
reimbursable in accordance with Paragraph 4 above, and any automobile allowance
due under Paragraph 5 above; and (iii) any amounts due under any Company
benefit, welfare or pension plan. Except as otherwise provided by their terms,
any stock options not vested at the time of the termination of this Agreement
under this Paragraph 7(a) shall immediately become fully vested.
The term "Total Disability," as used herein, shall
mean a mental or physical condition which in the reasonable opinion of an
independent medical doctor selected by the Company renders the Executive unable
or incompetent to carry out the material duties and responsibilities of the
Executive under this Agreement at the time the disabling condition was incurred.
In the event the Executive disagrees with such opinion, the Executive may, at
his sole expense, select an independent medical doctor and, in the event that
doctor disagrees with the opinion of the doctor selected by the Company, they
shall select a third independent medical doctor, and the three doctors shall, by
majority vote, determine whether the employee has suffered Total Disability. The
expense of the third doctor shall be shared equally by the Company and the
Executive. Notwithstanding the foregoing, if the Executive is covered under any
policy of disability insurance under Paragraph 3(c) above, under no
circumstances shall the definition of Total Disability be different from the
definition of that term in such policy.
(b). Discharge for Cause. The Company may discharge the
Executive for "Cause" upon notice and thereby immediately terminate his
employment under this Agreement. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment if the Executive, in
the reasonable judgment of the Company, (i) materially breaches any of his
agreements, duties or obligations under this Agreement and has not cured such
breach or commenced in good faith to correct such breach within thirty (30) days
after notice; (ii) embezzles or converts to his own use any funds of the Company
or any client or customer of the Company; (iii) converts to his own use or
unreasonably destroys, intentionally, any property of the Company, without the
Company's consent; (iv) is convicted of a crime; (v) is adjudicated an
incompetent; or (vi) is habitually intoxicated or is diagnosed by an independent
medical doctor to be addicted to a controlled substance (any disagreement of
Executive shall be resolved using the procedure provided in Paragraph 7(a)
above).
(c). Termination by Executive. Executive may terminate this
Agreement for the failure by the Company to comply with the material provisions
of this Agreement which failure is not cured within thirty (30) days after
notice ("Good Reason").
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(d). No Mitigation. The Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise, not shall the amount of any payment
provided for in this Agreement be reduced by any compensation earned by the
Executive as the result of his employment by another employer.
8. Restrictive Covenant.
(a). Competition. As used herein "Company Business" shall mean
any business which the Company is actively pursuing or actively considering
while the executive was employed by the Company provided that upon termination
or execution of this agreement the term "Company Business" shall refer to any
arrangement or contract or relation of the Company or any subsidiary existing or
actually pursued at the time of termination or expiration of the Agreement. The
Executive undertakes and agrees that during the term of this Agreement and for a
period of two years after the date of termination or expiration of this
Agreement he will not compete, directly or indirectly, with respect to a Company
Business or participate as a director, officer, employee, agent, consultant,
representative or otherwise, or as a stockholder, partner or joint venturer, or
have any direct or indirect financial interest, including, without limitation,
the interest of a creditor, in any business competing with respect to a Company
Business. Executive acknowledges that such prospects represent a corporate
opportunity or are the property of the Company and Executive should have no
rights with respect to such properties on projects. Executive further undertakes
and agrees that during the term of the Agreement and for a period of one year
after the date of termination or expiration of this Agreement he will not,
directly or indirectly employ, cause to be employed, or solicit for employment
any of Company's or its subsidiaries' employees. Notwithstanding the foregoing,
the provisions of the paragraph 7 (a) shall not apply to termination by the
Executive pursuant to Section 7(c) or by the Company without cause.
(b). Scope of Covenant. Should the duration, geographical area
or range or proscribed activities contained in Paragraph 8(a) above be held
unreasonable by any court of competent jurisdiction, then such duration,
geographical area or range of proscribed activities shall be modified to such
degree as to make it or them reasonable and enforceable.
(c). Non-Disclosure of Information.
(i). The Executive shall (i) never, directly or
indirectly, disclose to any person or entity for any reason, or use for his own
personal benefit, any "Confidential Information" (as hereinafter defined) either
during his employment with the Company or following termination of that
employment for any reason (ii) at all times take all precautions necessary to
protect from loss or disclosure by him of any and all documents or other
information containing, referring or relating to such Confidential Information,
and (iii) upon termination of his employment with the Company for any reason,
the Executive shall promptly return to the Company any and all documents or
other tangible property containing, referring or relating to such Confidential
Information, whether prepared by him or others.
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<PAGE>
(ii). Notwithstanding any provision to the contrary
in this Paragraph 8(c), this paragraph shall not apply to information which the
Executive is called upon by legal process regular on its face (including,
without limitation, by subpoena or discovery requirement) to disclose or to
information which has become part of the public domain or is otherwise publicly
disclosed through no fault or action of the Executive.
(iii). For purposes of this Agreement, "Confidential
Information" means any information relating in any way to the business of the
Company disclosed to or known to the Executive as a consequence of, result of,
or through the Executive's employment by the Company which consists of technical
and nontechnical information about the Company's products, processes, computer
programs, concepts, forms, business methods, data, any and all financial and
accounting data, marketing, customers, customer lists, and services and
information corresponding thereto acquired by the Executive during the term of
the Executive's employment by the Company. Confidential Information shall not
include any of such items which are published or are otherwise part of the
public domain, or freely available from trade sources or otherwise.
(iv). Upon termination of this Agreement for any
reason, the Executive shall turn over to the Company all tangible property then
in the Executive's possession or custody which belongs or relates to the
Company. The Executive shall not retain any copies or reproductions of computer
programs, correspondence, memoranda, reports, notebooks, drawings, photographs,
or other documents which constitute Confidential Information.
9. Arbitration.
(a). Any and all other disputes, controversies and claims
arising out of or relating to this Agreement, or with respect to the
interpretation of this Agreement, or the rights or obligations of the parties
and their successors and permitted assigns, whether by operation of law or
otherwise, shall be settled and determined by arbitration in New York City, New
York pursuant to the then existing rules of the American Arbitration Association
("AAA") for commercial arbitration.
(b). In the event that the Executive disputes a determination
that Cause exists for terminating his employment hereunder pursuant to paragraph
7(b), or the Company disputes the determination that Good Reason exists for the
Executive's termination of this Agreement pursuant to paragraph 7(c), either
party disputing this determination shall serve the other with written notice of
such dispute ("Dispute Notice") within thirty (30) days after the date the
Executive is terminated for Cause or the date the Executive terminates this
Agreement for Good Reason. Within fifteen (15) days thereafter, the Executive or
the Company, as the case may be, shall, in accordance with the Rules of the AAA,
file a petition with the AAA for arbitration of the dispute, the costs thereof
to be shared equally by the Executive and the Company unless an order of the AAA
provides otherwise. If the Executive serves a Dispute Notice upon the Company,
an amount equal to the portion of the Base Salary Executive would be entitled to
receive hereunder shall be placed by the Company in an interest-bearing escrow
account mutually agreeable to the parties or the Company shall deliver an
irrevocable letter of credit for such amount plus interest containing terms
mutually agreeable to the parties. If the AAA determines that Cause existed
for the termination, the escrowed funds and accrued interest shall be paid
to the Company. However, in the event the AAA determines that the
6
<PAGE>
Executive was terminated without Cause or that Executive resigned for Good
Reason, the escrowed funds and accrued interest shall be paid to the Executive.
(c). Any proceeding referred to in paragraph 9(a) or (b) shall
also determine Executive's entitlement to legal fees as well as all other
disputes between the parties relating to Executive's employment.
(d). The parties covenant and agree that the decision of the
AAA shall be final and binding and hereby waive their right to appeal therefrom.
10. Indemnity. The Company shall indemnify and hold executive
harmless from all liability to the full extent permitted by the laws of its
state of incorporation.
11. Miscellaneous.
(a). Notices. Any notice, demand or communication required or
permitted under this Agreement shall be in writing and shall either be
hand-delivered to the other party or mailed to the addresses set forth below by
registered or certified mail, return receipt requested or sent by overnight
express mail or courier or facsimile to such address, if a party has a facsimile
machine. Notice shall be deemed to have been given and received when so
hand-delivered or after three (3) business days when so deposited in the U.S.
Mail, or when transmitted and received by facsimile or sent by express mail
properly addressed to the other party. The addresses are:
To the Company: Teltran International Group, Ltd.
One Penn Plaza
Suite 4632
New York, New York 10119
Facsimile No.: (212) 643-1283
cc: Parker Duryee Rosoff & Haft, P.C.
529 Fifth Avenue
New York, New York 10017-4608
Facsimile No.: (212) 972-9487
To the Executive: Byron R. Lerner
10 Estate Drive
Roslyn, New York 11576
The foregoing addresses may be changed at any time by notice given in the manner
herein provided.
(b). Integration; Modification. This Agreement constitutes the
entire understanding and agreement between the Company and the Executive
regarding its subject matter and supersedes all prior negotiations and
agreements, whether oral or written, between them with respect to its subject
matter. This Agreement may not be modified except by a written agreement signed
by the Executive and a duly authorized officer of the Company.
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<PAGE>
(c). Enforceability. If any provision of this Agreement shall
be invalid or unenforceable, in whole or in part, such provision shall be deemed
to be modified or restricted to the extent and in the manner necessary to render
the same valid and enforceable, or shall be deemed excised from this Agreement,
as the case may require, and this Agreement shall be construed and enforced to
the maximum extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted, or as if such provision had
not been originally incorporated herein, as the case may be.
(d). Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties, including and their respective heirs,
executors, successors and assigns, except that this Agreement may not be
assigned by the Executive.
(e). Waiver of Breach. No waiver by either party of any
condition or of the breach by the other of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one (1) or more
instances shall be deemed or construed as a further or continuing waiver of any
such condition or breach or a waiver of any other condition, or the breach of
any other term or covenant set forth in this Agreement. Moreover, the failure of
either party to exercise any right hereunder shall not bar the later exercise
thereof with respect to other future breaches.
(f). Governing Law. This Agreement shall be governed by the
internal laws of the State of New York.
(g). Headings. The headings of the various sections and
paragraphs have been included herein for convenience only and shall not be
considered in interpreting this Agreement.
(h). Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(i). Due Authorization. The Company represents that all
corporate action required to authorize the execution, delivery and performance
of this Agreement has been duly taken.
IN WITNESS WHEREOF, this Agreement has been executed by the Executive
and, on behalf of the Company, by its duly authorized officer on the day and
year first above written.
------------------------------------------
Byron Lerner
TELTRAN INTERNATIONAL GROUP, INC.
By:
--------------------------------------
James Tubbs, Executive Vice President
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<PAGE>
USA INTERCONNECTIVITY AND SUPPORT AGREEMENT
THIS AGREEMENT is made on October 12, 1998
BETWEEN OZEMAIL INTERLINE PTY LIMITED (ACN 078 742 891) of Level 1,
OzEmail Center, 39 Herbert Street, St Leonards, New South Wales,
Australia ("OZI").
AND TELTRAN INTERNATIONAL GROUP, LTD of One Penn Plaza, Suite 4632, New York, NY
10119 ("Teltran").
BACKGROUND
A. OZI has acquired the System.
B. OZI is seeking service providers to operate a service using the System
in other countries and to join with it in providing a worldwide service
comprised of interconnected Systems.
C. Teltran has applied to become a service provider in respect of the
System and OZI has agreed to admit it on the terms of this Agreement.
D. Under that System, a potential user in a particular region uses the VIN
Hardware Teltran installed in the Territory to transmit data. Teltran
notifies OZI of the intended destination of the data. OZI provides
routing information sufficient to enable Teltran to route the data over
IP Networks (including the Internet) to a Participant (as defined
below) in the distant location who receives the data to be processed
further and facilitates the data Termination.
E. The Parties have entered into this Agreement to record their agreement
in respect of operating a service using the System.
F. Simultaneous herewith the parties will enter into the Licence Agreement
to record their agreement in respect of the intellectual property in
relation to the System.
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATION
1.1 Unless the context otherwise requires:
Agreement means this Agreement, and all schedules attached to this
Agreement, as amended from time to time;
Associate means, with reference to a specified Person, a Person who
directly, or indirectly through one or more intermediaries, Controls,
is Controlled by, or is under common Control with, that Person;
Call means voice call data and/or fax transmitted and received by using
the VIN Hardware and the Service;
A Closed Group exists where the Service has been supplied for private
use by a Person and parties related to it. Guidelines will be issued by
OZI from time to time, principally for the internal routing of Calls
within the Closed Group and without allowing the public general access
to such a system for use as a public routing service in the ordinary
course of business;
Confidential Information means all information passing from one Party
to the other Party relating to the business of the disclosing Party or
any other Person who has contracted with OZI to terminate and/or
originate Calls, including trade secrets, drawings, know-how,
techniques, source and object code, business and marketing plans and
projections, arrangements and Agreements with third parties, customer
information and customer information proprietary to customers,
formulae, suppliers, customer lists, concepts not reduced to material
form, designs, plans, and models but excludes information:
(a) which is in or becomes part of the public domain other than
through breach of this Agreement;
(b) which the receiving Party can prove by contemporaneous written
documentation was already known to it at the time of
disclosure by the disclosing Party or its representatives; or
(c) which the receiving Party acquires from a third party entitled
to disclose it free of obligations of confidentiality; or
(d) which the receiving Party is obliged by law to disclose
provided that reasonable prior
<PAGE>
notice is given to the disclosing Party.
Control means, in relation to a body corporate, the power of a Person
directly or indirectly, to secure:
(a) by means of the holding of shares or the possession
of voting power (either at director or shareholder
level) in or in relation to that or any other body
corporate;
(b) by virtue of any powers conferred by the Articles of
Association or other document regulating that or any
other body corporate,
that the affairs of the first mentioned body corporate are conducted
in accordance with the wishes of that Person;
Control Node means the controlling hardware and software which provides
information to the VIN Hardware through the Network for routing of
Calls and, in some cases, billing information.
Customer means a Person who is provided with a personal identifier
number by a Participant or who is otherwise authorised by a Participant
to make Calls using the Service.
Dollar and $ means a United States Dollar;
Documentation means all system manuals and user manuals to be
provided by OZI under this Agreement. Documentation includes the
Operations Manual;
Intefrnet means any combination of interconnected Systems, including
Internet, intranet or extranet, used by the OZI and Participants for
the delivery of the Service including all existing protocols (such as
ATM, frame relay, TCP/IP, voice over IP) and all new and/or modified
protocols which may be developed and/or implemented during the Term;
Licence Agreement means the intellectual property licence agreement to
be entered into between OZI and Teltran on the date of this Agreement
substantially in the form attached as Schedule 4;
Licensed Rights means the licences and rights granted to Teltran
pursuant to the Licence Agreement;
Network means any packet switched network, including the Internet and
networks based on ATM or frame relay;
Operations Manual means the documents referred to in Schedule 1 as
amended from time to time pursuant to Clause 10;
OZI Software means the software licensed to Teltran pursuant to the
Licence Agreement as defined in that Agreement;
Reseller means any Person appointed by Teltran to promote the Service
in the Territory in accordance with Clause 7 of this Agreement;
Participant means any of OZI, Teltran and other Persons who have
contracted with OZI or an affiliate to terminate and originate Calls
and the Participants means all those Participants;
Party means either Teltran or OZI and Parties means both of them;
Person includes an individual, company, corporation, partnership,
government or government agency, authority or entity however designated
or constituted;
Port means a fully functional port on a VIN available for use as part
of the Service;
PSTN means public switched telephone network;
Service means the routing and carriage of Calls from origination to
Termination across a Network as contemplated by this Agreement, or, as
the context requires, that part of the Service for which OZI alone is
responsible;
Service Fee is the fee defined in clause 6;
System means a combination of VIN Hardware and OZI Software to be
provided by OZI to Teltran under this Agreement and/or the Licence
Agreement, which, when used in concert with each other, will facilitate
Calls to be originated, carried, routed and Terminated via Networks;
Term means the period from the date of this Agreement until its expiry
or earlier termination;
Termination in relation to a Call means that part of the Service which
involves attempting to secure a connection between the VIN Hardware to
which the Call has been routed and the Call's ultimate destination (via
a PSTN if applicable) and carrying that Call in its entirety between
those two points once that connection is established. To Terminate a
Call has a corresponding meaning. Termination Point, in relation to a
Call, means the Call's ultimate dialled destination;
Termination Fee is defined in Clause 6.6;
Termination Tariff means the tariff for the Termination of Calls set
from time to time in accordance with Clause 3 of Schedule 6, the
current version of which is at Schedule 6;
<PAGE>
Territory means the area set out in Schedule 2, as amended by written
agreement of the Parties from time to time; and
VIN Hardware means all or any part of the hardware set out in the
Operations Manual as necessary for the carriage or routing of Calls or
of particular types of Calls between Participants known as VINs.
1.2 Reference to:
(a) one gender includes the other genders;
(b) the singular includes the plural and vice versa;
(c) a Party includes the Party's executors, administrators,
successors and permitted assigns; and
(d) a statute, regulation or provision of a stature or regulation
("Statutory Provision") includes:
(1) that Statutory Provision as amended or re-enacted
from time to time; and
(2) a statute, regulation or provision enacted in
replacement of that Statutory Provision.
1.3 Headings are for convenience only and do not affect the interpretation,
or form part, of this Agreement.
1.4 "Including" and similar expressions are not words of limitation.
1.5 Where a word or expression is given a particular meaning, other parts
of speech and grammatical forms of that word or expression have a
corresponding meaning.
1.6 Schedule 3 sets out a broad overview of the operation of the Service.
Schedule 3 is indicative only and does not impose any obligations on
OZI.
2. THE SERVICE
2.1 OZI hereby appoints Teltran as a non-exclusive provider of the Service
in the Territory subject to the terms of this Agreement.
2.2 Teltran must:
(a) use all reasonable endeavours to rollout or cause a rollout of
the System in the Territory with reasonable diligence so as to
have and maintain the ability to Terminate and Originate Calls
to and from all points within the Territory accessible via any
PSTN within the Territory;
(b) ensure that all VIN Hardware and OZI Software used by it in
relation to the Service is operated in accordance with the
Operations Manual;
(c) use all reasonable endeavours to rollout or cause a rollout of
the System in the Territory with reasonable diligence so as to
have and maintain the ability to route and carry Calls from
and to any VIN Hardware operated by Teltran within the
Territory to the VIN Hardware operated by any Participant;
including the activation of prioritisation (except in the case
of store and forward messages) to the extent technologically
available, the establishment and maintenance of any internal
systems and any connection to the Internet such that in all
normal circumstances reasonable endeavours are taken to
achieve the following targets:
(i) propagation delay of the signal is less than 280
milliseconds, that being a round trip `Ping' between
any VIN POP within Teltran's network and the OZI Web
site `www.ozemailphone.aust.com, which is
geographically based in the USA;
(ii) variation in propagation delay of the signal is less
than 50 milliseconds;
(iii) interruption in signal is less than 400 milliseconds;
and
(iv) packet loss is less than 3%;
(d) not operate any VIN Hardware outside the Territory;
(e) charge OZI not more than the Termination Tariff for the
Termination of any Call;
(f) comply with the Operations Manual except in the case of
manifest error in which case Teltran shall promptly notify OZI
of the error;
(g) ensure that at least 50% of Ports (and corresponding bandwidth
to necessitate operation) held by Teltran are available for
Termination of Calls on an aggregate basis over a 24 hour
period;
(h) maintain sufficient VIN Hardware to terminate Calls routed to
it and to route Calls originated by it within the Territory
under this Agreement such that a telephony grade of
<PAGE>
service of P.O2 (the probability of VIN Hardware being unable
to accept a Call during the busiest hour of a day being no
greater than two per cent (2%)) is maintained;
(i) test VIN Hardware in accordance with any testing procedures
set out in the Operations Manual;
(j) not use VIN Hardware unless and until it has satisfied the
requirements set out in the Operations Manual;
(k) ensure that VIN Hardware at all times complies with any
specifications set out in the Operations Manual;
(l) provide OZI with remote access to Teltran's systems sufficient
for OZI to enable OZI to verify Teltran's compliance with the
technical aspects of its obligations under this Agreement, and
otherwise as set out in the Operations Manual;
(m) maintain a help desk service adequate to provide a quality and
timely service to assist in resolving problems that Customers
in the Territory have in relation to their Calls, accessible
24 hours per day;
(n) subject to any applicable laws, use all reasonable endeavours
to obtain privacy, data protection and other consents and
approvals from each Customer as necessary or desirable to
facilitate exchange of Call-related and billing data as
contemplated by this Agreement; and
(o) keep a sufficient stock of spare parts and/or replacement VIN
Hardware, to adequately service the System, or as reasonably
specified in the Operations Manual (if greater) to ensure it
operates in accordance with this Agreement (in particular
Clause 2.2(f)).
(p) Provided Teltran complies with Clause 2.2a through 2.2o,
Teltran will not be required to give any other warranty with
respect the availability of Call Termination in the Territory.
2.3 Teltran shall indemnify OZI and all other Participants against all
claims, losses, liabilities and expenses arising from a failure to
obtain all privacy, data protection and other consents and approvals
from Customers necessary or desirable to facilitate exchange of
Call-related and billing data as contemplated by this Agreement.
2.4 Teltran must maintain sufficient competent trained staff and otherwise
commit such other resources as are reasonably required to meet its
obligations under this Agreement.
2.5 Teltran will be responsible for obtaining, at its cost, all permits,
licences and approvals in the Territory associated with the performance
of its obligations under this Agreement.
2.6 Teltran agrees that it shall comply with the guidelines relating to the
operation of Closed Groups, as may be amended by OZI from time to time,
subject to OZI providing reasonable prior written notice to Teltran
from time to time of any proposed amendments.
2.7 The Customer Sample Terms & Conditions, as contained in Schedule 8, are
deemed to be sufficient for those terms required to be entered in to
between Teltran and its customers for provision of the Service.
3. PURCHASE OF VIN HARDWARE FROM OZI
3.1 Orders for VIN Hardware may be placed with or through OZI. OZI may
accept any order by notice to Teltran. If OZI cannot or will not fulfil
HKTEL Canada's reasonable order for Node Hardware within forty two (42)
days of acceptance of that order, HKTEL Canada's obligations under
Clauses 2.2(a) and (c) shall be suspended until deliveries are made in
accordance with that order.
<PAGE>
3.2 OZI will deliver VIN Hardware ordered under this Agreement and accepted
by OZI to a carrier nominated by Teltran. All risk passes to Teltran on
delivery to that carrier. Ownership does not pass until payment is made
in full.
3.3 Subject to the Licence Agreement, OZI shall not charge Teltran more
than its costs for VIN Hardware and its provisioning (if relevant), as
set out in Schedule 5.
3.4 OZI must not unreasonably refuse any orders for VIN Hardware made by
Teltran from time to time.
3.5 Teltran must:
(a) comply with all reasonable directions given by OZI from time
to time in relation to any technical aspect of the Service or
any VIN Hardware; and
(b) not use the VIN Hardware except in conjunction with equipment
meeting the specifications set out in the Operations Manual;
and
(c) not use any other device or devices in substitution for VIN
Hardware, save with OZI's prior written consent.
4. OZI RESPONSIBILITIES
4.1 On notification of receipt of a Customer's Call by Teltran and
nomination by a Customer of a specific Termination Point which OZI has
advised is accessible using the Service, OZI must provide routing
information to Teltran sufficient for the Call to be routed to that
Participant. OZI does not warrant that Calls will be capable of
successful Termination at any time or to any place.
4.2 OZI shall not enable Teltran to provide the Service commercially until
Teltran has installed a minimum of 48 Ports in an operational manner
which are to be installed as soon as possible after the date of this
Agreement.
4.3 For the duration of the Term OZI must:
(a) subject to Clause 4.2, provide the Service and the System as
contemplated by this Agreement and in the manner set out in
the Operations Manual;
(b) during OZI's normal business hours, provide Teltran with
reasonable assistance in installing and configuring VIN
Hardware;
(c) maintain an audit trail of Calls for a period of at least 1
year from the making and/or Termination of a Call and for at
least 1 year after the expiry or earlier termination of this
Agreement;
(d) produce and provide to Teltran routing information for bill
production;
(e) co-operate with Teltran's technical staff in providing to
Teltran support and assistance set out in the Operations
Manual;
(f) maintain its network operations center 24 hours every day;
(g) make available technical support to Teltran 24 hours every day
including an escalation procedure for technical support to be
set out in any specifications published by OZI from time to
time (whether or not as part of the Operations Manual) in
relation to support;
(h) provide reasonable access to the Web interface for the Service
for Teltran to customise Teltran's portion of the interface
and provide to Teltran instructions relating to such
customisation as part of the Documentation;
(i) calculate and notify Teltran of the payments required by
Teltran under this Agreement;
(j) promptly (but in any case no later than 7 days of the relevant
event) notify Teltran of the appointment or termination of the
appointment of any other Participant; and
(k) commit all reasonably available resources required to remedy
any event within OZI's control that adversely affect the
System as a whole, which may include a work around.
4.4 OZI shall, at the request of Teltran, use all reasonable efforts to
modify any billing reports to a form reasonably requested by Teltran on
the basis that Teltran shall pay to OZI an amount equal to the direct
cost plus 10 percent of carrying out such work.
4.5 OZI's support obligations do not include on-site technical assistance.
4.6 OZI may agree to provide service beyond that set out in the Operations
Manual or this Agreement at a price to be agreed between the Parties.
4.7 OZI must provide reasonable assistance to Teltran in obtaining and
maintaining pursuant to Clause 2.5 any permits and approvals necessary
for performance by Teltran of this Agreement.
<PAGE>
4.8 OZI will continue development practices in line with compliance of
objectives designed to satisfy computing requirements for the Year
2000. OZI will conduct periodic testing to ensure these objectives are
continually met.
4.9 Provide Teltran with a trial VIN network access period of 30 (thirty)
days, during which time Teltran will be liable for all call termination
costs. Teltran will provide OZI with a purchase order valued according
to the price list in Schedule 5. OZI will invoice Teltran for the
purchase order after the 30 day trial period or on signing this
contract, whichever comes first. Further OZI will invoice Teltran for
termination costs according to standard terms and conditions as
describe herein. Following this trial period, Teltran will be liable
for Service Fees according to standard terms and conditions as set out
in Schedule 6 of this agreement.
5. MANAGEMENT
5.1 The Parties must each appoint a business manager and technical manager.
Each pair of managers must conduct project meetings at mutually agreed
times during the term of this Agreement. Those meetings may be by
telephone.
5.2 The business and technical managers have authority to make binding
decisions on the day to day business or technical aspects of the
Agreement respectively. For the avoidance of doubt, no Agreement or
decision will be binding until and unless it is reduced to writing and
is signed by a business or technical manager of each Party.
6. FEES AND CHARGES
6.1 Under this Agreement:
(a) the calculation of all billing information for charges
incurred between OZI and Teltran may be carried out by OZI
and/or Teltran;
(b) OZI will charge Teltran in respect of Calls originating in the
Territory:
(1) a fee calculated under clause 6.2; and
(2) any amount to be remitted to another Participant for
the Termination of Calls originating through Teltran.
6.2 The Service Fee for a period is the fee for provision of the Service
and other support under this Agreement for a period and is the total of
the aggregate of the fees payable for each Call originated in the
Territory during that period calculated in accordance with clause 1 of
Schedule 6 using, where appropriate, the time for each Call determined
in accordance with clause 6.3.
6.3 The time for each Call for the purposes of clauses 6.2, 6.4 and
Schedule 6 is the time of that Call (determined in minimum increments
of six seconds rounded up) commencing from the time the cessation of
ring-back from the Termination Point and concluding at the time that
the Call originator hangs up.
6.4 Teltran acknowledges that it is in the interests of all Participants
that termination costs be kept to a minimum and provided on a cost
recovery basis only. If at any time OZI becomes able to arrange
termination within the Territory for any Calls at a lower rate than the
Termination Tariff charged by Teltran, then OZI may give notice to
Teltran requiring Teltran to show cause to OZI within seven (7) days of
that notice why termination should not be carried out by another person
or means. Unless Teltran is able to demonstrate within that seven (7)
day period that such alternative termination with its accompanying
lower cost, is unlikely to be more attractive to callers, then OZI may
commence utilisation of the alternative termination arrangements.
6.5 Notwithstanding Clause 6.4, Teltran acknowledges that it has no
exclusivity in relation to the Termination of Calls in the Territory.
6.6 The Termination Fee for each Call is equal to the price for that Call
(calculated in accordance with clause 6.3 and the Termination Tariff)
charged to OZI by the party terminating the Call.
6.7 For each Call originating through VIN Hardware operated by Teltran and
terminated through the use of the Service, Teltran must pay OZI the
Termination Fee for that Call.
<PAGE>
6.8 OZI may amend the Termination Tariff in respect of Calls from time to
time by written notice to Teltran as reasonably necessary to reflect
the costs of Termination to OZI and other Participants of such
termination provided that OZI shall give at least 5 days prior notice
of any such change.
6.9 OZI will be responsible for remittance of amounts due and payable by
OZI to other Participants which arise out of Terminations by other
Participants of traffic originated by Teltran's Customers.
7. RIGHT TO APPOINT RESELLERS
7.1 Teltran may appoint any entity in its sole and reasonable discretion as
Resellers to assist in marketing the Service in the Territory, provided
that:
(a) the Reseller shall not promote or market the Service or the
System outside the Territory;
(b) the Reseller shall not market or promote the Service in the
Territory other than in accordance with the Teltran marketing
and promotion activities authorized under this Agreement; and
(c) Teltran shall not directly benefit from the Reseller's market
activities associated with a product or service that competes
with the System or the Service. For purposes of this Section
7.1(c), examples of a product or service that does or does not
compete with the Service or the System shall be established by
the good faith negotiation and mutual agreement of the
Parties.
(d) Teltran will provide OZI with a copy of its standard Reseller
Agreement, to be included in this contract as Schedule 7.
7.2 Teltran shall cause the appointment of any Reseller to be terminated
promptly: after receipt of notice in writing from OZI where, in the
reasonable opinion of OZI, Teltran has received a direct benefit as a
result of the Reseller's promotion of a directly competitive system or
service; or if Reseller fails to use all reasonable endeavours to
market and promote the System or the Service or directly or indirectly
disparages the System or the Service. Teltran shall notify OZI in
advance of its intention to appoint any Reseller where the proposed
Reseller or its Associates is providing or marketing a service that is
competitive to the Service and shall take into account any reasonable
comments of OZI in making such appointment.
7.3 Teltran agrees to appoint one or more Resellers in the Territory in
accordance with Section 7.2 to ensure that the Service is promoted in
respect of voice Calls to a minimum of 50,000 business users and/or
1,000,000 consumer users in the Territory within twelve (12) months of
Commercial Launch.
7.4 Teltran shall be responsible for all acts and omissions of the
Resellers in the performance of this Agreement as if those acts and
omissions were its own.
8. GENERAL PROVISIONS RELATING TO PAYMENT OF FEES AND CHARGES
8.1 Any payments due pursuant to this Agreement, including but not only
amounts payable under Clause 6 may be netted off (set off) by OZI.
Invoices will be for gross charges (ie not netted) and expressed in US
dollars.
8.2 OZI may invoice Teltran each calendar month in arrears. Invoices shall
be transmitted to Teltran by electronic mail or fax and are deemed
received at the time of transmission (unless a non-delivery message is
received). Invoices will not include all Call information which will be
posted to appropriate web pages so that it can be accessed by Teltran
in accordance with the Operations Manual.
8.3 Teltran shall pay to OZI any amount payable under Schedule 6 within 14
days of the end of the month in which the payment or benefit was
obtained by Teltran.
8.4 All payments must be made by direct wire transfer into an account
nominated in writing with communication of payment.
8.5 All fees and other payments under this Agreement must be made in United
States dollars. Fees based on sales in other currencies are converted
to dollars at the official closing rate of exchange for that currency
in the U.S. market, as published in the Wall Street Journal on the last
day of the relevant month (or if not published on that day, on the last
day in that month that the Wall Street Journal (Western Edition)
published that rate).
8.6 All amounts payable under this Agreement are exclusive of all
withholding tax, sales tax, value added tax, goods and services tax,
consumption tax, use tax or other taxes, customs, duties and similar
levies if any, payable in or to any jurisdiction or authority
whatsoever (other than taxes on
<PAGE>
the net income of OZI). Where any payment would otherwise require
deduction of any tax, custom, duty or levy Teltran must pay a grossed
up amount such that, after any payment by Teltran in respect of those
taxes, customs, duties or levies, OZI receives the amount calculated
under this Agreement. Teltran shall then promptly pay all such
withholdings and shall provide to OZI original receipts for such
payment. OZI shall refund to Teltran any grossed up amount to the
extent that it actually obtains relief, a benefit or credit including
by offsetting the amount received against tax otherwise payable in
respect of the withholdings paid by Teltran promptly after receipt of
that relief, benefit or credit.
8.7 Overdue amounts accrue interest from the relevant due date until the
date that payment is received at the rate which is the lesser of:
(a) the LIBOR rate last quoted at the relevant due date plus 4
percent per year; and
(b) the greatest percentage permitted by applicable law.
9. RECORDS
9.1 OZI's records and any invoices or statements of the total of the Calls
in respect of any period are prima facie evidence of the information
stated therein.
9.2 Each of the Parties in their principal place of business must keep,
maintain and preserve during the term of this Agreement and for at
least four (4) years following the expiration or earlier termination of
this Agreement, complete and accurate records covering all transactions
relating to this Agreement including transaction logs.
9.3 Those records must be available for inspection by the other Party from
time to time for four (4) years following the expiration or earlier
termination of the Agreement, during reasonable business hours and upon
reasonable notice. Each Party may make copies of any part of the other
Party's records and must ensure that the other Party is not hindered
while inspecting or copying their records.
9.4 OZI may elect to conduct an audit of Teltran in relation to its
compliance with this Agreement and the records it has kept in relation
to it twice in any year and Teltran may elect to conduct an audit of
OZI in relation to the payment of Termination Fees no more than twice
in any year. The initiating Party must give the other Party at least 30
days' notice of any audit. For the purpose of conducting any audit, the
requested Party must, at its own expense provide the initiating Party,
or its independent auditors with:
(a) access to its premises and office space; and
(b) all information, facilities, services and accessories
reasonably required by them.
9.5 If an audit indicates a material inaccuracy (being variation of the
greater of 5 per cent (or more) of net amounts payable between the
Parties during the period covered by the audit and $50,000.00, the
Party receiving the benefit of that inaccuracy must indemnify the other
Party for the reasonable cost of the audit.
9.6 If an audit indicates an inaccuracy, the Party receiving the benefit of
that inaccuracy must pay to the other Party any outstanding amount.
9.7 It is agreed that KPMG is deemed to be an acceptable auditor with
respect the provisions contained in this Clause 9, provided KPMG
operate within guidelines and practices considered acceptable to OZI.
If otherwise OZI is at liberty to appoint another auditor.
<PAGE>
10. DOCUMENTATION
10.1 OZI may amend any Documentation from time to time by written notice to
Teltran. OZI undertakes to make reasonable efforts to consult with
Teltran in relation to any proposed changes to the Operations Manual
and to give at least 30 days notice of such changes provided that OZI
may shorten this period if, in its opinion, amendments must be made
urgently to maintain the reputation, goodwill and/or integrity of the
Service. OZI undertakes to act reasonably in relation to changes to the
Documentation.
10.2 OZI shall supply updates to the Documentation to reflect improvements
and rectification of errors and otherwise as required to reflect the
appointment of new Participants.
10.3 OZI shall provide Documentation either by physical delivery or by
posting the same on Web pages which can be accessed by Teltran or other
agreed form of electronic communication.
10.4 All Documentation will be provided in English. OZI is not required to
prepare translations of the Documentation into any other language.
10.5 Teltran may prepare translations of Documentation or any part of it
into any other language. Teltran must ensure that all copyright and
other intellectual property rights in any translation it prepares is
vested in OZI. Teltran indemnifies OZI against any loss suffered as a
result of any Person's use of Teltran's erroneous translations where
any such loss is suffered as a direct result of a mistake in such
transaction.
11. WARRANTIES
11.1 OZI warrants, represents and agrees that:
(a) all hardware and software media to be delivered to Teltran
pursuant to this Agreement will be new, undamaged and
unencumbered;
(b) title to any hardware purchased by Teltran under this
Agreement will pass to it upon payment in full therefore;
(c) the VIN Hardware to be provided by it to Teltran under this
Agreement and/or the Licence Agreement will materially and
substantially comply with specifications set out in the
Operations Manual (provided that Teltran acknowledges that its
sole remedy for breach of this warranty will be to require
repair or resupply of the non-conforming item);
(d) it will use its best endeavours to ensure that the
Documentation contains information sufficient that it will, by
itself, be sufficiently comprehensive to enable relevant
Teltran staff, suitably trained, to provide the Service in
accordance with the Documentation;
(e) all of OZI's employees and subcontractors providing services
to Teltran under this Agreement will be suitably qualified,
trained and experienced to do so; and
(f) it will make spare parts for all VIN Hardware to be provided
to Teltran pursuant to this Agreement, or comparable
substitutes therefor for the Term, such spare parts to be
provided on reasonable terms and conditions not materially
different from the terms and conditions generally applying for
the supply of spare parts to other Participants.
The warranties given in this Clause are collectively and individually
referred to as the Performance Warranty.
11.2 Teltran must provide OZI with all access to Teltran's premises and VIN
Hardware reasonably necessary to correct or diagnose any reported
error(s).
11.3 The Performance Warranty provided in Clause 11.1 does not apply to
errors which are a result of:
(a) use of the Service outside the scope of this agreement;
(b) changes in, or modifications to the Service, or VIN Hardware;
(c) use of the Service by any Person outside the scope of the
Operations Manual;
(d) use of data or software of third parties or with hardware
which is incompatible with the Service unless that data,
software, or hardware was recommended or otherwise approved in
writing by OZI;
(e) any changes to any component of any VIN Hardware, unless they
were recommended by OZI in writing;
(f) changes made to the specifications or Documentation by Teltran
without the prior written approval of OZI; or
(g) accident, physical, electric or magnetic stress, unauthorised
alterations, modifications, or changes; failure of electrical
power, environmental controls; or causes other than
<PAGE>
ordinary use provided that OZI shall use its best endeavours
to minimise any errors or delays caused by the factors
referred to in this subclause.
11.4 The Parties acknowledge that because of the nature of the technology
and Networks, the Call quality of Calls transmitted over it may be less
than that from the normal use of the PSTN.
11.5 Teltran acknowledges that OZI makes, has made, and, by the supply of
the VIN Hardware will make, no representations in relation to the VIN
Hardware's compliance with any local laws or regulatory requirements or
that Teltran's use of that hardware will comply with any such
requirements. Teltran will be responsible for obtaining homologation
approvals at its own cost subject to the supply by OZI of test data and
information available to it. OZI will, at the reasonable cost of
Teltran, promptly provide such assistance which Teltran may reasonably
request in order to obtain any necessary local approvals in connection
with its use of the said hardware.
11.6 Teltran must not represent or warrant to any Person that the Service or
any software program or related documentation:
(a) will meet any performance criteria or any Participant's or any
Customer's requirements except to the extent it is explicitly,
or by necessary implication, stated to meet them within the
Documentation;
(b) will be error free; or
(c) will not be interrupted by reason of defect in it, the general
nature of Internet communications or by reason of fault on the
part of any Participant.
11.7 To the greatest extent possible under applicable law, Teltran expressly
waives all representations, warranties or conditions not specifically
set out in this Agreement including but not limited to implied
representations, warranties or conditions of merchantable quality or
fitness for a particular purpose and those arising by statute or
otherwise in law or from course of dealing or usage of trade.
11.8 Each Party is responsible for the actions and omissions of its
employees and agents who cause damage to the other, whether through
fraud or otherwise. Each Party indemnifies and holds the other Party
harmless from any and all damages caused by such persons.
11.9 Each Party warrants that it has full power to enter into this
Agreement, perform its obligations under it and that the person signing
this Agreement on its behalf has been duly authorised and empowered to
enter into it. Each Party acknowledges that it has not been induced to
enter into this agreement by any representations or statements, oral or
written, not expressly contained in it or expressly incorporated by
reference.
12. LIMITATION OF LIABILITY
12.1 The limitation of liability provisions of this Agreement:
(a) reflect an informed voluntary allocation of the risks (known
and unknown) that exist in connection with the provision of
goods and services under this Agreement by the parties
including the performance of the Service:
(b) take precedence over and apply notwithstanding any other
provisions of this Agreement; and
(c) form a material part of the Agreement reached between the
Parties.
12.2 To the extent permissible by law, OZI has no liability under or in
respect of this Agreement except as set out in it. Neither Party shall
be liable to the other for any consequential damages suffered by the
other, whether foreseeable or not, in contract or tort, arising out of
a breach of this Agreement.
12.3 No action, regardless of form, arising out of this Agreement may be
brought by Teltran more than two (2) years after the facts giving rise
to the cause of action have occurred, regardless of whether those facts
by that time are known to, or reasonably ought to have been discovered
by Teltran.
12.4 OZI's aggregate liability for all actions in relation to this Agreement
and/or the Licence Agreement is equal to the amount earned by OZI
personally (not including Termination Fees) under this Agreement and
the Licence Agreement in the first 24 months of the Term.
12.5 Except as expressly provided herein, in no event shall either party be
liable for any claim for damages for loss of profit, loss of expected
savings or consequential damages.
<PAGE>
13. TERM AND TERMINATION
13.1 This Agreement commences on the date of execution by the last of the
Parties and continues in effect for a period of three (3) years unless
otherwise terminated pursuant to the terms of this Agreement.
13.2 This Agreement may be terminated:
(a) by Teltran, for a material breach of this Agreement by OZI, at
Teltran's option, upon written notice if OZI has not cured the
breach within 30 days after receiving written notice;
(b) by OZI, for a material breach of this Agreement by Teltran, at
OZI's option, upon written notice if Teltran has not cured a
material breach within 30 days of receiving written notice.
For the purposes of this Agreement and for the purposes of
example only, any breach of Clause 2 by Teltran is a material
breach of this Agreement; and
(c) by either Party, upon the other Party coming under any form of
administration (or a like event) or relief relating to
insolvency (or a like event).
13.3 In addition to its other remedies under this Agreement:
(a) OZI may suspend its performance under this Agreement, and
disconnect Teltran from the Service, if Teltran is in arrears
of any payment owing under this Agreement for 30 days or
longer, and OZI has given to Teltran at least 14 days notice
of its intention to suspend; and
(b) Teltran may direct OZI to suspend the provision of the Service
from a Participant where that Participant is in default of its
obligation without reasonable cause (in the opinion of OZI) to
pay Termination Fees in respect of Calls originated by that
Participant and terminated by Teltran where such default has
continued for a period of 30 days or longer and OZI has given
to Teltran at least 14 days notice of its intention to
suspend. OZI shall suspend such Service until such payment is
made.
13.4 On termination and without prejudice to any other rights which the
Parties may have:
(a) each Party must immediately deliver to the other Party, the
other Party's Confidential Information then in its possession
or control, if any, and must deliver a certificate of an
officer of such Party attesting that all Confidential
Information has been returned;
(b) each Party must not make any further use of the other Party's
Confidential Information; and
(c) each Party must immediately pay all sums owing to the other
under this Agreement or as they subsequently become due; and
(d) Teltran must take all reasonable steps to transfer to OZI or
its nominee the benefit of all approvals and permits acquired
by it specifically in relation to the System and the Service..
13.5 Clauses 2.3, 9.3, 11, 12, 13, 14, 15, 16, 17 and 19 shall survive
termination of this Agreement.
14. CONFIDENTIALITY
14.1 Each Party may use the Confidential Information of a disclosing Party
only for the purposes of this Agreement and must keep confidential all
Confidential Information of each disclosing Party except to the extent
(if any) the recipient of any Confidential Information is required by
law to disclose the Confidential Information.
14.2 Either Party may disclose Confidential Information of the other Party
to those of its employees and agents who have a need to know the
Confidential Information for the purposes of this Agreement but only if
the employee or agent executes a confidentiality undertaking in a form
approved by the other Party, such approval not to be unreasonably
withheld.
14.3 This Clause survives the termination of this Agreement.
<PAGE>
15. OWNERSHIP OF PROPRIETARY RIGHTS
15.1 Teltran does not acquire any rights in, title to or interest in the
Service or related Documentation, except as explicitly set out in this
Agreement or in the Licence Agreement.
16. INDEMNIFICATION
16.1 Teltran indemnifies OZI against any and all claims and liabilities,
including reasonable legal fees, resulting from:
(a) Teltran's modifications ( not approved in writing by OZI) to
the Service;
(b) any claim based upon Teltran's or the use through Teltran of
the Service by a Customer of Teltran;
(c) any breach by Teltran of this Agreement; and
(d) a failure by Teltran to comply with any applicable law in the
Territory, save where resulting from the gross or wilful
negligence of OZI, its agents or employees.
16.2 OZI indemnifies Teltran against any and all claims and liabilities,
including reasonable legal fees, resulting from any breach by OZI of
this Agreement.
17. PUBLICITY
Teltran and OZI must cooperate regarding public relations activities,
including public announcements, joint press releases, and other
activities to be mutually agreed.
18. INTERDEPENDENCE WITH LICENCE AGREEMENT
18.1 This Agreement shall have no force and effect unless and until the
Licence Agreement becomes binding between the Parties.
18.2 Any default under the Licence Agreement by Teltran shall constitute a
default under this Agreement by Teltran and any default under the
Licence Agreement by OZI shall be deemed to constitute a default under
this Agreement by OZI.
18.3 Any circumstance justifying Teltran in terminating the Licence
Agreement shall justify Teltran in terminating this Agreement and any
circumstance justifying OZI in terminating the Licence Agreement shall
justify OZI in terminating this Agreement.
19. GENERAL PROVISIONS
Co-operation
19.1 The Parties must co-operate with each other to fulfil the purpose of
this Agreement. Each Party must provide all reasonable assistance to
the other in relation to the conduct of any litigation related to this
Agreement. The costs of that assistance must be borne by the Party
receiving the benefit of that litigation.
Notices
19.2 Any notice required for or permitted for this Agreement must be
delivered as follows with notice deemed given as indicated:
(a) in writing by personal delivery when delivered personally;
(b) in writing by overnight courier upon written verification of
receipt;
(c) by telecopy or fax transmission when confirmed by telecopier
or fax transmission report;
(d) in writing by certified or registered mail, return receipt
requested, upon verification of receipt; or
(e) by receipted electronic email to an email address of the other
Party nominated for the receipt of notices under this
Agreement.
Assignment
19.3 This Agreement is not assignable or transferable by Teltran except as
expressly set out herein, without the prior written consent of OZI. Any
attempt to assign this Agreement without that consent is void.
19.4 Teltran shall not suffer or allow a change in control of Teltran
(without the prior written consent of OZI which must not be
unreasonably withheld, conditioned or delayed) in any circumstance
where an assignment of Teltran's interest in this Agreement to the
Person acquiring control would not be permitted under this Agreement.
Subcontracting
<PAGE>
19.5 OZI may subcontract any of its obligations under this Agreement without
restriction. For the avoidance of doubt no subcontracting will relieve
OZI of primary liability for any obligation it may have under this
Agreement.
Agency
19.6 Neither Party is an employee or agent of the other Party. In
particular, any work performed by OZI in connection with this Agreement
is performed by OZI as an independent contractor, and not as an
employee or agent of Teltran. Neither Party has the authority to, and
neither Party shall, make any representation, prepare documents or
statements on behalf of, or in the name of the other Party, give any
warranties, accept any orders, enter into a contract on behalf of the
other Party, or obligate the other Party in any manner, unless
expressly authorised to so by this Agreement or in writing by the other
Party.
Waivers And Amendments
19.7 No failure to exercise, and no delay in exercising, on the part of
either Party, any privilege, any power or any rights under this
Agreement will operate as a waiver of them, nor will any single or
partial exercise of any right or power under this Agreement preclude
further exercise of any other right under it. Any waivers or amendments
are effective only if made in writing by non-pre-printed Agreements
clearly understood by both Parties to be an amendment or waiver and
signed by a representative of the respective Parties authorised to bind
the Parties.
Severability
19.8 If any provision of this Agreement is held to be invalid or
unenforceable, then the remaining provisions shall continue in full
force and effect.
Consequence of Breach of the Other Party
19.9 If a Party breaches a term of this Agreement then to the extent that
such breach renders compliance with any obligation by the other Party
impossible, impractical or futile, the other Party shall be relieved
from compliance with that obligation unless and until the breach is
rectified.
Governing Law
19.10 This Agreement is governed by the laws in force in New South Wales,
Australia, except with respect to the conflict of law provisions
thereof. Each of the Parties agree that the courts of New South Wales
have jurisdiction over the subject matter of this Agreement and
constitute the most convenient forum for hearing any proceedings
arising out of any dispute between the Parties.
19.11 Teltran hereby appoints [An Officer of the Company] of [Address] as its
agent for the service of all documents, notices and legal proceedings
and the service of all documents, notices and legal proceedings on
[Officer of the Company] will be deemed to be served on Teltran.
19.12 The application of the United Nations Convention for the International
Sale of Goods is expressly disclaimed.
19.13 The prevailing Party in any action to enforce this Agreement is
entitled to recover costs and expenses including, without limitation,
legal fees.
Force Majeure
19.14 An obligation of a Party under this Agreement is suspended during any
period in which it is unable to perform that obligation for any reason
beyond the reasonable control that Party or its associates, including
but not limited to, acts of God, earthquake, labour disputes and
strikes, riots, war, governmental requirements and the actions or
omissions of the other Party (force majeure event). If the force
majeure event extends for more than 21 days and there is an actual or
threatened material disadvantage to either Party, it may, at its
option, terminate this Agreement.
Entire Agreement
<PAGE>
19.15 This Agreement including its Schedules constitutes the entire Agreement
between the Parties with respect to its subject matter except as set
out herein. This Agreement supersedes, and the terms of this Agreement
govern any other prior or collateral Agreements with respect to its
subject matter with the exception of the Telecommunications Services
Agreement (including Schedules a through d) executed between Teltran
and OZI 12 December 97 and any other subsequent agreements which may be
entered into regarding the current re-filing relationship between
Teltran and OZI. Any amendments to this Agreement must be in writing
and executed by an officer of the Parties.
19.16 This Agreement has precedence over the Documentation to the extent of
any inconsistency.
19.17 To the extent that any applicable law prohibits any provision of this
Agreement that provision is to be read down to the extent necessary to
comply with that law. Teltran must keep OZI informed of any such laws
and their effect.
Executed by the Parties:
Teltran OZEMAIL INTERLINE PTY LIMITED
(ACN 078 742 891)
By: /s/ Byron R. Lerner By: /s/ J. B. Rousselot
------------------------------- -------------------------------
Name: Byron R. Lerner Name: J. B. Rousselot
----------------------------- -----------------------------
Title: President and CEO Title: Director and CEO
---------------------------- ----------------------------
Date: 10/2/98 Date: 10/19/98
----------------------------- -----------------------------
SCHEDULE 1
OPERATIONS MANUAL
Documents relating to the operation of the system are provided from the
following web site:-
https://www.ozemailphone.aust.com/voice/owa/login
OZI will provide Teltran with appropriate login access.
These documents are provided as Microsoft Word 97 files [or earlier versions],
which will be updated from time to time to reflect any changes, modifications or
provision of new features.
<PAGE>
USA INTELLECTUAL PROPERTY LICENCE AGREEMENT
THIS AGREEMENT is made on October 12, 1998
BETWEEN
1. OZEMAIL INTERLINE PTY LIMITED (ACN 078 742 891) of Level 1, OzEmail
Center, 39 Herbert Street, St Leonards, New South Wales, Australia
("OZI").
2. TELTRAN INTERNATIONAL GROUP, LTD. of One Penn Plaza, Suite 4632, New
York, NY 10119 ("Teltran")
BACKGROUND
A. OZI has acquired the System.
B. OZI is seeking service providers to operate a service using the System
in other countries and to join with it in providing a worldwide service
comprised of interconnected Systems.
C. Teltran has applied to become a service provider in respect of the
System and OZI has agreed to admit it on the terms of this Agreement.
D. Under that System, a potential user in a particular region uses the
Node Hardware installed on his site to transmit data. Teltran notifies
OZI of the intended destination of the data. OZI provides routing
information sufficient to enable Teltran to route the data over IP
Networks (including the Internet) to a Participant (as defined below)
in the distant location who receives the data to be processed further.
The Participant facilitating the data termination may be Teltran (eg
intra-Territory data transfer). Subject to the terms of this Agreement,
Teltran must terminate data which is routed to it from Participants.
E. The parties have entered into this Agreement to record their
arrangement in relation to the intellectual Property of the System.
F. Simultaneously herewith the parties will enter into the
Interconnectivity and Support Agreement which records their
arrangements in relation to the operation of a service using the
System.
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATION
1.1 Unless the context otherwise requires:
Agreement means this agreement and all schedules attached to this
Agreement as amended from time to time;
Associate means, with reference to a specified Person, a Person who
directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, that Person;
Call means data transmitted and received by using the VIN Hardware and
the service.
Closed Group means a group as defined in clause 1 of the
Interconnectivity and Support Agreement;
Confidential Information means all information passing from one Party
to the other Party relating to the business of the disclosing Party or
any other Person who has contracted with OZI to terminate and originate
Calls, including but not limited to trade secrets, technology,
inventions (whether patentable or not), drawings, know-how, techniques,
source and object code, business and marketing plans and projections,
arrangements and agreements with third parties, customer information
and customer information proprietary to customers, formulae, suppliers,
customer lists, concepts not reduced to material form, designs, plans,
and models but excludes information:
(a) which is in or becomes part of the public domain other than
through breach of this Agreement;
(b) which the receiving Party can prove by contemporaneous written
documentation was already rightfully known to it at the time
of disclosure by the disclosing Party or its representatives;
(c) which the receiving Party rightfully acquires from a third
party entitled to disclose it free of obligations of
confidentiality;
(d) which the receiving Party is obliged by law to disclose
provided that reasonable prior notice is given to the
disclosing Party;
<PAGE>
Customer means a Person who is provided with a personal identification
number by a Participant, or who is otherwise authorised by a
Participant to make Calls using the Service;
Dollar and $ means a United States Dollar;
Documentation means all system manuals and user manuals provided by OZI
under this Agreement.
Documentation includes the Operations Manual;
Intellectual Property means all intellectual property rights throughout
the world including but not limited to patent and patentable rights
(including the right to apply for patents), confidential information,
trade secrets, trade marks, circuit layout rights, know how and
approvals of any nature and copyright;
Interconnectivity and Support Agreement means the agreement of that
name between the parties on the date of this Agreement;
Internet means any combination of interconnected Systems, including
Internet, intranet or extranet, used by OZI and Participants for the
delivery of the Service including all existing protocols (such as ATM,
frame relay, TCP/IP, voice IP, fax IP) and all new and/or modified
protocols which may be developed and/or implemented during the Term;
Licensed Rights means the licences and rights granted to Teltran
pursuant to clause 2;
Network means any packet switched network, including the Internet and
networks based on ATM or frame relay;
VIN Hardware means any hardware set out in the Operations Manual as
necessary for the carriage or routing of Calls or of particular types
of Calls between Participants and includes all or any part of the
installations known as FINs and VINs;
Operations Manual means the documents referred to in Schedule 1 of the
Interconnectivity and Support Agreement as amended from time to time
pursuant to the terms of that agreement;
Origination Tariff means the tariff set from time to time in accordance
with clause 11 and Schedule 3 Part B;
OZI Software means the software set out in Schedule 2 in object code
format as modified by OZI from time to time and otherwise as set out in
this Agreement;
Participant means any of OZI, Teltran and other Persons who have
contracted with OZI or an affiliate to terminate and originate Calls
(including Resellers appointed by other affiliates) and the
Participants means all those Participants;
Party means either Teltran or OZI and Parties means both of them;
Person includes an individual, company, corporation, partnership,
government or government agency, authority or entity however designated
or constituted;
PSTN means public switched telephone network;
Reseller means a Reseller appointed pursuant to clause 7 of the
Interconnectivity and Support Agreement;
Service means the routing and carriage of Calls from origination to
termination across a Network as contemplated by this agreement, or, as
the context requires, that part of the Service for which OZI alone is
responsible;
Sublicensee means a sublicensee of Teltran appointed in accordance with
the terms of this Agreement;
System means a combination of specialised hardware and software modules
to be provided by OZI to Teltran under this Agreement and/or the
Interconnectivity and Support Agreement, which, when used in concert
with each other, will facilitate Calls to be originated, carried,
routed and Terminated via Networks;
Term means the period from the date of this Agreement until its expiry
or other termination;
Termination in relation to a Call means that part of the Service which
involves attempting to secure a connection between the Node Hardware to
which the Call has been routed and the Call's ultimate destination (via
a PSTN if applicable) and carrying that Call in its entirety between
those two points once that connection is established. To Terminate a
Call has a corresponding meaning.
Termination Point, in relation to a Call, means the Call's ultimate
dialled destination; and
Territory means the area set out in Schedule 1, as amended by written
agreement of the Parties from time to time
2. LICENCE
<PAGE>
2.1 Subject to the terms and conditions of this Agreement and applicable
laws, OZI grants Teltran the non-exclusive licence in the Territory and
during the Term to:
(a) Use OZI Software including copying the same in the manner
permitted under this Agreement.
(b) Use, and reproduce as may be reasonably necessary for
training, archival, disaster recovery or other non-productive
purposes, the Documentation;
(c) Use, and reproduce any part of the Documentation as reasonably
necessary to comply with its obligations under this Agreement;
(d) Use the hardware configuration described in the Operations
Manual, solely for the purpose of performing its obligations
under this Agreement;
(e) Use any advertising or promotional material provided by OZI,
solely for the purposes of promoting the Service; and
(f) Use the Intellectual Property comprised in any of the items
referred to in paragraphs (a) to (e) as amended from time to
time for those purposes.
2.2 Subject to the terms and conditions of this Agreement OZI also grants
to Teltran non-exclusive licences during the Term but outside the
Territory to:
(a) Activate OZI Software located on VIN Hardware by other
Participants solely in the course of routing Calls in the
course of providing the Service in respect of Calls routed
from VIN Hardware in the Territory; and
(b) Use the Intellectual Property comprised in any of the items
referred to in paragraph (a) as amended from time to time for
those purposes.
2.3 Teltran expressly recognises that the Licensed Rights shall be subject
to the retention by OZI of the right to exercise and license within the
Territory and during the Term the rights to activate OZI Software
located on VIN Hardware solely in the course of routing Calls in the
course of providing the Service in respect of Calls routed from VIN
Hardware.
2.4 Save as provided in this Agreement and the Interconnectivity and
Support Agreement, Teltran has no rights to OZI Software, the VIN
Hardware, the Documentation or any Intellectual Property of OZI
relating to the same or the Service.
2.5 To the extent permitted by applicable law:
(a) Teltran undertakes not to reverse engineer, disassemble, or
decompile the object code version of OZI Software; and
(b) Teltran must not make or permit any adaptations or derivative
works based on OZI Software.
2.6 If and to the extent that Teltran develops any adaptations or
derivative works (whether or not permitted under this Agreement),
Teltran acknowledges and agrees that the whole of the Intellectual
Property in any adaptations or derivative works based on OZI Software
vest in OZI. Teltran undertakes to do all things necessary or desirable
to assign or otherwise vest or evidence or record the assignment or
vesting of those intellectual property rights in OZI. Teltran
undertakes to immediately advise OZI of the development of any such
adaptation or derivative works and to provide full details thereof
including source code to OZI.
3. SERVICE OBLIGATIONS
3.1 Teltran must:
(a) Ensure that all VIN Hardware and OZI Software used by it in
relation to the Service is operated in accordance with the
Operations Manual;
(b) Not operate any VIN Hardware outside the Territory except as
authorised by clauses 2 and 5 or clause 8 of the
Interconnectivity and Support Agreement; and
(c) Provide OZI with remote access to Teltran systems sufficient
for OZI to update any OZI Software and to enable OZI to verify
Teltran compliance with the technical aspects of its
obligations under this Agreement, and otherwise as set out in
the Operations Manual.
4. OZI RESPONSIBILITIES
4.1 OZI must calculate and notify Teltran of the payments required by
Teltran under this Agreement.
4.2 OZI shall, at the request of Teltran, use all reasonable efforts to
modify any billing reports to a form reasonably requested by Teltran on
the basis that Teltran shall pay to OZI an amount equal to the direct
cost plus 10 percent of carrying out such work.
<PAGE>
4.3 OZI undertakes that it will retain rights to OZI Software and utilise
the same in the provision of the Service.
5. RIGHT TO SUBLICENSE
5.1 Teltran shall not sell, transfer, sublicense or otherwise dispose of
all or any of the Licensed Rights granted under this Agreement, without
the prior written consent of OZI, which may be withheld by OZI at its
absolute discretion.
5.2 Without limiting clause 5.1, Teltran may grant rights to Resellers
appointed pursuant to and subject to the conditions of the
Interconnectivity and Support Agreement, which involve limited use of
the Licensed Rights on such terms as may be approved by OZI in writing
in advance. Any attempt to grant such rights without the approval of
OZI shall be void.
6. ROYALTY BASED ON TIME
6.1 Under this Agreement:
(a) the calculation of all billing information for charges
incurred between OZI and Teltran may be carried out by OZI
and/or Teltran;
(b) OZI will charge Teltran a royalty in respect of Calls
originated in the Territory or from Closed Groups which
Teltran has sublicensed calculated in accordance with clause
6.2.
6.2 The Royalty Fee for a period is the total of:
(a) the aggregate of the fees payable for each Call originated in
the Territory which Teltran has sublicensed during that period
calculated in accordance with clause 1 of Schedule 3 using,
where appropriate, the time for each Call determined in
accordance with clause 6.3; and
(b) any additional amounts payable under clause 7 or otherwise in
accordance with the provisions of Schedule 3.
6.3 The time for each Call for the purposes of clause 6.2 is the time of
that Call (determined in minimum increments of six seconds rounded
down) commencing from the time the cessation of ringback from the
Termination Point and concluding at the time that the Call originator
hangs up.
7. ROYALTY NOT BASED ON TIME
7.1 Where and to the extent Teltran or any Reseller or any Associate of
Teltran or a Reseller receives or is credited with a payment or other
benefit arising out of or in respect of the use, licensing or provision
of the Licensed Rights and this Agreement does not otherwise set out a
percentage or amount payable by Teltran to OZI, Teltran shall pay to
OZI each month a fee calculated in accordance with clause 2 of Schedule
3 and any guidelines determined thereunder.
7.2 Teltran shall pay all amounts payable in accordance with this clause 7
within fourteen (14) days of the end of the month in which the payment
or benefit was obtained by Teltran.
7.3 Teltran shall promptly provide to OZI all information reasonably
necessary for the purposes of determining entitlements under this
clause 7.
8. GENERAL PROVISIONS RELATING TO PAYMENT OF ROYALTIES
8.1 Any payments due pursuant to this Agreement, including but not only
royalties payable under clauses 6 and 7, may be netted off (set off) by
OZI. Invoices will be for gross charges (i.e. not netted) and expressed
in US dollars.
8.2 OZI may invoice Teltran each calendar month in arrears. Invoices shall
be transmitted to Teltran by electronic mail or fax and are deemed
received at the time of transmission (unless a nondelivery message is
received). Invoices will not include all Call information which will be
posted to appropriate web pages so that it can be accessed by Teltran
in accordance with the Operations Manual.
8.3 Teltran must pay each invoice within fourteen (14) days of the date the
invoice is received or deemed to be received under clause 8.2.
8.4 All payments must be made by direct wire transfer into an account
nominated in writing with communication of payment.
8.5 All fees and other payments under this Agreement must be made in United
States dollars. Fees based on sales in other currencies are converted
to dollars at the official closing rate of exchange for that currency
in the U.S. market, as published in the Wall Street Journal (Western
Edition) on
<PAGE>
the last day of the calendar month to which the fee related (or, if not
published on that day, the last day in that month that the Wall Street
Journal published that rate).
8.6 All amounts payable under this Agreement are exclusive of all
withholding tax, sales tax, value added tax, goods and services tax,
consumption tax, use tax or other taxes, customs, duties and similar
levies if any, payable in or to any jurisdiction or authority
whatsoever (other than taxes on the net income of the relevant Party).
Where any payment would otherwise require deduction of any tax, custom,
duty or levy the paying Party must pay a grossed up amount such that,
after any payment by the paying Party in respect of those taxes,
customs, duties or levies, the Party being paid receives the amount
calculated under this Agreement. The paying Party shall then promptly
pay all such withholdings and shall provide to the Party being paid
original receipts for such payment. The Party being paid shall refund
to the paying Party any grossed up amount to the extent that it
actually obtains relief, a benefit or credit including by offsetting
the amount received against tax otherwise payable in respect of the
withholdings paid by the paying Party promptly after receipt of that
relief, benefit or credit.
8.7 Overdue amounts accrue interest from the relevant due date until the
date that payment is received at the rate of the lesser of:
(a) the LIBOR Rate last quoted at the relevant due date plus four
percent (4%); and
(b) the greatest percentage permitted by applicable law.
9. RECORDS
9.1 Each of the Parties in their principal place of business must keep,
maintain and preserve during the term of this Agreement and for at
least four (4) years following the expiration of this Agreement,
complete and accurate records covering all transactions relating to
this Agreement including transaction logs.
9.2 Those records must be available for inspection by the other Party from
time to time for four (4) years following the expiration of the
agreement, during reasonable business hours and upon reasonable notice.
Each Party may make copies of any part of the other Party's records and
must ensure that the other Party is not hindered while inspecting or
copying their records.
9.3 OZI may elect to conduct an audit of Teltran in relation to its
compliance with this Agreement and the records it has kept in relation
to it twice in any year. OZI may elect to conduct an audit of Teltran
in relation to its compliance with the payment of Licence Fees under
this Agreement. The auditing Party must give the other Party at least
thirty (30) days' notice of any audit. For the purpose of conducting
any audit, the audited Party must, at its own expense provide the
auditing Party, or its independent auditors with: (a) access to its
premises and office space; and (b) all information, facilities,
services and accessories reasonably required by them.
9.4 If an audit indicates a material inaccuracy (being a variation of the
greater of five percent (5%) of net amounts payable between the parties
during the period covered by the audit and $50,000.00), the party
receiving the benefit of that inaccuracy must indemnify the other party
for the cost of the audit.
9.5 If an audit indicates an inaccuracy, the Party receiving the benefit of
that inaccuracy must pay to the other Party any outstanding amount
9.6 Without limiting the generality of clause 8.1 of the Interconnectivity
and Support Agreement, Teltran shall ensure that it has the right to
conduct an audit in similar terms to this clause in respect of any
Reseller and shall carry out such an audit where reasonably requested
by OZI on the basis that the costs of such audit shall be borne by OZI
if no material inaccuracy in relation to that Reseller (being a
variation of the greater of five percent (5%) or more of net amounts
payable between the Reseller and Teltran during the period covered by
the audit and $50,000) is indicated.
9.7 Teltran shall co-operate in accessing and making available all
information reasonably necessary from Resellers and Associates of
Resellers and Teltran to establish compliance by Resellers with the
Required Terms and compliance by Teltran under this Agreement.
10. DOCUMENTATION
10.1 OZI may amend any Documentation from time to time by written notice
to Teltran. OZI undertakes to make reasonable efforts to consult with
OZI in relation to any proposed changes to the Operations Manual and to
give at least thirty (30) days notice of such changes provided that
<PAGE>
OZI may shorten this period if, in its opinion, amendments must be made
urgently to maintain the reputation, goodwill and/or integrity of the
Service. OZI undertakes to act reasonably in relation to changes to the
Operations Manual.
10.2 OZI shall supply updates to OZI Software and Documentation to reflect
the appointment of new Participants and otherwise as required.
10.3 OZI shall provide OZI Software and Documentation either by physical
delivery or by posting the same on Web pages which can be accessed by
Teltran or other agreed electronic transmission.
10.4 OZI is not required to prepare translations of the Documentation or OZI
Software into any language.
10.5 Teltran may prepare translations of Documentation or any part of it
into any other language. Teltran must ensure that all copyright and
other intellectual property rights in any translation it prepares is
vested in OZI. Teltran indemnifies OZI against any loss OZI suffers as
a result of any Person's use of Teltran translations.
11. TARIFFS
The Parties acknowledge that the Origination Tariff (and changes
thereto) shall be calculated in accordance with Schedule 3.
12. WARRANTIES
12.1 Each Party warrants that it has full power to enter into this
Agreement, perform its obligations under it and that the person signing
this Agreement on its behalf has been duly authorised and empowered to
enter into it. Each Party acknowledges that it has not been induced to
enter into this Agreement by any representations or statements, oral or
written, not expressly contained in it or expressly incorporated by
reference.
12.2 Teltran and OZI must not represent or warrant to any Person that the
Service or any software program or related documentation provided by or
on behalf of either Party:
(a) will meet any performance criteria or any Participant's or any
Customer's requirements except to the extent it is explicitly,
or by necessary implication, stated to meet them within the
Documentation;
(b) will be error free; or
(c) will not be interrupted by reason of defect in it, the general
nature of Internet communications or by reason of fault on the
part of any Participant.
12.3 The Parties acknowledge that because of the nature of the technology
and Networks, the Call quality of Calls transmitted over it may be less
than that from the normal use of the PSTN.
12.4 To the greatest extent possible under applicable law, each Party
expressly waives all representations, warranties or conditions not
specifically set out in this Agreement which may be available to the
other Party, including but not limited to implied representations,
warranties or conditions of merchantable quality or fitness for a
particular purpose and those arising by statute or otherwise in law or
from course of dealing or usage of trade.
12.5 Each party is responsible for the actions and omissions of its
employees and agents who cause damage to the other, whether through
fraud or otherwise. Each party indemnifies and holds the other party
harmless from any and all damages caused by such persons.
13. LIMITATION OF LIABILITY
13.1 The limitation of liability provisions of this Agreement:
(a) reflect an informed voluntary allocation of the risks (known
and unknown) that exist in connection with the provision of
goods and services under this Agreement by OZI including the
performance of the Service;
(b) take precedence over and apply notwithstanding any other
provisions of this Agreement; and
(c) form a material part of the agreement reached between the
Parties.
13.2 TO THE EXTENT PERMISSIBLE BY LAW, OZI HAS NO LIABILITY UNDER OR IN
RESPECT OF THIS AGREEMENT EXCEPT AS SET OUT IN IT OR IN THE
INTERCONNECTIVITY AND SUPPORT AGREEMENT.
14. TERM AND TERMINATION
<PAGE>
14.1 This Agreement commences on the date of execution by the last of the
Parties and continues in effect for a period of three (3) years from
that date, unless otherwise terminated pursuant to the terms of this
Agreement.
14.3 This Agreement may be terminated:
(a) by Teltran, for a material breach of this Agreement by OZI, at
Teltran option, upon written notice if OZI has not cured the
breach within thirty (30) days after receiving written notice;
(b) by OZI, for a material breach of this Agreement by Teltran, at
OZI's option, upon written notice if Teltran has not cured a
material breach within thirty (30) days of receiving written
notice; and
(c) by either Party, upon the other Party coming under any form of
administration or relief relating to insolvency.
14.4 On termination and without prejudice to any other rights which the
Parties may have:
(a) each Party must immediately deliver to the other Party, the
other Party's Confidential Information then in its possession
or control, if any, and must deliver a certificate of an
officer of such Party attesting that all Confidential
Information has been returned;
(b) each Party must not make any further use of the other Party's
Confidential Information;
(c) each Party must immediately pay all sums owing to the other
under this Agreement or as they subsequently become due
hereunder; and
14.5 Clauses 2.4, 2.6, 9, 12, 13, 14, 15, 16, 17, 18 and 20 shall survive
any termination or expiration of this Agreement.
14.6 Within thirty (30) days of any termination or expiration of this
Agreement, Teltran must, at its cost, return to OZI or destroy all
copies of OZI Software (other than Software embedded in hardware), and
must not, and has no implied license to, in any way utilise OZI's
Intellectual Property Rights, PROVIDED THAT if the Agreement is
terminated as a result of a default of OZI, Teltran shall be allowed a
period of two (2) months' grace to comply with this clause.
15. CONFIDENTIALITY
15.1 Each Party may use the Confidential Information of a disclosing Party
only for the purposes of this Agreement and must keep confidential all
Confidential Information of each disclosing Party except to the extent
(if any) the recipient of any Confidential Information is required by
law to disclose the Confidential Information.
15.2 Either Party may disclose Confidential Information of the other Party
to those of its employees and agents who have a need to know the
Confidential Information for the purposes of this Agreement but only if
the employee or agent executes a confidentiality undertaking in a form
approved by the other Party, such approval not to be unreasonably
withheld.
15.3 This clause survives the termination of this Agreement.
16. OWNERSHIP OF PROPRIETARY RIGHTS
16.1 Teltran does not acquire any rights in, title to or interest in OZI
Software or related Documentation, except as explicitly set out in this
Agreement. Specifically, OZI does not grant Teltran rights to create
any translations, adaptations or derivative works of OZI Software
except as contained in this Agreement.
16.2 Teltran acknowledges that OZI may sell or otherwise dispose of all or
part of the technology underlying the Service or its rights to that
technology to a third party, and that nothing in this Agreement
prevents or restricts OZI from so doing.
17. INDEMNIFICATION
17.1 Teltran indemnifies OZI against any and all claims and liabilities,
including but not limited to reasonable legal fees, resulting from:
(a) any claim that would otherwise have been unsuccessful but for
Teltran modifications (not approved in writing by OZI) to the
Service; and
(b) any claim based upon Teltran or any Customer's use of the
Service otherwise than in accordance with this Agreement.
18. PUBLICITY
<PAGE>
Teltran and OZI must cooperate regarding public relations activities,
including public announcements, joint press releases, and other
activities to be mutually agreed.
19. INTERDEPENDENCE WITH INTERCONNECTIVITY AND SUPPORT AGREEMENT
19.1 This Agreement shall have no force and effect unless and until the
Interconnectivity and Support Agreement becomes binding between the
parties.
19.2 Any default under the Interconnectivity and Support Agreement by
Teltran shall constitute a default under this Agreement by Teltran and
any default under the Interconnectivity and Support Agreement by OZI
shall be deemed to constitute a default under this Agreement by OZI.
19.3 Any circumstance justifying Teltran in terminating the
Interconnectivity and Support Agreement shall justify Teltran in
terminating this Agreement and any circumstance justifying OZI in
terminating the Interconnectivity and Support Agreement shall justify
OZI in terminating this Agreement.
20. GENERAL PROVISIONS
Co-operation
20.1 The Parties must co-operate with each other to fulfil the purpose of
this Agreement. Each Party must provide all reasonable assistance to
the other (except as between the Parties) in relation to the conduct of
any litigation related to this Agreement. The costs of that assistance
must be borne by the Party receiving the benefit of that litigation.
Notices
20.2 Any notice required for or permitted for this Agreement must be
delivered as follows with notice deemed given as indicated:
(a) in writing by personal delivery when delivered personally;
(b) in writing by overnight courier upon written verification of
receipt;
(c) by telecopy or fax transmission when confirmed by telecopier
or fax transmission report;
(d) in writing by certified or registered mail, return receipt
requested, upon verification of receipt; or
(e) by receipted electronic email to an email address of the other
Party nominated for the receipt of notices under this
Agreement.
All notices must be sent to the Parties at the addresses described
above or to any other address that the receiving Party notifies for the
purpose of notice in accordance with this clause.
Assignment
20.3 This Agreement is not assignable or transferable by Teltran except as
expressly set out herein, without the prior written consent of OZI,
which consent shall not be unreasonably withheld or delayed. Any
attempt to assign this Agreement without that consent is void. Teltran
shall not suffer or allow a change in control (without the prior
written consent of OZI, which consent shall not be unreasonably
withheld or delayed in any circumstance where an assignment of Teltran
interest in this Agreement to the Person acquiring control would not be
permitted under this Agreement.
Agency
20.4 Neither Party is an employee or agent of the other Party. In
particular, any work performed by OZI in connection with this Agreement
is performed by OZI as an independent contractor, and not as an
employee or agent of Teltran. Nothing contained in this Agreement will
be interpreted or construed as to characterise the relationship between
OZI and Teltran as a joint venture, partnership or franchise for any
purpose. Neither Party has the authority to, and neither Party shall,
make any representation, prepare documents or statements on behalf of,
or in the name of the other Party, give any warranties, accept any
orders, enter into a contract on behalf of the other Party, or obligate
the other Party in any manner, unless expressly authorised to so by
this Agreement or in writing by the other Party.
Waivers And Amendments
20.5 No failure to exercise, and no delay in exercising, on the part of
either Party, any privilege, any power or any rights under this
Agreement will operate as a waiver of them, nor will any single or
partial exercise of any right or power under this Agreement preclude
further exercise of any other right under it. Any waivers or amendments
are effective only if made in writing by non-pre-
<PAGE>
printed agreements clearly understood by both Parties to be an
amendment or waiver and signed by a representative of the respective
Parties authorised to bind the Parties.
Severability
20.6 If any provision of this Agreement is held to be invalid or
unenforceable, then the remaining provisions shall continue in full
force and effect.
Consequence of Breach of the Other Party
20.7 If a Party breaches a term of this Agreement then to the extent that
such breach renders compliance with any obligation by the other Party
impossible, impractical or futile, the other Party shall be relieved
from compliance with that obligation unless and until the breach is
rectified.
Governing Law
20.8 This Agreement is governed by the laws in force in New South Wales.
Each of the Parties agree that the courts of New South Wales have
jurisdiction over the subject matter of this Agreement and constitute
the most convenient forum for hearing any proceedings arising out of
any dispute between the Parties.
20.9 Teltran hereby appoints [An Officer of the Company] of [Address] as its
agent for the service of all documents, notices and legal proceedings
and the service of all documents, notices and legal proceedings on
[Officer of the Company] will be deemed to be served on Teltran.
20.10 The application of the United Nations Convention for the International
Sale of Goods is expressly disclaimed.
20.11 The prevailing Party in any action to enforce this Agreement is
entitled to recover costs and expenses including, without limitation,
legal fees.
Force Majeure
20.12 An obligation of a Party under this Agreement is suspended during any
period in which it is unable to perform that obligation for any reason
beyond the reasonable control that Party or its Associates, including
but not limited to, acts of God, earthquake, labor disputes and
strikes, riots, war, governmental requirements and the actions or
omissions of the other Party (force majeure event). If the force
majeure event extends for more than twenty one (21) days and there is
an actual or threatened material disadvantage to either Party, it may,
at its option, terminate this Agreement.
Entire agreement
20.13 This Agreement including its Schedules constitutes the entire agreement
between the Parties with respect to its subject matter except as set
out herein. This Agreement supersedes, and the terms of this Agreement
govern any other prior or collateral agreements with respect to its
subject matter with the exception of the Telecommunications Services
Agreement (including Schedules a through d) executed between Teltran
and OZI 12 December 97 and any other subsequent agreements which may be
entered into regarding the current re-filing relationship between
Teltran and OZI. Any amendments to this Agreement must be in writing
and executed by an officer of the Parties.
20.14 This Agreement has precedence over the Documentation to the extent of
any inconsistency.
20.15 To the extent that any applicable law prohibits any provision of this
Agreement:
(a) that provision is to be read down to the extent necessary to
comply with that law; and
(b) the parties shall negotiate in good faith to modify this
Agreement in good faith in a manner reasonably appropriate to
meet with the requirements of any applicable law.
Teltran must keep OZI informed of any such laws and their effect.
20.16 To the extent this Agreement is inconsistent with Interconnectivity and
Support Agreement, the terms of the Interconnectivity and Support
Agreement shall prevail.
Executed by the Parties:
Teltran OZEMAIL INTERLINE PTY LIMITED
(ACN 078 742 891)
By: /s/ Bryon R. Lerner By: /s/ J.B. Rousselot
------------------------- -----------------------------
<PAGE>
Name: Byron R. Lerner Name: J. B. Rousselot
----------------------- ---------------------------
Title: President, and CEO Title: Director and CEO
---------------------- --------------------------
Date: 10/2/98 Date: 10/19/98
----------------------- ---------------------------
<PAGE>
Telecommunications Services Agreement
THIS AGREEMENT is made this 15th day of October,1998
BETWEEN: TELTRAN INTERNATIONAL, INC. a Delaware Corporation with its
principal offices at One Penn Plaza, Suite 4632, New York, NY
10119 ("Teltran").
AND: OZEMAIL INTERLINE PTY LIMITED (ACN 078 742 891) ("Customer") with
its principal offices at OzEmail Centre, 39 Herbert Street, St
Leonards NSW 2065.
Introduction
Customer desires to purchase telecommunications services from Teltran and
Teltran desires to sell such services to Customer.
Agreement
1. Services Provided
1.1 In accordance with the terms and conditions of this Agreement, Teltran
shall provide carrier telecommunication services as set out in Schedule
A (the "Services") to Customer.
1.2 Services to be provided shall be limited to those countries set out in
Schedule B unless otherwise agreed. Teltran shall have the right to
change the countries set out in Schedule B upon seven (7) days written
notice to Customer ("Change of Country Notice".)
2. Term
2.1 Subject to clause 6, this Agreement shall be deem to have commenced on
the date above which shall be the same as the commencement date for the
USA Interconnectivity and Support Agreement and the USA Intellectual
Property License Agreement signed between the Parties (the
"Commencement Date") and continue for a period of twenty four (24)
months. This Agreement shall be independent of the other Agreements
mentioned in this section but all three will begin on the same date and
run concurrently until such time that they are terminated in accordance
with the provisions contained in each.
2.2 Subject to clause 6, this Agreement shall thereafter continue on the
same terms and conditions, on a month to month basis unless either
party notifies the other party in writing not less than sixty (60) days
prior to the expiration date of its desire to terminate this Agreement.
3. Commitment
3.1 Customer agrees to use and accept the Services at the rates set out in
Schedule B.
3.2 Teltran shall have the right to change the rates set out in Schedule B
upon seven (7) days written notice to Customer ("Change of Rate
Notice".)
3.3 This Agreement is not contingent on any minimum traffic volumes.
Without limitation, Customer reserves the right, at its absolute
discretion, to reduce or suspend traffic to any country or countries to
which Teltran supplies the Services.
<PAGE>
4. Technical Requirements
4.1 In order to utilise the Services, a connection between Customer's
network and the Teltran network at the Teltran point of presence
facility set out in Schedule A ("Teltran POP") has been established
("Service Interconnection"). Teltran shall maintain the Service
Interconnection facilities set out in Schedule A, as modified by
Customer from time to time subject to Teltran approval. Such approval
shall not be withheld to the extent that the modification does not
result in the facilities comprising equipment other than Voice
Interface Nodes (VIN's) and/or DS-1 facilities.
4.2 To the extent that the Service Interconnection facilities referred to
in clause 4.1 are housed at the Teltran POP, Teltran shall:
(a) allow Customer or third parties authorised by Customer access
to the Teltran POP for the purposes of maintaining, modifying
or updating the Service Interconnection facilities; and
(b) use reasonable endeavours, being no less than the efforts used
in respect of its equipment at the Teltran POP, to maintain a
secure environment and appropriate conditions for the
operation of the Service Interconnection (including the
Service Interconnection facilities).
4.3 Save for the cost of provision and maintenance of the Service
Interconnection facilities referred to in clause 4.1, the fees
payable under clause 5.1 and Taxes payable under clause 10, Customer
shall have no other liability to Teltran whatsoever (including the
reimbursement of any costs or expenses incurred by Teltran) in
relation to the provision of the Services. Without limitation, Teltran
shall not incur any costs or expenses on Customer's behalf, nor enter
into any third party agreements or arrangements which places
obligations on Customer, without the prior written consent of Customer.
4.4 Teltran shall pay all applicable settlements with overseas
correspondents and payments under any intercarrier arrangement
related to the Services provided to Customer under this Agreement.
5. Billing
5.1 Customer shall pay Teltran for Services provided in accordance with the
rates set out in Schedule B on the basis that billable calls will be
rounded to the next higher six seconds with a minimum billing period of
thirty seconds, except where rates are listed on Schedule B based upon
one minute billing periods (as shown in that Schedule) in which case
the length of the billable call will be rounded to the next higher one
minute interval.
5.2 Teltran shall deliver via facsimile or email transmission to Customer a
summary invoice and traffic report with Call Detail Records (CDR's) to
the Customer for
<PAGE>
each calendar week, which invoice and report shall set forth the actual
amount and cost of services rendered to Customer during the immediately
preceding week according to Teltran's records.
5.3 Such invoice may also contain any appropriate debits or credits to
previous invoices rendered to Customer. Upon receipt of the invoice the
Customer shall, within two (2) business days of the date of the
invoice, deliver the invoice amount (to the extent that it is not
disputed) without any deductions or offsets of any kind via wire
transfer for deposit in Teltran's account.
5.4 Any billing discrepancies shall be presented to Teltran in reasonable
detail in writing within 30 days of the date of the invoice in
question. If Teltran fails to reply in writing regarding the billing
discrepancy within 30 days, the disputed amount shall be deemed valid
and accepted by Teltran. Both parties shall endeavour to resolve all
disputes within 60 days.
5.5 Both parties agree to act in good faith to resolve billing disputes
between each other. If within sixty (60) days a dispute is not
resolved, both parties agree to immediately resolve disputes with
binding arbitration with respect to any and all proceedings. Any such
proceeding shall be pursuant to the rules of the American Arbitration
Association as they are applicable to the immediate resolution of
disputes brought forward. A single arbitrator, who must be
knowledgeable in the telecommunications industry, will be utilised in
any proceedings. The arbitrator shall be empowered to promptly
adjudicate and determine each proceeding in law and/or in equity, and
must determine who the prevailing Party is within ten (10) days after
the matter has been referred to arbitration under this clause. Judgment
upon the reward will be final and may be entered in any Federal or
State Court, in the State of New York, having jurisdiction over the
relevant Party. Both Parties agree to immediately comply with the
judgment having been entered and/or confirmed.
5.6 If Customer does not make payments due in respect of invoices rendered
in accordance with this clause 5 by the due date on a regular basis
(save where the amount rendered is in dispute),
Teltran may request Customer to provide a Letter of Credit for an
amount not to exceed the average invoice amount during the previous
month.
For the purposes of this clause, Customer shall be deemed not to have
made payment on a regular basis where it is late in making payment of:
(a) 3 consecutive invoices; or
(b) 3 invoices in any eight week period.
5.7 Teltran may offset against the Letter of Credit any amounts due under
this Agreement (save to the extent that they are in dispute) that are
unpaid ten (10)
<PAGE>
business days from the due date unless express agreement has been
reached by the parties.
6. Termination
6.1 Either Party may terminate this Agreement and suspend the performance
of any of its obligations hereunder if:
(a) The other Party fails to perform or observe any material term,
condition or agreement to be performed or observed by it
hereunder and fails to cure the same within thirty (30) days
after receipt of written notice hereof;
(b) It has terminated either or both of the USA Interconnectivity
and Support Agreement and the USA Intellectual Property
License Agreement of even date;
(c) The other Party ceases doing business as a going concern,
makes an assignment for the benefit of creditors, admits in
writing to its inability to pay its debts as they become due,
files a voluntary petition in bankruptcy, is adjudicated a
bankrupt or an insolvent, files a petition seeking for itself
any reorganisation, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under any
present or future statute, law or regulation or files an
answer admitting the material allegations of a petition filed
against it in any such proceeding, consents to or acquiesces
in the appointment of a trustee, receiver, or liquidator of it
or of all or any substantial part of its assets or properties,
or it or its shareholders shall take any action looking to its
dissolution or liquidation; or
(d) A petition in bankruptcy is filed against the other Party and
is not dismissed within sixty (60) days of being filed or,
without the Party's consent or acquiescence, a trustee,
receiver or liquidator of it or of all or any substantial part
of its assets and properties is appointed and such appointment
is not vacated within thirty (30) days thereafter.
6.2 Customer may terminate this Agreement by giving written notice to
Teltran sixty (60) days prior to Customer's desired termination date.
6.3 Teltran may terminate this Agreement by giving written notice to
Customer sixty (60) days prior to its intention to do so.
6.4 Upon termination:
(a) Customer will be billed for and shall pay within fourteen (14)
days after such Termination the total outstanding charges due;
and
(b) Teltran shall have the right to offset against the Letter of
Credit (if any) any amount not paid under clause 6.4(a)
(unless in dispute) and shall cancel the Letter of Credit and
return it to Customer within 30 days of termination.
<PAGE>
7. Representations of Parties
7.1 Each party shall comply at all times with all laws and regulations
applicable to the sale and provision of Services to its users and
end-users.
8. Disclaimer of Warranties
8.1 Save to the extent obligations are specifically imposed on it by this
Agreement, Teltran (including its subsidiaries, affiliates,
predecessors, successors and assigns) makes no warranties, express or
implied, and specifically disclaims any warranty of merchantability or
fitness for a particular purpose with respect to services or products
provided pursuant to this Agreement.
8.2 In no event shall either Party be liable for consequential, special or
indirect damages or lost profits sustained by reason of its performance
of this Agreement, or for any failure, breakdown, or interruption of
service, whatever shall be the cause, or however long it shall last,
and regardless of whether any one has been advised of the possibility
of such damages.
8.3 Regardless of the nature of any claim or the form of any action which
may be brought against Teltran as a result of or arising out of any
errors or omissions which Teltran may make or may result in providing
the Services for Customer, Teltran's sole liability and obligation to
Customer, except in the case of claims arising out of intentional and
wrongful acts of Teltran, shall be to use commercially reasonable
efforts to investigate and, to the extent reasonably practicable and
within the reasonable control of Teltran, correct the circumstances
that caused such errors. Teltran shall not be liable for any loss or
damages sustained by reason of any failure or interruption of Services
covered by this Agreement, nor shall Teltran provide Customer with any
credits to be applied against future amounts due, whether such loss or
damage arises because of breakdown of equipment or because of any other
reason except where caused by intentional and wrongful acts of Teltran.
Teltran's liability hereunder shall under no circumstances be greater
than the amount of fees paid by Customer for the Services with respect
to which the error or omission occurred.
8.4 Except as provided for herein, neither Party shall have liability for
damages caused by the other Party's failure to perform its
responsibilities under this Agreement.
8.5 The limitations of liability herein shall apply regardless of the form
of action, whether in contract, tort, warranty, strict liability, or
negligence. This Agreement does not create any claim or right of
action, nor is it intended to confer any benefit on any third party,
including but not limited to any user or end-user of Customer.
8.6 The limitations set forth in this clause 8 shall survive termination of
this Agreement.
9. Indemnity
<PAGE>
9.1 A Party (the indemnifying Party) shall indemnify and hold harmless the
other Party (the indemnified Party), its officers, directors, employees
and agents, against and from any liability, loss, damage, cost and
expense (including attorneys' fees and costs of litigation) arising out
of or in connection with any claim or action which any person or entity
(other than the other Party) may file or threaten to file against
either party or its officers, directors, employees or agents arising
from the actions or agreements of such indemnifying party or from a
breach of this Agreement by the indemnifying Party. The indemnification
provided herein shall survive the termination of this Agreement and the
termination of any Service provided pursuant to this Agreement.
Notwithstanding any other provision of this Agreement, the officers,
directors, employees and agents of either Party shall have no liability
to the other Party, or any affiliate of the other Party, under this
Agreement or in connection with the Services to be provided hereunder.
A Party shall have no obligation of indemnity in any particular
circumstance if pursuant to the terms of the Agreement such Party has
no direct liability or its liability is limited in such circumstances.
For example, pursuant to Clause 8.3 (save to the extent stated in that
clause), Teltran shall have no obligation to Customer for any
interruption in Services and consequently has no indemnity obligation
to Customer arising from such interruption.
10. Taxes
10.1 The rates set forth in Attachment B are exclusive of any applicable
taxes assessed by any governmental entity arising as a result of the
provision of Services by Teltran to Customer under this Agreement
(collectively, the "Taxes") which shall be charged to Customer.
10.2 In addition to all other fees and amounts payable hereunder, Customer
shall be solely responsible for the payment of any and all Taxes save
to the extent it provides Teltran with appropriate tax exemption
documentation or is otherwise exempt from the requirements to pay the
Taxes.
10.3 Customer shall be responsible for the collection of all applicable
taxes and fees from Customer's customers ("End Users") and for the
remittance of such taxes and fees to the relevant governmental
authority.
11. Interfacing and Communication with End-Users
11.1 Interfacing and communicating with end-users shall be the sole
responsibility of Customer with respect to any use that Customer may
make of the Services provided pursuant to this Agreement to in turn
provide service to other persons or entities. Such interfacing and
communicating shall include without limitation installation of service,
termination of service, placing of orders, billing and billing
inquiries, reporting of service outages and problems, collection of
charges and handling and resolution of all disputes.
12. Customer's Use of Service
<PAGE>
12.1 Customer may use the Services provided pursuant to this Agreement for
any lawful purpose consistent with the transmission and switching
parameters of its telecommunications network, and may resell its use
(or the use of any part thereof) to a third party in the normal course
of the Customer's business, subject to the following:
(a) Abuse - The abuse of the Services is prohibited. The following
activities constitute abuse:
(1) Using the Services to make calls that might
reasonably be expected to frighten, abuse, torment,
or harass another, or
(2) Using Service in such a way that it interferes
unreasonably with the use of Services or Teltran's
network by others.
(b) Fraudulent Use - The fraudulent use of, or the intended or
attempted fraudulent use of, the Services is prohibited. The
following activities constitute fraudulent use:
(1) Using Services to transmit any message or code,
locate a person, or otherwise give or obtain
information, without payment for Service, or
(2) Using or attempting to use Service with the intent to
avoid the payment, either in whole or in part, of any
charges by any means or device.
12.2 Where Teltran believes in good faith that there is fraudulent use of
Services under clause 12.1(b), Teltran may, after written notice to the
Customer and if such conduct is not rectified within a reasonable
period after receipt of such notice, and without liability on the part
of Teltran, restrict, suspend, or discontinue providing the relevant
Service.
13. Confidentiality
13.1 Both parties shall mark as confidential all information provided by
each party to the other, which is considered by the disclosing party to
be confidential information. The party receiving such confidential
information shall not
(a) use any portion of such confidential information other than in
connection with performance under this Agreement; or
(b) disclose such confidential information to any third party,
except to the extent required by law, to a government agency
or department or to enforce its rights under this Agreement.
13.2 The obligations to protect confidential information under clause 13.1
shall remain in effect except to the extent that:
(a) such confidential information becomes generally available to
the public; and
<PAGE>
(b) such confidential information was developed by the
receiving party independently of disclosure
hereunder.
14. Assignment
14.1 Neither party may assign this Agreement in whole or in part without the
prior written consent of the other party which shall not be
unreasonably withheld or delayed.
14.2 Clause 14.1 shall not restrict Customer's ability to resell the
Services.
15. Independent Parties
15.1 The relationship established by the Agreement shall in no way
constitute either party (or its agents or employees) as a partner,
agent or fiduciary of the other party. The provision of service
described in this Agreement does not establish any joint undertaking,
joint venture or fiduciary relationship between Teltran and Customer.
16. Force Majeure
16.1 Neither party nor its affiliates, subsidiaries, subcontractors or
agents shall be liable in any way for delay, failure in performance,
loss or damage due to causes beyond its reasonable control including
any of the following: fire, strike, embargo, explosion, power blackout,
earthquake, volcanic action, flood, war, water, the elements, labour
disputes, civil or military authority, act of God, or acts of the
public enemy.
17. Severability
17.1 If any proportion of this Agreement shall be found to be invalid or
unenforceable, such portion shall be void and of no effect, but the
remainder of the agreement shall continue in full force unless the
Agreement fails in its essential purpose without the voided portion.
18. Notices
18.1 All notice, identifications, formal requests or other formal
communications required or desired to be given in connection with this
agreement, shall be in writing and shall be effective when delivered in
person, mailed by registered or certified post of sent by telex or
facsimile ("fax") to the recipient party, unless the parties otherwise
agree in writing. Notice shall be addressed to the following
(a) If to Teltran:
Mr Peter Biagioli
Teltran International, Inc.
One Penn Plaza, Suite 4632
<PAGE>
New York NY 10119
(b) If to Customer:
Mr Andrew Cowling
OzEmail Interline Pty Limited
Level 1, CSC House
39 Herbert Street
St Leonards NSW 2065
19. Compliance with Laws
19.1 Each party is responsible for its own compliance with all laws and
regulations affecting its business, including but not limited to the
collection and remittance of all taxes and other levies imposed by law.
20. Choice of Law
20.1 The domestic law of the State of New York, except its conflict-of-law
rules, shall govern the construction, interpretation and performance of
the Agreement.
21. Jurisdiction
21.1 Each party hereby irrevocably consents to the jurisdiction of the
courts of the State of New York in connection with all disputes,
controversies, claims and actions arising in connection with or
relating to this Agreement and agrees that such courts shall be sole
and exclusive jurisdiction of such disputes, controversies, claims and
action. Each party hereby waives personal service of any summons,
complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to such party at the
address for notice pursuant to Clause 18 above.
Executed as an Agreement
TELTRAN INTERNATIONAL, INC.
By: /s/ Byron R. Lerner
---------------------------
Byron R Lerner
President & CEO
Date:10/15/98
OZEMAIL INTERLINE PTY LIMITED
By: /s/ J.B. Rousselot
---------------------------
J.B. Rousselot
CEO
Date:10/19/98
<PAGE>
Teltran International Group, Ltd.
SCHEDULE OF SUBSIDIARIES
Name State of Incorporation Percentage Ownership
----- ---------------------- --------------------
Teltran International Delaware 100%
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Teltran International Group, Ltd.
We hereby consent to the use of our certified financial statement and
to all references to our firm included in or made part of this Form
10-SB.
/s/ Liebman Goldberg & Drogin, LLP
---------------------------------
Liebman Goldberg & Drogin, LLP
Garden City, NY
March 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Audited
Consolidated Balance Sheet and Statement of Operations as of and for the year
ended December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,389
<SECURITIES> 0
<RECEIVABLES> 94,296
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 119,482
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 159,853
<CURRENT-LIABILITIES> 400,362
<BONDS> 0
0
0
<COMMON> 7,697
<OTHER-SE> (241,754)
<TOTAL-LIABILITY-AND-EQUITY> 159,853
<SALES> 0
<TOTAL-REVENUES> 535,197
<CGS> 0
<TOTAL-COSTS> 706,672
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (416,307)
<INTEREST-EXPENSE> 29,959
<INCOME-PRETAX> (446,266)
<INCOME-TAX> 388
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (446,654)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
